Court Upholds Dismissal of ESOP Fiduciary Claims Due to Failure to Exhaust Administrative Remedies

On October 15, 2025, the U.S. Court of Appeals for the Eleventh Circuit, in Bolton, et al., v. Inland Fresh Seafood Corp. of America, Inc., No. 24-10084 (11th Cir. 2025), affirmed a trial court's decision dismissing a purported class action lawsuit alleging violations of ERISA related to the purchase of Inland Fresh Seafood Corporation of America, Inc. (Inland) by the company's employee stock ownership plan (ESOP). The Eleventh Circuit agreed with the trial court that dismissal was warranted because the plaintiffs failed to exhaust their administrative remedies prior to filing their lawsuit in federal court. 

In their lawsuit, the plaintiffs, who are participants in the ESOP, alleged that Inland, its officers and directors, and the ESOP's trustee and committee all breached their ERISA fiduciary duties by causing the ESOP to pay in excess of fair market value in purchasing the company's stock for $92 million. The plaintiffs alleged that the overpayment was the result of Inland misrepresenting the company's sales projections to inflate the valuation of the company to an amount more than its stock was actually worth. The plaintiffs argued that if a proper due diligence process had been conducted by the trustee and if Inland had not misrepresented the company's value, the ESOP would not have overpaid in purchasing the company's stock.

In affirming the trial court's decision, the court reasoned that in the Eleventh Circuit, "plaintiffs in ERISA actions must exhaust available administrative remedies before suing in federal court." The court acknowledged that the circuit's application of the exhaustion requirement is at odds with the majority of other circuits that "require exhaustion for benefits claims—[but] do not require exhaustion for claims alleging violations of ERISA." In rejecting the plaintiffs' argument that several Supreme Court decisions have made the Eleventh Circuit's exhaustion precedent bad law, the court stated that because the Supreme Court had not "discussed our precedent and did not otherwise comment on the precise issue before the prior panel, our precedent remains binding."

The court also rejected the plaintiffs' argument made in the alternative that the case should be remanded so the district court could review a factual record to decide whether the plaintiffs actually exhausted their administrative remedies. The court reasoned that the district court did not abuse its discretion in deciding the plaintiffs did not "plead exhaustion or a valid exception." Similarly, the court rejected the plaintiffs' arguments that the district court abused its discretion by failing to excuse their exhaustion requirement. According to the court, the district court was correct that: (1) "the plan's committee could take up the plaintiffs' claims" and that the administrative process afforded them "an adequate legal remedy"; (2) the plan expressly requires the plaintiffs to exhaust their administrative remedies; and (3) the plaintiffs could not show a basis for an exhaustion futility argument. While affirming the district court's dismissal decision, the court did remand the case to the district court to decide whether it should be dismissed with or without prejudice. 

The concurrence written by Circuit Judge Adalberto Jordan, joined by Circuit Judge William H. Pryor, Jr., is noteworthy. They propose to convene en banc to "consider overruling Mason v. Continental Group, 763 F.2d 1219, 1227 (11th Cir. 1985), which imposed a judicially created and atextual administrative exhaustion requirement for fiduciary breach and statutory claims under ERISA, 29 U.S.C. §§ 1109(a), 1132(a)(2)–(3)." In the concurrence, Judge Jordan points out that the Eleventh Circuit is the only circuit with a mandatory exhaustion requirement and that the majority of circuits have held that "plaintiffs asserting fiduciary-breach statutory claims under ERISA do not have to exhaust administrative remedies." 

