Facts

Connecticut General Life Insurance Co. and CIGNA Health and Life Insurance Co. sued LA Peer Surgery Center LLC, Babak Larian, and Siamak Tabib under the Employment Income Retirement Security Act.

CIGNA is an insurance company and serves as claims administrator for certain employee health benefit plans governed by ERISA. La Peer was a surgical center located in Los Angeles that was co-founded by Tabib. Tabib was also a managing member of La Peer.

PLAINTIFFS' CONTENTIONS:
CIGNA contended that La Peer was an out-of-network provider, and had no contractual relationship with it. As a result, employees with CIGNA plans were generally responsible for larger deductible or co-pay for going to La Peer, which were intended to deter employees from using La Peer's more expensive out-of-network services as opposed to less expensive in-network services. However, CIGNA contended that La Peer circumvented this deterrence by reducing or entirely waiving the employee's co-payment obligation. Although the employees paid the same or less than they would have, had they received services at an in-network provider, La Peer billed CIGNA for the full cost of the treatments. CIGNA contended that La Peer's bills were considerably higher, and that it failed to disclose its practice of waiving employees' co-payment obligations.

CIGNA asserted claims for restitution, declaratory, injunctive, and other relief under ERISA. CIGNA also asserted fraud and violation of the California Unfair Competition Law claims.

DEFENDANTS' CONTENTIONS:
Defendants moved to dismiss the complaint for lack of standing. Defendants also contended that plaintiffs failed to exhaust administrative remedies as required under ERISA, and that it failed to comply with the Insurance Code. Moreover, defendants contended that CIGNA's fraud claim fails because it did not plead with the requisite particularity. Defendants also contended that CIGNA failed to show justifiable reliance, and that CIGNA's state law claims were preempted by ERISA. Alternatively, defendants moved to strike portions of the complaint.

Result

The court held that CIGNA had standing to sue defendants as a fiduciary under ERISA, but that the complaint failed to allege sufficient facts demonstrating CIGNA had been delegated discretionary authority under the relevant plans, and thereby granted defendants' motion to dismiss. Defendants' motion to strike was denied as moot. Plaintiffs were granted leave to amend its complaint.