Introduction
A federal judge has dismissed a proposed class action involving four former employees of Wells Fargo. These individuals accused Wells Fargo of violating its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by mismanaging the prescription drug benefits within its employee health plan.
Details of the Case
U.S. District Judge Laura M. Provinzino ruled in detail that the plaintiffs lacked Article III standing. They failed to show a concrete and particularized injury directly linked to the alleged misconduct that the court could address.
Plaintiffs and Allegations
The plaintiffs—Sergio Navarro, Theresa Gamage, Dayle Bulla, and Jane Kinsella—are former Wells Fargo employees and prior participants in the Wells Fargo & Company Health Plan (referred to as the Plan), a self-funded employee welfare benefit plan governed by ERISA. Representing themselves and other similarly situated participants, as well as the Plan itself, they claimed Wells Fargo engaged in fiduciary mismanagement. This was allegedly done by contracting with Express Scripts, Inc. (ESI), a traditional pharmacy benefit manager (PBM), without a competitive bidding process and on terms that led to inflated prescription drug prices and excessive administrative fees.
Legal Claims
The plaintiffs accused Wells Fargo of breaches of fiduciary duty under ERISA § 1104(a) and engaging in prohibited transactions under § 1106. They sought remedies under 29 U.S.C. §§ 1132(a)(2) and (a)(3), including restitution, surcharge, disgorgement, removal of fiduciaries, replacement of the PBM, and appointment of an independent fiduciary.
Analysis and Ruling
The court’s analysis heavily relied on the Plan’s documents. Notably, these documents weakened the plaintiffs’ claims that their increased costs were directly caused by the alleged misconduct. Judge Provinzino granted Wells Fargo’s motion to dismiss under Rule 12(b)(1), concluding that the plaintiffs’ alleged harm was speculative, causation was inadequate, and the requested relief would not necessarily remedy the injury.
The court emphasized that the plaintiffs did not claim they were denied any benefits promised under the Plan. Instead, they argued they paid more than necessary due to mismanagement. The court found this harm too speculative, especially considering the Plan’s structure and Wells Fargo’s discretion in setting contributions.
Judicial Reasoning and Precedents
Given Wells Fargo’s unilateral authority over participant contribution rates, the court found it speculative to assume lower PBM costs would result in reduced premiums or out-of-pocket expenses. Even if all requested relief was granted, including the removal of fiduciaries and PBM replacement, Wells Fargo could legally maintain or increase participant contributions.
Judge Provinzino remarked, “Merely changing ‘may’ to ‘would’ is a semantic sleight of hand,” dismissing the plaintiffs’ claim that reduced fees “would” have led to lower participant costs.
Impact and Conclusion
The court also determined that because the plaintiffs were no longer participants in the Plan, they lacked standing to seek forward-looking relief. They would not be affected by any prospective relief, such as replacing fiduciaries or altering the Plan structure.
Drawing on Thole v. U.S. Bank N.A., 590 U.S. 538 (2020), which ruled that participants in a defined-benefit plan lacked standing to sue over fiduciary mismanagement when they received all promised benefits, the court deemed the Plan similarly structured. Consequently, the plaintiffs’ theory of harm was insufficient under Thole.
The court also referenced the Third Circuit’s recent decision in Knudsen v. MetLife Grp., Inc., 117 F.4th 570 (3d Cir. 2024), which hypothetically allowed for ERISA standing based on excessive out-of-pocket health costs. However, the court found the plaintiffs’ claims too speculative even under that framework.
Final Verdict
The complaint was dismissed without prejudice, leaving open the possibility that a future plaintiff, perhaps one still participating in the Plan and able to allege specific, traceable harm, could pursue similar claims.
Judge Provinzino concluded: “The Court is not unsympathetic to Plaintiffs’ concerns. Prescription drug costs are high—even for those who are insured.” Yet, under current law, the plaintiffs lacked the standing to proceed.
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