18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 325 Plaintiffs lacked Article III standing by failing to allege an injury that was fairly traceable to the conduct of the Administrative Committee. Specifically, Plaintiffs’ claims against the Administrative Committee centered on the Committee’s alleged failure to make accurate disclosures regarding the Intel Plans, and the Court determined that Plaintiffs did not claim that they actually read or relied on these disclosures. For these reasons, the Court granted Defendants’ motion to dismiss. Freitas, et al. v. Geisinger Health Plan, et al., 2021 U.S. Dist. LEXIS 100325 (M.D. Penn. May 27, 2021). Plaintiffs filed a class action against Defendants Geisinger Health Plan and SCIOinspire Corp., alleging violations of the ERISA in connection with declining health insurance claims. Defendant filed a motion to dismiss pursuant to Rule 12(b)(6), and the Court denied the motion. Plaintiffs received health insurance from the Geisinger Health Plan, which was fiduciary responsible for making discretionary decisions regarding the denial of benefits claims. SCIOinspire was alleged to be a plan fiduciary responsible for enforcing the plan’s subrogation rights. The Plan contained a subrogation clause. After Plaintiffs were injured in separate accidents by third-party, Plaintiffs subsequently received a total of $61,525.59 in health benefits under the Plan. After Plaintiffs settled their claims with the third-parties, SCIOinspire contacted them by letter and demanded reimbursement for the cost of medical benefits they had received pursuant to the Plan. Plaintiffs asserted that the requests were sent based on Defendants’ interpretation of the Plan’s subrogation clause. Plaintiffs thereafter filed their class action seeking under § 502(a)(1)(B) of the ERISA to recover the funds they paid in reimbursement in response to the SCIOinspire letters, as well as any funds that other class members had paid in reimbursement under similar circumstances. Plaintiffs also asserted five breach of fiduciary duty claims under § 502(a)(3), four of which arise from Defendants’ allegedly wrongful interpretation of the Plan’s subrogation clause. Id . at *5. The Court noted that the dispute centered on whether the Plan’s subrogation clause, standing alone, created an enforceable right of reimbursement. Defendants argued that the text of the subrogation clause plainly and unambiguously showed a contractual right of reimbursement. Id . at *13. Plaintiffs pointed to the absence of language establishing an express right of reimbursement. The Court found that the Plan’s subrogation clause did not unambiguously establish Defendants’ right to seek reimbursement from Plaintiffs because the subrogation clause was subject to more than one reasonable alternative interpretation. Accordingly, the Court concluded that it would not be possible for the average plan participant to be adequately informed of his obligations. For these reasons, the Court declined to dismiss Plaintiffs’ breach of fiduciary duty claims. Smith, et al. v. CommonSpirit Health, 2021 U.S. Dist. LEXIS 169922 (E.D. Ky. Sept. 8, 2021). Plaintiff, a participant in CommonSpirit’s 401(k) retirement savings retirement plan (“the Plan”), brought a putative class action pursuant to the ERISA, alleging that Defendants breached their fiduciary duty to its members by providing an inadequate selection of investment options and by allowing for unreasonable expenses to be charged for the administration of the Plan. Pursuant to the Plan’s terms, participants could direct their contributions into various investments options offered by the Plan, such as mutual funds and brokerage accounts. As the Plan Sponsor and fiduciary charged with administering the Plan, CommonSpirit assembled the Administration Committee and appointed its individual members to administer the Plan on CommonSpirit’s behalf. Defendants retained Fidelity Management Trust Co. to hold the Plan’s assets. In exchange for its services, Fidelity charged recordkeeping fees that were paid by Plan participants through a deduction in investment income. Each participant’s account was charged with the amount of distributions taken and allocation of administrative expenses. The gravamen of Plaintiff’s complaint was that Defendants violated their fiduciary duties of prudence and loyalty under § 1104(a) of the ERISA by: (i) selecting investment funds with higher fees and sub-par performance; (ii) offering an investment menu that was more expensive than that of comparable plans; and (ii) allowing the Plan to pay excessive recordkeeping fees to Fidelity. Defendants moved to dismiss Plaintiffs’ complaint in its entirety on the grounds that Plaintiff lacked Article III standing as to one of her claims, and that her complaint as a whole failed to state a claim upon which relief may be granted. First, as to standing, the Court rejected Defendants’ assertion that Plaintiff lacked standing to challenge funds that she did not invest in, since Plaintiff’s investment in one of the challenged funds was sufficient to confer standing to sue on behalf of the Plan members who invested in the remaining challenged funds. As to Defendants’ Rule 12(b)(6) motion, the Court agreed with Defendants that Plaintiff had not alleged facts from which the Court could infer imprudent conduct on the part of Defendants and dismissed her complaint on that basis. Plaintiff contended that Defendants should not have selected and retained the funds within the Fidelity Active Suite because of their high cost and underwhelming performance. However, the Court concluded that to make an investment-by-investment challenge like this one, a complaint