Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:08-cv-00153-Sarah Evans Barker, Judge.
The opinion of the court was delivered by: Kanne, Circuit Judge.
Before CUDAHY, KANNE, and TINDER,Circuit Judges.
When Blanca Gomez and Joan Wagner-Barnett left their jobs with St. Vincent Health, Inc. (the "Company"), they did not receive notices describing how to extend their health insurance coverage within the period prescribed by statute. Responding to a solicitation from a lawyer, Barnett and Gomez became the named plaintiffs in a proposed class action seeking damages from and statutory penalties against the Company for its violation of the notice provisions. The district court declined to certify the class, however, having found the proposed class counsel to be inadequate for the purposes of class representation. It then considered the named plaintiffs' individual claims on cross-motions for summary judgment. The district court denied their request for statutory penalties against the Company and Gomez's request for damages, but it awarded damages to Barnett. Barnett and Gomez now appeal the district court's decisions not to certify the class and not to award statutory penalties, and Barnett appeals the amount of damages the district court awarded her. We affirm.
St. Vincent Health, Inc. is the parent corporation for a system of hospitals and healthcare service facilities in central Indiana. During the period covered by the proposed class description, the Company administered group health plans for approximately sixteen facilities that employed thousands of individuals. In that capacity, it was responsible for complying with federal statutes and regulations relating to its employer-sponsored health insurance programs. This case involves the Company's obligation to timely notify qualified departing employees of their right to extend their health insurance coverage at their own cost after their employment ends. These notices are commonly called "COBRA notices," as the obligation was imposed by an amendment to the Employee Retirement Income Security Act (ERISA) of 1974 contained in the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985.
Between May 2004 and January 2006, approximately 1,570 employees in the St. Vincent network experienced a qualifying event that obligated the Company to provide them with COBRA notices. Because of the organization's complexity, the Company employed third-party administrators ("TPAs") to assist in distributing COBRA notifications. The TPAs would receive automated notification from the human resources departments at various St. Vincent network facilities; they would then produce the required COBRA notices and mail them to the qualified beneficiaries on the Company's behalf.
The Company also established an oversight system for its employee-benefit programs. It hired outside auditors to investigate compliance with statutory, regulatory, and internal policy requirements for all of its benefit programs; part of those audits involved monitoring the COBRA notification program. Bradley & Associates, a public accounting firm, performed the audits during the period relevant to this case. The firm would procure a random sample of terminated-employee files and the associated TPA data to ensure that the Company was meeting its COBRA obligations. In addition, the Company operated a call center where current and former employees could inquire about plan benefits. The center logged over 55,000 calls during the period of the complaint. Neither the audits nor the call center yielded any indication that the Company was faltering in its COBRA obligations.
Despite these efforts, the Company later determined that some notices had slipped through the cracks. In February 2006, three former employees brought a proposed class action against the Company in the Southern District of Indiana, alleging that at least forty former employees either received their COBRA notices late or never received them at all. In response, the Company fully investigated its COBRA compliance. It determined that between May 2004 and January 2006, an estimated 266 of the 1,570 participants who experienced qualifying events apparently did not timely receive their COBRA notices. The Company promptly contacted those individuals, provided the overdue notices, allowed retroactive election of benefits, and offered to negotiate payment plans for those who could not afford to immediately pay the accrued premium obligations.
The initial class action suit was terminated by court order in September 2007. Brown-Pfifer v. St. Vincent Health, Inc., No. 1:06-cv-0236, 2007 WL 2757264 (S.D. Ind. Sept. 20, 2007). The district court declined to certify the proposed class for multiple reasons, including its finding that the proposed class counsel was inadequate to repre-sent the proposed class. It then entered summary judgment in the Company's favor on the named plaintiffs' individual claims. Those named plaintiffs appealed the district court's judgment, but later voluntarily dismissed their appeal.
Instead of pursuing the appeal, the spurned proposed class counsel in the Brown-Pfifer case chose to pursue a new class action involving the same operative circumstances. Using the list of qualified beneficiaries produced by the Company during discovery in the Brown-Pfifer litigation, counsel contacted those participants who had received untimely COBRA notices and solicited their participation in another lawsuit against the Company. Among others, Gomez and Barnett responded to his solicitation and authorized him to file, on their behalf, the lawsuit we review today. As the only remaining*fn1 named plaintiffs, they sought to represent a class materi-ally identical to that proposed in Brown-Pfifer.
Gomez had worked as an Environmental Services Attendant at the St. Vincent Carmel Hospital until November 30, 2004. While working at the hospital, she and her husband were enrolled in health and dental insurance plans administered by the Company. After she left the job, her insurance coverage continued through December 31, 2004. Under COBRA, Gomez was eligible to extend her coverage for eighteen months by paying monthly premiums that had been previously paid by her employer. She should have received the COBRA notice by January 13, 2005, but she did not receive mailed notice until approximately June 22, 2006. If she had elected extended coverage, her monthly premiums would have been $304.10 for health insurance and an additional $35.54 for dental benefits. Gomez testified, however, that she would not have elected to extend her benefits because she could not have afforded the monthly premiums.
Barnett worked as a Registered Nurse at the St. Vincent Indianapolis Hospital. Her last day of employment was November 28, 2004. She had been enrolled in health, dental, and vision insurance plans administered by the Company. Like Gomez, Barnett had insurance coverage through St. Vincent that continued through December 31, 2004. She should have received the COBRA notice by January 11, 2005, but she did not receive mailed notice until June 25, 2006. Unlike Gomez, Barnett testified that she would have elected to pay the premiums to extend her benefits in order to offset her monthly prescription costs and other medical expenses. Her monthly COBRA premiums would have been $304.10 for health insurance, an additional $33.54 for dental benefits, and an additional $7.98 for vision benefits.
Barnett described having paid approximately $700 for prescription medications during the period between leaving St. Vincent Indianapolis and being covered by the health insurance program at her new employer in February 2005. She also provided evidence showing she incurred $648 of expenses for vision care between November 2004 and December 2005. She contends that she would not have ...