In Re UnitedHealth Group PBM Litigation

Filing 171

ORDER: (1) Defendants' motion to dismiss [Dkt. No. 67 ] is GRANTED, as set forth in this Order. (2) Counts I, II, III, IV, V, VI, VII, VIII, IX, X, XI, XII, XIII, XVI, and XVIII of the Consolidated Class Action Complaint [Dkt. No. 52 ] are DISMISSED WITHOUT PREJUDICE. (3) Count XIV, XV, and XVII of the Consolidated Class Action Complaint [Dkt. No. 52 ] are DISMISSED WITH PREJUDICE. (Written Opinion) Signed by Judge Joan N. Ericksen on December 19, 2017. (CBC)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

In re: UnitedHealth Group PBM Litigation

Case No. 16-CV-3352 (JNE/BRT)

THIS ORDER RELATES TO: Nos. 16-CV3352, 16-CV-3496, 16-CV-3914, 16-CV3996, 16-CV-4119, 16-CV-4129, 16-CV4130, and 16-CV-4136

ORDER

Plan members bring suit against UnitedHealth Group, Inc. and some of its wholly-owned
subsidiaries 1 under the Employee Retirement Income Security Act of 1974 (“ERISA”), the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), and various state laws relating to
breach of contract, fraud, and deceptive trade practices for Defendants’ conduct in administrating
pharmacy benefits that allegedly caused Plaintiffs to overpay for prescription drugs purchased at
retail network pharmacies. (See Consolidated Class Action Compl. (“CAC”), Dkt. No. 52.)
Defendants filed a motion to dismiss the CAC. (See Dkt. No. 67.) For the following reasons, the
Court grants Defendants’ motion to dismiss.
I. STANDARD OF REVIEW
Defendants move to dismiss Plaintiffs’ claims under Fed. R. Civ. P. 12(b)(6) and 9(b).
(See Dkt. No. 67.) When ruling on a motion to dismiss under the rules, the Court accepts the
alleged facts as true, drawing all reasonable inferences in favor of the non-moving party. See
Drobnak v. Andersen Corp., 561 F.3d 778, 781 (8th Cir. 2009). “This tenet does not apply,
however, to legal conclusions or ‘formulaic recitation of the elements of a cause of action’; such
1

Defendant UnitedHealth Group (“United”) wholly owns, either directly or indirectly, the
other Defendants in this action, which include UnitedHealthcare, Inc., United Healthcare
Services, Inc., UnitedHealthcare Insurance Company, UnitedHealthcare of Alabama, Inc.,
Oxford Health Insurance, Inc., UnitedHealthcare Community Plan, Inc., Optum, Inc., and
OptumRx, Inc. (See CAC ¶ 1; Dkt. No. 58.)
1

allegations may properly be set aside.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th
Cir. 2009); see United States ex rel. Raynor v. Nat’l Rural Utils. Coop. Fin., Corp., 690 F.3d
951, 955-56 (8th Cir. 2012).
Under Rule 12(b)(6), the Court evaluates whether the alleged facts are sufficient to “state
a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court draws on “its judicial
experience and common sense” to determine if the factual statements nudge a claim “across the
line from conceivable to plausible.” Iqbal, 556 U.S. at 679-80. When reviewing a complaint for
compliance with Rule 9(b), the Court determines whether the plaintiff “state[s] with particularity
the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
II. BACKGROUND
Plaintiffs received prescription drug benefits through health plans purchased directly
from Defendants or issued or administered by Defendants for Plaintiffs’ employers. (CAC ¶ 2.)
The non-Optum Defendants are health insurance and/or plan administrators (the “United
insurers”), and Defendant OptumRx (a subsidiary of Optum) is a pharmacy benefit manager
(“PBM”). (Id. ¶ 5.) The United insurers retained OptumRx as a PBM to provide prescription
drug benefits to plan members. (See id.) OptumRx participated in curating drug formularies,
setting copayment, coinsurance, and deductible requirements (member “contributions”), and
providing plan members with access to a network of pharmacies that have contracted with
OptumRx to adhere to certain terms, including accepting discounted rates for providing
prescription drugs. (See id. ¶¶ 5, 64(c).)
Before filling a prescription, pharmacies within OptumRx’s network of pharmacies
transmit key information about a plan member and the prescription via interstate wires to

2

OptumRx, which “instantaneously processes the claim according to the prescription drug plan
assigned to the patient.” (Id. ¶ 58.) OptumRx then transmits a message back “indicating whether
the drug and patient are covered and, if so, the amount the pharmacy must collect from the
patient as a copayment or coinsurance, or to be paid toward a deductible.” (Id.) Sometimes, a
copayment amount is greater than the amount OptumRx otherwise agreed to pay the pharmacy,
leading to a positive “spread.” (Id. ¶¶ 60, 185.) The spread is the difference between the amount
the pharmacy agreed to be paid and the amount it received from the plan member. (See id. ¶ 7.)
The agreements between the network pharmacies and OptumRx require the pharmacies to remit
the spread to OptumRx—what Plaintiffs term the “clawback.” (See id. ¶¶ 61-62, 71.) The
pharmacies are not entitled to keep the spread. (See id. ¶¶ 7-8.) In addition, the agreements
between OptumRx and pharmacies require pharmacies to forebear from informing plan members
if there is a spread and that it is remitted to OptumRx. (See id. ¶¶ 70, 82, 85-87, 92.)
Plaintiffs’ plan documents outline what plan members must pay to receive prescription
drugs under their plans. Under each of Plaintiffs’ plans, the plan documents provide that plan
members must pay copayments or coinsurance when filling prescriptions at retail pharmacies.
(See id. ¶¶ 4.) Plaintiffs allege, however, that they were entitled to pay less than they were
charged as copayments or coinsurance under the terms of their plans because their plans entitled
Plaintiffs to receive the benefit of the discounted rate, in the form of lower copayments or
coinsurance amounts. (See id. ¶ 181.) Plaintiffs allege that they purchased certain drugs on
numerous occasions and were overcharged due to OptumRx’s contribution calculations, resulting
in spreads and clawbacks. (See id. ¶¶ 128-42, 318.) They bring claims for damages and equitable
relief on behalf of two classes and five subclasses. (See id. ¶¶ 209-211.)

3

III. ANALYSIS
A. Count I under ERISA § 502(a)(1)(B)
Plaintiffs’ first count, which is brought under ERISA § 502(a)(1)(B) by the ERISA
Plaintiffs on behalf of themselves and the ERISA Subclass, is to recover benefits due to the
ERISA Plaintiffs under the terms of their plans, to enforce their rights under the terms of their
plans, and to clarify their rights to future benefits under the terms of their plans. (See CAC ¶
233.)
1. Plan Terms
Claims brought pursuant to this section stand or fall by the terms of the plan. 2 Kennedy v.
Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 300 (2009). “When construing the
language of an ERISA plan [courts] begin by examining the language of the plan documents.
‘Each provision should be read consistently with the others and as part of an integrated whole.’”
Bond v. Cerner Corp., 309 F.3d 1064, 1067-68 (8th Cir. 2002) (citation omitted); see Spizman v.
BCBSM, Inc., 855 F.3d 924, 927 (8th Cir. 2017); Kitterman v. Coventry Health Care of Iowa,
Inc., 632 F.3d 445, 448 (8th Cir. 2011). “Further, the terms must be construed so as to render
none of them nugatory and to avoid illusory promises.” Barker v. Ceridian Corp., 122 F.3d 628,
638 (8th Cir. 1997) (citation omitted). “If the plan is deemed ambiguous, extrinsic evidence may
be considered. But any ambiguities should be construed against the drafter only as a last step.”
Bond, 309 F.3d at 1068 (citation omitted).
Defendants argue that Count I should be dismissed with respect to most of the ERISA
Plaintiffs because the relevant plans do not entitle the ERISA Plaintiffs to the discounted rate.
2

The Court may consider plan documents relating to Plaintiffs’ plans because they are
necessarily embraced by the pleadings. See Fed. R. Civ. P. 12(d); Morrison v. MoneyGram Int'l,
Inc., 607 F. Supp. 2d 1033, 1045 (D. Minn. 2009) (citing Mattes v. ABC Plastics, Inc., 323 F.3d
695, 697 n.4 (8th Cir. 2003)).
4

(See Defendants’ Memorandum in Support of Their Motion to Dismiss (“Def. Br.”) 13-16, Dkt.
No. 69.) They do not dispute that Ellington and Sohmer’s (2016 only) plans entitle plan members
to the discounted rate. (See Defendants’ Reply Memorandum (“Def. Reply Br.”) 3 n.3, Dkt. No.
106.) Plaintiffs respond that all Plaintiffs’ plans prohibit the collection of spread and clawbacks.
(See Plaintiffs’ Response Memorandum in Opposition to the Motion to Dismiss (“Pl. Br.”) 5-9,
12-13, Dkt. No. 97.)
Starting with the alphabetically-first ERISA Plaintiff, Ackerman, the Court finds that his
plan does not entitle him to any discounted rates. The “Outpatient Prescription Drug Rider” to
Ackerman’s plan states that he is responsible for paying the lower of: (1) “the applicable Out-ofPocket Expense,” or (2) “the Network Pharmacy’s Usual and Customary Charge.” (Dkt. No. 80
at 157.) The Rider explains that “Out-of-Pocket Expenses” are those outlined in the “Summary
of Benefits” and are “either a specific dollar amount or a percentage of the Prescription Drug
Cost.” (Id.) The Summary of Benefits for Ackerman’s plan lists different flat copayment
amounts for different tiers of drugs. (See id. at 16.) The Rider defines “Usual and Customary
Charge” as “the usual fee that a pharmacy charges individuals for a Prescription Drug Product
without reference to reimbursement to the pharmacy by third parties.” (Id. at 162.)
Plaintiffs argue that a “UCR Rider” defines the “Usual, Customary and Reasonable
(UCR) Charge” as the lesser of several things, including “the amount the provider agrees to
accept as reimbursement for the particular covered services, supplies and/or drugs.” (Id. at 65;
see Pl. Br. 8.) However, as Defendants point out, that term is not equivalent to “Usual and
Customary Charge,” which is used in the Outpatient Prescription Drug Rider. (See Def. Reply
Br. 3.) Under the plain and unambiguous terms of Ackerman’s plan, he was not entitled to pay
the discounted rate if it was less than the copayment amount.

