Youth for Understanding, Inc.
| Decision Date | 12 September 2002 |
| Docket Number | No. CIV.A.02-0709 (JBD).,CIV.A.02-0709 (JBD). |
| Citation | 245 F.Supp.2d 1 |
| Parties | Paul F.X. RISTEEN, Plaintiff, v. YOUTH FOR UNDERSTANDING, INC., and Youth for Understanding USA, Inc., Defendants. |
| Court | U.S. District Court — District of Columbia |
David Henderson Martin, Canfield, Smith & Martin, Washington, DC, Robert Scott Oswald, Employment Law Group, PLLC, Washington, DC, for Paul F.X. Risteen, plaintiff.
Alexander Nemiroff, Shulman, Rogers, Gandal, Pordy & Ecker, P.A., Rockville, MD, Alan Smith Kerxton, Rockville, MD, William John Hickey, Godwin & Hickey, LLC, Rockville, MD, for Youth for Understanding, Inc., defendant.
Joseph Edward Hartman, Fulbright & Jaworski, L.L.P, Washington, DC, for Youth for Understanding USA, Inc. dba Youth for Understanding International Exchange, defendant.
Before the Court is plaintiff Paul Risteen's motion seeking a preliminary injunction against defendants Youth for Understanding, Inc. ("YFU") and Youth for Understanding USA, Inc. ("YFU USA") to enjoin them from denying him continuation health insurance coverage under the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1140 et seq., as amended by the Consolidated Omnibus Budget Reconciliation Act ("COBRA"), 29 U.S.C. § 1161 et seq. Risteen, a former employee of YFU, alleges that YFU USA is the successor employer to YFU following YFU's corporate reorganization, and therefore that YFU USA must assume YFU's obligation to provide Risteen his remaining COBRA continuation health benefits. The Court is able to reach and decide the merits of Risteen's claims laid out in his motion for preliminary injunction and, upon consideration of plaintiffs motion, the submissions of the parties, and oral argument, the Court grants Risteen's motion.
Located in Washington, D.C., YFU was a non-profit corporation that specialized in high school student exchange programs matching American students with foreign families and schools, as well as foreign students with American families and high schools. Complaint ¶ 4. Since 1951, more than 200,000 students have participated in YFU exchanges; in the 2001 academic year more than 3,000 students in the United States participated in YFU programs. YFU USA Opp., Ex. 1 at ¶ 3. Each participating country has its own national organization that coordinates the exchange of students; YFU served as the national organization in the United States. Id at ¶ 4.
YFU hired Risteen as a Regional Director on December 12, 1994, and promoted him in January 1997 to Vice President for Programs, effectively the number two position in the YFU hierarchy just below the president. Complaint at ¶ ¶ 5-6. Risteen found the environment under McNally hostile and intolerable, and tendered his resignation in April 2001. Id. at ¶ 17. YFU's Board of Trustees met in late April 2001 and accepted Risteen's resignation. Id. at ¶¶ 22-23. However, the Board offered Risteen a contract as a temporary employee to work from home, paying Risteen the equivalent of six months of his former salary, and it bought out his benefits package. Id. at ¶ 24. In September 2001, the Board informed Risteen that they had decided not to continue his employment with YFU after the expiration of his contract. Id. at ¶ 28.
Raising claims of employment discrimination, failure to pay wages, and ERISA violations, Risteen filed this action in the Superior Court of the District of Columbia on February 25, 2002, and YFU then removed the case to this Court. Notice of Removal f 1. On March 8, 2002, Risteen found out from his pharmacy that YFU was no longer providing health insurance for him. Risteen Motion, Ex. 1 at ¶ ¶ 1-5. As a result, Risteen was left with $1,832 of unpaid medical expenses related to heart complications. Id. at ¶¶ 8-9. After repeated inquiries to YFU, he was told that all further communications must go through YFU's attorney. Id. at ¶ 13. On April 22, 2002, Risteen was hospitalized through an emergency room admission to George Washington University Hospital with a preliminary diagnosis of congestive heart failure and possibly a pulmonary embolism. Id. at ¶ 14. Because he no longer had health insurance, Risteen asked to be discharged on April 24, 2002—against his doctors' medical advice. Id. at ¶ 15. The medicine prescribed on his release cost $629 for a two-week supply, which, Risteen claims, he was instructed to take "for the rest of my life." Id. at ¶ 16. The cost of Risteen's hospital stay and medical tests exceeded $17,000. Id. at ¶ 17. Moreover, Risteen's urologist refused to perform necessary prostate surgery on Risteen until his heart and lungs could withstand anesthesia. Id. at ¶ 18. Risteen had follow-up appointments with his cardiologist, urologist, pulmonologist, and psychiatrist, each paid out of his own pocket. Id at ¶ 19. Risteen claims that he is being denied (i.e., is denying himself) critical medial attention because he has no health insurance. Id. at ¶ 20.
