Seaway Food Town Inc v. Medical Mutl of OH ( 2003 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206 2 Seaway Food Town, Inc. v. No. 01-4285
ELECTRONIC CITATION: 2003 FED App. 0376P (6th Cir.) Medical Mutual of Ohio
File Name: 03a0376p.06
_________________
UNITED STATES COURT OF APPEALS COUNSEL
FOR THE SIXTH CIRCUIT ARGUED: Anastasia Kay Hanson, SPENGLER
_________________ NATHANSON, P.L.L., Toledo, Ohio, for Appellant. James
D. Thomas, SQUIRE, SANDERS & DEMPSEY, Cleveland,
SEAWAY FOOD TOWN , INC. X Ohio, for Appellee. ON BRIEF: Anastasia Kay Hanson,
Plaintiff-Appellant, - Lisa E. Pizza, Theodore M. Rowen, SPENGLER
- NATHANSON, P.L.L., Toledo, Ohio, for Appellant. James
- No. 01-4285 D. Thomas, Christopher R. Shea, SQUIRE, SANDERS &
v. - DEMPSEY, Cleveland, Ohio, for Appellee.
>
,
MEDICAL MUTUAL OF OHIO , _________________
-
Defendant-Appellee. -
OPINION
- _________________
-
N CLAY, Circuit Judge. Plaintiff, Seaway Food Town, Inc.
Appeal from the United States District Court (“Seaway”), filed suit against Defendant, Medical Mutual of
for the Northern District of Ohio at Toledo. Ohio (“Medical Mutual”), formerly known as Blue Cross &
No. 98-07576—James G. Carr, District Judge. Blue Shield Mutual of Ohio (“BC/BS”), alleging that BC/BS
breached its fiduciary duties to Seaway in violation of the
Argued: May 1, 2003 Employee Retirement Income Security Act of 1974
(“ERISA”), as amended, 29 U.S.C. §§ 1001-1461. Seaway
Decided and Filed: October 23, 2003 appeals from the district court’s order entered on October 10,
2001, granting Medical Mutual’s motion for summary
Before: CLAY and GIBBONS, Circuit Judges; judgment and denying Seaway’s motion for summary
CLELAND, District Judge.* judgment. For the reasons set forth below, we AFFIRM the
district court’s order.
*
The Ho norable Robert H. Cleland, United States District Judge for
the Eastern District of Michigan, sitting by designation.
1
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Medical Mutual of Ohio Medical Mutual of Ohio
STATEMENT OF FACTS resulting from the provider discounts, and that BC/BS did not
owe any fiduciary duties to Seaway during negotiations for
Procedural History the contract terms. Seaway, on the other hand, argued that the
contract terms were ambiguous, and that, because BC/BS was
On September 28, 1998, Seaway filed a complaint against administering Seaway’s plan, BC/BS owed fiduciary duties
Medical Mutual alleging that BC/BS breached its fiduciary to Seaway throughout their contractual relationship. The
duties with respect to its administration of Seaway’s district court conducted a hearing on the parties’ motions for
employee health benefit plan (“plan”) in violation of ERISA. summary judgment on September 20, 2001.
Specifically, Seaway alleges that BC/BS breached its
fiduciary duties to Seaway by failing to (1) use accurate data By order issued on October 10, 2001, the district court
to estimate the amount of discounts (hereafter referred to as granted Medical Mutual’s motion for summary judgment and
“provider discounts”1) BC/BS expected to receive from denied Seaway’s motion for summary judgment. The district
healthcare providers, (2) disclose the true nature and extent of court held that BC/BS did not act as an ERISA fiduciary
the provider discounts it actually received, and (3) pass along during negotiations with Seaway and that unambiguous
to Seaway the provider discounts it actually received. contract terms authorized BC/BS to retain any funds resulting
Seaway also alleged Ohio common law claims of breach of from the provider discounts for its sole benefit. The district
contract and conversion. Seaway sought various relief, court therefore concluded that Seaway was not entitled to a
including restitution in the amount of provider discounts pass-through of actual provider discounts. The district court
retained by BC/BS. also held that Seaway’s state law claims were preempted by
ERISA. On November 7, 2001, Seaway filed a notice of
Medical Mutual filed an answer to the complaint on appeal, contesting the ruling that BC/BS did not act as an
November 20, 1998. In its answer, Medical Mutual ERISA fiduciary.
counterclaimed for contribution and indemnification of any
judgment rendered against it and for attorney’s fees and costs Substantive History
incurred in defending the suit. Seaway filed an answer to the
counterclaims on December 1, 1998. A. The Parties
Both Medical Mutual and Seaway filed motions for Seaway is an Ohio corporation with its principal place of
summary judgment on June 1, 2001 and June 26, 2001, business in Maumee, Ohio. From 1990 to 1995, Seaway
respectively. Medical Mutual argued that unambiguous terms employed approximately 4000 employees and operated
contained in a series of contracts governing BC/BS and approximately sixty supermarkets throughout Michigan and
Seaway’s relationship authorized BC/BS to retain any funds Ohio.
