Sandra Peters v. Aetna Incorporated

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 19-2085
SANDRA M. PETERS, on behalf of herself and all others similarly situated,
Plaintiff – Appellant,
v.
AETNA INC.; AETNA LIFE INSURANCE COMPANY; OPTUMHEALTH CARE
SOLUTIONS, INC.,
Defendants – Appellees.
------------------------------
AMERICAN MEDICAL ASSOCIATION; MARYLAND STATE MEDICAL SOCIETY;
MEDICAL SOCIETY OF VIRGINIA; NORTH CAROLINA MEDICAL SOCIETY;
SOUTH CAROLINA MEDICAL ASSOCIATION,
Amici Supporting Appellant.
Appeal from the United States District Court for the Western District of North Carolina, at
Asheville. Martin K. Reidinger, District Judge. (1:15-cv-00109-MR)
Argued: October 26, 2020 Decided: June 22, 2021
Before AGEE, FLOYD and THACKER, Circuit Judges.
Affirmed in part, reversed in part, vacated in part, and remanded by published opinion.
Judge Agee wrote the opinion, in which Judge Floyd and Judge Thacker joined.
ARGUED: D. Brian Hufford, ZUCKERMAN SPAEDER LLP, New York, New York,
for Appellant. Earl B. Austin, III, BAKER BOTTS L.L.P., New York, New York; Brian
D. Boone, ALSTON & BIRD, LLP, Charlotte, North Carolina, for Appellees. ON BRIEF:
Jason M. Knott, Washington, D.C., Jason S. Cowart, Nell Z. Peyser, ZUCKERMAN
SPAEDER LLP, New York, New York; Larry S. McDevitt, David Wilkerson, THE VAN
WINKLE LAW FIRM, Asheville, North Carolina, for Appellant. Michael R. Hoernlein,
Rebecca L. Gauthier, ALSTON & BIRD LLP, Charlotte, North Carolina; E. Thomison
Holman, HOLMAN LAW, PLLC, Asheville, North Carolina; Jessica F. Rosenbaum,
BAKER BOTTS L.L.P., New York, New York, for Appellees. Leonard A. Nelson, Kyle
A. Palazzolo, AMERICAN MEDICAL ASSOCIATION, Chicago, Illinois, for Amici
American Medical Association, North Carolina Medical Society, Maryland State Medical
Society, South Carolina Medical Association, and Medical Society of Virginia.
2
AGEE, Circuit Judge:
Sandra Peters appeals the district court’s grant of summary judgment in favor of
Aetna Inc., Aetna Life Insurance Company, and Optumhealth Care Solutions, Inc.
(individually, “Aetna” and “Optum”; collectively, “Appellees”), as well as the denial of
her motion for class certification. For the reasons discussed below, we affirm in part,
reverse in part, vacate in part, and remand for further proceedings consistent with this
opinion.
I.
Mars, Inc. (“Mars”) operated a self-funded health care plan (“the Plan”) and hired
Aetna as a claims administrator of the Plan pursuant to a Master Services Agreement
(“MSA”). 1 Under the MSA, Aetna’s obligations included processing the participants’
claims for the Plan and providing a cost-effective network of health care providers. The
MSA contained a “Service and Fee Schedule” (“the Fee Schedule”), explaining that “[a]ll
Administrative Fees from this [Statement of Available Services] are summarized in the
following Service and Fee Schedule.” J.A. 6025. The Fee Schedule notes that
J.A. 6026, 6028. Aetna’s compensation, in return for providing all
of the agreed services under the MSA, was set at , meaning
1
Mindful of the standard on summary judgment, we recite the facts herein in the light most
favorable to the non-moving party, Peters. Garofolo v. Donald B. Heslep Assocs., Inc., 405
F.3d 194, 198 (4th Cir. 2005).
3
that
J.A. 3142.
The Aetna-Optum Relationship
The MSA permitted Aetna to subcontract “[t]he work to be performed by Aetna”
for the Plan. J.A. 5999. Aetna subsequently executed such subcontracts with Optum for
Optum to provide chiropractic and physical therapy services to the Plan participants for
more cost-effective prices than Aetna alone could provide. Optum’s “downstream
providers” offered in-network services to Aetna insureds (including the Plan participants)
at competitive rates. In exchange for Optum’s services, it was to be paid a fee.
Section 20(B) of the MSA specified that “Aetna shall be solely responsible for
payments due such subcontractors.” J.A. 5999. However, Aetna did not wish to pay Optum
out of the fees it received from Mars through the Plan. Instead, Aetna requested that Optum
“bury” its fee within the claims submitted by Optum’s downstream providers. J.A. 2692.
By doing so, the Plan and its participants effectively would pay part or all of Optum’s
administrative fee notwithstanding the contrary terms of the MSA.
As a result, the fee breakdown for health care services provided to Plan participants
through Optum operated as follows: After treatment, the health care provider submitted its
claim to Optum for the services rendered. Optum then added a “dummy code” to the claim
from the Current Procedural Terminology (“CPT”) 2 to reflect a bundled rate fee, consisting
2
The CPT is “a uniform coding used in ‘identifying, describing, and coding medical,
surgical, and diagnostic services performed by practicing physicians.’” Newport News
Shipbuilding & Dry Dock Co. v. Loxley, 934 F.2d 511, 513 n.2 (4th Cir. 1991) (citation
4
of Optum’s administrative fee and the cost of the health care provider’s services. Optum
would then forward the bundled rate fee claim to Aetna for its approval. In turn, this
bundled rate fee would be paid based on the Plan’s responsibility framework, depending
on the coinsurance required and whether a patient-paid deductible had been reached.
Appellees sought to keep this fee breakdown from being known by Mars or the Plan
participants. As one Aetna employee explained, “We need to ensure that the members are
not being relayed this information about wrap or administration fees as they are feeling
they are absorbing costs, which in turn makes most of them unhappy.” J.A. 2699.
Nonetheless, some Aetna and Optum employees exhibited concern over the fee “bumping”
arrangement, stating, for instance:
The scenario where the co-insurance amount is calculated based on Aetna’s
payment to us is very problematic – the essence of the [Department of
Insurance (“DOI”)] complaint on this will be patients are being forced to pay
a % of our fee, this is not going to viewed favorably by the DOI.
J.A. 2647.
The Terms of the Plan
Plan Participants received a Summary Plan Description (“SPD”), which set out their
rights and benefits under the Plan, including the charges for health care services and their
participant responsibility. And in the circumstances of this case, the SPD represents the
omitted). It is “the most widely accepted” system of coding “under government and private
health insurance programs.” Id. (citation omitted).
5
terms 3 of the Plan.4 Relevant to this appeal, the SPD, as also reflected in the subcontract
provision of the MSA, did not authorize the Plan or its participants to be charged Optum’s
administrative fee. This is evident when considering the SPD’s definitions of appropriate
charges. The SPD defines “Negotiated Charge” as “the maximum charge a Network
Provider has agreed to make as to any service or supply for the purpose of the benefits
under this Plan.” J.A. 3067. Critically, “[t]he Plan does not cover expenses that are not
considered Medically Necessary or appropriately provided.” J.A. 3030. “Charges for a
service or supply furnished by a Network Provider in excess of the Negotiated Charge” are
not covered. J.A. 3032.
Under the Plan, a “Network Provider” does not encompass an entity such as Optum,
as that is defined to be “[a] health care provider or pharmacy that has contracted to furnish
3
The Supreme Court has indicated that “the summary documents, important as they are,
provide communication with beneficiaries about the plan, but that their statements do not
themselves constitute the terms of the plan.” CIGNA Corp. v. Amara, 563 U.S. 421, 438
(2011) (emphasis omitted). Indeed, the SPD directs the parties to the Mars Plan for the
actual substance of the agreement: “The complete terms and conditions of the Plan are
described in a comprehensive legal Plan document. This SPD is not intended to cover every
circumstance contained in the Plan document.” J.A. 3001. But the actual Plan document is
not in the record and neither the parties nor the district court appear to have addressed or
relied on it during this litigation, instead referencing the SPD as fully representative of the
Plan. Nor has any claim been made that the SPD varies in any material way from the Plan.
We therefore accept the SPD as representative of the Plan as “it was [the parties’] burden
to place that evidence before the court. [The parties] failed to do so, and we are confined
to the record before us.” Prichard v. Metro. Life Ins. Co., 783 F.3d 1166, 1171 (9th Cir.
2015); see, e.g., MBI Energy Servs. v. Hoch, 929 F.3d 506, 511 (8th Cir.), cert. denied, 140
S. Ct. 541 (2019) (“Amara does not prevent a summary plan description from functioning
as the plan in the absence of a formal plan document.”). Therefore, we proceed with the
understanding that the SPD operates as the terms of the Plan.
4
We use the terms “Plan” and “SPD” interchangeably except where specifically identified
otherwise.
6
services or supplies for this Plan, but only if the provider is, with Aetna’s consent, included
in the directory as a Network Provider.” J.A. 3067. In contrast, an “Out-of-Network
Provider” is “[a] health care provider or pharmacy that has not contracted with Aetna, an
affiliate or a third-party vendor to furnish services or supplies for this Plan.” J.A. 3067. As
explained below, Optum is not a health care provider or pharmacy.
The SPD further explains the payment responsibility framework for Plan benefits,
reflecting that the “Annual Deductible” is “[t]he part of [the Plan participant’s] Covered
Expenses [they] pay each calendar year before the Plan starts to pay benefits.” J.A. 3063.
And “Coinsurance” is “[t]he amount [the Plan participant] pay[s] for Covered Expenses
after [they] have met the annual deductible.” J.A. 3064. Finally, “Annual Coinsurance
Maximum” is “[t]he amount of Coinsurance [the Plan participant] pay[s] each year before
the Plan pays 100% of the Negotiated Charge (for in-network services).” J.A. 3063. As
these definitions provide, each calendar year stands on its own, so that a Plan participant
begins anew the process of accruing her Annual Deductible and Annual Coinsurance
Maximum each year.
In application, the Plan required Peters, who participated in the Plan through her
husband’s employment with Mars, to pay 100% of covered expenses until she met her
annual deductible of $250. After reaching the deductible, she was responsible for paying
20% of the covered expenses for claims as coinsurance, and the Plan paid the other 80%
of those claims. However, once Peters paid the annual coinsurance maximum of $1,650,
the Plan paid 100% of covered expenses for the rest of the year.
7
Peters’ Claims
From 2013 to 2015, in addition to obtaining other non-Optum medical services,
Peters received treatment from chiropractors and physical therapists provided by Optum
under its contract with Aetna. Based on her comparison of the Explanation of Benefits
(“EOBs”) documents she received to the remittance advice forms that Optum sent her
health care providers, Peters determined that she made payments in excess of her health
care provider’s Negotiated Charge, which was the amount owed according to the terms of
the Plan.
For instance, Peters received treatment from a provider in Optum’s network on July
16, 2014. The health care provider submitted a claim to Optum for $40, but the provider’s
Negotiated Charge with Optum was limited to $34. When Optum received the health care
provider’s claim, it added the dummy CPT code to cover its administrative fee of $36.89,
resulting in a bundled rate fee of $70.89 ($34.00 + $36.89). When the claim reached Aetna,
it then applied the Plan’s responsibility framework, determining that Peters owed her
coinsurance of 20% so that she paid $14.18 of the $70.89 bundled rate fee, while the Plan
owed the balance ($56.71). Because Peters had paid her coinsurance charge of $14.18 and
the Negotiated Charge between the provider and Optum was for $34, Optum paid the
balance due of $19.82 to the provider and kept the remaining $36.89 that it received from
Aetna on behalf of the Plan.
Conversely, had the Plan’s responsibility framework been applied based on the
health care provider’s Negotiated Charge of $34 alone, and not the bundled rate fee, Peters
would have owed only 20% of $34 ($6.80) and the Plan would have owed 80% ($27.20).
8
Accordingly, Peters alleged that Appellees had overcharged her and the Plan, although she
did not take into account the cumulative impact of her annual deductible and coinsurance
payments, as well as the effect of her other non-Optum medical services.
The Lawsuit
In June 2015, Peters filed a class action complaint against Appellees, alleging
violations of the Employee Retirement Income Security Act (“ERISA”). 5 Pursuant to
ERISA § 404, 29 U.S.C. § 1104; and ERISA § 502(a)(1)–(3), 29 U.S.C. § 1132(a)(1)–(3), 6
Peters alleged that Appellees breached their fiduciary duties to her and the Plan based on
Aetna’s arrangement to have the Plan and its participants pay Optum’s administrative fee
via the bundled rate. Accordingly, Peters brought suit not only to redress the harm she
suffered due to Appellees’ actions, but also “for breach of fiduciary duty under ERISA on
behalf of the Mars, Inc. Health Care Plan.” J.A. 49.
Peters also alleged that Appellees engaged in comparable violations in their dealings
with similarly situated plans and their participants, so she requested to represent two classes
of such similarly situated plans and their participants: (1) “[a]ll participants or beneficiaries
of self-insured ERISA health insurance plans administered by Aetna for which plan
responsibility for a claim was assessed using an agreed rate between Optum and Aetna that
5
Peters also alleged violations of the Racketeer Influenced and Corrupt Organizations Act
(“RICO”). The district court granted Appellees’ motion to dismiss these claims, and Peters
does not challenge the disposition of those claims.
6
To prevent confusion between citations to the sections of ERISA itself and citations to
the sections of the United States Code in which ERISA is codified, all in-text references to
ERISA provisions will be made to the sections of ERISA itself.
9
exceeded the provider’s contracted rate with Optum for the treatment provided”; and (2)
“[a]ll participants or beneficiaries of ERISA health insurance plans insured or administered
by Aetna for whom coinsurance responsibility for a claim was assessed using an agreed
rate between Optum and Aetna that exceeded the provider’s contracted rate with Optum
for the treatment provided.” J.A. 1183. Peters sought equitable relief on behalf of herself,
the Plan, and the class members in the form of restitution, surcharge, disgorgement, and
declaratory and injunctive relief.
The district court denied class certification because it determined that the
ascertainability and commonality requirements of Rule 23(a) of the Federal Rules of Civil
Procedure were not met. As to ascertainability, the district court discounted Peters’ theory
of financial injury, which led it to conclude that she “failed to demonstrate that there exists
a class of participants who have actually been harmed by the Aetna-Optum arrangement.”
