misconduct." Under the above definition, Leigh would have had to had an "evil design" to injure Korbel when she called Debbie Krambs. Although Leigh may be charged with poor judgment, she cannot be accused of gross misconduct. Accordingly, we conclude that Korbel unreasonably determined that Leigh Paris committed gross misconduct and wrongfully denied her notice of and information about her COBRA benefits.
It only remains to determine what penalties, if any, Korbel or Duncan must pay. We note preliminarily that this matter is one of first impression in this Court. Thus, we look to other courts' interpretations of § 1132(c) in deciding whether to assess penalties.
Korbel argues that as they acted in good faith, and as Leigh Paris was not prejudiced by Korbel's actions, they should pay no penalties. Plaintiffs, on the other hand, assert that the lack of prejudice does no prevent us from assessing penalties.
Prejudice, has been considered by some courts, and ignored by others. In Chambers v. European American Bank, 601 F. Supp. 630, 638 (E.D.N.Y. 1985) the court did not assess penalties where the plaintiff/employee had not been prejudiced by the denial of information about the employers' benefits plans. See also Pollock v. Castrovinci, 476 F. Supp. 606, 619 (S.D.N.Y. 1979) (court refused to assess penalties where evidence suggested plaintiff's request for information was not in good faith). Other cases cited in Chambers have required prejudice, but have also denied penalties for other reasons. In Paris v. Profit Sharing Plan, etc., 637 F.2d 357, 362 (5th Cir. 1981), the appellate court affirmed the trial court's denial of penalties where the plaintiffs had made no attempt to show prejudice. In Wesley v. Monsanto Co., 554 F. Supp. 93 (E.D.Mo. 1982) affirmed 710 F.2d 490 (8th Cir. 1983), although the plaintiff was unprejudiced, he had never requested information, he had only asked that his pension benefits be paid. In Shlomchik v. Retirement Plan of Amalgamated Ins., 502 F. Supp. 240, 245 (E.D. Pa. 1980), there was no prejudice when the plaintiff had requested only a copy of the retirement benefits plan, not information about his ability to choose continuation of his health care plan. In Adams v. Western Conf. of Teamsters Pension Plan, 484 F. Supp. 933 (N.D. Utah 1979), the plaintiff had not proved that he had not been provided with requested information. In Kleinhans v. Lisle Savings Profit Sharing Plan, 810 F.2d 618, 624, and n.9 (7th Cir. 1987), there was no request for information.
However, in Porcellini v. Strassheim Printing Co., 578 F. Supp. 605, 612 (E.D. Pa. 1983), the court assessed penalties even though there was no prejudice to the plaintiff because the purpose of the penalty was to punish poor benefit plan administrators, not to compensate the employees. In Bova v. American Cyanamid, 662 F. Supp. 483 (S.D. Ohio 1987), the court assessed penalties, and followed Porcellini. Likewise, in Maryonovich v. Market Data Retrieval, Inc., 716 F. Supp. 343 (N.D.Ill. 1989), the court was inclined to follow Porcellini, but did not reach the penalties issue because the presence of prejudice to the plaintiff was an unresolved factual issue. And, in Bemis v. Hogue, 635 F. Supp. 1100, 1105-06 (E.D. Mi. 1986), the court assessed penalties without a showing of prejudice in order to punish an indifferent plan administrator. Cf. Lee v. Prudential Insurance Co. of America, 673 F. Supp. 998, 1005 (N.D. Cal. 1987) (plaintiff permitted to amend and to state a claim for penalties after showing a prior specific request for information about benefits and administrative appeal). All of the cases cited in the preceding paragraph leave the decision to assess penalties to the sound discretion of the trial court. See, e.g., Paris v. Profit Sharing Plan, etc., 637 F.2d 357, 362 (5th Cir. 1981).
In Porcellini, 578 F. Supp. 605, 612, the court was convinced that the penalties provisions of § 1132(c) were intended to induce compliance by plan administrators. The statute does not require prejudice to be shown by the plaintiff, and gives the trial court the discretion to decide whether to assess penalties. 29 U.S.C. § 1132(c). Additionally, a plan administrator's duties under COBRA are not onerous, while the result of non-compliance could be disastrous for the former employee.
In order to best effectuate the purpose of COBRA, see e.g., n.3 supra, we conclude that Porcellini was rightly decided, and accordingly will assess penalties.
In determining the amount of penalty to assess, Korbel's good faith may be a mitigating factor. Cf. Dehner v. Kansas City Southern Industries, Inc., 713 F. Supp. 1397, 1401-1402 (D. Kan. 1989). We also conclude, upon review of the law, that the lack of actual harm to an ERISA beneficiary may also be a mitigating factor.
