Libbey-Owens-Ford Co. v. Blue Cross and Blue Shield Mut. of Ohio

• Decision Date: 23 February 1993
• Docket Number: No. 92-3129,LIBBEY-OWENS-FORD,92-3129
• Citation: 982 F.2d 1031
• Parties: , 16 Employee Benefits Cas. 1315 COMPANY, as Administrator of the Group Health Insurance Plan, Plaintiff-Appellant/Third-Party Defendant, v. BLUE CROSS AND BLUE SHIELD MUTUAL OF OHIO, Defendant-Appellee/Third-Party Plaintiff, Trinova Corporation, as Administrator of the Group Health Insurance Plan, Third-Party Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1031

982 F.2d 1031

24 Fed.R.Serv.3d 857, 16 Employee Benefits Cas. 1315

LIBBEY-OWENS-FORD COMPANY, as Administrator of the Group

Health Insurance Plan, Plaintiff-Appellant/Third-Party Defendant, v. BLUE CROSS AND BLUE SHIELD MUTUAL OF OHIO,

Defendant-Appellee/Third-Party Plaintiff,

Trinova Corporation, as Administrator of the Group Health

Insurance Plan, Third-Party Defendant-Appellee.

No. 92-3129.

United States Court of Appeals, Sixth Circuit.

Argued Nov. 16, 1992.

Decided Jan. 13, 1993.

Rehearing Denied Feb. 1, 1993.

Order on Motion for Rehearing En Banc

Feb. 23, 1993.

Sue A. Sikkema (briefed), Thomas S. Zaremba (argued), Fuller & Henry, Toledo, OH, for plaintiff-appellant.

John R. Climaco (argued), John A. Peca, Jr., Daina B. Van Dervort (briefed), Climaco, Climaco, Seminatore, Lefkowitz & Garofoli, Cleveland, OH, for defendant-appellee.

Joseph P. Thacker, Cooper, Straub, Walinski & Cramer, Toledo, OH, Peter C. John, Phelan, Pope & John, Chicago, IL, for third-party defendant-appellee.

Before: KENNEDY, MARTIN, and SUHRHEINRICH, Circuit Judges.

BOYCE F. MARTIN, JR., Circuit Judge.

Libbey-Owens-Ford Co. has sought an accounting and restitution from Blue Cross and Blue Shield Mutual of Ohio under the Employment Retirement and Income Security Act, 29 U.S.C. § 1101 et seq., for rebates paid by others and for nursing home claims improperly paid by Blue Cross. Libbey-Owens-Ford appeals a pre-trial dismissal order that it had solicited. The dismissal with prejudice of the ERISA claims followed the district court's finding that Blue Cross owed no fiduciary duty under either state law or ERISA. We reverse. The grant of administrative control of an insurance plan creates a fiduciary duty, and the alleged breached duty should be determined by the district court.

The factual background begins with a November 21, 1968 Libbey-Owens-Ford Company agreement for providing health insurance by Blue Cross of Northwest Ohio. Under the terms of the agreement, Libbey-Owens-Ford would provide insurance coverage of health benefits to its eligible employees through Blue Cross. Libbey-Owens-Ford renewed the one-year contract annually until 1980. Between 1968 and 1980, Blue Cross administered claims for hospital care benefits under the group insurance policy that it also wrote. Throughout these years, Blue Cross had authority to decide all matters of coverage except to the extent that benefits were prescribed by Libbey-Owens-Ford's labor agreements with employees.

In 1980, Libbey-Owens-Ford negotiated a new contract with Blue Cross after deciding to self-insure the health needs of its employees. Under the amended agreement entered into on October 1, 1980, Libbey-Owens-Ford paid the costs of providing benefits under the plan directly to Blue Cross rather than by purchasing insurance from Blue Cross. Blue Cross continued to administer claims and decide matters of coverage, but it no longer insured the claims. Blue Cross provided monthly statements to Libbey-Owens-Ford of the amount paid to health-care providers and to other Blue Cross plans, as well as the amount of administrative charges that Libbey-Owens-Ford owed to Blue Cross. The amended agreement required Libbey-Owens-Ford to make a deposit with Blue Cross that represented approximately two months of claims and administrative fees calculated as a percentage of the claims paid. Blue Cross used the deposits, which totaled from $2.5 to $5 million between 1980 and 1987, to pay claims on behalf of the health-insurance plan.

