Central States Southeast v. Merck-Medco
| Decision Date | 08 December 2005 |
| Docket Number | Docket No. 04-3300-CV(L).,Docket No. 04-3464-CV(CON).,Docket No. 04-3545-CV(CON).,Docket No. 04-3871-CV(CON). |
| Citation | 433 F.3d 181 |
| Parties | CENTRAL STATES SOUTHEAST AND SOUTHWEST AREAS HEALTH AND WELFARE FUND, Sweetheart Cup Company, Inc., and Iron Workers Tri-State Welfare Fund, Movants-Appellants, Linda J. Cahn, Esq., Movant-Appellant, Group Hospitalization and Medical Services, Doing Business as CareFirst Blue Cross Blue Shield, Movant-Appellant, v. MERCK-MEDCO MANAGED CARE, L.L.C. a/k/a Medco Health Solutions, Inc., Defendant-Counter-Claimant-Appellee, Frank Steve McMillan, David J. Gibson, Adam Miles, Monica Keim, on Behalf of Northwest Airlines Prescription Plan and all other Similarly Situated Plans, Pamela Stolz, on Behalf of Northwest Airlines Prescription Plan and all other Similarly Situated Plans, Rosemarie DeLong, Carl J. Goodman, Trustees of the United Food & Commercial Workers, Gary Pietrzak, on Behalf of the Minnesota Teamsters Health and Welfare Plan, and Peabody Energy Corporation, Consolidated Plaintiffs, Betty Jo Jones, Intervenor Plaintiff, Genia Gruer, on Behalf of Herself and all others Similarly Situated, Walter J. Green, on Behalf of Himself and all others Similarly Situated, Mildred Bellow, on Behalf of Herself and all others Similarly Situated, Elizabeth O'Hare, on Behalf of Herself and all others Similarly Situated, Employers Health and Welfare Plan and Trust and Margaret J. Weener, Plaintiffs-Appellees, Marissa Janazzo, as Fiduciary for the County Line Buick Nissan Employee Welfare Benefit Plan, on Behalf of Herself as a Fiduciary and all other Similarly Situated Fiduciaries of Employee Welfare Benefit Plans, Plaintiffs-Counter-Defendants-Appellees, Harry J. Blumenthal, Jr. and Alan Horwitz, as Fiduciaries for the Blumenthal Print Works, Inc. Welfare Benefit Plan, on Behalf of Themselves as Fiduciaries and all other Similarly Situated Welfare Benefit Plans, Plaintiffs. |
| Court | U.S. Court of Appeals — Second Circuit |
Kenneth P. Ross, Robert F. Coleman & Associates, Chicago, IL (Robert F. Coleman, Sean B. Crotty, Robert F. Coleman & Associates, Chicago, IL; Eugene I. Pavalon, Pavalon, Gifford, Laatsch & Merino, Chicago, IL), for Movants-Appellants Central States Southeast and Southwest Areas Health and Welfare Fund, Sweetheart Cup Company, Inc., and Iron Workers Tri-State Welfare Fund.
W. Scott Simmer, Robins, Kaplan, Miller & Ciresi LLP, Washington, D.C. (Robert A. Scher, Foley & Lardner L.L.P., New York, NY; Christopher P. Sullivan, Robins, Kaplan, Miller & Ciresi LLP, Washington, D.C.), for Movants-Appellants Group Hospitalization and Medical Services d/b/a CareFirst Blue Cross Blue Shield.
Linda J. Cahn, Law Office of Linda J. Cahn, Esq., Morristown, NJ, Movant-Appellant.
Arthur N. Abbey, Abbey Gardy, LLP, New York, N.Y. (Karin E. Fisch, Abbey Gardy, LLP, New York, NY), for Plaintiffs-Appellees Elizabeth O'Hare, Genia Gruer, Estate of Mildred Bellow, Walter J. Green, and Marissa Janazzo.
Philippe Z. Selendy, Boies, Schiller & Flexner, LLP, New York, N.Y. (David Boies, Edward Normand, Boies, Schiller & Flexner, LLP, Armonk, NY), for Plaintiffs-Appellees Elizabeth O'Hare, Genia Gruer, Estate of Mildred Bellow, Walter J. Green, and Marissa Janazzo.
