The panel affirmed the district court’s dismissal, for lack of Article III standing, of ERISA plan participants’ putative class action alleging breach of fiduciary duty by the manager of a Multiple Employer Welfare Arrangement, or MEWA.
Plaintiffs, current and former employees of RingCentral, participated in RingCentral’s employee welfare benefits plan. The plan participated in the “Tech Benefits Program” administered by Sequoia Benefits and Insurance Services, LLC, a management and insurance brokerage company. The Tech Benefits Program was a MEWA that pooled assets from employer-sponsored plans into a trust fund for the purpose of obtaining insurance benefits for employees at large-group rates.
Plaintiffs filed this putative class action on behalf of the RingCentral plan and other Tech Benefits Program participants, asserting that Sequoia owed fiduciary duties to the plan under ERISA because Sequoia allegedly exercised control over plan assets through its operation of the Tech Benefits Program. Plaintiffs alleged that Sequoia violated its fiduciary duties by receiving and retaining commission payments from insurers, which plaintiffs regarded as kickbacks, and by negotiating allegedly excessive administrative fees with insurers, leading to higher commissions for Sequoia.
The panel held that plaintiffs failed to establish Article III standing as to either of their two theories of injury. Plaintiffs’ first theory of injury was that Sequoia’s actions allegedly caused them to pay higher contributions for their insurance, and that eliminating Sequoia’s commissions and reducing administrative fees would therefore have lowered plaintiffs’ payments. The panel held, as to this out-of-pocket-injury theory, that plaintiffs failed to establish the injury in fact required for Article III standing because their allegations did not demonstrate that they paid higher contributions because of Sequoia’s allegedly wrongful conduct. Plaintiffs thus also failed to plead causation, the second element of Article III standing. And plaintiffs failed to plead the third element, that their injury would likely be redressed by judicial relief, either by the imposition of a constructive trust on Sequoia’s ill-gotten profits or by the award of damages to the RingCentral plan.
Plaintiffs’ second theory of injury was that, as beneficiaries, they retained an equitable ownership in the Tech Benefits Program’s trust fund. The panel held that this theory of standing was barred under Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020), which held that participants in a defined-benefit pension plan lacked standing to bring an ERISA claim alleging that the plan’s fiduciaries had violated their duties of loyalty and prudence by poorly investing the plan’s assets. The plaintiffs in Thole received a fixed monthly payment, which did not fluctuate based on the value of the plan, and therefore suffered no monetary injury. The panel held that the plaintiffs here did not establish that they had some equitable interest in plan funds that the Thole plaintiffs lacked, or that a comparison to trust law could support their standing when such a comparison did not prevail in Thole. Although the Tech Benefits Program was not a defined-benefit pension plan, it similarly provided a fixed set of benefits as promised in plan documents.