Bickley v. Caremark Rx, Inc.

• Decision Date: 27 June 2006
• Docket Number: No. 05-10973.,05-10973.
• Citation: 461 F.3d 1325
• Parties: Roland H. BICKLEY, on behalf of Georgia Pacific Corporation Life Health and Accident Plan and all other similarly situated Plans, Plaintiff-Appellant, v. CAREMARK RX, INC., Caremark, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1325

461 F.3d 1325

Roland H. BICKLEY, on behalf of Georgia Pacific Corporation Life Health and Accident Plan and all other similarly situated Plans, Plaintiff-Appellant, v. CAREMARK RX, INC., Caremark, Inc., Defendants-Appellees.

No. 05-10973.

United States Court of Appeals, Eleventh Circuit.

June 27, 2006.

David A. McKay, Herman, Mathis, Casey, Kitchens & Gerel, LLP, Atlanta, GA, John A. Day, Rebecca C. Blair, Branham & Day, P.C., Brentwood, TN, for Bickley.

Anthony C. Harlow, W. Michael Atchison, Starnes & Atchison, LLP, Birmingham, AL, Frank E. Pasquesi, Robert H. Griffith, Foley & Lardner, LLP, Chicago, IL, for Defendants-Appellees.

Mary Williams, Elizabeth Hopkins (Office of Sol.), U.S. Dept. of Labor, Washington, DC, for Amicus Curiae.

Appeal from the United States District Court for the Northern District of Alabama.

Before ANDERSON, DUBINA and HILL, Circuit Judges.

DUBINA, Circuit Judge:

Appellant Roland H. Bickley ("Bickley") brought a class action suit, on behalf of the Georgia Pacific Corporation Life Health and Accident Plan ("the Plan") and all other similarly situated plans, pursuant to section 502(a)(2) and (a)(3) of the Employment Retirement Income Security Act of 1974 ("ERISA") (codified at 29 U.S.C. § 1132(a)(2) and (a)(3)), against Caremark, Rx, Inc.¹ and, its subsidiary, Caremark, Inc. ("Caremark"). Bickley alleged that Caremark, as Pharmacy Benefits Manager ("PBM") of the Plan, is a fiduciary within the meaning of ERISA and breached various fiduciary duties owed to the Plan in violation of section 409 of ERISA (codified at 29 U.S.C. § 1109(a)).² The district court dismissed the action without prejudice, reasoning that Bickley failed to exhaust his administrative remedies. Bickley v. Caremark RX, Inc., 361 F.Supp.2d 1317 (N.D.Ala.2004). After careful review of the record, reading the parties' briefs, and hearing oral argument, we affirm.

I. BACKGROUND

This case is one of many class actions that have been filed across the country against Caremark for alleged breaches of its fiduciary duties to self-funded employee benefit plans under ERISA. Bickley's complaint³ alleges that he is a participant in and beneficiary of the Plan, which is offered by his employer Georgia-Pacific. The Plan is an employee benefit plan governed by ERISA and is self-funded by Georgia-Pacific. Georgia-Pacific funds the Plan by placing its money in a trust or similar account for its employees' prescription drug benefits.

According to the complaint, employers which adopt self-funded plans typically hire a third-party administrator to administer the plan and to pay prescription drug claims for the employers using the plan's money. In this case, Bickley alleges that Georgia-Pacific's prescription drug benefits are administered by Caremark as a PBM. Georgia-Pacific's relationship with Caremark is governed by a contract ("PBM agreement"). In its capacity as PBM, Bickley alleges that Caremark manages both the purchase and flow of prescription drugs on behalf of the Plan. Specifically, Bickley alleges that Caremark buys drugs from manufacturers, sells drugs to retail pharmacies, operates a service where Plan members can fill their prescriptions by mail, and negotiates prescription drug prices with manufacturers and retail pharmacies.

Bickley filed this class action suit against Caremark on behalf of the Plan pursuant to section 502(a)(2) and (a)(3) of ERISA.⁴ Because of its management of the prescription drug benefits, Bickley alleges that Caremark is a fiduciary to the Plan. Bickley also alleges that Caremark breached its fiduciary duties, in violation of ERISA section 409,⁵ by enriching itself "through undisclosed discounts, rebates coupons and other forms of compensation from drug companies and pharmacies." Bickley further alleges that Caremark creates undisclosed pricing "spreads" between the discounted price it pays to retail pharmacies and drug manufacturers and the discounted price it contracts to be reimbursed by the Plan. Bickley alleges that Caremark receives undisclosed discounts, rebates, and soft dollars from drug manufacturers in exchange for favoring that drug manufacturer's drug over another in its standardized formulary and drug switching programs. Bickley asserts that Caremark failed to disclose these practices and retention of these profits, and that Caremark evades the government's best pricing statute, the Omnibus Budget and Reconciliation Act, by conspiring with drug manufacturers. Bickley sought declaratory and injunctive relief, attorneys' fees and costs, and an accounting for all Plan assets and profits Caremark retained for its own benefits.

