Tuesday, November 12, 2013

Pegram v. Herdrich case brief

Pegram v. Herdrich case brief summary
530 U.S. 211 (2000)

On petition for writ of certiorari to United States Court of Appeals for Seventh Circuit, petitioner health maintenance organization (HMO) and physician owner appealed from decision reversing trial court's dismissal of respondent's claim that petitioners breached fiduciary duty under 29 U.S.C.S. § 1109(a) by delaying treatment in order to increase incentive bonus.


Respondent claimed that the decision to delay her medical treatment was driven by petitioner health maintenance organization's (HMO) physician owners' self-interest in increasing their incentive bonuses in violation of petitioner's fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.S. § 1001 et seq. The question on appeal was whether treatment decisions made by petitioner, acting through its physicians, were fiduciary acts within the meaning of ERISA.


  • In reversing the court of appeals, the court held that they were not. 
  • It was not for the court to draw a line between good and bad HMO's by making judgments about socially acceptable medical risk. 
  • Congress did not intend petitioner or any other HMO to be treated as a fiduciary to the extent that it made mixed eligibility decisions acting through its physicians. 
  • The federal judiciary would be acting contrary to the congressional policy of allowing HMO organizations if it were to entertain an ERISA fiduciary claim portending wholesale attacks on existing HMO's solely because of their structure, untethered to claims of concrete harm.

Judgment reversed because mixed eligibility decision by petitioner health maintenance organization through its physician was not fiduciary decision under ERISA.

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