5

ERISA Plaintiff Mohr’s plans for 2011 through 2013 contain similar language to Plaintiff
Ackerman’s plan. (See Dkt. No. 80 at 1043, 1077, 1089, 1123, 1136, 1170.) However, Plaintiffs
argue that Mohr’s plan documents indicate that Mohr was entitled to the discounted rate during
those years. (See Pl. Br. 8-9.) For example, Plaintiffs point to a sentence under the heading of
“How Covered Services are Reimbursed” in Mohr’s “Member Handbook,” which states: “We
reimburse the Network Provider directly when you receive Covered Services and you will not be
responsible for any amount billed in excess of the contracted fee for the Covered Service.” (Dkt.
No. 98-7 at 55; see Pl. Br. 9.) Because the Summary of Benefits for Mohr’s 2011-13 plans lists
her supplemental prescription drug coverage under the heading of “Covered Service,” Plaintiffs
argue that this language from the handbook applies. (See Pl. Br. 9.)
Except as stated in the Member Handbook, the terms of Mohr’s 2011 to 2013 plans do
not appear to entitle members to the discounted rate for outpatient pharmacy benefits and are
structured similarly to Ackerman’s plan. (See, e.g., Dkt. No. 98-7 at 67-149.) The 2013 plan, for
example, states that the terms and conditions of the plan are subject to changes made by rider and
that the terms of a rider supersede conflicting terms in the main plan documents. (See id. at 97.)
The Outpatient Prescription Drug Rider provides for coverage at “Network Pharmacies,” and
does not provide for use of the discounted rate in determining member contribution amounts,
except where the Summary of Benefits provides for coinsurance as “a percentage of the
Prescription Drug Cost” (in essence, the discounted rate). (Id. at 143, 148.) However, because the
Member Handbook implies that plan members will be entitled to the discounted rate for all
Covered Services, which could be interpreted to include outpatient prescription drugs, the Court
will assume, without deciding, that she may be entitled to the discounted rate under the terms of
her plans for 2011 to 2013.

6

Mohr’s 2014 plan has a different structure and is ambiguous with regard to entitlement to
the discounted rate. The 2014 plan states, under the heading of “Section VI—Covered Services,”
that for “Prescription Drugs purchased at a retail or mail order or designated Participating
Pharmacy, [the plan member is] responsible for paying the lower of:” (1) “The applicable CostSharing” or (2) “The Participating Pharmacy’s Usual and Customary Charge.” (Dkt. No. 80 at
974.) The plan defines “Cost-Sharing” as “[a]mounts [the plan member] must pay for Covered
Services, expressed as Coinsurance, Copayments, and/or Deductibles.” (Id. at 933.) Section IV,
entitled “Cost-Sharing Expenses and Allowed Amount,” states: “Except where stated otherwise,
after [the plan member has] satisfied the annual Deductible . . . [the plan member] must pay the
Copayments, or fixed amounts, in the Schedule of Benefits in Section XV . . . . However, when
the Allowed Amount for a service is less than the Copayment, [the plan member is] responsible
for the lesser amount.” (Id. at 944.) Section IV defines the term “Allowed Amount” to mean “the
amount we have negotiated with the Participating Provider.” (Id. at 945.) The plan definitions
section defines “Allowed Amount” as “[t]he maximum amount on which Our payment is based
for Covered Services.” (Id. at 933.)
Mohr’s 2014 plan does not separate the outpatient prescription drug coverage from the
main plan via a supplemental rider. Although the 2014 plan states that the Cost-Sharing
Expenses are outlined in the “Schedule of Benefits in Section XV . . . when Covered Prescription
Drugs are obtained from a retail or mail order or Designated pharmacy,” and the Schedule of
Benefits sets forth specific copayment amounts for certain drug tiers, 3 the terms of Section IV
appear to entitle Mohr to the discounted rate. (Id. at 973-74.) For present purposes, the Court

3

The Court questions whether the Schedule of Benefits for Mohr’s 2014 plan provided by
Defendants is actually the correct Schedule of Benefits given that it is entitled “Section XIV,”
and not “Section XV,” as the plan notes. (Dkt. No. 80 at 911, 974-75.)
7

assumes that Mohr’s 2014 plan entitled her to the discounted rate if it was less than the listed
copayment amounts. See Bond, 309 F.3d at 1067-68.
The next ERISA Plaintiffs, M. and R. Chambers, have a plan that Plaintiffs term “Design
2.” Other ERISA Plaintiffs with the same or similar plan design include Hawks, Mastra, Sohmer
(2015 only), and Youngs. 4 (See Dkt. No. 80 at 590, 756, 821, 859, 903, 1561, 2140.) These plans
do not provide for outpatient prescription drug coverage within the main plan documents, but
instead provide for the coverage through an “Outpatient Prescription Drug Rider.” (E.g., Dkt.
No. 80 at 420.) The Rider directs plan members to the “Outpatient Prescription Drug Schedule of
Benefits” for information about “applicable Copayments and/or Coinsurance.” (Id. at 424.) The
Schedule of Benefits states that plan members “are responsible for paying the applicable
Copayment and/or Coinsurance described in the Benefit Information table.” (Id. at 432.) Under
the heading of “Payment Information,” the Schedule of Benefits provides that, for prescription
drugs purchased at a network retail pharmacy, plan members are responsible for paying the
lower of either (1) the “applicable Copayment and/or Coinsurance”, or (2) the “Network
Pharmacy’s Usual and Customary Charge.” 5 (Id. at 433.) That table also directs plan members to
the Benefit Information table and defines, for example, copayment as “a specific dollar amount.”
(Id.) Two pages later, the Benefit Information table states that the plan pays “100% of the
Prescription Drug Charge” after the member pays a set Copayment amount (depending on the
tier of the drug). (Id. at 436.)

4

Non-ERISA Plaintiffs Alston, Stevens, and Wiltsie’s plans also have a similar “Design 2”
structure. (See, e.g., Dkt. No. 80 at 267, 1262, 1391.)
5
The plans for the Chambers, Hawks, Mastra, Sohmer (2015 only), and Youngs entitle
plan members to the discounted rate for prescriptions filled through mail order network
pharmacies, but not retail network pharmacies. (See Dkt. No. 80 at 433, 590, 756, 821, 859, 903,
1561, 2140.) However, these Plaintiffs do not allege that they filled prescriptions through mail
order network pharmacies and overpaid when doing so.
8

Defendants argue that the Rider clearly sets forth what plan members must pay and does
not entitle them to the discounted rate for drugs filled at retail network pharmacies. (See Def. Br.
7-9.) Plaintiffs argue the opposite. (See Pl. Br. 6-7.) They start by pointing to the first page of the
Rider, which states: “Certain capitalized words have special meanings. We have defined these
words in either the [plan definitions section] or in this Rider in Section 3: Defined Terms.” (E.g.,
Dkt. No. 80 at 420 (emphasis omitted); see Pl. Br. 6.) The Rider’s definition section does not
define “Copayment,” but the plan’s definition section does. There, the plan defines “Copayment”
as “the charge, stated as a set dollar amount, that [a plan member is] required to pay for certain
Covered Health Services.” (Dkt. No. 80 at 357.) It continues: “Please note that for Covered
Health Services, you are responsible for paying the lesser of the following: The applicable
Copayment [or] The Eligible Expense.” (Id.) Plaintiffs argue that this language is part of the
definition of “Copayment.” (See Pl. Br. 7.) They then point to the plan’s Schedule of Benefits,
which defines “Eligible Expenses,” for “Covered Health Services [that] are received from a
Network provider,” as “our contracted fees with that provider.” (Dkt. No. 80 at 397.) They
contend that Eligible Expenses is imported, by way of the main-policy Copayment definition, to
the Rider’s articulation of member contribution responsibilities. (See Pl. Br. 7.)
The Court disagrees with Plaintiffs’ interpretation of the plan documents. The central
flaw in Plaintiffs’ argument is that the “please note” language appended to the plan’s definition
of “Copayment” is not part of the definition of that term, but rather an additional note added to
reiterate that, for services covered under the main plan, plan members must pay the lesser of the
listed copayments or the “Eligible Expense.” The same provision is included in the Schedule of
Benefits attached to the main plan, which governs plan member contribution amounts for
services covered by the main plan. (See Dkt. No. 80 at 369.) As the plan makes clear, though,

