In The Depot, Inc. v. Caring for Mountanans, Inc., No. 17-35597 (9th Cir. 2019), a panel for the Ninth Circuit Court of Appeals (the “Panel”) affirmed in part and reversed in part the district court’s dismissal of an action brought under ERISA and Montana state law against health insurance companies, and remanded the case for further proceedings.
In this case, the health insurance companies marketed health insurance plans, branded “Chamber Choices,” to members of the Montana Chamber of Commerce. Three small employers, Chamber members that provided their employees with healthcare coverage under Chamber Choices plans, alleged misrepresentations in the marketing of the plans. Affirming the district court’s dismissal of the ERISA claims, the Panel held that plaintiffs failed to state a claim for breach of fiduciary duty under ERISA (under 29 U.S.C. § 1132(a)(2)) in defendants’ alleged charging of excessive premiums. The Panel held that, in secretly charging excessive premiums, defendants did not act as fiduciaries of the plans because they did not exercise discretion over plan management or control over plan assets. Plaintiffs also failed to state a claim for equitable relief under ERISA (under § 1132(a)(3)) for prohibited transactions in imposing unreasonable charges for kickbacks and unrequested benefits because plaintiffs’ requested relief of restitution or disgorgement was not equitable in nature.
The Panel reversed the dismissal of plaintiffs’ state-law claims, based on defendants’ alleged misrepresentations that the premiums charged reflected the actual medical premium amount. The Panel held that ERISA did not expressly preempt the state-law claims because the claims did not have a reference to or an impermissible connection with an ERISA plan, and therefore did not “relate to” an ERISA plan. The state-law claims also were not conflict-preempted by ERISA. The Panel nonetheless agreed with the district court that plaintiffs’ allegations did not state with particularity the circumstances of the alleged fraud, as required by Federal Rule of Civil Procedure 9(b). The Panel therefore reversed the dismissal with prejudice of the state-law claims so that plaintiffs could amend their complaint to state the fraud allegations with greater particularity. The Panel noted, however, that the district court was also free on remand to decline to exercise supplemental jurisdiction over the state law claims.