Risteen has moved to amend his complaint to include two additional counts under COBRA. The proposed Count V of Risteen's amended complaint claims that YFU failed to pay benefits it owed Risteen before it ceased operations. Motion for Leave at pp. 5-7. Risteen maintains that YFU attempted to escape its COBRA liability to Risteen, and that YFU USA is "a mere continuation of the enterprise formerly known as YFU." Id. at p. 8. He contends that YFU has avoided its obligations under COBRA by "establishing a new corporate shell for the purpose of receiving the benefits, assets, and goodwill of YFU, Inc., thereby liquidating the assets of YFU, Inc. and leaving it unable to pay for its lawful obligations." Id. at p. 6. Therefore, Risteen claims, pursuant to 29 U.S.C. § 1132(a), "[a]s a successor entity, YFU USA, is obliged under every theory of successor liability to assume the obligations of YFU, Inc., including its ERISA obligations." Id at pp. 6-7. He seeks to recover the benefits for which he would have been eligible—approximately seven (7) months of COBRA continuation benefits—as well as his costs and attorney's fees. See Amended Complaint, at If 44.
Under the proposed Count VI, Risteen seeks to add a claim for YFU USA's failure "to enroll Risteen into its health care plan, pursuant to COBRA, for the remainder of his eligibility period." Id. at K 52. He maintains that YFU's "cessation of activities on March 8, 2002, and its subsequent transfer of its assets, employees, equipment, facilities, databases, clients, sponsors, and good will to Defendant YFU USA is a `transaction to evade liability.'" Id. at 1150. Risteen claims that "YFU USA is a mere continuation of the enterprise formerly known as YFU, Inc." Motion for Leave at p. 12.
Risteen may bring an action to recover and reinstate COBRA continuation benefits and allow for continuation health insurance coverage under 29 U.S.C. § 1132.1 The statute states:
Civil enforcement: (a) Persons empowered to bring a civil action A civil action may be brought—(1) by a participant or beneficiary—(A) for the relief provided for in subsection (c) of this section, or (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan; ... or (3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.
29 U.S.C. § 1132 (emphasis added); see also 26 C.F.R. § 54.4980B-1, A-1(b) (beneficiaries may "file a lawsuit to redress the noncompliance"). As the Supreme Court stated In Foman v. Davis, "[i]f the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits." 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).
Under Fed.R.Civ.P. 15(a), "[a] party may amend the party's pleading ... by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." The Court in Foman stated:
In the absence of any apparent or declared reason—such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.—the leave sought should, as the rules require, be `freely given.'
371 U.S. at 182, 83 S.Ct. 227. Here, Risteen moved to amend his complaint roughly five weeks after he learned that his health insurance benefits had been cut off—and hence without "undue delay" or "dilatory motive." Discovery had not yet begun, and there is no scheduling order in place setting a discovery cutoff, a pretrial conference, or a trial date; thus there would be no prejudice to defendants if the amendment is permitted. Given that this action is in an early stage, and there are no allegations of bad faith or prejudice to the defendants, the Court grants Risteen's motion to amend his complaint.
ERISA, as amended by COBRA, requires that an "employer" who sponsors a group health insurance plan must offer employees and "qualified beneficiaries," including spouses and dependent children, the opportunity to continue their health insurance coverage, at group rates but at their own expense, for at least 18 months after the occurrence of a "qualifying event"—such as a layoff or termination. See 29 U.S.C. §§ 1161-1168. Congress enacted COBRA so that employees who lose their jobs through layoffs and terminations can purchase continuation health insurance at a rate approximately equal to the employer's group...
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