Medical Mutual is an Ohio mutual organization with its
principal place of business in Cleveland, Ohio. Medical
1
W hen providers join the health benefit plan, they agree to accept Mutual is the successor to BC/BS. From 1991 to 1998,
discounted fees in lieu of payment in full. See, e.g., HC A H ealth Servs. BC/BS served as an administrator of Seaway’s plan pursuant
of Georgia, Inc. v. Em ployers Health Ins. Co., 240 F.3d 982 , 987 (11th to a series of contracts.
Cir. 2001).
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Medical Mutual of Ohio Medical Mutual of Ohio
B. Seaway’s Selection of BC/BS indicated that BC/BS would estimate the provider discounts
it expected to receive in 1991, and would then pass along the
In 1990, Seaway began searching for a new claims estimated provider discounts to Seaway through lower
administrator for its employee health benefit plan for the administrative fees and stop-loss premiums.3
coming year. To assist in the search, Seaway employed
Findley, Davies and Company (“FDC”), a health benefits In October of 1990, Seaway selected BC/BS’s traditional
consulting firm headquartered in Toledo, Ohio. FDC, on indemnity plan proposal, and selected BC/BS to administer its
behalf of Seaway, solicited health maintenance organization plan in 1991. BC/BS began administering Seaway’s plan in
plan proposals and traditional indemnity plan proposals from January of 1991 pursuant to the terms of two memoranda
six companies, including BC/BS. After receiving the dated October 4, 1990 and November 5, 1990, respectively.
proposals, FDC prepared a written report in which it analyzed
the financial aspects of each company’s proposal and C. The 1991 Group Contract
recommended that Seaway give further consideration to the
companies that submitted the most competitive proposals. BC/BS and Seaway executed a “Group Contract” on April
FDC presented the report to Seaway at a meeting on August 16, 1991, which was effective from January 1, 1991 to
29, 1990. During the meeting, Seaway instructed FDC to December 31, 1991 (“the 1991 Group Contract”). Under the
solicit proposals from two additional companies that Seaway 1991 Group Contract, BC/BS’s duties included paying
specifically identified. Shortly thereafter, FDC solicited and providers for claims made by Seaway’s employees, and
received proposals from the two companies. Several billing Seaway on a weekly basis for the claims paid,
meetings between FDC and Seaway followed. administrative fees, and stop-loss premiums. Section 9.5 of
the 1991 Group Contract provides:
FDC began negotiations, on behalf of Seaway, with the
companies that submitted the most competitive proposals, Some of the Plan’s [4] contracts with Providers [5] allow
including BC/BS. According to the deposition testimony of discounts, allowances, incentives, adjustments and
Waldo E. Yeager, Seaway’s Senior Vice President of Finance, settlements. These amounts are for the sole benefit of the
one of the issues discussed during negotiations between Plan and the Plan will retain any payments resulting
BC/BS and Seaway was whether BC/BS would pass along
provider discounts to Seaway. Yeager testified that from
discussions with BC/BS, it was Seaway’s understanding that 3
The phrase “stop-loss premiums” refers to prem iums for stop-loss
BC/BS would pass along provider discounts to Seaway. insurance coverage–insurance coverage that caps the amount of charges
According to the deposition testimony of Floyd C. Melby,2 a for which Seaway could be held liable per contract period.
Seaway employee who assisted FDC in soliciting proposals 4
and who reported to Yeager, BC/BS’s proposal indicated the The 199 1 G roup Contract refers to BC/BS as the “P lan” and to
method by which BC/BS would pass along the provider Seaway as the “Group ” or the “Employer.” (J.A. at 638 .)
discounts to Seaway. Yeager testified that BC/BS’s proposal 5
Section 1.13 of the 1991 Group Contract defines the term
“Provider” as “a ho spital, facility other provider, physician or professional
2
other provider as stated in the Certificate, Schedule of Benefits, Riders
At the time of his deposition, Melby was an employee of BC/BS. and Indo rsements.” (J.A. at 639.)