9

Riders are not subject to main plan terms if the Riders amend otherwise applicable terms. (See id.
at 362-63.) The Outpatient Prescription Drug Rider plainly modifies the member contribution
scheme. It amends the “lesser of” options that determine the amount plan members are required
to pay, as a plan term, by replacing “Eligible Expenses” with “Usual and Customary Charge”
and keeping the applicable “Copayment” as an option, using approximately the same definition
of the term—a “specific,” rather than “set,” dollar amount. (Compare Dkt. No. 80 at 433, with id.
at 357.) The plan unambiguously states what plan members must pay for outpatient prescription
drugs. Therefore, ERISA Plaintiffs with “Design 2” plans (M. Chambers, R. Chambers, Hawks,
Mastra, Sohmer (2015 only), and Youngs) are not entitled to the discounted rate as a “lesser of”
copayment option when filling drugs at retail network pharmacies.
Defendants assert that Holm’s plan does not provide coverage for outpatient prescription
drugs, 6 but that his employer entered into a prescription drug benefit administration agreement
directly with OptumRx. (See Def. Br. 9 n.10.) Nevertheless, they note that this administration
agreement provides that member copayments are the lesser of (1) “Ingredient Cost + applicable
dispensing fee + applicable Sales Tax, or” (2) the “[a]pplicable Copay.” (Dkt. No. 71 at 57; see
Def. Br. 10.) The “Ingredient Cost” takes into account the discounted rate. (See Dkt. No. 71 at
57; Pl. Br. 9.) In addition, the administration agreement states, under the heading of “Pharmacy
Program Fees,” that “[f]or each Covered Drug claim, member will be charged: Member’s
Copayment.” (Dkt. No. 71 at 61.) In view of these provisions, Holm appears to have been
entitled to pay an amount based on the discounted rate. The Court therefore assumes, without
deciding, that Holm’s plan entitled him to the discounted rate.

6

The Parties did not provide the Court with a copy of Holm’s plan documents. The Court
must, at the motion to dismiss phase, accept as true Plaintiffs’ allegation that Holm’s plan
covered outpatient prescription drugs. (See CAC ¶ 28.)
10

Lastly, it is undisputed that Ellington and Sohmer’s (2016 only) plans entitled them to the
discounted rate. (See Dkt. No. 80 at 1778, 1848, 2201.)
In summary, Ellington’s and Sohmer’s (2016 only) plans entitled them to pay the
discounted rate if the rate was less than stated copayment amounts. The Court assumes that
Holm’s and Mohr’s plans entitled plan members to the discounted rate. The plans for all other
ERISA Plaintiffs do not entitle those ERISA Plaintiffs to the discounted rate as a “lesser of”
payment option when filling prescription drugs at retail network pharmacies. Because those
ERISA Plaintiffs do not allege that Defendants violated the terms of their Plans other than by not
allowing them to pay lesser, discounted rates, such Plaintiffs fail to state claims for benefits
under ERISA § 502(a)(1)(B). 7 See Alves v. Harvard Pilgrim Health Care Inc., 204 F. Supp. 2d
198, 208-09 (D. Mass. 2002), aff’d, 316 F.3d 290 (1st Cir. 2003).
2. Exhaustion
Defendants argue that all ERISA Plaintiffs failed to exhaust their administrative
remedies, which is a prerequisite to claims for benefits. (See Def. Br. 17-18.) The CAC implicitly
states that Plaintiffs have not exhausted administrative remedies by asserting that such remedies
are inapplicable or would be futile. (See CAC ¶¶ 193-98.) Plaintiffs argue that the exhaustion
doctrine does not apply because the ERISA Plaintiffs’ claims are not for denial of benefits; they
never submitted a claim that was denied. (See Pl. Br. 13-15.) They also argue that the
administrative process is not implicated because the plans do not provide for a process unless
benefits were denied. (See id. at 16.) Defendants reply that participants have the right and duty to
invoke ERISA’s claims procedures whenever participants pay more than they should have paid

7

To the extent the ERISA Plaintiffs (except Holm, Mohr, and Sohmer) assert claims solely
to clarify their rights under their plans, the Court’s analysis of those ERISA Plaintiffs’ plan terms
clarifies the questions presented by the ERISA Plaintiffs. (See CAC ¶ 236(a), (d).)
11

under their plans. (See Def. Reply Br. 4.) Because Plaintiffs believe they should have paid less,
this requires exhaustion. (See id.)
ERISA does not explicitly require exhaustion of administrative or plan remedies, see 29
U.S.C. § 1133; 29 C.F.R. § 2560.503-1(b), (m), but exhaustion is required if a plan requires
exhaustion of administrative remedies. Conley v. Pitney Bowes, 34 F.3d 714, 716-17 (8th Cir.
1994). Exhaustion need not be “required” in the sense that it is mandatory under the plan;
“whether it is a denial letter or a plan document that uses permissive language to describe a
review procedure, ‘claimants with notice of an available review procedure should know that they
must take advantage of that procedure if they wish to bring wrongful benefit denial claims to
court.’” Wert v. Liberty Life Assurance Co. of Boston, Inc., 447 F.3d 1060, 1066 (8th Cir. 2006).
“This judicially created exhaustion requirement serves many important purposes, including
‘giving claims administrators an opportunity to correct errors, promoting consistent treatment of
claims, providing a non-adversarial dispute resolution process, decreasing the cost and time of
claims resolution, assembling a fact record that will assist the court if judicial review is
necessary, and minimizing the likelihood of frivolous lawsuits.’” Angevine v. Anheuser-Busch
Cos. Pension Plan, 646 F.3d 1034, 1037 (8th Cir. 2011) (quoting Galman v. Prudential Ins. Co.
of Am., 254 F.3d 768, 770 (8th Cir. 2001)). Exhaustion is not required, however, if (1) pursuing
an administrative remedy would be futile, or (2) there is no available administrative remedy. Id.
To show futility, a plan participant must show it is certain the claim will be denied on appeal.
Brown v. J.B. Hunt Transp. Servs., Inc., 586 F.3d 1079, 1085 (8th Cir. 2009).
Because the Court dismisses Count I as to those ERISA Plaintiffs with plans that do not
entitle plan members to the discounted rate, the Court only considers exhaustion for the

12

remaining Plaintiffs: Ellington, Holm, Mohr, and Sohmer (2016 only). The Court begins by
reviewing the administrative provisions within each of these Plaintiffs’ plan documents.
Ellington’s plan provides: “If you wish to receive reimbursement for a prescription, you
may submit a post-service claim as described in this section if: . . . you pay Coinsurance and you
believe that the amount of the Coinsurance was incorrect.” (E.g., Dkt. No. 80 at 1788.) 8 The plan
provides a comprehensive claims and appeals process. (See id. at 1788-99.) It also requires
exhaustion by limiting the availability of legal action until after plan members exhaust or
complete claims and appeals procedures. (See id. at 1799.) Ellington’s plan plainly requires
exhaustion and provides procedures for challenging coinsurance calculations.
Sohmer’s 2016 plan uses similar language to Ellington’s plan, but substitutes
“Coinsurance” for “Copay.” (Id. at 2176.) It also provides a comprehensive claims and appeals
process and requires exhaustion by limiting the availability of legal remedies. (See id. at 217686.) Thus, Sohmer’s 2016 plan plainly requires exhaustion and provides procedures for
challenging copayment calculations.
Mohr’s 2014 plan allows members to file claims for benefits and states: “If You disagree
with Our claim determination you may submit a Grievance pursuant to Section XI—Grievance,
Utilization Review & External Appeals of this Certificate.” (Dkt. No. 80 at 988.) It also states
that the “Grievance procedure applies to any issue not relating to a Medical Necessity or
experimental or investigational determination by Us. For example, it applies to contractual
benefit denials or issues or concerns You have regarding Our administrative policies.” (Id. at
990.) It then provides for a grievance review and appeals process. (See id. at 990-91.) Although
the plan does not appear to limit the availability of legal actions, it does designate courts located
8

Ellington’s plan only requires payment of coinsurance, not copays. (See Dkt. No. 80 at

1778.)
13

in New York as the forum for legal disputes related to the plan. (See id. at 1016.) The plan’s
administrative procedures are sufficient to advance the purposes for requiring exhaustion. See
Angevine, 646 F.3d at 1037. Pursuing these procedures will allow the plan to correct any errors
in its calculation of plan benefits and will create a fact record to assist the Court if judicial review
does indeed become necessary. See id. Therefore, the Court holds that Mohr’s 2014 plan
required exhaustion due to the availability of grievance procedures for resolving contractual
disputes.
Mohr’s 2011 through 2013 plans also require exhaustion. For example, the 2013 plan’s
Member Handbook states: “Our Grievance, Appeal and Complaint Procedures provide Members
with a meaningful, dignified and confidential process to hear and resolve issues between
Members, Us and Providers in a timely manner.” (Dkt. No. 80 at 1047.) The “Grievance and
Appeal procedure” is designed for “denials based on benefits exclusions or limitations and
claims payment disputes.” 9 (Id. at 1055.) The procedure allows for appeals. (See id. at 1055-57.)
The plan also provides for a “Complaint Procedure” to handle “expression[s] of dissatisfaction
with any aspect of Our or a Network Provider’s business operations, activities or behaviors
regardless of whether any remedial action is required.” (Id. at 1057; see id. at 1057-59.) The plan
documents for years 2011 to 2013 also provide for the Grievance and Complaint Procedures.
(See id. at 1069-70, 1093, 1101-05, 1115-16, 1140, 1148-52, 1162-63.) In light of the apparent
applicability of these administrative remedies procedures, and the purposes behind requiring
exhaustion, the Court holds that Mohr’s 2011 through 2013 plans require exhaustion.

