Winsor v. Sequoia Benefits and Insurance Services LLC

Background

The plaintiffs were current and former participants in RingCentral, Inc.’s Welfare Benefits Plan. They alleged that Sequoia Benefits and Insurance Services LLC and Gregory S. Golub acted as fiduciaries of the plan and engaged in an unlawful kickback scheme by receiving commissions from insurers.

The defendants moved to dismiss the complaint. The court focused on Article III standing, which is the constitutional requirement that a plaintiff show a concrete personal injury, a connection between that injury and the defendant’s conduct, and a likelihood that a court decision will remedy the injury.

Court’s Analysis

The plaintiffs advanced two apparent injury theories. First, they alleged that they paid contributions from their paychecks for medical, vision, dental, and life insurance and that those contributions would have been lower without the defendants’ alleged violations of the Employee Retirement Income Security Act. Second, they alleged that money not paid as commissions would otherwise have been available for employee benefits and compensation.

The court held that the complaint did not plausibly connect the commissions to the plaintiffs’ contributions. The plaintiffs did not allege how their benefit contributions were calculated, whether the insurers would have charged the plan less without the commissions, or whether RingCentral would have passed any savings on to employees. The complaint stated that RingCentral was required to pay at least 75% of single-coverage contributions and 50% of family-coverage contributions, but did not allege that RingCentral required employees to pay the maximum amounts allowed.

The court also rejected the plaintiffs’ argument that a Department of Labor technical release supported standing. The court observed that the release concerned certain rebates under the Public Health Service Act, and the plaintiffs had not alleged that the relief they sought would qualify as such a rebate. The plaintiffs’ second theory—that noncommission funds would have produced more employee benefits—also failed because the complaint contained no supporting facts, and the plaintiffs did not address that theory in their opposition.

Disposition

The court concluded that the complaint did not clearly allege facts satisfying even the injury requirement for Article III standing. It granted the defendants’ motion to dismiss and dismissed the complaint with 30 days’ leave to amend. The court did not reach the defendants’ other arguments on the merits, but noted that the plaintiffs should consider those arguments if they amend. The order disposed of Docket No. 35.