The Source Blog

On March 9, 2026, Jennifer L. Rochon, United States District Judge for the Southern District of New York, partially granted and partially denied a motion to dismiss a case against JPMorgan Chase.  The original suit, filed by JPMorgan employees, claimed that their employer mismanaged health benefit plan funds, allowing excessive payments to CVS Caremark, resulting in higher healthcare premiums, higher drug costs, and lower wages, thereby constituting a violation of the Employee Retirement Income Security Act of 1974 (ERISA).  JP Morgan had moved to dismiss the case, but the judge's order will allow some of the claims to proceed.

Original Cause of Action

On March 13, 2025, the JPMorgan Chase Health Care and Insurance Program for Active Employees and its component Medical Plan filed a class action suit against JPMorgan Chase & Co. for "breaches of fiduciary duties and prohibited transactions under the Employee Retirement Income Security Act…."

Specifically, the suit accuses JPMorgan of overpaying its Pharmacy Benefits Manager (PBM) for drugs that are available at much lower prices.  The suit claims JPMorgan failed to consider better alternatives to the standard PBM model, allowing its PBM (CVS Caremark) to raise prices of 366 generic drugs by an average of 211%, meaning that some employees were paying more for medications than uninsured patients.  One drug, which the suit claims normally costs $16.20 for a 30-unit prescription, was inflated more than 38,000% to $6,229.23.

Plaintiffs claimed that the defendants breached their ERISA fiduciary duties of loyalty and prudence, and that the defendants also violated ERISA by engaging in prohibited transactions.

The suit claims JPMorgan breached its fiduciary duty by allowing the PBM to manage its business in a way that enriched CVS Caremark at the expense of plan members.  In addition to the grossly inflated drug prices, the suit claims JPMorgan failed to properly oversee CVS Caremark, allowing excessive charges to go unchecked, and that JPMorgan’s business relationship with CVS (a major banking client) may have influenced its decision-making.

Allowing excessive, unreasonable compensation to the PBM could constitute a prohibited transaction under ERISA, which prohibits transactions that unreasonably benefit service providers at the expense of employees.

Judge Rules on Motion to Dismiss

On June 3, 2025, JPMorgan filed a motion to dismiss the case for lack of subject-matter jurisdiction, arguing that the plaintiffs lack standing to file suit because they have not suffered a concrete injury, and for failure to state an ERISA claim.  JPMorgan made three points to support the subject-matter jurisdiction argument: first, that since Plaintiffs received all the benefits promised under the Plan, there was no cognizable injury.  Second, the theory that employees in the Plan paid higher out-of-pocket costs was too speculative, as they did not provide price comparisons to demonstrate actual overpayment.  Third, the claim that participants paid higher premiums as a result of PBM overpayments was also speculative, as it did not show a direct relationship between plan costs and participant premiums.

In the March 2026 order, the Judge agreed with JPMorgan that many of the claims were too speculative, and added that JPMorgan did not breach fiduciary duties of loyalty and prudence, noting that decisions about relationships with third parties do not become fiduciary acts simply because the defendants also sponsor an ERISA plan.  The court stated that the defense is challenging the choices made regarding the architecture of the Plan’s prescription-drug benefit component, rather than specific acts of plan management or administration, and that “[n]one of those challenged choices are fiduciary in nature.”

The Judge sided with the plaintiffs on some aspects, stating that claims of having to overpay for prescription drugs and premiums due to mismanagement of health and benefits programs, resulting in overpaying for a product, would constitute a cognizable injury as a prohibited transaction under ERISA.

Part of a Larger Pattern

Similar lawsuits have recently been filed, including a 2024 suit against Johnson & Johnson claiming that the company violated federal law by allowing its PBM to overcharge plan participants, and a similar 2024 suit against Wells Fargo.  Notably, the employees in this case are represented by the same law firm that litigated the Johnson & Johnson and Wells Fargo suits.  (Both of these cases were ultimately dismissed due to lack of standing by the plaintiffs).  The previous two cases targeted the Express Scripts PBM, this one involves CVS Caremark.  Since the pattern is no longer limited to Express Scripts, it suggests that other PBMs (such as OptumRx) may be targets of future suits.

This most recent suit highlights the increasing scrutiny funders of health plans are placing on contracted parties that oversee aspects of the Plan, including PBMs, and targets plan sponsors for failing to oversee their financial arrangements properly.  In general, employers that self-fund their benefit plans have an ERISA fiduciary duty to ensure assets are used for the benefit of participants.  Overseeing the actions of PBMs can be difficult if the PBM is concealing actions (like spread pricing – where the PBM charges health plans more for prescription drugs than what they paid the pharmacy, keeping the difference as profit) through affiliates and undisclosed contracts.  In the JPMorgan case, the plaintiffs argue that the prices paid by the Plan were so overinflated that JPMorgan should have known it was overpaying, regardless of how the PBM was operating.

Broader Implications

Although the judge dismissed the claims that JPMorgan breached their ERISA fiduciary duties of loyalty and prudence, the claim that JPMorgan engaged in prohibited transactions will continue, however this does not guarantee the plaintiffs success with the case overall.  In ruling to allow the ERISA prohibited transactions claim to continue, Judge Rochon noted that “[d]efendants may have ample defenses to this claim” and although the standard set by the Supreme Court to get past a motion to dismiss an ERISA prohibited transaction claim is “barebones” and could result in cases too easily getting past the motion-to-dismiss stage, Judge Rochon stated she would stick to that standard and allow the case to proceed.

Obviously, if the plaintiffs in the JPMorgan case succeed, it would mean lower healthcare costs for them, but if the larger trend of holding plan administrators responsible for financial mismanagement results in more attention being given to how healthcare funds are being spent, this could result in reductions in healthcare costs for employees in general.

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