Caremark filed a motion to dismiss based on lack of standing, failure to state a claim, and failure to exhaust administrative remedies. The district court alternatively held that if exhaustion was not required, Bickley's complaint was due to be dismissed with prejudice because he lacked statutory standing to sue on behalf of the Plan under ERISA section 502(a)(2) or (a)(3) and because Caremark did not constitute an ERISA fiduciary. The district court then issued an order dismissing Bickley's motion for class certification as moot. Bickley then perfected this appeal.

II. STANDARD OF REVIEW

We review a motion to dismiss under the same standards as the trial court. Stephens v. Dep't of Health and Human Servs., 901 F.2d 1571, 1573 (11th Cir.1990). "On a motion to dismiss, the facts stated in the appellant's complaint and all reasonable inferences therefrom are taken as true." Id.

We review the district court's decision to excuse a plaintiff's failure to exhaust administrative remedies for clear abuse of discretion. See Curry v. Contract Fabricators, Inc., 891 F.2d 842, 846 (11th Cir.1990), abrogated on other grounds by Murphy v. Reliance Standard Life Ins. Co., 247 F.3d 1313, 1314 (11th Cir.2001).

III. DISCUSSION

"The law is clear in this circuit that plaintiffs in ERISA actions must exhaust available administrative remedies before suing in federal court." Counts v. Amer. Gen'l Life & Acc. Ins. Co., 111 F.3d 105, 108 (11th Cir.1997). This exhaustion requirement applies equally to claims for benefits and claims for violation of ERISA itself. Perrino v. S. Bell Tel. & Tel. Co., 209 F.3d 1309, 1316 n. 6 (11th Cir.2000).⁶ "However, a district court has the sound discretion `to excuse the exhaustion requirement when resort to administrative remedies would be futile or the remedy inadequate,' . . . or where a claimant is denied `meaningful access' to the administrative review scheme in place." Id. at 1315 (internal citations omitted). "The decision of a district court to apply or not apply the exhaustion of administrative remedies requirement for ERISA claims is a highly discretionary decision which we review only for a clear abuse of discretion." Id.

In this case, Bickley did not exhaust the administrative remedy outlined in the Plan and the district court did not excuse the exhaustion requirement. On appeal, Bickley argues that the district court should have excused his failure to exhaust the administrative remedies because an administrative remedy was not available for his claims of breach of fiduciary duty. He argues that the administrative scheme set out in the Plan was limited solely to a claim for benefits, and that the Plan explicitly provided that a participant who alleges violations of fiduciary duty may file suit in federal court.⁷ Alternatively, Bickley argues that if administrative procedures were available for his claims, such procedures were futile and could not provide adequate relief. We disagree.

First, the language in the Plan upon which Bickley relies does not excuse him from exhausting his administrative remedies before filing suit. In the Plan Details, under the heading of "Statement of ERISA Rights," it states that if "plan fiduciaries misuse the plan's money . . . [a plan participant] may seek assistance from the U.S. Department of Labor, or . . . may file suit in federal court." (R. Vol. 4, Tab 62, Ex. A at 83.) This Plan language, however, merely recites plan participants' general rights under ERISA and does not excuse a participant from satisfying the exhaustion requirement. See Springer v. Wal-Mart Assocs. Group Health Plan, 908 F.2d 897, 900 (11th Cir.1990) (finding that despite plan's general language giving a participant the right to sue in federal court, the exhaustion requirement must be satisfied first because "the right to seek federal review matures only after that requirement has been appropriately satisfied or otherwise excused").

Second, we are not persuaded by Bickley's argument that no administrative procedure for his statutory claims was available because the administrative scheme in the Plan only related to denial of benefit claims. Although the Plan's administrative scheme related to "claims,"⁸ the Plan also provided that "[i]f you have questions about your plan, you should contact the Plan Administrator [Georgia-Pacific]" and Georgia-Pacific "has the exclusive responsibility and complete discretionary authority to control the operation and administration of the Plan, with all power necessary to . . . resolve all interpretive, equitable and other questions that shall arise in the operation and administration of this Plan." (R. Vol. 4, Tab 62, Ex. A at 81 & 83.) Thus, as the district court properly held, "[t]aking all the provisions as a part of an integrated Agreement and viewing the same provisions in the light of ERISA's integrated statutory scheme, . . . Bickley and other Plan members do have an administrative remedy." Bickley, 361 F.Supp.2d at 1336. According to the Plan, the Plan Administrator, Georgia-Pacific, or the Plan Benefits Claim Processor, can receive and review claims such as Bickley's and respond. In fact, not only can Georgia-Pacific respond to such claims, it has the duty to consider the pursuit of breach of fiduciary duty claims on behalf of the Plan. See ERISA § 409.

We have...