Navarro v. Wells Fargo & Company

Background

Sergio Navarro, Theresa Gamage, Dayle Bulla, and Jane Kinsella were former Wells Fargo employees and former participants in the Wells Fargo & Company Health Plan. They sued on their own behalf, on behalf of a proposed class of plan participants, and on behalf of the plan. The opinion refers to Wells Fargo & Company as the defendant because Wells Fargo agreed to assume responsibility for the action, while the plaintiffs agreed to dismiss their claims against the other defendants without prejudice.

The plaintiffs alleged that Wells Fargo breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by failing to properly monitor and control the plan’s prescription-drug costs. The plan used Express Scripts, Inc. as its pharmacy benefit manager. The plaintiffs alleged that the plan paid excessive prescription-drug prices and administrative fees, which caused participants to pay higher premiums and out-of-pocket costs. They sought recovery for losses to the plan, equitable relief, and changes to the plan’s administration, including replacing Express Scripts and removing or replacing plan fiduciaries.

Wells Fargo moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of Article III standing, or alternatively under Rule 12(b)(6) for failure to state a claim. The court considered the standing challenge based on the complaint’s allegations and documents incorporated into or necessarily embraced by the complaint.

Standing analysis

Article III standing requires a plaintiff to allege a concrete and particularized injury, a sufficient connection between that injury and the defendant’s conduct, and a likelihood that a favorable court decision would remedy the injury. The court stated that ERISA does not create an exception to these constitutional requirements.

For the claims brought under 29 U.S.C. § 1132(a)(2), the court concluded that the plan was closely analogous to a defined-benefit health plan. In that type of plan, participants generally receive contractually defined benefits rather than benefits that fluctuate with the value of individual accounts. The court held that a participant may theoretically show an injury based on excessive premiums or out-of-pocket costs, but the plaintiffs’ allegations here did not do so.

The court found the alleged connection between Wells Fargo’s payments to Express Scripts and the plaintiffs’ personal costs too speculative. The plan gave Wells Fargo sole discretion to set participant contribution rates, and those rates could depend on factors unrelated to prescription-drug expenses. The plan also allowed plan expenses to be paid from plan assets or participant contributions. As a result, even if Wells Fargo had paid lower fees or changed pharmacy-benefit arrangements, the plaintiffs had not plausibly shown that their own premiums or out-of-pocket costs would have been lower.

The court also found that the requested relief was not sufficiently likely to remedy the alleged injury. Even if the plaintiffs obtained the relief they requested, Wells Fargo could still change participant contribution amounts under the plan’s terms. The court therefore held that the plaintiffs lacked standing to pursue their claims under Section 1132(a)(2).

For the claims under 29 U.S.C. § 1132(a)(3), the court reached the same result for additional reasons. The plaintiffs were no longer plan participants, so prospective changes—such as replacing Express Scripts or changing the plan’s fiduciaries—would not personally affect them. The court also held that the plaintiffs had not alleged a concrete injury supporting retrospective equitable relief. In addition, some requested relief had the characteristics of monetary or compensatory relief, which the court said is not available under Section 1132(a)(3).

Disposition

The court held that the plaintiffs lacked Article III standing to bring their claims. Because the complaint was dismissed for lack of standing, the court did not decide Wells Fargo’s alternative Rule 12(b)(6) argument.

Judge Laura M. Provinzino granted Wells Fargo’s motion to dismiss. The court dismissed the plaintiffs’ complaint without prejudice and directed that judgment be entered accordingly.