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Honey v. Health

United States District Court, D. Nevada

April 24, 2014

REGINA C. HONEY, individually and as natural parent of ADDISON M. HONEY, a minor, and LUCAS R. HONEY, a minor, et al., Plaintiffs,
DIGNITY HEALTH, a California nonprofit corporation, doing business as ST. ROSE DOMINICAN HOSPITAL — SIENA CAMPUS, et al., Defendants.


GEORGE FOLEY, Jr., Magistrate Judge.

This matter is before the Court on Defendant Dignity Health's Motion for Offset (#108) filed on March 5, 2014. Plaintiffs filed their Opposition to Defendant's Motion (#109) on March 21, 2014. Defendant filed its Reply (#111) on March 31, 2014. The Court conducted a hearing in this matter on April 21, 2014.


Plaintiffs allege that Defendant Dignity Health (hereinafter "Dignity") terminated Plaintiff Regina Honey's employment on June 22, 2010. Plaintiffs further allege that following her termination, Dignity failed to inform Ms. Honey that her and her family's health insurance benefits ceased on June 30, 2010 and failed to notify or provide Plaintiff with the option to continue health insurance coverage (COBRA) after a qualifying event occurs, such as termination for something other than gross conduct as required by 29 U.S.C. §1161. Plaintiffs allege that pursuant to 29 U.S.C. §1132(c), the Court is vested with the discretion to assess a civil penalty against any party that fails to meet this statutory obligation in an amount not more than $110/day from the first day that notice is delinquent until valid notice is finally made. Each violation with respect to a single participant shall be treated as a separate violation. Plaintiffs thus allege that the Court may impose separate civil penalties on Dignity with respect to each member of the Honey family. See Plaintiffs' Motion for Summary Judgment (#88), pg. 2.

The Plaintiffs also alleged claims for civil penalties under 29 U.S.C. § 1132(c) against Codefendants Conexis Benefits Administrators and Conexis, LLP ("Conexis") and Payflex Systems, USA, Inc. ("Payflex") based on their alleged failures to notify Plaintiffs of their COBRA rights. Conexis and Payflex have now been dismissed from this action with prejudice by stipulation between Plaintiffs and the Codefendants. See Orders (#102) and (#105). Conexis informed Dignity that it entered into a confidential settlement agreement with the Plaintiffs, but has refused to provide Dignity with a copy of the settlement agreement or disclose the amount of the settlement payment, if any, made to the Plaintiffs. Payflex has refused to disclose to Dignity whether it entered into a settlement agreement with the Plaintiffs or paid any money to Plaintiffs pursuant to a settlement agreement. Plaintiffs state in their opposition that they have entered into confidential settlement agreements with both Conexis or Payflex.

Dignity alleges that it is entitled to an offset for any payments made to the Plaintiffs by Codefendants Conexis or Payflex, and therefore seeks an order requiring Plaintiffs to produce the settlement agreements and/or disclose the amounts paid to Plaintiffs by Conexis or Payflex in exchange for the dismissal of the claims against them. Plaintiffs argue that Dignity is not entitled to an offset for any payments made to them by Conexis or Payflex, and therefore the settlement payments made by Codefendants are irrelevant and the Court should not order production of settlement agreements or disclosure of the settlement amounts.


Defendant Dignity has the initial burden to show that the settlement agreements and/or the amounts of the settlements between Plaintiffs and Conexis and Payflex are relevant to its defenses to Plaintiffs' claim and therefore discoverable. See Krause v. Nevada Mut. Ins. Co., 2014 WL 496636, *4 (D.Nev. 2014) ("The party seeking to compel discovery has the initial burden of establishing that a request satisfies the relevancy requirements of Rule 26(b)(2).") Relevancy under Rule 26(b) is construed broadly. Id., citing Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340 (1978).[1]

Dignity argues that the payments received by Plaintiffs from the Codefendants are relevant because civil penalties or statutory damages awarded under 29 U.S.C. §1132(c)(1)(A) are, at least in part, intended to compensate the Plaintiffs for the injuries or harm they have suffered, and Plaintiffs should not recover damages greater than what is needed to fully compensate them. Plaintiffs argue, however, that the remedy provided by §1132(c)(1)(A) is a penalty which intended to punish a defendant and deter it from engaging in future violations. The amount of civil penalties paid by one defendant by way of judgment or settlement is therefore irrelevant to the determination of the civil penalties that should be imposed on a codefendant.