9

Although Plaintiffs argued, at the motion hearing, that the Grievance procedure only
applies after there is an “Adverse Determination” based on medical necessity determinations, the
Grievance procedure language in the Member Handbook states, for example, that standard
Grievances may be initiated after either receipt of an Adverse Determination or for other issues.
(See, e.g., Dkt. No. 80 at 1056.)
14

The administrative agreement relating to Holm’s plan provides that OptumRx will
adjudicate benefits claims and reimbursement requests submitted by plan members. (See Dkt.
No. 71 at 18.) It alludes to claims and appeals procedures under the plan. (See id.) Plaintiffs do
not argue to the contrary. (See, e.g., Pl. Br. 18.) Holm’s plan required exhaustion in that
reimbursement procedures relating to copayment calculations are available to him. Pursuing
these procedures, like those under Mohr’s plans, will fulfill the purposes of the exhaustion
doctrine.
Because the relevant ERISA Plaintiffs’ plans provided avenues for addressing their
copayment and coinsurance calculation disputes and required exhaustion of those avenues, the
Court turns to futility. Plaintiffs allege that exhaustion would be futile because Defendants would
be the ones who would review the claims, and Defendants have concealed their scheme and
made it difficult to pursue an administrative claim. (See CAC ¶¶ 195-97.) Plaintiffs also argue
that exhaustion would be futile because Defendants admit to the spread scheme, but deny doing
anything wrong. (See Pl. Br. 19.) Finally, they assert that the time to file any kind of claim has
expired for some Plaintiffs. (See id. at 21.) Defendants respond that Plaintiffs’ reasons for futility
would excuse exhaustion in virtually every case. (See Def. Br. 20-22.) They also argue that
Plaintiffs became aware of the spread before initiating this action, but did not avail themselves of
any administrative remedies. (Id. at 22.)
“The futility exception is narrow—the plan participant must show that it is certain that
[her] claim will be denied on appeal, not merely that [she] doubts that an appeal will result in a
different decision.” Brown, 586 F.3d at 1085 (alterations in original) (emphasis added) (internal
quotation marks omitted). “‘[U]nsupported and speculative’ claims of futility do not excuse a

15

claimant’s failure to exhaust his or her administrative remedies.” Midgett v. Wash. Grp. Int’l
Long Term Disability Plan, 561 F.3d 887, 898 (8th Cir. 2009).
It is far from certain that, had the ERISA Plaintiffs pursued available administrative
processes, Defendants would have denied or failed to respond to the ERISA Plaintiffs’ claims,
grievances, or complaints. See Angevine, 646 F.3d at 1038 (rejecting futility when the plaintiff
made no attempt to pursue an administrative remedy and administrator had not denied similar
claims); Chorosevic v. MetLife Choices, 600 F.3d 934, 946 (8th Cir. 2010) (rejecting futility on
basis of the defendants’ positions in litigation); Springer v. Wal-Mart Associates’ Grp. Health
Plan, 908 F.2d 897, 901 (11th Cir. 1990) (“If futility were established by the mere fact that the
plan administrator who makes initial benefits decisions and the trustees who review appeals
share common interests or affiliations, the exhaustion of internal administrative remedies would
be excused in virtually every case.”). Moreover, excusing exhaustion in any case involving
confidential discounted rates and the correct application of entitlement to those rates to
copayment and coinsurance amounts would undermine the purposes of the exhaustion
requirement in many cases.
Most of the relevant plans do not limit the time period for filing claims, grievances, or
complaints. Where they appear to present a deadline, the limitation period is either a set number
of days after a covered health service was provided or when the member became aware of the
issue. (See, e.g., Dkt. No. 80 at 988, 990, 1056, 1069.) Plaintiffs do not allege facts showing that
pursuit of any of the relevant plans’ administrative remedies would certainly be denied on the
basis that they are untimely. Even if the relevant administrative procedures have filing deadlines,
Plaintiffs have not alleged, nor can the Court automatically assume, that the plan would not
review a tardy claim, grievance, or complaint. See Weeks v. Coca-Cola Bottling Co. of Ark., 491

16

F. Supp. 1312, 1313 (E.D. Ark. 1980) (“[N]o attempt was made by the plaintiff to avail himself
of [the] procedure, and he argues that the Retirement Committee would have summarily denied
any retirement request outside the 90-day period. On the present state of the facts, it is
impossible to say whether or not the Retirement Committee would have so acted. The equities of
this situation called for the Retirement Committee to be required to allow the plaintiff to present
additional evidence outside this 90-day period, and the Court should not assume that had this
request been made, it would have been denied.”); see also Schleeper v. Purina Benefits Ass’n,
170 F.3d 1157, 1158 (8th Cir. 1999) (per curiam) (“[W]e are unwilling to assume futility.”). The
remaining Plaintiffs therefore fail to meet their burden of showing futility of exhaustion, and
their claims in Count I are dismissed for failure to exhaust administrative remedies. 10
B. Count IV under ERISA § 404
Plaintiffs allege that Defendants breached their fiduciary duties with respect to the
ERISA Plaintiffs and the ERISA Subclass when they, generally, (1) required pharmacies to
charge a spread for prescription drugs (a benefit calculation), (2) required pharmacies to remit
the spread, (3) set their own compensation by requiring the clawbacks, (4) misrepresented and
failed to disclose the manner in which they charged for prescription drugs, (5) prohibited
pharmacies from disclosing to patients the discounted rates or to sell at those rates, and (6)
negotiated the discounted rates. (See CAC ¶ 153; see also Pl. Br. at 23-30.) Defendants argue
that Count IV, as well as Counts II, III, and VI, fail because Defendants did not act as fiduciaries
10

Having decided that exhaustion by Ellington, Holm, Mohr, and Sohmer is required, the
Court need not address the other arguments raised with respect to Count I. To the extent these
ERISA Plaintiffs bring claims to clarify benefits, such claims fall within the exhaustion doctrine.
See Harrison v. TEAMCARE-A Cent. States Health Plan, 187 F. Supp. 3d 812, 817 (E.D. Ky.
2016); see also Stark v. PPM Am., Inc., 354 F.3d 666, 671 (7th Cir. 2004) (“Exhaustion of plan
remedies is favored because . . .the facts and the administrator’s interpretation of the plan may be
clarified for the purposes of subsequent judicial review . . . .” (emphasis added) (citation
omitted)).
17

when taking these actions, and the claims are disguised attempts to avoid exhaustion. (See Def.
Br. 23.)
As an initial matter, “there can be no breach of fiduciary duty where an ERISA plan is
implemented according to its written, nondiscretionary terms.” Alves, 204 F. Supp. 2d at 210; see
Alves, 316 F.3d at 291. Thus, the fiduciary duty claims brought by the ERISA Plaintiffs other
than Ellington, Holm, Mohr, and Sohmer fail. They also fail for the reasons that the other ERISA
Plaintiffs’ claims fail, as follows.
“In every case charging breach of ERISA fiduciary duty, . . . the threshold question is not
whether the actions of some person employed to provide services under a plan adversely affected
a plan beneficiary’s interest, but whether that person was acting as a fiduciary (that is, was
performing a fiduciary function) when taking the action subject to complaint.” Pegram v.
Herdrich, 530 U.S. 211, 226 (2000); see Lockheed Corp. v. Spink, 517 U.S. 882, 892 (1996).
“[A] person is a fiduciary with respect to a plan to the extent,” for example, “he exercises any
discretionary authority or discretionary control respecting management of such plan or exercises
any authority or control respecting management or disposition of its assets.” 29 U.S.C. §
1002(21)(A). ERISA requires “that the fiduciary with two hats wear only one at a time, and wear
the fiduciary hat when making fiduciary decisions.” Pegram, 530 U.S. at 225.
With respect to actions (1) and (3), 11 Defendants did not act as fiduciaries because they
did not exercise discretionary authority over the plan or its assets when calculating and relaying
copayment and coinsurance obligations to pharmacies. Persons who have no power to make
decisions as to plan policy, interpretations, practices, or procedures, but who perform