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Medical Mutual of Ohio Medical Mutual of Ohio
therefrom. All claims submitted to the Plan will have Addenda I and II were attached to the 1991 Group Contract,
copayment and deductible amounts calculated according and were both incorporated by reference into the 1991 Group
to the Provider’s charges for Covered Services [6] Contract. Addendum II provided that “[a]ll of the terms,
without regard to the Plan’s discounts, allowances or conditions and provisions of the [1991 Group] Contract apply
incentives. to this Addendum unless specifically modified herein.” (J.A.
at 650.) In addition, Addendum II detailed the reimbursement
(J.A. at 646.) The contract fell within the definition of an arrangement between BC/BS and Seaway, which is referred
ERISA-covered plan, as it “was established . . . for the to as the “billed charges”8 arrangement. Under this
purpose of providing for its participants or their beneficiaries, arrangement, BC/BS charged Seaway the amount that
through the purchase of insurance or otherwise . . . medical, providers actually billed for rendering covered services to
surgical, or hospital care or benefits, or benefits in the event Seaway’s employees. Addendum II also detailed the amount
of sickness, accident, disability, [or] death . . . .”7 of administrative fees and stop-loss premiums for which
Seaway was responsible. Neither the 1991 Group Contract
nor Addendum II reflected Seaway’s understanding that
BC/BS would pass along estimated provider discounts to
Seaway through lower administrative fees and stop-loss
6 premiums.
Section 1.7 of the 1991 Group Contract defines the term “Covered
Service” as “a Provider’s service, supply, product or accommodation
described in a Co vered Person’s Certificate or Schedule of Benefits, Rider At his deposition, Yeager testified that the 1991 Group
or Ind orsem ent for which the Plan pays.” (J.A. at 6 38.) Contract “appeared to be . . . a boilerplate type of agreement
. . . which we . . . understood to be representing all of the
7 details that had been discussed . . . .” (J.A. at 528.) Yeager
In full, the ap plicab le pro vision states:
testified that he could not recall whether FDC reviewed the
The terms “employee welfare benefit plan” and “welfare plan” mean 1991 Group Contract, but he was “pretty sure” that FDC did
any plan, fund, or program which was heretofore or is hereafter so. (J.A. at 528.) Yeager also testified that he could not
established or maintained by an employer or by an employee
organization, or by both, to the extent that such plan, fund, or recall whether he had discussed the terms of the 1991 Group
program was established or is maintained for the purpose of Contract with FDC before he signed it on behalf of Seaway.
providing for its participants or their beneficiaries, through the
purchase of insurance o r otherwise, (A) med ical, surgical, or hospital
care or benefits, or benefits in the event of sick ness, acciden t,
disab ility, death or une mplo yment, or vacation ben efits,
app renticeship or other training program s, or day care ce nters,
scholarship funds, or prepaid legal services, o r (B) any benefit
described in section 186(c) of this title (other than pensions on
retirement or death, and insurance to provide such pensions).
8
29 U.S.C. § 1002(1). An “employee welfare benefit plan” may also be Section 1(a) of Addendum II defines the term “Billed Charges” as
deemed an “employee benefit plan” or a “plan.” Id. § 1002(3). T he term “a Provider’s published charges for Covered Services, before any am ounts
“plan” is used in the provision defining a “fiduc iary,” as discussed infra. for Provid er discounts, inc entives, allowances or settleme nts or for
Id. § 1002(21 )(A). ded uctibles or co paym ents.” (J.A. at 650.)
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Medical Mutual of Ohio Medical Mutual of Ohio
D. The 1992 and 1993 Renewals BC/BS and Seaway executed a renewal, which was
effective from January 1, 1993 to December 31, 1993 (“the
On behalf of Seaway, in mid-1991, FDC began 1993 renewal”). Yeager signed the 1993 renewal on behalf
negotiations, with BC/BS for a renewal of the 1991 Group of Seaway. The 1993 renewal was contained in a new
Contract for the following year. An issue frequently Addendum II, which was incorporated by reference into the
discussed during the negotiations was whether BC/BS would 1991 Group Contract. The terms of the 1993 renewal are
pass along a higher percentage of the estimated provider identical, in all relevant respects, to the terms of the 1992
discounts to Seaway than the percentage BC/BS typically renewal, except the 1993 renewal changed the guaranteed
offered customers. In a letter dated November 1, 1991, discount against billed charges from 13.56% to 7.74%.
