United States v. 2006-10-16 | 04-15328 | GLANTON VADVANCE PCS, INC. | precedential | opinion |

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
 TOMMIE GLANTON, on behalf of
ALCOA Prescription Drug Plan
and all other similarly situated No. 04-15328
plans, et al.; TARA MACKNER, on D.C. Nos. behalf of the KMART
CV-02-00507-SRB  COMPREHENSIVE HEALTH PLAN, CV-03-00607-SRB Plaintiffs-Appellants,
OPINION v.
ADVANCEPCS INC.,
Defendant-Appellee. 
Appeal from the United States District Court
for the District of Arizona
Susan R. Bolton, District Judge, Presiding
Argued and Submitted
October 18, 2005—San Francisco, California
Filed October 17, 2006
Before: Alex Kozinski and Ferdinand F. Fernandez,
Circuit Judges, and Terry J. Hatter, Jr.,* District Judge.
Opinion by Judge Kozinski
*The Honorable Terry J. Hatter, Jr., Senior United States District Judge
for the Central District of California, sitting by designation.
17579

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COUNSEL
Stephen J. Herman, Herman Mathis Casey Kitchens & Gerel,
LLP, New Orleans, Louisiana; David S. Casey, Jr., Herman
Mathis Casey Kitchens & Gerel, LLP, San Diego, California;
Mary E. Alexander, Mary Alexander & Associates, San Fran-
cisco, California, for the plaintiff-appellant.
Paul J. Ondrasik, Jr., Martin D. Schneiderman, Eric G. Ser-
ron, Steptoe & Johnson LLP, Washington, D.C.; Peter S.
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Kozinets, Steptoe & Johnson LLP, Phoenix, Arizona, for the
defendant-appellee.
Howard M. Radzely, Solicitor of Labor, Timothy D. Hauser,
Associate Solicitor, Elizabeth Hopkins, Counsel for Appellate
and Special Litigation, Mary F. Williams, Trial Attorney, for
amicus Secretary of the United States Department of Labor,
Washington, D.C.
Douglas K. deVries, deVries Law Firm, Sacramento, Califor-
nia; Ronald Dean, Pacific Palisades, California; Amy Bach,
United Policyholders, San Francisco, California, for amicus
United Policyholders.
OPINION
KOZINSKI, Circuit Judge:
We consider whether prescription drug plan participants
who have suffered no judicially cognizable injury may sue
their plans’ fiduciaries under the Employee Retirement
Income Security Act of 1974 (“ERISA”).
Facts
AdvancePCS is a pharmacy benefits management company
(PBM). PBMs manage prescription drug benefit programs and
seek to reduce their clients’ drug costs by pooling claims and
negotiating volume discounts with pharmaceutical companies.
Among AdvancePCS’s clients are employee welfare benefit
plans sponsored by ALCOA and K-Mart.
When AdvancePCS receives a prescription from one of the
plan participants, it decides whether to buy the drug (prefera-
bly from a seller with whom it has negotiated a discount),
reject the claim or switch the participant to another drug.
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AdvancePCS pays for the drugs with plan assets after
accounting for the participant’s co-payment. Plaintiffs allege
that, in addition to earning fees from the plans, AdvancePCS
has secretly been keeping the spread between what it charges
the plans for drugs and what it pays suppliers—a practice
plaintiffs claim violates ERISA.
Plaintiff Tommie Glanton works for ALCOA and is a
member of its prescription drug plan. Plaintiff Tara Mackner
was a member of the K-Mart plan, but ceased working for K-
Mart after the suit was filed and thus no longer participates in
its plan.1
Plaintiffs sued AdvancePCS under ERISA for breach of
fiduciary duty. The district court found that plaintiffs lacked
standing. Plaintiffs appeal.
Analysis
[1] 1. ERISA authorizes plan participants to sue fidu-
ciaries for losses the plan suffers from a breach of their duties.
29 U.S.C. §§ 1109, 1132(a). A plan fiduciary is defined as
anyone who exerts “any discretionary authority . . . respecting
management of such [a] plan.” 29 U.S.C. § 1002(21)(A).
[2] AdvancePCS easily fits this definition. In choosing
whether to fill a prescription or shift a participant to a differ-
ent drug, it exercises discretion over the plans’ assets. While
AdvancePCS is not named as a plan fiduciary, the applicable
section of ERISA makes no distinction between named and
unnamed fiduciaries. See 29 U.S.C. § 1002(21)(A); see also
Kayes v. Pac. Lumber, 51 F.3d 1449, 1458-61 (9th Cir. 1995).
It follows that plaintiffs here are authorized to sue
AdvancePCS for breach of fiduciary duty.
1The parties dispute whether Mackner lost whatever standing she had
when she stopped working for K-Mart. Because we conclude that Mack-
ner lacked standing in the first place, we do not reach this question.
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[3] 2. Plaintiffs, nevertheless, cannot proceed unless they
have Article III standing. See Raines v. Byrd, 521 U.S. 811,
820 n.3 (1997). They claim to meet the traditional standing
requirements outlined by Lujan v. Defenders of Wildlife, 504
U.S. 555 (1992). Alternatively, they contend that they have
standing as congressionally authorized representatives of the
injured plans.
