The Depot, Inc. et al v. Caring for Montanans, Inc. et al
ORDER granting 46 Motion to Dismiss, 48 Motion to Dismiss with prejudice. The Clerk of Court shall enter judgment in favor of Defendants and shall CLOSE this case. Signed by Judge Dana L. Christensen on 6/23/2017. (NOS)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
THE DEPOT, INC., a Montana
Corporation, UNION CLUB BAR,
INC., a Montana Corporation, and
TRAIL HEAD, INC., a Montana
Corporation, on behalf of themselves
and all those similarly situated,
JUN 2 3 2017
S District Court
D1stnct Of Montana
CARING FOR MONTANANS, INC.,
FIKIA BLUE CROSS AND BLUE
SHIELD OF MONTANA, INC.,
HEALTH CARE SERVICE CORP., and
JOHN DOES I-X,
Before the Court is the renewed joint motion to dismiss of Defendants
Caring for Montanans, Inc. ("CFM") and Health Care Service Corporation
("HCSC"). On February 14, 2017, this Court granted Defendants' first motion to
dismiss, granting Plaintiffs leave to amend their complaint. Plaintiffs filed their
First Amended Complaint ("F AC") on March 8, 2017. Defendants now argue that
Plaintiffs have failed to remedy the deficiencies identified in this Court's earlier
order and that all claims should be dismissed with prejudice. The Court agrees.
"On a motion to dismiss, material allegations of the complaint are taken as
admitted, and the complaint is to be liberally construed in favor of the plaintiff."
Kennedy v. H & M Landing, Inc., 529 F.2d 987, 989 (9th Cir. 1976).
This Court's Order of February 14, 2017 recounts the general history
leading up to the initiation of this putative class action on June 13, 2016.
Following that Order, Plaintiffs filed the FAC. In addition to the allegations
included within the original complaint, the FAC alleges that the relationship
between Defendants and Plaintiffs was distinguishable from the average
insured/insurer relationship because Defendants were able to modify the terms of
the insurance arrangement during the calendar year. Plaintiffs, all of which are
small businesses, further claim that they are uncommonly dependant on
Defendants' services due to their lack of sophistication in selecting and
administering employee benefits.
Aside from the modified factual allegations, the FAC also presents new
legal theories. Plaintiffs allege two new claims under Montana law, claims for
fraudulent inducement and constructive fraud. They have reframed their claim for
negligent misrepresentation, asking the Court to consider only the conduct
predating the creation of the ERISA plan.
Rule 12(b)( 6) motions test the legal sufficiency of a pleading. Fed. R. Civ.
P. 12(b)(6). Under Federal Rule of Civil Procedure 8(a)(2), a complaint must
contain "a short and plain statement of the claim showing that the pleader is
entitled to relief." "To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible
on its face."' Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility
when the court can draw a "reasonable inference" from the facts alleged that the
defendant is liable for the misconduct alleged. Id.
The briefings on Defendants' renewed motion to dismiss are largely
duplicative of those filed on the first motion to dismiss. The parties have not
presented legal argument suggesting that the Court erred in its Order granting
Defendants' first motion to dismiss. Thus, the Court addresses only whether
Plaintiffs' amendments to the complaint alter the outcome, referring generally to
its earlier Order for the relevant legal principles.
Count I: Breach of Fiduciary Duty under ERISA
The most significant differences between the original complaint and the
FAC are designed to support Plaintiffs' argument that Defendants are fiduciaries
under ERISA. Plaintiffs have alleged additional facts, all of which are intended to
show that the relationship between Plaintiffs and Defendants was "extraordinary"
-beyond the scope of the normal insurer/insured relationship. Much of
Plaintiffs' brief is targeted to this point. However, Plaintiffs' argument that this
particular insurer/insured relationship differs from others misconstrues
Defendants' arguments and this Court's earlier order. Even ifthe parties did not
have equal bargaining power, the relationship was ordinary in the sense that
Defendants sold insurance, and Plaintiffs purchased that insurance. Plaintiffs have
not alleged that Defendants advised them in any way regarding insurance
products, only that Plaintiffs depended on Defendants to consider their best
interests. While the Court is sympathetic to Plaintiffs, particularly considering
that they are small businesses dependent primarily on an unskilled workforce, it
does not alter the Court's reasoning. Plaintiffs' expectations of
Defendants-which may, indeed, include that Defendants would act as a fiduciary
should-cannot be used to support their claim that ERISA considers Defendants to
While it may be true that Plaintiffs were somewhat vulnerable in negotiating
their insurance contracts with Defendants, it does not follow that Defendants were
fiduciaries with respect to the relevant conduct-assessing and collecting premium
moneys. The FAC does not change the reasoning set forth in this Court's earlier
Order regarding Defendants' alleged exercise of discretion over plan management
First, Defendants had no discretionary authority or control over plan
management or administration, even if Plaintiffs mistakenly believed that they did.
The phrases "plan management" and "administration" do not refer to an insurer's
selection of insurance products but rather to the plan manager or administrator's
conferral of benefits and dealings with beneficiaries. See, e.g., Varity Corp. v.
Howe, 516 U.S. 489, 502-03 (1996). In the present case, it is Plaintiffs, not
Defendants, who were fiduciaries under the administration and management
theory. Plaintiffs' dependence on Defendants' insurance expertise does not
change this analysis because it was ultimately Plaintiffs' responsibility to manage
and administer the plan in the best interest of the beneficiaries.
Second, even if Defendants had exercised such control, the relevant conduct
here is the imposition and collection of premiums. Plaintiffs' claims do not arise
from plan management and administration at all. Rather, all of Plaintiffs' claims
are grounded in their allegation that Defendants charged too much for premiums
and did not freely give information about the basis for those premiums. Plaintiffs'
amendments have no effect on the Court's analysis of the original complaint.
