In Knudsen v. MetLife Grp., Inc., No. 23-2420, __F.4th__, 2024 WL 4282967 (3d Cir. Sept. 25, 2024), Plaintiffs are former employees of MetLife Group, Inc. and participants in the MetLife Options & Choices Plan (the “Plan”). In a putative class action seeking to represent all participants and beneficiaries of the Plan since January 24, 2017 (excluding fiduciaries), they assert that MetLife misappropriated the Plan’s funding in violation of ERISA, specifically, that MetLife violated ERISA by diverting $65 million in drug rebates from the Plan to itself from 2016 to 2021. Plaintiffs allege that because of MetLife’s illegal conduct, Plaintiffs and the putative class members paid higher insurance premiums. The district court found that Plaintiffs lack Article III standing and dismissed the case. The Third Circuit affirmed and held that: (1) the district court’s dismissal order was final and appealable, even though the complaint was dismissed without prejudice, and (2) Plaintiff’s “speculative” allegations that their out-of-pocket costs increased because MetLife kept the drug rebates did not allege concrete financial harm for standing purposes.

Plaintiffs participated in the Plan for medical and prescription drug coverage and paid a fixed percentage of contributions for spousal and dependent coverage, plus residual prescription drug costs that were not fully covered by the Plan. As recounted by the court, “the Plan hired Express Scripts as its exclusive pharmacy benefit manager (“PBM”) and paid Express Scripts between $3.2 million and $6.3 million in annual compensation.” Express Scripts negotiated volume discounts and rebates with drug manufacturers. Plan documents state that these rebates are not considered in calculating any co-payments or Coinsurance under the Plan. During the relevant time, MetLife directed all of the rebates to itself. Plaintiffs’ theory is that they paid more for their health insurance because MetLife illegally kept $65 million in rebates instead of using those rebates to reduce Plaintiffs’ out-of-pocket expenses. The district court determined that Supreme Court’s decision in Thole v. U.S. Bank N.A., and the Third Circuit’s decision in Perelman v. Perelman categorically bar an ERISA plaintiff’s assertion of injury based on increased out-of-pocket costs and therefore Plaintiffs lacked standing. The Third Circuit disagreed with the district court’s broad reading of those precedents but still concluded that Plaintiffs have not established injury-in-fact.

The court agreed with Plaintiffs that Thole and Perelman do not require dismissal under Article III whenever a participant in a self-funded healthcare plan brings an ERISA suit alleging that mismanagement of plan assets increased their out-of-pocket expenses. To hold otherwise would mean that “MetLife could charge Plan participants thousands of dollars more in premiums than is allowed under Plan documents, resulting in potential ERISA violations, and Plan participants would have no judicial recourse to seek return of their overpayments.” However, Plaintiffs’ Complaint falls short of alleging concrete financial harm. Plaintiffs are required to establish that they have or will pay more in premiums, or other out-of-pocket costs, as a result of MetLife not applying the $65 million in rebates to the Plan. Here, “Plaintiffs do not allege which out-of-pocket costs increased, in what years, or by how much. Any increase in costs was determined by MetLife, but it is incumbent upon Plaintiffs to allege concrete facts establishing that MetLife’s challenged conduct caused increased costs.” The court explained that Plaintiffs must show that they have an individual right to the withheld rebate monies, such that MetLife’s purportedly unlawful retention of the monies harmed Plaintiffs. Because Plaintiffs failed to allege financial harm that is actual or imminent, they lack Article III standing.

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