BC/BS informed Seaway that estimated provider discounts
were being passed along to Seaway through lower E. The 1994 Group Contract and Subsequent
administrative fees, lower stop-loss premiums, and a Contracts
guaranteed discount against billed charges. BC/BS also
informed Seaway that BC/BS was “at risk financially” due to In 1993, FDC began negotiations with BC/BS regarding
its estimation of the provider discounts. (J.A. at 668.) contract terms for the coming year. In a letter dated
September 3, 1993, FDC requested that BC/BS assure that it
BC/BS and Seaway executed a renewal, which was would pass along 100% of the estimated provider discounts
effective from January 1, 1992 to December 31, 1992 (“the to Seaway in the same manner as the past renewals. FDC also
1992 renewal”). Yeager signed the 1992 renewal on behalf requested that BC/BS explain the distinction between the
of Seaway. The 1992 renewal was contained in a new existing billed charges arrangements, under which Seaway
Addendum II, which was incorporated by reference into the received a guaranteed discount against billed charges, and a
1991 Group Contract. The 1992 renewal provided that “[a]ll “paid claims” arrangement, under which Seaway would
of the terms, conditions and provisions of the [1991 Group] receive a pass-through of the actual provider discounts.
Contract apply to this Addendum unless specifically modified BC/BS complied with FDC’s requests in a letter dated
herein.” (J.A. at 673.) The 1992 renewal indicated that September 13, 1993.
BC/BS and Seaway had a billed charges arrangement. The
1992 renewal also indicated that BC/BS passed along the Instead of executing a renewal, on August 8, 1994, BC/BS
estimated provider discounts to Seaway through lower and Seaway executed a “Group Contract” which was effective
administrative fees, lower stop-loss premiums, and a from January 1, 1994 to December 31, 1994 (“the 1994
guaranteed discount of 13.56% against billed charges. Group Contract”). Section 9.5 of the 1994 Group Contract
provides:
On behalf of Seaway, in mid-1992, FDC began negotiations
with BC/BS for a renewal of the 1991 Group Contract for the The Group is obligated to pay the premiums specified by
following year. During the negotiations, BC/BS represented this Contract when due, and [BC/BS] shall have no right
that it would continue to pass along 100% of the estimated to any additional amounts from the Group. [BC/BS] is
provider discounts to Seaway. obligated to pay for Covered Services pursuant to this
Contract, and the Group shall have no right to any
additional amounts from [BC/BS].
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Medical Mutual of Ohio Medical Mutual of Ohio
Some of [BC/BS’s] contracts with Providers allow DISCUSSION
discounts, allowances, incentives, adjustments and
settlements. These amounts are for the sole benefit of A. Standard of Review
[BC/BS], and [BC/BS] will retain any payments resulting
therefrom. All institutional claims submitted to [BC/BS] This Court reviews a district court’s grant or denial of
will have co-payment and deductible amounts, when summary judgment de novo. Best v. Cyrus, 310 F.3d 932,
applicable, calculated according to the Provider’s charges 934 (6th Cir. 2002). Summary judgment is appropriate “if the
for Covered Services without regard to [BC/BS’s] pleadings, depositions, answers to interrogatories, and
discounts, allowances or incentives. admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
(J.A. at 753.) the moving party is entitled to a judgment as a matter of law.”
Fed. R. Civ. P. 56(c). In reviewing the district court’s grant
Addenda I, II, and III were attached to the 1994 Group or denial of summary judgment, this Court “draw[s] all
Contract. Addendum III indicated that BC/BS passed along justifiable inferences in the light most favorable to the
100% of the estimated provider discounts to Seaway through nonmoving party.” Best, 310 F.3d at 934 (citing Matsushita
lower administrative fees, lower stop-loss premiums, and a Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
guaranteed discount of 7.98% against billed charges. (1986)).
In 1995, BC/BS and Seaway switched from the billed B. ERISA Fiduciary Status
charges arrangement to the paid claims arrangement. The
contract years from 1995 to 1998 are not at issue. Under ERISA:
F. The Audit [A] person is a fiduciary with respect to a plan to the
extent (i) he exercises any discretionary authority or
In 2000, Seaway employed Schmidt, Long & Associates, discretionary control respecting management of such
Inc. (“Schmidt”) to perform an audit of BC/BS’s records. plan or exercises any authority or control respecting
Schmidt prepared a report in which it compared the provider management or disposition of its assets, (ii) he renders
discounts BC/BS actually received against the provider investment advice for a fee or other compensation, direct
discounts BC/BS passed along to Seaway. Schmidt or indirect, with respect to any moneys or other property
concluded that Seaway was owed $714,879.25 for provider of such plan, or has any authority or responsibility to do
discounts retained by BC/BS from 1991 to 1994, plus interest. so, or (iii) he has any discretionary authority or
Seaway seeks restitution in that amount on appeal. discretionary responsibility in the administration of such
plan.
