By: HUB’s EB Compliance Team

Back in 2024, the Lewandowski v. Johnson & Johnson (J&J) and Navarro v. Wells Fargo & Company (Wells Fargo) fiduciary duties lawsuits grabbed the attention of those working with health and welfare benefit plans. They also underscored the critical importance of fiduciary responsibilities for health and welfare benefit plan sponsors. The cases against J&J and Wells Fargo have been dismissed twice, yet they continue to work their way through the courts.

Recent developments in two other cases, Stern v. JPMorgan Chase & Co. (JPMorgan) and Barbich v. Northwestern University (Northwestern), highlight the continued importance of fiduciary obligations for plan sponsors. These cases are also notable as motions to dismiss filed by the defendants were denied by the relevant courts.

JPMorgan summary

JPMorgan is similar to both J&J and Wells Fargo as the case revolves around the pharmacy benefit manager (PBM) selected by the plan. Among other things, the complaint alleges that JPMorgan allegedly failed to conduct a competitive RFP process for PBM services, failed to negotiate acquisition-cost-based or NADAC-based pricing instead of average wholesale price (AWP), and failed to negotiate full rebate pass-through. Together, these allegedly resulted in higher costs for prescription drugs under the plan.

Northwestern summary

Unlike the other cases, which focus on prescription drugs and PBMs, this case focuses specifically on the plan designs offered by the plan to eligible employees. Specifically, the plaintiffs focus on the three tiers of coverage offered under the Northwestern plan dubbed “premier,” “select” and “value,” which represent high, middle and low options.

The central allegation in the complaint is that the “premier” level plan “financially dominated” the “value” level plan. This theory is based on a 2017 scientific article in The Quarterly Journal of Economics, titled “Choose to Lose: Health Plan Choices from a Menu with Dominated Option.”

Per the complaint, “A health insurance option is financially dominated when there is another option that results in lower total out-of-pocket expenses to participants, inclusive of premiums and regardless of the amount of medical care received.” Effectively, when accounting for premiums and out-of-pocket expenses, financial outcomes under the “value” plan are better than under the “premier” plan. By creating such a situation, the plan fiduciaries allegedly breached their duties owed to plan participants.

JPMorgan motion to dismiss

In ruling on JPMorgan’s motion to dismiss, the court granted portions of the motion, dismissing certain claims, while also denying other portions, preserving those claims. Specifically, the court dismissed the claims focused on the duty of prudence and duty of loyalty.

The court rejected the motion to dismiss the prohibited transaction claim. This claim, which will now proceed, focused on the total compensation paid by the plan to the PBM. Specifically, the complaint alleged that between the administrative fees, spread pricing and rebates, the total compensation paid to the PBM was not reasonable as required by ERISA, and thus amounted to a prohibited transaction.

Perhaps most importantly, the court denied the motion to dismiss for lack of standing. This is important because both J&J and Wells Fargo were dismissed due to lack of standing. Standing is effectively a party’s right to file a lawsuit and often hinges on whether they can show that they have been harmed by the alleged action or inaction of the other party. In denying the motion, the court found that plaintiffs established standing through the allegations that they personally paid higher out-of-pocket amounts for prescription drugs because those costs were derived from the already inflated prices.

Northwestern motion to dismiss

Northwestern moved to dismiss on several grounds: that plaintiffs received all benefits they were entitled to under the plan documents, that they failed to allege harm to the plan as a whole, and — most critically — that structuring and pricing the preferred provider organization (PPO) options were settlor functions outside ERISA's fiduciary framework. Northwestern also argued that because plaintiffs were not charged more than what the plan documents authorized, and no plan assets were mismanaged, there was no cognizable ERISA injury.

The court denied the motion across all claims. On the settlor/fiduciary distinction, the court declined to resolve the question at the pleading stage, finding it sufficient that plaintiffs alleged Northwestern acted as a fiduciary by selecting the specific plan options and exercising a duty to monitor those selections.

This contrasts significantly with the JPMorgan ruling, where the court drew a firm settlor/fiduciary line to dismiss the prudence claims outright. In Northwestern, that factual question remains open for discovery and summary judgment.

Conclusion — Reminders for Plan Sponsors

While recognizing that J&J, Wells Fargo and now JPMorgan and Northwestern are still working their way through the courts, with outcomes far from certain, employers can still use these cases as reminders for managing their plans. Here are a few proactive action items employers can take with fiduciary obligations in mind:

If you have any questions, please contact your HUB advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect, and Hub International does not have an obligation to update this information. You should consult an attorney, accountant or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.