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Cox v. Blue Cross Blue Shield of Michigan

United States District Court, E.D. Michigan, Southern Division

October 28, 2016

KIMBERLY COX, et al., Plaintiffs,
v.
BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant.

          OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS PLAINTIFFS' FOURTH AMENDED COMPLAINT (Dkt. 68) AND DISMISSING CASE WITH PREJUDICE

          MARK A. GOLDSMITH, UNITED STATES DISTRICT JUDGE

         Plaintiffs Kimberly Cox and Heather Claus initiated this putative class action under the Employment Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq., alleging that Defendant Blue Cross Blue Shield of Michigan (“BCBSM”) breached its fiduciary duty as a third-party administrator by charging Plaintiffs' respective ERISA healthcare plans “hidden” fees. BCBSM filed a motion to dismiss Plaintiffs' fourth amended complaint (Dkt. 68), claiming that Plaintiffs lack standing to bring this action. The issues have been fully briefed. Because oral argument will not aid the decisional process, the motion will be decided based on the parties' briefing. See E.D. Mich. LR 7.1(f)(2). As discussed below, the Court grants the motion and dismisses this case with prejudice.

         I. BACKGROUND

         The Court addressed the factual and procedural background of this case in an opinion and order granting BCBSM's prior motion to dismiss Plaintiffs' third amended complaint. See Cox v. Blue Cross Blue Shield of Mich., 166 F.Supp.3d 891, 893-894 (E.D. Mich. 2015). To avoid needless repetition, the Court sets forth a brief statement of the necessary facts to provide context for this opinion.

         From June 2005 to December 2013, Cox was a participant and beneficiary of a BCBSM-administered plan provided by her employer, Genesys Regional Medical Center (the “Genesys plan”). 4th Am. Compl. ¶¶ 11-12, 22 (Dkt. 65). From October 1996 to present, Claus has been a beneficiary of a BCBSM-administered plan through her late husband's membership in Operating Engineers Local 324 (the “Operating Engineers plan”). Id. ¶¶ 13-14, 25. Plan sponsors for the Genesys plan and the Operating Engineers plan entered into Administrative Services Contracts (“ASCs”) with BCBSM, which “set forth the rights and responsibilities of each party with regard to BCBSM's administration of the Plans.” Id. ¶ 1.

         Plaintiffs allege that BCBSM engaged in self-dealing and breached its fiduciary duties by illegally paying itself additional administrative fees, which Plaintiffs refer to as “hidden” fees, and failing to disclose the misappropriated funds to its principals, contrary to the ASCs and in violation of ERISA. Id. ¶¶ 3, 4. On September 12, 2014, Plaintiffs filed this putative class action pursuant to 29 U.S.C. § 1132(a)(3).[1] Plaintiffs seek both injunctive relief under § 1132(a)(3)(A) and “other appropriate equitable relief” under § 1132(a)(3)(B) in the form of restitution, disgorgement, surcharge, and the imposition of a constructive trust or equitable lien. 4th Am. Compl. at 37-39 (prayer for relief).[2]

         In its opinion granting BCBSM's motion to dismiss the third amended complaint, the Court concluded that Plaintiffs failed to set forth sufficient allegations in their third amended complaint to establish statutory standing to pursue their requested equitable relief under § 1132(a)(3)(B). Cox, 166 F.Supp.3d at 899. The Court also held that the complaint lacked sufficient allegations to establish constitutional standing to pursue Plaintiffs' requested injunctive relief under § 1132(a)(3)(A). Id. While dismissing the third amended complaint, the Court granted Plaintiffs leave to file a motion to amend their complaint, see id. at 900, which they did, see Pls. Mot. for Leave (Dkt. 59). After the Court granted the motion to amend in part, see 4/28/2016 Order (Dkt. 64), Plaintiffs filed their fourth amended complaint, see 4th Am. Compl. (Dkt. 65), which was followed by BCBSM's present motion to dismiss.

         II. ANALYSIS

         To pursue their ERISA claims, Plaintiffs must possess both constitutional and statutory standing. Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986). BCBSM's motion to dismiss contends that Plaintiffs still lack both types of standing. Because the Court agrees with BCBSM that Plaintiffs lack constitutional standing to bring this action, it will not address whether Plaintiffs possess statutory standing.

