FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

THE DEPOT, INC.; UNION CLUB

BAR, INC.; TRAIL HEAD, INC.,

Plaintiffs-Appellants,

v.

CARING FOR MONTANANS, INC.,

FKA Blue Cross Blue Shield of

Montana, Inc.; HEALTH CARE

SERVICES CORPORATION,

Defendants-Appellees.

No. 17-35597

D.C. No.

9:16-cv-00074-DLC

OPINION

Appeal from the United States District Court

for the District of Montana

Dana L. Christensen, Chief Judge, Presiding

Argued and Submitted December 7, 2018

Seattle, Washington

Filed February 6, 2019

Before: William A. Fletcher and Jay S. Bybee, Circuit

Judges, and Larry A. Burns,* District Judge.

Opinion by Judge Bybee

* The Honorable Larry A. Burns, United States District Judge for the

Southern District of California, sitting by designation.
2 THE DEPOT V. CARING FOR MONTANANS

SUMMARY**

Employee Retirement Income Security Act

The panel affirmed in part and reversed in part the district

court’s dismissal of an action brought under ERISA and

Montana state law against health insurance companies and

remanded for further proceedings.

The companies marketed health insurance plans, branded

“Chamber Choices,” to members of the Montana Chamber of

Commerce. Three small employers, Chamber members that

provided their employees with healthcare coverage under

Chamber Choices plans, alleged misrepresentations in the

marketing of the plans.

Affirming the district court’s dismissal of the ERISA

claims, the panel held that plaintiffs failed to state a claim for

breach of fiduciary duty under 29 U.S.C. § 1132(a)(2) in

defendants’ alleged charging of excessive premiums. The

panel held that, in secretly charging excessive premiums,

defendants did not act as fiduciaries of the plans because they

did not exercise discretion over plan management or control

over plan assets. Plaintiffs also failed to state a claim for

equitable relief under § 1132(a)(3) for prohibited transactions

in imposing unreasonable charges for kickbacks and

unrequested benefits because plaintiffs’ requested relief of

restitution or disgorgement was not equitable in nature.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
THE DEPOT V. CARING FOR MONTANANS 3

The panel reversed the dismissal of plaintiffs’ state-law

claims, based on defendants’ alleged misrepresentations that

the premiums charged reflected the actual medical premium

amount. The panel held that ERISA did not expressly

preempt the state-law claims because the claims did not have

a reference to or an impermissible connection with an ERISA

plan, and therefore did not “relate to” an ERISA plan. The

state-law claims also were not conflict-preempted byERISA. 

The panel nonetheless agreed with the district court that

plaintiffs’ allegations did not state with particularity the

circumstances of the alleged fraud, as required by Federal

Rule of Civil Procedure 9(b). The panel therefore reversed

the dismissal with prejudice of the state-law claims so that

plaintiffs could amend their complaint to state the fraud

allegations with greater particularity. The panel noted,

however, that the district court was also free on remand to

decline to exercise supplemental jurisdiction over the statelaw claims.

COUNSEL

Kenneth J. Halpern (argued), Rachana A. Pathak, Dana

Berkowitz, and Peter K. Stris, Stris & Maher LLP, Los

Angeles, California; John Morrison, Morrison Sherwood

Wilson & Deola PLLP, Helena, Montana; for PlaintiffsAppellants.

Anthony F. Shelley (argued) and Theresa Gee, Miller &

Chevalier Chartered, Washington, D.C.; Michael David

McLean and Stefan T. Wall, Wall McLean & Gallagher,

PLLC, Helena, Montana; for Defendant-Appellee Caring for

Montanans, Inc.
4 THE DEPOT V. CARING FOR MONTANANS

Stanley T. Kaleczyc (argued), M. Christy S. McCann, and

Kimberly A. Beatty, Browning Kaleczyz Berry & Hoven

P.C., Helena, Montana, for Defendant-Appellee Health Care

Services Corporation.

OPINION

BYBEE, Circuit Judge:

Plaintiffs are three small employers in Montana who are

members of the Montana Chamber of Commerce. 

Defendants are health insurance companies that marketed

fully insured health insurance plans to the Chamber’s

members branded “Chamber Choices.” From 2006 until

2014, plaintiffs provided their employees with healthcare

coverage under Chamber Choices plans, and did so based on

defendants’ representations that the monthly premiumswould

reflect only the cost of providing benefits. But according to

plaintiffs, these representations were false—defendants

padded the premiums with hidden surcharges, which they

used to pay kickbacks to the Chamber and to buy

unauthorized insurance products.

Upon learning of these surcharges, plaintiffs filed suit

against defendants, asserting two claims under the Employee

Retirement Income Security Act of 1974 (“ERISA”),

29 U.S.C. § 1001 et seq., as well as several state-law claims

based on defendants’ misrepresentations. The district court

dismissed all of the claims, concluding that plaintiffs failed

to state actionable claims under ERISA while at the same

time concluding that plaintiffs’ state-law claims are

preempted by ERISA. We affirm the district court’s
THE DEPOT V. CARING FOR MONTANANS 5

dismissal of plaintiffs’ ERISA claims, reverse the dismissal

of plaintiffs’ state-law claims, and remand.

I. BACKGROUND

A. Factual Background

Plaintiffs are three small businesses operating in

Montana.1 The Depot, Inc. is a steakhouse; Union Club Bar,

Inc. is a bar; and Trail Head, Inc. is a sporting goods retailer. 

During the period relevant to this lawsuit, plaintiffs were

members of the Montana Chamber of Commerce. Blue Cross

Blue Shield of Montana (“BCBSMT”)—an insurance

company that is now known as Caring for Montanans, Inc.

(“CFM”)—marketed “fully-insured” group health insurance

plans to the Chamber’s employer-members known as

“Chamber Choices.” Health Care Service Corp. (“HCSC”)

purchased the health insurance business of BCBSMT in July

2013 and marketed the Chamber Choices plans thereafter.

From 2006 to 2014, plaintiffs enrolled in Chamber

Choices plans and paid monthly premiums to defendants in

exchange for health insurance coverage for their employees. 

Coverage for plaintiffs’ employees hinged on plaintiffs

paying the required monthly premiums. According to

plaintiffs, “[i]n the course of marketing Chamber Choices,”

defendants represented that the premiums would be equal to

the “actual medical premium”—i.e., “the cost of providing

insurance benefits to covered individuals plus administrative

1 Because this case comes to us on review of a motion to dismiss, we

accept as true the factual allegations in the operative complaint. See

Askins v. U.S. Dep’t of Homeland Sec., 899 F.3d 1035, 1038 (9th Cir.

2018).
6 THE DEPOT V. CARING FOR MONTANANS

costs” and “[not] for any purpose other than to pay for the

purchased health insurance coverage.” Plaintiffs accordingly

relied on that representation in choosing to participate.

All parties agree that each Chamber Choices plan

constituted an “employee welfare benefit plan” subject to

ERISA. 29 U.S.C. § 1002(1); see Fossen v. Blue Cross &

Blue Shield of Mont., Inc., 660 F.3d 1102, 1109–10 (9th Cir.

2011). According to the Member Guide for one of the

Chamber Choices plans

2—which provides a summary of

benefits available to covered employees for the relevant

year—the employers (i.e., plaintiffs), not BCBSMT, were the

named “plan administrator[s]” and fiduciaries under ERISA. 

Defendants, however, performed most of the claim

management and administration duties. Plaintiffs’ role was

limited to deducting monthly premiums from their

employees’ wages to send to defendants for coverage and

notifying defendants if an employee lost eligibility for

coverage. The Member Guide also purported to allow

defendants to make changes to the terms of the policy in the

following modification provision:

[BCBSMT] maymake administrative changes

or changes in dues, terms or Benefits in the

Group Plan by giving written notice to the

Group and/or purchasing pool member at least

60 days in advance of the effective date of the

changes. Dues may not be increased more

2 Plaintiffs incorporated the Member Guide by reference in their

complaint. See Santomenno v. Transamerica Life Ins. Co., 883 F.3d 833,

836 n.2 (9th Cir. 2018). According to plaintiffs, the Member Guide is

representative of the Chamber Choices plans.
THE DEPOT V. CARING FOR MONTANANS 7

than once during a 12-month period, except as

allowed by Montana law.

The requirement that enrollees receive 60 days’ advance

notice of modifications is consistent with federal and state

laws governing group health plans, including plans not

subject to ERISA. See 29 C.F.R. § 2590.715-2715(b)

(requiring 60 days’ advance notice of “any material

modification . . . in any of the terms of the plan or coverage”);

Mont. Code Ann. § 33-22-107(3)(a) (requiring 60 days’

advance notice of “a change in rates or a change in terms or

benefits”).

Plaintiffs allege that, while they subscribed to Chamber

Choices plans, defendants unlawfully padded the premiums

with two surchargeswithout plaintiffs’ knowledge or consent. 

First, from 2006 to 2014, defendants secretly embedded a

surcharge into the premiums, which they used to pay

kickbacks to the Chamber. These kickbacks were designed

to persuade the Chamber to continue to market defendants’

plans to its members. Second, from 2008 to 2014, defendants

secretly embedded an additional surcharge into the premiums

that defendants used to purchase “additional insurance

products that [plaintiffs] did not request or authorize.” 

