OCTOBER TERM, 1999

															Syllabus

															PEGRAM ET AL. v. HERDRICH

															CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH
CIRCUIT

															No. 98-1949. Argued February 23, 2000-Decided June 12,2000

															Petitioners (collectively Carle) function as a health
maintenance organization (HMO) owned by physicians providing
prepaid medical services to participants whose employers contract
with Carle for coverage. Respondent Herdrich was covered by Carle
through her husband's employer, State Farm Insurance Company. After
petitioner Pegram, a Carle physician, required Herdrich to wait
eight days for an ultrasound of her inflamed abdomen, her appendix
ruptured, causing peritonitis. She sued Carle in state court for, inter alia, fraud. Carle responded that the Employee
Retirement Income Security Act of 1974 (ERISA) preempted the fraud
counts and removed the case to federal court. The District Court
granted Carle summary judgment on one fraud count, but granted
Herdrich leave to amend the other. Her amended count alleged that
the provision of medical services under terms rewarding physician
owners for limiting medical care entailed an inherent or
anticipatory breach of an ERISA fiduciary duty, since the terms
created an incentive to make decisions in the physicians'
self-interest, rather than the plan participants' exclusive
interests. The District Court granted Carle's motion to dismiss on
the ground that Carle was not acting as an ERISA fiduciary. The
Seventh Circuit reversed the dismissal. Held: Because mixed treatment and eligibility decisions
by HMO physicians are not fiduciary decisions under ERISA, Herdrich
does not state an ERISA claim. Pp.218-237.

															(a) Whether Carle is a fiduciary when acting through its
physician owners depends on some background of fact and law about
HMO organizations, medical benefit plans, fiduciary obligation, and
the meaning of Herdrich's allegations. The defining feature of an
HMO is receipt of a fixed fee for each patient enrolled under the
terms of a contract to provide specified health care if needed.
Like other risk bearing organizations, HMOs take steps to control
costs. These measures are commonly complemented by specific
financial incentives to physicians, rewarding them for decreasing
utilization of health-care services, and penalizing them for
excessive treatment. Hence, an HMO physician's financial interest
lies in providing less care, not more. Herdrich argues that Carle's
incentive scheme of annually paying physician owners the profit
resulting from their own decisions rationing care distinguishes its
plan 212 Syllabus

															from HMOs generally, so that reviewing Carle's decision under a
fiduciary standard would not open the door to claims against other
HMOs. However, inducement to ration care is the very point of any
HMO scheme, and rationing necessarily raises some risks while
reducing others. Thus, any legal principle purporting to draw a
line between good and bad HMOs would embody a judgment about
socially acceptable medical risk that would turn on facts not
readily accessible to courts and on social judgments not wisely
required of courts unless resort cannot be had to the legislature.
Because courts are not in a position to derive a sound legal
principle to differentiate an HMO like Carle from other HMOs, this
Court assumes that the decisions listed in Herdrich's count cannot
be subject to a claim under fiduciary standards unless all such
decisions by all HMOs acting through their physicians are judged by
the same standards and subject to the same claims. Pp. 218-222.

															(b) Under ERISA, a fiduciary is someone acting in the capacity
of manager, administrator, or financial adviser to a "plan," and
Herdrich's count accordingly charged Carle with a breach of
fiduciary duty in discharging its obligations under State Farm's
medical plan. The common understanding of "plan" is a scheme
decided upon in advance. Here the scheme comprises a set of rules
defining a beneficiary's rights and providing for their
enforcement. When employers contract with an HMO to provide
benefits to employees subject to ERISA, their agreement may, as
here, provide elements of a plan by setting out the rules under
which beneficiaries will be entitled to care. ERISA's provision
that fiduciaries shall discharge their duties with respect to a
plan "solely in the interest of the participants and
beneficiaries," 29 U. S. C. § 1l04(a)(1), is rooted in the common
law of trusts, but an ERISA fiduciary may also have financial
interests adverse to beneficiaries. Thus, in every case charging
breach of ERISA fiduciary duty, the threshold question is not
whether the actions of some person providing services under the
plan adversely affected a beneficiary's interest, but whether that
person was performing a fiduciary function when taking the action
subject to complaint. Pp. 222-226.

															(c) Herdrich claims that Carle became a fiduciary, acting
through its physicians, when it contracted with State Farm. It then
breached its duty to act solely in the beneficiaries' interest,
making decisions affecting medical treatment while influenced by a
scheme under which the physician owners ultimately profited from
their own choices to minimize the medical services provided.
Herdrich's count lists mixed eligibility and treatment decisions:
decisions relying on medical judgments in order to make plan
coverage determinations. Pp. 226-230.

															(d) Congress did not intend an HMO to be treated as a fiduciary
to the extent that it makes mixed eligibility decisions acting
through its 213 physicians. Congress is unlikely to have thought of such
decisions as fiduciary. The common law trustee's most defining
concern is the payment of money in the beneficiary's interest, and
mixed eligibility decisions have only a limited resemblance to that
concern. Consideration of the consequences of Herdrich's contrary
view leave no doubt as to Congress's intent. Recovery against
for-profit HMOs for their mixed decisions would be warranted simply
upon a showing that the profit incentive to ration care would
generally affect such decisions, in derogation of the fiduciary
standard to act in the patient's interest without possibility of
conflict. And since the provision for profits is what makes a
for-profit HMO a proprietary organization, Herdrich's remedy-return
of profit to the plan for the participants' benefit-would be
nothing less than elimination of the for-profit HMO. The Judiciary
has no warrant to precipitate the upheaval that would follow a
refusal to dismiss Herdrich's claim. Congress, which has promoted
the formation of HMOs for 27 years, may choose to restrict its
approval to certain preferred forms, but the Judiciary would be
acting contrary to congressional policy if it were to entertain an
ERISA fiduciary claim portending wholesale attacks on existing HMOs
solely because of their structure. The Seventh Circuit's attempt to
confine the fiduciary breach to cases where the sole purpose of
delaying or withholding treatment is to increase the physician's
financial reward would also lead to fatal difficulties. The HMO's
defense would be that its physician acted for good medical reasons.
For all practical purposes, every claim would boil down to a
malpractice claim, and the fiduciary standard would be nothing but
the traditional medical malpractice standard. The only value to
plan participants of such an ERISA fiduciary action would be
eligibility for attorney's fees if they won. A physician would also
be subject to suit in federal court applying an ERISA standard of
reasonable medical skill. This would, in turn, seem to preempt a
state malpractice claim, even though ERISA does not preempt such
claims absent a clear manifestation of congressional purpose, New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U. S. 645 . Pp.
231-237. 154 F.3d
362 , reversed.

															SOUTER, J., delivered the opinion for a unanimous Court. Carter G. Phillips argued the cause for
petitioners. With him on the briefs were Virginia A. Seitz and Richard D. Raskin. James A. Feldman argued the cause for the United States
as amicus curiae urging reversal. With him on the brief 214 were Solicitor General Waxman, Deputy Solicitor General
Kneedler, Allen H. Feldman, and Mark S. Flynn. James P. Ginzkey argued the cause and filed a brief for
respondent. *

															JUSTICE SOUTER delivered the opinion of the Court.

															The question in this case is whether treatment decisions made by
a health maintenance organization, acting through its physician
employees, are fiduciary acts within the meaning of the Employee
Retirement Income Security Act of 1974 (ERISA), 88 Stat. 832, as
amended, 29 U. S. C. § 1001 et seq. (1994 ed. and Supp.
III). We hold that they are not.

															*Briefs of amici curiae urging reversal were filed for the
American Association of Health Plans et al. by Stephanie W Kanwit,
Daly D. E. Temchine, Kirsten M. Pullin, Jeffrey Gabardi, Louis
Saccoccio, Stephen A. Bokat, Robin S. Conrad, and Sussan Mahallati
Kysela; and for the Washington Legal Foundation by Lonie A. Hassel,
William F. Hanrahan, Daniel J. Popeo, and Richard A.
Samp.

