United States District Court, N.D. Texas, Fort Worth Division
DAVID L. HAGER, Plaintiff,
DBG PARTNERS, INC., Defendant.
MEMORANDUM OPINION AND ORDER
McBRYDE UNITED STATES DISTRICT JUDGE.
Posture of the Case
January 28, 2019, the court conducted a bench trial on the
issues the Fifth Circuit expected to be resolved when it
reversed certain rulings made by this court on August 28,
2017, and remanded the action to this court, Hager v. DBG
Partners, Inc., 903 F.3d 460, 471 (5th Cir.
2018). Those issues are (1) whether plaintiff, David L. Hager
("Hager"), should receive statutory penalties from
defendant, DBG Partners, Inc., by reason of defendant's
alleged failure to notify Hager of termination of the
healthcare plan carried by defendant for its employees, and,
if so, the nature and extent of such penalties, id.
at 470-71, (2) whether, in fact, defendant failed to notify
Hager of such termination, (3) whether Hager should recover
attorney's fees from defendant, as Hager has requested in
his complaint, and, if so, the amount, id. at 471,
and (4) whether Hager should recover from defendant costs of
court incurred in this action, id.
Fifth Circuit affirmed this court's judgment of dismissal
as to all claims pleaded by Hager other than his claims for
recovery of attorney's fees and costs of
court. It upheld this court's denial of
Hager's claim for compensatory damages for violations of
COBRA notice requirements. Id. at
469-70.Because Hager acknowledged before this
court that he had received notice of his right to continue
his healthcare coverage under COBRA, and failed to explain on
appeal why that notice was inadequate, the Fifth Circuit
considered that issue forfeited. Id. at 466-67.
Thus, this court's dismissal of that pleaded claim was
upheld. Similarly, the Fifth Circuit upheld this court's
dismissal of Hager's pleaded claim of fraudulent
conversion of insurance premium payments he had provided to
defendant with the intent that defendant would forward the
payments on to the health insurance carrier providing Hager
COBRA coverage. Id. at 464.
Fifth Circuit held, Hager adequately alleged that defendant
did not fulfill its notice obligations under COBRA.
See Doc. 1 at 7, ¶ 23 & at 8, ¶ 25
(there are two paragraphs 25 on pages .7-8 of the complaint)
. However, the court has a concern with
the Fifth Circuit's statement, having reference to a
penalty based on a failure, if any, of defendant to notify
him of termination of its health plan for its employees that
had the effect of terminating Hager's COBRA insurance
coverage, that "Hager maintained in the district court
that he was entitled to such a penalty." Hager,
903 F.3d at 470. While the record of this court substantiates
that Hager attempted to inject that issue into the case
before this court dismissed all his COBRA claims, an overall
view of the record discloses that there is no way this court
reasonably could have known when it dismissed all of
Hager's claims that he was actually making such a claim.
court does not intend by anything stated in this opinion to
be critical of the handling by the Fifth Circuit of
Hager's appeal from this court's dismissal order. The
opinion of the Fifth Circuit discloses that the Fifth
Circuit' conscientiously studied the record before it and
applicable legal authorities, and made certain rulings in
favor of defendant based on the contents of the record and
those legal authorities even though defendant was
unrepresented on the appeal and did not provide the Fifth
Circuit any assistance in evaluating accuracy or completeness
of the appellate record, nor did the Fifth Circuit have the
benefit of a defense counsel's assistance in bringing to
the Fifth Circuit's attention inferences beneficial to
defendant that might be drawn from the contents of the
incomplete record that had been provided to the Fifth Circuit
for its consideration in deciding the appeal.
Fifth Circuit noted in its opinion, defendant failed to file
a brief on appeal. Consequently, the Fifth Circuit was
without any assistance in evaluating the integrity, from the
standpoint of the presentation of Hager's claims before
this court, of contentions Hager made before the Fifth
Circuit. That was a subject of an exchange between this court
and defendant's counsel at the January 2019 bench trial,
that went as follows:
THE COURT: Well, one of the problems I think that
developed in this case, Mr. Richerson, is your client was not
represented in the Fifth Circuit. No. brief was filed on
behalf of DBG, and no lawyer appeared on behalf of DBG, so
the plaintiff had a free run to tell the Fifth Circuit
anything they wanted to tell the Fifth Circuit, and they
didn't have anybody answering that.
Why did you not represent DBG in the Fifth Circuit?
MR, RICHERSON: Well, Your Honor, that had nothing to
do with DBG. I was actually sick. I closed my
THE COURT: You were what?