11

Plaintiffs allege that all “Defendants” engaged in these actions, but the CAC implies only
that OptumRx or Defendants who acted as administrators engaged in these actions. (See, e.g.,
CAC ¶¶ 58-62, 153.)
18

administrative functions for an employee benefit plan within the framework of the plan’s
policies, interpretations, rules, practices, and procedures, are not fiduciaries. See 29 C.F.R. §
2509.75-8, D-2. Examples of these “ministerial functions” include calculation of benefits,
calculation of services and compensation credits for benefits, processing of claims, and
collection of contributions and application of contributions as provided in the plan. See id. A
plan may hire a third party to perform these “ministerial claims processing functions.”
McKeehan v. Cigna Life Ins. Co., 344 F.3d 789, 792 (8th Cir. 2003); see Waldoch v. Medtronic,
Inc., 757 F.3d 822, 832 (8th Cir. 2014); Ince v. Aetna Health Mgmt., Inc., 173 F.3d 672, 675 (8th
Cir. 1999) (“The processing of claims is the kind of ‘purely ministerial function’ that does not
give rise to fiduciary duties when performed by a third party on a contract basis.”). Defendants
may have acted as fiduciaries when performing certain functions, but the alleged “instantaneous”
calculations, based on plan terms, and relay of those calculations to pharmacies did not constitute
a discretionary fiduciary action. (CAC ¶ 58.) Plaintiffs do not allege facts showing that
Defendants’ actions constituted anything more than ministerial claims processing.
Plaintiffs argue that Defendants acted as fiduciaries when they exercised discretion over
the amounts they charged plan participants—which enabled Defendants to “set” their own
compensation. (See Pl. Br. 25-26.) A person may become a fiduciary with respect to
compensation if a plan gives the person control over factors, such as claims determinations, that
determine the amount of that person’s compensation, as sourced from plan assets. See F.H.
Krear & Co. v. Nineteen Named Trs., 810 F.2d 1250, 1259 (2d Cir. 1987) (citing Sixty-Five Sec.
Plan v. Blue Cross & Blue Shield, 583 F. Supp. 380, 387–88 (S.D.N.Y.1984)); Seaway Food
Town, Inc. v. Med. Mut. of Ohio, 347 F.3d 610, 619 (6th Cir. 2003) (“We agree with the Seventh
Circuit’s reasoning that where parties enter into a contract term at arm’s length and where the

19

term confers on one party the unilateral right to retain funds as compensation for services
rendered with respect to an ERISA plan, that party’s adherence to the term does not give rise to
ERISA fiduciary status unless the term authorizes the party to exercise discretion with respect to
that right.”). As already stated, Plaintiffs do not allege facts demonstrating that Defendants had
discretion over the instantaneous calculations they were performing, except to the extent that
Plaintiffs allege Defendants did not apply the correct calculations. But if calculations may be
construed as an exercise of discretion solely on the basis that the calculations were incorrect
under the terms of the relevant plan, any mistake could transform ministerial conduct into
fiduciary act. See Kyle Rys., Inc. v. Pac. Admin. Servs., Inc., 990 F.2d 513, 516 (9th Cir. 1993)
(finding that an administrator’s actions in administering a plan did not render it a fiduciary when
it “improperly and untimely paid claims”). Based on the Court’s review of the CAC and plan
documents, the Court cannot reasonably infer that Defendants had discretion to require
copayments or coinsurance outside of what was required by the plan documents. See Pharm.
Care Mgmt. Ass’n v. Rowe, 429 F.3d 294, 301 (1st Cir. 2005) (“Our review of the requirements
imposed on the PBMs . . . lead[s] us to believe that the PBMs do not exercise ‘discretionary
authority or control in the management and administration of the plan.’”); Baker v. Big Star Div.
of the Grand Union Co., 893 F.2d 288, 290 (11th Cir. 1989) (“An insurance company does not
become an ERISA ‘fiduciary’ simply by performing administrative functions and claims
processing within a framework of rules established by an employer . . . .”).
The Defendants also did not act as fiduciaries when engaging in actions (2), (3) (in part),
(5), and (6) because all of these activities involved the performance of contractual terms
negotiated with plans or pharmacies. First, to the extent Plaintiffs complain about the acts of
negotiating and setting discounted rates, such conduct is not a fiduciary function. Setting the

20

payout details of a plan, including distribution of “profit derived from the spread between
subscription income and expenses of care and administration” does not risk breach of any
fiduciary duties because “decisions about the content of a plan are not themselves fiduciary
acts.” Pegram, 530 U.S. at 226. Furthermore, negotiating prices with providers is also not a
fiduciary function, but rather the administration of a network administrator’s business. See
DeLuca v. Blue Cross Blue Shield of Mich., 628 F.3d 743, 747 (6th Cir. 2010); Chicago Dist.
Council of Carpenters Welfare Fund v. Caremark, Inc., 474 F.3d 463, 475 (7th Cir. 2007);
Moeckel v. Caremark, Inc., 622 F. Supp. 2d 663, 677 (M.D. Tenn. 2007); cf. McCaffree Fin.
Corp. v. Principal Life Ins. Co., 811 F.3d 998, 1003 (8th Cir. 2016) (“[A] service provider’s
adherence to its agreement with a plan administrator does not implicate any fiduciary duty where
the parties negotiated and agreed to the terms of that agreement in an arm’s-length bargaining
process.”). “[T]he mere fact that a company has named itself as pension plan administrator or
trustee does not restrict it from pursuing reasonable business behavior.” Vartanian v. Monsanto
Co., 131 F.3d 264, 268 (1st Cir. 1997). In line with the above principles, Defendants’ choice to
negotiate contractual terms requiring pharmacies to keep rates confidential was also not a
fiduciary function. It did not concern discretionary management or administration of any plans or
plan assets. And confidentiality may serve legitimate business interests.
With respect to action (4), persons may act as fiduciaries when communicating plan
terms to plan members. For example, it is a breach of the duty of loyalty to affirmatively mislead
a participant or beneficiary. Braden, 588 F.3d at 598. However, there are no allegations showing
that Defendants misrepresented or failed to disclose the terms of the ERISA Plaintiffs’ member
contribution responsibilities under the plans. The terms were included in the ERISA Plaintiffs’
plan documents, and Plaintiffs do not plausibly allege that those terms were themselves false or

21

materially misleading. Where the plans do not entitle the ERISA Plaintiffs to the discounted rate
as a “lesser of” option, the plans allude to the discounted rate in other parts of the plans, as
already discussed. Although Defendants never informed plan members what the discounted rates
were, that failure is not actionable as a breach of fiduciary duty. See Alves, 316 F.3d at 291;
Alves, 204 F. Supp. 2d at 210; Corsini v. United HealthCare Servs., Inc., 145 F. Supp. 2d 184,
193 (D.R.I. 2001). And Plaintiffs do not plausibly allege how failure to disclose negotiated rates
or the collection of a spread for plans that entitle plan members to those rates as a “lesser of”
option (or plans that do not) was material to making informed decisions about benefits. See
Braden, 588 F.3d at 594; Shea v. Esensten, 107 F.3d 625, 628 (8th Cir. 1997). Therefore, the
ERISA Plaintiffs fail to make out a breach of fiduciary duty claim for action (4).
Finally, Plaintiffs generally argue that Defendants acted as fiduciaries by exercising
authority or control over the management of plan assets, including any collected spreads,
administration agreements, and insurance policies. (See Pl. Br. 26-28.) They argue that the
spreads are plan assets because they were collected at plan members’ expense and used to benefit
Defendants. (See id. at 28.) And they argue that Defendants are misusing the administration
agreements and insurance policies as “leverage” in negotiating discounted rates, spreads, and
clawbacks with pharmacies. (Id.). Defendants reject these contentions. (See Def. Br. 23-25.)
Plan assets include cash, financial instruments, and other property that may be used to the
benefit of the fiduciary at the expense of plan participants. See Edmonson v. Lincoln Nat’l Life
Ins. Co., 725 F.3d 406, 429 (3d Cir. 2013); Kayes v. Pac. Lumber Co., 51 F.3d 1449, 1467 (9th
Cir. 1995) (explaining the functional approach to defining plan assets). For example, participant
contributions in the form of premiums are plan assets when collected. See 29 C.F.R. § 2510.3102(a)(1); Collins v. Pension & Ins. Comm. of S. Cal. Rock Prods. & Ready Mixed Concrete