29 U.S.C. § 1002(21)(A). “ERISA also defines a ‘person’ to
include a corporation.” Hamilton v. Carell, 243 F.3d 992,
998 (6th Cir. 2001) (citing 29 U.S.C. § 1002(9)). “The
Supreme Court has recognized that ERISA ‘defines
No. 01-4285 Seaway Food Town, Inc. v. 13 14 Seaway Food Town, Inc. v. No. 01-4285
Medical Mutual of Ohio Medical Mutual of Ohio
“fiduciary” not in terms of formal trusteeship, but in was not yet in existence . . . . During negotiations,
functional terms of control and authority over the plan . . . .’” Seaway was free to seek and chose a different
Id. (quoting Mertens v. Hewitt Assocs., 508 U.S. 248, 262 administrator with a better plan and lower costs.
(1993)). This Court has stated: ....
ERISA regulates the management and administration of
[W]e must examine the conduct at issue to determine employee benefit plans. Here, Seaway asks this Court to
whether it constitutes “management” or “administration” regulate the establishment of a plan. ERISA is not
of the plan, giving rise to fiduciary concerns, or merely intended to regulate such conduct. To reiterate, ERISA
a business decision that has an effect on an ERISA plan is not involved in regulating conduct affecting the
not subject to fiduciary standards. establishment of a plan or with its terms. Simply put,
ERISA’s concern is with the elements of a plan and its
Hunter v. Caliber Sys., Inc., 220 F.3d 702, 718 (6th Cir. administration after it has been established.
2000) (internal quotation marks and alterations omitted)
(citing Sengpiel v. B.F. Goodrich Co., 156 F.3d 660, 666 (6th (J.A. at 222) (emphasis in original) (internal quotation marks
Cir. 1998)). Thus, and citations omitted). The district court also held that
Section 9.5 of the 1991 and 1994 Group Contracts authorized
[i]n every case charging breach of ERISA fiduciary duty BC/BS to retain the actual provider discounts for its sole
. . . the threshold question is not whether the actions of benefit. The district court reasoned:
some person employed to provide services under a plan
adversely affected a plan beneficiary’s interest, but The administrative services contract[s] clearly state[] that
whether that person was acting as a fiduciary (that is, was provider discounts are for the “sole benefit” of [BC/BS].
performing a fiduciary function) when taking the action Seaway cannot point to any language in the contract[s]
subject to complaint. that would provide Seaway with a right to the actual
provider discounts during 1991 through 1994.
Pegram v. Herdrich, 530 U.S. 211, 226 (2000); see also According to the terms of the administrative services
Mich. Affiliated Healthcare Sys., Inc. v. CC Sys. Corp., 139 contract[s], Seaway had no right to a pass through of
F.3d 546, 549 (6th Cir. 1998) (recognizing that the definition actual provider discounts.
of an ERISA fiduciary not only includes persons specifically ....
named as fiduciaries by the plan, but also any person who On its face, § 9.5 is clear and unambiguous.
exercises discretionary control or authority over a plan’s Nonetheless, Seaway asks that I look past the face of the
management, administration, or assets). administrative services contract[s] to extrinsic evidence.
Seaway contends that there is a “latent” ambiguity in
In its October 10, 2001 order, the district court held that § 9.5 . . . . I decline, however, to have recourse to
BC/BS did not act as an ERISA fiduciary when negotiating extrinsic evidence to create ambiguity in § 9.5.
contract terms with Seaway. The district court reasoned:
(J.A. at 224-25.) In its order, the district court only
At that point[,] [BC/BS] was in no position to exercise considered whether BC/BS acted as a fiduciary when
discretion or authority or administer the plan. The plan
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Medical Mutual of Ohio Medical Mutual of Ohio
negotiating contract terms with Seaway, and when complying excess premiums were to be refunded to the plaintiffs. The
with Section 9.5 of the 1991 and 1994 Group Contracts. Seventh Circuit held that BC/BS was not an ERISA fiduciary
because BC/BS did not exercise discretionary authority with
On appeal, Seaway argues that the district court erred in respect to the setting of the premium rates. Id. at 1132. The
failing to consider whether BC/BS acted as an ERISA Seventh Circuit reasoned that the parties had entered into an
fiduciary when exercising control over Seaway’s plan assets. “arm’s length bargain presumably governed by competition
Medical Mutual argues that Seaway waived for appellate in the marketplace” that specified the premium rates. Id.
