## Facts

- Lisa Holford’s employment with Exhibit Design Consultants was terminated, triggering potential COBRA continuation rights.
- Holford alleged the employer failed to provide the written COBRA election notice required after a qualifying event under 29 U.S.C. § 1166.
- The employer admitted it did not properly notify Holford of her COBRA rights at termination.
- The employer argued the violation was not in bad faith because it had included COBRA-related language in an employee handbook and later offered COBRA coverage retroactive to separation.
- Holford asserted the retroactive offer did not make her whole because she understood it to risk denial of retroactive claims and to require a lump-sum premium payment.
- The employer contended Holford misunderstood the offer and that it did not impose additional coverage limitations or require lump-sum payment.
- Holford sought statutory penalties under 29 U.S.C. § 1132(c), actual damages for unpaid medical expenses, and attorney’s fees and costs.
- Default was entered against the employer for failure to timely answer; by agreement, default was set aside as to all counts except the COBRA notice claim, leaving liability established on that count and the court to determine relief.

## Issues

1. Whether an admitted failure to provide the required COBRA notice warranted discretionary statutory penalties under 29 U.S.C. § 1132(c) despite handbook language and a later retroactive offer.
2. What per-day penalty amount should be imposed for the COBRA notice violation.
3. Whether Holford could recover actual medical expenses as damages, or whether failure to mitigate barred recovery.
4. Whether Holford was entitled to attorney’s fees and costs, and what amount was reasonable.

## Decision

- The court granted default judgment relief on the COBRA notice claim and imposed statutory penalties under 29 U.S.C. § 1132(c).
- The court set the penalty at $55 per day for the violation period, declining to impose the maximum rate.
- The court denied Holford’s request for actual damages for medical expenses, finding she failed to mitigate damages.
- The court awarded attorney’s fees and costs, but reduced the requested amounts to reflect customary local rates and proportionality.

## Legal Principles

- COBRA requires timely, specific written notice of continuation rights after a qualifying event; generalized or incomplete handbook references do not satisfy 29 U.S.C. § 1166.
- Penalties under 29 U.S.C. § 1132(c) for notice failures are discretionary and may reflect culpability, prejudice to the beneficiary, deterrence, and the employer’s circumstances, while avoiding excessive sanctions.
- A claimant seeking actual damages tied to a COBRA notice violation remains subject to a duty of reasonable mitigation; failure to mitigate can bar recovery of medical expenses.
- Attorney’s fees and costs may be awarded in ERISA/COBRA notice litigation based on culpability, deterrence, relative merits, and ability to pay, and are subject to reasonableness review.

## Conclusion

The court imposed a $55-per-day statutory penalty and awarded reduced attorney’s fees for the employer’s admitted failure to provide required COBRA notice, but denied recovery of medical expenses because the plaintiff did not reasonably mitigate her damages.


Holford v. Exhibit Design Consultants, 218 F. Supp. 2d 901 (W.D. Mich. 2002)