In the present case, Korbel has violated both § 1166 (notice upon the happening of a qualifying event) and § 1132 (provide information upon request). Accordingly, summary judgment is granted in favor of plaintiffs on their claims of ERISA violations, and Harold Duncan, Korbel's Vice President for Administration/Finance, is ordered to pay to Leigh Paris penalties under 29 U.S.C. §§ 1132 and 1166 in the amount of $ 10 per day for each day between May 29, 1988
and November 22, 1988. Duncan also is ordered to pay to Leigh Paris penalties under § 1132(c) in the amount of $ 10 per day from August 13, 1988 to November 22, 1988, the time between Leigh Paris' initial request for information, and Korbel's proper response.
Regarding Jonathan Northrop, Korbel is hereby ordered to pay penalties of $ 10 per day from May 29, 1988 to November 22, 1988 for failure to provide Jonathan with proper notice under 29 U.S.C. § 1166(4). Korbel is also ordered to pay penalties of $ 10 per day from August 13, 1988 to November 22, 1988 pursuant to § 1132(c) for failure to respond to the request for information for Jonathan Northrop. See n.1 supra.
As Ronald Paris was not an eligible beneficiary at any time during this litigation, he has failed to state a claim on which relief can be granted, and his claims are hereby DISMISSED.
E. Attorneys Fees.
The Ninth circuit balances five factors in determining whether to grant attorneys' fees under 29 U.S.C. § 1132(g). Here, they include 1) Korbel's bad faith; 2) Korbel's ability to pay an award of fees; 3) the deterrent effect of an award of fees; 4) whether the party seeking fees sought to benefit all beneficiaries of an ERISA plan; and 5) the relative merit of the parties' positions. Terpinas v. Seafarer's International Union of N. America, 722 F.2d 1445 (9th Cir. 1984) (citing Hummell v. S.E. Rykoff & Co., 634 F.2d 446 (9th Cir. 1980)).
Although Korbel is not unable to pay a fee award, there is no evidence that Korbel acted in bad faith -- it truly, although erroneously, believed that Leigh Paris committed gross misconduct. In addition, there is no evidence that an award of fees would have a greater deterrent effect than the penalties assessed. Leigh Paris' suit did not seek to benefit all beneficiaries at Korbel. Despite Korbel's good faith beliefs, viewed objectively, Korbel's position lacks the merit of the plaintiffs' ERISA claims. However, the lack of merit does not tip the balance towards an award of attorneys fees. Accordingly, plaintiffs' motion for attorneys fees is DENIED.
1. Summary Judgment in favor of Korbel is GRANTED as to Leigh Paris' claim of wrongful termination.
2. Summary judgment in favor of plaintiffs Leigh Paris and Jonathan Northrop is GRANTED as to their claims of lack of notice (29 U.S.C. 1166(4)) and penalties are assessed as stated above.
3. Summary judgment is GRANTED in favor of plaintiff Leigh Paris and Jonathan Northrop on their claims of lack of information following a request, 29 U.S.C. 1132(c), and penalties are assessed as stated above. Summary judgment is GRANTED in favor of the plaintiff as to Jonathan Northrop on the same claim.
4. The claims of plaintiff Ronald Paris are DISMISSED for failure to state a claim.
5. The plaintiffs' tort claim based on violations of ERISA are DISMISSED as preempted by ERISA.
6. Plaintiffs motion for attorneys fees is DENIED.
7. Defendant's Motion To Strike Plaintiff's Reply or in the alternative, Application for Leave to File Surrebuttal is DENIED.
IT IS SO ORDERED.
Dated: March 14, 1990
IT IS HEREBY ADJUDGED THAT:
1. Summary Judgment be extended in favor of Korbel as to Leigh Paris' claim of wrongful termination, and Leigh Paris shall take nothing by this claim.
2. Summary Judgment be extended in favor of plaintiffs Leigh Paris and Jonathan Northrop as to their claims of lack of notice, 29 U.S.C. 1166(4). Leigh Paris and Jonathan Northrop shall each take $ 10.00 per day from May 29, 1988 to November 22, 1988, inclusive, to be paid by defendant Korbel.
3. Summary judgment be extended in favor of plaintiffs Leigh Paris and Jonathan Northrop on their claims of lack of information following a request, 29 U.S.C. 1132(c). Leigh Paris and Jonathan Northrop shall each take $ 10.00 per day from August 13, 1988 to November 22, 1988, inclusive, to be paid by defendant Korbel.
IT IS SO ADJUDGED.
Dated: March 16, 1990