															Briefs of amici curiae urging affirmance were filed for
the State of Illinois et al. by James E. Ryan, Attorney
General of Illinois, Joel D. Bertocchi, Solicitor General, Jacqueline Zydeck, Assistant Attorney General, and Dan
Schweitzer, and by the Attorneys General for their respective
States as follows: Bill Lockyer of California, M. Jane
Brady of Delaware, Robert A. Butterworth of Florida, Thomas J. Miller of Iowa, Tom Reilly of
Massachusetts, Mike Moore of Mississippi, Jeremiah W
(Jay) Nixon of Missouri, Joseph P. Mazurek of Montana, Frankie Sue Del Papa of Nevada, John J. Farmer, Jr., of New Jersey, Michael F. Easley of North Carolina, Betty D. Montgomery of Ohio, W A. Drew
Edmondson of Oklahoma, Mike Fisher of Pennsylvania, Sheldon Whitehouse of Rhode Island, Paul G. Summers of Tennessee, and John Cornyn of Texas; for
the American College of Legal Medicine et al. by Miles J. Zaremski; for Health Care for All et al. by Wendy E. Parmet, S. Stephen Rosenfeld, and Clare
D. McGorrian; for Health Law, Policy, and Ethics Scholars by Louis R. Cohen, Ruth E. Kent, and Carol J. Banta; and for the Ehlmann Plaintiffs by George
Parker Young. Briefs of amici curiae were filed for the American Medical
Association by Gary W Howell, Thomas Campbell, Michael L. Ile, Anne
M. Murphy, and Leonard A. Nelson; and for the AARP et al. by Mary
Ellen Signorille, Sarah Lenz Lock, Melvin Radowitz, Paula Brantner,
Jeffrey Lewis, and Vicki Gottlich. 215 I

															Petitioners, Carle Clinic Association, P. C., Health
Alliance Medical Plans, Inc., and Carle Health Insurance Management
Co., Inc. (collectively Carle), function as a health maintenance
organization (HMO) organized for profit. Its owners are physicians
providing prepaid medical services to participants whose employers
contract with Carle to provide such coverage. Respondent, Cynthia
Herdrich, was covered by Carle through her husband's employer,
State Farm Insurance Company.

															The events in question began when a Carle physician, petitioner
Lori Pegram,l examined Herdrich, who was experiencing pain in the
midline area of her groin. Six days later, Dr. Pegram discovered a
six by eight centimeter inflamed mass in Herdrich's abdomen.
Despite the noticeable inflammation, Dr. Pegram did not order an
ultrasound diagnostic procedure at a local hospital, but decided
that Herdrich would have to wait eight more days for an ultrasound,
to be performed at a facility staffed by Carle more than 50 miles
away. Before the eight days were over, Herdrich's appendix
ruptured, causing peritonitis. See 154 F.3d
362 , 365, n. 1 (CA71998). Herdrich sued Pegram and Carle in state court for medical
malpractice, and she later added two counts charging statelaw
fraud. Carle and Pegram responded that ERISA preempted the new
counts, and removed the case to federal court,2 where they then
sought summary judgment on the

															1 Although Lori Pegram, a physician owner of Carle, is listed as
a petitioner, it is unclear to us that she retains a direct
interest in the outcome of this case.

															2 Herdrich does not contest the propriety of removal before us,
and we take no position on whether or not the case was properly
removed. As we will explain, Herdrich's amended complaint alleged
ERISA violations, over which the federal courts have jurisdiction,
and we therefore have jurisdiction regardless of the correctness of
the removal. See Grubbs v. General Elec. Credit
Corp., 405 U. S.
699 (1972); Mackay v. Uinta Development Co., 229 U. S. 173 (1913). 216 state-law fraud counts. The District Court granted their motion
as to the second fraud count but granted Herdrich leave to amend
the one remaining. This she did by alleging that provision of
medical services under the terms of the Carle HMO organization,
rewarding its physician owners for limiting medical care, entailed
an inherent or anticipatory breach of an ERISA fiduciary duty,
since these terms created an incentive to make decisions in the
physicians' self-interest, rather than the exclusive interests of
plan participants.3

															3 The specific allegations were these:

															"11. Defendants are fiduciaries with respect to the Plan and
under 29 [D. S. C. § ] 1109(a) are obligated to discharge their
duties with respect to the Plan solely in the interest of the
participants and beneficiaries and

															"a. for the exclusive purpose of:

															"i. providing benefits to participants and their beneficiaries;
and "ii. defraying reasonable expenses of administering the
Plan;

															"b. with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of
an enterprise of a like character and like aims.

															"12. In breach of that duty:

															"a. CARLE owner/physicians are the officers and directors of
RAMP and CRIMCO and receive a year-end distribution, based in large
part upon, supplemental medical expense payments made to CARLE by
RAMP and CRIMCO;

															"b. Both RAMP and CRIMCO are directed and controlled by CARLE
owner/physicians and seek to fund their supplemental medical
expense payments to CARLE:

															"i. by contracting with CARLE owner/physicians to provide the
medical services contemplated in the Plan and then having those
contracted owner/physicians:

															"(1) minimize the use of diagnostic tests;

															"(2) minimize the use of facilities not owned by CARLE; and

															"(3) minimize the use of emergency and non-emergency
consultation and/or referrals to non-contracted physicians.

															"ii. by administering disputed and non-routine health insurance
claims

															and determining:

															"(1) which claims are covered under the Plan and to what extent;
"(2) what the applicable standard of care is;

															"(3) whether a course of treatment is experimental; 217 Herdrich sought relief under 29 U. S. C. § 1l09(a), which
provides that "[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 this subchapter shall be personally
liable to make good to such plan any losses to the plan resulting
from each such breach, and to restore to such plan any profits of
such fiduciary which have been made through use of assets of the
plan by the fiduciary, and shall be subject to such other equitable
or remedial relief as the court may deem appropriate, including
removal of such fiduciary." When Carle moved to dismiss the ERISA count for failure to state
a claim upon which relief could be granted, the District Court
granted the motion, accepting the Magistrate Judge's determination
that Carle was not "involved [in these events] as" an ERISA
fiduciary. App. to Pet. for Cert. 63a. The original malpractice
counts were then tried to a jury, and Herdrich prevailed on both,
receiving $35,000 in compensation for her injury. 154 F. 3d, at
367. She then appealed the dismissal of the ERISA claim to the
Court of Appeals for the Seventh Circuit, which reversed. The court
held that Carle was acting as a fiduciary when its physicians made
the challenged decisions and that Herdrich's allegations were
sufficient to state a claim: "Our decision does not stand for the proposition that the
existence of incentives automatically gives rise to a breach
of fiduciary duty. Rather, we hold that incentives can rise to the level of a breach where, as pleaded here, the fiduciary
trust between plan participants and plan fiduciaries no longer
exists (i. e., where physicians delay providing necessary treatment
to, or withhold ad- "(4) whether a course of treatment is reasonable and customary;
and "(5) whether a medical condition is an emergency." App. to Pet.
for Cert. 85a-86a. 218 ministering proper care to, plan beneficiaries for the sole
purpose of increasing their bonuses)." Id., at 373. We granted certiorari, 527 U. S. 1068 (1999), and now reverse
the Court of Appeals.

															II

															Whether Carle is a fiduciary when it acts through its physician
owners as pleaded in the ERISA count depends on some background of
fact and law about HMOs, medical benefit plans, fiduciary
obligation, and the meaning of Herdrich's allegations.

