Sixth Circuit Revives Breach of Fiduciary Duty Claims Against United HealthCare for Seeking Reimbursement of Medical Expenses Not Required by ERISA Plan

In Patterson v. United HealthCare Ins. Co., No. 22-3167, __F.4th__, 2023 WL 4882436 (6th Cir. Aug. 1, 2023), Plaintiff-Appellant Eric Patterson appealed the district court’s dismissal of his ERISA breach of fiduciary duty claims against United HealthCare Insurance Company and related entities due to lack of standing and for failure to state a claim. After being injured in an auto accident and settling the matter with the other driver, Patterson received a recovery from which United, through its agent, Optum, claimed reimbursement for medical expenses it paid on Patterson’s behalf as the insurer of Swagelok Company’s (Patterson’s employer) medical plan. Patterson agreed to pay the plan $25,000. Later, through litigation related to his wife, also a plan beneficiary, Patterson obtained a copy of the plan document which contained no provision for reimbursement rights. The plan’s attorneys previously represented to Patterson that there was no plan document and so they relied on reimbursement language in the summary plan description. Based on the plan document, the state court in his wife’s lawsuit entered judgment in her favor. Then Patterson sued United, Optum, Swagelok, and the plan’s attorneys for breaching various ERISA duties owed to him and for return of his $25,000. Patterson also alleged that there was a larger scheme to “swindle beneficiaries out of their third-party recoveries” and sought injunctive and monetary relief on the plan’s and other beneficiaries’ behalf. The district court dismissed the complaint and the Sixth Circuit reversed in part and affirmed in part. The court concluded that Patterson has cognizable claims for breach of fiduciary duty and engagement in prohibited transactions against United and Optum and that ERISA Section 1132(a)(3) offers the only viable route for recovery against defendants. The court further concluded that Patterson’s relief is limited to return of his $25,000 settlement payment. The court revived and remanded the breach of fiduciary duty and prohibited transactions claims and affirmed dismissal of the other claims.

The court made several notable findings. First, it resolved the threshold question of standing partially in Patterson’s favor. Patterson’s purported loss of $25,000 is a concrete injury. Defendants’ alleged behavior caused him to lose those funds, and an award of $25,000 would redress his injury. But, Patterson has not alleged a plausible future harm entitling him to prospective injunctive relief even though he remains a beneficiary of the plan. Patterson also alleged injuries on behalf of the plan beneficiaries, but these allegations are deficient to establish injury and it is not clear he would have standing to raise claims on behalf of the plan or other beneficiaries. The court rejected Defendants’ argument that the Rooker-Feldman doctrine and res judicata deprives the court of jurisdiction.

On the merits of Patterson’s claims, the court found that Patterson adequately alleged claims for breach of fiduciary duty and for engagement in prohibited transactions against United and Optum (not Swagelok and the plan attorneys). The court distinguished these claims from those involving an equitable lien by agreement. The court declined to decide the issue of whether Optum was acting in a fiduciary capacity when it entered into the settlement agreement with Patterson. This issue is for the district court to decide on remand. The court also explained that Patterson’s request for return of his $25,000 is equitable. Both disgorgement and equitable restitution may be pursued through ERISA Section 502(a)(3). The court found that Patterson adequately pled any tracing requirement tied to his disgorgement claim when he alleged that “Optum retained the payment for its own benefit, and did not deposit those monies into the plan.” Patterson alleged that United controlled Optum which is sufficient to keep United as a defendant past the motion to dismiss stage. Patterson’s payment of $25,000 is a specifically identified fund in Optum’s possession and is susceptible to recovery even if it is commingled with other funds. If Optum spent the $25,000 on nontraceable items or transferred it to the plan, then Patterson cannot invoke disgorgement and equitable restitution.

The court affirmed dismissal of Patterson’s ERISA Section 502(a)(2) claims because he did not allege harm to the plan. Patterson also did not allege facts sufficient to state a claim against Swagelok and the plan attorneys for engaging in a large-scale scheme. “[H]is experience alone does not give rise to a plausible inference that those defendants played a role in any conspiracy.” Lastly, the court found no error in the district court’s denial of leave to amend the complaint on behalf of a putative class. The proposed amendment did not add facts to suggest that other insureds were injured.