Ninth Circuit Dismisses Claim on Behalf of Welfare Benefit Plan for Lack of Article III Standing

Just this month, the Ninth Circuit revisited the relationship between ERISA and Article III constitutional standing, recently addressed by the U.S. Supreme Court in Thole v. U.S. Bank, 140 S. Ct. 1615.

In Winsor v. Sequoia Benefits & Ins. Servs., LLC, the Ninth Circuit held that plaintiffs—participants in a multiple employer welfare arrangement (“MEWA”)—lacked standing to raise ERISA claims against a service provider to the MEWA (Sequoia Benefits and Insurance Services). Plaintiffs had alleged that Sequoia Benefits violated ERISA fiduciary and prohibited transaction rules by negotiating excessive administrative fees with insurers in return for commission payments, which plaintiffs characterized as kickbacks.

The Ninth Circuit held that plaintiffs could not bring their claim because they did not suffer an “injury in fact” (among other deficiencies) and thus lacked Article III standing to raise a claim. The complaint failed to sufficiently allege any facts suggesting that they individually paid higher fees or insurance premiums as a result of Sequoia’s alleged actions. Nor did they allege that they did not receive the benefits promised them under the MEWA. Absent any injury to the plaintiffs themselves, they did not have Article III standing based on allegations that they had an “equitable ownership” in the assets of the MEWA: Thole, the Ninth Circuit held, precluded any such attempt to establish derivative injury through an injury to the assets of the Plan. Although the ERISA plans at issue in Winsor and Thole were different—one a welfare plan and one a defined benefit pension plan—that was not material, as the same principles the Court relied upon in Thole applied equally to the welfare benefit plan at issue in Winsor.

Citation: Winsor v. Sequoia Benefits & Ins. Servs., LLC, No. 21-16992, 2023 U.S. App. LEXIS 5515 (9th Cir. Mar. 8, 2023).