Supreme Court Upholds Tennessee Ban on Gender-Affirming Care for Minors

On June 18, 2025, the Supreme Court issued its opinion in United States v. Skrmetti, No. 23-477, upholding Tennessee Senate Bill 1 (SB 1), a statute that prohibits healthcare providers from prescribing or administering hormones or puberty blockers to minors for the purpose of gender-affirming care, on the basis that the law did not trigger heightened scrutiny and satisfied a rational basis-level of review. As we have previously discussed in our coverage of the case as it made its way to the Supreme Court, the private plaintiffs and the United States, as intervenor, argued last year to the Court that the law violates the Equal Protection Clause because it discriminates on the basis of sex and transgender status, and as such should be subject to the heightened scrutiny standard relevant for sex discrimination. The majority opinion, written by Chief Justice Roberts and joined by four other conservative justices, held that the law did not discriminate on the basis of sex or transgender status, but rather classified only on the basis of age and "medical use." As such, the Court reviewed and upheld SB 1 under the most lenient standard of judicial review, and in so doing greenlit similar state laws that have been passed in dozens of other states.

The majority concluded that the law "does not turn on sex" because it prohibits certain treatments for certain medical uses – to treat gender dysphoria – while allowing the same treatment for other medical uses, for all minors, regardless of their sex. Referencing the word "sex" in the law's text is not sufficient to trigger heightened scrutiny, the majority opined. Further, the opinion states that whether a law enforces stereotypes about how someone of a certain sex should act is an inquiry reserved for heightened scrutiny but that question is not relevant when the law does not classify on the basis of sex to begin with. 

The majority also concluded that the law did not classify on the basis of transgender status, and so it did not reach the question of whether transgender status is a suspect (like race) or quasi-suspect (like sex) class in the first instance. Relying heavily on Geduldig v. Aiello, 417 U.S. 484 (1974), which found that an insurance program that discriminated on the basis of pregnancy did not discriminate on the basis of sex, the majority concluded that the fact that some transgender minors do not seek prohibited treatment means that the law does not turn on transgender status.

Justice Thomas filed a concurrence emphasizing the importance of deference to state legislatures "in politically contentious debates." Justice Barrett wrote separately to argue that transgender status is not a suspect class because there has been no history of legal discrimination on that basis as there has been on the basis of race and sex. Justice Alito concurred in the judgment but not the entirety of the majority's reasoning, noting that he was "uneasy with [the majority's] analysis" and would find that SB 1 does classify on the basis of transgender status, but that such status does not trigger heightened scrutiny.

The primary dissent, written by Justice Sotomayor for the three liberal justices, argued that the majority "contorts logic and precedent" to avoid subjecting SB 1 to "intermediate scrutiny," to which it should be subject because it classifies on the basis of sex and transgender status. The dissent opines that SB 1, by its own terms, prohibits certain treatments on the basis that they are "inconsistent" with a minor's biological sex, in order to "encourage[e] minors to appreciate their sex." In so doing, the dissent asserts that SB 1 classifies on the basis of sex (by allowing, for instance, biological males, but not biological females, to receive testosterone) and transgender status (by prohibiting treatment "wholly coextensive" with transgender status), which should be treated as a quasi-suspect class due to historical and current discrimination against transgender individuals. The dissent concludes that the Court should have required the state to demonstrate that SB 1 satisfies intermediate scrutiny, which asks whether the law is "substantially related" to "important governmental objectives." 

JPMorgan Forfeitures Lawsuit Dismissed With Prejudice

On June 13, 2025, the court in Daniel J. Wright v. JPMorgan Chase & Co., et al., No. 2:25-cv-00525 (C.D. Cal.), granted a motion by JPMorgan Chase & Co. and JPMorgan Chase Bank, N.A. (collectively, JPM) seeking dismissal of the plaintiff's complaint that alleged JPM violated several provisions of ERISA with respect to its use of the JPM 401(k) plan's (the Plan) forfeited assets. Specifically, the plaintiff alleged that the defendants violated ERISA by "wrongfully and consistently us[ing] forfeited nonvested plan assets for [their] own benefit, to reduce future employer contributions, rather than for the benefit of Plan participants." The plaintiff brought claims against JPM for (1) breach of fiduciary duty under 29 U.S.C. § 1104(a), (2) violation of ERISA's anti-inurement provision under 29 U.S.C. § 1103(c)(1), (3) violation of ERISA's prohibited transactions under 29 U.S.C. § 1106, and (4) failure to monitor Plan fiduciaries.