J.A. 2724–29. Regarding commonality, the district court underscored the advantages it
perceived that participants received through an expanded network of providers based on
the Aetna-Optum relationship. The district court found that “[a] proposed class challenging
conduct that did not harm – and in fact benefitted – some proposed class members fails to
establish the commonality required for certification.” J.A. 2735.
Subsequently, the district court concluded that neither Aetna nor Optum could be
held liable under ERISA, as they were not operating as fiduciaries when engaging in the
actions at the heart of Peters’ complaint, and granted Appellees’ motions for summary
judgment:
10
[T]he Court notes that it has already recognized that Aetna served only as a
limited fiduciary with respect to the Plaintiff and the Mars Plan. As the Court
previously concluded, Aetna was not serving in a fiduciary capacity when it
negotiated “with Optum to establish and maintain a provider network that
benefitted a broad range of health-care consumers . . . .” Aetna contracted
with Optum in order to lower physical therapy and chiropractic costs for
Aetna plan sponsors and members generally, and this contractual relationship
has proven to be successful, saving millions of dollars for both plan sponsors
and members.
J.A. 3233 (alteration in original) (internal citations omitted).
Relatedly, the district court determined that Aetna did not breach any fiduciary duty
and that neither Peters nor the Plan suffered a loss due to any of the alleged ERISA
violations. Specifically, the district court concluded that Peters failed to “demonstrate[]
how she could have possibly suffered any injury from EOB statements documenting health
care transactions that, on balance, saved her money.” J.A. 3235. In this vein, the district
court characterized Peters’ theory of financial injury as “premised on the assertion that
[Peters] would have paid less for her physical therapy and chiropractic benefits without the
Aetna-Optum relationship in place, i.e., that Aetna somehow should have provided her
access to the Optum network of providers directly, without Optum’s participation.” J.A.
3238. In doing so, the district court utilized a hypothetical construct in which the Aetna-
Optum contractual relationship did not exist, crediting the Aetna-Optum relationship as
saving “both Aetna plan sponsors and members millions of dollars,” and determining that
Peters “suffered no financial loss” and “did not actually pay such inflated co-insurance
amounts.” J.A. 3238, 3242.
Finally, the district court held that Optum could not be held liable as either a
fiduciary or party in interest under ERISA. The district court reasoned that Optum did not
11
qualify as a fiduciary because Aetna retained the reigns in the Aetna-Optum contracts,
which were negotiated at arm’s length and involved Optum conducting purely
administrative services. It further indicated that Optum could not be properly characterized
as a party in interest because Optum had no preexisting relationships with either the Plan
or Aetna.
Peters timely appealed, and this Court has jurisdiction under 28 U.S.C. § 1291. We
review the district court’s order granting summary judgment de novo. Garofolo, 405 F.3d
at 198. “Summary judgment is appropriate when there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Jones v.
Chandrasuwan, 820 F.3d 685, 691 (4th Cir. 2016) (citation and internal quotation marks
omitted).
II.
On appeal, Peters raises several claims of error, including challenges to the district
court’s view of Aetna and Optum as neither fiduciaries nor parties in interest under ERISA,
their breach of fiduciary duty, and the viability of her class certification claims. Before
considering these questions, we first address the relevant ERISA provisions and Peters’
claims under them, her standing to proceed, 7 and the merits of her financial injury theory.
7
Although Appellees do not expressly raise a question of Article III standing, “federal
courts have an independent obligation to ensure that they do not exceed the scope of their
jurisdiction, and therefore they must raise and decide jurisdictional questions that the
parties either overlook or elect not to press.” Henderson ex rel. Henderson v. Shinseki, 562
U.S. 428, 434 (2011).
12
A.
We begin with an overview of the ERISA provisions relevant to Peters’ claims,
explaining their significance in the ERISA context and framing the related discussions of
standing and the merits of Peters’ claims.
“ERISA is a comprehensive statute designed to promote the interests of employees
and their beneficiaries in employee benefit plans.” Ingersoll–Rand Co. v. McClendon, 498
U.S. 133, 137 (1990) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983)). To
protect participants in employee benefit plans, ERISA “establish[es] standards of conduct,
responsibility, and obligation[s] for fiduciaries of employee benefit plans.” Pilot Life Ins.
Co. v. Dedeaux, 481 U.S. 41, 44 (1987) (quoting 29 U.S.C. § 1001(b)). Trust law “serves
as ERISA’s backdrop.” Beck v. PACE Int’l Union, 551 U.S. 96, 101 (2007); Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989) (“ERISA abounds with the language and
terminology of trust law.”).
ERISA authorizes a broad range of remedies for cognizable violations, including
recovery of “plan benefits, attorney’s fees and other statutory relief.” 10 Vincent E.
Morgan, Business and Commercial Litigation in Federal Courts § 106:45 (4th ed. Dec.
2020 update). At issue here is Peters’ request for “other statutory relief” on behalf of
herself, the Plan, and the class members. In her complaint, Peters requested that the district
court:
Issue equitable and injunctive relief under ERISA to remedy [Appellees’]
past and ongoing violations of ERISA and breaches of fiduciary duty,
including but not limited to enjoin further misconduct, requiring [Appellees]
to issue accurate EOBs, restoring of monetary losses to self-insured plans
and insureds, including interest, imposing a surcharge for the improper gains
13
obtained in breach of [Appellees’] duties, and removal of [Appellees] as
administrators of the plans[.]
J.A. 58
Under ERISA’s civil enforcement scheme in § 502, Peters requests “declaratory
relief, surcharge, restitution, and disgorgement, relief for the plans that were victimized,
and other equitable remedies.” Appellant’s Br. 55. Peters characterizes these claims as
seeking (1) “to enforce her rights under the terms of the plan” under § 502(a)(1)(B); (2)
“appropriate equitable relief on behalf of the Mars Plan” under § 502(a)(2); and (3)
“appropriate equitable relief to redress violations of ERISA and the terms of the plan, and
to enforce any provisions of ERISA and the terms of the plan” under § 502(a)(3).
Appellant’s Br. 11.
Section 502(a)(1) generally involves “wrongful denial of benefits and information,”
Varity Corp. v. Howe, 516 U.S. 489, 512 (1996), and authorizes a civil action by a
participant or beneficiary “to recover benefits due to him under the terms of his plan, to
enforce his rights under the terms of the plan, or to clarify his rights for future benefits
under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B).
Separately, § 502(a)(2) specifically “allow[s] for a derivative action to be brought
by a . . . ‘participant’ on behalf of the plan to obtain recovery for losses [under § 409 8]
8
Section 409 establishes liability for breaches of fiduciary duties, stating,
Any person who is a fiduciary with respect to a plan who breaches any of the
responsibilities, obligations, or duties imposed upon fiduciaries by this
subchapter shall be personally liable to make good to such plan any losses to
the plan resulting from each such breach, and to restore to such plan any
profits of such fiduciary which have been made through use of assets of the
14
sustained by the plan because of breaches of fiduciary duties.” In re Mut. Funds Inv. Litig.,
529 F.3d 207, 210 (4th Cir. 2008). Any recovery under § 502(a)(2) would go to the Plan,
as “a plan participant may not sue under ERISA § 502(a)(2) unless [s]he seeks recovery on
behalf of the plan.” Wilmington Shipping Co. v. New Engl. Life Ins. Co., 496 F.3d 326,
334 (4th Cir. 2007); see Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140 (1985)
(holding that a participant’s action filed pursuant to ERISA § 502(a)(2) must seek remedies
that provide a “benefit [to] the plan as a whole”).
Finally, § 502(a)(3) permits a civil action
by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice
which violates any provision of this subchapter or the terms of the plan, or
(B) to obtain other appropriate equitable relief (i) to redress such violations
or (ii) to enforce any provisions of this subchapter or the terms of the plan.
29 U.S.C. § 1132(a)(3). This “catchall” provision “act[s] as a safety net, offering
appropriate equitable relief for injuries caused by violations that § 502 does not elsewhere
adequately remedy.” Varity Corp., 516 U.S. at 512.
Pursuant to § 502’s provisions, Peters makes four primary claims for herself, the
Plan, and the class members: restitution, surcharge, disgorgement, and declaratory and
injunctive relief. In her request for restitution, which is a “remedy traditionally viewed as
‘equitable,’” Mertens v. Hewitt Assocs., 508 U.S. 248, 252, 255 (1993), Peters asks for the
“restor[ation] of . . . monetary losses to self-insured plans and insureds,” J.A. 58. We have
plan by the fiduciary, and shall be subject to such other equitable or remedial
relief as the court may deem appropriate, including removal of such
fiduciary.
29 U.S.C. § 1109(a).
15
held that “[t]o establish a right to equitable restitution under ERISA, claimants must show
that they seek to recover property that (1) is specifically identifiable, (2) belongs in good
conscience to the plan, and (3) is within the possession and control of the defendant.” Ret.
Comm. of DAK Ams. LLC v. Brewer, 867 F.3d 471, 479 (4th Cir. 2017) (citing Sereboff v.
Mid Atl. Med. Servs., Inc., 547 U.S. 356, 362–63 (2006)).
Peters also petitions for surcharge of the Appellees. The Supreme Court has
recognized surcharge as a form of “appropriate equitable relief” available under § 502(a)(3)
because it was “typically available in equity.” CIGNA Corp. v. Amara, 563 U.S. 421, 439,
441–42 (2011) (quoting Sereboff, 547 U.S. at 361). Specifically, courts of equity utilized
this remedy “to provide relief in the form of monetary ‘compensation’ for a loss resulting
from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment.” Id. at 441–
42. Here, Peters requests the “impos[ition] [of] a surcharge for the improper gains obtained
in breach of [Appellees’] duties,” J.A. 58, presumably in the amount that the Plan and she
(or other participants) expended as a result of Appellees’ alleged breach of fiduciary duties,
see McCravy v. Metro. Life Ins. Co., 690 F.3d 176, 181 (4th Cir. 2012) (“[The plaintiff]
contends that she, as the beneficiary of a trust, is rightfully seeking to surcharge the trustee
[MetLife] in the amount of life insurance proceeds lost because of that trustee’s breach of
fiduciary duty.” (citation and internal quotation marks omitted)).
Next, Peters asks that Appellees be made to disgorge any improper gains obtained
from their breach of fiduciary duties. J.A. 58. Unlike restitution’s focus on making the
victim whole, “[d]isgorgement wrests ill-gotten gains from the hands of a wrongdoer. It is
an equitable remedy meant to prevent the wrongdoer from enriching himself by his wrongs.
16
Disgorgement does not aim to compensate the victims of the wrongful acts[.]” S.E.C. v.
Huffman, 996 F.2d 800, 802 (5th Cir. 1993) (internal citations omitted). And looking to
trust law, which provides valuable context to the ERISA scheme, disgorgement may be
proper even if the breach of fiduciary duty is inadvertent or caused no loss to the trust
beneficiary. Edmonson v. Lincoln Nat’l Life Ins. Co., 725 F.3d 406, 416 n.5 (3d Cir. 2013);
George G. Bogert et al., The Law of Trusts and Trustees § 862 (rev. 2d ed. June 2020
update) (“[A] rule of damages provides that a trustee is liable for any profit he has made
through his breach of trust even though the trust has suffered no loss.”).
Finally, as to declaratory and injunctive relief, Peters requests “injunctive relief
under ERISA to remedy [Appellees’] past and ongoing violations of ERISA and breaches
of fiduciary duty, including but not limited to enjoin further misconduct, [and] requiring
[Appellees] to issue accurate EOBs.” J.A. 58. Trust law recognizes that an injunction may
be proper “[i]f the beneficiary can show that an act contemplated by the trustee or a third
person would amount to a breach of trust or otherwise prejudice the beneficiary.” Bogert
et al., supra, § 861. On this basis, ERISA authorizes the issuance of injunctions in order to
grant “appropriate equitable relief” to aggrieved plaintiffs. Pell v. E.I. DuPont de Nemours
& Co. Inc., 539 F.3d 292, 306 (3d Cir. 2008); see Mertens, 508 U.S. at 256 (identifying
injunctions as a “categor[y] of relief that w[as] typically available in equity”). Accordingly,
if an injunction request is found to be equitable and not legal in nature, a court may enjoin
a practice that constitutes an ERISA violation. Great-W. Life & Annuity Ins. Co. v.
Knudson, 534 U.S. 204, 210–11 (2002) (distinguishing between equitable and legal
injunctive relief in the ERISA context).
17
B.
With this ERISA foundation in mind, we first consider Peters’ Article III standing.
Although only facially contesting the merits of Peters’ claims when challenging the
legitimacy of any financial injury, Appellees cite Pender v. Bank of America Corp., 788
F.3d 354 (4th Cir. 2015), a case that expressly considered the injury-in-fact requirement of
standing. The parties make no particular attempts to distinguish between their arguments
on financial injury in the context of standing as opposed to on the merits.
We are cognizant of the close connectedness of Peters’ theory of financial injury to
her Article III standing and the merits of some of her claims. But these inquiries remain
separate and distinct even if the evaluations overlap under similar facts. Green v. City of
Raleigh, 523 F.3d 293, 299 (4th Cir. 2008) (“[A] plaintiff’s standing to bring a case does
not depend upon his ultimate success on the merits underlying his case[.]” (citation
omitted)); see also Wooden v. Bd. of Regents of Univ. Sys. of Ga., 247 F.3d 1262, 1280
(11th Cir. 2001) (“[Standing] is a threshold determination that is conceptually distinct from
whether the plaintiff is entitled to prevail on the merits.”). Only if Peters has standing do
we address her claims on the merits.
Addressing the injury-in-fact requirement of Article III standing,9 Appellees assert
that Peters did not suffer a financial loss and therefore cannot show injury to pursue the
relief requested. However, we are satisfied that, at a minimum, Peters demonstrates a
financial injury sufficient to establish standing so as to proceed with her restitution claim.
9
The other requirements for Article III standing—causation and redressability—are not at
issue. See Pender, 788 F.3d at 367.
18
And even assuming arguendo that she could not show such an injury for standing purposes
for those claims, she could still seek surcharge, disgorgement, and declaratory and
injunctive relief.
1.
Restitution is a form of relief to “make-whole” the plaintiff. Perelman v. Perelman,
793 F.3d 368, 373 (3d Cir. 2015). While generally equitable in nature, it is directly tied to
remedying a financial injury. Here, Peters requests restitution to “restor[e] . . . monetary
losses to self-insured plans and insureds.” J.A. 58. In simple terms, Peters seeks return of
amounts she contends that she and the Plan paid by reason of Appellees’ alleged breach of
a fiduciary duty.