Plaintiffs further allege that defendants took efforts to conceal

these surcharges. Beginning in 2009, defendants began

“channeling the kickbacks to the Chamber through an

insurance agent and channeling a share of the [surcharges]

into a ‘rate stabilization’ account.” And beginning in 2012,

defendants began “making cryptic notations that itemized

certain charges on the bills” in an effort to “reduce [their]

own legal risk.”
8 THE DEPOT V. CARING FOR MONTANANS

In February 2014, the Montana Commissioner of

Securities and Insurance fined BCBSMT $250,000 for illegal

insurance practices under Montana law, including billing in

excess of the actual medical premium and paying kickbacks

to the Chamber. See Mont. Code Ann. §§ 33-18-208, 33-18-

212. After the Commissioner’s findings were publicly

released in March 2014, a group of Chamber Choices

participants filed a class action suit against defendants in state

court alleging claims of breach of fiduciary duty, breach of

contract, unfair and deceptive trade practices, and unjust

enrichment. Mark Ibsen, Inc. v. Caring for Montanans, Inc.,

371 P.3d 446, 448 (Mont. 2016). After defendants

unsuccessfully tried to remove the case to federal court, the

state trial court dismissed the lawsuit, finding that the

plaintiffs’ claims were based on statutory violations and that

the relevant state statute did not provide a private right of

action. Id. at 448–49. The Montana Supreme Court affirmed. 

Id. at 455.

B. Procedural History

Plaintiffs filed this lawsuit in federal court in June 2016. 

In their original complaint, plaintiffs raised two ERISA

claims: a breach of fiduciary duty claim under 29 U.S.C.

§ 1132(a)(2), and a prohibited interested-party transaction

claim under 29 U.S.C. § 1132(a)(3). Plaintiffs also raised

state-law claims for breach of contract, breach of fiduciary

duty, breach of the implied covenant of good faith and fair

dealing, negligent misrepresentation, unjust enrichment, and

unfair trade practices under the Montana Unfair Trade

Practices and Consumer Protection Act, Mont. Code Ann.

§ 30-14-101 et seq.
THE DEPOT V. CARING FOR MONTANANS 9

The district court dismissed the original complaint

without prejudice. The court concluded that defendants did

not satisfy ERISA’s definition of a “fiduciary” for purposes

of the breach of fiduciary duty claim, and that plaintiffs

were not seeking “appropriate equitable relief” as required

for the prohibited transaction claim. The court also

concluded that plaintiffs’ state-law claims were preempted

by ERISA because they constituted “alternative enforcement

mechanisms” to the prohibited transaction claim.

Plaintiffs filed their amended complaint in March 2017. 

As before, plaintiffs assert two claims under ERISA: a breach

of fiduciary duty claim under 29 U.S.C. § 1132(a)(2), and a

prohibited transaction claim under 29 U.S.C. § 1132(a)(3). 

Plaintiffs also assert state-law claims for fraudulent

inducement, constructive fraud, negligent misrepresentation,

unjust enrichment, and unfair trade practices. The district

court dismissed all of the claims, this time with prejudice. 

The court concluded that plaintiffs failed to remedy the

defects in their ERISA claims and that plaintiffs’ state-law

claims (including the new fraud claims) were still preempted

by ERISA. The court also concluded that plaintiffs’

allegations of fraud do not satisfy the heightened pleading

requirements under Federal Rule of Civil Procedure 9(b). 

Plaintiffs timely appealed, and we have jurisdiction pursuant

to 28 U.S.C. § 1291.

II. STANDARD OF REVIEW

On appeal, plaintiffs challenge the district court’s

dismissal of their ERISA claims as well as the dismissal of

their state-law claims. We review de novo a district court’s

order granting a motion to dismiss for failure to state a claim

under Federal Rule of Civil Procedure 12(b)(6). Santomenno
10 THE DEPOT V. CARING FOR MONTANANS

v. Transamerica Life Ins. Co., 883 F.3d 833, 836 (9th Cir.

2018). To survive a motion to dismiss, the complaint “must

contain sufficient factual matter, accepted as true, to ‘state a

claim to relief that is plausible on its face.’” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). We will thus “affirm

a dismissal for failure to state a claim where there is no

cognizable legal theory or an absence of sufficient facts

alleged to support a cognizable legal theory.” Interpipe

Contracting, Inc. v. Becerra, 898 F.3d 879, 886 (9th Cir.

2018) (quoting L.A. Lakers, Inc. v. Fed. Ins. Co., 869 F.3d

795, 800 (9th Cir. 2017)). And although “we accept as true

all factual allegations,” we do not “accept as true allegations

that are conclusory.” In re NVIDIA Corp. Sec. Litig.,

768 F.3d 1046, 1051 (9th Cir. 2014). Nor do we consider

factual assertions made for the first time on appeal, as “our

review is limited to the contents of the complaint.” Allen v.

City of Beverly Hills, 911 F.2d 367, 372 (9th Cir. 1990); see

Amgen Inc. v. Harris, 136 S. Ct. 758, 760 (2016) (per

curiam).

We also review de novo a dismissal for failure to satisfy

Federal Rule of Civil Procedure 9(b), which requires a party

alleging fraud to “state with particularity the circumstances

constituting fraud.” WPP Luxembourg Gamma Three Sarl v.

Spot Runner, Inc., 655 F.3d 1039, 1047 (9th Cir. 2011)

(quoting Fed. R. Civ. P. 9(b)).

III. ERISA CLAIMS

We begin with plaintiffs’ claims under ERISA. 

“Congress enacted ERISA to ‘protect the interests of

participants in employee benefit plans and their beneficiaries’

by setting out substantive regulatory requirements for
THE DEPOT V. CARING FOR MONTANANS 11

employee benefit plans” and “an integrated system of

procedures for enforcement.” Aetna Health Inc. v. Davila,

542 U.S. 200, 208 (2004) (internal alterations omitted) (first

quoting 29 U.S.C. § 1001(b); then quoting Mass. Mut. Life

Ins. Co. v. Russell, 473 U.S. 134, 147 (1985)). Relevant here,

ERISA’s enforcement scheme provides a cause of action

against plan fiduciaries for breach of their fiduciary duties,

29 U.S.C. § 1132(a)(2), and a cause of action to remedy plan

or ERISA violations—including prohibited interested-party

transactions—with “appropriate equitable relief,” id.

§ 1132(a)(3). Plaintiffs bring claims against defendants under

both provisions. We address each in turn.

A. Breach of Fiduciary Duty Claim

Plaintiffs claim that, by collecting and concealing the

premium surcharges, defendants breached their fiduciary

duties—including a duty “to act ‘solely in the interest of the

participants and beneficiaries,’” Varity Corp. v. Howe,

516 U.S. 489, 506 (1996) (quoting 29 U.S.C. § 1104(a)(1))—

and are thus liable under 29 U.S.C. § 1132(a)(2).3 But to

breach a fiduciary duty, one must be a fiduciary. And here,

defendants were not acting as fiduciaries when taking the

action subject to plaintiffs’ complaint. We thus affirm the

district court’s dismissal of plaintiffs’ breach of fiduciary

duty claim.

3 Under § 1132(a)(2), a plan participant, beneficiary, or fiduciary may

bring “[a] civil action . . . for appropriate relief under [§ 1109].” 

Section 1109 imposes personal liability upon “[a]ny person who is a

fiduciary with respect to a plan who breaches any of the responsibilities,

obligations, or duties imposed upon fiduciaries by [ERISA].” 29 U.S.C.

§ 1109(a).
12 THE DEPOT V. CARING FOR MONTANANS

There are two types of fiduciaries under ERISA. First, a

party that is designated “in the plan instrument” as a fiduciary

is a “named fiduciary.” 29 U.S.C. § 1102(a)(2). Second,

ERISA provides the following definition of what is

sometimes referred to as a “functional” fiduciary:

[A] person is a fiduciary with respect to a plan

to the extent (i) he exercises any discretionary

authority or discretionary control respecting

management of such plan or exercises any

authorityor control respectingmanagement or

disposition of its assets, (ii) he renders

investment advice for a fee or other

compensation, direct or indirect, with respect

to any moneys or other property of such plan,

or has any authority or responsibility to do so,

or (iii) he has any discretionary authority or

discretionary responsibility in the

administration of such plan.

Id. § 1002(21)(A); Santomenno, 883 F.3d at 837. Because a

person4is a fiduciary under this provision only “to the extent”

the person engages in the listed conduct, a person may be a

fiduciarywith respect to some actions but not others. Pegram

v. Herdrich, 530 U.S. 211, 225–26 (2000) (quoting 29 U.S.C.

§ 1002(21)(A)); see Acosta v. Brain, 910 F.3d 502, 519 (9th

Cir. 2018) (“[W]e must distinguish between a fiduciary

‘acting in connection with its fiduciary responsibilities’ with

regard to the plan, as opposed to the same individual or entity

‘acting in its corporate capacity.’ Only the former triggers

fiduciary status; the latter does not.” (internal citation

4 ERISA’s definition of “person” includes “corporation[s]” and other

“association[s].” 29 U.S.C. § 1002(9).
THE DEPOT V. CARING FOR MONTANANS 13

omitted)). The central question is “whether that person was

acting as a fiduciary (that is, was performing a fiduciary

function) when taking the action subject to complaint.” 

