Federal Judge Allows ERISA Class Action Against Northwestern to Proceed 

A federal judge denied Northwestern University’s motion to dismiss a proposed class action lawsuit accusing the school of violating its fiduciary duty by mismanaging employee health plan options. This allows the case to move toward discovery and potential trial. 

District Judge Jeremy Daniel of the Northern District of Illinois ruled that the plaintiffs in Barbich et al v. Northwestern University et al—who are current and former Northwestern employees—had sufficiently alleged that they overpaid for health insurance benefits due to the university’s handling of its employee welfare plan. The court also denied the plaintiffs’ request to file an additional briefing, known as a sur-reply, and directed Northwestern to formally answer the complaint by April 23. 

The lawsuit, brought by named plaintiffs Natalie Barbich, Bruce Lindvall and Timothy Peterson, claims Northwestern violated its fiduciary duty as a plan sponsor under the Employee Retirement Income Security Act. According to the complaint, the university offered multiple preferred provider organization health plans but failed to properly evaluate and disclose that one option—the higher-premium “Premier PPO”—provided no meaningful advantage over cheaper alternatives. 

Plaintiffs allege that this structure effectively forced employees into a “dominated” plan choice, where participants paid more in premiums without receiving commensurate benefits. They claim this resulted in financial harm, including excessive payroll deductions for their health plan and reduced wages. 

Northwestern sought dismissal on several grounds, including lack of standing and failure to state a claim. The university argued that employees had received the health benefits they were promised and therefore suffered no concrete injury. But the judge rejected that argument, finding that allegations of overpayment alone—regardless of whether benefits were delivered—can constitute a sufficient injury under federal law. 

The university also contended that it acted as a “settlor”—a role involving plan design decisions that are not subject to ERISA fiduciary duties—rather than as a fiduciary. The court declined to resolve that issue at this stage, concluding that the plaintiffs plausibly alleged fiduciary misconduct and that the distinction would require a more developed factual record. 

In addition, the judge found that the plaintiffs had adequately stated claims that Northwestern breached its duties of prudence and loyalty by offering inferior plan options, and that it may have failed to disclose material information about those options. 

The case now moves into the next phase of litigation, where Northwestern will be required to respond to the allegations and the parties will begin exchanging evidence under the rules of discovery. If the class is certified, the lawsuit could represent a group of similarly situated university employees affected by the health plan structure. 

Nichols Kaster, PLLP, The Prinz Law Firm and Jackson Lewis PC represent the plaintiffs. Groom Law Group and Croke, Fairchild, Duarte & Beres, LLC represent the defendants.