Sixth Circuit Affirms §1927 Sanctions on Plaintiff’s Attorney for Maintaining Untimely ADA Lawsuit Where Plaintiff Failed to Notify EEOC of Changed Address

Yesterday, the Sixth Circuit affirmed sanctions against a plaintiff’s attorney under §1927 in the amount of $25,995.32 for pursuing an ADA lawsuit that was not filed until more than nine months after the EEOC mailed his client its right-to-sue letter.  Carter v. Hickory Healthcare, Inc. No. 17-4199 (6th Cir. 9-27-18).  The plaintiff had notified the OCRC of her change of address, but had failed to similarly notify the EEOC. Thus, when the EEOC finally mailed her RTS letter, it was sent to her former address and her attorney did not discover this mistake for months.  The Court rejected a tolling argument based on the EEOC’s failure to mail a copy to her attorney (whose address had not changed). “It thus is not true that “a failure by the EEOC to copy counsel on a right-to-sue letter prevents the ninety-day period from running.”  Ball v. Abbott Advert., Inc., 864 F.2d 419, 421 (6th Cir. 1988).”

According to the Court’s opinion, the plaintiff had filed her Charge of Discrimination six years earlier in 2007 with the Ohio Civil Rights Commission and it was dual filed with the EEOC.  The OCRC ultimately found in 2013 that she had been subject to unlawful discrimination when she was terminated for refusing to monitor client smoking breaks that aggravated her asthma after previously notifying the defendant employer of her medical condition, which it had accommodated until she was assigned a new supervisor.   While the OCRC processed her dual-filed charge, the plaintiff had moved, had notified the OCRC of her change of address, but failed to similarly notify the EEOC.  Although her attorney requested that the EEOC issue her a RTS letter, he apparently similarly failed to notify the EEOC of her new address.  The EEOC mailed the RTS letter to her former address and this was not discovered by her attorney for approximately six months, even though the statute of limitations to file an ADA action is 90 days after the RTS letter has been issued.  The 90 days begins to run on the fifth day after the EEOC mails the RTS.  

[A] judge may impose sanctions under § 1927 when a lawyer objectively “falls short of the obligations owed by a member of the bar to the court.”  Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642, 646 (6th Cir. 2006) (quotation omitted).  The lawyer need not have “subjective bad faith” but must act with “something more than negligence or incompetence.”  Id.  A court may impose the sanction if an attorney “abuses the judicial process or knowingly disregards the risk” that he will needlessly multiply the proceedings.  Id.  Maintaining a clearly time-barred lawsuit constitutes a classic example of conduct that warrants a sanction.  See, e.g., Davis v. Bowron, 30 F. App’x 373, 376 (6th Cir. 2002).

The Court rejected the argument that the employer defendant failed to mitigate its expenses by waiting to file a summary judgment motion instead of a motion to dismiss soon after the Complaint was filed.  The defendant employer’s attorneys had notified the plaintiff’s attorney in writing that the lawsuit was clearly untimely and so the attorney’s liability began upon the receipt of that letter.   Interestingly, the district court denied the employer’s Motion for Rule 11 sanctions and that decision was not appealed.

The Court similarly rejected the plaintiff’s argument that her notification to the OCRC of her new address should have been sufficient after the OCRC informed her that it would share information with the EEOC because the EEOC rules clearly provide that it must be provided with separate notice. 29 C.F.R. § 1601.7(b).  While her mistake was understandable, it was not excusable.  She could have, for instance, inquired much earlier about why she had not received the RTS notice.

The Court also rejected the attorney’s argument that he thought that equitable tolling would apply to suspend the 90 days due to the mistaken address and the EEOC’s failure to also send him a copy of the RTS letter when it was mailed to his client’s former address.

But these arguments were leaky at best, frivolous at worst.  That a regulation required the Commission to send some types of attorneys a copy of the right-to-sue letter does not justify equitable tolling.  The regulation applies only to public sector claims, not private sector ones like Carter’s.  See 29 C.F.R. §§ 1614.103(b), 1614.605(d).  It thus is not true that “a failure by the EEOC to copy counsel on a right-to-sue letter prevents the ninety-day period from running.”  Ball v. Abbott Advert., Inc., 864 F.2d 419, 421 (6th Cir. 1988).

Much of the opinion discusses the appropriate standard of review of a Magistrate recommendation and appellate jurisdiction.  Neither party raised this on appeal.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney. 