22

Ass’ns, 144 F.3d 1279, 1282 (9th Cir. 1998) (“Although ERISA does not explicitly define ‘plan
assets,’ a plain interpretation of the term does not encompass future contributions not yet
made.”). When determining whether something is a plan asset, courts rely on ordinary notions of
property rights. See Edmonson, 725 F.3d at 429. If a plan does not have a right to certain
property, then the property is not a plan asset such that fiduciary duties apply to the disposition
of that property. See Chicago Dist. Council of Carpenters Welfare Fund, 474 F.3d at 476
(finding that a third-party administrator owed no fiduciary duties to a plan for rebates when the
administrator was under no obligation to secure manufacturer rebates on prescription drugs and
was only obligated to forward a fixed amount of any rebates to the plan). As such, because plans
generally have no right to the recoupment of copayments and coinsurance paid to providers, such
payments do not, absent an arrangement to the contrary, constitute plan assets, but instead
merely the out-of-pocket expenses of plan members. See Deluca v. Michigan, No. 06-12552,
2007 WL 1500331, at *3 (E.D. Mich. May 23, 2007).
Plaintiffs do not plausibly allege that the spreads collected on copayments are plan assets.
Plaintiffs allege that such payments come from plan members, not the plan, and they do not
allege facts showing that the spreads are collected on behalf of the plan or that the plan has a
right to the spreads. (See CAC ¶ 72.) Rather, they appear to allege that the spreads were pure
profit for Defendant administrators. (See CAC ¶¶ 12, 79, 153(f), 180(m), 186, 198.) Plaintiffs
argue that the spreads fit the functional definition of plan assets, but their reliance on that
definition is misplaced; as one court has observed, the functional approach does not generally
apply to situations involving financial assets. See Edmonson, 725 F.3d at 429.
In addition, Plaintiffs do not plausibly allege how Defendants exercised authority or
control over any agreements. As already determined, to the extent Defendants negotiated lower

23

discounted rates, such activities were not fiduciary functions. That Defendants were able to
leverage the size of their member base, garnered as a result of doing business with multiple plans
and administrators, to negotiate lower rates with pharmacies does not constitute exercise of or
control over administration agreements or insurance policies. See Moeckel v. Caremark, Inc.,
622 F. Supp. 2d 663, 679 (M.D. Tenn. 2007) (“There is no requirement in the contract that [the
third-party administrator] negotiate retail pharmacy discounts for the benefit of or behalf of the
. . . Plan.”). Even under the functional approach, Plaintiffs have not plausibly alleged how that
leveraging benefited Defendants at the expense of insureds or the plan. Therefore, Plaintiffs do
not plausibly allege that Defendants acted as fiduciaries vis-à-vis any plan assets.
In summary, Defendants did not act as fiduciaries when engaging in the complained-of
conduct or, if they did, Plaintiffs have not plausibly alleged how such conduct constitutes a
breach of any fiduciary duties. Therefore, Count IV is dismissed. 12
C. Counts II and III under ERISA §§ 406(a)(1)(C)-(D) and 406(b)
The ERISA Plaintiffs bring claims, on behalf of themselves and the ERISA Subclass, for
prohibited transactions in Counts II and III. (See CAC ¶¶ 251, 238-39.) Plaintiffs argue that
Defendants’ clawbacks constituted compensation, siphoned from plan assets. (See Pl. Br. 38-39.)
They also argue that Defendants used plan administrative agreements and insurance policies to
secure clawbacks. (See id. at 41.)
To state a claim under ERISA’s prohibited transaction rules in § 406, plaintiffs must have
acted as fiduciaries with respect to the complained-of conduct. See Lockheed, 517 U.S. at 892;

12

In addition, Plaintiffs’ breach of fiduciary duty claims may be subject to the exhaustion
doctrine to the extent they “turn[] on an interpretation of the ERISA benefits plan at issue.”
Burds v. Union Pac. Corp., 223 F.3d 814, 817 (8th Cir. 2000) (citing Zipf v. Am. Tel. & Tel. Co.,
799 F.2d 889, 894 n.6 (3d Cir. 1986)); see Harrow v. Prudential Ins. Co. of Am., 279 F.3d 244,
254 (3d Cir. 2002).
24

Pegram, 530 U.S. at 226; Flanigan v. Gen. Elec. Co., 242 F.3d 78, 87 (2d Cir. 2001)
(“[P]rohibited transaction rules apply only to decisions by [a person] acting in its fiduciary
capacity.”). Prohibited transactions also generally involve plan assets. See 29 U.S.C. § 1106(a)(b).
Plaintiffs’ prohibited transaction claims fail for the same reasons that their fiduciary duty
claims fail. See supra Part III.B. Plaintiffs do not plausibly allege that Defendants acted as
fiduciaries when making the complained-of actions with respect to any transactions. They also
do not plausibly allege use of plan assets “that are potentially harmful to the plan.” Lockheed,
517 U.S. at 893; see Alves, 204 F. Supp. 2d at 215 (“The mere fact that defendants used
discounting arrangements to reduce their net cost of providing prescription drug benefits does
not constitute self-dealing . . . .”). Therefore, the prohibited transaction claims are dismissed.
D. Counts VI and VII under ERISA §§ 405(a) and 502(a)(3)
The ERISA Plaintiffs bring claims, on behalf of themselves and the ERISA Subclass, for
underlying breaches of fiduciary duty and prohibited transactions in Counts VI and VII. (See
CAC ¶¶ 281, 289.) Because both Counts VI and VII rely on underlying breaches of fiduciary
duty or prohibited transactions, and the Court dismisses the underlying fiduciary duty and
prohibited transaction claims, these Counts are also dismissed. See In re Citigroup ERISA Litig.,
662 F.3d 128, 145 (2d Cir. 2011), abrogated on other grounds by Fifth Third Bancorp v.
Dudenhoeffer, 134 S. Ct. 2459 (2014).
E. Count V under ERISA § 702
The ERISA Plaintiffs bring, on behalf of themselves and the ERISA Subclass, claims for
discrimination on the basis of medical condition in Count V. (See CAC ¶ 274.) Defendants argue
that Count V fails because Defendants required the ERISA Plaintiffs to pay the same member

25

contribution as every other plan member, per the term of the ERISA Plaintiffs’ plans. (See Def.
Br. 30; Def. Reply Br. 13.) Plaintiffs argue that the ERISA Plaintiffs purchased prescription
medications subject to the spread, whereas plan members who did not need the specific drugs
that lead to spreads did not pay a spread, so Defendants discriminated against the ERISA
Plaintiffs with respect to these Plaintiffs’ contributions as a condition of continued enrollment.
(See Pl. Br. 42.)
ERISA § 702 provides that a plan “may not require any individual (as a condition of
enrollment or continued enrollment under the plan) to pay a premium or contribution which is
greater than such premium or contribution for a similarly situated individual enrolled in the plan
on the basis of any health status-related factor in relation to the individual or to an individual
enrolled under the plan as a dependent of the individual.” 29 U.S.C. § 1182(b)(1). Generally
speaking, discrimination does not occur if plan terms apply uniformly to similarly situated plan
members. See 29 C.F.R. § 2590.702; see Zurich Am. Ins. Co. v. O’Hara, 604 F.3d 1232, 1238–
39 (11th Cir. 2010). Because Plaintiffs do not allege facts showing that any of the relevant plans’
terms did not apply uniformly to plan members, Count V is dismissed.
F. Counts VIII and IX under RICO
All Plaintiffs bring, on behalf of themselves and all Classes and Subclasses, claims under
RICO in Counts VIII and IX. (See CAC ¶¶ 294, 327.) RICO prohibits “any person employed by
or associated with any enterprise engaged in . . . interstate . . . commerce, to conduct or
participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of
racketeering activity.” 18 U.S.C. § 1962(c). RICO “does not cover all instances of wrongdoing.
Rather, it is a unique cause of action that is concerned with eradicating organized, long-term,
habitual criminal activity.” Crest Constr. II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir. 2011)

26

(quoting Gamboa v. Velez, 457 F.3d 703, 705 (7th Cir. 2006)). To establish a civil claim under
RICO, plaintiffs must show that the defendants engaged in “(1) conduct (2) of an enterprise (3)
through a pattern (4) of racketeering activity.” Nitro Distrib., Inc. v. Alticor, Inc., 565 F.3d 417,
428 (8th Cir. 2009) (quoting Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)).
Defendants argue that Plaintiffs fail to adequately plead the elements of RICO. (See Def.
Br. 31.) In particular, they attack Plaintiffs’ allegations relating to the enterprise. (See id. at 3336.) Plaintiffs allege two alternative enterprises for Count VIII: (1) “OptumRx and the
pharmacies in Optum’s pharmacy network,” or (2) “solely . . . such pharmacies.” (CAC ¶ 295.)
Defendants argue that Plaintiffs’ allegations show that Defendants and pharmacies in the
OptumRx network have an adversarial relationship, did not have a common purpose to defraud,
did not work together to defraud plan members, and merely engaged in parallel conduct. (See
Def. Br. 31, 33-36; Def. Reply Br. 15-17.) Plaintiffs assert that the pleaded enterprise shares the
common purpose of providing Plaintiffs and class members with medically necessary
prescription drugs in accordance with the terms of their plans and that the pharmacies knew
about the pharmacy network’s collective existence. (See id. at 44-50.)
An enterprise, for RICO purposes, “includes any individual, partnership, corporation,
association, or other legal entity, and any union or group of individuals associated in fact
although not a legal entity.” 18 U.S.C. § 1961(4); see Nelson v. Nelson, 833 F.3d 965, 968 (8th
Cir. 2016). An association-in-fact enterprise must be “a continuing unit that functions with a
common purpose.” Boyle v. United States, 556 U.S. 938, 948 (2009). An association-in-fact
enterprise has at least three structural features: “a purpose, relationships among those associated
with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s
purpose.” Id. at 946.