         The requirement for constitutional standing is derived from Article III of the United States Constitution, which limits the jurisdiction of federal courts to justiciable cases and controversies. Hollingsworth v. Perry, 133 S.Ct. 2652, 2661 (2013) (citing U.S. Const. art. III, § 2); Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 37 (1976) (“No principle is more fundamental to the judiciary's proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies.”). An essential feature of this requirement “is that any person invoking the power of a federal court must demonstrate standing to do so.” Hollingsworth, 133 S.Ct. at 2661; see also DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342 (2006) (“The core component of the requirement that a litigant have standing to invoke the authority of a federal court is an essential and unchanging part of the case-or-controversy requirement of Article III.”). The doctrine of standing ensures that a federal court's exercise of power is not “gratuitous” or “inconsistent” with the limitations imposed by Article III. See Simon, 426 U.S. at 38; Clinton v. City of New York, 524 U.S. 417, 429-430 (1998) (stating that standing “serves to identify those disputes which are appropriately resolved through the judicial process”). As the parties invoking federal jurisdiction, Plaintiffs bear the burden of establishing standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).

         A plaintiff must satisfy three requirements to establish Article III standing: “The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016). As this case is at the pleading stage, Plaintiffs “must clearly allege facts demonstrating each element.” Id.

         A party seeking an injunction in federal court must satisfy a fourth requirement to have constitutional standing - the party must generally show “a non-speculative threat that he [or she] will again experience injury as a result of the alleged wrongdoing.” Werner v. Primax Recoveries, Inc., 365 F. App'x 664, 668 (6th Cir. 2010); see also City of Los Angeles v. Lyons, 461 U.S. 95, 102 (1983) (the plaintiff must show a “real and immediate threat of repeated injury” demonstrated by more than “past exposure to illegal conduct”); O'Shea v. Littleton, 414 U.S. 488, 495-496 (1974) (explaining that “[p]ast exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief”). Moreover, “while past illegal conduct might constitute evidence regarding whether there is a real and immediate threat of repeated injury, where the threat of repeated injury is speculative or tenuous, there is no standing to seek injunctive relief.” Taylor v. Mich. Dep't of Natural Res., 502 F.3d 452, 464-465 (6th Cir. 2007); Grendell v. Ohio Supreme Court, 252 F.3d 828, 833 (6th Cir. 2001) (same).

         There is some relaxation of standing requirements in the ERISA context. An ERISA plan participant or beneficiary seeking injunctive relief under § 1132(a)(3)(A) need not demonstrate his or her own individual harm as part of establishing an injury in fact. Loren, 505 F.3d at 609-610. By contrast, a plan participant or beneficiary seeking “other appropriate equitable relief” under § 1132(a)(3)(B) is still obliged to do so. See, e.g., Perelman v. Perelman, 793 F.3d 368, 373 (3d Cir. 2015) (“Claims demanding a monetary equitable remedy . . . require the plaintiff to allege an individualized financial harm traceable to the defendant's alleged ERISA violations.”); Faber v. Metro. Life Ins. Co., 648 F.3d 98, 102 (2d Cir. 2011) (disgorgement requires showing of individual harm); Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 433 F.3d 181, 199-200 (2d Cir. 2005) (“Obtaining restitution or disgorgement under ERISA requires that a plaintiff satisfy the strictures of constitutional standing by demonstrating individual loss.”); Horvath v. Keystone Health Plan E., Inc., 333 F.3d 450, 456 (3d Cir. 2003) (“[R]estitution and disgorgement . . . are individual in nature and therefore require [the plaintiff] to demonstrate individual loss.”). And an ERISA plan participant or beneficiary seeking an injunction must still establish that the threat of repeated illegality is non-speculative in nature. Werner, 365 F. App'x at 668.

         As explained below, Plaintiffs cannot meet the injury-in-fact requirement for the non-injunctive equitable relief they seek, because they do not allege individual harm; they have also failed to allege any likelihood of repeated injury or ...


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