Washington v. Lenzy Family Inst.

LEONARD WASHINGTON, Plaintiff, v. LENZY FAMILY INSTITUTE, INC., et al., Defendants.

No. 1:21-cv-1102

United States District Court, N.D. Ohio, Eastern Division

December 22, 2022

MEMORANDUM OPINION AND ORDER

BRIDGET MEEHAN BRENNAN UNITED STATES DISTRICT JUDGE

Before this Court is The Lenzy Family Institute, Inc. and Lenzy Family Institute Board of Directors (the “Lenzy Defendants”) partial motion to dismiss Plaintiff Leonard Washington's amended complaint. (Doc. No. 24.) Plaintiff opposed this motion. (Doc. No. 28.) For the reasons stated below, this motion is GRANTED in part and DENIED in part.

I. Background

A. Factual Allegations

Defendant Lenzy Institute, Inc. (“Lenzy”) is an Ohio nonprofit corporation offering mental health diagnostic and curative services. (Doc. No. 22 at PageID 395, ¶ 8.) Lenzy's principal place of business is in Canton, Ohio. (Id.) Defendant Lenzy Institute Board of Directors (“Lenzy Board”) is Lenzy's governing body. (Id. at PageID 395, ¶ 9.)

Lenzy hired Plaintiff on or about October 27, 2016, as a Residential House Worker and Treatment Counselor. (Id. at PageID 395, ¶ 11.) Plaintiff became a full-time Lenzy employee in January 2018. (Id. at PageID 395, ¶ 13.)

On or about January 15, 2018, Lenzy announced a new healthcare group coverage plan, and Plaintiff became insured under UnitedHealthcare Group Policy number 02Y9798 (the “First UHC Plan”). (Id. at PageID 395, ¶ 12.) On or about February 1, 2019, Plaintiff's coverage under the First UHC Plan was replaced or substituted by UnitedHealthcare Group Policy number GA2Y9798IM (the “Second UHC Plan”). (Id. at PageID 395, ¶ 14.)

Lenzy management made premium payments directly to UnitedHealthcare to fund the Plans. (Id. at PageID 396, ¶¶ 15-16.) Lenzy funded the premium payments through monthly deductions from employee paychecks. (Id.) Lenzy management had the discretion to determine the amount of each deduction. (Id.) At some point, Lenzy stopped making the premium payments. (Id.) Lenzy, however, continued making the monthly deductions. (Id.)

UnitedHealthcare terminated the Second UHC Plan on or about June 2, 2019. (Id. at PageID 396, ¶ 17; UHC Complaint Doc No. 22-2^[1]at PageID 409.) The Lenzy Defendants owed UnitedHealthcare over $30,000 in unpaid premium payments. (Doc. No. 22 at PageID 396, ¶ 18.) Lenzy did nothing to ensure Plaintiff received coverage under another plan. (Id. at PageID 396, ¶ 20.) Even after the termination of the Second UHC Plan, the Lenzy Defendants continued to deduct premium payments from Plaintiff's and other employees' paychecks. (Id. at PageID 396, ¶ 21.) Lenzy's Executive Director, Elizabeth Lenzy (“Ms. Lenzy”), did not lose coverage after UnitedHealthcare's termination because she had supplemental policies through Aflac and Medicare. (Id. at PageID 396-97, ¶¶ 19, 25.)

At some point before Lenzy laid Plaintiff off on March 16, 2020, Lenzy materially reduced Plaintiff's hours. (Id. at PageID 397-98, ¶¶ 27, 32.) Moreover, throughout Plaintiff's employment at Lenzy, “he was incorrectly paid and not paid for all of his work, and because of this, his hours worked were reduced.” (Id. at PageID 397, ¶ 26.) Neither Lenzy, the Lenzy Board, nor Ms. Lenzy provided Plaintiff with notice or documentation of any modifications or changes to his insurance coverage, including termination of coverage. (Id. at PageID 396-97, ¶¶ 22-23.) Nor did they notify Plaintiff about Continuation of Health Coverage (“COBRA”) rights or related information. (Id. at PageID 397, ¶ 23.)

B. Procedural History

On May 28, 2021, Plaintiff initiated this complaint against Lenzy, the Lenzy Board, UnitedHealthcare, and John Doe I & II. (Doc. No. 1.) On June 24, 2021, Lenzy and the Lenzy Board filed a motion to dismiss for failure to state a claim (Doc. No. 7) and an answer to the complaint (Doc. No. 8). On the same day, UnitedHealthcare submitted an answer. (Doc. No. 9.)