Before: MINER and POOLER, Circuit Judges, and BLOCK, Judge.*
This appeal involves challenges to the District Court's approval of an amended settlement agreement ("Settlement Agreement") arising out of the commencement of class action suits brought against a pharmaceutical benefits manager ("PBM"), pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001, et seq. The Settlement Agreement would affect more than 815,000 employee health benefit plans, which provide or provided prescription benefit coverage to approximately fifty-one million Americans. Movant-appellant Group Hospitalization and Medical Services, doing business as CareFirst Blue Cross Blue Shield ("CareFirst"), appeals from a Judgment of the United States District Court for the Southern District of New York (Brieant, J.), entered June 30, 2004, incorporating an Order, entered March 25, 2004, of that same court, denying CareFirst's motion to intervene in the class action litigation, the District Court having determined that CareFirst is not a member of the class and therefore lacks standing and authority to object to the settlement agreement on its own behalf or to opt out of the Settlement Agreement. Movants-appellants, CareFirst, Central States Southeast and Southwest Areas Health and Welfare Fund ("Central States"), Sweetheart Cup Company, Inc. ("Sweetheart"), Iron Workers Tri-State Welfare Fund ("Iron Workers"), and Linda J. Cahn, Esq. ("Cahn")1 (collectively, the "Movants-Appellants"), all appeal from the same Judgment of the District Court, entered June 30, 2004, incorporating orders (i) certifying the instant action as a class action, pursuant to Fed.R.Civ.P. 23(a) and (b)(3); (ii) approving the amended Settlement Agreement, dated July 31, 2003; (iii) awarding legal fees and disbursements; and (iv) severing cases in which the ERISA plans opted out of the settlement.
On this appeal, Movants-Appellants raise the following issues: (i) whether individual ERISA plan participants and beneficiaries who suffered neither economic nor medical injuries as a result of the PBM's actions had standing under Article III of the United States Constitution to assert claims that the PBM violated its fiduciary obligations to the ERISA plans to which they belonged; and (ii) whether a named ERISA plan trustee had Article III standing to assert the same. Assuming either of the preceding questions is answered in the affirmative, Movants-Appellants present the following additional issues: (i) whether the adverse interests of the self-funded plans and insured or capitated plans created a conflict of interest requiring the court to create subclasses before approving the Settlement Agreement;2 (ii) whether the District Court abused its discretion in certifying the class and approving the Settlement Agreement; (iii) whether the District Court abused its discretion in denying a motion to intervene made by an entity that (a) acted as an insurer for certain plans and (b) acted as a third-party administrator for other plans; and (iv) whether the District Court abused its discretion in setting the amount of the attorney's fee for the attorney of an ERISA plan trustee who opted out of the class.
Serious questions have been raised as to whether four of the class action representative plaintiffs — plan participants and beneficiaries who apparently suffered neither economic nor medical injuries resulting from the PBM's alleged wrongdoings — have Article III standing to assert, on behalf of their Plans, claims that the PBM violated its fiduciary obligations under ERISA and, thus, whether they had the authority to enter into the Settlement Agreement with the PBM on behalf of the class. There is also a serious question as to whether one of the representative plaintiffs, a plan trustee and fiduciary who allegedly had a contract with the PBM, or with an insurer who in turn had coverage with the PBM, is able to demonstrate the requisite injury-in-fact to support Article III standing. The failure of the District Court to resolve these questions compels us to vacate the Judgment of the District Court and to remand for a decision on the jurisdictional issue of Article III standing.
On December 12, 1997, a complaint was filed in the United States District Court for the Southern District of New York against the PBM defendant-counter-claimant-appellee Merck-Medco Managed Care, L.L.C., Merck & Co., Inc., and Medco Health Solutions ("Medco").3 Gruer v. Merck-Medco Managed Care, L.L.C., Civil Action No. 9167(CLB) (Dec. 12, 1997). The Complaint asserted breaches of Medco's alleged fiduciary duties to pharmaceutical benefit plans ("Plans") that it contracted with, in violation of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq. Between 1997 and 2002, five more putative class action cases were filed against Merck and Co., Inc. (Medco's parent company at the time) in the Southern District of New York. All these cases were consolidated into the present action. In 2001, the Judicial Panel on Multidistrict Litigation accepted jurisdiction of these and other cases and consolidated them in the Southern District.4 Each action was brought as a putative class action and each arose out of Medco's alleged breach of fiduciary duties owed to employee benefit plans under ERISA. Each class action was brought on behalf of all fiduciaries, participants, and beneficiaries of all employee welfare benefit Plans with prescription benefit coverage that (i) had contracts with Medco or any subsidiary of Merck; (ii) received prescription benefit services from Medco during the class period; and (iii) used a certain Medco formulary on an "open" formulary basis.5
The named plaintiffs in four of the six class action cases, Genia Gruer, Walter Green, Mildred Bellow, and Elizabeth O'Hare (collectively, the "Individual Plaintiffs"), were individual Plan beneficiaries suing under ERISA to obtain derivative relief for each of their own Plans and their members and all other Plans in the country that received Medco prescription benefit coverage. The Individual Plaintiffs sought to represent a putative class of all Plans that contracted directly with Medco, and all Plans that had contracted with insurers that had in turn contracted with Medco — i.e., more than 815,000 Plans.
A fifth named plaintiff, Marissa Janazzo ("Janazzo") was a Plan trustee purporting to sue on behalf of her Plan and all similarly situated Plan trustees whose Plans received prescription benefit coverage from Medco. Janazzo and the four Individual Plaintiffs are collectively...
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