USPI Secures Venue Transfer in Tobacco Surcharge Lawsuit
Table of Contents
- 1. USPI Secures Venue Transfer in Tobacco Surcharge Lawsuit
- 2. Key Arguments and Court’s Decision
- 3. Understanding Venue Transfer Laws
- 4. Legal Representation
- 5. The Rise of Tobacco Surcharges and Legal Challenges
- 6. Frequently Asked Questions About Tobacco Surcharges
- 7. What specific ERISA regulations govern the imposition of tobacco surcharges on employee health plans?
- 8. Gibson Dunn Secures Venue Transfer in ERISA Tobacco Surcharge Case Against United Surgical Partners International
- 9. The Core of the Dispute: ERISA and Tobacco Surcharges
- 10. Gibson Dunn’s Accomplished Venue Transfer Strategy
- 11. Understanding ERISA and Tobacco Surcharges: A Deeper Dive
- 12. Implications for Employers and Health Plan Sponsors
- 13. Real-World Examples of ERISA Litigation Related to Surcharges
- 14. The Role of Gibson Dunn in Complex Litigation
october 30, 2025
United Surgical Partners International Inc. (USPI) achieved a significant legal victory on October 29, 2025, as a court approved its request to move a lawsuit to the Northern District of Texas. The case had originally been filed in the Eastern District of Kentucky. The ruling, based on provisions within 28 U.S.C. § 1406(a) and alternatively § 1404(a), represents a win for the company’s legal strategy.
The lawsuit was initiated by Dara Janosky, a former USPI employee, who claims the company improperly implemented a tobacco surcharge within its employee health benefits plan. Janosky alleges a breach of fiduciary duty as defined by 29 U.S.C. § 1104, and a violation of ERISA‘s anti-discrimination stipulations found in 29 U.S.C. § 1182. This case is indicative of a broader trend where health plan members are increasingly challenging tobacco-related surcharges.
Key Arguments and Court’s Decision
USPI operates without a presence in Kentucky, and the only basis for the Eastern District of Kentucky’s jurisdiction was the Plaintiff’s residence. Despite established ERISA venue rules, USPI successfully argued for a transfer to the Northern District of Texas, where the company headquarters and plan administration are located. The Court largely adopted the arguments presented by the legal team representing USPI.
A crucial point underscored by the court – and emphasized by USPI’s counsel – was that the Plaintiff did not allege a breach of contract regarding the plan itself. Rather, the claim centered on the legality of the plan’s tobacco surcharge. The Court steadfast that the alleged violation occurred where plan decisions were made, not where the Plaintiff lived. This distinction proved pivotal in justifying the venue transfer under both 28 U.S.C. § 1406(a) and 28 U.S.C. § 1404(a).
Understanding Venue Transfer Laws
Venue transfer, governed by statutes like 28 U.S.C. § 1406(a) and § 1404(a), is a procedural mechanism allowing cases to be moved to a more appropriate court. Section 1406(a) permits transfer when the original venue is inconvenient. Section 1404(a) allows transfer if a different venue is more suitable for the case, even if the original venue is proper. These laws aim to streamline litigation and ensure fairness for all parties involved.
| Statute | Basis for Transfer |
|---|---|
| 28 U.S.C. § 1406(a) | Inconvenience of the original venue. |
| 28 U.S.C. § 1404(a) | Suitability of an alternative venue. |
Did You Know? According to the Kaiser Family Foundation, nearly 9% of workers in employer-sponsored health plans faced tobacco surcharges in 2023, a figure steadily increasing as companies seek to encourage healthier lifestyles.
Legal Representation
The Gibson Dunn team securing this outcome for USPI included partners Karl Nelson and Ashley Johnson, along wiht associates Jennafer tryck, Ellen Smith Yost, and Hannah Wilkens. Their expertise in ERISA litigation and procedural law was instrumental in achieving this favorable result.
Pro Tip: When assessing potential legal challenges to employee benefits plans, it’s crucial to consider the location where key decisions are made, as this can substantially impact venue selection.
The Rise of Tobacco Surcharges and Legal Challenges
Tobacco surcharges, implemented by employers and health plans, add an additional cost to health insurance premiums for individuals who use tobacco products. The intention is to incentivize employees to quit smoking or avoid tobacco use, thereby reducing healthcare costs. Though,these surcharges have faced increasing legal scrutiny,with plaintiffs arguing they violate ERISA and potentially discriminate against tobacco users.
the legal arguments frequently enough center on whether such surcharges are permissible under ERISA’s wellness program provisions and whether they disproportionately impact certain groups. Courts are grappling with balancing the employer’s right to manage healthcare costs with the potential for unfair or discriminatory practices. As of late 2024, there’s a growing body of case law clarifying the boundaries of permissible tobacco surcharges, and this trend is expected to continue.