27

Generally speaking, a “hub-and-spokes” enterprise, in which the hub serves as a contact
point for other members who otherwise do not interact, is not sufficiently coherent unless the
members spokes are connected by a unifying rim. See Target Corp. v. LCH Pavement
Consultants, LLC, No. 12-CV-1912 (JNE/JJK), 2013 WL 2470148, at *4 (D. Minn. June 7,
2013) (citing In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 374 (3d Cir. 2010) and other
cases). “This is because without a ‘rim,’ there are no allegations of concerted actions among the
spokes, only allegations of parallel conduct. And an association-in-fact enterprise requires more
than parallel conduct; it requires relationships among those associated with the enterprise, and it
requires those associated with the enterprise to ‘function as a unit, that they be “put together to
form a whole.”’” Id. (quoting In re Ins. Brokerage Antitrust Litig., 618 F.3d at 374).
Plaintiffs failed to allege a RICO enterprise. OptumRx serves as the hub for pharmacies
in its network. (See CAC ¶ 295.) The pharmacies are the spokes. (See id.) But the CAC contains
no allegations demonstrating any concerted actions among the spokes. It only alleges parallel
collection of spreads through adherence to pharmacy-by-pharmacy network contracts and
general network policies. (See id. ¶¶ 63-64, 294-310.) The pleaded structure lacks “relationships
among those associated with the enterprise” showing that they “associated together for a
common purpose.” Boyle, 556 U.S. at 944, 946 (emphasis added). This is demonstrated by the
inferential notion that, absent OptumRx’s efforts to develop its network of pharmacies, there
would be no basis upon which to conclude that the pharmacies now in the network are part of an
enterprise; there are no allegations showing that the pharmacies have relationships between
themselves in addition to their individual contractual relationships with OptumRx. See In re Ins.

28

Brokerage, 618 F.3d at 374; LCH Pavement, 2013 WL 2470148, at *5. Because Plaintiffs fail to
plead an adequate RICO enterprise for Count VIII, the Count is dismissed.13
Defendants argue that because Plaintiffs fail to plead a RICO claim in Count VIII, the
RICO conspiracy claim in Count IX also fails. (See Def. Br. 38.) “Although the Eighth Circuit
has not directly addressed this issue, other courts have determined that ‘[a]ny claim under section
1962(d) based on conspiracy to violate the other subsections of section 1962 necessarily must
fail if the substantive claims are themselves deficient.’” Jaworski v. Rollupspacovers, Roll-it Spa
Covers, Creative Innovations LLC, No. 11-CV-1816 (DSD/JSM), 2012 WL 1130684, at *3 (D.
Minn. Apr. 3, 2012) (quoting Lum v. Bank of Am., 361 F.3d 217, 227 n.5 (3d Cir. 1993),
abrogated on other grounds by Twombly, 550 U.S. 544) (citing Howard v. Am. Online Inc., 208
F.3d 741, 751 (9th Cir. 2000), and Nat’l Org. for Women, Inc., v. Scheidler, 968 F.2d 612, 630
(7th Cir. 1992)). The Court agrees. Count IX is dismissed.
G. Counts X-XVIII under State Law
1. Counts X-XII under Minnesota Common Law
The Non-ERISA Plaintiffs (Alston, Fellgren, Stevens, and Wiltsie), on behalf of
themselves and the Non-ERISA Subclass, bring claims for breach of contract (Count X), breach
of the covenant of good faith and fair dealing (Count XI), and unjust enrichment (Count XII).
(See CAC ¶¶ 336, 345, 349-50.) As previously stated, Alston, Stevens, and Wiltsie have plans
that do not entitle them to the discounted rate. See supra note 4. Therefore, the Court dismisses
Counts X-XII with respect to these Plaintiffs. Fellgren’s claims remain because her plan entitled
her to the discounted rate at retail network pharmacies. (See Dkt. No. 80 at 1992.)

13

The Court also determines that, for Plaintiffs without plans entitling them to the
discounted rate as a “lesser of” option, Plaintiffs fail to allege the existence of fraud. Plaintiffs do
not plausibly allege a material misrepresentation or omission with respect to such Plaintiffs.
29

Defendants argue that Fellgren’s claims should be dismissed for failure to exhaust
administrative remedies provided under her plan because the Affordable Care Act (“ACA”)
subjects non-ERISA policies to the administrative procedures under ERISA. (See Def. Br. 1819.) Plaintiffs respond that no court has imposed exhaustion requirements on ACA plans and
that, for that reason, the Court should not do so in this case. (See Pl. Br. 18.)
The ACA requires that plans provide an appeals process for coverage determinations and
claims similar to that required under ERISA. See 42 U.S.C. § 300gg-19(a); 29 C.F.R. §
2590.715-2719(b). The ACA also incorporates ERISA’s claims procedures for group health
plans and health insurers offering group coverage. 14 See § 300gg-19(a)(2)(A) (incorporating 29
C.F.R. § 2560.503-1). Although the ACA may not contain a cause of action for benefits similar
to that provided for under ERISA, see, e.g., 42 U.S.C. § 300gg-22, the importation of ERISA
claims and appeals procedures suggests that the purposes of exhaustion in the ERISA context
would fulfill the same ends in the non-ERISA context. Moreover, the Eighth Circuit has
“required exhaustion in ERISA cases only when it was required by the particular plan involved.”
Conley v. Pitney Bowes, 34 F.3d 714, 716 (8th Cir. 1994). Exhaustion of remedies provided for
in non-ERISA plans is warranted when it would fulfill the purposes of ERISA exhaustion.
Fellgren’s plan provides: “If you wish to receive reimbursement for a prescription, you
may submit a post-service claim as described in this section if: . . . you pay a Copay and you
believe the amount of the Copay was incorrect.” (Dkt. No. 80 at 1944.) The plan provides a
comprehensive appeals process. (See id. at 1946-53.) It also states: “You cannot bring any legal
action against [the plan] or the Claims Administrator to recover reimbursement until 90 days
14

Fellgren’s plan through her school district employer appears to be a group health plan.
(See Dkt. No. 80 at 1872.) Defendants argue it is and that the ACA governs her plan. (See Def.
Br. 18-19, 19 n.19.) Plaintiffs argue that “some [of Plaintiffs’] plans are subject to neither the
ACA nor ERISA,” but they do not explain why or single out any plans. (Pl. Br. 18.)
30

after you have properly submitted a request for reimbursement as described in this section and all
required reviews of your claim have been completed.” (Id. at 1953.) Requiring Fellgren to
comply with her plans’ procedures not only respects freedom of contract, but will also serve
important purposes, such as giving administrators an opportunity to correct errors, 15 promoting
consistent treatment of claims, providing a non-adversarial dispute resolution process, decreasing
the cost and time of claims resolution, and assembling a fact record that will assist the Court if
judicial review becomes necessary. See Angevine, 646 F.3d at 1037. Requiring exhaustion may
also minimize the likelihood of frivolous lawsuits brought under non-ERISA, ACA plans. See id.
Therefore, because Fellgren’s plan requires exhaustion of administrative remedies, exhaustion of
those remedies will promote important purposes, and Fellgren does not otherwise carry her
burden of showing that exhaustion would be futile, the Court holds that Fellgren must exhaust
her remedies under her plan. Accordingly, Count X is dismissed. Counts XI and XII, which arise
from the same facts as Count X, are also dismissed for failure to exhaust. 16
2. Counts XIII and XIV under Michigan law
In Count XIII, Plaintiff Wiltsie, on behalf of himself and the Non-ERISA Michigan
Subclass, brings a Michigan Consumer Protection Act (“CPA”), see Mich. Comp. Laws §
445.903(1), claim for deceptive methods, acts, or practices in the conduct of trade or commerce,
(see CAC ¶ 353). Although it is unclear what theory of deception Wiltsie alleges, the claim

15

Fellgren only alleges details concerning one instance of overpayment. (See CAC ¶
318(xcix).)
16
The claims also fail because they arise from the same facts as the breach of contract
claim, and the plan documents govern the dispute. See Teng Moua v. Jani-King of Minn., Inc.,
810 F. Supp. 2d 882, 893-94, 900 (D. Minn. 2011); see also Angevine, 646 F.3d at 1038 (“[W]e
conclude that [the plaintiff] is required to exhaust his administrative remedies under the Plan
before he can bring a civil action in federal court.”); Do Sung Uhm v. Humana, Inc., 620 F.3d
1134, 1144 (9th Cir. 2010) (“[C]laimants cannot circumvent the 405(h) exhaustion requirement
by restyling the remedy sought.”).
31

sounds in fraud. When a Michigan CPA claim is based on fraud or mistake, it must be pled with
particularity under Rule 9(b). See Home Owners Ins. Co. v. ADT LLC, 109 F. Supp. 3d 1000,
1008 (E.D. Mich. 2015). Rule 9(b) requires plaintiffs to “state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
Wiltsie’s plan does not entitle him to the discounted rate as a “lesser of” option, so his
claim under the Michigan CPA is implausible. See supra note 4. In addition, the CAC does not
contain allegations that meet Rule 9(b)’s pleading standard with respect to this claim. For
example, Plaintiffs allege that Wiltsie filled prescriptions on several dates, (see CAC ¶ 141), but
they do not allege what Wiltsie paid on any date or the discounted rate for the relevant drug—
both of which are needed to determine if there was a spread. In other words, the CAC does not
contain allegations detailing “what was obtained or given up” as a result of any fraud. Abels v.
Farmers Commodities Corp., 259 F.3d 910, 920 (8th Cir. 2001). Due to these pleading
inadequacies, Count XIII is dismissed.
Defendants moved to dismiss Count XIV, Wiltsie’s claim under Chapter 20 of
Michigan’s Insurance Code, arguing there is no private right of action under the statute. In
response, Wiltsie “voluntarily dismissed” Count XIV. The Court dismisses the claim.
3. Count XV under the Florida DUTPA
Fellgren, on behalf of herself and the Non-ERISA Florida Subclass, brings a Florida
Deceptive and Unfair Trade Practices Act (“DUTPA”), see Fla. Stat. § 501.204, claim for unfair
methods of competition, unconscionable acts or practices, and unfair or deceptive acts or
practices in the conduct of any trade or commerce, (see CAC ¶ 363). Defendants argue that this
claim must be dismissed because the Florida DUTPA does not apply to conduct regulated by the
insurance commissioner of Florida. (See Def. Br. 40-41; Def. Reply Br. 19.) Plaintiffs argue that

