Winsor v. Sequoia Benefits and Insurance Services LLC ( 2021 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 RACHAEL WRIGHT WINSOR, et al., Case No. 21-cv-00227-JSC 8 Plaintiffs, ORDER RE: MOTION TO DISMISS v. 9 Re: Dkt. No. 35 10 SEQUOIA BENEFITS & INSURANCE SERVICES LLC, et al., 11 Defendants. 12 13 Plaintiffs, current and former participants in RingCentral, Inc.’s Welfare Benefits Plan, 14 allege that Sequoia Benefits and Insurance Services LLC and Gregory S. Golub engaged in an 15 unlawful kickback scheme as fiduciaries of RingCentral’s Welfare Benefits Plan.1 Before the 16 Court is Defendants’ motion to dismiss. (Dkt. No. 35.)2 After carefully considering the parties’ 17 briefing, and having had the benefit of oral argument on May 28, 2021, the Court GRANTS 18 Defendants’ motion. Plaintiffs have not met their burden of proving that they have Article III 19 standing to pursue their claims. 20 DISCUSSION 21 “Standing is a necessary element of federal-court jurisdiction” and a “threshold question in 22 every federal case.” Thomas v. Mundell, 572 F.3d 756, 760 (9th Cir. 2009) (citing Warth v. 23 Seldin, 422 U.S. 490, 498 (1975)). Article III standing consists of three “irreducible constitutional 24 minimum” requirements: “[t]he plaintiff must have (1) suffered an injury in fact, (2) that is fairly 25 traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a 26 1 All parties have consented to the jurisdiction of a magistrate judge pursuant to 28 U.S.C. § 27 636(c). (Dkt. Nos. 5 & 26.) 1 favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). These 2 elements are often referred to as injury in fact, causation, and redressability. See, e.g., Planned 3 Parenthood of Greater Washington & N. Idaho v. U.S. Dep’t of Health & Human Servs., 946 F.3d 4 1100, 1108 (9th Cir. 2020). Plaintiffs, invoking federal jurisdiction, bear the burden of 5 establishing the existence of Article III standing and, at the pleading stage, “must clearly [] allege 6 facts demonstrating each element.” Spokeo, 136 S. Ct. at 1547 (internal quotation marks and 7 citation omitted); see also Baker v. United States, 722 F.2d 517, 518 (9th Cir. 1983) (“The facts to 8 show standing must be clearly apparent on the face of the complaint.”). 9 An injury in fact is “an invasion of a legally protected interest” that is (1) “concrete,” (2) 10 “particularized,” and (3) “actual or imminent, not conjectural or hypothetical.” Spokeo, 136 S. Ct. 11 at 1548 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). To be “particularized,” an 12 injury “must affect the plaintiff in a personal and individual way,” while “concreteness” requires 13 an injury to be “‘de facto’; that is, it must actually exist.” Id. at 1548 (internal citation omitted). 14 The requirement that an injury be “actual or imminent” “ensure[s] that the alleged injury is not too 15 speculative for Article III purposes—that the injury is certainly impending.” Clapper v. Amnesty 16 Int’l USA, 568 U.S. 398, 409 (2013). Further, there must be a sufficient “causal connection 17 between the injury and the conduct complained of.” United States v. Hays, 515 U.S. 737, 743 18 (1995). Standing theories that depend on a “speculative chain of possibilities”—such as those that 19 turn on “the decisions of independent actors”—lack the necessary causal connection. Clapper, 20 568 U.S. at 414; see also Yesler Terrace Cmty. Council v. Cisneros, 37 F.3d 442, 447 (9th Cir. 21 1994) (“[W]hen standing hinges on choices made by a third party, plaintiff must “adduce facts 22 showing that those choices have been or will be made in such manner as to produce causation and 23 permit redressability of injury.”) (quoting Lujan, 504 U.S. at 562). 