MR. RICHERSON: I was sick and I closed my practice,
and I reopened it and I closed it again, and during the time
when my brief was due, it was basically I was closing the
practice and I just couldn't do it, and that was really
the only reason why.
I didn't want the client to suffer for it, but that was
the truth, and it was unexpected. Only two or three cases
were affected, but that was the absolute reason. I just
couldn't do it physically.
Doc. 120 at 190.
the adverse effects of the non-representation of defendant in
the appeal was noted by the Fifth Circuit in its opinion when
it discussed an August 16 meeting for a settlement
conference, which was followed by a proceeding in the
courtroom. Hager, 903 F.3d at 464. The Fifth Circuit
noted in its opinion that "[a]fter the conference, the
parties reported to the courtroom; the proceeding that
followed is not in the record." Id.
(emphasis added). This court has discovered that three
district court proceedings had not been transcribed and put
of record prior to Hager's appeal to the Fifth Circuit,
with the consequence that the Fifth Circuit did not have a
complete record of the proceedings of this court. Those
transcripts have been prepared, are now of record, and appear
as Docs. 79, 80, and 81 on this court's docket in this
action. If defendant had been properly represented on the
appeal, those absences from the appellate record undoubtedly
would have been called to the Fifth Circuit's attention
inasmuch as information important to the defense was
contained in two of those transcripts. Particularly pertinent
were exchanges between the court and counsel for Hager that
are found in the transcript the Fifth Circuit referred to
when it said "the proceeding that followed is not in the
record." Hager, 903 F.3d at 464. During that
proceeding, the court and counsel for Hager had the following
exchange that defined the issues that were before this court
THE COURT: Let's see. As I recall, we're
down to the back end, that is, whether your client got proper
notice of termination of the coverage of the group policy?
MR. O'KELLY: Correct, Your Honor.
THE COURT: And then if he did get notice -- if he
didn't get notice, did they make a reasonable effort to
give him notice. That would be an issue.
MR. O'KELLY: That would be the issue, yes, Your
THE COURT: And then even if they didn't give him
notice, does he have any right to recover damages because of
MR. O' KELLY: We have made --
THE COURT: Is that kind of where we are?
MR. O'KELLY: You're right, Your Honor. I
won't respond, but you're right. You've
identified the issues correctly. Your Honor.
Doc. 80 at 4-5 (emphasis added). This court's order of
dismissal was, according to the Fifth Circuit's rulings,
correct as to the third issue. Because of this court's
decision on the third issue, it had no reason to decide the
first two; however, the court has now found, based on the
record as it now exists, that defendant in good faith tried
to give Hager notice
exchange quoted above occurred on August 16, 2017, the last
occasion for the parties to be before the court prior to the
August 21, 2017 proceeding that led to the court's
announcement that the case was being dismissed. That exchange
was consistent with the following reasons that were stated on
the record at the time the dismissal was announced when the
parties were before the court on August 21, 2017:
THE COURT: I'm telling you now that I'm
satisfied that your client does not have any right to recover
compensatory damages based on any alleged failure of the
defendant to notify your client that the policy had been
Is that what you want a record of?
MR. O'KELLY; Well, if that's your finding,
then I need a record of that so I have something to --
THE COURT: Okay. That's what my finding is.
That hearing we had on August 8th of this year clearly
reflects what happened to the part of the claim that had to
do with failure to give him notice of his entitlement to
COBRA coverage. That's behind us.
And I'm telling you now that there's no point in
going to trial on the other one, that is, the alleged failure
to give proper notice of termination of the plan. That's
not going to get you any money, and there's not much
point in going to trial if you're not going to win, if I
don't have anything for the jury to decide.
Doc. 74 at 28-29.
similar importance is information contained in the transcript
that is now of record as Doc. 81, which is a transcript of a
pretrial conference that was conducted in this action on July
3, 2017. Even though Hager had been ordered to put in the
joint pretrial order the parties to were to submit to the
court "a full and complete statement of plaintiff's
claims, with specificity," doc. 19, attach. Special
Pretrial Instructions at 1, ¶ 4(c), the joint pretrial
order the parties presented to the court in advance of the
July 3, 2017 pretrial conference said nothing about any claim
by Hager for recovery of any penalties; rather, the only
description of any claims Hager had under COBRA was stated by
Hager as follows:
Violation of 29 U.S.C. SI1611166 (COBRA) as follows:
a. Failing to provide Plaintiff with timely notifications of
his right to elect COBRA coverage within 30 days of
Plaintiff's termination of employment;
b. Failing to notify Plaintiff or any covered employee of
cancellation of Plaintiff's health insurance coverage at
the time of termination of coverage;
c. Failing to notify or otherwise keep Plaintiff properly
informed of his COBRA coverage under Defendant's group
medical insurance plan.