															A

															Traditionally, medical care in the United States has been
provided on a "fee-for-service" basis. A physician charges so much
for a general physical exam, a vaccination, a tonsillectomy, and so
on. The physician bills the patient for services provided or, if
there is insurance and the doctor is willing, submits the bill for
the patient's care to the insurer, for payment subject to the terms
of the insurance agreement. Cf. R. Rosenblatt, S. Law, & S.
Rosenbaum, Law and the American Health Care System 543-544 (1997)
(hereinafter Rosenblatt) (citing Weiner & de Lissovoy, Razing a
Tower of Babel: A Taxonomy for Managed Care and Health Insurance
Plans, 18 J. Health Politics, Policy & Law 75, 76-78 (Summer
1993)). In a fee-for-service system, a physician's financial
incentive is to provide more care, not less, so long as payment is
forthcoming. The check on this incentive is a physician's
obligation to exercise reasonable medical skill and judgment in the
patient's interest.

															Beginning in the late 1960's, insurers and others developed new
models for health-care delivery, including HMOs. Cf. Rosenblatt
546. The defining feature of an HMO is receipt of a fixed fee for
each patient enrolled under the terms of a contract to provide
specified health care if needed. The HMO thus assumes the financial
risk of providing the bene- 219 fits promised: if a participant never gets sick, the HMO keeps
the money regardless, and if a participant becomes expensively ill,
the HMO is responsible for the treatment agreed upon even if its
cost exceeds the participant's premiums.

															Like other risk-bearing organizations, HMOs take steps to
control costs. At the least, HMOs, like traditional insurers, will
in some fashion make coverage determinations, scrutinizing
requested services against the contractual provisions to make sure
that a request for care falls within the scope of covered
circumstances (pregnancy, for example), or that a given treatment
falls within the scope of the care promised (surgery, for
instance). They customarily issue general guidelines for their
physicians about appropriate levels of care. See id., at
568-570. And they commonly require utilization review (in which
specific treatment decisions are reviewed by a decisionmaker other
than the treating physician) and approval in advance
(precertification) for many types of care, keyed to standards of
medical necessity or the reasonableness of the proposed treatment.
See Andresen, Is Utilization Review the Practice of Medicine?,
Implications for Managed Care Administrators, 19 J. Legal Med. 431,
432 (Sept. 1998). These cost-controlling measures are commonly
complemented by specific financial incentives to physicians,
rewarding them for decreasing utilization of health-care services,
and penalizing them for what may be found to be excessive
treatment, see Rosenblatt 563-565; Iglehart, Health Policy Report:
The American Health Care SystemManaged Care, 327 New England J.
Med. 742, 742-747 (1992). Hence, in an HMO system, a physician's
financial interest lies in providing less care, not more. The check
on this influence (like that on the converse, fee-for-service
incentive) is the professional obligation to provide covered
services with a reasonable degree of skill and judgment in the
patient's interest. See Brief for American Medical Association as Amicus Curiae 17-21. 220 The adequacy of professional obligation to counter financial
self-interest has been challenged no matter what the form of
medical organization. HMOs became popular because fee-for-service
physicians were thought to be providing unnecessary or useless
services; today, many doctors and other observers argue that HMOs
often ignore the individual needs of a patient in order to improve
the HMOs' bottom lines. See, e. g., 154 F. 3d, at
375-378 (citing various critics of HMOs).4 In this case, for
instance, one could argue that Pegram's decision to wait before
getting an ultrasound for Herdrich, and her insistence that the
ultrasound be done at a distant facility owned by Carle, reflected
an interest in limiting the HMO's expenses, which blinded her to
the need for immediate diagnosis and treatment.

															B

															Herdrich focuses on the Carle scheme's provision for a "year-end
distribution," n. 3, supra, to the HMO's physician owners.
She argues that this particular incentive device of annually paying
physician owners the profit resulting from their own decisions
rationing care can distinguish Carle's organization from HMOs
generally, so that reviewing Carle's decisions under a fiduciary
standard as pleaded in Herdrich's complaint would not open the door
to like claims about other HMO structures. While the Court of
Appeals agreed, we think otherwise, under the law as now
written.

															Although it is true that the relationship between sparing
medical treatment and physician reward is not a subtle one under
the Carle scheme, no HMO organization could survive without some
incentive connecting physician reward with treatment rationing. The
essence of an HMO is that salaries and profits are limited by the
HMO's fixed membership fees. See Orentlicher, Paying Physicians
More To Do Less:

															Financial Incentives to Limit Care, 30 U. Rich. L. Rev. 155,

															4 There are, of course, contrary perspectives, and we endorse
neither side of the debate today. 221 174 (1996). This is not to suggest that the Carle provisions are
as socially desirable as some other HMO organizational schemes;
they may not be. See, e. g., Grumbach, Osmond,
Vranigan, Jaffe, & Bindman, Primary Care Physicians' Experience
of Financial Incentives in Managed-Care Systems, 339 New England J.
Med. 1516 (1998) (arguing that HMOs that reward quality of care and
patient satisfaction would be preferable to HMOs that reward only
physician productivity). But whatever the HMO, there must be
rationing and inducement to ration.

															Since inducement to ration care goes to the very point of any
HMO scheme, and rationing necessarily raises some risks while
reducing others (ruptured appendixes are more likely; unnecessary
appendectomies are less so), any legal principle purporting to draw
a line between good and bad HMOs would embody, in effect, a
judgment about socially acceptable medical risk. A valid conclusion
of this sort would, however, necessarily turn on facts to which
courts would probably not have ready access: correlations between
malpractice rates and various HMO models, similar correlations
involving fee-for-service models, and so on. And, of course,
assuming such material could be obtained by courts in litigation
like this, any standard defining the unacceptably risky HMO
structure (and consequent vulnerability to claims like Herdrich's)
would depend on a judgment about the appropriate level of
expenditure for health care in light of the associated malpractice
risk. But such complicated factfinding and such a debatable social
judgment are not wisely required of courts unless for some reason
resort cannot be had to the legislative process, with its
preferable forum for comprehensive investigations and judgments of
social value, such as optimum treatment levels and health-care
expenditure. Cf. Turner Broadcasting System, Inc. v. FCC, 512 U. S.
622 , 665-666 (1994) (plurality opinion) ("Congress is far
better equipped than the judiciary to 'amass and evaluate the vast
amounts of data' bearing upon an issue as complex 222 and dynamic as that presented here" (quoting Walters v. National Assn. of Radiation Survivors, 473 U. S. 305 , 331, n. 12 (1985))); Patsy v. Board of Regents of Fla., 457 U. S. 496 ,513 (1982)
("[T]he relevant policy considerations do not invariably point in
one direction, and there is vehement disagreement over the validity
of the assumptions underlying many of them. The very difficulty of
these policy considerations, and Congress' superior institutional
competence to pursue this debate, suggest that legislative not
judicial solutions are preferable" (footnote omitted)).

															We think, then, that courts are not in a position to derive a
sound legal principle to differentiate an HMO like Carle from other
HMOs.5 For that reason, we proceed on the assumption that the
decisions listed in Herdrich's complaint cannot be subject to a
claim that they violate fiduciary standards unless all such
decisions by all HMOs acting through their owner or employee
physicians are to be judged by the same standards and subject to
the same claims.

															C

															We turn now from the structure of HMOs to the requirements of
ERISA. A fiduciary within the meaning of ERISA must be someone
acting in the capacity of manager, administrator, or financial
adviser to a "plan," see 29 U. S. C. §§ 1002(21)(A)(i)-(iii), and
Herdrich's ERISA count accordingly charged Carle with a breach of
fiduciary duty in discharging its obligations under State Farm's
medical plan. App. to Pet. for Cert. 85a-86a. ERISA's definition of
an employee welfare benefit plan is ultimately circular: "any plan,
fund, or program ... to the extent that such plan, fund, or program
was established ... for the purpose of providing ... through the
purchase of insurance or otherwise ... medical,

															5 They are certainly not capable of making that distinction on a
motion to dismiss; if we accepted the Court of Appeals's reasoning,
complaints against any flavor of HMO would have to proceed at least
to the summary judgment stage. 223 surgical, or hospital care or benefits." § 1002(1)(A). One is
thus left to the common understanding of the word "plan" as
referring to a scheme decided upon in advance, see Webster's New
International Dictionary 1879 (2d ed. 1957); Jacobson &
Pomfret, Form, Function, and Managed Care Torts: Achieving Fairness
and Equity in ERISA Jurisprudence, 35 Houston L. Rev. 985, 1050
(1998). Here the scheme comprises a set of rules that define the
rights of a beneficiary and provide for their enforcement. Rules
governing collection of premiums, definition of benefits,
submission of claims, and resolution of disagreements over
entitlement to services are the sorts of provisions that constitute
a plan. See Hansen v. Continental Ins. Co., 940 F.2d
971 , 977 (CA5 1991). Thus, when employers contract with
an HMO to provide benefits to employees subject to ERISA, the
provisions of documents that set up the HMO are not, as such, an
ERISA plan; but the agreement between an HMO and an employer who
pays the premiums may, as here, provide elements of a plan by
setting out rules under which beneficiaries will be entitled to
care.

