Guest Article

From Mandated Health Benefits--The COBRA Guide, published by Thompson Publishing Group, Inc.

State COBRA Law Preempted by ERISA; State Court Cannot Hear Federal COBRA Claims

Claims against an employer under a Connecticut COBRA-like law were dismissed by a Connecticut superior court as preempted by the federal COBRA law. The court also held that federal, not state courts, have exclusive jurisdiction over COBRA notice penalty claims. Therefore, it rejected a COBRA notice claim that was filed in state court. The case is Thompson v. Bridgeport Hospital, 2001 WL 823130 (Super. Ct. Conn., June 22, 2001).

Facts of the Case

Arlie Thompson, an employee at Bridgeport Hospital, alleged that her supervisor orally informed her that she would be terminated effective Dec. 1, 1997. She further alleged that she never received severance pay, accrued vacation pay or any other benefits due to her; rather, all that she received was a written unemployment notice in January 1998.

Thompson later sued Bridgeport in state court for, among other things, violating a Connecticut state law that requires employers to notify their employees of cancellations or discontinuations of benefits. She also sued Bridgeport for violating COBRA's notice rules.

State Law Preempted

The court first analyzed Thompson's claims that Bridgeport violated the Connecticut law. Many states, like Connecticut, have COBRA-like provisions in their state laws. As a general rule, state laws that relate to employee benefit plans or administration are preempted by ERISA and cannot be applied against employers or their plans. However, if the state laws are directed at insurance companies or policies, they may be applied against the insurers (and policies) -- not directly against employers that purchase those policies.

The Connecticut court reviewed the Connecticut law and determined that it directly relates to ERISA plan administration. Moreover, the court noted that a U.S. Department of Labor advisory opinion concluded that the specific Connecticut law at issue in the case was preempted by ERISA. Therefore, the court dismissed Thompson's claims against Bridgeport under Connecticut's COBRA-like law.

State vs. Federal Court Jurisdiction on COBRA Penalty Claims

The court next considered Thompson's claims for COBRA notice penalties. Under COBRA, a plan administrator that fails to notify qualified beneficiaries of their COBRA election rights on a timely basis may be liable for statutory penalties of up to $110 per day from the date of failure under ERISA. Bridgeport contended that Thompson's claim should be stricken because ERISA provides that only federal district courts have jurisdiction over COBRA notice penalty claims.

The court agreed. It noted that although state and federal courts have concurrent jurisdiction over ERISA's civil enforcement provisions, lawsuits seeking to enforce COBRA's penalty provisions are within the exclusive jurisdiction of the federal district court.

To that end, the court indicated that Thompson alleged that she suffered monetary damages as a result of paying her medical expenses and sought enforcement of COBRA's penalty provisions. Therefore, the court did not have concurrent jurisdiction over her claims and granted Bridgeport's motion to dismiss the case.

Implications

This case points out often overlooked procedural matters to consider when an employer is faced with a COBRA lawsuit. Often, claims for COBRA violations can be defeated without even getting to the "merits" of the case (that is, whether the COBRA violation actually occurred). Before a court can review the merits, it must determine that it has proper jurisdiction and what law is to apply -- state or federal. If, as in Thompson, a court does not have jurisdiction or cannot apply the relevant state law being raised by the plaintiff, the case will be dismissed without even analyzing whether the defendant did what was alleged.

Excerpted from the September 2001 supplement to Mandated Health Benefits -- The COBRA Guide, ©Thompson Publishing Group, Inc., 2001. All rights reserved.

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