Doc. 78, Ex. A at 2.
court pointed out to Hager's counsel at the pretrial
conference the inadequacy of the pretrial order. Doc. 81 at
2, 4-5, 15-16. His counsel explained to the court what Hager
expected to recover based on the failure of defendant to
notify him of termination of his COBRA coverage, saying:
MR. O'KELLY: Well, under Cobra, if my client is not
getting coverage and incurs medical bills that should have
been covered but for the omissions of the employer or the
plan administrator, then the law is pretty clear that he
gets, not only his premiums, but, also, the medical expenses
Doc. 81 at 15, No. mention was made of a claim for penalties.
court ordered at the pretrial conference that the parties
prepare and file a revised joint pretrial order, and directed
that it "will have a detailed listing of plaintiff's
claims where the Court can read that and understand what
plaintiff's claims are." Id. at 21-22.
revised joint pretrial order (titled "Amended Joint
Pre-Trial Order") that the parties provided to the court
in response to that directive described Hager's claims in
some detail. Doc. 78, Ex. B at 2-4, § 4, ¶¶
1-16. Hager's only claims pertaining to liability by
defendant to Hager for violations of COBRA were stated as
15. Defendant is liable for Plaintiff's medical expenses
incurred between June 1, 2015 and July 31, 2015.
16. Defendant is also liable for Plaintiff's attorneys
fees and costs that Plaintiff has incurred in the pursuit of
Id. at 3-4, ¶¶ 15-16. Not once did Hager
mention in his description of his claims that he was seeking
penalties from defendant based on any set of facts or
circumstances. No. mention was made of penalties in any other
section of the amended pretrial order.
the Fifth Circuit provided for its consideration of
Hager's appeal copies of either the original or the first
amended proposed pretrial orders that failed to mention any
claim for penalties. Doc. 78, Exs. A & B. They were not
in the case file when the case was dismissed.
defendant had been represented by an attorney in the appeal
to the Fifth Circuit, the attorney undoubtedly would have
called the foregoing matters to the attention of the Fifth
Circuit, which could well have caused the Fifth Circuit to
conclude that it did not have a complete record on appeal,
and to require Hager to produce transcripts of the
proceedings and to cause them to become parts of the
appellate record. Once the Fifth Circuit had the complete
record, it might well have concluded, with the help of
defense counsel if there had been one, that Hager had not
sufficiently informed this court that Hager was making a
claim for penalties based on defendant's failure to
notify Hager that it was terminating its health insurance
plan. If the Fifth Circuit had reached such a conclusion, it
could have affirmed this court's dismissal.
defendant had been properly represented by counsel on appeal,
its counsel would have called to the Fifth Circuit's
attention the same things this court called to the attention
of the parties by the order this court issued on November 20,
2018, for the purpose of explaining to the parties in advance
of a proposed hearing that the court was unaware when the
court dismissed all of Hager's claims that Hager was
making a claim for penalties based on the alleged failure of
defendant to notify Hager of termination of the health
insurance plan. See Doc. 86. The sequential
discussion of pertinent events in this action that are
provided this court's November 20, 2018 order, as the
action pended in the district court before the court's
August 2 017 dismissal, demonstrates without any serious
question that this court had no reason to be aware at the
time of the court's August 2017 order of dismissal that
Hager was asserting a claim for penalties based on a failure
of defendant to notify Hager of termination of the health
made no such claim in the complaint by which he initiated
this action in February 2016. Doc. 86 at 3-4. And, there is
persuasive basis for a contention that such a claim would
constitute a claim for Special Damages, as contemplated by
Rule 9(g) of the Federal Rules of Civil Procedure, which
provides that "[i]f an item of Special Damage is
claimed, it must be specifically stated." See
Doc. 86 at 15.
than to reiterate what the court put in the November 20, 2018
order on the subject of the unique circumstances in this
action that caused the court not to have knowledge when the
court dismissed all of Hager's COBRA claims that Hager
was making a claim of entitlement to penalties based on
defendant's alleged failure to notify him of termination
of the health plan, the court is inviting the reader of this
opinion to refer to and read the text under the heading
"Unique Circumstances in This Action" at pages
18-29 of the November 20, 2018 order. Doc. 86 at 18-29. Near
the end of the November 20, 2018 order, the court explained,
and directed, as follows:
This court agrees with the statement by the Fifth Circuit
that "Hager maintained in the district court that he was
entitled to such a penalty." Supra at 1-2.