Pegram, 530 U.S. at 226.

Plaintiffs claim that defendants were acting as fiduciaries

when charging excessive premiums based on the functions

described in subparagraph (i)—exercising discretion over

plan management and exercising authority over plan assets.5

These provisions are distinct and therefore must be analyzed

separately. See IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d

1415, 1421 (9th Cir. 1997).

1. Discretion over Plan Management

Plaintiffs first argue that, in secretly charging excessive

premiums, defendants “exercise[d] . . . discretionaryauthority

or discretionary control respecting [plan] management.” 

29 U.S.C. § 1002(21)(A)(i). We disagree. Insurance

companies do not normally exercise discretion over plan

management when they negotiate at arm’s length to set rates

or collect premiums. That is because these negotiations occur

before the agreement is executed, at which point the insurer

has no relationship to the plan and thus no discretion over its

management.

5 Plaintiffs do not argue that defendants acted as fiduciaries under

29 U.S.C. § 1002(21)(A)(iii), which provides that a person is a fiduciary

to the extent it “has any discretionary authority or discretionary

responsibility in the administration of [the] plan.” Insurers generally act

in a fiduciary capacity under this “plan administration” provision when

making a discretionary determination about whether a claimant is entitled

to benefits. See King v. Blue Cross & Blue Shield of Ill., 871 F.3d 730,

745–46 (9th Cir. 2017).
14 THE DEPOT V. CARING FOR MONTANANS

We addressed a similar issue in Santomenno, holding that

a service provider—i.e., a company that managed a selffunded ERISA plan as a third-party administrator—“is not an

ERISA fiduciary when negotiating its compensation with a

prospective customer.” 883 F.3d at 837. The service

provider in that case performed several functions for

retirement plans, including the selection of various potential

investments, and its compensation was set as a fixed

percentage of the assets managed. Id. at 835–36. We

explained that “[a] service provider is plainly not involved in

plan management when negotiating its prospective fees”; to

the contrary, “at that stage ‘discretionary control over plan

management lies with the trustee, who decides whether to

agree to the service provider’s terms.’” Id. at 838 (internal

alterations omitted) (quoting Santomenno ex rel. John

Hancock Tr. v. John Hancock Life Ins. Co. (U.S.A.), 768 F.3d

284, 293 (3d Cir. 2014) (“John Hancock”)). In other words,

“‘a service provider owes no fiduciary duty with respect to

the negotiation of its fee compensation’ because ‘nothing

prevent[s] the trustees from rejecting the provider’s product

and selecting another service provider; the choice [i]s

theirs.’” Id. (internal alterations omitted) (quoting John

Hancock, 768 F.3d at 295). And after the contract is

executed, the “service provider cannot be held liable for

merely accepting previously bargained-for fixed

compensation” because “the plan administrator act[s] as ‘a

fiduciary only for purposes of administering the plan, not for

purposes of negotiating or collecting its compensation.’” Id.

at 840 (citations omitted).

The reasoning in Santomenno applies equally to ratesetting by insurance companies. Premium rates, like fixed

compensation fees, are generally negotiated in “an arm’s

length bargain presumably governed by competition in the
THE DEPOT V. CARING FOR MONTANANS 15

marketplace,” Schulist v. Blue Cross of Iowa, 717 F.2d 1127,

1132 (7th Cir. 1983), which means that the insurance

company is “free to negotiate its [rates] with an eye to its

profits,” Srein v. Soft Drink Workers Union, Local 812, 93

F.3d 1088, 1096 (2d Cir. 1996). Because the potential

purchaser of the insurance policy remains free to “reject[ ] the

[insurer’s] product and select[ ] another,” the insurance

company “is plainly not involved in plan management when

negotiating” premium rates. Santomenno, 883 F.3d at 838

(quoting John Hancock, 768 F.3d at 295); see also Cotton v.

Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1278–79 (11th Cir.

2005) (“Simply urging the purchase of its products does not

make an insurance company an ERISA fiduciarywith respect

to those products.” (citation omitted)).

That reasoningforecloses plaintiffs’ claim here. Plaintiffs

concede that the terms of the insurance agreements in this

case—including the premium amounts—were negotiated at

arm’s length. The agreements were thus “‘presumably

governed by competition in the marketplace’ that specified

the premium rates.” Seaway Food Town, Inc. v. Med. Mut. of

Ohio, 347 F.3d 610, 618 (6th Cir. 2003) (quoting Schulist,

717 F.2d at 1132). And the alleged misconduct in this

case—misrepresenting that the monthly premiums reflected

only the actual medical premium—occurred when the

policies were being marketed. Indeed, plaintiffs allege that

defendants made these misrepresentations in an effort to

“induce [p]laintiffs to buy coverage through Chamber

Choices.” Although plaintiffs may not have known about the

surcharges when deciding to subscribe to Chamber Choices

plans, the premium amounts were fully disclosed, and

plaintiffs always remained free to walk away and select
16 THE DEPOT V. CARING FOR MONTANANS

another insurance company.

6 Defendants exercised no

discretionary control over the plan’s management at that

point.

Although plaintiffs agree that insurance companies do not

ordinarily act as fiduciaries when negotiating premium rates,

they claim that this is not an ordinary case. Rather, according

to plaintiffs, defendants possessed an ability to exercise

discretion over the plan by virtue of the modification

provision in the Member Guide:

[BCBSMT] maymake administrative changes

or changes in dues, terms or Benefits in the

Group Plan by giving written notice to the

Group and/or purchasing pool member at least

60 days in advance of the effective date of the

changes. Dues may not be increased more

than once during a 12-month period, except as

allowed by Montana law.

Plaintiffs argue that this provision granted defendants an

unfair “ability to unilaterally amend plan terms” upon “mere

notice to the beneficiaries” and therefore “subjected [them] to

ERISA fiduciary duties.”

Generally, a “company does not act in a fiduciary

capacity when deciding to amend . . . a welfare benefits

6 Plaintiffs contend that, because the surcharges were concealed, the

premiums were not “definitively calculable and nondiscretionary

compensation . . . clearly set forth in a contract with the fiduciaryemployer.” Santomenno, 883 F.3d at 841. But the premiums were fully

disclosed and negotiated; the fact that defendants did not disclose the

composition of the premiums (or how they were spending them) does not

mean that defendants exercised discretion in setting them.
THE DEPOT V. CARING FOR MONTANANS 17

plan.” Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73,

78 (1995) (citation omitted). Setting that aside, the mere

existence of a discretionary ability is insufficient to bestow

fiduciary status if that discretion was not “exercise[d].” 

29 U.S.C. § 1002(21)(A)(i). Even assuming plaintiffs’

contention that the modification provision granted defendants

the ability to unilaterally amend plan terms, plaintiffs do not

adequately allege that defendants ever exercised that

discretion, let alone “when taking the action subject to

complaint.” Pegram, 530 U.S. at 226. Indeed, plaintiffs

concede that defendants “initially imposed the surcharges in

an arms-length negotiation”—i.e., before the modification

provision was effective.7 Thus, even if defendants may have

become fiduciaries “at some point after entering into the

contracts, [they] plainly held no such status prior to the

execution of the contracts” when the premium amounts were

negotiated. Santomenno, 883 F.3d at 839 (internal alterations

omitted) (quoting F.H. Krear & Co. v. Nineteen Named Trs.,

810 F.2d 1250, 1259 (2d Cir. 1987)).

We made this point in Santomenno. There, the plaintiffs

argued that the service provider “was a fiduciary when

7 Plaintiffs point to an allegation in the complaint that defendants

“‘imposed and increased’the non-premiumsurcharges ‘without providing

the notice required by contract.’” That conclusory allegation does not

indicate that defendants exercised discretion under the modification

provision. Nor would such an allegation be plausible, because plaintiffs’

theory is that the modification provision granted defendants discretion to

increase premiums, not “non-premium surcharges.” And if, as plaintiffs

allege, they “had no way to know” that defendants were embedding

surcharges into the premium amounts, any alleged increases would have

had to occur before the premium amounts were agreed to. Otherwise, a

mid-year increase in surcharges would have led to a mid-year increase in

premiums, a fact that is not alleged in the complaint and that would have

been quite obvious to plaintiffs had it occurred.
18 THE DEPOT V. CARING FOR MONTANANS

selecting the investment options because it retaine[d]the right

to delete or substitute the funds the employer ha[d] selected

for the Plan.” Id. at 839 n.5. We disagreed, observing that

the plaintiffs failed to “allege that [the service provider] ever

exercised its discretion.” Id. We also noted that the service

provider could “only alter investment options upon six

months’ notice,” and that the contract “allow[ed] the

employer opportunity to terminate the contract if displeased

with any change.” Id. Similarly, we rejected the plaintiffs’

reliance on a contractual provision that allowed the service

provider “to change [its fees] upon advance written notice,”

explaining that the “plaintiffs have not alleged that [the

service provider] ever changed its fees; indeed, if it did, the

employer is free under the [contract] to find another

provider.” Id. at 839 n.4; see id. at 841 n.8 (similar). The

bottom line is that a party is a fiduciary only to the extent the

party actually exercises the alleged discretionary control or

authority over plan management.