To demonstrate financial injury, Peters argues that she suffered an economic loss
due to Appellees’ breach of various fiduciary duties because she was required to pay in
excess of her participant responsibility according to the terms of the Plan. That is, Peters
contends that she paid more than the health care provider’s Negotiated Charge as set by
the Plan because she also paid Optum’s administrative fee contained in the bundled rate.
Appellees respond that, reviewing all of Peters’ benefits claims in a given calendar year,
she would have been worse off had they charged Peters the health care provider’s
Negotiated Charge rather than Appellees’ bundled rate. Said another way, Appellees
contend that taking Peters’ claims in the aggregate for a given year show she actually saved
money, or broke even, despite use of the bundled rate. The district court agreed with the
result sought by Appellees, although under a somewhat different rationale, and concluded
that Peters failed to “demonstrate[] how she could have possibly suffered any injury from
19
EOB statements documenting health care transactions that, on balance, saved her money.”
J.A. 3235.
We, however, are persuaded that Peters suffered a financial injury sufficient to
establish an injury-in-fact for the purposes of Article III standing. Our conclusion turns on
the determination that the financial loss analysis must be conducted at the individual claims
level rather than at the aggregate claims level. This is so because—in the context of
standing, as opposed to the merits—the fact that Peters may have benefitted from the
determination of certain claims does not offset the fact that she was harmed by others. See
13A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice &
Procedure § 3531.4 (3d ed. Oct. 2020 update) (“Once injury is shown, no attempt is made
to ask whether the injury is outweighed by benefits the plaintiff has enjoyed from the
relationship with the defendant. Standing is recognized to complain that some particular
aspect of the relationship is unlawful and has caused injury.”). 10
10
See also, e.g., Aluminum Co. of Am. v. Bonneville Power Admin., 903 F.2d 585, 590 (9th
Cir. 1989) (concluding that the plaintiff utility companies “d[id] allege an injury: excessive
electricity rates[.] There is harm in paying rates that may be excessive, no matter what the
[plaintiff utility companies] may have saved”); Almonor v. BankAtlantic Bancorp, Inc., No.
07-61862-CIV, 2009 WL 8412125, at *5 (S.D. Fla. July 15, 2009) (“While it may be true
that Defendants’ alleged breaches actually conferred a net benefit on Plaintiff, that fact is
irrelevant to whether Plaintiff suffered an injury-in-fact or whether Plaintiff suffered a
compensable loss under ERISA.”); L.A. Haven Hospice, Inc. v. Sebelius, 638 F.3d 644,
657 (9th Cir. 2011) (“[S]o long as [the plaintiff] can point to some concrete harm logically
produced by [the regulation at issue], it has standing to challenge the [regulation at issue]
even though in a prior, current, or subsequent fiscal year it may also have enjoyed some
offsetting benefits from the operation of the current regulation.”); Nat’l Collegiate Athletic
Ass’n v. Governor of New Jersey, 730 F.3d 208, 223 (3d Cir. 2013) (“A plaintiff does not
lose standing to challenge an otherwise injurious action simply because he may also derive
some benefit from it. Our standing analysis is not an accounting exercise[.]”), abrogated
on other grounds by Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461 (2018).
20
Applying this principle, Peters has shown that combining Optum’s administrative
fee with the provider’s Negotiated Charge via the bundled rate caused her to pay more on
certain individual claims than she otherwise would have had to pay under the Plan’s terms,
therefore causing a financial injury sufficient to establish an injury-in-fact for Article III
standing purposes. As her July 16, 2014 claim illustrates, for instance, Aetna determined
that Peters owed 20% of the $70.89 charge for the bundled rate ($14.18), while the Plan
owed the remaining 80% ($56.71). In contrast, had the Plan’s responsibility framework
been applied based on the health care provider’s Negotiated Charge of $34 alone, both
Peters and the Plan would have owed somewhat less on this specific claim: Peters would
have owed 20% of $34 ($6.80 instead of $14.18) and the Plan would have owed the
remainder of $27.20 instead of $56.71. As discussed in depth below, a reasonable factfinder
could conclude, based on the summary judgment record, that this was an overcharge as to
Peters and the Plan in violation of the terms of the Plan. The record reflects that similar
overpayments occurred in some of Peters’ other claims. Because Peters has adequately
demonstrated that she and the Plan suffered a financial injury, she has satisfied the injury-
in-fact requirement for Article III standing. She may thus proceed with her claim for
restitution on the merits.
2.
Even if Peters failed to demonstrate a financial injury for standing purposes as to
the restitution claim, her allegations revolving around breach of fiduciary duty would
separately provide her standing to pursue claims for surcharge, disgorgement, and
declaratory and injunctive relief. Peters requests “surcharge for the improper gains
21
obtained in breach of [Appellees’] duties,” disgorgement of any improper gains obtained
from their alleged breach of fiduciary duties, and injunctive relief “to remedy [Appellees’]
past and ongoing violations of ERISA and breaches of fiduciary duty, including but not
limited to enjoin further misconduct, [and to] require[] [Appellees] to issue accurate
EOBs.” J.A. 58. Pender guides our analysis here. 788 F.3d 354.
In Pender, we explained that Article III standing for a disgorgement claim under
ERISA revolves around whether a plaintiff’s “legally protected interest” has been harmed.
Id. at 366. Specifically, we determined that “a financial loss [was] not a prerequisite for
[Article III] standing to bring a disgorgement claim under ERISA.” Id. at 365–66 (second
alteration in original) (quoting Edmonson, 725 F.3d at 417). We reasoned that this precept
was fundamental in the disgorgement context because “[r]equiring a financial loss for
disgorgement claims would effectively ensure that wrongdoers could profit from their
unlawful acts as long as the wronged party suffers no financial loss.” Id.
As described in Pender, apart from exhibiting harm to a “legally protected interest,”
which Peters has done based on her breach of fiduciary duty arguments, she need not
demonstrate a personal financial loss to establish standing to request disgorgement of
improper gains. See id. at 365–66 (“[A] financial loss is not a prerequisite for [Article III]
standing to bring a disgorgement claim under ERISA. . . . [I]t goes without saying that the
Supreme Court has never limited the injury-in-fact requirement to financial losses
(otherwise even grievous constitutional rights violations may well not qualify as an injury).
Instead, an injury refers to the invasion of some ‘legally protected interest’ arising from
constitutional, statutory, or common law.” (internal quotation marks omitted)).
22
Similarly, identifying a financial injury is unnecessary to establish standing for
surcharge and declaratory and injunctive relief. As Amara explained, equity courts could
permit surcharge “to provide relief in the form of monetary ‘compensation’ for a loss
resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment.”
563 U.S. at 441–42 (emphasis added); Restatement (Third) of Trusts § 95 cmt. b (2012)
(“If a breach of trust causes a loss . . . , the beneficiaries . . . may have the trustee surcharged
for the amount necessary to compensate fully for the consequences of the breach.
Alternatively, the trustee is subject to such liability as may be necessary to prevent the
trustee from benefiting individually from the breach of trust.” (internal citations omitted));
see also Skinner v. Northrop Grumman Ret. Plan B, 673 F.3d 1162, 1167 (9th Cir. 2012)
(explaining that ERISA beneficiaries can obtain surcharge under either an unjust
enrichment theory or loss theory); Morrissey v. Curran, 650 F.2d 1267, 1282 (2d Cir. 1981)
(“If a trustee was acting in his own interest in connection with performing his duties as a
trustee, he was held accountable for any loss to the estate or any profit he made[.]”). Peters
proceeds under the unjust enrichment theory. J.A. 58; see Restatement (Third) of Trusts
§ 100 cmt. c (2012) (“A trustee who commits a breach of trust normally is not allowed to
benefit individually from the breach, and the trustee is subject to liability to eliminate any
such benefit.”). And a claim for surcharge under an unjust enrichment theory requires no
showing of financial injury, but rather a benefit accrued by one or both of the Appellees,
which Peters sufficiently demonstrates based on her claim that Aetna bypassed its
obligation to pay Optum’s administrative fee. See Skinner, 673 F.3d at 1167 (declining to
surcharge the defendant under the unjust enrichment theory where the plaintiffs “presented
23
no evidence that the [defendant] gained a benefit by failing to ensure that participants
received an accurate SPD”); see also, e.g., Amara v. CIGNA Corp., 925 F. Supp. 2d 242,
260 (D. Conn. 2012) (“In weighing unjust-enrichment surcharge, the question is whether,
but for CIGNA’s [breach of fiduciary duty], CIGNA would not have obtained the cost
savings that it did.”), aff’d, 775 F.3d 510 (2d Cir. 2014); Malbrough v. Kanawha Ins. Co.,
943 F. Supp. 2d 684, 698 (W.D. La. 2013) (discussing the defendant’s improper benefits
in the context of an unjust enrichment theory for surcharge).
And as the Sixth Circuit recognized in the context of plaintiffs seeking declaratory,
injunctive, and other equitable relief under ERISA, “Plaintiffs need not demonstrate
individualized injury to proceed with their claims for injunctive relief under § [502](a)(3);
they may allege only violation of the fiduciary duty owed to them as a participant in and
beneficiary of their respective ERISA plans.” Loren v. Blue Cross & Blue Shield of Mich.,
505 F.3d 598, 610 (6th Cir. 2007). Peters meets this standard by enumerating the fiduciary
duties she contends were owed to her and the Plan and Appellees’ subsequent violation of
those duties. Accordingly, even without a personal financial injury, Peters has standing to
maintain her claims for surcharge, disgorgement, and declaratory and injunctive relief
based on her allegations of breach of fiduciary duty. 11
11
The record appears to indicate that Peters is no longer a Plan participant, J.A. 2046,
which raises a question on prospective injunctive relief because she may not be able to rely
on only past conduct to establish Article III standing, see Abbott v. Pastides, 900 F.3d 160,
176 (4th Cir. 2018). Considering the tangential nature of this point for the purposes of our
discussion on the requisiteness of establishing a financial injury and that the parties have
not raised this issue on appeal, we leave consideration of this matter for the district court’s
resolution in the first instance upon remand.
24
That Peters is not only suing as an individual participant, but also on behalf of the
Plan under § 502(a)(2) does not alter this conclusion. “Courts have recognized that a
plaintiff with Article III standing may proceed under § [502](a)(2) on behalf of the plan or
other participants.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 593 (8th Cir. 2009).
And “[s]ince [Peters] has standing under Article III, we conclude that § [502](a)(2)
provides h[er] a cause of action to seek relief for the entire Plan.” Id. Peters “has alleged
injury in fact that is causally related to the conduct [s]he seeks to challenge on behalf of
the Plan.” Id. In other words, Peters “has a personal stake in the litigation” because her
requested relief “will stand or fall with that of the Plan.” Id.; see Wilmington Shipping Co.,
496 F.3d at 335 (“[The plaintiff’s] injury is no less concrete because the benefit to him
from a favorable outcome in this litigation would derive from the restored financial health
of the Plan.”).
C.
Satisfied that Peters has Article III standing, we proceed to the assessment of her
claims on the merits. For purposes of this Section C, we address only her claim for
restitution. In that regard, we assume that Peters produced sufficient evidence for a
reasonable factfinder to conclude that (1) Aetna was operating as an ERISA fiduciary and
that its complaint-related actions amounted to a breach of fiduciary duty; and (2) Optum
was either an ERISA fiduciary or party in interest involved in prohibited transactions.
Peters’ claims for surcharge, disgorgement, and declaratory and injunctive relief are
addressed separately below in Section D, wherein Appellees’ ERISA fiduciary status and
breach of any fiduciary duty are considered on the merits. See infra § II.D.
25
Unlike Peters’ claims based on surcharge, disgorgement, and declaratory and
injunctive relief that do not require a showing of personal financial harm, her claim for
restitution requires such financial loss in order to establish compensable injury on the
merits. As discussed below, we find that Peters failed to show such an injury, meaning that
her individual claim for restitution under § 502(a)(1) and (3) fails. However, we are unable
to conduct the necessary appellate review as to whether Peters’ claims for restitution on
behalf of the Plan would succeed or fail to survive the motions for summary judgment.
Said another way, we cannot determine from this record whether there is sufficient
evidence to determine if the Plan sustained a financial injury, so we must remand this
question and the corresponding inquiry on the Plan’s entitlement to restitution under §
502(a)(2) to the district court for a determination in the first instance.
1.
As noted, Peters asserts that she suffered an economic loss due to Appellees’ actions
because she was required to pay in excess of her health care provider’s Negotiated Charge
contrary to the terms of the Plan. In effect, Peters asserts that Appellees should have
charged her for only the health care provider’s Negotiated Charge under the Plan, not the
Negotiated Charge combined with the cost of Optum’s administrative fee via the bundled
rate. Specifically, she claims she sustained a direct personal loss for excess coinsurance
payments totaling $151.42, while the Plan made excess payments for Peters’ claims in the
amount of $1,020.96. Appellees seek to undermine the entirety of Peters’ claims by
asserting that she suffered no financial loss, but in fact experienced a financial gain when
all of her health care claims for a given year are considered in the aggregate.
26
In Donovan v. Bierwirth, the Second Circuit looked to trust law for guidance in
order to determine the proper measure of damages under ERISA for breach of a fiduciary
duty. 754 F.2d 1049 (2d Cir. 1985). In that case, pension plan trustees purchased stock in
the parent corporation with plan assets to help defeat a tender offer on the parent
corporation’s stock. Id. at 1051. Later, they resold the stock at a profit. Id. Plaintiffs
asserted that the trustees’ purchase of the stock on behalf of the Plan was for an improper
purpose and constituted a breach of fiduciary duty, and sought injunctive relief,
appointment of a receiver, and recoupment of the plan’s losses. Id. The district court
determined that it would “tak[e] evidence on the issue of loss to the Plan before taking
additional evidence on the question of breach of duty,” id., ultimately concluding that the
plan had not sustained a loss, id. at 1051–52.
On appeal, assuming a breach of fiduciary duty had occurred to resolve the question
of loss, the Second Circuit advised that, for purposes of damages, “[o]ne appropriate
remedy in cases of breach of fiduciary duty is the restoration of the trust beneficiaries to
the position they would have occupied but for the breach of trust.” Id. at 1056 (citing
Restatement (Second) of Trusts § 205(c) (1959)). Following this guidance, the court held
that “the measure of loss applicable . . . requires a comparison of what the Plan actually
earned on the . . . investment with what the Plan would have earned had the funds been
available for other Plan purposes.” Id. “If the latter amount is greater than the former, the
loss is the difference between the two; if the former is greater, no loss was sustained.” Id.