															D

															As just noted, fiduciary obligations can apply to managing,
advising, and administering an ERISA plan, the fiduciary function
addressed by Herdrich's ERISA count being the exercise of
"discretionary authority or discretionary responsibility in the
administration of [an ERISA] plan," 29 U. S. C. § 1002(21)(A)(iii).
And as we have already suggested, although Carle is not an ERISA
fiduciary merely because it administers or exercises discretionary
authority over its own HMO business, it may still be a fiduciary if
it administers the plan.

															In general terms, fiduciary responsibility under ERISA is simply
stated. The statute provides that fiduciaries shall discharge their
duties with respect to a plan "solely in the interest of the
participants and beneficiaries," § 1l04(a)(1), that is, "for the
exclusive purpose of (i) providing benefits to 224 participants and their beneficiaries; and (ii) defraying
reasonable expenses of administering the plan," § 1104(a)(1)(A).6
These responsibilities imposed by ERISA have the familiar ring of
their source in the common law of trusts. See Central States,
Southeast & Southwest Areas Pension Fund v. Central Transport, Inc., 472 U. S. 559 , 570 (1985)
("[R]ather than explicitly enumerating all of the powers and
duties of trustees and other fiduciaries, Congress invoked the
common law of trusts to define the general scope of their authority
and responsibility"). Thus, the common law (understood as including
what were once the distinct rules of equity) charges fiduciaries
with a duty of loyalty to guarantee beneficiaries' interests: "The
most fundamental duty owed by the trustee to the beneficiaries of
the trust is the duty of loyalty .... It is the duty of a trustee
to administer the trust solely in the interest of the
beneficiaries." 2A A. Scott & w. Fratcher, Trusts § 170, p. 311
(4th ed. 1987) (hereinafter Scott); see also G. Bogert & G.
Bogert, Law of Trusts and Trustees § 543 (rev. 2d ed. 1980)
("Perhaps the most fundamental duty of a trustee is that he must
display throughout the administration of the trust complete loyalty
to the interests of the beneficiary and must exclude all selfish
interest and all consideration of the interests of third persons"); Central States, supra, at 570-571; Meinhard v. Salmon, 249 N. Y. 458, 464, 164 N. E. 545, 546 (1928)
(Cardozo, J.) ("Many

															6 In addition, fiduciaries must discharge their duties

															"(E) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of
an enterprise of a like character and with like aims; "(C) by diversifying the investments of the plan so as to
minimize the risk of large losses, unless under the circumstances
it is clearly prudent not to do so; and

															"(D) in accordance with the documents and instruments governing
the plan insofar as such documents and instruments are consistent
with the provisions of this subchapter and subchapter III of this
chapter." 29 U. S. C. § l104(a)(1). 225 forms of conduct permissible in a workaday world for those
acting at arm's length, are forbidden to those bound by fiduciary
ties. A trustee is held to something stricter than the morals of
the market place. Not honesty alone, but the punctilio of an honor
the most sensitive, is then the standard of behavior").

															Beyond the threshold statement of responsibility, however, the
analogy between ERISA fiduciary and common law trustee becomes
problematic. This is so because the trustee at common law
characteristically wears only his fiduciary hat when he takes
action to affect a beneficiary, whereas the trustee under ERISA may
wear different hats.

															Speaking of the traditional trustee, Professor Scott's treatise
admonishes that the trustee "is not permitted to place himself in a
position where it would be for his own benefit to violate his duty
to the beneficiaries." 2A Scott § 170, at 311. Under ERISA,
however, a fiduciary may have financial interests adverse to
beneficiaries. Employers, for example, can be ERISA fiduciaries and
still take actions to the disadvantage of employee beneficiaries,
when they act as employers (e. g., firing a beneficiary for
reasons unrelated to the ERISA plan), or even as plan sponsors (e. g., modifying the terms of a plan as allowed by ERISA to
provide less generous benefits). Nor is there any apparent reason
in the ERISA provisions to conclude, as Herdrich argues, that this
tension is permissible only for the employer or plan sponsor, to
the exclusion of persons who provide services to an ERISA plan.

															ERISA does require, however, that the fiduciary with two hats
wear only one at a time, and wear the fiduciary hat when making
fiduciary decisions. See Hughes Aircraft Co. v. Jacobson, 525
U. S. 432 , 443-444 (1999); Varity Corp. v. Howe, 516 U. S. 489 ,
497 (1996). Thus, the statute does not describe fiduciaries simply
as administrators of the plan, or managers or advisers. Instead it
defines an administrator, for example, as a fiduciary only "to the
extent" that he 226 acts in such a capacity in relation to a plan. 29 U. S. C. §
1002(21)(A). In every case charging breach of ERISA fiduciary duty,
then, the threshold question is not whether the actions of some
person employed to provide services under a plan adversely affected
a plan beneficiary's interest, but whether that person was acting
as a fiduciary (that is, was performing a fiduciary function) when
taking the action subject to complaint.

															E

															The allegations of Herdrich's ERISA count that identify the
claimed fiduciary breach are difficult to understand. In this
count, Herdrich does not point to a particular act by any Carle
physician owner as a breach. She does not complain about Pegram's
actions, and at oral argument her counsel confirmed that the ERISA
count could have been brought, and would have been no different, if
Herdrich had never had a sick day in her life. Tr. of Oral Arg.
53-54.

															What she does claim is that Carle, acting through its physician
owners, breached its duty to act solely in the interest of
beneficiaries by making decisions affecting medical treatment while
influenced by the terms of the Carle HMO scheme, under which the
physician owners ultimately profit from their own choices to
minimize the medical services provided. She emphasizes the threat
to fiduciary responsibility in the Carle scheme's feature of a
year-end distribution to the physicians of profit derived from the
spread between subscription income and expenses of care and
administration. App. to Pet. for Cert. 86a.

															The specific payout detail of the plan was, of course, a feature
that the employer as plan sponsor was free to adopt without breach
of any fiduciary duty under ERISA, since an employer's decisions
about the content of a plan are not themselves fiduciary acts. Lockheed Corp. v. Spink, 517 U. S. 882, 887 (1996)
("Nothing in ERISA requires employers to establish employee benefit
plans. Nor does ERISA mandate what kind of benefits employers must
provide if they 227 choose to have such a plan").7 Likewise it is clear that there
was no violation of ERISA when the incorporators of the Carle HMO
provided for the year-end payout. The HMO is not the ERISA plan,
and the incorporation of the HMO preceded its contract with the
State Farm plan. See 29 U. S. C. § l109(b) (no fiduciary liability
for acts preceding fiduciary status).

															The nub of the claim, then, is that when State Farm contracted
with Carle, Carle became a fiduciary under the plan, acting through
its physicians. At once, Carle as fiduciary administrator was
subject to such influence from the yearend payout provision that
its fiduciary capacity was necessarily compromised, and its
readiness to act amounted to anticipatory breach of fiduciary
obligation.

