Restricting Access to ERISA's Already Lousy Remedies
Part of the problem with ERISA’s remedies for plan participants and beneficiaries is undoubtedly the language of the statute itself. For example, it is clear from the language of 29 U.S.C. §1132(g) that an award of attorney fees to a prevailing plaintiff under the statute is within the court’s discretion rather than mandatory. For other aspects of ERISA’s remedies, the beneficiaries' problems lie with the fact that the federal judiciary has pretty consistently construed less than definitive statutory language to limit benefits and compensation when there is a choice to make between stingy or generous interpretations. Other times the federal judiciary just ignores the plain language of the statute.
The recent decision from the U.S. Court of Appeals for the Ninth Circuit in Glanton v. AdvancePCS, Inc., 2006 U.S. App. LEXIS 25696 illustrates one of the latter two circumstances. The case deals with pharmacy benefit managers. PBMs act as middlemen between pharmacy companies and employee benefit plans who purchase prescription drugs for their employees and their dependents. PBMs take advantage of their ability to buy in bulk to negotiate the best prices they can.
Everyone recognizes that it would be improper for PBMs to make secret deals with the pharmaceutical companies to the detriment of the employee benefit plans. Another way in which PBMs could act less than honestly is to make under the table deals with both the pharmaceutical companies and the employee benefit plan managers to the detriment of the employees and their dependents.
Tommie Glanton worked for Alcoa. AdvancePCS, the PBM for the Alcoa Prescription Drug Plan, had already been paid a fee for its services by the Alcoa plan. Glanton had information that made him believe AdvancePCS was also keeping the difference it negotiated between the cost of the drugs from the pharmaceutical companies and what it was paid for the drugs by the employee plans it had as clients. Glanton thought this was wrong and resulted in a loss to the Alcoa Prescription Drug Plan.
He retained an all-star cast of lawyers to represent him, acting on behalf of the Alcoa plan and other prescription drug plans sponsored by other employers that used AdvancePCS, to get that money back. Assume Glanton’s allegations were true; the Ninth Circuit did for purposes of its decision. The only question before the court was whether Glanton had standing to bring the claims on behalf of the Alcoa plan.
At 29 U.S.C. §§1109 and 1132(a)(2) ERISA authorizes plan participants to sue ERISA fiduciaries where breaches of their duties cause a loss to the ERISA plan. According to the court, there was no question AdvancePCS was a fiduciary under ERISA. So it seems that there should be no question that a participant in the plan, seeing the plan lose money based on a fiduciary’s breach of duty, would have the ability to bring suit on behalf of the plan.
The Ninth Circuit ruled otherwise. First it said that Glanton had not suffered any injury for which the litigation would likely put money in his pocket. So what if Glanton got money back for the plan. He had no promise or even likelihood that any additional money would be paid to him according to the Ninth Circuit. Whether Glanton ended up getting a dime depended entirely on what the Alcoa plan administrators decided to do with the extra money Glanton’s lawsuit might generate.
The bottom line is that even though Congress expressly authorizes plan participants to sue when a fiduciary’s improper actions cause a loss to their ERISA plan, regardless for whether the plan participant has suffered a loss himself, this is insufficient authority to allow a plan participant to bring suit. He must point to a specific likelihood that he will end up with money in his wallet as a result of the lawsuit.
Congress specifically deputizes plan participants to safeguard against losses to ERISA plans. The Ninth Circuit nullifies that deputization in Glanton. Very odd. It seems characteristic of the “activist judge” label we sometimes hear thrown around. Fortunately, the plaintiffs have petitioned the Ninth Circuit for reconsideration of this decision.