The Second Circuit then remanded on the question of loss, so that the district court could
27
make findings of fact based on the actual transaction amounts in order to determine if a
loss was sustained by the Plan. Id. at 1058.
Many of our sister circuits have found Donovan’s trust-law-based formula
instructive and have followed it. 12 We also find Donovan instructive and follow its
principles here. Accordingly, the measure of loss applicable in an ERISA trust
circumstance like this case requires a comparison of what Peters or the Plan would have
paid had Peters’ claims excluded Optum’s administrative fee with what they actually paid
on those claims. See Morgan, supra, § 106:44 (“[C]ourts are not restricted to a single
method of computing the losses. If courts are uncertain about computing the amount of the
award, courts may refer to the common law of trusts and enforce whichever remedy is
‘most advantageous to the participants and most conducive to effectuating the purposes of
the trust.’” (quoting Eaves v. Penn, 587 F.2d 453, 462 (10th Cir. 1978))). Correspondingly,
if what Peters and the Plan actually paid on Peters’ claims is less than—or equal to—what
they would have paid had Peters’ claims excluded Optum’s administrative fee, no loss was
sustained. Donovan, 754 F.2d at 1056.
12
Perez v. Bruister, 823 F.3d 250, 265 (5th Cir. 2016) (noting Donovan’s approach “to
compute overpayments”); Peabody v. Davis, 636 F.3d 368, 373 (7th Cir. 2011) (quoting
Donovan’s measure of loss framework); Graden v. Conexant Sys. Inc., 496 F.3d 291, 301
(3d Cir. 2007) (favorably citing Donovan’s loss model); Shade v. Panhandle Motor Serv.
Corp., 91 F.3d 133, 1996 WL 386611, at *4 (4th Cir. 1996) (unpublished table decision)
(per curiam) (referencing Donovan for the principle of restoring the plaintiff “to the
position he would have occupied but for [the defendant’s] breach of its fiduciary duty”);
Roth v. Sawyer-Cleator Lumber Co., 61 F.3d 599, 603 (8th Cir. 1995) (“We have favorably
cited Donovan for the measure of loss in a stock manipulation case, and have approved a
district court case that relied extensively on. Martin v. Feilen, 965 F.2d 660, 671 (8th Cir.
1992), cert. denied, 506 U.S. 1054 (1993). We believe that Donovan provides the
appropriate analysis of the measure of loss in a case such as this.”).
28
This Donovan framework demonstrates that the district court failed in some respects
to apply a proper standard when conducting its review based on the hypothetical
nonexistence of the Aetna-Optum relationship. Nonetheless, Peters is equally incorrect in
asserting that offsetting losses with gains is erroneous in a merits analysis (irrespective of
standing). In effect, Peters wants relief where the Donovan framework helps her, but wants
to ignore it when that same framework shows she actually had a gain or broke even.
Considering the Donovan-based formula and offsetting Peters’ losses with the gains
she experienced on all her healthcare claims under the Plan, it becomes apparent from the
undisputed evidence that she suffered no direct financial injury from Appellees’ actions.
Therefore, her individual claim for restitution under § 502(a)(1) and (3) cannot be
sustained. For this reason, despite our disagreement with the district court’s explanation on
how it arrived at its conclusion, we affirm the district court’s grant of summary judgment
to Appellees on this discrete claim.
2.
Beginning with the district court’s assessment of financial injury, it did not analyze
loss in line with the Donovan framework. Rather, it compared what Peters and the Plan
paid on Peters’ claims with “a world where the challenged agreements were not entered
into in the first place,” a model which has no nexus to the ERISA breaches alleged. J.A.
2728. In other words, the district court assumed a scenario in which “Aetna plans and
participants would be subject to the rates that Aetna charged prior to its contractual
arrangement with Optum.” J.A. 2728. On this basis, the district court often referenced its
belief that Peters was not harmed, considering “all the claims incurred by the participant
29
in any given plan year, including those for which the participant benefited as well as those
for which the participant was allegedly harmed.” J.A. 2731. In doing so, the district court
concluded that Peters experienced no direct financial injury, but rather a net gain, as a result
of the lower health care provider rates that Optum brought to the Plan participants as
opposed to what Aetna alone would have charged. Although the district court erred in
focusing on a hypothetical construct unrelated to the claims alleged based on the bundled
rate scheme, we come to the same result under Donovan.
The district court’s focus on a hypothetical scenario in which the Aetna-Optum
relationship did not exist fails to grasp the actual conduct and ERISA fiduciary violations
Peters alleged. As indicated above, the measure of loss requires a comparison of what
Peters and the Plan would have paid had her claims excluded Optum’s administrative fee
and what they actually paid per the bundled rate. On this particular point then, we agree
with Peters’ contention that the district court erred in comparing what she and the Plan
actually paid with what they would have paid had the Aetna-Optum relationship not
existed. As Peters explained, her contention was never “that the ‘Aetna-Optum contractual
arrangement’ was itself illegal. Rather, she brought ERISA claims challenging Aetna’s
repeated self-serving benefit determinations charging her and her plan for Optum’s fees in
the guise of medical expenses.” Appellant’s Br. 34.
However, Peters’ proffered damages model also misses the mark because she
essentially asks that we disregard her total claims under the Plan, which would include all
her health care expenses, not just those from Optum. Instead, Peters wants to focus
exclusively on the claims in which she suffered a financial loss via the bundled rate. Trust
30
law does not support this approach, and instead instructs that offsetting gains and losses is
appropriate where the misconduct in question “constitute[s] a single breach.” Restatement
(Third) of Trusts § 101 (2012) (“The amount of a trustee’s liability for breach of trust may
not be reduced by a profit resulting from other misconduct unless the acts of misconduct
causing the loss and the profit constitute a single breach.”). To determine whether a single
breach occurred, the Third Restatement offers the following factors, indicating that the first
factor is “likely to be of particular significance”:
(1) Whether the improper acts are the result of a single strategy or policy, a single
decision or judgment, or a single set of interrelated decisions;
(2) The amount of time between the instances of misconduct and whether the
trustee was aware of the earlier misconduct and its resulting loss or profit;
(3) Whether the trustee intended to commit a breach of trust or knew the
misconduct was a breach of trust; and
(4) Whether the profit and loss can be offset without inequitable consequences,
for example to beneficiaries having different beneficial interests in the trust.
Id. § 101 cmt. c.
Again, assuming only for purposes of this Section C that (1) Aetna was a fiduciary
and breached its fiduciary duty and (2) Optum was either a fiduciary or party in interest
engaged in prohibited transactions, the evidence before us only permits the conclusion that
Appellees’ actions constituted a single breach primarily under the first factor of the
Restatement. Accordingly, offsetting gains and losses—i.e., considering all of Peters’
health care claims for a given calendar year—is the appropriate measure to assess whether
she incurred any losses. See Bogert, supra, § 862 (“Where the profit and loss arise from
breaches of trust that are not separate and distinct but are regarded as a single breach, the
31
trustee is liable only for the net loss[.]”). Here, the breach originated and occurred based
on a “single strategy or policy”—that being Aetna’s agreement with Optum to bundle
Optum’s administrative fee utilizing the dummy CPT code. Restatement (Third) of Trusts
§ 101 cmt. c. In contrast to the earlier discussion on standing, which focused on an
assessment of Peters’ asserted financial injury arising from discrete individual claims, trust
law principles direct that we offset all applicable gains and losses in adjudicating the full
claim on the merits.
To do so, we follow the Donovan-based formula to quantify what Peters and the
Plan would have paid if her claims excluded Optum’s administrative fee. That is to say,
keeping in mind the Plan’s responsibility framework, Peters’ liability for a claim was the
amount described in the SPD: the “Negotiated Charge,” defined as “the maximum charge
a Network Provider has agreed to make as to any service or supply for the purpose of the
benefits under this Plan.” J.A. 3067. For every claim in a given year, we then consider the
health care provider’s Negotiated Charge, the actual charge, and the Plan responsibility
framework. Although straightforward to state, it is a bit more difficult in application.
To follow the Donovan framework, we begin by considering Peters’ deductible
payments, which depended on the total health care expenses she incurred in any given
calendar year. Specifically, the Plan required Peters to pay 100% of covered expenses until
she met her deductible of $250—“[t]he part of [her] Covered Expenses [she] pa[id] each
calendar year before the Plan start[ed] to pay benefits.” J.A. 3063. After reaching the
deductible, she was then responsible for paying 20% of the covered expenses as
coinsurance—“[t]he amount [Peters] pa[id] for Covered Expenses after [she] . . . met the
32
annual deductible,” J.A. 3064—with the Plan paying the other 80%. Once Peters met the
annual coinsurance maximum of $1,650—“[t]he amount of Coinsurance [she] pa[id] each
year before the Plan pa[id] 100% of the Negotiated Charge (for in-network services),” J.A.
3063—the Plan paid 100% of the covered expenses. We therefore proceed to compare the
amounts that Peters and the Plan would have paid for health care services under the Plan’s
terms (the Negotiated Charge) with the sums that were actually paid (under Appellees’
bundled rate). This process determines whether Peters or the Plan had a net “gain,” “loss,”
or no change. In other words, we assess whether Peters and the Plan suffered a loss in the
aggregate or experienced a gain based on all of her claims in each year. We conduct this
analysis separately as to Peters and the Plan to determine if either, irrespective of the other,
suffered a financial loss.
Although, as noted, we disagree with the district court’s reasoning, we affirm the
grant of summary judgment to Appellees as applied to Peters because she failed to
demonstrate that she suffered the required financial injury for purposes of restitution.
Applying the Donovan formula to Peters’ total claims reflects that she would have paid
more each year, or broken even, if she had only paid the health care provider’s Negotiated
Charge as opposed to what she paid in the aggregate under the bundled rate. While this
seems counterintuitive, the mechanics of the Plan’s coinsurance and deductible structure
direct this result. In particular, Peters seeks to treat the bundled rate charges in isolation.
She wishes to include only the Optum chiropractic and physical therapy care claims, but
ignore all her other health care expenses even though these applied to the deductible and
coinsurance and were not subject to the bundled rate.
33
In this regard, we find the report of Appellees’ expert, Dr. Daniel Kessler, to be
instructive and a useful application of Donovan. Dr. Kessler analyzed Peters’ claims by
comparing what Peters would have paid each year in the aggregate had her claims excluded
Optum’s administrative fee (i.e., had she been charged only her health care provider’s
Negotiated Charge) with what she actually paid on her claims. In doing so, Dr. Kessler
showed that Peters’ “gains” exceeded any “losses” or she broke even.
As to Peters’ claims accrued in 2013, Dr. Kessler applied the Plan’s responsibility
framework to those claims and determined that even if they had been based solely on her
health care provider’s Negotiated Charge, she would have “experienced zero economic
impact—neither net harm nor net benefit.” J.A. 5879; see J.A. 5915–16 (detailing Dr.
Kessler’s calculations on Peters’ claims from 2013). In doing so, Dr. Kessler explained that
Peters “reached her Out-of-pocket maximum in the actual world and would reach it [if she
were charged only the Negotiated Charge of the health care providers]. She was responsible
for the maximum amount in Coinsurance required by her Plan in both scenarios.” J.A.
5879. So, “she was [r]esponsible for exactly the same amount in the actual world as she
would be [if she had been charged only the Negotiated Charge].” J.A. 5879.
For 2014, Dr. Kessler calculated that Peters actually experienced a net gain of
$114.71, meaning that if her claims had been based solely on her health care provider’s
Negotiated Charge, she would have paid $114.71 more than she paid in actuality.
Specifically, Dr. Kessler’s analysis showed that Peters’ actual participant responsibility
totaled $1,785.29 in 2014, while her total participant responsibility would have been
$1,900 in that same year had she been solely charged her health care provider’s Negotiated
34
Charge. See J.A. 5919–21 (detailing Dr. Kessler’s calculations on Peters’ claims from
2014). The difference between these two figures makes up the net gain of $114.71.
The manner in which Peters’ claims were applied to meet her deductible of $250
accounts for this difference. In short, if Peters’ claims had been based just on her health
care provider’s Negotiated Charge, she would have met her deductible by paying the full
$250. However, in actuality, Peters met her $250 deductible by paying only $135.29 in
participant responsibility. As Dr. Kessler’s analysis shows, Appellees charged a bundled
rate of $70.89 to Peters’ first four relevant claims in 2014, but only required her to pay a
portion of that rate while nonetheless applying the full value of the bundled rate towards
her $250 deductible. See J.A. 5919. For instance, as to Peters’ first claim in 2014, Appellees
charged a bundled fee of $70.89, but Peters only paid $36 in participant responsibility. Id.
Nonetheless, Appellees credited the full $70.89 bundled rate towards her $250 deductible–
–resulting in a $34.89 deductible-credit windfall to Peters. See id. Conversely, under
Peters’ theory, she would have had to pay the entire deductible sum of $250 without the
assistance of the bundled rate inflating her ability to meet that figure.
Accordingly, based on the actual calculation of Peters’ deductible, Dr. Kessler
concluded that Peters “Pays Less” in 2014 in the amount of $114.71. Id. The impact of this
analysis shows that the higher bundled rate amount credited to Peters’ deductible (while
only holding her accountable out-of-pocket for the health care provider’s Negotiated
Charge) caused her to meet her deductible faster (and correlated to less participant
responsibility). By contrast, lower claims based on just the health care provider’s
Negotiated Charge would have delayed her ability to meet her deductible (and would have
35
indicated greater participant responsibility). 13 Peters offered no direct rebuttal evidence to
Dr. Kessler’s analysis in this regard.
In sum, we agree with Dr. Kessler’s analysis that Peters avoided paying “greater
participant responsibility” in the amount of $114.71 for 2014 and had no net loss in either
2013 or 2015 when all of her health care claims are considered. Therefore, Peters
experienced no direct financial injury (but rather a net gain) based on the bundled rate
scheme in the aggregate. Accordingly, the district court reached the correct result in
granting summary judgment to Appellees on Peters’ individual request for restitution under
§ 502(a)(1) and (3), which relies on a demonstration of financial injury.