On July 23, 2021, Plaintiff filed a motion for leave to file first amended complaint (Doc. No. 13) and a motion to stay the motion to dismiss until rendering a decision on the motion for leave (Doc. No. 14.) On October 26, 2021, the Court granted Plaintiff's motion to file the first amended complaint and denied the motion to stay as moot. (Doc. No. 21.)

On October 29, 2021, Plaintiff filed his first amended complaint. (Doc. No. 22.) The complaint contains six counts: violation of 29 U.S.C. § 1165(a) and § 1166(a)(3)-(4) and (c) for failure to give notice of COBRA benefits (Count I), violation of the Employee Retirement Income Security Act's (“ERISA”) disclosure notification requirements (Count II), breach of fiduciary duties (Count III), breach of duties under Ohio Rev. Code § 4113.15(C) (Count IV), equitable estoppel under ERISA (Count V), and promissory estoppel (Count VI).

On November 12, 2021, Lenzy and the Lenzy board filed an answer to Plaintiff's amended complaint (Doc. No. 25) and a motion to dismiss counts I, III, and VI and to partially dismiss count II (Doc. No. 24) of Plaintiff's amended complaint.

On December 8, 2021, Plaintiff filed a notice of dismissal without prejudice of his claims against UnitedHealthcare. (Doc. No. 27.) On December 21, 2021, the Court dismissed UnitedHealthcare. (Doc. No. 29.)

II. Discussion

A. Standard of Review

When addressing a motion to dismiss brought under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must construe the complaint in the light most favorable to the plaintiff and accept all well-pleaded material allegations in the complaint as true. United States ex rel. Ibanez v. Bristol-Myers Squibb Co., 874 F.3d 905, 914 (6th Cir. 2017) (setting forth the standard of review for a motion to dismiss); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The sufficiency of the complaint is tested against the notice pleading requirement that a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief[.]” Fed.R.Civ.P. 8(a)(2). Although this standard is a liberal one, a complaint must still provide the defendant with “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true,” to state a plausible claim. Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570).

Facial plausibility means that the complaint contains “factual content that allows the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Such plausibility “is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)). In such a case, the plaintiff has not “nudged [his] claims across the line from conceivable to plausible, [and the] complaint must be dismissed.” Twombly, 550 U.S. at 570; see Iqbal, 566 U.S. at 678.

A complaint need not set down in detail all the particulars of a plaintiff's claim. However, “Rule 8 . . . does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Iqbal, 566 U.S. at 678 (This standard requires “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”). “Bare assertions,” basic recitations of the elements of the cause of action, or “conclusory” allegations are not entitled to the assumption of truth and, without more, do not satisfy the Rule 8 notice standard. Id. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555).

B. Count I: COBRA Notification

Count I is premised on Defendants' failure to provide Plaintiff with notice of COBRA rights and continuation benefits information as required by 29 U.S.C. §§ 1165 & 1166. (Doc. No. 22 at PageID 397.)

1. Overview of Relevant Law

COBRA was enacted to ensure employees who lose coverage under their employer-sponsored healthcare plans do not go without coverage before finding suitable replacement coverage. Morehouse v. Steak N Shake, 938 F.3d 814, 818-19 (6th Cir. 2019). The statute allows employees “to continue their health insurance coverage, at group rates but at their own expense, for at least 18-months after the occurrence of a ‘qualifying event' and notice to the affected employee.” Id. at 819 (quotations and citations omitted). And to ensure employees are made aware of this entitlement, “COBRA requires an employer to provide employees and qualified beneficiaries with notification of their right to receive continued health insurance benefits within a specific period of time after the occurrence of the qualifying event.” Id. In short, employers must provide employees with notice after the occurrence of a “qualifying event.” See id.; see also 29 U.S.C §§ 1161 & 1166. This notice provides the employee with information to avoid loss of coverage.

The exhaustive list of “qualifying events” that trigger COBRA'S notice requirements is stated in 29 U.S.C. § 1163:

For purposes of this part, the term “qualifying event” means, with respect to any covered employee, any of the following events which, but for the continuation coverage required under this part, would result in the loss of coverage of a qualified beneficiary:

1) The death of the covered employee.

2) The termination (other than by reason of such employee's gross misconduct), or reduction of hours, of the covered employee's employment.

3) The

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