Is Anyone Left Standing?


 Today the Ninth Circuit decided Glanton v. AdvancePCS Inc. http://caselaw.lp.findlaw.com/data2/circs/9th/0415328p.pdf

Plaintiff participants sued the Plan's Pharmacy benefits management company (PBM) saying the PBM was buying prescriptions for less than it was selling them to the plan and the PBM was making an inappropriate bundle. The court held that while defendant PBM was a fiduciary, plaintiffs had no Article III constitutional standing to bring the claim.

Interestingly, the court never mentions either 502(a)(2) or (a)(3) of ERISA - the two possible bases for ERISA standing. However, the court, by implication, appears to reject both bases as conferring Art. III standing.

First, the court notes that if plaintiffs are successful, the money will go to the plan. The plan, in turn, may lower the co-pays and deductibles for plaintiffs, redounding directly to the benefit of the participants & beneficiaries, or it may reduce employer contributions. However, for a benefit from the litigation to depend on the acts of an independent third party is not sufficient to confer Art. III standing because it is insufficient evidence of the required "harm." I presume this is the discussion of the (a)(3) claim.

Here's the really interesting part. As for the stealth (a)(2) claim, the court held that the plaintiffs don't have standing to sue on behalf of the Plan because, while the Plan has suffered harm, the plaintiffs have not. For example, sayeth the court, in Kayes v. Pacific Lumber, where plaintiffs sued saying the fiduciary's selection of an annuity provider resulted in a reduction of the plaintiffs' annuities, there was a sufficient allegation of the participant's direct harm. Not so here, as the plaintiffs cannot show a direct harm to themselves.

This is, of course, a completely new twist on representational standing under (a)(2). Not only must the Plan suffer harm, but the plan participant who seeks to recover on behalf of the plan must have suffered direct harm because of the plan's harm. So let's say that a plan fiduciary steals some of the DB's plan money. If a participant sues on behalf of the plan to recover it, the defendants will argue, under Glanton, that the participant's benefit has not been reduced because of the theft (after all, not only is there the good ol' PBGC, but there's the employer who now has to contribute more in light of the theft) (Shades of Harley v 3M).

The court noted that "associational" standing worked only one way - that the association may sometimes represent the individual. However, it did not work the other way, the individual may not represent the association. But this entirely misses the 502(a)(2) point.

Here, the plan clearly suffered an injury. Are the fiduciaries of the plan the only ones allowed to sue to redress that loss if there is no individual participant or beneficiary who is directly (as is true in most cases) affected by the loss?