Court Limits COBRA Award for Worker Terminated for Misconduct

December 14, 2007 ( - The U.S. Bankruptcy Court for the Southern District of New York awarded a former Delphi Corporation employee $10 per day for his claim of COBRA violations by the company, instead of the statutory $110 a day.

In its opinion the court pointed out that COBRA eligibility is denied for workers fired for gross misconduct, and Delphi objected to ex-employee Joseph Reno’s COBRA claim on this basis. However, the court said that, although Delphi succeeded in defending itself against a wrongful termination claim by Reno, establishing that the company had sufficient cause to fire him, it failed to meet its burden to show Reno’s conduct was “sufficiently reprehensible to constitute ‘gross misconduct.'”

In addition, the court determined that a “Notice of Ineligibility for COBRA Continuation Coverage” Delphi sent to Reno that stated he was not entitled to coverage because of his alleged “gross misconduct” was “fairly cryptic” in nature because it informed Reno merely that he was ineligible “[d]ue to your employment status code.” For this reason, Delphi’s size and sophistication, and its ability to pay, the court awarded Reno $10 a day under 29 U.S.C. § 1132(c), for 504 days.

The court also denied an award for Reno’s legal bills in the amount of $85,334.09 for which he sought reimbursement in part because almost all of the claimed attorney’s fees were incurred in prosecuting Reno’s disallowed claims. Only fees for services specifically rendered in connection with Reno’s COBRA claims were allowable, according to the opinion, but the court found Reno’s counsel did not distinguish time spent solely on such claims from time spent on the disallowed claims.

Additionally, the court said, Reno was acting only for himself; he did not confer a benefit on a larger group of plan participants, therefore his allowed COBRA claim will not include any amount for attorney’s fees.

The opinion In re: Delphi Corporation, et. al. is available  here .