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The Depot, Inc. v. Caring For Montanans, Inc.

United States District Court, D. Montana, Missoula Division

June 23, 2017

THE DEPOT, INC., a Montana Corporation, UNION CLUB BAR, INC., a Montana Corporation, and TRAIL HEAD, INC., a Montana Corporation, on behalf of themselves and all those similarly situated, Plaintiffs,
v.
CARING FOR MONTANANS, INC., F/K/A BLUE CROSS AND BLUE SHIELD OF MONTANA, INC, HEALTH CARE SERVICE CORP, and JOHN DOES I-X, Defendants.

          ORDER

          Dana L. Christensen, United States District Chief Judge.

         Before the Court is the renewed joint motion to dismiss of Defendants Caring for Montanans, Inc. ("CFM") and Health Care Service Corporation ("HCSC"). On February 14, 2017, this Court granted Defendants' first motion to dismiss, granting Plaintiffs leave to amend their complaint. Plaintiffs filed their First Amended Complaint ("FAC") on March 8, 2017. Defendants now argue that Plaintiffs have failed to remedy the deficiencies identified in this Court's earlier order and that all claims should be dismissed with prejudice. The Court agrees.

         BACKGROUND

         "On a motion to dismiss, material allegations of the complaint are taken as admitted, and the complaint is to be liberally construed in favor of the plaintiff." Kennedy v. H&MLanding, Inc., 529 F.2d 987, 989 (9th Cir. 1976).

         This Court's Order of February 14, 2017 recounts the general history leading up to the initiation of this putative class action on June 13, 2016. Following that Order, Plaintiffs filed the FAC. In addition to the allegations included within the original complaint, the FAC alleges that the relationship between Defendants and Plaintiffs was distinguishable from the average insured/insurer relationship because Defendants were able to modify the terms of the insurance arrangement during the calendar year. Plaintiffs, all of which are small businesses, further claim that they are uncommonly dependant on Defendants' services due to their lack of sophistication in selecting and administering employee benefits.

         Aside from the modified factual allegations, the FAC also presents new legal theories. Plaintiffs allege two new claims under Montana law, claims for fraudulent inducement and constructive fraud. They have reframed their claim for negligent misrepresentation, asking the Court to consider only the conduct predating the creation of the ERISA plan.

         LEGAL STANDARD

         Rule 12(b)(6) motions test the legal sufficiency of a pleading. Fed.R.Civ.P. 12(b)(6). Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility when the court can draw a "reasonable inference" from the facts alleged that the defendant is liable for the misconduct alleged. Id.

         ANALYSIS

         The briefings on Defendants' renewed motion to dismiss are largely duplicative of those filed on the first motion to dismiss. The parties have not presented legal argument suggesting that the Court erred in its Order granting Defendants' first motion to dismiss. Thus, the Court addresses only whether Plaintiffs' amendments to the complaint alter the outcome, referring generally to its earlier Order for the relevant legal principles.

         I. Count I: Breach of Fiduciary Duty under ERISA

         The most significant differences between the original complaint and the FAC are designed to support Plaintiffs' argument that Defendants are fiduciaries under ERISA. Plaintiffs have alleged additional facts, all of which are intended to show that the relationship between Plaintiffs and Defendants was "extraordinary" -beyond the scope of the normal insurer/insured relationship. Much of Plaintiffs' brief is targeted to this point. However, Plaintiffs' argument that this particular insurer/insured relationship differs from others misconstrues Defendants' arguments and this Court's earlier order. Even if the parties did not have equal bargaining power, the relationship was ordinary in the sense that Defendants sold insurance, and Plaintiffs purchased that insurance. Plaintiffs have not alleged that Defendants advised them in any way regarding insurance products, only that Plaintiffs depended on Defendants to consider their best interests. While the Court is sympathetic to Plaintiffs, particularly considering that they are small businesses dependent primarily on an unskilled workforce, it does not alter the Court's reasoning. Plaintiffs' expectations of Defendants-which may, indeed, include that Defendants would act as a fiduciary should-cannot be used to support their claim that ERISA considers Defendants to be fiduciaries.

         While it may be true that Plaintiffs were somewhat vulnerable in negotiating their insurance contracts with Defendants, it does not follow that Defendants were fiduciaries with respect to the relevant conduct-assessing and collecting premium moneys. The FAC does not change the reasoning set forth in this Court's earlier Order regarding Defendants' alleged exercise of discretion over plan management or administration.

         First, Defendants had no discretionary authority or control over plan management or administration, even if Plaintiffs mistakenly believed that they did. The phrases "plan management" and "administration" do not refer to an insurer's selection of insurance products but rather to the plan manager or administrator's conferral of benefits and dealings with beneficiaries. See, e.g., Varity Corp. v. Howe,516 U.S. 489, 502-03 (1996). In the present case, it is Plaintiffs, not Defendants, who were fiduciaries under the administration and management theory. Plaintiffs' dependence on Defendants' insurance expertise does not ...


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