District Court Dismisses ERISA Fiduciary Case
April 09, 2025
On March 24, 2025, in Navarro v. Wells Fargo & Co., a federal court in the District of Minnesota dismissed a case alleging that an employer failed to meet its fiduciary duty to its group health plan when it mismanaged the plan’s prescription drug benefit.
The plaintiffs were former employees of the defendant employer, which sponsors and administers the health plan the plaintiffs participated in. The plaintiffs alleged that the defendant violated the fiduciary duties imposed upon it by ERISA when it mismanaged the health plan’s employee prescription drug benefits program. The plaintiffs alleged that this mismanagement resulted in plan participants (including the plaintiffs) paying substantially more in premiums and out-of-pocket costs for certain prescription drug benefits than they would have absent the defendant’s mismanagement.
The defendant engaged a pharmacy benefit manager (PBM) to administer the prescription drug program for the health plan. The plaintiffs alleged that the defendant, as plan administrator, had a fiduciary duty under ERISA to act prudently and carefully monitor drug costs to make sure that the prices of the drugs covered by the plan were reasonable. Instead, the plaintiffs alleged that the defendant breached its fiduciary duty when it agreed to pay the PBM higher prices than it would have otherwise paid for the prescription drugs covered by the plan. The plaintiffs alleged that this breach caused them to pay higher premiums and out-of-pocket costs for drugs that the defendant could have either negotiated for a lower price or provided the plaintiffs with cheaper alternatives. The plaintiffs also alleged that the defendant breached its fiduciary duty to the plan itself by paying higher fees to the PBM than necessary.
The defendant argued that the plaintiffs lacked standing to bring the lawsuit. In order to establish standing, the plaintiffs must show that they suffered an injury that can be traced to the defendant’s actions and that can be fixed by a favorable court decision. The defendant denied that the plaintiffs could show that the higher costs they paid were directly attributable to the defendant’s agreements with the PBM.
The court agreed with the defendant, concluding that the prices plaintiffs paid for premiums and out-of-pocket expenses were the product of several factors, and the plaintiffs did not draw a clear line from the defendant’s alleged activity (including the fees paid to the PBM) to the injury they claimed.
Employer Takeaway
Like the Johnson & Johnson case (discussed here), this case highlights the increased attention to ERISA’s fiduciary duties. Employers should review their benefit plan governance procedures and practices. For further information concerning ERISA fiduciary governance, PPI clients can download a copy of the publication ERISA Fiduciary Governance: A Guide for Employers from the Client Help Center.
Navarro v. Wells Fargo & Co., Inc.