While the foregoing resolves Peters’ claims for personal financial loss, the record is
otherwise silent as to what gain or loss the Plan incurred utilizing the Donovan framework
for the restitution claim. We are therefore unable to conduct appellate review of the district
court’s judgment as to Peters’ claim on behalf of the Plan. As such, we find it appropriate
to vacate the district court’s grant of summary judgment to Appellees on this claim and
remand the matter to the district court to develop a fuller record of the relevant financial
facts, if necessary, and determine the Plan’s financial injury for restitution purposes, if any,
in the first instance.
Under Donovan, if the district court finds that the Plan sustained a financial injury,
then restitution may be an available remedy for the Plan under § 502(a)(2). See Amara, 563
13
As to Peters’ claim in 2015, we briefly note that Dr. Kessler determined Peters
experienced no harm because she “had one Optum claim for which she was Responsible
for the Optum Downstream rate of $36.00,” J.A. 5884, meaning it was already based on
the Negotiated Charge. Peters did not rebut this evidence.
36
U.S. at 441–42. Correspondingly, if the district court determines that the Plan did not suffer
an economic loss, then summary judgment in favor of Appellees as to a restitution claim
would be appropriate. Accordingly, we affirm the district court’s judgment on Peters’
personal claim for restitution under § 502(a)(1) and (3), but vacate and remand to the
district court this claim under § 502(a)(2) as to the Plan for examination in the first instance
under Donovan.
D.
We next address the remaining merits issues concerning Peters’ request for
surcharge, disgorgement, and declaratory and injunctive relief under § 502(a)(1) and (3).
We proceed by considering, “first, whether [Aetna] was an ERISA fiduciary, and second,
whether [Aetna’s] action amounted to a breach.” Pipefitters Local 636 Ins. Fund v. Blue
Cross & Blue Shield of Mich., 722 F.3d 861, 865 (6th Cir. 2013). And we conclude that
Peters has produced sufficient evidence to create genuine disputes of material fact that
affect the requested relief of surcharge, disgorgement, and declaratory and injunctive relief
so as to survive the motions for summary judgment. In doing so, we conduct a party-
specific analysis as to Aetna and later consider Optum’s separate liability.
ERISA recognizes two types of fiduciaries, named and functional. A party that is
designated “in the plan instrument” as a fiduciary is a “named fiduciary.” 29 U.S.C.
§ 1102(a)(2). A “functional” fiduciary is defined as:
[A] person is a fiduciary with respect to a plan to the extent (i) he exercises
any discretionary authority or discretionary control respecting management
of such plan or exercises any authority or control respecting management or
disposition of its assets, (ii) he renders investment advice for a fee or other
compensation, direct or indirect, with respect to any moneys or other
37
property of such plan, or has any authority or responsibility to do so, or (iii)
he has any discretionary authority or discretionary responsibility in the
administration of such plan.
Id. § 1002(21)(A). Under ERISA’s functional fiduciary standard, “being a fiduciary under
ERISA is not an all-or-nothing situation.” Gordon v. CIGNA Corp., 890 F.3d 463, 474 (4th
Cir. 2018) (citing Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 61–62 (4th Cir.
1992)). Rather, whether a party functions as a fiduciary is determined “with respect to the
particular activity at issue” because an entity functions as a fiduciary “to the extent” it
performs a particular function. Coleman, 969 F.2d at 61 (quoting 29 U.S.C.
§ 1002(21)(A)). “Thus, an entity can be a fiduciary for some activities and not others.”
Gordon, 890 F.3d at 474.
ERISA requires fiduciaries to abide by the general duties of loyalty and care that
are firmly rooted in the common law of trusts. See Cent. States, Se. & Sw. Areas Pension
Fund v. Cent. Transp., Inc., 472 U.S. 559, 570–71 (1985); see also Restatement (Third) of
Trusts §§ 77–78. Specifically, ERISA imposes three broad duties on ERISA fiduciaries:
(1) the duty of loyalty, which requires that “all decisions regarding an ERISA plan . . . be
made with an eye single to the interests of the participants and beneficiaries”; (2) the
“prudent person fiduciary obligation,” which requires a plan fiduciary to act “with the care,
skill, prudence, and diligence of a prudent person acting under similar circumstances”; and
(3) the exclusive benefit rule, which requires a fiduciary to “act for the exclusive purpose
of prov[id]ing benefits to plan participants.” James v. Pirelli Armstrong Tire Corp., 305
F.3d 439, 448–49 (6th Cir. 2002) (citation and internal quotation marks omitted). In
addition, ERISA prohibits self-dealing because “[a] fiduciary with respect to a plan shall
38
not deal with the assets of the plan in his own interest or for his own account.” 29 U.S.C.
§ 1106(b)(1). These duties also preclude a fiduciary from making “material
misrepresentations and incomplete, inconsistent or contradictory disclosures” to the plan
beneficiaries. Griggs v. E.I. DuPont de Nemours & Co., 237 F.3d 371, 380 (4th Cir. 2001)
(quoting Harte v. Bethlehem Steel Corp., 214 F.3d 446, 452 (3d Cir. 2000)).
Liability for ERISA violations can attach in certain circumstances even if a party is
not a fiduciary. Under ERISA’s prohibited transaction provision,
[a] fiduciary with respect to a plan shall not cause the plan to engage in a
transaction, if he knows or should know that such transaction constitutes a
direct or indirect transfer to, or use by or for the benefit of a party in interest,
of any assets of the plan.
29 U.S.C. § 1106(a)(1)(D). So, even though the plan fiduciary is the one who “cause[d] the
plan to engage in a [prohibited] transaction,” id. § 1106(a)(1), the “culpable fiduciary,”
beneficiary, or trustee may still bring suit against “the arguably less culpable” party in
interest because “the purpose of the action is to recover money or other property for the
[plan beneficiaries],” Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238,
252 (2000) (citation omitted).
In the context of an employee benefit plan, a “party in interest” can mean, inter alia,
“a person providing services to such plan[.]” 29 U.S.C. § 1002(14)(B). When assessing
whether an entity is a party in interest, it is necessary to determine the scope of the entity’s
relationship with the plan:
[I]f a service provider has no prior relationship with a plan before entering a
service agreement, the service provider is not a party in interest at the time
of the agreement. . . . [I]t only becomes a party in interest after the initial
39
transaction occurs, and subsequent transactions are not prohibited absent
self-dealing or disloyal conduct.
Sweda v. Univ. of Pa., 923 F.3d 320, 337 n.12 (3d Cir. 2019). This concept of liability as
a party in interest is limited, however: “[T]he transferee must be demonstrated to have had
actual or constructive knowledge of the circumstances that rendered the transaction
unlawful.” Harris Tr., 530 U.S. at 251.
The lodestar to determining fiduciary or party in interest liability are the terms of
the Plan, as “ERISA requires the Plan be administered as written and to do otherwise
violates not only the terms of the Plan but causes the Plan to be in violation of ERISA.”
Gagliano v. Reliance Standard Life Ins. Co., 547 F.3d 230, 239 (4th Cir. 2008) (citing 29
U.S.C. § 1102(a)(1)); see also Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S.
99, 108 (2013) (noting “the particular importance of enforcing plan terms as written”);
White v. Provident Life & Accident Ins. Co., 114 F.3d 26, 28 (4th Cir. 1997) (“ERISA
demands adherence to the clear language of [an] employee benefit plan.”). And any
changes to the Plan must be completed through a written amendment process because
ERISA “does not provide for . . . unwritten modifications of ERISA plans.” White, 114
F.3d at 29; see 29 U.S.C. § 1102(a)(1) (requiring that “[e]very employee benefit plan shall
be established and maintained pursuant to a written instrument”); 29 U.S.C. § 1102(b)(3)
(requiring that an ERISA plan describe the formal procedures by which the plan may be
amended).
40
1.
We first consider whether Peters produced sufficient evidence to permit a
reasonable factfinder to conclude that Aetna was operating as an ERISA fiduciary. Then,
we assess whether her claims that Aetna’s actions constituted a breach of fiduciary duty
withstand summary judgment. In doing so, we consider whether Peters has come forward
with sufficient evidence to proceed with her requests for surcharge, disgorgement, and
declaratory and injunctive relief under § 502(a)(1) and (3).
i.
The record contains sufficient evidence to permit a reasonable factfinder to
determine that Aetna was a functional fiduciary regarding many of the complaint-related
actions. The district court briefly addressed its perception of Aetna’s fiduciary status in its
order granting summary judgment:
[T]he Court notes that it has already recognized that Aetna served only as a
limited fiduciary with respect to the Plaintiff and the Mars Plan. As the Court
previously concluded, Aetna was not serving in a fiduciary capacity when it
negotiated “with Optum to establish and maintain a provider network that
benefitted a broad range of health-care consumers.” Aetna contracted with
Optum in order to lower physical therapy and chiropractic costs for Aetna
plan sponsors and members generally, and this contractual relationship has
proven to be successful, saving millions of dollars for both plan sponsors and
members.
41
J.A. 3233 (internal citation omitted). As the foregoing reflects, the district court did not
appear to consider whether Aetna was a named fiduciary, but did consider Aetna to act in
a functional fiduciary status to an undefined degree. 14
Peters has provided sufficient evidence for a reasonable factfinder to conclude that
Aetna was operating as a functional fiduciary when it both “exercise[d] . . . discretionary
authority or discretionary control respecting management of [the Plan] or exercise[d] . . .
authority or control respecting management or disposition of [the Plan’s] assets,” and had
“discretionary authority or discretionary responsibility in the administration of [the Plan].”
29 U.S.C § 1002(21)(A)(i), (iii). Moreover, under the MSA, a reasonable factfinder could
find that Aetna had discretionary authority and control to spend Plan assets because
“charges of any amount payable under the Plan shall be made by check drawn by Aetna[.]”
J.A. 5989.
In Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Michigan, the Sixth Circuit
considered functional fiduciary status on comparable facts. 751 F.3d 740 (6th Cir. 2014).
Similar to the case at bar, Hi-Lex had a self-funded health benefit plan for its employees,
pooling its money into a fund and then using a third-party administrator, Blue Cross Blue
Shield, to manage the fund and pay claims out of the Hi-Lex plan. Id. at 743. In exchange
for this service, Blue Cross Blue Shield received a monthly per-employee administrative
14
The record is unclear as to whether Aetna qualifies as a named fiduciary. However, we
decline to address this inquiry considering the district court did not resolve it and
recognizing that we nonetheless reach the same end result based on our functional fiduciary
analysis.
42
fee out of the Hi-Lex plan. Id. Unbeknownst to Hi-Lex, however, Blue Cross Blue Shield
manipulated an extra fee by marking up the price of hospital services and pocketing the
difference. Id. Hi-Lex sued, alleging that Blue Cross Blue Shield had breached its fiduciary
duty under ERISA. Id.
The Sixth Circuit found in favor of Hi-Lex. Referring back to the statutory definition
of a “fiduciary,” the Sixth Circuit reasoned that Blue Cross Blue Shield had the
responsibility of and control over plan assets—specifically, the funds in the Hi-Lex plan.
Id. at 744–47. The court concluded that Blue Cross Blue Shield therefore operated as a
functional fiduciary because it discretionarily imposed the unauthorized extra fee, which it
then paid with Hi-Lex plan assets. Id. at 744–45. We are persuaded that the same principles
apply in this case.
“[T]he threshold question” is whether Aetna was acting as a fiduciary “when taking
the action subject to complaint.” Pegram v. Herdrich, 530 U.S. 211, 226 (2000). The
district court was mistakenly preoccupied with Aetna’s role in subcontracting out to Optum
some of the services it was otherwise required to provide under the MSA. But those actions
are not the “action subject to complaint.” Rather, Aetna’s questionable construct to pay
Optum’s administrative fee through the bundled rate using the dummy CPT code to
implement a fee-shifting scheme is the “action subject to complaint.” See J.A. 38–42
(describing the basis of Aetna’s “cost-shifting scheme” in Peters’ complaint); see also
Fayeulle v. Cigna Corp., No. 1:15-CV-01581-JLK, 2016 WL 9752312, at *3 (D. Colo.
June 29, 2016) (“The actions at the center of Plaintiffs’ complaint are not Cigna’s decision
to contract with Columbine or ASH, determining whether Plaintiffs were entitled to
43
particular benefits, or routine processing of claims or benefit amounts, but rather
Defendants’ decision to charge the administrative fees Cigna owed to Plaintiffs and their
plans and then generate misleading EOBs characterizing those charges as ‘medical
expenses.’”). It is this course of conduct that is relevant to the functional fiduciary analysis.
The district court’s fiduciary status analysis thus focused on the wrong conduct.
When the proper challenged conduct is considered, it is apparent that Peters
produced sufficient evidence to withstand summary judgment because a reasonable
factfinder could conclude that Aetna acted as a functional fiduciary by “exercis[ing] . . .
discretionary authority or discretionary control respecting management of [the Plan]” and
had “discretionary authority or discretionary responsibility in the administration of [the
Plan].” 29 U.S.C § 1002(21)(A)(i), (iii). Indeed, a reasonable factfinder could determine
that Aetna acted as such when it avoided payment of Optum’s administrative fee by causing
Peters and the Plan to shoulder that expense and then paid the fees out of the Plan to Optum.
Peters produced evidence to show that this course of conduct was not by
happenstance. Aetna and Optum scouted for a usable CPT code that could operate as the
“dummy code.” Specifically, they sought to find one that was an “infrequently billed CPT
code” that was “still . . . considered valid.” J.A. 5605, 5610. “Aetna MA requested a
proposal that buil[t] the [administrative services only] pricing into the provider fee
schedule/claims process[.]” J.A. 3120. “[O]ne of Aetna’s original goals of the service
44
model design was to ‘bury’ the admin fee within the claims process (to ensure Aetna didn’t
have to pay a [ fee] out of their own bank account).” 15 J.A. 2692.
A reasonable factfinder could conclude that Optum’s administrative fee was
therefore imposed upon Peters and the Plan at Aetna’s discretion, but without authority
under the Plan and in direct violation of the MSA, as discussed below. See Pipefitters, 722
F.3d at 867 (concluding that the defendant was a fiduciary because it “necessarily had
discretion in the way it collected the funds” at issue); Abraha v. Colonial Parking, Inc.,
243 F. Supp. 3d 179, 186 (D.D.C. 2017) (finding that the defendant’s exercise of
contractual authority to change from a flat per-participant fee to a percentage-of-
contributions fee was an exercise of discretion over the service provider’s own
compensation and therefore plausibly subjected the defendant to ERISA fiduciary
obligations); Golden Star, Inc. v. Mass Mut. Life Ins. Co., 22 F. Supp. 3d 72, 80–82 (D.