															F

															The pleadings must also be parsed very carefully to understand
what acts by physician owners acting on Carle's behalf are alleged
to be fiduciary in nature.8 It will help to keep

															7 It does not follow that those who administer a particular plan
design may not have difficulty in following fiduciary standards if
the design is awkward enough. A plan might lawfully provide for a
bonus for administrators who denied benefits to every 10th
beneficiary, but it would be difficult for an administrator who
received the bonus to defend against the claim that he had not been
solely attentive to the beneficiaries' interests in carrying out
his administrative duties. The important point is that Herdrich is
not suing the employer, State Farm, and her claim cannot be
analyzed as if she were.

															8 Herdrich argues that Carle is judicially estopped from denying
its fiduciary status as to the relevant decisions, because it
sought and sucessfully defended removal of Herdrich's state action
to the Federal District Court on the ground that it was a fiduciary
with respect to Herdrich's fraud claims. Judicial estoppel
generally prevents a party from prevailing in one phase of a case
on an argument and then relying on a contradictory argument to
prevail in another phase. See Rissetto v. Plumbers & Steamfitters Local 343, 94
F.3d 597 , 605 (CA9 1996). The fraud claims in Herdrich's
initial complaint, however, could be read to allege breach of a
fiduciary obligation to disclose physician incentives to limit
care, whereas 228 two sorts of arguably administrative acts in mind. Cf. Dukes v. U. S. Healthcare, Inc., 57 F.3d
350 , 361 (CA3 1995) (discussing dual
medical/administrative roles of HMOs). What we will call pure
"eligibility decisions" turn on the plan's coverage of a particular
condition or medical procedure for its treatment. "Treatment
decisions," by contrast, are choices about how to go about
diagnosing and treating a patient's condition: given a patient's
constellation of symptoms, what is the appropriate medical
response?

															These decisions are often practically inextricable from one
another, as amici on both sides agree. See Brief for
Washington Legal Foundation as Amicus Curiae 12; Brief for
Health Law, Policy, and Ethics Scholars as Amici Curiae 10. This is so not merely because, under a scheme like Carle's,
treatment and eligibility decisions are made by the same person,
the treating physician. It is so because a great many and possibly
most coverage questions are not simple yesor-no questions, like
whether appendicitis is a covered condition (when there is no
dispute that a patient has appendicitis), or whether acupuncture is
a covered procedure for pain relief (when the claim of pain is
unchallenged). The more common coverage question is a when-and-how
question. AI-

															her amended complaint alleges an obligation to avoid such
incentives. Although we are not presented with the issue here, it
could be argued that Carle is a fiduciary insofar as it has
discretionary authority to administer the plan, and so it is
obligated to disclose characteristics of the plan and of those who
provide services to the plan, if that information affects
beneficiaries' material interests. See, e. g., Glaziers and
Glassworkers Union Local No. 252 Annuity Fund v. Newbridge Securities, Inc., 93 F.3d
1171 , 1179-1181 (CA3 1996) (discussing the disclosure
obligations of an ERISA fiduciary); cf. Varity Corp. v. Howe, 516 U.
S. 489 , 505 (1996) (holding that ERISA fiduciaries may have
duties to disclose information about plan prospects that they have
no duty, or even power, to change).

															But failure to disclose is no longer the allegation of the
amended complaint. Because fiduciary duty to disclose is not
necessarily coextensive with fiduciary responsibility for the
subject matter of the disclosure, Carle is not estopped from
contesting its fiduciary status with respect to the allegations of
the amended complaint. 229 though coverage for many conditions will be clear and various
treatment options will be indisputably compensable, physicians
still must decide what to do in particular cases. The issue may be,
say, whether one treatment option is so superior to another under
the circumstances, and needed so promptly, that a decision to
proceed with it would meet the medical necessity requirement that
conditions the HMO's obligation to provide or pay for that
particular procedure at that time in that case. The Government in
its brief alludes to a similar example when it discusses an HMO's
refusal to pay for emergency care on the ground that the situation
giving rise to the need for care was not an emergency, Brief for
United States as Amicus Curiae 20-21.9 In practical terms,
these eligibility decisions cannot be untangled from physicians'
judgments about reasonable medical treatment, and in the case
before us, Dr. Pegram's decision was one of that sort. She decided
(wrongly, as it turned out) that Herdrich's condition did not
warrant immediate action; the consequence of that medical
determination was that Carle would not cover immediate care,
whereas it would have done so if Dr. Pegram had made the proper
diagnosis and judgment to treat. The eligibility decision and the
treatment decision were inextricably mixed, as they are in
countless medical administrative decisions every day.

															The kinds of decisions mentioned in Herdrich's ERISA count and
claimed to be fiduciary in character are just such mixed
eligibility and treatment decisions: physicians' conclusions about
when to use diagnostic tests; about seeking consultations and
making referrals to physicians and facilities other than Carle's;
about proper standards of care, the ex-

															9 ERISA makes separate provision for suits to receive particular
benefits. See 29 U. S. C. § 1132(a)(1)(B). We have no occasion to
discuss the standards governing such a claim by a patient who, as
in the example in text, was denied reimbursement for emergency
care. Nor have we reason to discuss the interaction of such a claim
with state-law causes of action, see infra, at 235-237. 230 perimental character of a proposed course of treatment, the
reasonableness of a certain treatment, and the emergency character
of a medical condition.

															We do not read the ERISA count, however, as alleging fiduciary
breach with reference to a different variety of administrative
decisions, those we have called pure eligibility determinations,
such as whether a plan covers an undisputed case of appendicitis.
Nor do we read it as claiming breach by reference to discrete
administrative decisions separate from medical judgments; say,
rejecting a claim for no other reason than the HMO's financial
condition. The closest Herdrich's ERISA count comes to stating a
claim for a pure, unmixed eligibility decision is her general
allegation that Carle determines "which claims are covered under
the Plan and to what extent," App. to Pet. for Cert. 86a. But this
vague statement, difficult to interpret in isolation, is given
content by the other elements of the complaint, all of which refer
to decisions thoroughly mixed with medical judgment. Cf. 5A C.
Wright & A. Miller, Federal Practice and Procedure § 1357, pp.
320-321 (1990) (noting that, where specific allegations clarify the
meaning of broader allegations, they may be used to interpret the
complaint as a whole). Any lingering uncertainty about what
Herdrich has in mind is dispelled by her brief, which explains that
this allegation, like the others, targets medical necessity
determinations. Brief for Respondent 19; see also id., at
3.10

															10 Though this case involves a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6), and the complaint should
therefore be construed generously, we may use Herdrich's brief to
clarify allegations in her complaint whose meaning is unclear. See
C. Wright & A. Miller, Federal Practice and Procedure § 1364,
pp. 480-481 (1990); Southern Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group Ltd., 181
F.3d 410 , 428, n. 8 (CA3 1999); Alicke v. MCI
Communications Corp., 111 F.3d
909 , 911 (CADC 1997); Early v. Bankers Life & Cas. Co., 959 F.2d
75 , 79 (CA71992). 231 III A

															Based on our understanding of the matters just discussed, we
think Congress did not intend Carle or any other HMO to be treated
as a fiduciary to the extent that it makes mixed eligibility
decisions acting through its physicians. We begin with doubt that
Congress would ever have thought of a mixed eligibility decision as
fiduciary in nature. At common law, fiduciary duties
characteristically attach to decisions about managing assets and
distributing property to beneficiaries. See Bogert & Bogert,
Law of Trusts and Trustees §§ 551, 741-747, 751-775, 781-799; 2A
Scott §§ 176, 181; 3 id., §§ 188-193; 3A id., § 232.
Trustees buy, sell, and lease investment property, lend and borrow,
and do other things to conserve and nurture assets. They payout
income, choose beneficiaries, and distribute remainders at
termination. Thus, the common law trustee's most defining concern
historically has been the payment of money in the interest of the
beneficiary.

