                            UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA


                                              )
DEBRA DORSEY,                                 )
                                              )
               Plaintiff,                     )
                                              )
       v.                                     )      Civil Action No. 09-1085 (RMC)
                                              )
JACOBSON HOLMAN, PLLC, et al.,                )
                                              )
               Defendants.                    )
                                              )


                                 MEMORANDUM OPINION

               Debra Dorsey complains that her former employer, Jacobson Holman, The Jacobson

Holman PLLC Profit-Sharing Plan, and John C. Holman as Plan Administrator (collectively,

Jacobson Holman), violated the American Recovery and Reinvestment Act of 2009 (“ARRA”) when

it denied her health insurance premium assistance.1 Jacobson Holman points to the administrative

appeals process at the Department of Labor for any denial of ARRA benefits and moves to dismiss

Count II of the First Amended Complaint for failure to exhaust. Ms. Dorsey opposes, arguing that

the Employee Retirement Income Security Act does not require her to exhaust administrative

remedies. However, since Ms. Dorsey’s possible entitlement to assistance with her health insurance

premiums arises only under ARRA, and since Congress established an expedited review process at



       1
          Ms. Dorsey also sued the Jacobson Holman PLLC Health Benefit Plan but the Jacobson
Holman Defendants say no such entity exists. See Def.’s Mem. in Supp. of Summ. J. [Dkt. # 12-1]
at 1 n.1. Ms. Dorsey does not contest this assertion, and thus the Health Benefit Plan will be
dismissed as a Defendant in this case. See Hopkins v. Women’s Div., General Bd. of Global
Ministries, 238 F. Supp. 2d 174, 178 (D.D.C. 2002) (when a plaintiff files an opposition to a motion
to dismiss addressing only certain arguments, a court may treat those arguments that the plaintiff
failed to address as conceded) (citing FDIC v. Bender, 127 F.3d 58, 67-68 (D.C. Cir. 1997)).
DOL for denial of benefits, the Court concludes that Congress intended to funnel all complaints

through that process where they might be resolved without the delay and expense of litigation. In

the exercise of its discretion, the Court will require administrative exhaustion. The motion will be

granted.

                                            I. FACTS

               A. Statutory Background

                       1. ERISA and COBRA Benefits

               Part 6 of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”),

29 U.S.C. §§ 1161-1166, and parallel provisions of the Internal Revenue Code, 26 U.S.C. § 4980B,

were enacted as part of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”).2

Under these provisions, a group health plan must provide each qualified beneficiary who would lose

health insurance coverage as a result of a “qualifying event” the option of continuing such coverage

for 18 months by paying for it individually. Termination of employment that would result in loss

of health insurance constitutes such a qualifying event. 29 U.S.C. § 1163. If a terminated employee

elects to continue insurance coverage, the plan may require payment of a premium up to 102% of

the cost of the coverage for similarly-situated beneficiaries. 29 U.S.C. §§ 1162 & 1164. The

additional 2% covers the cost of administration. This is commonly referred to as a COBRA benefit.

                       2. American Recovery and Reinvestment Act of 2009

               The ARRA, Pub. L. No. 111-5, 123 Stat. 115 (2009), popularly known as the

Stimulus Act, was passed as emergency legislation to rescue the American economy from the recent



        2
         Regulations have been issued by the Secretary of the Treasury. See 26 C.F.R. § 54.4980B-
1 to 54.4980B-10.

                                                -2-
deep recession. It contains provisions to enable jobless persons to afford continuing health insurance

coverage through a subsidy of their COBRA premiums. Section 3001 of ARRA, 123 Stat. at 455-

466, provides for a 65% reduction in the premium otherwise payable by an Assistance Eligible

Individual who is involuntarily terminated from employment and who elects continuation of

insurance coverage through COBRA. This cost is recouped by a tax credit. An Assistance Eligible

Individual is generally someone who: (1) is eligible for continued health insurance coverage under

COBRA at any time from September 1, 2008 through December 31, 2009;3 (2) elects to continue

health insurance coverage and pay COBRA costs; and (3) is involuntarily terminated (or, under

amendments, had hours significantly reduced so as to deprive an employee of eligibility for health

insurance) during the relevant period.4 See http:www..gov/ebsa/newsroom/2010/ebsa041610.html

(last visited on April 26, 2010 at 9:00 a.m. EST), Statement of Asst. Sec. Phyllis C. Borzi. If

eligible, a former employee would be required to pay only 35% of the required COBRA premium.

