ERISA Class Action Against Wells Fargo Concerning Health Plan Prescription Drug Benefit Contracting, Pricing, and Monitoring Dismissed Without Prejudice 

On March 24, 2025, the U.S. District Court for the District of Minnesota dismissed without prejudice on Article III standing grounds all claims pending against Wells Fargo and Company (Wells Fargo) arising out of its employee benefit plan prescription drug coverage (Plan), Navarro v. Wells Fargo. & Co., No. 24-cv-3043. As previously discussed, Wells Fargo's motion to dismiss argued, in part, that the plaintiffs, who were all former employees of the company, lacked standing to seek plan-wide relief because they received all the benefits to which they were entitled and the individual harms they alleged were too speculative. 

The plaintiffs' ERISA breach of fiduciary duty claims allege that Wells Fargo's contract with its pharmacy benefit manager (PBM) charged inflated prices and administrative fees and that Wells Fargo breached its ERISA duties in failing to take certain actions such as negotiating better terms with its PBM, conducting a more thorough process in selecting its PBM, steering participants to lower-cost alternatives for generic-specialty drugs, negotiating a different PBM structure (such as a pass-through PBM structure), and monitoring costs. The plaintiffs also allege that Wells Fargo caused its Plan to engage in prohibited transactions with its PBM, a party in interest under ERISA, because it agreed to pay unreasonable compensation to its PBM. The plaintiffs' prayer for relief includes the recovery of losses to the Plan, restitution, disgorgement, surcharge, and permanent injunctive relief to include the replacement of the Plan's PBM and appointment of an independent plan fiduciary. 

In dismissing the plaintiffs' ERISA § 502(a)(2) claims, the court, citing the Supreme Court case Thole v. U.S. Bank N.A. (Thole II) and the Court of Appeals for the Third Circuit case Knudsen v. MetLife Group, Inc., found that "in theory," "the individual harm [plaintiffs] allege could constitute injury-in-fact for standing purposes," "[b]ut on the actual facts [p]laintiffs allege, these [p]laintiffs cannot satisfy Article III's standing requirements because their alleged harm is speculative and, ultimately, not redressable." More specifically, the court found:

The underlying argument [p]laintiffs advance, while different in the specifics, is essentially the same as in Knudsen: had Wells Fargo more closely monitored the Plan's prescription drug costs and negotiated a better deal with [its PBM], replaced [its PBM] with a different PBM, or adopted a different model altogether, the Plan would have paid less in administrative fees and other compensation to [its PBM], which would have resulted in lower participant contributions and out-of-pocket costs. Plaintiffs' theory appears tempting at first blush, but it withers upon closer scrutiny. To begin, the connection between what Plan participants were required to pay in contributions and out-of-pocket costs, and the administrative fees the Plan was required to pay [its PBM], is tenuous at best. Of critical importance here is that the Plan vests Wells Fargo with "sole discretion" to set participant contribution rates. The Plan's terms are clear that participant contribution amounts may be affected by several factors having nothing to do with prescription drug benefits, like whether a participant uses tobacco, whether a participant obtains coverage for her spouse or children in addition to herself, and a participant's "compensation category." And notwithstanding that Wells Fargo supplied the bulk of Plan funding during the relevant period... the Plan authorizes Wells Fargo to require participants to fund all Plan expenses, not just expenses related to their own individual benefits. 

The court also rejected the plaintiffs' "attempts to establish a direct connection between their increased costs and the increases in administrative fees paid by the Plan to [its PBM]" through a comparison of "only 260 of the drugs in the Plan's formulary, a relatively narrow subset of the 'thousands' of drugs in the Plan's full formulary" to "the prices an uninsured person would pay at retail pharmacies for the same prescriptions or the acquisition costs paid by the pharmacies to obtain those drugs." The court deemed this argument deficient, in part, because prescription benefit plan participants are only required to pay the full out-of-pocket costs for prescription drugs until meeting their annual deductible. 

In dismissing the plaintiffs' ERISA § 502(a)(3) claims also on standing grounds, the court found that the plaintiffs did not allege "concrete individual harm" and "have no concrete stake in the lawsuit regarding any prospective injunctive relief" because they "are no longer participants in the Plan... so any changes to the Plan's structure or administration going forward—like replacing... the Plan's PBM or removing the Plan's fiduciaries and appointing an independent fiduciary... will not personally affect them in any way, much less redress the individual harm they allege." Further, the court found "[a]s it relates to [p]laintiffs' request for non-injunctive (that is, retrospective) equitable relief, [p]laintiffs do not dispute that they received all the benefits to which they were entitled when they were participants in the Plan, even if they believe they had to pay more for those benefits than they should have." 