JPM moved to dismiss the complaint on two grounds, that the plaintiff (1) lacked standing under Article III and (2) failed to state a claim. The court rejected JPM's standing argument, stating that the plaintiff's allegations that he "experienced diminished account balances and reduced investment returns" because of JPM's use of the Plan's forfeitures was sufficient at the motion to dismiss stage to claim "concrete and particularized economic injury attributable to [JPM's] conduct," as required for Article III standing. The court further stated that the plaintiff met the additional Article III standing requirement that his alleged injury would likely be redressed through his lawsuit if JPM was found liable. 

As to JPM's second argument for failure to state a claim, the court sided with JPM, agreeing with recent decisions within the Ninth Circuit (Hutchins v. HP Inc., No. 5:23-cv-05875 (N.D. Cal.); Dimou v. Thermo Fisher Scientific, Inc., No. 23-cv1732 (S.D. Cal.); Sievert v. Knight-Swift Transportation Holdings, Inc., No. 24-cv-02443-PHX-SPL (D. Ariz); and Madrigal v. Kaiser Foundation Health Plan, Inc., No. 2:24-cv-05191 (C.D. Cal.)) that have rejected similar forfeitures-related ERISA claims. The court in Wright agreed with JPM that the Plan document did not permit JPM to use forfeited funds to pay participants' share of administrative fees, contrary to what plaintiff alleged, and even if the Plan had permitted this use, ERISA does not require JPM to use the funds to pay administrative costs. The court reasoned that ERISA "does not require fiduciaries to maximize pecuniary benefits or to resolve every issue of interpretation in favor [of] plan beneficiaries." The court also noted that the plaintiff failed to allege how any of JPM's actions with respect to forfeited funds violated ERISA or that he did not receive any of the benefits "promised under the terms of the Plan."  

In dismissing the plaintiff's anti-inurement claim, the court determined that the plaintiff's failure to allege that Plan assets were used "for a purpose other than to pay [their] obligations to the Plan's beneficiaries" was fatal to his claim. The plaintiff's prohibited transaction claim was similarly rejected due to the plaintiff's failure to plausibly allege a transaction as required under ERISA § 406. 

While there have been several forfeitures cases that have been dismissed with leave to amend, the court here dismissed the plaintiff's complaint with prejudice. The court reasoned that while some recent dismissals have granted leave to amend to give an opportunity for plaintiffs to allege "more particularized facts or special circumstances" to support their claims, leave was not appropriate here for several reasons, including the court's conclusion that the plaintiff's claims were based "on a misreading of the Plan's terms." 

PhRMA Challenges Tennessee Law Regulating 340B Drug Pricing Program 

On May 22, 2025, Pharmaceutical Research and Manufacturers of America v. Skrmetti, No. 3:25-cv-00582 (M.D. Tenn.), was filed challenging Tennessee Senate Bill 1414 (SB 1414) as an unconstitutional "attempt to rewrite the terms of" the federal 340B Drug Pricing Program, 42 U.S.C. § 256b (340B). 

The plaintiff, Pharmaceutical Research and Manufacturers of America (PhRMA), has members that manufacture and sell pharmaceutical drugs. Under 340B, certain covered entities, such as clinics, programs, and hospitals, can purchase prescription drugs from manufacturers at a low price for certain purposes such as to provide for low-income and underserved patients of these covered entities. The 340B program is overseen and regulated by the U.S. Department of Health and Human Services (HHS) and there is an administrative dispute resolution (ADR) program run by an agency within HHS, the U.S. Health Resources and Services Administration (HRSA), that handles disputes under the program. The complaint states that "340B has become the second largest government pharmaceutical program, exceeded only by Medicare Part D."  