24 Plaintiffs allege that Defendants’ receipt of commissions from the contracting insurers 25 injured them in two ways. First, they allege that they make contributions from their pay for their 26 medical, vision, dental and life insurance and that their “contributions would be less if not for 27 Defendants’ violations of ERISA.” (Dkt. No. 1 at ¶¶ 10-11.) Second, they allege that the 1 funds that would otherwise be available for employee benefits and compensations.” (Id.) 2 As for the first theory, Plaintiffs’ opposition cites their Complaint, ¶¶ 61, 65, for the 3 proposition that Defendants “pass the results of their malfeasance on to all who contribute, and 4 then lock-in the injury when they retain unlawful commissions instead of rebating them.” (Dkt. 5 No. 46 at 24.) No facts are alleged in those paragraphs, however, that support a plausible 6 inference that if Defendants had not charged the insurers a commission (1) the insurers would 7 have charged the RingCentral Plan less, or (2) even if the insurers would have charged 8 RingCentral less for the coverage, RingCentral would have reduced the amount of their 9 employees’ required contributions. Indeed, the Complaint does not even hint at how Plaintiffs’ 10 contributions to their benefits are determined. At most, Plaintiffs allege that Defendants required 11 RingCentral to pay at least 75% of required contributions for single coverage and 50% of coverage 12 for family coverage. (Dkt. No. 1 at ¶17.) But that is a floor; Plaintiffs do not allege that either 13 was required to pay the maximum allowed, that is, 25% of the contribution amount. Without any 14 allegations as to how RingCentral determined Plaintiffs’ contributions for their benefits there are 15 not facts alleged that plausibly suggest that had the amounts RingCentral was required to pay been 16 lower it would have asked its employees to pay less. 17 The sole case Plaintiffs cite in support of their alleged concrete injury illustrates the 18 inadequacy of Plaintiffs’ allegations. In Cen. States Se. & Sw. Areas Health & Welfare Fund v. 19 Merck-Medco Managed Care, L.L.C., 433 F.3d 181 (2d Cir. 2005), the Second Circuit held that 20 there were serious questions whether the drug plan participants—as opposed to the drug plan 21 itself—had suffered any injury due to alleged inflated prices for prescription drugs because the 22 plan participants generally pay a flat co-pay regardless of the cost of the drug. Id. at 202. The 23 court also suggested that those plan participants who pay a percentage of drug cost as their co-pay 24 might have suffered an injury. Id. Because the record was unclear whether any plaintiffs had 25 standing, the court reversed and remanded to the district court to determine the jurisdictional 26 standing question. Here, Plaintiffs have not alleged any facts as to how their premium payments 27 are calculated. Is it a flat amount? Is it a percentage? Is it zero? Nothing is alleged. They have 1 U.S. Bank N.A., 140 S.Ct. 1615, 1620-21 (2020). 2 At oral argument Plaintiffs insisted that they have nonetheless met their burden of proving 3 || injury because under United States Department of Labor Technical Release 2011-04 any monies 4 || Defendants are required to return to the RingCentral plan will have to be shared with 5 || RingCentral’s participating employees. Plaintiffs do not address the legal effect, if any, of the 6 || Technical Release, but, putting that omission aside, the Technical Release gives guidance 7 regarding rebates paid pursuant to section 2718 of the Public Health Services Act. Again, nothing 8 || is alleged in the Complaint or in Plaintiffs’ opposition that suggests the relief they seek here would 9 || constitute a rebate under the Public Health Services Act. Plaintiffs have not met their burden of 10 || proving injury under this first theory. 11 There are also no facts alleged in the complaint that support the second apparent theory: 12 || that monies not paid in commission would have provided more employee benefits. Indeed, in 5 13 their opposition Plaintiffs do not even mention this theory. It, too, fails. CONCLUSION 3 15 Plaintiffs’ Complaint does not clearly allege facts that satisfy even the first element of 16 || Article III standing. The Complaint is therefore dismissed with 30 days leave to amend. If 3 17 || Plaintiffs chose to amend their complaint, they should consider Defendants’ other arguments made 18 in their motion to dismiss as Plaintiffs are now on notice of those alleged inadequacies and should 19 attempt to cure them in an amended complaint if they can do so in good faith. The Court also 20 notes that Plaintiffs’ and Defendants’ use of footnotes in their briefs was excessive, made the 21 briefs hard to read, and violated the spirit, if not the law, of the Local Rule regarding brief length. 22 This Order disposes of Docket No. 35. 23 IT IS SO ORDERED. 24 Dated: June 1, 2021 26 ne 7 CQUELINE SCOTT CORLEY United States Magistrate Judge 28