Seeking to overcome this conclusion, plaintiffs argue that

defendants did exercise discretion after the contracts were

executed by virtue of their “decision to continue charging

inflated amounts, when [they] held complete and unilateral

authority to eliminate those overcharges.” This

argument—which condemns defendants for failing to

exercise discretion under the very provision that plaintiffs

denounce as unfair—is unpersuasive. In this context, a

failure to exercise discretion does not amount to an exercise

of discretion within the meaning of § 1002(21)(A)(i). See

Santomenno, 883 F.3d at 839 n.5. Once defendants agreed to

enter into a contract with plaintiffs, defendants may have

acquired fiduciary status with respect to some plan functions,

see, e.g., King v. Blue Cross & Blue Shield of Ill., 871 F.3d

730, 745–46 (9th Cir. 2017), but any fiduciary status
THE DEPOT V. CARING FOR MONTANANS 19

defendants may have acquired did not compel defendants to

renegotiate the premium rates they had just agreed to accept. 

Rather, defendants were “merely accepting previously

bargained-for” premiums, and the bargaining itself did not

give rise to fiduciary status. Santomenno, 883 F.3d at 840

(citation omitted).8 Thus, in allegedly charging and collecting

excessive premiums—which is “the action subject to

complaint,” Pegram, 530 U.S. at 226—defendants were not

exercising discretionary authority over plan management.

2. Control over Plan Assets

Plaintiffs separately argue that defendants acted as

fiduciaries because they “exercise[d] . . . authority or control

respecting management or disposition of [plan] assets.” 

29 U.S.C. § 1002(21)(A)(i). Plaintiffs contend that the

premiums they paid to defendants for insurance coverage

were “plan assets” and that defendants were subject to

fiduciary obligations when using them. But plaintiffs’

premise is flawed. Premiums paid to an insurance company

in return for coverage under a fully insured insurance policy

are not “plan assets.”

8 Defendants’ failure to exercise discretion also sets this case apart

from the cases cited by plaintiffs in which an insurer actually exercised

discretion that had been granted in the contract. See, e.g., Ed Miniat, Inc.

v. Globe Life Ins. Grp., Inc., 805 F.2d 732, 734, 737–38 (7th Cir. 1986)

(insurer “unilaterally and without justification announced . . . an

abandonment of existing policy holders, by reducing the rate ofreturn paid

on account . . . and increasing premium rates to the maximum allowed by

the policy”); Chi. Bd. Options Exch., Inc. v. Conn. Gen. Life Ins. Co.,

713 F.2d 254, 255, 259–60 (7th Cir. 1983) (insurer “exercis[ed]” its

discretion to make a “unilateral amendment [to] an annuity contract” from

which the plaintiffs could not withdraw). Here, the premiums charged

were based not on defendants’ discretion but instead on arm’s-length

negotiations.
20 THE DEPOT V. CARING FOR MONTANANS

ERISA defines “plan assets” to mean “plan assets as

defined by such regulations as the Secretary [of Labor] may

prescribe.” Id. § 1002(42). Although the Secretary has not

prescribed a comprehensive regulation defining “plan

assets,”

9

several circuits have followed the “consistent[ ]”

position of “[t]he Department of Labor . . . that ‘the assets of

a plan generally are to be identified on the basis of ordinary

notions of property rights under non-ERISA law.’” Gordon

v. CIGNA Corp., 890 F.3d 463, 472 (4th Cir. 2018) (citing

U.S. Dep’t of Labor, Advisory Op. No. 93-14A, 1993 WL

188473, at *4 (May 5, 1993)); accord Merrimon v. Unum Life

Ins. Co. of Am., 758 F.3d 46, 56 (1st Cir. 2014); Hi-Lex

Controls, Inc. v. Blue Cross Blue Shield of Mich., 751 F.3d

740, 745 (6th Cir. 2014); Tussey v. ABB, Inc., 746 F.3d 327,

339 (8th Cir. 2014); Edmonson v. Lincoln Nat. Life Ins. Co.,

725 F.3d 406, 427 (3d Cir. 2013); Faber v. Metro. Life Ins.

Co., 648 F.3d 98, 105–06 (2d Cir. 2011); In re Luna,

406 F.3d 1192, 1199 (10th Cir. 2005). We agree with this

weight of authority; absent applicable regulatory guidance,

plan “assets” under 29 U.S.C. § 1002(A)(21)(i) are to be

identified based on ordinary notions of property rights.10

9 A Department of Labor regulation defines “assets of the plan” to

“include amounts . . . that a participant or beneficiary pays to an employer,

or amounts that a participant has withheld from his wages by an employer,

for contribution . . . to the plan, as of the earliest date on which such

contributions . . . can reasonably be segregated from the employer’s

general assets.” 29 C.F.R. § 2510.3-102(a)(1). As explained below, this

regulation is inapplicable here because the “amounts” plaintiffs seek to

recover are not amounts that were “pa[id] to an employer” by plan

participants but instead amounts paid by an employer to an insurance

company.

10 Although we have adopted a “functional definition of what

constitutes an ‘asset of the plan’ for purposes of [29 U.S.C. § 1106],”

Kayes v. Pac. Lumber Co., 51 F.3d 1449, 1466–67 (9th Cir. 1995) (citing
THE DEPOT V. CARING FOR MONTANANS 21

Applying that principle here, we conclude that neither

plaintiffs nor their employees had a property interest in the

premium payments once they were paid to defendants. 

Plaintiffs paid the premiums to defendants in exchange for a

contractual right to receive a particular service—healthcare

coverage under a Chamber Choices plan. The premiums

were monthly fees that defendants collected as revenue for

providing that service. Upon paying the premiums, plaintiffs

had no “beneficial ownership interest” in them. Hi-Lex

Controls, 751 F.3d at 745 (quoting U.S. Dep’t of Labor,

Advisory Op. No. 92-24A, 1992 WL 337539, at *2 (Nov. 6,

1992)). Instead, defendants were simply indebted to plaintiffs

to provide the agreed-upon coverage. Cf. Grupo Mexicano de

Desarrollo, S.A. v. All. Bond Fund, Inc., 527 U.S. 308,

319–20 (1999) (“[A] general creditor . . . ha[s] no cognizable

interest, either at law or in equity, in the property of his

debtor, and therefore [may] not interfere with the debtor’s use

of that property.”).

Plaintiffs try to equate the premiums paid to defendants

with “participant contributions” made into a self-funded plan,

which are generally deemed to be plan assets. Acosta v. Pac.

Enters., 950 F.2d 611, 620 & n.7 (9th Cir. 1991); see

29 C.F.R. § 2510.3-102(a)(1); Advisory Op. No. 92-24A,

1992 WL 337539, at *2. But plaintiffs elide the distinction

between a self-funded plan and a fully insured plan. Under

a “self-funded” plan, the insurance company “acts only as a

third-party administrator; the employer is responsible for

paying claims [out of the employees’ contributions] and

bearing the financial risk.” N. Cypress Med. Ctr. Operating

Acosta v. Pac. Enters., 950 F.2d 611, 620 (9th Cir. 1991)), that definition

assumes fiduciary status and is thus not helpful in determining whether a

party is in fact a fiduciary under 29 U.S.C. § 1002(A)(21)(i).
22 THE DEPOT V. CARING FOR MONTANANS

Co., Ltd. v. Aetna Life Ins. Co., 898 F.3d 461, 468 (5th Cir.

2018); see Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936,

941–42 (2016). Premiums paid under a self-funded plan are

therefore contributions from employees earmarked and held

in trust by the employer for the employees’ later benefit. See

Gordon, 890 F.3d at 472; Hi-Lex Controls, 751 F.3d at 747. 

These employer-held contributions are therefore assets of the

plan. See 29 C.F.R. § 2510.3-102(a)(1) (defining “assets of

the plan” to include amounts “that a participant or beneficiary

pays to an employer . . . [or] that a participant has withheld

from his wages by an employer” (emphasis added)); Advisory

Op. No. 92-24A, 1992 WL 337539, at *2 (describing

“participant contributions” in the context of “plans whose

benefits are paid as needed solely from the general assets of

the employer maintaining the plan”).

This case, however, does not involve a self-funded plan. 

Instead, as plaintiffs allege, all of the plans sold by

defendants were “fully-insured health insurance policies.” 

Under a “fully insured” plan, the insurance company “acts as

a direct insurer; it guarantees a fixed monthly premium for

12 months and bears the financial risk of paying claims.” N.

