Almost twenty years ago, I lost Glanton v. AdvancePCS, 465 F.3d 1123 (9^th Cir. 2006), in which we were suing the plans’ PBMs as fiduciaries for disgorgement and restoration of plan losses and ill-gotten gains under ERISA Sections 409 and 502(a)(2), and the Court (incorrectly, in my view, for whatever it’s worth) held that there was no Article III standing, even though Congress had expressly vested plan participants and beneficiaries with the statutory standing to sue for losses on behalf of their plans.

When the U.S. Supreme Court appeared to expand Article III standing for participants to sue for plan losses in the 401(k) context a few years later in LaRue v. DeWolff Boberg & Associates, 128 S.Ct. 1020 (2008), I thought that might have signaled a different result.

Fast-forward to last year, in which suits were filed challenging much of the same PBM conduct that we were challenging back in the early 2000s.  Instead of suing the PBMs themselves as alleged ERISA fiduciaries, however, the plan participants sued the formal Plan Trustees for breach of fiduciary duty in selecting and maintaining the services of these PBMs – who enriched themselves with plan assets and/or otherwise caused losses to the plan.

In at least one of these cases, a District Court in New Jersey has taken the Glanton approach, and dismissed at least the plan loss claims for lack of Article III standing.  The Court found that:

“The connection between what plan participants were required to pay in contributions and out-of-pocket costs, and the administrative fees the Plan was required to pay the PBM, is tenuous at best. The Plans vest Defendants with ‘sole discretion’ to set participant contribution rates. Participant contribution amounts may be affected by several factors having nothing to do with prescription drug benefits, such as: group health plan market trends; administrative expenses; non-drug medical costs; the costs of other prescription drugs and categories of drugs; historical cost-sharing levels under the Plan; and other internal or external factors impacting employees. The Plans authorize Defendants to require participants to fund all plan expenses, not just expenses related to their own individual benefits….

“Put simply, it is too speculative that the allegedly excessive fees the Plan paid to its PBM “had any effect at all” on Plaintiffs’ contribution rates and out-of-pocket costs for prescriptions….

“Plaintiffs allege that any reduction in overall healthcare spending — e.g., if Defendants stopped causing the Plans to overspend on prescription drugs by millions of dollars each year — would result in proportionally lower employee contributions in accordance with the established contribution ratio. And, similarly, because Defendants caused the Plans to overspend on prescription drugs, overall healthcare spending increased, and employee contributions in the form of premiums increased in tandem. Plaintiffs’ argument fundamentally misses the point: if Plaintiffs prevailed in this case and received every bit of the relief they request, Defendants could still increase Plan participants’ contribution amounts under the Plans’ terms without any violation of ERISA having occurred. Defendants have the sole discretion to set participant contribution rates. Plaintiffs cannot articulate how this Court could alter the terms of the Plans to expressly require Defendants to reduce or maintain participants’ contribution amounts. Whether removal of the current fiduciaries, appointment of an independent fiduciary, replacement of the Plans’ PBMs, surcharge, restitution, or other remedies, Plaintiffs’ theory of redressability stumbles on the same obstacle — Defendants’ discretion to set participant contribution rates. Simply put, while Plaintiffs’ requested relief could result in lower contribution rates and out-of-pocket costs, there is no guarantee that it would, and pleadings must be something more than an ingenious academic exercise in the conceivable to meet the standing threshold. Accordingly, the Court separately finds that Plaintiffs also lack standing based on the lack of redressability.”

 

Lewandowski v. Johnson & Johnson, No.24-671, 2025 WL 3296009 (D.N.J. Nov. 26, 2025).