Finally, for the same reasons set forth in this Court's Order of February 14,
201 7, Plaintiffs have not alleged that Defendants exercised authority or control
regarding management or disposition of plan assets. As discussed in this Court's
earlier order, plan assets may not include the assets of an insurer. Plaintiffs argue
that "Defendants exercised control over plan assets [before the money had
changed hands] when they charged Plaintiffs (i.e., directed them to pay) the
Surcharge and the Additional Surcharge-knowing that Plaintiffs would
unquestioningly pay the bills." (Doc. 50 at 10.) However, Plaintiffs' argument, if
accepted, would effectively rewrite ERISA's provision excluding an insurer's
assets from plan assets. Again, Plaintiffs' relative lack of sophistication
demonstrates why they may not have equal bargaining power with insurers, but it
does not mean that ERISA provides them a cause of action.
Count II: Nonfiduciary Party in Interest Claim
Unlike the original complaint, the FAC separately pleads a claim for
equitable relief under§ 502(a)(3). Despite this alteration, the allegations relevant
to this claim are unchanged, and Plaintiffs have not remedied the defects identified
by the Court in its earlier order.
Here, there is no issue of law to be resolved. As in this Court's earlier
Order, there is no dispute regarding whether the allegations fit the mold of§
502(a)(3)-they do-or about whether§ 502(a)(3) recognizes disgorgement as an
equitable remedy, even when the defendant is a non-fiduciary-it does. The
question here is simply whether Plaintiffs have alleged facts plausibly suggesting
that equitable relief may be available in the particular circumstances.
Plaintiffs have not met their burden. Plaintiffs request remuneration and
have alleged no facts suggesting that the requested relief is anything other than
money damages. Plaintiffs describe their demand as one for "appropriate
equitable relief ... , including but not limited to the monetary remedies of
surcharge, disgorgement of profits, and any other 'make-whole' relief." (Doc. 45
at 20-21.) However, as alleged, the facts demonstrate that the relief sought is
legal in nature, not equitable. Plaintiffs claim that Defendants profited at their
expense, and Plaintiffs seek compensation for their damages. Plaintiffs have not
alleged that the wrongful payments were maintained in a segregated account such
that equity provides a solution. Although the terms "restitution" and
"disgorgement" are used, the requested relief is money damages. For the reasons
identified in this Court's order of February 14, 2017, Plaintiffs have no claim
Counts III-VII: State Law Claims
Counts III through VII are grounded in state law. In addition to those state
law claims alleged in the original complaint, Plaintiffs have brought claims for
fraudulent inducement and constructive fraud. 1 Additionally, they have reworked
their claim for negligent misrepresentation. Through the changes, Plaintiffs
attempt to show that their state law claims arose from Defendants' conduct prior to
the issuance of the policy. The amendments are unsuccessful, and Plaintiffs have
no viable state law claim.
Plaintiffs cite to Woodworker's Supply, Inc. v. Principal Mutual Life
Insurance Co. for the proposition that BRISA does not preempt a claim for
negligent misrepresentation when a plaintiff alleges that pre-contract
misrepresentations induced plan participation. 170 F.3d 985, 991. Although this
was true in Woodworker's Supply, which involved a claim against an insurance
agent-not a party in interest under BRISA-it does not follow that Plaintiffs'
claim against Defendants is similarly allowable. Plaintiffs have not cited to a
single case in which a court allowed a similar state law claim to proceed against a
Plaintiffs have also brought claims for unjust enrichment and violation of the Montana
Consumer Protection Act, which have not been meaningfully altered following the original
complaint. Their argument in favor of these claims follows that regarding negligent
misrepresentation-they seek relief for Defendants' conduct in negotiating the plans, which
occurred before the plan existed. Because the conduct at issue is the same that gives rise to their
claim for negligent misrepresentation, the same analysis applies as to the claims as to negligent
misrepresentations. Thus, the claims are preempted.
party in interest, which makes sense given that ERISA was wholly indifferent to
the agent's conduct in Woodworker's Supply and to the conduct at issue in
Plaintiffs' other cited cases. Here, however, ERISA speaks to the allegedly
wrongful conduct, preempting Plaintiffs' claims.
Section 502(a)(3) creates a cause of action when a party in interest "caus[es]
the plan to engage in a transaction" for "more than reasonable compensation." 29
U.S.C. §§ 1106(a)(l)(C), 1108(b)(2), 1132(a)(3). However, as discussed in
Section II of this Order and this Court's Order of February 14, § 502(a)(3) does
not provide a remedy in this particular instance. Thus, even though Plaintiffs,
"relegated to asserting a claim only under ERISA, [are] left without a remedy,"
ERIS A preempts Plaintiffs' claim for negligent representation. Bast v. Prudential
Ins. Co. ofAm., 150 F.3d 1003, 1010 (9th Cir. 1998). Because Plaintiffs' claims
for fraudulent inducement and constructive fraud are premised on the same facts,
and therefore fall within the ground covered by ERISA, these claims, too, are
"alternative enforcement mechanisms," preempted by federal law. N. Y. State
Conf ofBlue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 658
Accordingly, IT IS ORDERED that Defendants' Joint Motion to Dismiss
Additionally, as Defendant Health Care Services Corp. points out, Plaintiffs have not
met the heightened pleading standard required under Federal Rule of Civil Procedure 9(b) as to
their allegations of fraud.
(Docs. 46, 48) is GRANTED. Plaintiffs' Amended Complaint (Doc. 45) is
DISMISSED with prejudice. The Clerk of Court shall enter judgment in favor of
Defendants and shall CLOSE this case.
DATED this 2. ?:t1ay of June, 2017.
Dana L. Christensen, Chief Judge
United States District Court
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