Mass. 2014) (denying summary judgment to an insurer on the issue of whether it acted as
a functional fiduciary because a reasonable jury could conclude that it was, based on its
15
We note that the district court impermissibly drew an inference in favor of Aetna in
regard to the “bury” language, crediting Aetna’s interpretation of this wording in its order
granting summary judgment in favor of Aetna: “Although some emails and notes
offhandedly referred to the Aetna-Optum fee structure as ‘burying’ Optum’s administrative
fee in the claims process, Optum’s Rule 30(b) corporate designee, Theresa Eichten,
explained that ‘burying’ meant only ‘[t]hat Aetna requested [Optum] build [its]
administrative fee into the claims process.’” J.A. 3227 (alterations in original) (citations
omitted). Drawing inferences in favor of the movant is in contravention of the summary
judgment standard. See, e.g., W. C. English, Inc. v. Rummel, Lkepper & Kahl, LLP, 934
F.3d 398, 405 (4th Cir. 2019) (reaffirming that a district court “[can]not resolve genuine
disputes [of fact] . . . against the nonmoving party on summary judgment”). That
determination falls to the ultimate finder of fact, and the district court erred in doing
otherwise at the summary judgment stage.
45
discretion to set a “management fee” anywhere between zero and one percent); Glass
Dimensions, Inc. ex rel. Glass Dimensions, Inc. Profit Sharing Plan & Tr. v. State St. Bank
& Tr. Co., 931 F. Supp. 2d 296, 304 (D. Mass. 2013) (same where insurer had discretionary
authority to set a “lending fee” anywhere from zero to 50 percent). Peters’ evidence was
sufficient to show that Aetna’s intentional implementation of the dummy CPT
code/bundled rate scheme was a discretionary act that a reasonable factfinder could find
gave rise to functional fiduciary status.
Bolstering our conclusion that a reasonable factfinder could determine that Aetna
operated as a functional fiduciary is the record evidence that it “exercise[d] . . .
discretionary authority or discretionary control respecting management or disposition of
[the Plan’s] assets” by directing the Plan assets to pay claims much like Blue Cross Blue
Shield did in Hi-Lex. 29 U.S.C § 1002(21)(A)(i); see Hi-Lex, 751 F.3d at 744–45.
Specifically, the MSA gave Aetna authority to pay claims benefits on behalf of Mars,
stating,
Plan benefit payments and related charges of any amount payable under the
Plan shall be made by check drawn by Aetna . . . . [Mars], by execution of
the Services Agreement, expressly authorizes Aetna to issue and accept such
checks on behalf of [Mars] for the purpose of payment of Plan benefits and
other related charges.
J.A. 5989. Aetna’s Rule 30(b) corporate designee, Jennifer Allison Cross Hennigan,
confirmed this was the regular course of business between Aetna and Mars, affirming that
“Aetna was authorized to issue checks on behalf of Mars to pay plan benefits” and that
“Mars also agreed to provide funds sufficient to satisfy plan benefits.” J.A. 6203. “Because
the power to draft checks on the plan account constitute[s] control over plan assets, [a
46
reasonable factfinder could determine that Aetna] qualified as an ERISA fiduciary.”
Briscoe v. Fine, 444 F.3d 478, 493 (6th Cir. 2006). We therefore conclude that Aetna was
not entitled to summary judgment because Peters produced sufficient evidence for a
reasonable factfinder to conclude that Aetna was operating as a functional fiduciary with
respect to the Plan.
ii.
Having established that the district court erred in granting summary judgment to
Aetna on the issue of fiduciary status, we turn to whether Peters produced sufficient
evidence to withstand summary judgment as to Aetna’s actions amounting to a breach of
its fiduciary duty. We conclude that the district court’s grant of summary judgment in favor
of Aetna was also improper because a reasonable factfinder could conclude that Aetna
breached its duties based on the following four actions regarding the EOBs: (1) referring
to Optum, and not the actual health care provider, as the “provider” of the medical services;
(2) using “dummy codes” that did not represent actual medical services; (3)
misrepresenting the “amount billed” as including Optum’s administrative fee; and (4)
describing the Optum rate, which included its administrative fee, as the amount that the
Plan and its participants, like Peters, owed for their claim. We address each of these in turn.
First, the EOBs referred to Optum, and not the actual health care provider, as the
“provider” of the medical services. A reasonable factfinder could conclude that this was in
contravention of the terms of the Plan and a breach of fiduciary duty. Agreeing with
Aetna’s interpretation and deeming Aetna’s actions “entirely consistent with the Mars
Plan,” but referencing only the MSA, the district court stated:
47
Mars and Aetna had agreed in their Master Services Agreement that Aetna
would “issue a payment on behalf of Customer for [in-network] services in
an amount determined in accordance with the Aetna contract with the
Network Provider and the Plan benefits.” The Plaintiff argues that this
payment should have been calculated using only the Optum [health care
provider] rates. But Optum’s [health care providers] are not the “Network
Provider” in this context; Optum is. Optum provided the network of
therapists to Aetna members. This interpretation is not only consistent with
the Mars Plan’s definitions of those terms, it is the only reasonable
interpretation of the relevant contracts. Aetna had no contracts with Optum’s
[health care providers]; thus, including the individual physical therapists,
chiropractors, and other treatment providers in the Master Services
Agreement’s definition of “Network Provider” would render that
agreement’s provision requiring Aetna to issue payment in accordance with
its “contract with the Network Provider” meaningless.
J.A. 3234–35 (first alteration in original) (emphasis and internal citations omitted).
As a threshold matter, the district court erred in relying solely on the MSA as
opposed to the SPD when interpreting the terms of the Plan. See, e.g., Kress v. Food Emps.
Labor Rels. Ass’n, 391 F.3d 563, 568 (4th Cir. 2004) (“SPDs—Summary Plan
Descriptions—are required by statute to ‘be written in a manner calculated to be understood
by the average plan participant, and shall be sufficiently accurate and comprehensive to
reasonably apprise such participants and beneficiaries of their rights and obligations under
the plan.’” (emphasis omitted) (quoting 29 U.S.C. § 1022(a)); id. at 568 (“We first turn to
the plain language of the SPD to determine whether it in fact authorizes the Fund’s
actions.”); United McGill Corp. v. Stinnett, 154 F.3d 168, 172 (4th Cir. 1998) (“[T]he plain
language of an ERISA plan must be enforced in accordance with ‘its literal and natural
meaning.’” (quoting Health Cost Controls v. Isbell, 139 F.3d 1070, 1072 (6th Cir. 1997))).
Had it properly assessed the SPD rather than the MSA, the district court would have
concluded that the SPD supports Peters’ position: Network Providers were the actual health
48
care providers and the Plan prohibited non-medical charges, including Optum’s
administrative fee, from being charged back to the Plan and its participants. Starting with
the basics, a “Network Provider” is defined by the SPD as “[a] health care provider or
pharmacy that has contracted to furnish services or supplies for this Plan, but only if the
provider is, with Aetna’s consent, included in the directory as a Network Provider.” J.A.
3067. In contrast, an “Out-of-Network Provider” is “[a] health care provider or pharmacy
that has not contracted with Aetna, an affiliate or a third-party vendor to furnish services
or supplies for this Plan.” J.A. 3067.
Based on the controlling SPD definitions, which are written “to be understood by
the average plan participant,” Kress, 391 F.3d at 568, a reasonable factfinder could
determine that Optum was not a Network Provider, see, e.g., Aetna Life Ins. Co. v.
Huntingdon Valley Surgery Ctr., 703 F. App’x 126, 131 (3d Cir. 2017) (“In ordinary usage,
a ‘health care provider’ is a person or entity that is qualified to render medical care to
patients. Because an administrator or manager does not render medical care, she is not, by
plain definition, a provider.”). Optum itself seemed to recognize as much, as evidenced by
its representation that it did not provide treatment to patients. 16
16
In Theresa Eichten’s deposition, Optum’s Rule 30(b) corporate designee, she
confirmed that Optum does not physically provide medical treatment to patients:
Q: Did Optum, in this arrangement, provide medical treatment to
patients?
...
A: No. We do not touch a patient.
Q: Does Optum diagnose medical conditions?
A: No, we do not.
Q: Treat medical conditions?
49
This interpretation is bolstered by the brief of amici, the American Medical
Association, North Carolina Medical Society, Maryland State Medical Society, South
Carolina Medical Association, and Medical Society of Virginia. In their brief, amici
explain that “within the health care industry, a ‘provider’ is one who performs a service
(such as a physician) or who maintains a health care facility (such as a hospital).” Amici
Br. 13. Accordingly, a reasonable factfinder could conclude that Optum was simply not a
Network Provider under the Plan. “Mere contracting with those who perform services or
maintain facilities is not the provision of health care, and companies, such as Optum, who
maintain these contracts are not deemed the ‘provider’ of the service (even though they
may provide the network).” Amici Br. 13.
In contrast, a reasonable factfinder could conclude that it was the practitioners who
offered medical care services as health care providers that qualified under the SPD’s
Network Provider definition, as they actually provided the medical services to the Plan
participants like Peters. See J.A. 3792 (in Aetna and Optum’s subcontract, indicating that
a Network Provider is “[a] duly licensed and qualified provider of health care services who
is subcontracted with [Optum]”). Indeed, this is a logical reading of the definitions in
A: No. We do not touch a patient.
Q: Is Optum licensed to provide physical therapy or occupational
therapy services?
...
A: No. We don’t treat patients.
Q: Optum is not a treating provider?
A: Correct, we are not.
J.A. 2303–04.
50
question, as it gives full effect to the contrasting “Out-of-Network Provider” definition. 17
Peters therefore produced sufficient evidence to create a genuine issue of material fact as
to whether this asserted misrepresentation constituted a breach of fiduciary duty to support
her claims for surcharge, disgorgement, and declaratory and injunctive relief under
§ 502(a)(1) and (3).
Next, we consider the remaining asserted breaches of fiduciary duty, which are
analytically linked, beginning with the second asserted misrepresentation that resulted
from the EOBs’ use of “dummy codes” to bill for Optum’s administrative fee. In their brief,
amici discuss that the American Medical Association is the author and copyright holder of
the CPT code set book. Amici Br. 1. This code set is critical as a “definitive resource to
ensure that people and organizations are using the same language when referring to health
care services.” Amici Br. 4. “Critically, CPT codes only describe health care procedures
and services.” Amici Br. 5. Thus, a reasonable factfinder could plausibly infer that Aetna,
as one of the “largest health care companies in the United States,” Amici Br. 2, and CPT
licensee with the American Medical Association, Amici Br. 5, misused the “dummy” CPT
code because “CPT does not have ‘catch-all’ or ‘miscellaneous’ codes that can serve as a
label for whatever . . . [Aetna] elect[s] to charge a member and their plan,” Amici Br. 6.
Peters therefore produced sufficient evidence to create a genuine issue of material fact as
17
This is because an “Out-of-Network Provider” is “[a] health care provider or pharmacy
that has not contracted with Aetna, an affiliate or a third-party vendor to furnish services
or supplies for this Plan.” J.A. 3067 (emphases added). Since the health care providers who
assisted Peters were contracted with a third-party vendor (Optum), they could not be
considered Out-of-Network Providers, see J.A. 1136 (the district court’s characterization
of Optum as a “third-party service provider” in its order on a motion to compel).
51
to whether Aetna utilized a dummy CPT code in direct contravention of the recognized
purpose of the CPT code and thereby breached its fiduciary duty.
Turning to the third and fourth asserted misrepresentations, involving the EOBs’
“amount billed,” a reasonable factfinder could conclude that Aetna used the dummy CPT
code to improperly include Optum’s administrative fee in the bundled rate as the amount
that the Plan and Peters owed for the claim. The plain terms of the SPD support Peters’
argument that neither she nor the Plan were responsible for Optum’s administrative fee, as
it does not fall within the definition of a “Negotiated Charge” that could properly be
assessed under the Plan. The SPD defined “Negotiated Charge” as “the maximum charge
a Network Provider has agreed to make as to any service or supply for the purpose of the
benefits under this Plan.” J.A. 3067. Critically, “[t]he Plan does not cover expenses that
are not considered Medically Necessary or appropriately provided,” J.A. 3030, and
“[c]harges for a service or supply furnished by a Network Provider in excess of the
Negotiated Charge” are not covered, J.A. 3032. Thus, unlike the Negotiated Charge, a
reasonable factfinder could conclude that Optum’s administrative fee (1) was not charged
by a Network Provider; and (2) fell into the category of uncovered expenses. So, even
though Mars was paying Aetna for its services, the record on summary judgment is
sufficient to support the inference that Aetna devised this cost-shifting scheme to avoid
having to pay Optum for its subcontracted services in direct contravention of the SPD.
Peters therefore produced sufficient evidence for a reasonable factfinder to conclude that
Aetna breached the terms of the Plan, and thereby breached its fiduciary duty.
52
The MSA also supports this conclusion, indicating that a reasonable factfinder could
conclude that Aetna violated it as well. The MSA between Mars and Aetna contained the
Fee Schedule, explaining that “[a]ll Administrative Fees from this [Statement of Available
Services] are summarized in the following Service and Fee Schedule.” J.A. 6025 (emphasis
added).
J.A. 6026, 6028.
Accordingly, Aetna’s compensation, in return for providing all of the agreed services under
the MSA, is set at a , J.A. 6026, meaning that
J.A. 3142. Reading this evidence in Peters’ favor, there is no contract
authority for any additional rate containing Optum’s administrative fee, and more
specifically, there was no exception for the dummy CPT code bundled rate to pass on the
fees of Optum—or any other subcontractor—to the Plan or its participants. A reasonable
factfinder could thus determine that doing so violated § 20(B) of the MSA, which dictates
that “Aetna shall be solely responsible for payments due such subcontractors.” J.A. 5999;
J.A. 879 (in Aetna’s press release regarding the Aetna-Optum relationship, representing
that “[s]elf-funded plans will not be charged any fees for this program”).
