The United States District Court for the Northern District of Illinois recently ruled that an employer did not violate COBRA's notice requirements when it failed to extend COBRA privileges to a terminated employee whom the employer believed had fraudulently obtained disability benefits. In Kariotis v. Navistar International Transportation Corp., the plaintiff, Kathleen Kariotis, took a leave of absence in March 1995 for knee replacement surgery from her executive assistant position at Navistar. Kariotis' treating physician originally released her to return to work roughly two months after her surgery, but her return date was postponed by the physician three times, causing her absence to extend over four months.
Navistar became suspicious of Kariotis' need for the additional time off and hired an undercover surveillance specialist to videotape her public activity. Kariotis was videotaped on three separate days engaging in the following activities: walking, sitting, bending, driving a vehicle, getting into a vehicle, getting into and out of a golf cart and sweeping and pushing a grocery cart.
After reviewing the videotape, Navistar's human resources executives set up an appointment with Kariotis to discuss her recuperation. According to Navistar, Kariotis stated in that meeting that she had been unable to shop or walk straight until two days prior to the meeting. (Kariotis, who was unaware of the videotape at the time of the meeting, later claimed that she never made these statements during the meeting.) Shortly after the meeting, Navistar notified Kariotis that she was terminated for cause, including but not limited to fraudulently claiming disability benefits for which she was not eligible.
Kariotis sued Navistar, claiming violations of the Consolidated Omnibus Budget Reconciliation Act ("COBRA"), the Employee Retirement Income Security Act of 1974 ("ERISA"), the Americans With Disabilities Act ("ADA"), the Family and Medical Leave Act ("FMLA") and the Age Discrimination in Employment Act ("ADEA"), in addition to various state law claims. Kariotis and Navistar filed cross-motions for summary judgment.
The court granted the relevant portions of Navistar's motion and denied Kariotis' cross-motion. With respect to plaintiff's ADA, ADEA and ERISA claims, the court held that Kariotis presented no direct evidence that unlawful discrimination of any form played a role in Navistar's decision to terminate her, and that any presumption of discrimination dissolved because Navistar offered a lawful reason for its decision. Kariotis then argued that Navistar's nondiscriminatory explanation that it "believed" she had defrauded the company to obtain disability benefits was a lie since the company could have, but did not, (i) show the videotape to her own doctor to solicit his opinion as to whether the tape was inconsistent with her complaints; (ii) have a company-appointed doctor examine her and provide a second opinion as to whether she was able to return to work; or (iii) take into account her doctor's opinion that she did not commit disability fraud. The court held that Kariotis' allegations were insufficient to show that Navistar's nondiscriminatory reason was a lie and that the court was not concerned whether the employer's decision was "wise, logical, prudent, ill-informed, ill-considered, or accurate." The court held that Kariotis had not shown that Navistar did not believe its reason for her termination.
In connection with the COBRA claim, the court held that Navistar was not obligated to notify plaintiff of her COBRA rights because she did not have a "qualifying event" giving rise to COBRA entitlement. The court noted that Kariotis' termination would have been a qualifying event but for the fact that she was terminated for "gross misconduct." Although Kariotis agreed with Navistar that disability fraud qualifies as "gross misconduct," she argued that Navistar's "belief" that she committed disability fraud does not meet the standard. Adopting a principle used widely in discriminatory discharge cases, the court examined whether Navistar had a good faith belief at the time of termination that Kariotis committed disability fraud. After finding that Kariotis had not cast sufficient doubt on the truthfulness of Navistar's belief, the court granted Navistar summary judgment on Kariotis' COBRA claim.