The Depot, Inc. v. Caring for Montanans, Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

THE DEPOT, INC.; UNION CLUB No. 17-35597
BAR, INC.; TRAIL HEAD, INC.,
Plaintiffs-Appellants, D.C. No.
9:16-cv-00074-DLC
v.

CARING FOR MONTANANS, INC., OPINION
FKA Blue Cross Blue Shield of
Montana, Inc.; HEALTH CARE
SERVICES CORPORATION,
Defendants-Appellees.

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 by ERISA.
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 state-
law 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 Plaintiffs-
Appellants.

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 premiums would
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 plans2—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] may make 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 surcharges without 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
authority or control respecting management 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
person4 is a fiduciary under this provision only “to the extent”
the person engages in the listed conduct, a person may be a
fiduciary with 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] . . . discretionary authority
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 self-
funded 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 rate-
setting 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 fiduciary with respect
to those products.” (citation omitted)).

That reasoning forecloses 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] may make 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 fiduciary-
employer.” 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-premium surcharges ‘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 of return 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 arguably a 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
Smith Barney (“Salomon”), a firm that 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,14 the 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 ‘specifically identifiable’
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
money with 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 substantially reorganized, 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 expressly preempts “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 ERISA-
regulated 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’ state-
law 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’ state-
law 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 of fiduciary
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 by ERISA 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’ state-
law 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’ ERISA preemption
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.