The Depot, Inc. v. Caring for Mountanans, Inc., No. 17-35597 (9th Cir. 2019)
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Three small employers in Montana filed suit against health insurance companies, alleging claims under the Employee Retirement Income Security Act of 1974 (ERISA), as well as state law claims based on defendants' representations. The Ninth Circuit affirmed the district court's dismissal of plaintiffs' ERISA claims and held that plaintiffs failed to state a claim for breach of fiduciary duty under 29 U.S.C. 1132(a)(2) where defendants did not exercise control over plan assets when charging or spending the allegedly excessive premiums.
However, the panel reversed the district court's dismissal of plaintiffs' state law claims and held that ERISA did not expressly preempt state-law claims against an insurer that did not bear on an ERISA-regulated relationship. Furthermore, the state law claims were not barred by conflict preemption. The panel reversed the district court's dismissal with prejudice of the state-law claims so that plaintiffs may amend their complaint to state the fraud allegations with greater particularity.
Court Description: Employee Retirement Income Security Act. 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 for further proceedings. The 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 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 § 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 DEPOT V. CARING FOR MONTANANS 3 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.
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