                 ARRA also provides that an individual who is denied a reduced COBRA payment

by a plan, employer, or insurer has a right of appeal in the form of a streamlined, expedited process

of review by the Secretary of Labor. The ARRA provides:

            EXPEDITED REVIEW OF DENIALS OF PREMIUM ASSISTANCE –
            In any case in which an individual requests treatment as an assistance
            eligible individual and is denied such treatment by the group health plan,
            the Secretary of Labor (or the Secretary of Health and Human Services in
            connection with COBRA continuation coverage which is provided other
            than pursuant to part 6 of subtitle B of title I of the Employee Retirement
            Income Security Act of 1974), in consultation with the Secretary of the
            Treasury, shall provide for expedited review of such denial. An individual
            shall be entitled to such review upon application to such Secretary in such


        3
            The time period has now been extended to May 31, 2010.
        4
            The “relevant time period” is from September 1, 2008 to May 31, 2010.

                                                 -3-
          form and manner as shall be provided by such Secretary. Such Secretary
          shall make a determination regarding such individual’s eligibility within 15
          business days after receipt of such individual’s application for review under
          this paragraph. Either Secretary’s determination upon review of the denial
          shall be de novo and shall be the final determination of such Secretary. A
          reviewing court shall grant deference to such Secretary’s determination.
          The provisions of this paragraph, paragraphs (1) through (4), and paragraph
          (7) shall be treated as provisions of title I of the Employee Retirement
          Income Security Act of 1974 for purposes of part 5 of subtitle B of such
          title.

ARRA § 3001(a)(5), 123 Stat. at 458. The Secretary must issue her decision within fifteen business

days after receipt of a complete application for review, and courts are to give deference to the

Secretary’s determination. Id.

               When it passed ARRA, the Committee on Ways and Means of the House of

Representatives issued a publication entitled “How To” Manual on Health Coverage for the

Unemployed in the American Recovery and Reinvestment Act. See Defs.’ Mot. to Dismiss [Dkt.

# 12] (“Defs.’ Mot.”), Ex. 3 (“How To” Manual). This publication answered “frequently asked

questions on the COBRA premium reduction.” Id. (lower case substituted). In summary, the

Committee explained that a “65% reduction in the premiums payable by involuntarily terminated

workers and their families for health care continuation coverage under COBRA” was available under

ARRA and would “last for up to 9 months.” Id. In answering the question as to who is eligible for

the premium reduction, the pamphlet explained:

          To be eligible for the premium reduction, you must be a COBRA qualified
          beneficiary who meets all of the following requirements:

                  •      Is eligible for COBRA continuation coverage as a result of
                         Federal or State law at any time during the period beginning
                         September 1, 2008 and ending [May 31, 2010];

                  •      Elects COBRA coverage (when first offered or during the


                                                -4-
                          additional election period); and

                  •       Was involuntarily terminated during the period beginning
                          September 1, 2008 and ending [May 31, 2010].

Id. at 1. The House Committee also gave the following advice:

          11. QUESTION: What do I do if I think I qualify for the COBRA
          premium reduction but my plan tells me I do not?

          A. If your health plan finds that you are ineligible for the premium
          reduction, you can apply for review of that determination by the Secretary
          of Labor or by the Secretary of Health and Human Services depending on
          your type of plan . . . . The Secretary will review your application and make
          a determination within 15 business days.

          12. QUESTION: Where do I send my appeal?

          A. The Departments of Labor (DOL) and Health and Human Services
          (HHS) are currently developing processes and an official form that will be
          required to be completed for applications for review.

Id. at 4. Thereafter, DOL also published guidance on its own website that contains an Application

for Review of Denial of COBRA Premium Reduction and advises:

          If you believe you are eligible for COBRA continuation coverage and for
          this premium reduction through a private sector health plan sponsored by
          an employer with at least 20 employees, but your request for these benefits
          or the reduced premium has been denied, you may apply to the U.S.
          Department of Labor to review the denial.

See http://www.dol.gov/ebsa/COBRA.html (last visited on Apr. 26, 2010 at 9:30 a.m. EST). The

official application form is available at www.dol.gov/COBRA and can be filed online or submitted

by fax or mail. Id.

               B. Facts

               Debra Dorsey worked for Jacobson Holman until September 16, 2007. First Am.

Compl. [Dkt. # 2] ¶ 18. Thereafter, she elected to receive her health insurance coverage under


                                                -5-
COBRA. On April 10, 2009, Ms. Dorsey asked Jacobson Holman to adjust her payments to the

reduced COBRA premium provided by ARRA. Id. ¶ 36. She emailed her request, stating:

            . . . I am eligible for a reduction in my COBRA benefits. I refer you to the
            Department of Labor’s website, www.dol.gov/ebsa. for the specifics. I
            spoke with Mr. Wardlow at the Department of Labor this morning, and he
            confirmed that I was eligible for COBRA benefits and asked that I contact
            you immediately to obtain the required information.