The court does not address the arguments raised by Wells Fargo unrelated to standing, but does question the sufficiency of the plaintiffs' complaint as to the merits of the breach of fiduciary duty claims pertaining to Wells Fargo's selection of its PBM and its failure to negotiate a specialty drug "carve-out model," noting that "these allegations, even accepted as true, are missing critical information" in its comparisons to prescription drug plans of other companies such as "facts regarding the relative size and scope of those companies' plans or... how much those companies' plans saved by implementing those carve-outs" or alleging "that the carve-outs reduced those plan participants' contributions or out-of-pocket costs at all" or "why those companies chose to implement carve-outs." 

As recently discussed, there are at least two other pending cases raising similar claims as this case, Stern v. JPMorgan Chase & Co., No. 25-2097 (S.D.N.Y. Mar. 13, 2025), and Lewandowski v. Johnson and Johnson, No. 24-671 (D.N.J. Jan. 5, 2024). These cases have not yet progressed beyond the pleadings stage, but if they do, they will likely set the stage for additional cases by plan participants and beneficiaries challenging an assortment of costs and fees in health plans. Because the Wells Fargo dismissal was without prejudice, the plaintiffs have an opportunity to replead their claims to address the initial complaint's shortcomings, as the Johnson and Johnson plaintiffs recently did, and any amended complaint could add plaintiffs who are currently participants in the Wells Fargo plan. 

ERISA Preemption Ends Doctor's Defamation Suit

On March 17, 2025, the U.S. District Court for the District of New Jersey granted summary judgment to Cigna Health and Life Insurance Company (Cigna) in a case brought by a medical provider alleging defamation related to claims denials for out-of-network services the plaintiff doctor provided. Ahn v. Cigna Health & Life Ins. Co., No. 2:19-cv-07141(D.N.J. Mar. 17, 2025). The court, in an unpublished opinion, held that the plaintiff's defamation claim was preempted by ERISA because the claims arose out of Cigna's ERISA-required communications regarding benefits determinations, which the court found to be a "central matter of plan administration."

The plaintiff's suit rested on allegedly defamatory statements found in a number of Explanation of Benefits notices (EOBs) sent by Cigna to plan participants regarding claims for services provided by the plaintiff. The EOBs denied the participants' claims for payment under their plans, using a billing code that stated, incorrectly, that the plaintiff was an unlicensed healthcare professional. The plaintiff alleged that Cigna continued to send EOBs referring to him as an "unlicensed provider" after he notified Cigna of the problem and that he lost patients, was not paid for covered services, and suffered damage to his reputation as a result of the EOBs. He brought suit in state court alleging defamation, defamation per se, and tortious interference, which Cigna removed to federal court. The plaintiff dropped all claims except his claim for defamation per se, which Cigna argued was preempted by ERISA and, in any event, that the plaintiff could not show actual damages.

The court agreed with Cigna that the doctor's claim fell within ERISA's express preemption provision, ERISA § 514(a), which states that ERISA "supercede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). First, the court found that all the relevant EOBs were issued under employer-sponsored plans covered by ERISA. Then the court found that the defamation claim fell under the "connection with" ERISA preemption test as articulated by longstanding Supreme Court precedent, because the claim arose out of a central matter of plan administration – namely, the requirement that ERISA plans provide a notice and explanation to patients whose claims are denied. The court explained: 

Dr. Ahn's defamation per se claim is premised on statements made in EOBs sent to beneficiaries of ERISA plans. Those EOBs were sent pursuant to Cigna's obligations under ERISA to provide written notice to patients whose claims were denied, including the specific reasons for the denial. In other words, the fact that Cigna sent the allegedly defamatory EOBs pursuant to their obligations under ERISA shows how Dr. Ahn's claims relate to ERISA. 

The court concluded that its holding was bolstered by similar cases in other jurisdictions finding state tort claims, including for defamation, were preempted where the alleged violation related to an insurer's decision to deny coverage. The court rejected the plaintiff's contention that the false statement that he was "unlicensed" was distinguishable from the plan's general "handling, review, and disposition" of claims. As such, the court did not address the issue of damages, and it granted summary judgment in full to Cigna on the basis of ERISA preemption. 

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