32

the Florida Office of Insurance Regulation (“FLOIR”) does not regulate Defendants because
Defendants only provide claims administration services, not insurance, to Fellgren’s plan. (See
Pl. Br. 58-59.)
The Florida DUTPA does not apply to “[a]ny person or activity regulated under laws
administered by: (a) [FLOIR].” Fla. Stat. § 501.212(4). FLOIR performs “the duties and
responsibilities required by the Insurance Code (Chapters 624-632, 634-642, and 651, Florida
Statutes) and Chapters 69N and 69O, Florida Administrative Code.” Statement of Agency
Organization and Operation, FLOIR, http://www.floir.com/Office/AgencyOrganization
Operation.aspx (last visited Dec. 19, 2017). The Florida DUTPA does not apply to claims against
insurers. Zarrella v. Pac. Life Ins. Co., 755 F. Supp. 2d 1218, 1226 (S.D. Fla. 2010); W.S.
Badcock Corp. v. Myers, 696 So. 2d 776, 782 (Fla. Dist. Ct. App. 1996).
The Florida Insurance Code contains several provisions relating to third-party
administrators. 17 For example, one provision requires administrators to apply for and receive a
“valid certificate of authority issued by [FLOIR]” before operating as an administrator. Fla. Stat.
§ 626.8805(1). OptumRx has complied with this requirement and is registered to operate as an
administrator in Florida. 18 Other United entities are also registered in multiple capacities. 19 In
addition, the Code regulates administrator contractual relationships. See, e.g., Fla. Stat. ch. 626,
17

The Florida Insurance Code defines an “Administrator” as “any person who directly or
indirectly solicits or effects coverage of, collects charges or premiums from, or adjusts or settles
claims on residents of this state in connection with authorized commercial self-insurance funds
or with insured or self-insured programs which provide life or health insurance coverage or
coverage of any other expenses described in s. 624.33(1) or any person who, through a health
care risk contract as defined in s. 641.234 with an insurer or health maintenance organization,
provides billing and collection services to health insurers and health maintenance organizations
on behalf of health care providers.” Fla. Stat. § 626.88(1). Based on Plaintiffs’ allegations,
OptumRx appears to fall within this definition.
18
See Active Company Search, FLOIR, http://www.floir.com/companysearch/ (last visited
Dec. 19, 2017) (search for “OptumRx” under “Company Name”).
19
See supra note 18 (search for “UnitedHealth” under “Company Name”).
33

Pt. VII, §§ 627.64731, 624.4411; Self-Ins. Inst. of Am. v. Gallagher, No. TCA 86-7308-WS,
1989 WL 143288, at *13 (N.D. Fla. June 2, 1989), aff’d sub nom. Self-Ins. Inst. v. Gallagher,
909 F.2d 1491 (11th Cir. 1990) (unpublished table decision). The Code also regulates activities
related to this case, such as claims administration and review and the method by which claims
are paid. See, e.g., Fla. Stat. §§ 627.426, .613, .6131, .4035(3).
In light of the comprehensive nature of the Florida Insurance Code and its applicability to
Defendants, either as administrators or insurers, and their relevant activities, the Court holds that
Fellgren’s Florida DUTPA claim in Count XV fails as a matter of law. Count XV is therefore
dismissed.
4. Count XVI under the Minnesota UDTPA
The Non-ERISA Plaintiffs, on behalf of themselves and the Non-ERISA Subclass, bring
a Minnesota Uniform Deceptive Trade Practices Act (“UDTPA”), see Minn. Stat. § 325D.45,
subd. 1, claim for deceptive trade practices relating to the failure to disclose discounted rates and
collection of spreads and misrepresenting the true amount of plan members’ copayment and
coinsurance obligations, (see CAC ¶¶ 381-83.)
To the extent the Non-ERISA Plaintiffs’ Minnesota UDTPA claims relate to disclosure of
negotiated rates, for reasons similar to those already stated herein, the claim is dismissed.
Plaintiffs do not articulate a plausible theory as to why non-disclosure of discounted rates or the
existence of a spread, as a general matter, is required by any duties or is material to Plaintiffs’
benefits decisions. The Court dismisses the Non-ERISA Plaintiffs’ Minnesota UDTPA claims to
the extent they are based on a theory of fraudulent omissions.
Furthermore, as already stated, the only Non-ERISA Plaintiff whose plan entitled plan
members to the discounted rate is Fellgren. The Court therefore dismisses the other Non-ERISA

34

Plaintiffs’ claims in Count XVI for failure to plausibly plead a deceptive trade practice relating
to erroneous contribution calculations. Regarding Fellgren, as discussed in Part III.G.1, her plan
provides for administrative remedies in the event she believes she paid more than she should
have under the plan documents. Fellgren alleges only one instance in which she paid more than
she should have. (See CAC ¶ 318(xcix).) Requiring Fellgren to pursue her administrative
remedies before asserting a claim for deceptive trade practices will promote the purposes of
exhaustion. See Burds v. Union Pac. Corp., 223 F.3d 814, 817 (8th Cir. 2000) (requiring
exhaustion when a claim “turn[ed] on an interpretation of the ERISA benefits plan at issue”); see
also Harrow v. Prudential Ins. Co. of Am., 279 F.3d 244, 254 (3d Cir. 2002) (requiring
exhaustion when the plaintiff’s “claim was actually premised on the plan administrators' failure
to furnish plaintiff with insurance coverage”). In particular, the creation of a factual record in
response to the claim will assist future judicial review, if necessary, by better enabling the Court
to determine whether Fellgren is “likely to be damaged” by future actions—a requirement for
seeking relief under the Minnesota UDTPA. Minn. Stat. § 325D.45, subd. 1. Therefore,
Fellgren’s Minnesota UDTPA claim in Count XVI relating to her alleged overpayment is
dismissed for failure to exhaust.
5. Count XVII under the Florida DUTPA and Count XVIII for Common Law Fraud
Plaintiff Rabbiner, on behalf of himself and the Florida Subclass of the Medicare Class,
brings a claim under the Florida DUTPA against the Optum Defendants only. (See CAC ¶ 394.)
As already stated, however, such a claim fails as a matter of law. See Part III.G.3. Rabbiner also
brings, on behalf of himself and the Medicare Class, a claim for common law fraud. (See CAC ¶
406.) However, that claim must fail because either it challenges omissions relating to failure to
disclose discounted claims—which theory the Court has already determined is not plausibly pled

35

and determines is also not plausibly pled with respect to Rabbiner’s claims for the same
reasons 20—or because Plaintiffs do not allege the details of any instance in which Rabbiner paid
more than what was required under his Medicare plan. He therefore fails to meet Rule 9(b)’s
pleading standard. The claims in Counts XVII and XVIII are dismissed.
IV. CONCLUSION
Based on the files, records, and proceedings herein, and for the reasons stated above, IT
IS ORDERED THAT:
1.

Defendants’ motion to dismiss [Dkt. No. 67] is GRANTED, as set forth in
this Order.

2.

Counts I, II, III, IV, V, VI, VII, VIII, IX, X, XI, XII, XIII, XVI, and XVIII
of the Consolidated Class Action Complaint [Dkt. No. 52] are
DISMISSED WITHOUT PREJUDICE.

3.

Count XIV, XV, and XVII of the Consolidated Class Action Complaint
[Dkt. No. 52] are DISMISSED WITH PREJUDICE.

LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: December 19, 2017
s/ Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge

20

Rabbiner’s omissions claims may also be preempted by Medicare. See 42 C.F.R.
§ 423.440(a). Because the Centers for Medicare and Medicaid Services (“CMS”) reviews and
approves plan documents and marketing materials, state laws that would deem such materials
misleading—when CMS has not and otherwise approved them—could conflict with federal
standards and be preempted. See Do Sung Uhm, 620 F.3d at 1152-53, 1157.
36