The record on summary judgment is sufficient to sustain a finding that Aetna
circumvented the Plan terms by “burying” the administrative fee it owed Optum in the
dummy CPT code claims process. A reasonable factfinder could conclude that such action
contradicted the obligations Aetna had contracted to fulfill under the terms of the Plan and
the MSA, effectively changing the terms of both without formal amendment of either. See
53
J.A. 6206 (Aetna’s Rule 30(b) corporate designee, Jennifer Allison Cross Hennigan,
confirming that Aetna was supposed to “pa[y] claims in a manner consistent with the terms
of the plan”); J.A. 6032 (indicating in the MSA that “Aetna will process and pay the claims
for Plan benefits . . . in a manner consistent with the terms of the Plan and the Services
Agreement”); Kim v. Hartford Life Ins. Co., 748 F. App’x 371, 374 (2d Cir. 2018)
(“[Defendant insurance company] lack[ed] authority to modify the terms of the Plan . . .
and [was] obligated to process claims in accordance with the Plan’s written terms.”); see
also Chao v. Malkani, 452 F.3d 290, 295 (4th Cir. 2006) (“While a mistaken interpretation
of plan terms hardly proves a fiduciary breach, defendants’ bizarre reading—violative of
both the Plan and ERISA—surely supports the overall conclusion that they were not acting
prudently in managing the Plan.” (internal citations omitted)). Based on the foregoing
analysis, it naturally follows that Peters produced sufficient evidence to create a genuine
issue of material fact as to whether Aetna’s improper use of the dummy CPT codes and
billing practice constituted separate actionable misrepresentations and amounted to
breaches of fiduciary duty on Aetna’s part.
iii.
Aetna attempts to undercut Peters’ misrepresentation theory, asserting that she
cannot prove reliance on these misrepresentations and properly noting that Peters conceded
she did not rely on her EOBs. 18 However, the lack of reliance is not fatal to her theory of
18
In her deposition, Peters revealed that she did not rely on her EOBs:
Q: So you didn’t make any payments in reliance on this EOB,
correct?
54
fiduciary breach because a showing of detrimental reliance is unnecessary for any of her
claims. In Amara, the Supreme Court advised that “[l]ooking to the law of equity, there is
no general principle that ‘detrimental reliance’ must be proved before a remedy is decreed.”
563 U.S. at 443. The Court then assessed various forms of equitable relief under
§ 502(a)(3), considering whether a showing of detrimental reliance was required for each
one. Id. at 443–44. For instance, the Court concluded that for purposes of estoppel,
detrimental reliance was required simply “because the specific remedy being contemplated
impose[d] such a requirement”—that is, that “the defendant’s statement ‘in truth,
influenced the conduct of’ the plaintiff, causing ‘prejudic[e].’” Id. (second alteration in
original) (citations omitted). In contrast, in the context of a claim for surcharge, the Court
concluded that a showing of detrimental reliance was not always necessary because other
forms of loss can account for harm:
[A]ctual harm may sometimes consist of detrimental reliance, but it might
also come from the loss of a right protected by ERISA or its trust-law
antecedents. In the present case, it is not difficult to imagine how the failure
to provide proper summary information, in violation of the statute, injured
employees even if they did not themselves act in reliance on summary
documents[.]
Id. at 444 (internal citations omitted).
A: No.
Q: And you didn’t rely on any of the statements or information in
this EOB to make any payments, correct?
...
A: Yes, that is correct.
J.A. 1671.
55
Here, following Amara’s example, we consider whether courts of equity would
impose a requirement of detrimental reliance on the remedies at issue: As previously noted,
Peters seeks restitution, surcharge, disgorgement, and declaratory and injunctive relief. 19
Based on Amara, these equitable remedies do not require Peters to demonstrate detrimental
reliance. Beginning with her request for restitution to “restor[e] . . . monetary losses to self-
insured plans,” J.A. 58, restitution does not have as a characteristic an element that would
suggest detrimental reliance was a necessary part of establishing a right to relief. This is
evident when considering what we have held is required to establish a right to equitable
restitution under ERISA: “[C]laimants must show that they seek to recover property that
(1) is specifically identifiable, (2) belongs in good conscience to the plan, and (3) is within
the possession and control of the defendant.” Brewer, 867 F.3d at 479 (citing Sereboff, 547
U.S. at 362–63).
Next, as expressly noted in Amara, Peters’ pursuit of surcharge “for the improper
gains obtained in breach of [Aetna’s] duties,” J.A. 58, does not mandate a showing of
detrimental reliance. Similarly, detrimental reliance is unnecessary to pursue disgorgement
of Aetna’s improper gains, if any, obtained from its breach of fiduciary duties. Chauffeurs,
19
As indicated above, although Peters’ claim for restitution is foreclosed based on her
inability to demonstrate a personal financial injury, we nonetheless include this claim in
our discussion of detrimental reliance as it has not been ruled out as a possible remedy for
Peters’ claims on behalf of the Plan, and this issue could arise on remand and is best settled
now. We briefly note that while this form of relief does not require a showing of detrimental
reliance (as discussed below), a showing of financial injury is still a threshold requirement.
Accordingly, Peters’ ability to demonstrate financial harm on behalf of the Plan for a
restitution claim relies on the district court’s assessment of whether the Plan suffered a gain
or a loss as a result of Appellees’ actions.
56
Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 570 (1990) (“[W]e have
characterized damages as equitable where they are restitutionary, such as in ‘action[s] for
disgorgement of improper profits[.]’” (quoting Tull v. United States, 481 U.S. 412, 424
(1987)). Based on the requirements to establish each of these respective remedies, a
showing of detrimental reliance is not necessary.
Finally, the same can be said for declaratory and injunctive relief “to remedy
[Aetna’s] past and ongoing violations of ERISA and breaches of fiduciary duty, including
but not limited to enjoin further misconduct, [and] requiring [Aetna] to issue accurate
EOBs.” J.A. 58. Declaratory relief could be likened to an equitable proceeding known as a
bill or petition for instruction, “one of the earliest forms of equitable declaration.” Edwin
Borchard, Declaratory Judgments 576 (2d ed. 1941). Such a proceeding operated as
follows:
The fiduciary who is in doubt must set forth the particular portion of the
instrument concerning which he requests the determination of the court, and
the facts on which he grounds his right to relief, showing that he has a present
interest in a definitive adjudication of the question raised and supplying the
names of any other parties who may be affected by the determination. The
court, if it sees fit to grant the application, will then cite such parties as it
deems requisite to show cause why the determination requested by the
fiduciary should not be made. Whatever decree is then made, unless reversed
or modified, is thereafter conclusive on all parties to the proceeding and
compliance with instructions given relieves the fiduciary from liability.
Executors’ and Trustees’ Bills for Instructions, 44 Yale L.J. 1433, 1436 (1935) (footnotes
omitted). None of these components implicate detrimental reliance. As for injunctive relief,
in the context of permanently enjoining Aetna from issuing misleading EOBs, a court of
equity would require that Peters show:
57
(1) that [she] has suffered an irreparable injury; (2) that remedies at law, such
as monetary damages, are inadequate to compensate for that injury; (3) that,
considering the balance of hardships between the plaintiff and defendant, a
remedy in equity is warranted; and (4) that the public interest would not be
disserved by a permanent injunction.
eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). Again, none of these
components implicate detrimental reliance, so Aetna’s attempt to undercut Peters’
fiduciary breach argument on this basis fails.
The district court erred in granting summary judgment to Aetna, as Peters produced
sufficient evidence for a reasonable factfinder to conclude that Aetna was at least a
functional fiduciary under ERISA and breached its corresponding fiduciary duties.
Specifically, a reasonable factfinder could conclude that Aetna was unjustly enriched when
avoiding payment of Optum’s administrative fee and causing Peters and the Plan to
shoulder that expense and therefore award Peters surcharge and disgorgement. See Skinner,
673 F.3d at 1167 (declining to surcharge the defendant under the unjust enrichment theory
where the plaintiffs “presented no evidence that the [defendant] gained a benefit by failing
to ensure that participants received an accurate SPD”); Parke v. First Reliance Standard
Life Ins. Co., 368 F.3d 999, 1008–09 (8th Cir. 2004) (“Under traditional rules of equity, a
defendant who owes a fiduciary duty to a plaintiff may be forced to disgorge any profits
made by breaching that duty . . . . We have precisely such a situation here. The district
court concluded that First Reliance owed a fiduciary duty to Parke and that it breached that
duty. First Reliance has not appealed that issue. Thus, First Reliance can be forced . . . to
disgorge any profits it earned as a result of that conduct.” (internal citations omitted));
Amara, 925 F. Supp. 2d at 260 (“In weighing unjust-enrichment surcharge, the question is
58
whether, but for CIGNA’s [breach of fiduciary duty], CIGNA would not have obtained the
cost savings that it did.”). Moreover, a reasonable factfinder could find declaratory and
injunctive relief appropriate based on the misrepresentations contained in the EOBs. See,
e.g., Hill v. Blue Cross & Blue Shield of Mich., 409 F.3d 710, 718 (6th Cir. 2005) (“BCBSM
is using an allegedly improper methodology for handling all of the Program’s emergency-
medical-treatment claims. Only injunctive relief . . . will provide the complete relief sought
by Plaintiffs by requiring BCBSM to alter the manner in which it administers all the
Program’s claims for emergency-medical-treatment expenses.”). Peters therefore
withstood summary judgment on her claims for surcharge, disgorgement, and declaratory
and injunctive relief under § 502(a)(1) and (3), and for her claims on behalf of the Plan for
surcharge, disgorgement, and declaratory and injunctive relief—as well as possibly
restitution—under § 502(a)(2).
2.
We now turn to whether Peters produced sufficient evidence to create a genuine
issue of material fact as to Optum’s status as a functional fiduciary as there is no basis in
the record to show that Optum was a named fiduciary. In short, Peters has failed to show
that Optum was operating as a functional fiduciary. But, as we explain, the district court
improperly concluded at the summary judgment stage that Optum could not be held liable
under the related theory that it was a party in interest engaged in prohibited transactions.
i.
The district court twice concluded that Optum was not operating as a functional
fiduciary, first in rejecting a motion to compel and later in granting summary judgment. In
59
doing so, it concluded that Optum could not be a functional fiduciary because Aetna
retained the reigns in the Aetna-Optum contracts, which were negotiated at arm’s length
and involved Optum conducting purely administrative services. We agree.
The Aetna-Optum contracts support this conclusion, as the contracts did not
delegate discretionary authority or control over the Plan or its assets to Optum. See J.A.
3895 (“[Optum] shall provide Claims Management Services in accordance with the terms
of this Agreement, including applicable Mandates, accreditation standards, and [Aetna]
standards[.]”); J.A. 3898 (“[Optum] agrees to cooperate with and participate in [Aetna’s]
applicable appeal, grievance and external review procedures (including, but not limited to,
Medicare appeals and expedited appeals procedures), provide [Aetna] with the information
necessary to resolve same, and abide by decisions of the applicable appeals, grievance and
review committees. If [Aetna] determines that a claim that was initially denied, in whole
or in part, must be paid, in whole or in part, [Optum] agrees to pay such claim or portion
of such claim, as applicable, as [Aetna] directs.”); J.A. 5580 (“[Optum] agrees to allow
[Aetna] to maintain oversight of the Patient Management services furnished by [Optum].”);
J.A. 5598 (“[Optum] agrees to comply with [Aetna’s] benefit coverage guidelines.”).
Even reading these contract excerpts in a light most favorable to Peters, the only
reasonable inference that can be drawn is that, in contrast to exercising a degree of control
or discretionary authority, Optum was serving in an administrative role as a third-party
vendor, which is generally insufficient to give rise to functional fiduciary status. See 29
C.F.R. § 2509.75-8 (suggesting that “a person who performs purely ministerial functions .
. . within a framework of policies, interpretations, rules, practices and procedures made by
60
other persons,” such as applying “rules determining eligibility for participation or
benefits,” “advising participants of their rights and options under the plan,” and collecting
“contributions . . . as provided in the plan,” is not acting in a fiduciary capacity). Peters
contests this conclusion by utilizing out-of-context quotes from the record, none of which
have probative value in support of her position that Optum was operating as a functional
fiduciary. Thus, the only reasonable conclusion that can be drawn based on the totality of
the covenants in the Aetna-Optum contracts is that Optum was not a functional fiduciary.
ii.
Whether Optum was a party in interest engaged in prohibited transactions with
Aetna is a separate issue. While the district court indicated that Optum could not be a party
in interest as a matter of law because Optum had no “pre-existing relationship[s]” with
either the Plan or Aetna, J.A. 3240, this is incorrect. It is true enough that Optum had no
prior relationship with the Plan before entering a service agreement with Aetna. But that
means only that Optum was not a party in interest at the time it entered the agreement.
Optum could become a party in interest after the execution of the Aetna-Optum contracts,
when it became a service provider to the plan—that is, by making available its network of
providers to plan members like Peters. Compare with Danza v. Fid. Mgmt. Tr. Co., 533 F.
App’x 120, 125 (3d Cir. 2013) (“While Fidelity is currently a party in interest as a service
provider to the plan, it was not ‘providing services’ and was not a fiduciary when the Trust
Agreement was signed, so that transaction did not fall within a prohibited category.”).
Thus, Optum could be a party in interest because it “provided services to the plan at the
time [its administrative] fees were paid[.]” Sweda, 923 F.3d at 339.
61
Against this backdrop, we are persuaded that Peters has produced sufficient
evidence at the summary judgment stage for a reasonable factfinder to conclude that Optum
could be liable as a party in interest involved in prohibited transactions. Specifically, based
on the totality of the record, a reasonable factfinder could determine that Optum “had actual
or constructive knowledge of the circumstances that rendered [the bundled rate framework]
unlawful.” Harris Tr., 530 U.S. at 251. As previously discussed at length, Optum was
aware of Aetna’s interest in burying the administrative fee in the claims process and was
involved in the CPT dummy code scouting process. Moreover, its employees registered
concerns over the legitimacy of the administrative fee billing model. 20 As such, even
though Optum might not have been directly privy to the terms of the Plan, J.A. 2136
(“Optum has never received Aetna’s plan[.]”), a reasonable factfinder could infer that
Optum was fully aware of the questionable nature of the joint venture and concurred in it.
Said another way, based on the record on summary judgment, Optum could be held liable
as a party in interest involved in prohibited transactions based on its apparent participation
20
J.A. 2647 (“The scenario where the co-insurance amount is calculated based on Aetna’s
payment to us is very problematic – the essence of the DOI complaint on this will be
patients are being forced to pay a % of our fee, this is not going to viewed favorably by the
DOI. . . . Our thinking so far feels a bit like circling the wagons and drinking our own
Koolaid to support a position we have a hard time explaining and understanding, and one
that most certainly will be viewed negatively by the DOI.”); J.A. 2652 (“While we can spin
it however we like, it is virtually impossible for the member and provider to make the math
work on the co-insurance if we are basing claims adjudication on the co-insurance being
calculated inclusive of our admin. This will lead to inquiries and complaints.”); J.A. 2657
(“This isn’t going away and won’t take much longer to bubble up to be a substantial issue.