[4] To establish standing under Lujan, plaintiffs must show
a likelihood that the injury they have suffered will be
redressed by a favorable outcome to the litigation. Id. at 560-
62. Plaintiffs don’t claim they were denied benefits or
received inferior drugs. Rather, they claim that AdvancePCS
charged the plans too much for drugs, and that this caused the
plans to demand higher co-payments and contributions from
participants. Plaintiffs claim that, if their suit is successful, the
plans’ drug costs will decrease, and that the plans might then
reduce contributions or co-payments. But nothing would force
ALCOA or K-Mart to do this, nor would any one-time award
to the plans for past overpayments inure to the benefit of par-
ticipants. ALCOA and K-Mart would be free to reduce their
contributions or cease funding the plans altogether until any
such funds were exhausted. There is no redressability, and
thus no standing, where (as is the case here) any prospective
benefits depend on an independent actor who retains “broad
and legitimate discretion the courts cannot presume either to
control or to predict.” ASARCO, Inc. v. Kadish, 490 U.S. 605,
615 (1989) (opinion of Kennedy, J.); see also Fernandez v.
Brock, 840 F.2d 622, 627 (9th Cir. 1988).
Other circuits that have considered this issue have reached
the same conclusion. See Cent. States Se. & Sw. Areas Health
& Welfare Fund v. Merck-Medco Managed Care, 433 F.3d
181, 201 (2d Cir. 2005); Horvath v. Keystone Health Plan E.,
333 F.3d 450, 455 (3d Cir. 2003); Harley v. Minnesota Min-
ing & Mfg., 284 F.3d 901, 906 (8th Cir. 2002).
[5] We therefore turn to plaintiffs’ argument that they have
standing to bring this lawsuit as representatives of the plan.
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Plaintiffs rely heavily on Vermont Agency of Natural
Resources v. United States ex rel. Stevens, 529 U.S. 765
(2000), which upheld qui tam actions against an Article III
standing challenge. Relators in qui tam actions are congres-
sionally authorized to sue for redress of injuries suffered by
the United States. Qui tam plaintiffs retain a percentage of the
recovery; the rest goes to the United States. The issue in Ver-
mont Agency was whether the fact that qui tam plaintiffs have
suffered “no . . . invasion” of any “legally protected right”
precludes them from having Article III standing. Id. at 772-
73.
[6] The Court concluded that the False Claims Act (FCA)
“can reasonably be regarded as effecting a partial assignment
of the Government’s damages claim” to the relator, and that
an “adequate basis for the relator’s suit [could be found] in
the doctrine that the assignee of a claim has standing to assert
the injury in fact suffered by the assignor.” Id. at 773. The
Court noted “the long tradition of qui tam actions in England
and the American Colonies,” and that it has “routinely” enter-
tained suits by assignees. Id. at 773-74.
[7] We find the qui tam analogy inapt. Whereas qui tam
actions have existed for centuries, there is no similar tradition
of unharmed ERISA beneficiaries bringing suit on behalf of
their plans.2 More importantly, the FCA assigns relators a
concrete stake in qui tam cases by giving them a piece of the
action. Id. at 772. ERISA gives plan beneficiaries nothing;
any monetary recovery goes to the plans—as would the bene-
fits of any injunctive relief.3
2Traditionally, trust law, on which ERISA is based, does not allow ben-
eficiaries to bring suit on behalf of the trust. See Restatement (Second) of
Trusts § 214 cmt. b. (“A particular beneficiary cannot maintain a suit for
a breach of trust which does not involve any violation of duty to him.”).
3Plaintiffs point to language in Vermont Agency that they claim supports
their position: “It would perhaps suffice to say that the relator here is sim-
ply the statutorily designated agent of the United States.” 529 U.S. at 772
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Plaintiffs argue, more generally, that “representative dam-
ages litigation is common—from class actions under Fed. R.
Civ. P. 23(b)(3) to suits by trustees representing hundreds of
creditors in bankruptcy to parens patriae actions by state gov-
ernment to litigation by and against executors of decedents’
estates.” In re Oil Spill by the Amoco Cadiz, 954 F.2d 1279,
1319 (7th Cir. 1992), quoted with approval in United Food &
Commercial Workers Union Local No. 751 v. Brown Group,
Inc., 517 U.S. 544, 557 (1996). None of these examples is
particularly relevant to our case, because in each the plaintiff
has a direct stake in the outcome of the litigation. A party can
only serve as class representative if he has a personal claim
(emphasis added). According to plaintiffs, they, too, have been designated
by statute as the agents of their respective plans, and have standing, just
like qui tam relators. But, plaintiffs’ truncated quotation omits an impor-
tant qualifier: “in whose name (as the statute provides) the suit is brought
—and that the relator’s bounty is simply the fee he receives out of the
United States’ recovery for filing and/or prosecuting a successful action on
behalf of the Government.” Id. (emphases omitted). As the omitted portion
of the sentence makes clear, the Supreme Court started with the assump-
tion that a qui tam relator has an interest in the outcome of the lawsuit
because he stands to gain a part of any recovery. The Court thus had no
cause to consider the situation where a party is authorized to bring suit on
behalf of another party, but is given no stake in the outcome.