Tri-Agencies and White House Address Fertility Benefits

On October 16, 2025, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) issued "FAQs about Affordable Care Act Implementation Part 72" (Part 72). The guidance addresses ways employers can offer fertility benefits as "excepted benefits," which are individual and group health insurance plans or policies not subject to certain federal requirements, including non-discrimination provisions and other requirements pursuant to the Health Insurance Portability and Accountability Act (HIPAA), certain Affordable Care Act (ACA) mandates, the Mental Health Parity and Addiction Equity Act (MHPAEA), and other requirements under Part 7 of ERISA and parallel Internal Revenue Code (IRC) and Public Health Service Act (PHSA) provisions. Access to fertility treatments, including in vitro fertilization (IVF), and enhancing coverage of the same have been top priorities of the Trump administration and the Departments, as set forth in Executive Order 14216, "Expanding Access to In Vitro Fertilization."
 
As summarized in Part 72, there are four categories of excepted benefits. One of these categories, "limited excepted benefits," covers benefits provided under a separate policy, certificate, or contract of insurance, or are otherwise not an integral part of a group health plan and include certain employee assistance programs (EAP) and certain health reimbursement arrangements (HRA). Another category, "independent, noncoordinated excepted benefits," includes both coverage for only a specified disease or illness (such as cancer-only policies) and hospital or other fixed indemnity insurance. Section 9831(c)(2) of the IRC, section 732(c)(2) of ERISA, and sections 2722(c)(2) and 2763(b) of the PHSA and their implementing regulations set forth in detail the rules and requirements for benefits to qualify as excepted benefits.

Part 72 states that an employer may offer fertility benefits as an independent, noncoordinated excepted benefit, and as a limited excepted benefit in the form of a HRA or other account-based plan that reimburses an employee's out-of-pocket costs for fertility benefits, as long as the arrangement meets the applicable statutory and regulatory requirements. Part 72 also states that an employer may offer an EAP that offers benefits for coaching and navigator services pertaining to fertility options as limited except benefits, subject to certain requirements. 

Part 72 makes clear that employers are not required to enroll their employees in a separate "traditional" group health plan in order to offer fertility benefits as an independent, noncoordinated excepted benefit. However, if an employer does offer this type of excepted benefit and other group health plan coverage, the former "must be provided under a separate policy, certificate, or contract of insurance," "there must be no coordination between the provision of the benefits under the excepted benefit coverage and any exclusion of benefits under any group health plan maintained by the same plan sponsor," and "the benefits provided by excepted benefit coverage must be paid without regard to whether benefits are provided with respect to the same event under any group health plan maintained by the same plan sponsor."

Of note for employers and plan sponsors, Part 72 clarifies that fertility benefits cannot be offered as an independent, noncoordinated excepted benefit under a self-funded arrangement, but the Departments "intend to undertake future notice and comment rulemaking to provide additional ways that certain fertility benefits may be offered as a type of limited excepted benefit," such as "on a self-funded basis if the applicable conditions to be considered a limited except benefit are met."  

Likely to account for the high cost of IVF and other fertility treatments, the Departments also state in Part 72 that they are considering whether to modify the standards under which supplemental health insurance coverage, including a supplemental benefit for fertility coverage, will be considered to satisfy the conditions for being an excepted benefit, including the current criterion that the cost of the supplemental coverage must not exceed 15 percent of the cost of primary coverage. 

Also on October 16, 2025, the White House issued a fact sheet announcing actions to lower costs and expand access to IVF and "high-quality fertility care," "bringing most-favored-nation drug pricing to women." First, the government reached an agreement with drug manufacturer EMD Serono to make fertility medication GONAL-F available to women generally at a discount equal to 796 percent of the deal price and to women with incomes below 550 percent of the federal poverty level at a discount totaling 2,320 percent of the deal price, when purchasing from TrumpRx.gov. Second, the fact sheet announces that the Food and Drug Administration (FDA) will include a lower cost fertility drug in the initial round of the FDA Commissioner's National Priority Review Voucher program, and states that if this drug is approved, "American patients stand to benefit even more from lower prices due to increased competition in the fertility drug space." Third, the fact sheet references the Departments' FAQs addressing the expanded insurance and benefits packages for coverage of treatment of infertility and the Departments' intention to undertake rulemaking to expand employers' ability to offer fertility benefits to their employees. 

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