PhRMA's complaint alleges that "certain private, for-profit entities—including the largest national chain pharmacies—have, in increasing numbers, sought to leverage 340B as a tool to enhance their profitability in a way that Congress never intended." More specifically, the complaint describes "complicated contractual arrangements between a covered entity, a pharmacy, and other entities like a third-party administrator" where "for-profit pharmacies end up obtaining drugs purchased at the 340B price" "and at great financial benefit to themselves... sell drugs purchased at 340B prices to patients who are ineligible to receive such 340B-priced drugs." The complaint also alleges that a "product replenishment model" "perpetuates the problem" because "contract pharmacies purport to retroactively identify individuals with some relationship to a covered entity" and then "purchase additional drugs at the 340B price—nominally in the name of the covered entities—to 'replenish' the drugs sold previously to the purported covered entity patients." 

In the complaint, the plaintiffs challenge portions of SB 1414 that contain requirements on drug manufacturers and their agents or affiliates barring them from imposing requirements or limitations on a 340B entity, to include those relating to the submission of health information or data related to claims, utilization, purchasing, payments, or inventory management of 340B drugs, claim adjudication, audits, accreditation, or accessing discounts under the 340B program. See TN Code § 47-18-136(a). The plaintiffs also refer to parts of SB 1414 that provide that "[a] drug manufacturer, or its agent or affiliate, shall not, either directly or indirectly, deny, impose any restrictions, prohibitions, discriminate against, or otherwise limit the acquisition of a 340B drug by, or delivery of a 340B drug to, a 340B entity or other location that is under contract with, or otherwise authorized by, a 340B entity to receive 340B drugs on behalf of the 340B entity unless such receipt is prohibited by [HHS] or applicable state law." Id. § 47-18-136(c). Moreover, the complaint highlights that SB 1414 provides for both civil and criminal penalties, alleging that "[b]y defining a violation of [SB 1414] as an unfair or deceptive act under the Tennessee Consumer Protection Act, SB 1414 effectively creates a private right of action" and therefore "appears to empower private entities in Tennessee to circumvent the ADR system established by Congress as 340B's sole enforcement mechanism." SB 1414 § 2; TN Code § 47-18-109(a)(1)). SB 1414 goes into effect July 1, 2025.

The lawsuit seeks both declaratory and injunctive relief pursuant to (1) a field and conflict preemption theory pursuant to the Supremacy Clause and the 340B statute, (2) a Commerce Clause challenge based on the extraterritorial reach of SB 1414 to pharmaceutical manufacturers "many of whom have no physical presence in Tennessee," and (3) a Due Process Clause challenge on grounds that SB 1414 is unconstitutionally vague. 

On June 17, 2025, PhRMA moved for a preliminary injunction, citing, among other things, the irreparable harm of incurring "unrecoverable compliance costs and unrecoverable lost resources, among other things, or face Tennessee's imposition of criminal and civil penalties." The same day, the Tennessee Attorney General moved to dismiss the case on both threshold standing and sovereign immunity grounds and on the merits, focusing on PhRMA's field and conflict preemption theories and Due Process claim. 

We frequently cover suits challenging the state regulation of health benefit plans, including the administration of prescription drugs, on ERISA preemption and constitutional grounds. This suit, instead, relies on conflict and field preemption principles, on the theory that 340B is exclusively federal "[u]nlike some other federal healthcare programs, where Congress has assigned the states significant roles in administering the programs," such as the Medicaid statute and the Patient Protection and Affordable Care Act (ACA). PhRMA alleges that SB 1414, instead, "has the purpose and effect of regulating a federal program," "expressly predicates its purported addition of a state law obligation on the existence of an underlying federal obligation," and "a state adjudicator will be required to answer multiple questions of federal law to determine if a manufacturer violated SB 1414." TN Code § 47-18-104(a), (c). 

In The News

Members Anthony Shelley and Joanne Roskey were both recognized by Legal 500 as "Leading Partners" in Labor and Employment: ERISA Litigation. Congratulations to Tony and Joanne!

Joanne commented in Law360 on the ERISA Industry Committee's (ERIC) lawsuit challenging the Biden administration's final mental health parity rule.

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