Cypress Med. Ctr., 898 F.3d at 468. Premiums paid under a

fully insured plan are not held in trust; rather, they are “fixed

fee[s]” paid in exchange for the insurance company

“assum[ing] the financial risk of providing the benefits

promised.” Pegram, 530 U.S. at 218–19. And as explained

above, once defendants collected those fees, neither plaintiffs

nor their employees maintained any sort of property interest

in them. Accordingly, defendants did not exercise control
THE DEPOT V. CARING FOR MONTANANS 23

over plan assets when charging or spending the allegedly

excessive premiums.11

Because defendants were not exercising a fiduciary

function when taking “the action subject to complaint,”

Pegram, 530 U.S. at 226, we affirm the district court’s

dismissal of plaintiffs’ breach of fiduciary duty claim under

29 U.S.C. § 1132(a)(2).

B. Prohibited Transaction Claim

Next,we consider plaintiffs’ prohibited transaction claim,

for which they purport to seek “appropriate equitable relief”

under 29 U.S.C. § 1132(a)(3). We conclude that the relief

plaintiffs seek is not equitable and accordingly affirm the

district court’s dismissal of plaintiffs’ prohibited transaction

claim.

Under ERISA’s prohibited transaction provisions, “[a]

fiduciary with respect to a plan shall not cause the plan to

engage in a transaction” with “a party in interest” for the

“furnishing of . . . services” if “more than reasonable

compensation is paid therefor.” 29 U.S.C. §§ 1106(a)(1)(C),

11 In light of our holding, we express no opinion on the district court’s

conclusion that the premium payments were not plan assets pursuant to

ERISA’s “guaranteed benefit policy” provision, 29 U.S.C. § 1101(b)(2).
24 THE DEPOT V. CARING FOR MONTANANS

1108(b)(2).12 ERISA provides a cause of action for

remedying prohibited transactions:

A civil action may be brought . . . by a

participant, beneficiary, or fiduciary (A) to

enjoin any act or practice which violates any

provision of [ERISA Title I] or the terms of

the plan, or (B) to obtain other appropriate

equitable relief (i) to redress such violations

or (ii) to enforce any provisions of [ERISA

Title I] or the terms of the plan.

Id. § 1132(a)(3). Because § 1132(a)(3) “makes no mention

at all of which parties may be proper defendants,” a party in

interest—including a non-fiduciary third party—may be sued

under this provision for its participation in a prohibited

transaction. Harris Tr. & Sav. Bank v. Salomon Smith

Barney, Inc., 530 U.S. 238, 246, 249–51 (2000); see

Landwehr v. DuPree, 72 F.3d 726, 734 (9th Cir. 1995). And

even though the plan fiduciary is the one who “cause[d] the

plan to engage in [the prohibited] transaction,” 29 U.S.C.

§ 1106(a)(1), the “culpable fiduciary” may still bring suit

against “the arguably less culpable” party in interest because

“the purpose of the action is to recover money or other

12 The text of these sections creates the prohibited transaction as

follows: “Except as provided in section 1108 . . . [a] fiduciary with respect

to a plan shall not cause the plan to engage in a transaction, if he knows

or should know that such transaction constitutes a direct or indirect . . .

furnishing of . . . services . . . between the plan and a party in interest.” 

29 U.S.C. § 1106(a)(1)(C). “The prohibitions provided in section 1106 of

this title shall not apply to . . . [c]ontracting or making reasonable

arrangements with a party in interest for . . . services necessary for the

establishment or operation of the plan, if no more than reasonable

compensation is paid therefor.” Id. § 1108(b)(2).
THE DEPOT V. CARING FOR MONTANANS 25

property for the [plan beneficiaries],” Harris Tr., 530 U.S. at

252 (quoting Restatement (Second) of Trusts § 294 cmt. c, at

70 (1957)).13 Thus, a plan fiduciary may (1) seek an

injunction or “other appropriate equitable relief” (2) against

a “party in interest” (3) for participating in a transaction for

services for which “more than reasonable compensation is

paid.”

The parties and the district court all agree that the second

and third components are satisfied in this case. Each

defendant is a “party in interest”—which ERISA defines as

“a person providing services to [a] plan,” 29 U.S.C.

§ 1002(14)(B)—because they provide underwriting and

claim-adjudication services to the plans. And the alleged

conduct in this case—imposing unreasonable charges for

kickbacks and unrequested benefits—is arguablya prohibited

transaction for “services” between plan fiduciaries(plaintiffs)

and parties in interest (defendants) for which “more than

reasonable compensation is paid.” Id. §§ 1106(a)(1)(C),

1108(b)(2). Because an injunction is not at issue here, the

only dispute is whether plaintiffs are seeking “appropriate

equitable relief” under § 1132(a)(3).

13 In Harris Trust, the fiduciaries of a pension plan sued Salomon

SmithBarney (“Salomon”), a firmthat provided broker-dealer and trading

services to the plan. 530 U.S. at 242. While the plan was receiving these

services, the plan also purchased worthless investments from Salomon at

the direction of an investment manager that exercised “discretion over a

portion of the plan’s assets” and was therefore also a plan fiduciary. Id.

at 242–43. The remaining fiduciaries sued Salomon under § 1132(a)(3)

as a non-fiduciary party in interest, contending that the investment

manager, acting as a fiduciary, caused the plan to engage in a prohibited

transaction between the plan and a party in interest for the sale of property

in exchange for plan assets. Id. at 243 (citing 29 U.S.C. § 1106(a)(1)(A),

(D)).
26 THE DEPOT V. CARING FOR MONTANANS

In a series of decisions, the Supreme Court has explained

that the phrase “appropriate equitable relief” in § 1132(a)(3)

“is limited to those categories of relief that were typically

available in equity during the days of the divided bench

(meaning, the period before 1938 when courts of law and

equity were separate).” Montanile v. Bd. of Trs. of Nat’l

Elevator Indus. Health Benefit Plan, 136 S. Ct. 651, 657

(2016) (internal quotation marks omitted); see US Airways,

Inc. v. McCutchen, 569 U.S. 88, 94–95 (2013); Sereboff v.

Mid Atl. Med. Servs., Inc., 547 U.S. 356, 361–62 (2006);

Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S.

204, 210 (2002); Mertens v. Hewitt Assocs., 508 U.S. 248,

256 (1993). As a result, a plaintiff may not use § 1132(a)(3)

to seek any “form of legal relief,” such as “money damages.” 

Great-West, 534 U.S. at 210 (internal alteration omitted)

(quoting Mertens, 508 U.S. at 255). To qualify as “equitable

relief,” both “(1) the basis for the plaintiff’s claim and (2) the

nature of the underlying remedies sought” must be equitable

rather than legal. Montanile, 136 S. Ct. at 657 (internal

alterations omitted) (quoting Sereboff, 547 U.S. at 363).

Even if we assume that the basis for plaintiffs’ claim in

this case is equitable,14the nature of the underlying remedies

sought by plaintiffs in their complaint is not equitable. 

Plaintiffs seek a judgment to obtain money from defendants,

and “[a]lmost invariably suits seeking . . . to compel the

defendant to pay a sum of money to the plaintiff are suits for

14 Although we are skeptical that the basis for plaintiffs’ claim is

equitable, defendants did not dispute that issue in the district court and

raise it for the first time on appeal. We thus do not address that question

and instead apply our “‘general rule’ against entertaining arguments on

appeal that were not presented or developed before the district court.” 

Richards v. Ernst & Young, LLP, 744 F.3d 1072, 1075 (9th Cir. 2013)

(citation omitted).
THE DEPOT V. CARING FOR MONTANANS 27

‘money damages’”—the “classic form of legal relief.” 

Great-West, 534 U.S. at 210 (citation and internal alteration

omitted). Although plaintiffs attempt to characterize the

relief they seek as equitable by labeling it “restitution” and

“disgorgement,” we must “look to the ‘substance of the

remedy sought rather than the label placed on that remedy.’” 

Mathews v. Chevron Corp., 362 F.3d 1172, 1185 (9th Cir.

2004) (citation and internal alteration omitted). We conclude

that, notwithstanding the labels, plaintiffs’ requested relief is

not equitable in nature.

1. Restitution

The restitution plaintiffs seek is not equitable. The

Supreme Court has drawn a “fine distinction between

restitution at law and restitution in equity.” Great-West,

534 U.S. at 214. A plaintiff seeks “restitution at law” when

the plaintiff cannot “assert title or right to possession of

particular property” but instead seeks to “impose personal

liability on the defendant” as a means of “recovering money

to pay for some benefit the defendant . . . received from [the

plaintiff].” Id. at 213–14 (quoting 1 Dan B. Dobbs, Law of

Remedies § 4.2(1), at 571 (2d ed. 1993) (“Dobbs”)). By

contrast, a plaintiff seeks “restitution in equity, ordinarily in

the form of a constructive trust or an equitable lien, where

money or property identified as belonging in good conscience

to the plaintiff [can] clearly be traced to particular funds or

property in the defendant’s possession.” Id. at 213 (citing 1

Dobbs § 4.3(1), at 587–88); see 2 Dobbs § 6.1(3), at 12–13.

