June 26, 2022

Volume XII, Number 177

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June 24, 2022

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June 23, 2022

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Plaintiffs’ Bar Shows Renewed Interest in COBRA Notice Litigation

Numerous Fortune 500 companies around the country have recently seen a barrage of cases alleging that notices required under the Consolidated Omnibus Budget Reconciliation Act (COBRA) fail to provide all information required by COBRA. Class action cases filed against high-visibility defendants in Georgia, Michigan, Florida, and elsewhere allege the companies violated federal law when they sent purportedly inaccurate, threatening, or confusing notices of former employees’ rights to elect to continue medical-insurance coverage after their employment ended.

Under COBRA, election notices must contain information including a mailing address for payments, the identity of the plan administrator, an explanation of how to enroll, and a physical form to elect coverage. The U.S. Department of Labor (DOL) provides a model COBRA notice template, updated in 2020, which contains these items. Yet few companies use DOL’s model COBRA notice, for several reasons. First, most companies contract with third-party vendors, who design and provide their own notices to covered persons experiencing a qualifying event, such as job separation. Second, these vendors often omit the plan administrator’s name to avoid confusion, because the payments must be mailed to the third-party vendor. Third, many items specified in the DOL model notice are often unknown (and therefore omitted) at the time notice is given. The resulting litigation is directed at the employer or plan sponsor as the defendant, but not the vendor whose election notice is challenged.

Employers have long had difficulty adhering to COBRA’s technical requirements, which have become even more onerous over the past two years. In addition to revising model COBRA notices in 2020, the DOL and Internal Revenue Service (IRS) also extended many deadlines relating to COBRA; DOL and IRS provided additional guidance following the enactment of the American Rescue Plan Act of 2021.

New COBRA litigation was already surging before these changes went into effect, and the increased complexity added by these new developments have added fuel to the fire. Purely technical violations of COBRA’s notice provisions not resulting in actual harm to the plaintiffs, when brought as a class action, can nevertheless expose defendants to staggering potential damages because of statutory penalties that accrue per person per day, as well as the potential for an award of attorneys’ fees.

In sum, COBRA provides many avenues to sue companies – many of whom do not even issue their own COBRA notices – for technical violations of its quickly multiplying requirements. These cases, filed as class actions, can present the risk of protected litigation, even where the underlying claims lack merit. Accordingly, many defendant companies opt for class settlements ranging from just over $100,000 to just under $1,000,000, oftentimes at the outset of litigation before any discovery has even been conducted. Even less surprising is that more and more plaintiff-side firms are entering this field, eyeing the potential to take home one-third of a large common fund settlement shortly after filing a complaint.

Jackson Lewis P.C. © 2022National Law Review, Volume XII, Number 139
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About this Author

Charles Seeman, Jackson Lewis, ERISA, Employment Lawyer, Benefits Attorney
Principal

Charles F. Seemann, III, is a Principal in the New Orleans, Louisiana, office of Jackson Lewis P.C. His practice emphasizes ERISA and employment law, but encompasses a wide variety of litigation and counseling matters as well.

Mr. Seemann's primary practice focus includes the defense of ERISA plans and plan fiduciaries at both public and private companies, multi-employer plans and plan fiduciaries, and financial institutions providing services to ERISA plans. In addition to ERISA, Mr. Seemann has extensive experience in a wide range of employment matters,...

504-208-5843
Kyle R. Bevan Associate Jackson Lewis P.C.
Associate

Kyle R. Bevan is an associate in the Orange County, California, office of Jackson Lewis P.C. and a member of the firm’s ERISA Complex Litigation group.

Kyle actively defends ERISA class action matters asserting claims for breach of fiduciary duty on both coasts of the country. He is litigating ERISA defined contribution plan excessive fee class actions and is involved in all aspects of initial motion practice, class certification, and discovery issues. Recently, he has been in the forefront of novel projects, teaming up...

949-885-5253
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