• David Martin

The Attempted Murder of a COBRA Class Action Claim


Many employers may require an employee to sign an arbitration clause as a condition of employment or as a condition for receiving benefits. Starbucks is one of those companies. Given that under ERISA a participant or beneficiary is not entitled to a jury trial, there usually is not a significant advantage to trying to compel the arbitration of ERISA claims. The Department of Labor generally requires that plans include that arbitration is only used as a procedure to exhaust claim remedies and not as a substitute for judicial relief before an Article III judge. However, there can be reasons to force arbitration on participants and beneficiaries – such as killing a class action.


Class actions are the savior of small individual claims that may not be economically feasible to bring on their own.

In other words, if a violation only amounts to a few thousand dollars per person it may not be economically feasible to bring a lawsuit about that one violation for just one person. If the harm occurred to 50 or 100 or more people then it may be economically feasible. So, Starbucks’s strategy was clear – put an arbitration clause in all employment agreements which also precludes class actions and use that as a tool to make hundreds of people, who have been deprived of their statutory rights under COBRA, file individual lawsuits. Thus, Starbucks may avoid litigation altogether if it can force people to have their claim heard one at a time.


In Jenkins v. First American Cash Advance of Georgia, LLC, 400 F.3d 868, 877-78 (11th Cir. 2005), the court held that arbitration agreements precluding class action relief are valid and enforceable. See also, Randolphv. Green Tree Fin. Corp.-Alabama,244 F.3d 814, 819 (11th Cir. 2001) (holding "a contractual provision to arbitrate TILA claims is enforceable even if it precludes a plaintiff from utilizing class action procedures in vindicating statutory rights under TILA").


If ERISA is not already unfair enough, forcing arbitration of ERISA claims only compounds the problem.

A recent case out of the Middle District of Florida explored whether one of the plaintiffs, who was covered at one time by a Starbucks health plan, could be compelled to pursue his COBRA claims in arbitration. In Torres v. Starbucks Corp., Case No: 8:20-cv-1311-CEH-TGW (M.D. Fla. Mar. 15, 2021), Torres filed a class action alleging a defective COBRA notice, but Torres was a former employee of Starbucks who had signed an arbitration agreement. Counsel amended the lawsuit and added a claim from another individual, Lubin, as part of the same action. He was not a former Starbucks employee. He was the husband of a former Starbucks employee.


COBRA provides the rights to ongoing health insurance coverage after a qualifying event such as termination of employment. Certain notices are mandated by law and those notices must contain certain information.

There must be compliance with 29 U.S.C. § 1166(a) and 29 C.F.R. § 2590.606-4 as to the content of the notice. The intention is to allow participants who have lost their health insurance a reasonable understanding as to how to enroll in ongoing health insurance coverage and whom to contact in order to do so. Lubin, being a participant in the Starbucks health plan by virtue of his wife's employment, never signed an arbitration agreement (his wife did). When she was terminated they both lost health insurance coverage. Lubin received a COBRA enrollment notice, but it was very confusing and did not have the required information on it. He claimed he was caused "economic injuries in the form of lost insurance, higher insurance premiums, and unpaid medical bills.”” Torres at *11.


Starbucks vigorously sought to dismiss Lubin's lawsuit. It did not want to litigate a class-action COBRA claim. Starbucks argued that Lubin must arbitrate his COBRA claims in accordance with his wife's agreement. The court disagreed.

The court noted, “Absent an agreement to arbitrate, ‘a court cannot compel the parties to settle their dispute in an arbitral forum’. Bazemore v. Jefferson Cap. Sys., LLC, 827 F.3d 1325, 1329 (11th Cir. 2016) (quoting Klay v. All Defendants, 389 F.3d 1191, 1200 (11th Cir. 2004)).” Torres at *9. Starbucks also argued that equitable estoppel barred the claim because Lubin’s arose out of the agreement which contained the arbitration clause. But Lubin was not suing to enforce the agreement. He was suing because he did not receive the statutorily required COBRA notices. Starbucks also argued that Lubin was a third-party beneficiary of his wife's contract. Again, the court noted that Lubin was not suing to enforce his wife's contract but rather suing for his statutory rights to a proper COBRA notice. Starbucks also argued that Lubin's claim was derivative. Again, the court noted Lubin was only seeking to enforce his own statutory rights because he was a qualified beneficiary. His rights stood alone and were not derivative of his wife's rights.


The class action was allowed to proceed.


There is much more to COBRA. You should consult a COBRA claim attorney experienced in handling ERISA and COBRA claims if you have a specific question, issue, or problem. An experienced ERISA disability attorney can help you charm the COBRA.