															Mixed eligibility decisions by an HMO acting through its
physicians have, however, only a limited resemblance to the usual
business of traditional trustees. To be sure, the physicians (like
regular trustees) draw on resources held for others and make
decisions to distribute them in accordance with entitlements
expressed in a written instrument (embodying the terms of an ERISA
plan). It is also true that the objects of many traditional private
and public trusts are ultimately the same as the ERISA plans that
contract with HMOs. Private trusts provide medical care to the
poor; thousands of independent hospitals are privately held and
publicly accountable trusts, and charitable foundations make grants
to stimulate the provision of health services. But beyond this
point the resemblance rapidly wanes. Traditional trustees
administer a medical trust by paying out 232 money to buy medical care, whereas physicians making mixed
eligibility decisions consume the money as well. Private trustees
do not make treatment judgments, whereas treatment judgments are
what physicians reaching mixed decisions do make, by definition.
Indeed, the physicians through whom HMOs act make just the sorts of
decisions made by licensed medical practitioners millions of times
every day, in every possible medical setting: HMOs, fee-forservice
proprietorships, public and private hospitals, military field
hospitals, and so on. The settings bear no more resemblance to
trust departments than a decision to operate turns on the factors
controlling the amount of a quarterly income distribution. Thus, it
is at least questionable whether Congress would have had mixed
eligibility decisions in mind when it provided that decisions
administering a plan were fiduciary in nature. Indeed, when
Congress took up the subject of fiduciary responsibility under
ERISA, it concentrated on fiduciaries' financial decisions,
focusing on pension plans, the difficulty many retirees faced in
getting the payments they expected, and the financial mismanagement
that had too often deprived employees of their benefits. See, e. g., S. Rep. No. 93-127, p. 5 (1973); S. Rep. No.
93-383, p. 17 (1973); id., at 95. Its focus was far from the
subject of Herdrich's claim.

															Our doubt that Congress intended the category of fiduciary
administrative functions to encompass the mixed determinations at
issue here hardens into conviction when we consider the
consequences that would follow from Herdrich's contrary view.

															B

															First, we need to ask how this fiduciary standard would affect
HMOs if it applied as Herdrich claims it should be applied, not
directed against any particular mixed decision that injured a
patient, but against HMOs that make mixed decisions in the course
of providing medical care for profit. Recovery would be warranted
simply upon showing that the 233 profit incentive to ration care would generally affect mixed
decisions, in derogation of the fiduciary standard to act solely in
the interest of the patient without possibility of conflict.
Although Herdrich is vague about the mechanics of relief, the one
point that seems clear is that she seeks the return of profit from
the pockets of the Carle HMO's owners, with the money to be given
to the plan for the benefit of the participants. See 29 U. S. C. §
1109(a) (return of all profits is an appropriate ERISA remedy).
Since the provision for profit is what makes the HMO a proprietary
organization, her remedy in effect would be nothing less than
elimination of the for-profit HMO. Her remedy might entail even
more than that, although we are in no position to tell whether and
to what extent nonprofit HMO schemes would ultimately survive the
recognition of Herdrich's theoryY It is enough to recognize that
the Judiciary has no warrant to precipitate the upheaval that would
follow a refusal to dismiss Herdrich's ERISA claim. The fact is
that for over 27 years the Congress of the United States has
promoted the formation of HMO practices. The Health Maintenance
Organization Act of 1973, 87 Stat. 914, 42 U. S. C. § 300e et
seq., allowed the formation of HMOs that assume financial risks
for the provision of health-care services, and Congress has amended
the Act several times, most recently in 1996. See 110 Stat. 1976,
42 U. S. C. § 300e (1994 ed., Supp. III). If Congress wishes to
restrict its approval of HMO practice to certain

															11 Herdrich's theory might well portend the end of nonprofit
HMOs as well, since those HMOs can set doctors' salaries. A claim
against a nonprofit HMO could easily allege that salaries were
excessively high because they were funded by limiting care, and
some nonprofits actually use incentive schemes similar to that
challenged here, see Pulvers v. Kaiser Foundation Health
Plan, 99 Cal. App. 3d 560, 565, 160 Cal. Rptr. 392, 393-394
(1979) (rejecting claim against nonprofit HMO based on physician
incentives). See Brody, Agents Without Principals: The Economic
Convergence of the Nonprofit and For-Profit Organizational Forms,
40 N. Y. L. S. L. Rev. 457, 493, and n. 152 (1996) (discussing ways
in which nonprofit health providers may reward physician
employees). 234 preferred forms, it may choose to do so. But the Federal
Judiciary would be acting contrary to the congressional policy of
allowing HMO organizations if it were to entertain an ERISA
fiduciary claim portending wholesale attacks on existing HMOs
solely because of their structure, untethered to claims of concrete
harm.

															C

															The Court of Appeals did not purport to entertain quite the
broadside attack that Herdrich's ERISA claim thus entails, see 154
F. 3d, at 373, and the second possible consequence of applying the
fiduciary standard that requires our attention would flow from the
difficulty of extending it to particular mixed decisions that on
Herdrich's theory are fiduciary in nature.

															The fiduciary is, of course, obliged to act exclusively in the
interest of the beneficiary, but this translates into no rule
readily applicable to HMO decisions or those of any other variety
of medical practice. While the incentive of the HMO physician is to
give treatment sparingly, imposing a fiduciary obligation upon him
would not lead to a simple default rule, say, that whenever it is
reasonably possible to disagree about treatment options, the
physician should treat aggressively. After all, HMOs came into
being because some groups of physicians consistently provided more
aggressive treatment than others in similar circumstances, with
results not perceived as justified by the marginal expense and risk
associated with intervention; excessive surgery is not in the
patient's best interest, whether provided by fee-for-service
surgeons or HMO surgeons subject to a default rule urging them to
operate. Nor would it be possible to translate fiduciary duty into
a standard that would allow recovery from an HMO whenever a mixed
decision influenced by the HMO's financial incentive resulted in a
bad outcome for the patient. It would be so easy to allege, and to
find, an economic influence when sparing care did not lead to a
well patient, that 235 any such standard in practice would allow a factfinder to
convert an HMO into a guarantor of recovery.

															These difficulties may have led the Court of Appeals to try to
confine the fiduciary breach to cases where "the sole purpose" of
delaying or withholding treatment was to increase the physician's
financial reward, ibid. But this attempt to confine mixed
decision claims to their most egregious examples entails erroneous
corruption of fiduciary obligation and would simply lead to further
difficulties that we think fatal. While a mixed decision made
solely to benefit the HMO or its physician would violate a
fiduciary duty, the fiduciary standard condemns far more than that,
in its requirement of "an eye single" toward beneficiaries'
interests, Donovan v. Bierwirth, 680 F.2d
263 , 271 (CA2 1982). But whether under the Court of
Appeals's rule or a straight standard of undivided loyalty, the
defense of any HMO would be that its physician did not act out of
financial interest but for good medical reasons, the plausibility
of which would require reference to standards of reasonable and
customary medical practice in like circumstances. That, of course,
is the traditional standard of the common law. See W. Keeton, D.
Dobbs, R. Keeton, & D. Owens, Prosser and Keeton on Law of
Torts § 32, pp. 188-189 (5th ed. 1984). Thus, for all practical
purposes, every claim of fiduciary breach by an HMO physician
making a mixed decision would boil down to a malpractice claim, and
the fiduciary standard would be nothing but the malpractice
standard traditionally applied in actions against physicians.

															What would be the value to the plan participant of having this
kind of ERISA fiduciary action? It would simply apply the law
already available in state courts and federal diversity actions
today, and the formulaic addition of an allegation of financial
incentive would do nothing but bring the same claim into a federal
court under federal-question jurisdiction. It is true that in
States that do not allow malpractice actions against HMOs the
fiduciary claim would offer a plaintiff a 236 further defendant to be sued for direct liability, and in some
cases the HMO might have a deeper pocket than the physician. But we
have seen enough to know that ERISA was not enacted out of concern
that physicians were too poor to be sued, or in order to federalize
malpractice litigation in the name of fiduciary duty for any other
reason. It is difficult, in fact, to find any advantage to
participants across the board, except that allowing them to bring
malpractice actions in the guise of federal fiduciary breach claims
against HMOs would make them eligible for awards of attorney's fees
if they won. See 29 U. S. C. § 1132(g)(1). But, again, we can be
fairly sure that Congress did not create fiduciary obligations out
of concern that state plaintiffs were not suing often enough, or
were paying too much in legal fees.