However, the techniques used by plaintiff to maintain that he
had such an entitlement were so tenuous that this court did
not consider, or realize, that such an issue was actually
before this court for decision.
The court tentatively has concluded that those techniques
were such that they could form the basis for a denial by the
court of any penalties and attorneys' fees, bearing in
mind that a plaintiff has an obligation to make known to the
court in an appropriate manner the claims on which he is
asking the court to make a ruling.
However, the court is directing plaintiff to respond to the
contents of this order if he disagrees with, or wishes to
comment on, any of the facts recited, or conclusions
expressed, by the court in the order.
Id. at 29-30.
did respond on December 30, 2018. Doc, 96. In that response,
Hager was critical of the court for preparing and issuing the
November 20, 2018 order; and he disagreed with this
court's conclusions. However, he did not call the
court's attention in his response to any specific factual
statement in the order with which he disagreed. Instead, he
chose to use the court's issuance of the November 20
order as a basis for a motion for recusal under 28 U.S.C.
§ 455(a), in which he attacked this court for its
preparation and issuance of the order. Doc. 97. The motion
for recusal was filed shortly before the first setting of the
post-appeal trial of this action. The court rescheduled the
trial to give it an opportunity to fully consider and rule on
the motion, doc. 99, which the court denied by order issued
January 11, 2019, doc. 102.
January 28, 2019 trial, the court gave Hager's attorney
an opportunity while he was testifying to put of record any
complaint he had relative to accuracy of the things this
court said in the November 20, 2018 order. Doc. 120 at
following exchange occurred:
THE COURT: ....
Well, is there anything in the order I issued on November 20,
2018 that I did not accurately describe what happened in that
MR. O'KELLY: I don't believe so. I don't
have the order in front of me, . I have not read it recently,
but I don't believe you have mischaracterized anything,
except the suggestion that I had failed to preserve the issue
of penalties, which I thought 1 had done by asking for
general relief in the original complaint and then proceeding
with the amendment to the joint pretrial order so that that
was preserved. That's --that's what I did.
Id. at 186.
court anticipated, and dealt with, in the November 20, 2018
order the contention that the request in Hager's
complaint for "general relief" was sufficient to
alert the court that he was seeking penalties under COBRA.
Doc. 86 at 15-18; see also supra at 12-13 .
interest is the testimony counsel for Hager gave at the
January 28, 2019 trial concerning the events that led to the
inclusion in the second amended pretrial order of the mention
by Hager of a legal issue of penalties related to the alleged
failure of defendant to provide Hager notice of termination
of the health insurance. The court's description of those
and related events is found at pages 7-11 of the November 20,
2018 order. Doc. 86 at 7-11, ¶¶ 5-7. As the court
inferred from the information the court had available at the
time of that order, the inclusion of the penalty language in
the second amended pretrial order came about through
violations by Hager's counsel of a court order.
Id. at 10-11. Hager's attorney confirmed during
his testimony on January 28, 2019, the inferences the court
expressed in the November 20, 2018 order. Doc. 120 at 178-86.
Hager's counsel acknowledged by his testimony that he was
aware that the court had issued an order in response to his
motion for leave to add penalty language to the pretrial
order informing the parties that the language could be added
if the parties reached an agreement on that subject, but if
they could not reach an agreement, then Hager could reurge
his motion for leave. Id. at 181. He admitted that
he put the penalty language in the second amended pretrial
order without conferring with defendant's counsel because
he was "trying to protect [his] client to make sure [he]
preserved all issues." Id. at 182. He
recognized that he had sought leave of court to put that in
the pretrial order, and said that he thought he had received
leave of court to do so. Id. at 182-183. The fact is
that he had not received leave. In the course of the
questioning, counsel again explained his conduct by saying
that "I was trying to preserve the issues for the
plaintiff." Id. at 183-186. Needless to say,
if, as Hager has contended, a general prayer for relief in
Hager's complaint had done the job, his attorney did not,
in violation of an order, have to sneak the claim into the
wording of a pretrial order to preserve it.
mention of penalties by Hager's counsel in the second
amended pretrial order could well be what caused the Fifth
Circuit to say in its opinion that "Hager maintained in
the district court that he was entitled to such a
penalty," Hager, 903 P.3d at 4 70. Had
defendant been properly represented before the Fifth Circuit
on the appeal, defense counsel could have informed the Court
of the irregularities that resulted in the inclusion of the
penalty language in the second amended pretrial order, and
the Fifth Circuit panel presiding over the case could have
taken that into account in its evaluation as to whether Hager
properly advised the district court of the existence of his
claim for penalties before the order of dismissal was issued.
