Robert Moeckel, a participant in the John Morrell & Co. Employee Benefit Plan, brought suit for breach of fiduciary duty against Caremark, the plan’s Pharmacy Benefits Manager (“PBM”). The suit seeks statutory relief on behalf of the Plan, pursuant to Section 502(a)(2), as well as injunctive and equitable relief for the Plan and its participants who paid percentage co-payments, pursuant to Section 502(a)(3). Judge Trauger, sitting in the Middle District of Tennessee, rejected Caremark’s arguments that Moeckel: (i) lacked Article III standing; (ii) lacked statutory standing to sue on behalf of the Plan; (iii) was required to comply with Federal Rule 23.1; and (iv) should have exhausted some type of undefined administrative remedies. Judge Trauger also rejected Caremark’s argument that (v) Caremark could not be considered a fiduciary as a matter of law. The court appropriately held that, even though Caremark was not a named fiduciary, it could nevertheless serve as a “functional fiduciary” to the extent Caremark exercises control over plan assets or discretionary authority in the management of the Plan. Despite the boiler-plate language inserted by Caremark in its standard-form contracts that “nothing in this Agreement shall be deemed to confer upon Caremark the status of fiduciary as defined in the Employee Retirement Income Security Act of 1974,” Judge Trauger appropriately recognized that “courts examine the conduct at issue to determine whether it constitutes ‘management’ or ‘administration’ of the plan” (emphasis added), and held that “whether Caremark Inc. constitutes a ‘functional fiduciary’ is a crucial, and open, question.” Moeckel v. Caremark Inc., 385 F.Supp.2d 668 (M.D. Tenn. 2005).

[Note – Steve Herman and others represent Mr. Moeckel on behalf of the plan and a putative class of similarly situated plans against Caremark.]