ERISA Fiduciary Breach Claims Dropped in Drug Lawsuit

On Jan. 24, 2025, a U.S. District Court for the District of New Jersey dismissed two claims in a class-action lawsuit filed against Johnson & Johnson (J&J), which alleged that the company breached its fiduciary duties under ERISA by mismanaging its prescription drug benefits plan and costing the plan and its participants millions of dollars due to higher out-of-pocket costs for prescription drugs and higher premiums, among other things.

In dismissing the two fiduciary breach claims, the court ruled that the plaintiff (an employee of J&J) lacked standing to bring a lawsuit. The court found the plaintiff’s first claim, that she paid more in premiums due to the defendants’ purported breach of fiduciary duty, did not sufficiently show evidence of an injury. Further, the outcome of the lawsuit would not affect the plaintiff’s future benefit payments, and the plaintiff failed to show that the defendant’s specific conduct resulted in higher premiums.

Regarding the plaintiff’s second claim that she paid higher prices for drugs under the plans and thus paid more out of pocket, the court acknowledged that she suffered an injury that was traceable to the defendants’ alleged ERISA violations. Notwithstanding, the plaintiff lacked standing based on this injury because a favorable decision would not be able to compensate her for the money she already paid, given that she had reached her prescription drug cap for each year asserted in the complaint.

While the J&J ruling can be viewed favorably for employers in their roles as plan sponsors, the outcome of fiduciary litigation that was filed after the J&J case remains to be seen. Factors such as plan design and the specific allegations regarding how the defendants breached their fiduciary duties could result in different outcomes.

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