In support of their position, Plaintiffs rely on the Eighth Circuit's decision in Starr v. Metro Systems, Inc., 461 F.3d 1036, 1040 (8th Cir. 2006) which states as follows:

Under 29 U.S.C. §1132(c)(1)(A), an ERISA plan administrator "may in the court's discretion be personally liable" up to $100 per day from the date of his or her failure to comply with the notification requirements of 29 U.S.C. §1166(a)(4). The purpose of this statutory penalty is to provide plan administrators with an incentive to comply with the requirements of ERISA, Kerr v. Charles F. Vatterott & Co., 184 F.3d 938, 948 (8th Cir. 1999), and to punish noncompliance, Chesnut v. Montgomery, 307 F.3d 698, 704 (8th Cir. 2002). In exercising its discretion to impose statutory damages, a court primarily should consider "the prejudice to the plaintiff and the nature of the plan administrator's conduct." Kerr, 184 F.3d at 948. Although relevant, a defendant's good faith and the absence of harm do not preclude the imposition of the § 1132(c)(1)(A) penalty. Chesnut, 307 F.3d at 703. We review the decision to deny statutory damages for an abuse of discretion. Wilson v. Moog Auto., Inc. Pension Plan & Trust, 193 F.3d 1004, 1010 (8th Cir. 1999).

Plaintiffs also cite Van Hoove v. Mid-America Bldg. Maintenance, Inc., 841 F.Supp. 1523, 1537 (D.Kan. 1993) in which the court rejected the defendant's argument that a $10, 000 settlement that plaintiff received from a codefendant should offset the defendant's liability under §1132(c)(1)(A). The court stated: "Had Corroon and Black, the plan administrator, remained in the case, the court would have had the discretion to penalize Corroon and Black up to $100 per day for its statutory violations. It would be inappropriate to offset plaintiff's damages with a settlement amount that more closely represents a penalty than compensation for damages." Id.

The Ninth Circuit's interpretation of the purpose of §1132(c)(1)(A), however, differs from that of the Eighth Circuit and the district court in Van Hoove. In Stone v. The Travelers Corporation, 58 F.3d 434, 437-39 (9th Cir. 1995), the court was required to determine what statute of limitation governs claims under 29 U.S.C. §1132(c)(1)(A). Because §1132(c) does not provide its own statute of limitations, the court was required to look to the most analogous state statute of limitations. The district court applied California's one year statute of limitations for an action upon a statute for a penalty or forfeiture. The Ninth Circuit concluded, however, that the three year California statute of limitations for an action upon a liability created by statute, other than a penalty or forfeiture should apply. In so holding, the court relied on Rivera v. Anaya, 726 F.2d 564 (9th Cir. 1984) which held that the statutory damages remedy under the Federal Farm Labor Contractor Registration Act was not a penalty because the statute was intended to compensate plaintiffs in a situation where "the damages may be obscure and difficult to prove.'" Stone, 58 F.3d at 438, quoting Rivera, 726 F.2d at 567. The fact that Congress provided for either actual or statutory damages did not detract from the fact that the provision for damages contemplated compensation, and not a penalty or punishment by the government. Stone further noted that the wrong addressed by §1132(c)(1)(A) is substantially more private than public. The wrong is the failure of the employer or the administrator to provide the plan beneficiary with the requested information. The injury to the plaintiff is that he lacks information concerning "his own pension or severance rights." Stone, 58 F.3d at 438. The court also relied on the fact that the remedy was sought by and payable to the plaintiff for his injury, and was not sought by the government to compensate for a public injury. The court therefore concluded that "recovery of up to $100 per day provided to a participant or beneficiary by ERISA §1132(c) is not a penalty or forfeiture, ' but is instead a remedy sought by an individual as compensation to address a private wrong." Stone, 58 F.3d at 439.

In Hamilton v. Sears Roebuck and Company, 2008 WL 1901269 (D.Nev. 2008), the plaintiff asserted a claim under 29 U.S.C. §1132(c)(1)(A) based on the defendant's failure to provide COBRA notification. The district court found that the employer and the plan administrator failed to provide the notice as a result of a computer error. Due to this same error, the plaintiff continued to receive health insurance coverage under her former employer's health insurance plan. The court held that an award of statutory damages of $100 a day was too severe because the defendant's mistake was inadvertent. The court stated, however, that statutory damages could be awarded if plaintiff could show that she suffered some actual injury or damage. The Ninth Circuit affirmed this decision in an unpublished memorandum, ...

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