The Court has illustrated this distinction in several cases

involving ERISA plans claiming entitlement to a settlement

fund obtained by plan beneficiaries. In Great-West, the Court

concluded that the plan was seeking legal restitution because
28 THE DEPOT V. CARING FOR MONTANANS

the specifically identified fund was not in the defendants’

possession. 534 U.S. at 214. By contrast, in Sereboff, the

Court concluded that the plan was seeking equitable

restitution because the plan “sought ‘specificallyidentifiable’

funds that were ‘within the possession and control’” of the

defendants—not recovery from the defendants’ “assets

generally.” 547 U.S. at 362–63 (citation omitted). And in

Montanile, the Court faced the problem of a fund that,

although specifically identified at one time, had been

dissipated by the defendant on nontraceable items, leaving the

plan to seek recovery “out of the defendant’s general assets.” 

136 S. Ct. at 658. Observing the rule that equitable restitution

must seek to recover “specifically identified funds that

remain in the defendant’s possession or . . . traceable items

that the defendant purchased with the funds (e.g., identifiable

property like a car),” the Court held that seeking recovery out

of “the defendant’s general assets” due to dissipation of the

funds “on nontraceable items (like food or travel)” amounts

to “a legal remedy, not an equitable one.” Id.

In this case, the district court concluded that the nature of

the remedy sought by plaintiffs is not equitable, reasoning

that, under Montanile, “a party cannot recover in equity

unless the funds have been maintained in a segregated

account.” Montanile, however, concerned dissipation and

tracing, not segregation. The Court noted this distinction in

dicta, observing that at least in some instances, if a defendant

“commingl[es] a specifically identified fund . . . with a

different fund,” the “commingling allow[s] the plaintiff to

recover the amount of the lien from the entire pot of money.” 

Montanile, 136 S. Ct. at 661. And as plaintiffs point out, we

have, in another context, permitted recovery out of

commingled funds under the “lowest intermediate balance”

doctrine, which “evolved from equitable principles of trusts”:
THE DEPOT V. CARING FOR MONTANANS 29

“Where a wrongdoer mingles another’s

moneywith his own, from which commingled

account withdrawals are from time to time

made, there is a presumption of law that the

sums first withdrawn were moneys of the

tortfeasor.” . . . If the amount on deposit is

depleted below the amount of the trust,

however, the amount withdrawn is treated as

lost, and subsequent deposits do not replenish

the trust. Thus, the beneficiary is entitled to

the lowest intermediate balance between the

date of the commingling and the date of

payment.

In re R & T Roofing Structures &Commercial Framing, Inc.,

887 F.2d 981, 987 (9th Cir. 1989) (internal alterations

omitted) (quoting Republic Supply Co. v. Richfield Oil Co.,

79 F.2d 375, 378 (9th Cir. 1935)); see also Schuyler v.

Littlefield, 232 U.S. 707, 710 (1914) (“[W]here one has

deposited trust funds in his individual bank account, and the

mingled fund is at any time wholly depleted, the trust fund is

thereby dissipated, and cannot be treated as reappearing in

sums subsequently deposited to the credit of the same

account.”). Thus, plaintiffs argue, when a specific fund is

commingled with other funds in a general account, restitution

is available out of the general account as long as the general

account balance does not dip below the amount of the

wrongfully held money.

We need not decide whether this proposition is correct

because, even assuming it is, “the facts and allegations

supporting that proposition [do not] appear in [plaintiffs’]

complaint.” Amgen, 136 S. Ct. at 760. First, plaintiffs have

not identified a “specific fund” to which they are entitled. As
30 THE DEPOT V. CARING FOR MONTANANS

Montanile explains, “[e]quitable remedies ‘are, as a general

rule, directed against some specific thing,’” not “a sum of

money generally.” 136 S. Ct. at 658 (citation omitted). 

Plaintiffs, however, seek to recover not a specific thing but

instead some unidentified portion of the many premium

payments that exceeded “reasonable compensation.” The

premium surcharges plaintiffs seek to recover “never existed

as a distinct object or fund”; rather, they reflect “a specific

amount of money encompassed within a particular

fund”—the total premiums paid to defendants. Bilyeu v.

Morgan Stanley Long Term Disability Plan, 683 F.3d 1083,

1093 (9th Cir. 2012). And even if the amount of the

overcharges is measurable or otherwise identifiable, “[i]t is

the fund, not its size, that must be identifiable.” Cent. States,

Se. &Sw. Areas Health & Welfare Fund v. First Agency, Inc.,

756 F.3d 954, 960 (6th Cir. 2014); see Bilyeu, 683 F.3d at

1093 (distinguishing between a specific “amount of money”

and a specific “fund”). Indeed, a judgment in plaintiffs’ favor

would have no connection to any particular fund whatsoever. 

Defendants would simply be required to pay a certain amount

of money, and they could “satisfy that obligation by dipping

into any pot” they like. First Agency, 756 F.3d at 960. That

is restitution at law, not equity.

Second, the complaint never mentions the existence of a

general account in which the ill-gotten funds (i.e., the

premium surcharges) were commingled, such that the product

of those funds would be traceable. Again, Montanile is clear:

“[W]here a person wrongfully disposed of the property of

another but the property cannot be traced into any product,

the other cannot enforce a constructive trust or lien upon any

part of the wrongdoer’s property.” 136 S. Ct. at 659

(emphasis and internal alterations omitted) (quoting

Restatement of Restitution § 215(1), at 866 (1936)); see also
THE DEPOT V. CARING FOR MONTANANS 31

George G. Bogert et al., The Law of Trusts and Trustees

§ 921 (2d rev. ed. 1995) (“Bogert”) (explaining that

restitution of “trust property or its product” is generally

unavailable “where the proof of the beneficiary-claimant

merely shows the receipt of trust property by the defendant

and makes no case as to its subsequent history or its existence

among the present assets of the defendant”).

Nor do plaintiffs allege that defendants’ account balance

remained above the surcharge amounts for purposes of their

“lowest intermediate balance” theory. Indeed, a

“consequence of the lowest balance rule is that, unless there

is evidence to show the amount of the low balance, the

plaintiff may recover nothing at all, on the view that without

such evidence, the plaintiff’s funds have not been identified

in the account.” 2 Dobbs § 6.1(4), at 22. Here, the gravamen

of plaintiffs’ complaint is that defendants spent the

surcharges on kickbacks and unwanted insurance products. 

That leaves plaintiffs to simply declare in their briefs that it

is “almost inconceivable” that defendants did not place the

surcharges into a general account before spending them, and

that the general account still exists today such that the

surcharges would be traceable. But as the complaint itself

explains, BCBSMT has substantiallyreorganized, changed its

name to CFM, sold its health insurance business, and at some

point has donated or will donate its assets to public charity.

Thus, even if defendants placed surcharges collected between

2006 and 2014 into a general account, we certainly find it at

least “conceivable” that the account no longer exists. 

Because “our review is limited to the contents of the

complaint,” Allen, 911 F.2d at 372, we decline to entertain

plaintiffs’ unpleaded theory on appeal.
32 THE DEPOT V. CARING FOR MONTANANS

2. Disgorgement

Plaintiffs also purport to seek disgorgement, which they

define as a money judgment equivalent in value to ill-gotten

assets that were dissipated on non-traceable items. This

characterization of disgorgement—which runs headlong into

Montanile’s refusal to permit recovery of assets that have

been dissipated “on nontraceable items,” 136 S. Ct. at

658—is unavailing.

“Disgorgement” is simply a form of “[r]estitution

measured by the defendant’s wrongful gain” rather than by

the plaintiff’s loss, and is often described as “an ‘accounting

for profits.’” Restatement (Third) of Restitution and Unjust

Enrichment § 51 cmt. a, at 204 (2011); see Edmonson,

725 F.3d at 419 (“[D]isgorgement and accounting for profits

are essentially the same remedy.”); 1 Dobbs § 4.3(5), at 610

(“[A]ccounting for profits . . . forces the [defendant] to

disgorge gains received from improper use of the plaintiff’s

property or entitlements.”). And as the Supreme Court

explained in Great-West, “an accounting for profits” is an

additional remedy—available when the plaintiff “is entitled

to a constructive trust on particular property held by the

defendant”—that allows the plaintiff to “recover profits

produced by the defendant’s use of that property, even if [the

plaintiff] cannot identify a particular res containing the profits

sought to be recovered.” 534 U.S. at 214 n.2 (citing 1 Dobbs

§§ 4.3(1), 4.3(5), at 588, 608). That is also how the Court

described “disgorgement” in Harris Trust—a remedy

available to recover the “proceeds” from disposing of

particular property as well as “profits derived” from the illicit

use of that property. 530 U.S. at 250. Given the absence of
THE DEPOT V. CARING FOR MONTANANS 33

any particular property in this case, plaintiffs’ request for

disgorgement is not equitable in nature.15

Plaintiffs try to erase this particularity requirement by

citing several trust law treatises that explain that trust

beneficiaries could sue a third-party transferee in a court of

equity to obtain a “money judgment” when the ill-gotten

assets cannot be traced. See, e.g., Bogert § 868; 4 Austin

Wakeman Scott & William Franklin Fratcher, The Law of

Trusts §§ 291.1, 291.2, at 78–79 (4th ed. 1989); Restatement

(Second) of Trusts § 291 cmt. e, at 59. Indeed, plaintiffs

proclaim, courts of equity had “exclusive jurisdiction” in this

context, and an “exclusively equitable remedy is, by

definition, a typically equitable remedy.” But the Supreme

Court rejected this reasoning in Mertens, explaining that

although “courts of equity had exclusive jurisdiction over

virtually all actions by beneficiaries for breach of

trust”—including actions for monetary relief “against third

persons who knowingly participated in the trustee’s

breach”—many of those actions sought what were in effect

“‘legal remedies’ granted by an equity court.” 508 U.S. at

15 Under traditional rules of equity, an accounting for profits may be

available in the absence of a constructive trust over specifically

identifiable property if the defendant owed a fiduciary duty to the plaintiff

and breached that duty. See Parke v. First Reliance Standard Life Ins.

