Eighth Circuit Tosses Fiduciary Breach Claims Against Health Plan Service Providers

The initial critical inquiry in any ERISA fiduciary breach case is whether the defendant is an ERISA fiduciary—often a very complex inquiry.  In Central Valley Ag Cooperative v. Daniel Leonard et al., the Eighth Circuit rejected claims against two service provides to an ERISA group health plan because they were not fiduciaries.  A third defendant was a fiduciary, but the Court held that it fulfilled its fiduciary duties to the Plan.

Plaintiffs alleged, among other things, that the two non-fiduciary defendants became fiduciaries because they received alleged “kickbacks” from the plan and third parties.  The Eighth Circuit rejected this allegation, however, finding that the each of the payments in question were authorities under the various services provider contracts.  As a result—and because these defendants had no discretion to manipulate the amount of compensation they received—they were not ERISA fiduciaries.

Although one defendant was a fiduciary because it had discretionary authority to resolve claims for benefits, the court held that that fiduciary status was removed and distinct from the alleged “kickbacks” it received, all of which were authorized under the relevant contracts.  The claims against this defendant failed as well.

The Eighth Circuit also affirmed the district court’s unusual award of attorneys’ fees against the plaintiff.  The court concluded that the operative documents should have put the Plaintiff on notice that its claims would fail.  Such an award of fees is highly unusual against an unsuccessful plaintiff in ERISA litigation, but the Eighth Circuit concluded that the district court did not abuse its discretion when making this order.