															The mischief of Herdrich's position would, indeed, go further
than mere replication of state malpractice actions with HMO
defendants. For not only would an HMO be liable as a fiduciary in
the first instance for its own breach of fiduciary duty committed
through the acts of its physician employee, but the physician
employee would also be subject to liability as a fiduciary on the
same basic analysis that would charge the HMO. The physician who
made the mixed administrative decision would be exercising
authority in the way described by ERISA and would therefore be
deemed to be a fiduciary. See 29 CFR §§2509.75-5, Question D-1;
2509.75-8, Question D-3 (1993) (stating that an individual who
exercises authority on behalf of an ERISA fiduciary in interpreting
and administering a plan will be deemed a fiduciary). Hence the
physician, too, would be subject to suit in federal court applying
an ERISA standard of reasonable medical skill. This result, in
turn, would raise a puzzling issue of preemption. On its face,
federal fiduciary law applying a malpractice standard would seem to
be a prescription for preemption of state malpractice law, since
the new ERISA cause of action would cover the subject of a
state-law malpractice claim. See 29 U. S. C. § 1144 (preempting
state 237 laws that "relate to [an] employee benefit plan"). To be sure, New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U. S. 645 , 654-655
(1995), throws some cold water on the preemption theory; there, we
held that, in the field of health care, a subject of traditional
state regulation, there is no ERISA preemption without clear
manifestation of congressional purpose. But in that case the
convergence of state and federal law was not so clear as in the
situation we are positing; the state-law standard had not been
subsumed by the standard to be applied under ERISA. We could
struggle with this problem, but first it is well to ask, again,
what would be gained by opening the federal courthouse doors for a
fiduciary malpractice claim, save for possibly random fortuities
such as more favorable scheduling, or the ancillary opportunity to
seek attorney's fees. And again, we know that Congress had no such
haphazard boons in prospect when it defined the ERISA fiduciary,
nor such a risk to the efficiency of federal courts as a new
fiduciary malpractice jurisdiction would pose in welcoming such
unheard-of fiduciary litigation.

															IV

															We hold that mixed eligibility decisions by HMO physicians are
not fiduciary decisions under ERISA. Herdrich's ERISA count fails
to state an ERISA claim, and the judgment of the Court of Appeals
is reversed.

															It is so ordered.

Summary: In the case of Pegram et al. v. Herdrich, the Supreme Court ruled that health maintenance organizations (HMOs) and their physician owners are not considered fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA) when making mixed treatment and eligibility decisions. The case involved a patient, Herdrich, who sued her HMO, Carle, for fraud after a delay in receiving an ultrasound led to a ruptured appendix and subsequent health complications. Herdrich argued that Carle's incentive structure, which rewarded physician owners for limiting medical care, created an inherent breach of ERISA fiduciary duty. However, the Court found that the defining feature of an HMO is its receipt of a fixed fee per patient, and that cost-control measures and financial incentives for physicians are common features of HMO schemes. The Court also noted that any legal principle distinguishing Carle's incentive scheme from those of other HMOs would raise issues of preemption with state malpractice law. Ultimately, the Court held that mixed eligibility decisions by HMO physicians are not fiduciary decisions under ERISA, and Herdrich's claim was dismissed.


OCTOBER TERM, 2000

															Syllabus

															CLARK COUNTY SCHOOL DISTRICT v. BREEDEN

															ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT

															No. 00-866. Decided April 23, 2001

															At a meeting with respondent and a male employee to review job
applicants' psychological evaluation reports, respondent's male
supervisor read aloud a sexually explicit remark that one applicant
had made to a co-worker, looked at respondent, and stated, "I don't
know what that means." The other employee replied, "Well, I'll tell
you later," and both men chuckled. Respondent complained about the
comment to the offending supervisor and other officials of their
employer, petitioner Clark County School District. Pursuant to
Title VII of the Civil Rights Act of 1964, she subsequently filed a
42 U. S. C. § 2000e-3(a) retaliation claim against petitioner,
asserting that she was punished for these complaints and also for
filing charges against petitioner with the Nevada Equal Rights
Commission and the Equal Employment Opportunity Commission and for
filing the present suit. The District Court granted petitioner
summary judgment, but the Ninth Circuit reversed. Held: Respondent's claims are insufficient to withstand a
summary judgment motion. No one could reasonably believe that the
incident of which respondent complained violated Title VII. Sexual
harassment is actionable under Title VII only if it is so severe or
pervasive as to alter the conditions of the victim's employment and
create an abusive working environment. Faragher v. Boca
Raton, 524 U. S.
775 , 786. Simple teasing, offhand comments, and isolated
incidents (unless extremely serious) will not amount to
discriminatory changes in employment terms and conditions. The
actions of respondent's supervisor and co-worker are at worst an
isolated incident that cannot remotely be considered "extremely
serious." Regarding respondent's claim that she was punitively
transferred for filing charges and the present suit, she failed to
show the requisite causal connection between her protected
activities and the transfer. Petitioner did not implement the
transfer until 20 months after respondent filed her charges, and it
was contemplating the transfer before it learned of her suit.

															Certiorari granted; 232 F.3d
893 , reversed. 269 PER CURIAM.

															Under Title VII of the Civil Rights Act of 1964, 78 Stat. 255,
as amended, 42 U. S. C. § 2000e-3(a), it is unlawful "for an
employer to discriminate against any of his employees ... because
[the employee] has opposed any practice made an unlawful employment
practice by [Title VII], or because [the employee] has made a
charge, testified, assisted, or participated in any manner in an
investigation, proceeding, or hearing under [Title VII]." In 1997,
respondent filed a § 2000e-3(a) retaliation claim against
petitioner Clark County School District. The claim as eventually
amended alleged that petitioner had taken two separate adverse
employment actions against her in response to two different
protected activities in which she had engaged. The District Court
granted summary judgment to petitioner, No. CV-S-97-365-DWH(RJJ)
(D. Nev., Feb. 9, 1999), but a panel of the Court of Appeals for
the Ninth Circuit reversed over the dissent of Judge Fernandez, No.
99-15522,2000 WL 991821 (July 19, 2000) (per curiam) (unpublished),
judgt. order reported at 232 F.3d
893 . We grant the writ of certiorari and reverse.

															On October 21, 1994, respondent's male supervisor met with
respondent and another male employee to review the psychological
evaluation reports of four job applicants. The report for one of
the applicants disclosed that the applicant had once commented to a
co-worker, "I hear making love to you is like making love to the
Grand Canyon." Brief in Opposition 3. At the meeting respondent's
supervisor read the comment aloud, looked at respondent and stated,
"I don't know what that means." Ibid. The other employee
then said, "Well, I'll tell you later," and both men chuckled. Ibid. Respondent later complained about the comment to the
offending employee, to Assistant Superintendent George Ann Rice,
the employee's supervisor, and to another assistant 270 superintendent of petitioner. Her first claim of retaliation
asserts that she was punished for these complaints.

															The Court of Appeals for the Ninth Circuit has applied §
2000e-3(a) to protect employee "oppos[ition]" not just to practices
that are actually "made ... unlawful" by Title VII, but also to
practices that the employee could reasonably believe were unlawful.
2000 WL 991821, at *1 (stating that respondent's opposition was
protected "if she had a reasonable, good faith belief that the
incident involving the sexually explicit remark constituted
unlawful sexual harassment"); Trent v. Valley Electric
Assn. Inc., 41 F.3d
524 , 526 (CA9 1994). We have no occasion to rule on the
propriety of this interpretation, because even assuming it is
correct, no one could reasonably believe that the incident
recounted above violated Title VII.