Defs.’ Mot., Ex. 1 (email exchange between Ms. Dorsey and Simor Moskowitz). Mr. Moskowitz,

the Jackson Holman official authorized to respond to COBRA premium reduction requests, replied

on the same day, refusing to permit Ms. Dorsey to pay a reduced premium as follows:

            We respectfully disagree with your position that you are entitled [to] a
            COBRA premium subsidy.

            In our view, you voluntarily resigned and thus are not eligible from the
            COBRA premium reduction which relates only to involuntary termination,
            as acknowledged in your email. You effectively abandoned your job by not
            returning to it at the expiration of the FMLA5 period; no action was required
            on your part. Whether or not you want to acknowledge that you resigned
            is a matter of semantics. The bottom line is that you left your job, never
            came back, making it clear that you could not and would not come back.

            We therefore decline your request that we subsidize your COBRA premium
            payment.

Id. (emphasis in original).

                Ms. Dorsey then sought help from the DOL. On her behalf, “a representative of the

agency contacted Jacobson Holman to advise them that she was entitled to the ARRA subsidized

premium” but “[d]espite this determination, Jacobson Holman, PLLC denied [her] the subsidized

premium.” First Am. Compl. ¶¶ 33-42 (Count II).



        5
        The Family and Medical Leave Act (“FMLA”), 29 U.S.C. § 2601 et seq., guarantees most
workers 12 weeks of unpaid leave for illness, the birth of a child, and other such events.

                                                  -6-
               In this lawsuit, Ms. Dorsey asserts that she meets all the requirements for the premium

subsidy and that the DOL has already “determined” her eligibility. Id. ¶¶ 34-35, 38-39. She alleges

that this denial of benefits violated ERISA and the Internal Revenue Code, as amended by ARRA.

Id. ¶¶ 40-41. Jackson Holman asserts that Ms. Dorsey is required to exhaust administrative remedies

before pursuing her claim in court.

                                      II. LEGAL STANDARD

               “[T]he existence of an administrative remedy automatically triggers a non-

jurisdictional exhaustion inquiry.” Avocados Plus Inc. v. Veneman, 370 F.3d 1243, 1248 (D.C. Cir.

2004). Jackson Holman’s motion to dismiss Count II due to failure to exhaust is a motion to dismiss

for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

               A Rule 12(b)(6) motion to dismiss challenges the adequacy of a complaint on its face,

testing whether a plaintiff has properly stated a claim. Federal Rule of Civil Procedure 8(a) requires

that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled

to relief.” Fed. R. Civ. P. 8(a). A complaint must be sufficient “to give a defendant fair notice of

what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S.

544, 555 (2007) (internal citations omitted). In deciding a motion under Rule 12(b)(6), a court may

consider the facts alleged in the complaint, documents attached to the complaint as exhibits or

incorporated by reference, and matters about which the court may take judicial notice. Abhe &

Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007). To survive a motion to dismiss, a

complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is

“plausible on its face.” Twombly, 550 U.S. at 570.

               A court must treat the complaint’s factual allegations as true, “even if doubtful in


                                                  -7-
fact.” Id., 550 U.S. at 555. But a court need not accept as true legal conclusions set forth in a

complaint. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). “Threadbare recitals of the elements

of a cause of action, supported by mere conclusory statements, do not suffice.” Id. “While legal

conclusions can provide the framework of a complaint, they must be supported by factual

allegations. When there are well-pleaded factual allegations, a court should assume their veracity

and then determine whether they plausibly give rise to an entitlement to relief.” Id. at 1950.

                                           III. ANALYSIS

                Here, Ms. Dorsey contacted a Benefits Advisor at DOL but never followed through

with an application for review of Jacobson Holman’s denial of a subsidized premium for her

COBRA insurance coverage. She has no “final agency action” to appeal to this Court, but she insists

that she does not need one. “Because the [Benefits Advisor] did not know when the appeal process

would be available, Plaintiff sought counsel and on June 9, 2009 commenced this action.” Pl.’s

Opp’n [Dkt. # 17] at 3. Ms. Dorsey brings her suit under ERISA Sections 502(a)(1)(B), (a)(2) and

(a)(3)(B). See 29 U.S.C. § 1132(a)(1)(B) (allowing a participant or beneficiary to bring suit “to

recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the

plan or to clarify his rights to future benefits under the terms of the plan”); id. § 1132(a)(2) (allowing

a participant or beneficiary to sue for “appropriate relief” for breach of a fiduciary duty); id.

§ 1132(a)(3)(B) (allowing a participant or beneficiary “to obtain other appropriate equitable relief

(i) to redress such violations [of this subchapter] or (ii) to enforce any provisions of this

subchapter”). First Am. Compl. ¶ 1. Therefore, she argues, this case can proceed without regard to

the administrative appeal process. In the alternative, Ms. Dorsey suggests that she did contact DOL

before the appeal process was established and that should suffice.