this court's belief that any claim by Hager for penalties
related to the alleged failure by defendant to give Hager
notice of termination of the health plan was not brought to
this court's attention sufficiently for this court to be
aware of it when this court dismissed Hager's COBRA
claims, this court understands and respects that the Fifth
Circuit, by its reversal and remand, has indicated its
disagreement with this court's view of that matter, with
the result that this court accepts, as it must, the decisions
of the Fifth Circuit on that subject, However, the court
notes that the Fifth Circuit gave this court discretion in
deciding whether to award Hager penalties or attorney's
fees, and, if it did, the amount to be awarded as to each.
And, this court is taking into account all the information
contained in this court's November 20, 2018 order and
points made in this opinion in making those decisions.
Notice of Termination Issue
court now turns to the claim by defendant that it sent a
letter to Hager, notifying him that defendant would be ending
the Blue Cross health plan as of June 1, 2015, would no
longer be providing health benefits to its employees, and
that Hager's COBRA benefits could be affected. PL's
Ex. 8; Def.'s Ex. 9. That letter is the only thing on
which defendant relied as constituting notification to Hager
that the continued insurance coverage he obtained through
COBRA was being terminated. Defendant placed reliance on that
letter in its post-hearing memorandum filed in this court as
providing appropriate notification to Hager of his health
insurance coverage. Doc. 122 at 2-4. Defendant did not
provide any explanation as to why there are two versions of
the letter, one showing a date of May 12, 2015, PL's Ex.
8, and the other showing a date of May 5, 2015.- Def . 's
there is evidence that the person who ran defendant's
business thought the letter was mailed, doc. 80 at 24-25,
there was no direct evidence that the letter was actually put
in the United States mail for delivery to Hager. The letter
was addressed to Hager's address shown on the information
sheet on the inside of the front cover of Hager's
personnel file, which Hager had the obligation to maintain as
CFO of defendant. Def.'s Ex. 18. In May 2 015, Hager no
longer lived at that address, but lived at an address used in
an earlier letter that defendant's attorneys had prepared
for defendant's CEO to sign relative to the termination
of Hager's employment. Doc. 120 at 155-56; Pi.'s Ex.
7. Hager denied that he received the May 12, 2015 version of
the letter on the date shown on the letter. Doc. 120 at
22. He was not asked about the May 5, 2015 version of the
letter, but he did say that he did not receive during May,
June, or July 2015 any notice from defendant that the
insurance plan was to be, or had been, terminated.
Id. at 29.
version of the letter that purports to be from defendant to
Hager concerning termination of the health insurance coverage
apparently is what the Fifth Circuit had in mind when it
expressed the conclusion that, "alone, DBG's letter
is insufficient to support dismissal of Hager's
claim." Hager, 903 F, 3d at 468.
Defendant's arguments to the contrary in its post-hearing
memorandum are not persuasive. The court concludes that,
while the record contains evidence of defendant's
good-faith intent to inform Hager of its plan to terminate
the health insurance coverage, the court is not persuaded by
defendant's arguments that the termination-of-coverage
letter is sufficient to establish that Hager received notice
that the health insurance coverage was to be terminated.
Indeed, the Fifth Circuit held that because of
defendant's failure to file a brief, defendant forfeited
its contention that it had fulfilled its notice obligations.
Id. at 467.
Acted in Good Faith
Fifth Circuit said in its opinion that Hager had pointed to
evidence suggesting that defendant did not act in good faith
on the matter of providing notice, and defined that evidence
(1) DBG sent Hager's employment termination notice, which
was hand-delivered earlier than the health plan termination
notice, to the correct address; (2) Hager exchanged text
messages with Rowan about health insurance, during which
Rowan failed to mention the plan's discontinuation; and
(3) DBG deposited Hager's premiums when it received them,
and refused to refund them for almost two years.
Id. at 468.
court is persuaded by the evidence now in the record that the
evidence does not establish that defendant did not act in
good faith on the notice requirement. Rather, it shows that
defendant acted in good faith. Doc. 80 at 24-25; Doc. 120 at
only text exchange this court has found in the record shows
that, by the time that exchange occurred, Hager already knew
that the healthcare insurance coverage had been terminated.
PL'S Ex. 1; Doc. 12 0 at 2 9-30.
witness who testified on the subject of the giving of notice
by defendant to Hager of termination of the health insurance
was Todd Rowan ("Rowan"), who is the responsible
person at defendant, with the consequence that his motive and