Co., 368 F.3d 999, 1008–09 (8th Cir. 2004); cf. CIGNA Corp. v. Amara,

563 U.S. 421, 441–42 (2011) (describing a “surcharge,” which is an

equitable remedy “in the form of monetary ‘compensation’ for a loss

resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust

enrichment” (citation omitted)). But fiduciary status is “[t]he important

ingredient.” 1 Dobbs § 4.3(5), at 611 n.16; see CIGNA, 563 U.S. at 442

(“[T]he fact that the defendant . . . is analogous to a trustee makes a

critical difference.”). And for purposes of plaintiffs’ prohibited

transaction claim, defendants are not fiduciaries but instead non-fiduciary

third parties.
34 THE DEPOT V. CARING FOR MONTANANS

256. The phrase “equitable relief” in ERISA does not mean

“whatever relief a common-law court of equity could

provide.” Id. at 257. Rather, it means relief that was

“typically available in equity (such as injunction, mandamus,

and restitution, but not compensatory damages).” Id. at 256. 

And as explained above, equitable restitution (including its

disgorgement variant) generally requires specifically

identifiable property or its traceable proceeds.

Plaintiffs also point to Harris Trust, but nothing in Harris

Trust alters that conclusion. As the Court explained in that

case, beneficiaries can recover in equity from a third-party

transferee only because “equity impresse[d] a constructive

trust on the property” upon its transfer. Harris Tr., 530 U.S.

at 250 (quoting Moore v. Crawford, 130 U.S. 122, 128

(1889)). And a “constructive trust . . . may be imposed only

where the plaintiff’s funds are themselves located and

identified or where they are traced into other funds or

property.” 2 Dobbs § 6.1(3), at 12–13 (footnotes omitted). 

Indeed, “the nature of the relief” that the Court “described in

Harris Trust [was] a claim to specific property (or its

proceeds) held by the defendant.” Great-West, 534 U.S. at

215 (emphasis added). Because plaintiffs have not identified

any specific property from which proceeds or profits derived,

they cannot recover the derivative remedy of disgorgement.

In sum, plaintiffs are not seeking “appropriate equitable

relief” under 29 U.S.C. § 1132(a)(3). We thus affirm the

district court’s dismissal of plaintiffs’ prohibited transaction

claim.
THE DEPOT V. CARING FOR MONTANANS 35

IV. STATE-LAW CLAIMS

We now turn to plaintiffs’ claims under state law for

fraudulent inducement, constructive fraud, negligent

misrepresentation, unjust enrichment, and unfair trade

practices under the Montana Consumer Protection Act. Each

of these claims is based on defendants’ alleged

misrepresentations to plaintiffs that the premiums charged

reflected the actual medical premium amount. See generally

Morrow v. Bank of Am., N.A., 324 P.3d 1167, 1180–85

(Mont. 2014) (describing the elements of fraud, constructive

fraud, negligent misrepresentation, and unfair trade

practices). The district court dismissed these claims after

concluding that they are preempted by ERISA and that

plaintiffs’ fraud allegations are not pled with sufficient

particularity for purposes of Federal Rule of Civil Procedure

9(b). Plaintiffs challenge both conclusions.

A. Preemption

“[T]wo strands of ERISA preemption” are relevant here:

(1) “express” preemption under 29 U.S.C. § 1144(a); and

(2) “conflict” preemption based on 29 U.S.C. § 1132(a). 

Paulsen v. CNF Inc., 559 F.3d 1061, 1081 (9th Cir. 2009)

(citation omitted). Addressing each strand, we conclude that

ERISA does not preempt plaintiffs’ state-law claims.

1. Express Preemption

ERISA expresslypreempts “any and all State laws insofar

as they may now or hereafter relate to any employee benefit

plan.” 29 U.S.C. § 1144(a). The text of this provision—and

in particular, the phrase “relate to”—is broad. So broad, in

fact, that the Supreme Court has rejected an “‘uncritical
36 THE DEPOT V. CARING FOR MONTANANS

literalism’ in applying” it given its potentially never-ending

reach. Gobeille, 136 S. Ct. at 943 (quoting N.Y. State

Conference of Blue Cross & Blue Shield Plans v. Travelers

Ins. Co., 514 U.S. 645, 656 (1995)). To provide some

“workable standards” for determining the scope of § 1144(a),

the Court has identified “two categories” of state-law claims

that “relate to” an ERISA plan—claims that have a “reference

to” an ERISA plan, and claims that have “an impermissible

‘connection with’” an ERISA plan. Id. (citations omitted);

see Or. Teamster Emp’rs Tr. v. Hillsboro Garbage Disposal,

Inc., 800 F.3d 1151, 1155 (9th Cir. 2015) (“A [state] law

claim ‘relates to’ an ERISA plan ‘if it has a connection with

or reference to such a plan.’” (citation omitted)). These two

categories operate separately. See Cal. Div. of Labor

Standards Enf’t v. Dillingham Constr., N.A., Inc., 519 U.S.

316, 324–25 (1997).

We first address the “reference to” category. A state-law

claim has a “‘reference to’ an ERISA plan” if it “is premised

on the existence of an ERISA plan” or if “the existence of the

plan is essential to the claim’s survival.” Hillsboro Garbage,

800 F.3d at 1155–56 (quoting Providence Health Plan v.

McDowell, 385 F.3d 1168, 1172 (9th Cir. 2004)). In this

case, plaintiffs’ state-law claims are not premised or

dependent on the existence of an ERISA plan. Indeed, as

explained above, the alleged misrepresentations occurred

prior to any plan’s existence. We thus have little difficulty

concluding that plaintiffs’ state-law claims do not have an

impermissible “reference to” an ERISA plan.

We reach the same conclusion with respect to the

“connection with” prong. A claim has “an impermissible

‘connection with’” an ERISA plan if it “‘governs a central

matter of plan administration’ or ‘interferes with nationally
THE DEPOT V. CARING FOR MONTANANS 37

uniform plan administration,’” Gobeille, 136 S. Ct. at 943

(internal alteration omitted) (quoting Egelhoff v. Egelhoff,

532 U.S. 141, 148 (2001)), or if it “bears on an ERISAregulated relationship,” Hillsboro Garbage, 800 F.3d at 1155

(quoting Paulsen, 559 F.3d at 1082). We look to “the

objectives of the ERISA statute as a guide,” bearing in mind

a “‘starting presumption that Congress d[id] not intend to

supplant’ . . . state laws regulating a subject of traditional

state power” unless that power amounts to “a direct

regulation of a fundamental ERISA function.” Gobeille,

136 S. Ct. at 943, 946 (quoting Travelers, 514 U.S. at 654).

Preventing “sellers of goods and services, including

benefit plans, from misrepresenting the contents of their

wares” is certainly an area of traditional state regulation that

“is ‘quite remote from the areas with which ERISA is

expressly concerned—reporting, disclosure, fiduciary

responsibility, and the like.’” Wilson v. Zoellner, 114 F.3d

713, 720 (8th Cir. 1997) (quoting Dillingham, 519 U.S. at

330); see Nat’l Sec. Sys., Inc. v. Iola, 700 F.3d 65, 84–85 (3d

Cir. 2012) (collecting cases holding that ERISA does not

expressly preempt state-law claims against an insurer “who

makes fraudulent or misleading statements to induce

participation in an ERISA plan”). Moreover, plaintiffs’ statelaw claims do not “bear[ ] on an ERISA-regulated

relationship.” Rutledge v. Seyfarth, Shaw, Fairweather &

Geraldson, 201 F.3d 1212, 1219 (9th Cir. 2000), amended,

208 F.3d 1170 (9th Cir. 2000), abrogated in part on other

grounds by Davila, 542 U.S. 200. Although plaintiffs’

prohibited transaction claim involves an ERISA-regulated

relationship (the relationship between a fiduciary and a party

in interest), that relationship is unrelated to plaintiffs’ statelaw claims, which focus on the misrepresentations made by

defendants while they were operating “just like any other
38 THE DEPOT V. CARING FOR MONTANANS

commercial entity.” Paulsen, 559 F.3d at 1083 (citation

omitted).

Defendants argue that our decision in Rutledge compels

a contrary conclusion. In Rutledge, we concluded that

ERISA preempted a plan participant’s state-law claims

against a law firm that allegedly overcharged the plan for

legal services. 201 F.3d at 1222. We explained that “a core

factor leading to the conclusion that a state law claim is

preempted is that the claim bears on an ERISA-regulated

relationship,” id. at 1219, and one such “ERISA-governed

relationship” is the relationship between plan participants and

parties in interest “in the respect [t]here at issue—excessive

fees,” id. at 1221–22 & n.12. We thus held that “state-law

claims against a non-fiduciary for prohibited transactions

‘relate to the administration of a plan covered by ERISA,’”

and that the allegation of excessive fees in that case was a

“prohibited transaction governed by ERISA.” Id. at 1221–22

(quoting Concha v. London, 62 F.3d 1493, 1504 (9th Cir.

