Unreported / Non-Citable
Background
Plaintiff Dara Janosky filed a putative class-action lawsuit against her former employer, United Surgical Partners International, Inc. (USPI), challenging a provision in its employee health plan. Janosky alleged that a monthly “tobacco surcharge” levied against employees who use tobacco products violated the Employee Retirement Income Security Act of 1974 (ERISA). Her complaint asserted that the surcharge was a breach of fiduciary duty and a violation of ERISA’s anti-discrimination provisions.
Janosky, a resident of Kentucky, worked at a USPI facility in Ohio. USPI, a Delaware corporation with its principal place of business in Dallas, Texas, operates over 500 medical facilities nationwide, but none in Kentucky. The health plan at issue is administered from USPI’s headquarters in Texas.
Janosky filed the suit in the U.S. District Court for the Eastern District of Kentucky. USPI responded by filing a motion to transfer the case to the Northern District of Texas, arguing that Kentucky was an improper venue or, alternatively, that a transfer was warranted for the convenience of parties and witnesses.
The Court’s Holding
The court granted USPI’s motion and transferred the case to the U.S. District Court for the Northern District of Texas. The court first determined that venue was improper in Kentucky under ERISA’s specific venue statute, 29 U.S.C. § 1132(e)(2), which permits a suit where the plan is administered, where the breach occurred, or where the defendant resides or may be found. The court found none of these criteria were met. The plan was administered in Texas, not Kentucky. Crucially, the court held that for a claim of breach of fiduciary duty related to plan design and administration, the “breach” occurs where the relevant decisions were made (Texas), not where the plaintiff experienced the financial impact of those decisions (Kentucky).
Furthermore, the court concluded that USPI did not “reside” and could not be “found” in Kentucky for jurisdictional purposes. USPI lacked the necessary “minimum contacts” with Kentucky, as it has no offices or facilities in the state and does not purposefully conduct business there. The plaintiff’s residence in Kentucky and the presence of other potential class members were deemed insufficient to establish personal jurisdiction over the defendant. Because venue was improper, the court ordered the transfer under 28 U.S.C. § 1406(a).
The court also conducted a secondary analysis for transfer “for the convenience of parties and witnesses” under 28 U.S.C. § 1404(a). It found that even if venue had been proper in Kentucky, the balance of factors—including the location of witnesses (plan administrators), relevant documents, and the “locus of operative facts” (all centered in Texas)—strongly favored transferring the case to the Northern District of Texas.
Key Takeaways
- In ERISA cases alleging a breach of fiduciary duty related to a plan’s creation or administration, the breach is considered to have occurred where the key decisions were made, not where the plan participant feels the effect of those decisions.
- A national corporation cannot be sued in any state where its employees or potential class members happen to live. The company must have sufficient “minimum contacts” with the forum state itself for a court to have personal jurisdiction.
- When ruling on a motion to transfer venue, courts will give significant weight to the location of the “locus of operative facts,” which in a case challenging plan administration is typically the company’s headquarters where such decisions are made.
Why It Matters
This decision provides important clarification on the venue rules for a growing category of ERISA class actions that challenge the legality of plan terms rather than seeking denied benefits. The ruling distinguishes between a claim for benefits due (where a breach may occur where benefits are received) and a claim of fiduciary breach in plan design (where the breach occurs where the fiduciaries acted). This distinction can be critical in determining where a lawsuit must be filed.
For employers, this ruling reinforces that challenges to nationwide benefit plans will likely be litigated in the forum where the plan is administered, preventing them from having to defend similar lawsuits in multiple districts across the country. For plaintiffs’ attorneys, it serves as a caution that they must establish a strong jurisdictional link to their chosen forum, as the plaintiff’s own residence is not enough to secure venue against a corporate defendant headquartered elsewhere.