review the argument that BC/BS acted as fiduciary when
exercising control over Seaway’s plan assets because Seaway In Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805 F.2d
did not raise the argument in the district court. Regardless of 732, 737 (7th Cir. 1986), the Seventh Circuit clarified its
whether Seaway raised the argument in the district court, we holding in Schulist as follows:
hold that the argument is without merit.
Schulist stands for the proposition that if a specific
Seaway argues that BC/BS exercised continuing control [contract] term (not a grant of power to change terms) is
over Seaway’s plan assets inasmuch as Seaway paid funds to bargained for at arm’s length, adherence to that term is
BC/BS on a weekly basis, BC/BS in turn paid a portion of the not a breach of fiduciary duty. No discretion is exercised
funds to providers for payment of billed charges incurred by when an insurer merely adheres to a specific contract
Seaway’s employees, and BC/BS retained the remaining term. When a contract, however, grants an insurer
portion of the funds for its sole benefit. Seaway claims that discretionary authority, even though the contract itself is
the remaining portion of the funds arose from the provider the product of an arm’s length bargain, the insurer may
discounts received by BC/BS. Seaway further argues that be a fiduciary.
BC/BS’s control over funds in the form of plan assets gave
rise to ERISA fiduciary status. The plaintiffs in Ed Miniat were participating employers in a
retirement life reserve insurance plan issued by the
Medical Mutual argues that because Section 9.5 of the 1991 defendants. The plaintiffs argued that the defendants
and 1994 Group Contracts authorized BC/BS to retain any breached their fiduciary duties under ERISA by retaining
funds resulting from the provider discounts for its sole more than one-half of the premiums paid by the plaintiffs,
benefit, such funds belonged to BC/BS and not to the plan. without having issued any insurance under the plan. The
Medical Mutual therefore argues that BC/BS’s control over Seventh Circuit held that the plaintiffs alleged a claim that the
such funds did not give rise to ERISA fiduciary status. We defendants were ERISA fiduciaries. Ed Miniat, 805 F.2d at
agree. 738. The Seventh Circuit reasoned that the defendants’
power to amend or alter the terms of the plan constituted the
In Schulist v. Blue Cross & Blue Shield, 717 F.2d 1127 (7th requisite discretionary authority over plan assets. Id.Cir. 1983), the plaintiffs were trustees of employee health and
welfare benefit plans issued by BC/BS. The plaintiffs argued We agree with the Seventh Circuit’s reasoning that where
that BC/BS breached its fiduciary duties under ERISA by parties enter into a contract term at arm’s length and where
retaining excess premiums paid by the plaintiffs. The series the term confers on one party the unilateral right to retain
of contracts between the parties did not provide that the funds as compensation for services rendered with respect to
No. 01-4285 Seaway Food Town, Inc. v. 17
Medical Mutual of Ohio
an ERISA plan, that party’s adherence to the term does not
give rise to ERISA fiduciary status unless the term authorizes
the party to exercise discretion with respect to that right. See
Ed Miniat, 805 F.2d at 737; Schulist, 717 F.2d at 1132; see
also F.H. Krear & Co. v. Nineteen Named Trs., 810 F.2d
1250, 1259 (2nd Cir. 1987) (stating that “after a person has
entered into an agreement with an ERISA-covered plan, the
agreement may give it such control over factors that
determine the actual amount of its compensation that the
person thereby becomes an ERISA fiduciary with respect to
that compensation”).
Contrary to Seaway’s argument, we find that Section 9.5 of
the 1991 and 1994 Group Contracts does not authorize
BC/BS to exercise discretion with respect to any funds
resulting from the provider discounts. Section 9.5 specifically
authorizes BC/BS to retain such funds for its “sole benefit.”
The “sole benefit” language precludes BC/BS from exercising
discretion with respect to such funds. We therefore hold that
BC/BS’s adherence to Section 9.5 did not give rise to ERISA
fiduciary status. See Ed Miniat, 805 F.2d at 737; Schulist,
717 F.2d at 1132.
CONCLUSION
For the forgoing reasons, we AFFIRM the district court’s
order.