Deckard v. Interstate Bakeries Corp. (In re Interstate Bakeries Corp.)

Summarized by Lars Fuller , BakerHostetler
13 years 1 month ago

Citation:

Deckard v. Interstate Bakeries Corporation (In re Interstate Bakeries Corporation), No. 11-1595, slip. op. (8th Cir. Jan. 25, 2013)

Tag(s):

Ruling:

Eighth Circuit affirmed grant of summary judgment by bankruptcy court in favor of defendant/debtor on creditor's claim for civil penalties for debtor's failure to give notices required under the COBRA and denial of attorney fees. Circuit Judge Bye dissented from the ruling of the panel (Gruender and Shepherd). Majority of panel concluded that creditor failed to demonstrate that bankruptcy court's ruling was clearly erroneous or an abuse of discretion. Creditor failed to demonstrate that debtor's failure to give COBRA notices resulted in sufficient prejudice to creditor to warrant penalty where creditor received two years of continued coverage notwithstanding, and where creditor did not postpone medical coverage or experience an increased medical risks during his period of noncoverage. Panel affirmed bankruptcy court finding that creditor failed to show "some degree of success on the merits" to justify an award of attorney fees. The dissenting Circuit Judge disagreed, finding sufficient evidence of the debtor's bad faith, coupled with the failure to comply with COBRA, to justify a penalty, and finding that the undisputed COBRA violation justified an award of attorney fees.

Procedural context:

Eighth Circuit panel reviewed U.S. District Court order affirming bankruptcy court's grant of summary judgment in favor of defendant/debtor denying creditor's administrative claim. Majority of Eighth Circuit panel (Circuit Judges Gruender and Shepherd) affirmed. Circuit Judge Bye dissented.

Facts:

Creditor asserted administrative claim against debtor (Interstate Bakeries Corporation, i.e., Hostess) asserting that debtor was liable for civil penalties under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). Creditor began employment with debtor and commenced participation in debtor's employee benefit plan under ERISA. COBRA required debtor to give notice of the termination of benefits upon termination of creditor's employment. Creditor asserted that upon termination of his employment, debtor failed to give notification of the termination of benefits. For purposes of summary judgment, debtor could not prove it gave notice, so did not dispute that it did not give notice. Due to an apparent clerical oversight, creditor continued to receive health care coverage for almost two years after termination, receiving approximately $19,000 in health care. After nearly two years, debtor discovered the error, and cancelled creditor's coverage retroactively. The third party administrator attempted to recover the benefits paid to the various health care providers, and in turn, the health care providers pursued creditor for payment. Upon filing his administrative claim, debtor reinstated creditor's health care coverage date from his termination date through a date (approximately 29 months later) when creditor became eligible for Medicare health coverage. Health care providers refunded all but $230 of the $693.38 that they had collected from creditor.

Judge(s):

Eighth Circuit Judges Bye, Gruender, and Shepherd.

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