															Title VII forbids actions taken on the basis of sex that
"discriminate against any individual with respect to his
compensation, terms, conditions, or privileges of employment." 42
U. S. C. § 2000e-2(a)(1). Just three Terms ago, we reiterated, what
was plain from our previous decisions, that sexual harassment is
actionable under Title VII only if it is "so 'severe or pervasive'
as to 'alter the conditions of [the victim's] employment and create
an abusive working environment.'" Faragher v. Boca
Raton, 524 U. S.
775 , 786 (1998) (quoting Meritor Savings Bank, FSB v. Vinson, 477 U.
S. 57 , 67 (1986) (some internal quotation marks omitted)). See
also Burlington Industries, Inc. v. Ellerth, 524 U. S. 742 , 752 (1998)
(Only harassing conduct that is "severe or pervasive" can produce a
"constructive alteratio[n] in the terms or conditions of
employment"); Oncale v. Sundowner Offshore Services,
Inc., 523 U. S.
75 , 81 (1998) (Title VII "forbids only behavior so objectively
offensive as to alter the 'conditions' of the victim's
employment"). Workplace conduct is not measured in isolation;
instead, "whether an environment is sufficiently hostile or
abusive" must be judged "by 'looking at all the circumstances,'
including the 'frequency of the dis- 271 criminatory conduct; its severity; whether it is physically
threatening or humiliating, or a mere offensive utterance; and
whether it unreasonably interferes with an employee's work
performance.'" Faragher v. Boca Raton, supra, at
787-788 (quoting Harris v. Forklift Systems, Inc., 510 U. S. 17 ,23
(1993)). Hence, "[a] recurring point in [our] opinions is that
simple teasing, offhand comments, and isolated incidents (unless
extremely serious) will not amount to discriminatory changes in the
'terms and conditions of employment.'" Faragher v. Boca
Raton, supra, at 788 (citation and internal quotation marks
omitted).

															No reasonable person could have believed that the single
incident recounted above violated Title VII's standard. The
ordinary terms and conditions of respondent's job required her to
review the sexually explicit statement in the course of screening
job applicants. Her co-workers who participated in the hiring
process were subject to the same requirement, and indeed, in the
District Court respondent "conceded that it did not bother or upset
her" to read the statement in the file. App. to Pet. for Cert. 15
(District Court opinion). Her supervisor's comment, made at a
meeting to review the application, that he did not know what the
statement meant; her co-worker's responding comment; and the
chuckling of both are at worst an "isolated inciden[t]" that cannot
remotely be considered "extremely serious," as our cases require, Faragher v. Boca Raton, supra, at 788. The holding of
the Court of Appeals to the contrary must be reversed.

															Besides claiming that she was punished for complaining to
petitioner's personnel about the alleged sexual harassment,
respondent also claimed that she was punished for filing charges
against petitioner with the Nevada Equal Rights Commission and the
Equal Employment Opportunity Commission (EEOC) and for filing the
present suit. Respondent filed her lawsuit on April 1, 1997; on
April 10, 1997, respondent's supervisor, Assistant Superintendent
Rice, "mentioned 272 to Allin Chandler, Executive Director of plaintiff's union, that
she was contemplating transferring plaintiff to the position of
Director of Professional Development Education," App. to Pet. for
Cert. 11-12 (District Court opinion); and this transfer was
"carried through" in May, Brief in Opposition 8. In order to show,
as her defense against summary judgment required, the existence of
a causal connection between her protected activities and the
transfer, respondent "relie[d] wholly on the temporal proximity of
the filing of her complaint on April 1, 1997 and Rice's statement
to plaintiff's union representative on April 10, 1997 that she was
considering transferring plaintiff to the [new] position." App. to
Pet. for Cert. 21-22 (District Court opinion). The District Court,
however, found that respondent did not serve petitioner with the
summons and complaint until April 11, 1997, one day after Rice had made the statement, and Rice filed an affidavit stating
that she did not become aware of the lawsuit until after April 11,
a claim that respondent did not challenge. Hence, the court
concluded, respondent "ha[d] not shown that any causal connection
exists between her protected activities and the adverse employment
decision." Id., at 21.

															The Court of Appeals reversed, relying on two facts: The EEOC
had issued a right-to-sue letter to respondent three months before
Rice announced she was contemplating the transfer, and the actual
transfer occurred one month after Rice learned of respondent's
suit. 2000 WL 991821, at *3. The latter fact is immaterial in light
of the fact that petitioner concededly was contemplating the
transfer before it learned of the suit. Employers need not suspend
previously planned transfers upon discovering that a Title VII suit
has been filed, and their proceeding along lines previously
contemplated, though not yet definitively determined, is no
evidence whatever of causality.

															As for the right-to-sue letter: Respondent did not rely on that
letter in the District Court and did not mention it in 273 her opening brief on appeal. Her demonstration of causality all
along had rested upon the connection between the transfer and the
filing of her lawsuit-to which connection the letter was
irrelevant. When, however, petitioner's answering brief in the
Court of Appeals demonstrated conclusively the lack of causation
between the filing of respondent's lawsuit and Rice's decision,
respondent mentioned the letter for the first time in her reply
brief, Reply Brief in No. 99-15522 (CA9) pp. 9-10. The Ninth
Circuit's opinion did not adopt respondent's utterly implausible
suggestion that the EEOC's issuance of a right-to-sue
letter-an action in which the employee takes no part-is a protected
activity of the employee, see 42 U. S. C. § 2000e-3(a). Rather, the
opinion suggests that the letter provided petitioner with its first
notice of respondent's charge before the EEOC, and hence allowed
the inference that the transfer proposal made three months later
was petitioner's reaction to the charge. See 2000 WL 991821, at *3.
This will not do.

															First, there is no indication that Rice even knew about the
right-to-sue letter when she proposed transferring respondent. And
second, if one presumes she knew about it, one must also presume
that she (or her predecessor) knew almost two years earlier about the protected action (filing of the EEOC complaint) that the
letter supposedly disclosed. (The complaint had been filed on
August 23, 1995, and both Title VII and its implementing
regulations require that an employer be given notice within 10 days
of filing, 42 U. S. C. §§ 2000e-5(b), (e)(l); 29 CFR § 1601.14
(2000).) The cases that accept mere temporal proximity between an
employer's knowledge of protected activity and an adverse
employment action as sufficient evidence of causality to establish
a prima facie case uniformly hold that the temporal proximity must
be "very close," O'Neal v. Ferguson Constr. Co., 237 F.3d
1248 , 1253 (CAlO 2001). See, e. g., Richmond v. Oneok, Inc., 120 F.3d
205 , 209 (CAlO 1997) (3-month period insufficient); Hughes v. Derwinski, 967 F.2d
1168 , 1174-1175 (CA7 1992) 274 (4-month period insufficient). Action taken (as here) 20 months
later suggests, by itself, no causality at all.

															In short, neither the grounds that respondent presented to the
District Court, nor the ground she added on appeal, nor even the
ground the Court of Appeals developed on its own, sufficed to
establish a dispute substantial enough to withstand the motion for
summary judgment. The District Court's granting of that motion was
correct. The judgment of the Court of Appeals is reversed.

															It is so ordered.

Summary: Clark County School District v. Breeden (2001) concerned a female employee's retaliation claim against her employer under Title VII of the Civil Rights Act of 1964. The employee, Breeden, alleged that she was punished for complaining about a sexually explicit remark made by her male supervisor during a meeting and for filing charges with the relevant employment commissions. The Supreme Court held that Breeden's claims were insufficient to withstand a summary judgment motion, as no one could reasonably believe that the incident she complained about violated Title VII. The Court also found that she failed to show a causal connection between her protected activities and her transfer, as the transfer occurred 20 months after she filed her charges and the employer was already contemplating the transfer beforehand. The Court reversed the lower court's decision.