Frequently Asked Questions About Tobacco Surcharges
- What is a tobacco surcharge? A tobacco surcharge is an extra cost added to health insurance premiums for individuals who use tobacco products.
- Is a tobacco surcharge legal? The legality of tobacco surcharges is complex and depends on specific plan details and applicable laws.
- What is ERISA’s role in tobacco surcharge disputes? ERISA governs employee benefit plans and provides a framework for resolving disputes related to these plans, including tobacco surcharges.
- Can an employer force employees to quit smoking? Employers cannot force employees to quit smoking but can incentivize it through wellness programs and surcharges, within legal limits.
- What are the potential consequences of illegal tobacco surcharges? Illegal surcharges can lead to legal challenges, fines, and required plan adjustments.
What specific ERISA regulations govern the imposition of tobacco surcharges on employee health plans?
Gibson Dunn Secures Venue Transfer in ERISA Tobacco Surcharge Case Against United Surgical Partners International
The Core of the Dispute: ERISA and Tobacco Surcharges
The case centers around allegations that United Surgical Partners International (USPI) improperly imposed tobacco surcharges on employee health plan participants, violating the Employee Retirement Income Security Act (ERISA). These ERISA tobacco surcharges have become increasingly common, but are subject to strict legal scrutiny. the plaintiffs argued the surcharges where unlawfully applied, leading to a dispute over the appropriate venue for the litigation. this case highlights the growing legal challenges surrounding wellness programs and health plan design that incorporate tobacco use.
Gibson Dunn’s Accomplished Venue Transfer Strategy
Gibson Dunn, representing USPI, successfully argued for a transfer of venue from the original location to a more favorable jurisdiction. The firm’s strategy focused on demonstrating that the core events giving rise to the claim – the administration of the health plan and the calculation of surcharges – occurred in a different district.
Here’s a breakdown of the key arguments presented by Gibson Dunn:
* Convenience of Parties: The majority of witnesses and evidence were located outside the original jurisdiction,making trial readiness considerably more burdensome.
* Forum Selection Clause: While not directly applicable, the firm emphasized the importance of respecting the contractual framework governing the health plan.
* Local Interest: The primary connection to the case was demonstrably stronger in the new proposed venue.
* efficient Administration of justice: Transferring the case would streamline the litigation process and avoid unneeded duplication of effort.
This successful venue transfer is a meaningful win for USPI and demonstrates Gibson Dunn’s expertise in ERISA litigation and complex commercial disputes.
Understanding ERISA and Tobacco Surcharges: A Deeper Dive
ERISA governs most employer-sponsored health plans in the United States. While ERISA allows employers to promote employee health, any wellness program or surcharge must comply with specific regulations. Tobacco surcharges, in particular, are subject to limitations.
Key considerations include:
- The 75% Rule: The surcharge cannot exceed 75% of the health plan cost.
- Alternative Standards: Employers must offer a reasonable alternative standard,such as a wellness program,for employees who wish to avoid the surcharge.
- HIPAA Compliance: The program must comply with the Health Insurance Portability and Accountability Act (HIPAA) regarding the privacy of health information.
Failure to adhere to these rules can lead to costly ERISA lawsuits and potential penalties.
Implications for Employers and Health Plan Sponsors
This case serves as a crucial reminder for employers and health plan sponsors implementing or maintaining tobacco surcharges.
* Review plan Documents: Ensure your health plan documents clearly outline the terms of any tobacco surcharge, including the amount, alternative standards, and compliance with ERISA and HIPAA.
* Conduct Regular Audits: Periodically audit your wellness programs and surcharges to ensure ongoing compliance with evolving regulations.
* Seek Legal Counsel: Consult with experienced ERISA attorneys to proactively address potential legal risks and ensure your programs are defensible.
* Documentation is Key: Maintain thorough documentation of all aspects of your wellness program, including the rationale for the surcharge, the alternative standards offered, and the data used to calculate the surcharge.
several similar cases have emerged in recent years, highlighting the increasing scrutiny of employer wellness programs. Such as, in Equal Employment Opportunity Commission v. Orion Energy Solutions, the EEOC challenged a wellness program that required employees to undergo medical examinations and disclose personal health information, arguing it violated the Americans with Disabilities Act (ADA). While the case settled, it underscored the importance of balancing employee health promotion with legal compliance. Another case, Flanagan v. Flanagan, involved a dispute over the reasonableness of a tobacco surcharge and the availability of alternative standards. These cases demonstrate the diverse legal challenges employers face when implementing employee benefits programs.
The Role of Gibson Dunn in Complex Litigation
Gibson Dunn is a nationally recognized law firm with a strong track record in complex litigation, especially in the areas of ERISA, employee benefits, and healthcare law. Their success in securing the venue transfer in the USPI case further solidifies their reputation as a leading advocate for employers facing challenging legal issues. The firm’s expertise in navigating the intricacies of ERISA regulations and effectively presenting legal arguments was instrumental in achieving this favorable outcome.
