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FENNER v. FAVORITE BRAND INT'L

November 4, 1998

JULIA FENNER, Plaintiff,
v.
FAVORITE BRAND INTERNATIONAL, INC., a Delaware Corporation, and AON CONSULTING, INC., a Pennsylvania Corporation, Defendant.



The opinion of the court was delivered by: GETTLEMAN

MEMORANDUM OPINION AND ORDER

 Plaintiff Julia Fenner has filed a second amended complaint against defendants Favorite Brand International, Inc. ("Favorite Brands") and Aon Consulting, Inc. ("Aon"), alleging that Aon (Count I) and Favorite Brands (Count II) violated the Comprehensive Omnibus Budget Reconciliation Act of 1985 ("COBRA," 29 U.S.C. §§ 1161 et seq.) by failing to notify plaintiff of her COBRA rights in a timely manner. On August 6, 1998, plaintiff voluntary dismissed Aon from the case. Defendant Favorite Brands has filed a motion to dismiss Count II of the Second Amended Complaint pursuant to Fed. R. Civ. Pro. 12(b)(6) for failure to state a claim upon which relief can be granted. For the following reasons, Favorite Brands' motion is denied.

 BACKGROUND

 In June 1996, plaintiff was working as an Art Director at a company known as Kidd & Company, located in Ligonier, Indiana. On June 17, 1996, Favorite Brands purchased Kidd & Company and continued to operate at the same location. Plaintiff remained employed by Favorite Brands and continued to work at the Ligonier plant until she moved to Palatine, Illinois in September 1996. After she moved, plaintiff continued to work for Favorite Brands out of her home, and reported to her supervisors at Favorite Brands' headquarters in Lincolnshire, Illinois.

 Around the middle of October, 1996, plaintiff learned that Favorite Brands was closing the Ligonier plant and that all of the Ligonier employees had been contacted about their future with Favorite Brands or given severance packages and insurance options. Plaintiff was a beneficiary of a health plan provided first by Kidd & Company and subsequently by Favorite Brands. Plaintiff's insurance benefits and payroll were continuously received through the Ligonier plant, but Favorite Brands never contacted her regarding the shutdown of the plant. Plaintiff repeatedly asked Favorite Brands about the status of her insurance and payroll but never received a response.

 On January 27, 1997, plaintiff was informed by representatives of Favorite Brands that her employment was terminated. Plaintiff did not receive a written notice of her COBRA rights to elect continuing coverage under the health plans. On June 10, 1997, her attorney wrote a letter to Favorite Brands inquiring about plaintiff's COBRA right. On or about July 10, 1997, plaintiff received a COBRA notice [the "Notice"] from Favorite Brands. The Notice provided that, "your enrollment form must be postmarked no later than September 10, 1997; otherwise, your coverage will have terminated as of midnight, December 31, 1996." The transmitter of the Notice was stated as "Favorite Brands International COBRA Administration Center."

 DISCUSSION

 I. Standard for a Motion to Dismiss

 A motion to dismiss for failure to state a claim may not be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Hartford Fire Ins. Co. v. California, 509 U.S. 764, 811, 113 S. Ct. 2891, 125 L. Ed. 2d 612 (1993). Generally, in reviewing a motion to dismiss, the court accepts all factual allegations as true and draws all inferences in favor of the plaintiff. Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1428 (7th Cir. 1996).

 II. COBRA Violation

 COBRA requires the plan sponsor of each group health plan to provide each qualified beneficiary, who would lose coverage under the plan as a result of a qualifying event, an option to continue coverage under the plan. 29 U.S.C. § 1161. Upon occurrence of a qualifying event, "the employer of an employee under a plan must notify the administrator . . . within 30 days . . . of the date of the qualifying event[.]" 29 U.S.C. § 1166(a)(2). The administrator then must notify, within 14 days of receiving the notification from the employer, any qualified beneficiary of his COBRA rights. 29 U.S.C. §§ 1166(a)(4)(A) & (c). Any administrator who fails to meet this notification requirement "may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $ 100 a day from the date of such failure . . ., and the court may in its discretion order such other relief as it deems proper." 29 U.S.C. § 1132(c)(1).

 In its motion to dismiss, Favorite Brands raises three arguments: (1) the termination of plaintiff's employment did not result in the loss of coverage; (2) Favorite Brands is not a plan administrator; and (3) plaintiff does not allege that she has suffered any actual injury. For the following reasons all three arguments are denied.

 (1) The loss of coverage.

 The term "qualifying event" means any one of six listed events "which, but for the continuation coverage required under [the COBRA amendments], would result in the loss of coverage of a qualified beneficiary[.]" 29 U.S.C. § 1163. "The termination" of the beneficiary's employment is one of the six events listed in § 1163. Under certain circumstances, termination of an employment may not be a qualifying event due to lack of actual loss of coverage. Fenner v. Favorite Brands International, Inc., 1998 U.S. Dist. LEXIS 7224, No. 97 C 5906, 1998 WL 249232, at *5 (N.D. Ill. May 12, 1998). However, a "loss of coverage need not occur immediately after the qualifying event as long as the loss of coverage occurs before the end of the eighteen month maximum coverage period." Collins v. Strategic Health Care Management Serv. Inc., 1992 U.S. Dist. LEXIS 6075, No. 91 C 7469, 1992 WL 92099, ...


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