I’m not sure anyone can explain the math to a provider, patient, or DOI[.]”); J.A. 5708
(noting that “while we don’t like the admin fee, if we refuse we’ll lose business”).
62
in and knowledge of Aetna’s administrative fee billing model. We therefore conclude that
the district court erred in granting summary judgment to Optum in so far as that it could
not be held liable as a party in interest under ERISA. 21
III.
Finally, we consider the district court’s denial of Peters’ motion for class
certification. In her motion for class certification, Peters sought to represent two classes:
(1) “[a]ll participants or beneficiaries of self-insured ERISA health insurance plans
administered by Aetna for which plan responsibility for a claim was assessed using an
agreed rate between Optum and Aetna that exceeded the provider’s contracted rate with
Optum for the treatment provided”; and (2) “[a]ll participants or beneficiaries of ERISA
health insurance plans insured or administered by Aetna for whom coinsurance
responsibility for a claim was assessed using an agreed rate between Optum and Aetna that
21
We briefly note that Peters did not abandon her claims against Optum based on her
counsel’s statements during oral argument. Peters’ counsel represented that Peters did not
need to establish liability against Optum to proceed on her claims against Aetna and that
her goal was holding Aetna responsible for its actions: “[I]n reality, Aetna is the only one
that really needs to be held liable. . . . We don’t need Optum to be found liable. Aetna is
the one who came up with this idea. It’s the one who was unjustly enriched.” Oral
Argument at 13:26–31, 14:35–42, Peters v. Aetna Inc. (No. 19-2085) (4th Cir. Oct. 26,
2020), https://www.ca4.uscourts.gov/OAarchive/mp3/19-2085-20201026.mp3. These
ambiguous statements do not amount to waiver because Peters clearly asserted her claims
against Optum in her briefs and did not specifically abandon any of these claims in oral
argument. AirFacts, Inc. v. de Amezaga, 909 F.3d 84, 92–93 (4th Cir. 2018) (explaining
that a plaintiff’s ambiguous addressal of a particular claim during oral argument “did not
rise to a clear and unambiguous abandonment” of that claim, considering that the plaintiff
“had consistently pursued [it] throughout the case”).
63
exceeded the provider’s contracted rate with Optum for the treatment provided.” 22 J.A.
1183. The district court denied certification, concluding that the ascertainability and
commonality requirements under Rule 23 of the Federal Rules of Civil Procedure could
not be met.
As to ascertainability, the district court discounted Peters’ theory of financial injury,
which led it to the conclusion that Peters “failed to demonstrate that there exists a class of
participants who have actually been harmed by the Aetna-Optum arrangement.” J.A. 2729.
It also opined that to ascertain the members of Peters’ proposed classes, it “would be forced
to engage in a highly individualized inquiry of every plan, every participant and every claim
in those participants’ claim histories, taking into account the impact of each participant’s
deductible, copayments, coinsurance, and out-of-pocket maximum.” J.A. 2734–35. As to
the latter requirement of commonality, the district court focused on the benefits accrued
based on the Aetna-Optum relationship and determined that “[a] proposed class
22
We briefly circle back to standing in the context of class actions. “[O]nce an individual
has alleged a distinct and palpable injury to h[er]self [s]he has standing to challenge a
practice even if the injury is of a sort shared by a large class of possible litigants.” Senter
v. Gen. Motors Corp., 532 F.2d 511, 517 (6th Cir. 1976); see also Baehr v. Creig Northrop
Team, P.C., 953 F.3d 244, 252 (4th Cir. 2020) (“In a class action, ‘we analyze standing
based on the allegations of personal injury made by the named plaintiff[].’” (citation
omitted)). This is because “the standing-related provisions of ERISA were not intended to
limit a claimant’s right to proceed under Rule 23 on behalf of all individuals affected by
the challenged conduct, regardless of the representative’s lack of participation in all the
ERISA-governed plans involved.” Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 423
(6th Cir. 1998). As we determined earlier that Peters has Article III standing, we therefore
consider her request for class certification under Rule 23 because “[o]nce . . . standing has
been established, whether a plaintiff will be able to represent the putative class . . . depends
solely on whether [s]he is able to meet the additional criteria encompassed in Rule 23.” Id.64
challenging conduct that did not harm – and in fact benefitted – some proposed class
members fails to establish the commonality required for certification.” J.A. 2735.
The threshold requirements for class certification under Rule 23(a) are: (1)
numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. Fed. R.
Civ. P. 23(a). Apart from the enumerated requirements, “Rule 23 contains an implicit
threshold requirement that the members of a proposed class be ‘readily identifiable.’” EQT
Prod. Co. v. Adair, 764 F.3d 347, 358 (4th Cir. 2014) (quoting Hammond v. Powell, 462
F.2d 1053, 1055 (4th Cir. 1972)). Under this principle, sometimes called “ascertainability,”
“[a] class cannot be certified unless a court can readily identify the class members in
reference to objective criteria.” Id. A plaintiff “need not be able to identify every class
member at the time of certification.” Id. “But ‘[i]f class members are impossible to identify
without extensive and individualized fact-finding or “mini-trials,” then a class action is
inappropriate.’” Id. (quoting Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 593 (3d Cir.
2012)).
Considering commonality, although the rule speaks in terms of common questions,
“what matters to class certification . . . is . . . the capacity of a class-wide proceeding to
generate common answers apt to drive the resolution of the litigation.” Wal–Mart Stores,
Inc. v. Dukes, 564 U.S. 338, 350 (2011) (first alteration in original) (citation and internal
quotation marks omitted). A single common question will suffice, id. at 359, but it must be
of such a nature that its determination “will resolve an issue that is central to the validity
of each one of the claims in one stroke,” id. at 350. This Court reviews the district court’s
65
certification decision for an abuse of discretion. Doe v. Chao, 306 F.3d 170, 183 (4th Cir.
2002).
The district court analyzed ascertainability and commonality too rigidly.
Specifically, the district court hinged its lack-of-ascertainability determination on its
perception of Peters’ theory of financial injury. As explained above, however, Peters has
withstood summary judgment on claims that support her request for certain equitable forms
of relief on behalf of herself and the Plan: surcharge, disgorgement, and declaratory and
injunctive remedies without regard to financial injury. Thus, the district court’s basis for
denying class certification as to surcharge, disgorgement, and declaratory and injunctive
relief was erroneous. And the Plan’s entitlement to a remedy of restitution has yet to be
determined. 23
The same harms that would support Peters’ request for equitable relief regarding
surcharge, disgorgement, and declaratory and injunctive actions may be cognizable and
identifiable in the ascertainability context, leading us to the conclusion that the class
23
As previously established, Peters’ individual claim for restitution fails. Although “a
plaintiff’s capacity to act as representative of the class is not ipso facto terminated when he
loses his case on the merits,” Martinez-Mendoza v. Champion Int’l Corp., 340 F.3d 1200,
1215–16 (11th Cir. 2003), “[the Supreme Court] has repeatedly held [that] a class
representative must be part of the class and possess the same interest and suffer the same
injury as the class members,” E. Tex. Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395,
403 (1977) (citation and internal quotation marks omitted). Because Peters suffered no
direct financial injury to support her individual claim for restitution on the merits, she
cannot be a valid class representative to pursue this claim. Lossia v. Flagstar Bancorp, Inc.,
895 F.3d 423, 431 (6th Cir. 2018). We express no opinion on Peters’ ability to operate as
class representative as to the remaining claims, including those of the Plan. On remand, the
district court should determine in the first instance whether Peters is qualified to serve as
class representative as to those claims if it finds that the class action can be maintained.
66
members may also be ascertainable for those claims for relief. Indeed, the proposed class
members appeared to be objectively identifiable based on Appellees’ own data, as Peters
identified 87,754 members who experienced a scenario such as hers, where they (or their
plan) were charged Optum’s administrative fee. J.A. 4313; Krakauer v. Dish Network,
L.L.C., 925 F.3d 643, 658 (4th Cir. 2019) (finding that proposed class was ascertainable as
class-wide data allowed for identification on a “large-scale basis”). The district court’s
narrow focus on ascertainability (i.e., only through the lens of Peters’ financial injury
theory) constituted an abuse of discretion regardless of Peters’ ability to satisfy Rule 23 in
toto. E.g., Hargrove v. Sleepy’s LLC, 974 F.3d 467, 481 & n.8 (3d Cir. 2020) (analyzing
ascertainability, but “express[ing] no opinion on whether the other requirements for
certification under Rule 23 [were] satisfied [because] . . . [t]he District Court did not
consider the issue”). The district court must reexamine the ascertainability prong based on
Peters’ claims that survive the motions for summary judgment as explained previously.
The district court also abused its discretion at this stage when assessing
commonality, stating that “the evidence indicates that, in the aggregate, the Aetna-Optum
contracts saved plans and their participants millions of dollars,” implying that Peters could
not demonstrate that the proposed class members suffered the same injury. J.A. 2735
(emphasis omitted). Recall, though, that the district court’s basis of analysis was erroneous
as it failed to recognize the totality of the claims actually made. We believe, therefore, that
Peters’ proposed classes may be able to meet the commonality requirement when that
requirement is reexamined based on the claims that survive the motions for summary
judgment as explained previously. Indeed, there are common issues of law and fact,
67
including, for instance, whether Aetna was a fiduciary; whether it breached its duties to
plans and plan participants by directing Optum to bury its administrative fee in the claims
process; and whether its breach amounted to a harm as to the particular plan and plan
participants. See In re Schering–Plough Corp. ERISA Litig., 589 F.3d 585, 597 (3d Cir.
2009) (finding the commonality requirement met where the following common questions
were identified: “whether the defendants were fiduciaries; whether defendants breached
their duties to the Plan by failing to conduct an appropriate investigation into the continued
investment in Schering-Plough stock;” whether they failed to adequately to monitor the
plan’s investment committee; whether they failed to hire independent fiduciaries; and
whether their breaches caused plan losses). These types of common questions may be
sufficient to meet the commonality requirement, as they may “generate common answers
apt to drive the resolution” of the Appellees’ liability. Wal-Mart, 564 U.S. at 350 (citation
and emphasis omitted).
Appellees respond that these queries cannot be answered with common evidence
because of varying EOBs, plans, and damages. While these distinctions among proposed
class members may affect the dollar amount or scope of the available remedies, they do
not reflexively defeat class certification when the underlying harm derives from the same
common contention—that Appellees’ fee-shifting scheme breached the terms of the
applicable Plan and constituted a breach of fiduciary duty. As noted earlier, we fail to see
how surcharge, disgorgement, or declaratory and injunctive relief would necessarily be
foreclosed here in a class context based on the record to date. Indeed, the district court
could limit the common questions to eliminate or streamline those without proven
68
commonality. And if Peters’ theories depend on distinct proof or legal questions common
to some but not all class members, then subclasses may be created for purposes of case
management. See Fed. R. Civ. P 23(c)(5), (d); 3 William B. Rubenstein, Newberg on Class
Actions § 7:32 (5th ed. Dec. 2020 update) (noting that Rule 23(d) “authorize[s] a class
action court to create subclasses for management purposes” and “expedite resolution of the
case by segregating a distinct legal issue that is common to some members of the existing
class” (alterations omitted)). And, as in any class proceeding, it remains for a determination
on the facts presented which plans fit, or fail to fit, in a given class.
Appellees finally contend that Peters’ proposed classes cannot meet the far more
demanding standard in the predominance requirement under Rule 23(b). However, there is
no need to decide this inquiry at this point, as Rule 23(b) was not addressed by the district
court. On remand, the district court would need to consider anew whether all the
requirements of Rule 23(a) are met before proceeding to consider any of the Rule 23(b)
requirements. E.g., EQT Prod., 764 F.3d at 367 (considering the commonality requirement
and explaining that “[w]e do not decide today whether the disparate practices identified by
the defendants are sufficient to defeat the predominance requirement”). We express no
opinion on Peters’ ability to meet the full criteria of Rule 23 on remand, but nonetheless
conclude that it was an abuse of discretion for the district court to disregard the available
equitable remedies in support of its conclusion that Peters’ proposed classes failed to meet
the commonality requirement for purposes of Rule 23(a) at this stage.
Accordingly, we vacate and remand the district court’s order denying class
certification, so that the district court may consider anew its analysis of all the Rule 23
69
requirements in conformity with this opinion. E.g., Wagner v. NutraSweet Co., 95 F.3d
527, 534 (7th Cir. 1996) (“[T]he court’s decision to deny certification was affected by his
[erroneous summary judgment] ruling, which we have reversed . . . . We therefore also
vacate the court’s order denying certification so that it can be reviewed in light of our ruling
here.”).
IV.
For the foregoing reasons, we hold that Peters experienced no direct financial injury
as a result of Appellees’ use of the bundled rate in the claims process. Based on her inability
to demonstrate a direct financial injury, we affirm the district court’s judgment on Peters’
personal claim for restitution under § 502(a)(1) and (3). However, as we are unable to
conduct appellate review of Peters’ restitution claim on behalf of the Plan under
§ 502(a)(2), we vacate and remand that claim to the district court for development of the
record as necessary and resolution in the first instance under Donovan.
As for Peters’ claims for surcharge, disgorgement, and declaratory and injunctive
relief, which do not require a showing of direct financial injury, we are persuaded that she
has produced sufficient evidence for a reasonable factfinder to conclude that Aetna was
operating as a functional fiduciary under ERISA and breached its fiduciary duties. We also
conclude there is sufficient evidence in the record upon which a reasonable factfinder could
find that Optum was acting as a party in interest engaged in prohibited transactions, but not
as a fiduciary. We therefore reverse the district court’s judgment as to Peters’ claims for
surcharge, disgorgement, and declaratory and injunctive relief under § 502(a)(1) and (3),
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and for her claims on behalf of the Plan for surcharge, disgorgement, and declaratory and
injunctive relief under § 502(a)(2) and remand those claims for further proceedings
consistent with this opinion.
Finally, we hold that the district court abused its discretion in denying Peters’
motion for class certification when it failed to properly ascertain the full measure of
available remedies. Accordingly, we vacate and remand the district court’s order denying
class certification for a full reevaluation under Rule 23 in conformity with this opinion.
AFFIRMED IN PART, REVERSED IN PART,
VACATED IN PART, AND REMANDED
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