The passage, read in context, is even more problematic. In the immedi-
ately succeeding sentence, the Court notes that “the statute gives the rela-
tor himself an interest in the lawsuit, and not merely the right to retain a
fee out of the recovery.” Id. (emphasis omitted). “There is no doubt, of
course,” the Court further noted, “that as to this portion of the recovery—
the bounty he will receive if the suit is successful—a qui tam relator has
a ‘concrete private interest in the outcome of [the] suit.’ ” Id. (quoting
Lujan, 504 U.S. at 573) (alteration in original). The balance of the opinion
deals with the difficult question of whether Congress may give a third
party a stake in a lawsuit seeking to redress the invasion of somebody
else’s rights. The Court concludes (as we note in text) that it does, on the
theory that a part of the claim is assigned to the relator. Because the opin-
ion’s rationale hinges on the existence of such an assignment, it cannot
apply to plaintiffs here, who have been assigned no right to any portion
of the recovery.
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that is representative of the claims of other class members;
while he also litigates the case on behalf of the class, he
always shares in any recovery, on a par with other class mem-
bers. Trustees and executors, likewise, have a stake in the liti-
gation because they are acting on behalf of the estate, which
owns the claims being litigated. Finally, governmental entities
have a concrete stake in the proper application of the laws of
their jurisdiction, giving them a sufficient basis for Article III
standing in parens patriae cases. Alfred L. Snapp & Son, Inc.
v. Puerto Rico ex rel. Barez, 458 U.S. 592, 607 (1982).4
[8] Nor can plaintiffs find comfort in the associational
standing cases, where the Supreme Court has held that associ-
ations or unions may bring suit to redress the rights of their
members, even though the suing entity itself suffered no
injury. See, e.g., United Food & Commercial Workers, 517
U.S. at 558. These cases turn on the fiction that an individual
member authorizes the group to sue on his behalf. As the
Court discussed it in NAACP v. Alabama ex rel. Patterson,
357 U.S. 449 (1958), the association “and its members are in
a very practical sense identical.” Id. at 459, quoted in United
Food & Commercial Workers, 517 U.S. at 552. When the
association is “organized for a purpose germane to the subject
of its member’s claim . . . the association’s litigators will
themselves have a stake in the resolution of the dispute, and
4Like the district court, we find Amalgamated Clothing & Textile Work-
ers Union, AFL-CIO v. Murdock, 861 F.2d 1406 (9th Cir. 1988), and Wal-
ler v. Blue Cross of California, 32 F.3d 1337 (9th Cir. 1994), inapposite.
Both of these cases held that ERISA beneficiaries could seek a construc-
tive trust for ill-gotten gains fiduciaries allegedly received as a result of
breaching their duties. The question was not standing, but whether ERISA
authorized a remedy that would inure to the benefit of the plan participants
rather than the plan. We concluded that it did, because the plans had been
dissolved and any recovery would otherwise cycle back to the wrongdo-
ers. This removed any doubt as to standing because it gave the beneficia-
ries a concrete stake in the lawsuit. Plaintiffs here do not seek a
constructive trust for their own benefit, or any other remedy that would
entitle them to any amount recovered in this lawsuit. Nor could they,
because any recovery could not inure to the benefit of AdvancePCS.
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thus be in a position to serve as the defendant’s natural adver-
sary.” United Food & Commercial Workers, 517 U.S. at 555-
56.
[9] The theory underlying the associational standing cases
does not operate in reverse: By joining the association, the
member gives some indication that the association represents
his interests; but in accepting his membership, the association
gives no reciprocating signal that the member represents its
interests. Thus, a health plan might be able to sue on behalf
of its injured subscribers even if the plan suffered no injury
itself, but not vice versa. To hold otherwise would turn the
associational standing caselaw on its head—fatally undermin-
ing any limitation the requirement of concrete injury places
on constitutional standing.
[10] Finally, plaintiffs point to Massachusetts Mutual Life
Insurance v. Russell, 473 U.S. 134, 142 n.9 (1985), where the
Court noted that ERISA plan beneficiaries may bring suits on
behalf of the plan in a representative capacity. We have no
quarrel with this proposition—so long as plaintiffs otherwise
meet the requirements for Article III standing. ERISA plans
are organized in a variety of ways, and no doubt some would
give participants a stake in a lawsuit against fiduciaries. See,
e.g., Kayes, 51 F.3d at 1453 (plaintiffs alleged that the plan
fiduciary’s selection of a financially troubled insurance com-
pany was a breach of fiduciary duty that caused annuity pay-
ments owed to the plaintiffs to be reduced to seventy percent
of their previous level). In such cases, plan beneficiaries can
also sue on behalf of the plans, because they will have a con-
crete stake in the outcome of the proceedings. Such is not the
case here.
AFFIRMED.
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