1995)).

This case differs from Rutledge, however, because

plaintiffs’ state-law claims are premised on defendants’

misrepresentations in negotiations, not prohibited

transactions. Indeed, plaintiffs’ state-law claims could

succeed even if the premiums that defendants charged

constituted “reasonable compensation” under ERISA,

29 U.S.C. § 1108(b)(2), because the claims allege that

defendants misrepresented the composition of the premiums

in a way that induced plaintiffs to subscribe to Chamber

Choices plans. The actual amount of the premiums—and

whether that amount was “reasonable compensation” under

ERISA—is irrelevant to plaintiffs’ state-law claims. And the

misrepresentations occurred, at least initially, before plaintiffs
THE DEPOT V. CARING FOR MONTANANS 39

ever agreed to subscribe to a plan. The claims thus do not

“bear[ ] on an ERISA-regulated relationship,” Rutledge,

201 F.3d at 1219, because no such relationship existed when

the misrepresentations were made. Plaintiffs’ state-law

claims are accordingly not expressly preempted by ERISA.

2. Conflict Preemption

In addition to its express preemption provision, ERISA

articulates “a comprehensive civil enforcement scheme” in

29 U.S.C. § 1132(a) that is designed “to provide a uniform

regulatory regime over employee benefit plans.” Davila,

542 U.S. at 208 (quoting Pilot Life Ins. Co. v. Dedeaux, 481

U.S. 41, 54 (1987)).16 As a result, “any state-law cause of

action that duplicates, supplements, or supplants the ERISA

civil enforcement remedy conflicts with the clear

congressional intent to make the ERISA remedy exclusive”

and is therefore barred by conflict preemption. Id. at 209. 

Conflict preemption can bar a state-law claim “even if the

elements of the state cause of action [do] not precisely

duplicate the elements of an ERISA claim,” id. at 216, but a

state-law claim is not preempted if it reflects an “attempt to

remedy [a] violation of a legal duty independent of ERISA,”

id. at 214. State-law claims “are based on ‘other independent

legal duties’” when they “are in no way based on an

obligation under an ERISA plan” and “would exist whether

or not an ERISA plan existed.” Marin Gen. Hosp. v. Modesto

16 The “possible claims” under 29 U.S.C. § 1132(a) are “(1) an action

to recover benefits due under the plan; (2) an action for breach offiduciary

duties; and (3) a suit to enjoin violations of ERISA or the [p]lan, or to

obtain other equitable relief” to redress ERISA or plan violations. Bast v.

Prudential Ins. Co. of Am., 150 F.3d 1003, 1008 (9th Cir. 1998) (internal

citations omitted).
40 THE DEPOT V. CARING FOR MONTANANS

& Empire Traction Co., 581 F.3d 941, 950 (9th Cir. 2009)

(internal alteration omitted) (quoting Davila, 542 U.S. at

210).

In this case, the duties implicated in plaintiffs’ state-law

claims do not derive from ERISA; indeed, ERISA does not

purport to govern negotiations between insurance companies

and employers. Each of the state-law claims arises from

defendants’ misrepresentations and the effect they had on

plaintiffs’ decisions to subscribe to Chamber Choices plans. 

The legal duties at issue in these state-law claims are

independent of the duties imposed byERISA and would exist

regardless of whether an ERISA plan existed. See Cotton,

402 F.3d at 1290 (finding no conflict preemption where the

plaintiffs sought “damages based on fraud in the sale of

insurance policies”). Put in the terms used by the district

court, plaintiffs’ state-law claims are not “alternative

enforcement mechanisms” to ERISA claims because ERISA

does not have an enforcement mechanism that regulates

misrepresentations by insurance companies. Plaintiffs’ statelaw claims are thus not barred by either express or conflict

preemption.

B. Rule 9(b) Particularity

Finally, we turn to the district court’s conclusion that

plaintiffs “have not met the heightened pleading standard

required under Federal Rule of Civil Procedure 9(b) as to

their allegations of fraud.” Rule 9(b)’s particularity
THE DEPOT V. CARING FOR MONTANANS 41

requirement applies to plaintiffs’ claims of fraudulent

inducement and constructive fraud.17

Under Rule 9(b), a party “alleging fraud or mistake . . .

must state with particularity the circumstances constituting

fraud or mistake.” Fed. R. Civ. P. 9(b). To satisfy Rule

9(b)’s particularity requirement, the complaint must include

“an account of the ‘time, place, and specific content of the

false representations as well as the identities of the parties to

the misrepresentations.’” Swartz v. KPMG LLP, 476 F.3d

756, 764 (9th Cir. 2007) (per curiam) (quoting Edwards v.

Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). In

other words, the pleading “must ‘identify the who, what,

when, where, and how of the misconduct charged, as well as

what is false or misleading about the purportedly fraudulent

statement, and why it is false.’” Salameh v. Tarsadia Hotel,

726 F.3d 1124, 1133 (9th Cir. 2013) (quoting United States

ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d

1047, 1055 (9th Cir. 2011)).

17 We disagree with plaintiffs’ assertion that Rule 9(b) does not apply

to their constructive fraud claim because Montana’s version of the rule

would not apply in state court. Rule 9(b)’s particularity requirement “is

a federally imposed rule” that applies “irrespective of whether the

substantive law at issue is state or federal.” Kearns v. Ford Motor Co.,

567 F.3d 1120, 1125 (9th Cir. 2009) (quoting Vess v. Ciba-Geigy Corp.

USA, 317 F.3d 1097, 1102–03 (9th Cir. 2003)); see id. (rejecting the

argument “that Rule 9(b) does not apply to California’s consumer

protection statutes because California courts have not applied Rule 9(b)

[to those statutes]”). State law is relevant only “to determine whether the

elements of fraud have been pled sufficiently to state a cause of action.” 

Id. (quoting Vess, 317 F.3d at 1103). And because plaintiffs rely on a

“unified course of fraudulent conduct” as the basis of the constructive

fraud claim, the claim is at a minimum “grounded in fraud” and therefore

“must satisfy the particularity requirement of Rule 9(b).” Vess, 317 F.3d

at 1103–04.
42 THE DEPOT V. CARING FOR MONTANANS

The complaint in this case alleges that defendants

misrepresented the basis of the premiums they charged. But

the complaint lacks sufficient detail with respect to the

“who,” “when,” “where,” or “how.” Plaintiffs vaguely allege

that defendants made these misrepresentations “[i]n the

course of marketing” the plans to plaintiffs over a period of

eight years—from 2006 to 2014. Plaintiffs do not allege the

details of these misrepresentations, such as when defendants

made them, where or how defendants made them, to whom

they were made, or the specific contents of the

misrepresentations.18

See Concha, 62 F.3d at 1503 (“Rule

9(b) . . . requires that plaintiffs specifically plead those facts

surrounding alleged acts of fraud to which they can

reasonably be expected to have access.”). We therefore agree

with the district court that plaintiffs’ allegations do not state

with particularity the circumstances of the alleged fraud.

Nevertheless, because we reverse the district court’s

conclusion that plaintiffs’ state-law claims are preempted, we

reverse the district court’s dismissal with prejudice of the

state-law claims so that plaintiffs may amend their complaint

to state the fraud allegations with greater particularity. See

United States ex rel. Swoben v. United Healthcare Ins. Co.,

848 F.3d 1161, 1167 (9th Cir. 2016). We note, however, that

because we affirm the dismissal of plaintiffs’ ERISA claims,

the district court is also free on remand to decline to exercise

supplemental jurisdiction over the state-law claims and allow

plaintiffs to bring them in state court. See Sanford v.

18 Defendants also argue that the complaint impermissibly lumps

together HCSC and CFM as “BCBSMT.” This argument lacks merit. 

The complaint specifically explains that “BCBSMT” refers to CFM for

conduct occurring before July 2013, and to HCSC for conduct occurring

after July 2013.
THE DEPOT V. CARING FOR MONTANANS 43

MemberWorks, Inc., 625 F.3d 550, 561 (9th Cir. 2010)

(discussing supplemental jurisdiction under 28 U.S.C.

§ 1367(c)(3)).

V. CONCLUSION

“[R]educed to the size of a pea, this case is really about

claims of fraud and misrepresentation in the sale of some

[health] insurance policies.” Cotton, 402 F.3d at 1279. 

ERISA does not regulate such conduct, which means that

plaintiffs’ ERISA claims, and defendants’ ERISApreemption

defense, fail. We accordingly AFFIRM the district court’s

judgment with respect to plaintiffs’ ERISA claims,

REVERSE the district court’s judgment with respect to

plaintiffs’ state-law claims, and REMAND for further

proceedings consistent with this opinion. Each party shall

bear its own costs on appeal.

AFFIRMED IN PART, REVERSED IN PART, and

REMANDED.