Sixth Circuit: Pre-2002 ERISA Plan Need Not Inform Beneficiary of Shortened Statute of Limitations to Seek Judicial Review

Last week, the Sixth Circuit Court of Appeals affirmed the dismissal of an ERISA claim brought more than eight years after the plaintiff’s claim for long-term disability had been denied because the Plan only permitted claimants three years to seek review in federal court.  Engleson v. Unum Life Ins. Co. of Am., No. 12-4049 (6^th Cir. 7-3-13).  The Court rejected the plaintiff’s argument that ERISA at that time required the Plan to disclose the shortened limitations period in its claim denial letters or the summary plan description.  It was not until 2002 that the Plan was required to disclose information in claim denial letters about the claimant’s right to seek federal court review. “Because SPDs lack controlling effect in the face of plan language to the contrary, we do not feel compelled to read the regulation in a manner that requires sweeping, comprehensive disclosure, as [the plaintiff] asks us to do.” Finally, the Court rejected the plaintiff’s waiver and equitable tolling arguments.
 

According to the Court’s opinion, the plaintiff had filed his LTD claim in August 2001, but it and his subsequent appeal were denied, most recently in November 2001.  He filed a new claim in August 2008, which was granted.  He then sought review of his 2001 claim and when it was denied again, he filed suit in federal court in December 2009. The district court concluded that “[t]he plan requires participants to file an ERISA claim within “3 years after the time proof of claim is required.” Therefore, his lawsuit was untimely in March 2005.  

The Sixth Circuit rejected the plaintiff’s contention that the 2000 version of 29 C.F.R. § 2560.503-1(f) required the Plan to disclose the shortened statute of limitations in its claim denial letters.   Instead, the Court “construe[d] the phrase “appropriate information” as requiring only the disclosure of information pertaining to internal processes, not judicial review.”  (emphasis in original).  The ERISA regulations were amended effective January 1, 2002 at 29 C.F.R. § 2560.503-1(g)(1)(iv) to require the disclosure of “a description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action” to challenge adverse benefit determinations.” 

Moreover, the Court rejected the plaintiff’s argument that the Plan’s 2008 invitation to submit additional information about his 2001 claim and then refusal to reconsider the 2001 claim re-started the limitations period.  “When an adverse benefit determination is justified in the first instance and later denials are premised on the initial reason, there has been a “full and fair review” that satisfies § 1133 and its regulations.”

The plaintiff also argued that the SPD did not comply with 29 C.F.R. § 2520.102-3 because it failed to disclose the shortened statute of limitations for seeking judicial review even though it was required to address “applicable time limits” and remedies for the claimant to seek redress of claims.  “Because SPDs lack controlling effect in the face of plan language to the contrary, we do not feel compelled to read the regulation in a manner that requires sweeping, comprehensive disclosure, as [the plaintiff] asks us to do.”  Instead, the Court interpreted the regulation’s general phrase “applicable time limits” to extend “only to the terms that precede it, i.e., time limits need only be disclosed with respect to the processing of claims.” 

Mindful of this interpretation, we conclude that Unum’s SPD complied with the regulation. The SPD provided “applicable time limits” as to certain parts of the claims process, such as the plan administrator’s obligation to provide a claim response within 90 to 180 days and the claimant’s right to seek plan documents by filing suit in federal court after 30 days of noncompliance. Unum complied with the requirement of disclosing the time limits for the “remedies available under the plan for the redress of claims” by (1) explaining the internal appeals process; and (2) noting the claimant’s right to “file suit in a state or federal court” for claims that have been denied or ignored.

In addition, the Court rejected the claimant’s common law waiver argument based on the Plan’s  offer reconsider his 2001 claim if he submitted additional information. 

As there is no established federal common law in this circuit that governs the question of whether a plan administrator has affirmatively waived a contractual limitations provision, we “look to state-law principles for guidance.”  . . . While contractual limitations periods are generally enforced irrespective of state law so long as they are reasonable . . .  the present case does not raise the question as to whether the period is reasonable, but whether the period was waived.

The Court had previously relied on Hounshell v. American States Insurance Co., 424 N.E.2d 311, 314 (Ohio 1981) where 

“[a]n insurer . . . loses the right to assert its contractual statute of limitations if, ‘by its actions or declarations, it evidences a recognition of liability under the policy, and the evidence reasonably shows that such expressed recognition of liability and offers of settlement have led the insured to delay in bringing an action on the insurance contract.’”  . . .  An insurer’s decision to reconsider the validity of a claim, however, “does not constitute a waiver of the limitations clause.

While there may be alternatives to waiving a right than as discussed in Hounshell, the Court required “more than mere relinquishment—the waiver must be “a clear, unequivocal, and decisive act of the party against whom the waiver is asserted.”  The Plan’s “December 2008 letter lacks the clarity, directness, and decisiveness that the general waiver rule demands.”  More importantly, it “says nothing about waiving the limitations period.”

Finally, the Court rejected the equitable tolling argument on the grounds, among other things, that the plaintiff was not diligent in pursuing his rights.  Moreover, there was no evidence of bad faith.

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.