                                                   -8-
               Although ERISA itself does not specifically require the exhaustion of remedies

available under health plans prior to a lawsuit, the courts have uniformly applied this requirement

“as a matter of judicial discretion.” Communications Workers of Am. v. AT&T Co., 40 F.3d 426,

431-32 (D.C. Cir. 1994); Hunter v. Metro. Life Ins. Co., 251 F. Supp. 2d 107, 110 (D.D.C. 2003)

(“ERISA does not specifically require the exhaustion of remedies available under pension plans but

courts have uniformly applied this requirement as a matter of judicial discretion.”) Thus, “it is well

established that, barring exceptional circumstances, plaintiffs seeking a determination pursuant to

ERISA of rights under their pension plans ‘must . . . exhaust available administrative remedies under

their ERISA-governed plans before they may bring suit in federal court.’” Communications Workers,

40 F.3d at 431 (quotation omitted). The exhaustion requirement applies to claims for benefits as

well as claims for breach of a fiduciary duty. Simmons v. Willcox, 911 F.2d 1077, 1081 (5th Cir.

1990).

               It is noteworthy that Section 3001(a)(5) of ARRA specifies: “[t]he provisions of this

paragraph . . . shall be treated as provisions of title I of the Employee Retirement Income Security

Act of 1974 for purposes of part 5 of subtitle B of such title.” ERISA Section 502, 29 U.S.C.

§ 1132, discussed above, is part of part 5 of subtitle B of that law. Since exhaustion is required in

most contexts under ERISA,6 it would not be strange to require exhaustion under ARRA.7


         6
           Exhaustion is excused if a litigant’s interest in an immediate judicial forum clearly
outweighs the institutional interests underlying the exhaustion requirement. McCarthy v. Madigan,
503 U.S. 140, 146 (1992). For example, exhaustion may be excused if delaying judicial review
would cause irreparable injury, if the agency is not competent to address the issue or grant effective
relief, or if further pursuit of an administrative remedy would be futile. Id. at 146-49; see Boivin v.
U.S. Airways, Inc., 446 F.3d 148, 157-58 (D.C. Cir. 2006).
         7
        In the only reported case related to premium reduction under the ARRA, the plaintiff
exhausted his administrative remedies. See Hejazi v. United States Department of Labor, No. C09-

                                                 -9-
               Of course, the Secretary of Labor is not a plan fiduciary. However, Congress passed

the Stimulus Act to jump-start the American economy and bring it out of a deep recession. ARRA

was designed to give individuals who had been involuntarily terminated a less expensive option to

maintain COBRA health insurance coverage. It is entirely consistent with the emergency nature of

the legislation that Congress established a swift and sure administrative review process of any plan

or employer or insurer’s denial of COBRA premium reduction. The Secretary is directed to decide

any appeal within 15 business days of receipt of a completed application, and the courts are directed

to give deference to the Secretary’s decision. ARRA § 3001(a)(5), 123 Stat. at 458. Under this

regime, individuals who are eligible for premium reductions can obtain that benefit almost

immediately, which is in direct furtherance of the congressional purpose. It blunts that purpose to

require – or allow – individuals to turn in the first instance to the courts. Notably, Ms. Dorsey filed

this suit on June 9, 2009, the parties completed briefing on Jacobson Holman’s motion to dismiss

Count II on January 22, 2010, and the motion is finally decided today — none of which tells us

whether Ms. Dorsey is or is not an assistance-eligible individual. It would have been far more

speedy to follow the congressional path.

                                        V. CONCLUSION

               It is entirely consistent with the policies and purposes of ARRA to require an

individual who is denied a COBRA premium reduction to utilize the administrative appeal process

before bringing a federal lawsuit. Ms. Dorsey did not file an appeal to the Secretary and Count II,


1018RSL, 2009 WL 3485958 (W.D. Wash. Oct. 26, 2009). In that case, the plaintiff appealed his
employer’s denial of a reduced premium request to the DOL, and when the DOL affirmed the denial,
the plaintiff brought suit against the DOL under the Administrative Procedure Act, 5 U.S.C. §
706(2)(A). Id. at * 2. The court held that the Department of Labor did not act arbitrarily or
capriciously. Id.

                                                 -10-
complaining of Jacobson Holman’s denial of Ms. Dorsey’s request for COBRA premium reduction,

is therefore premature. Defendants’ motion to dismiss [Dkt. # 12] Count II will be granted. A

memorializing Order accompanies this Memorandum Opinion.



Date: April 27, 2010                      __________/s/___________________________
                                          ROSEMARY M. COLLYER
                                          United States District Judge




                                            -11-