After the agreement was amended, Blue Cross maintained authority to deal with claims processing and payments to hospitals. It prepared administrative manuals to govern the processing of claims. The manuals outlined the procedure for an appeal when Blue Cross denied a claim submitted by an employee of Libbey-Owens-Ford. Both the amended operating agreement and the administrative manuals describe Blue Cross' authority to grant or deny claims. These materials also demonstrate that Blue Cross retained authority to resolve all disputes regarding coverage. Article III of the amended Master Group Operating Agreement outlined Blue Cross' authority to address insurance disputes:

Any disputes which shall arise with respect to service on or with respect to benefits hereunder shall be submitted to, and resolved by, [Blue Cross] or Medical Indemnity, as the case may be, regardless of where the Enrollee shall reside. (Master Group Operating Agreement, Art. III)

The administrative manual issued in 1985 described the appeal procedure as follows:

An employee or dependent may appeal if he/she is dissatisfied with a decision made by Blue Cross and Blue Shield regarding a provision in this document. For example, if Blue Cross and Blue Shield rejects a claim, the employee or dependent may appeal by filing a written request for reconsideration. The written request must be submitted within 90 days after the employee or dependent has been notified of the plan's decision. The Blue Cross and Blue Shield Plan will conduct a thorough review and notify the employee or dependent of their decision. (1985 Manual at p. 7.01)

Regarding the issue of payments, Blue Cross received a discount from most Toledo area hospitals. Blue Cross generally paid hospitals at a rate of 97% of billed charges. It also audited hospital bills annually in order to determine whether any charges could be eliminated. If the revised hospital bills were less than the amounts paid by Blue Cross during the year, Blue Cross received refunds or rebates from the hospitals. Blue Cross did not credit the Libbey-Owens-Ford health insurance plan for the proceeds of these settlement audits.

In 1986, Libbey-Owens-Ford Company transferred its glass division to a wholly-owned subsidiary, LOF Glass Inc., and sold the subsidiary to Pilkington Holdings, Inc. After the sale, LOF Glass Inc. changed its name to Libbey-Owens-Ford Co. The former Libbey-Owens-Ford Company changed its name to Trinova. Also in 1986, Blue Cross of Northwest Ohio became Blue Cross and Blue Shield Mutual of Ohio.

On May 21, 1990, Libbey-Owens-Ford filed an ERISA-based complaint in the district court in its capacity as administrator and named fiduciary of the Group Health Insurance Plan for Libbey-Owens-Ford employees. On June 12, 1990, Libbey-Owens-Ford filed an amended complaint that included seven claims. First, it made an ERISA claim for an accounting of rebates received by Blue Cross. The second claim was for declaratory judgment that Blue Cross' conduct regarding the rebates was a breach of fiduciary duty under ERISA and that restitution was due. Third, Libbey-Owens-Ford made a tort claim for conversion regarding the rebates. Fourth, Libbey-Owens-Ford claimed that Blue Cross failed to provide claims information pursuant to ERISA. Fifth, Libbey-Owens-Ford sought an accounting, declaratory judgment, and restitution under ERISA for improperly paid nursing-home claims. The sixth claim was for an accounting and damages for breach of common law fiduciary duties regarding rebates, nursing-home claims, and refusal to provide information. Seventh, Libbey-Owens-Ford made a claim for breach of contract respecting rebates, improperly paid nursing-home claims, and refusal to provide information.

After unsuccessfully moving to dismiss the amended complaint for failure to join indispensable parties, Blue Cross filed its answer, a counterclaim, and a third-party complaint. The third-party complaint joined Trinova Corporation, which was Libbey-Owens-Ford's predecessor and had been the administrator of the Plan until April, 1986. The third-party complaint also joined Libbey-Owens-Ford Co. as the employer and sponsor of the Plan. The counterclaim sought contribution and indemnity against the plaintiff, and the third-party complaint sought relief from Trinova Corporation and Libbey-Owens-Ford Co.

On April 8, 1991, Libbey-Owens-Ford moved for voluntary partial summary judgment to determine whether Blue Cross was a fiduciary under ERISA and whether Libbey-Owens-Ford was entitled to an accounting upon demand. The district court denied this motion on July 30, 1991. Subsequently, Libbey-Owens-Ford moved for voluntary dismissal of its case without prejudice in accordance with Fed.R.Civ.P. 41(a)(2).

On November 25, 1991, the district court issued an opinion that set forth the conditions for dismissal and allowed Libbey-Owens-Ford the option of withdrawing its motion for partial summary judgment and proceeding with the case. In the opinion, the district court held that Blue Cross was not a fiduciary and did not have to provide an accounting to Libbey-Owens-Ford. Based upon this determination, the court ordered dismissal with prejudice of the claim for breach of common law fiduciary duties and the ERISA claims. Nonetheless, Libbey-Owens-Ford did not withdraw its motion to dismiss, and it proceeded on the merits of the case. Consequently, on January 2, 1992, the district court entered a final judgment order that dismissed with prejudice Libbey-Owens-Ford's first, second, and sixth claims for relief and eliminated all references to ERISA in the remaining claims. The district court dismissed the third, fourth, fifth, and seventh claims without prejudice pursuant to Fed.R.Civ.P. 41(a). On January 31, 1992, Libbey-Owens-Ford filed a notice of appeal.

We have jurisdiction over this case. As a general rule, neither party may appeal from a voluntary dismissal because it is not an involuntary adverse judgment. Laczay v. Ross Adhesives, 855 F.2d 351, 351 (6th Cir.1988), cert. denied, 489 U.S. 1014, 109 S.Ct. 1125, 103 L.Ed.2d 188 (1989). However, in this circuit, this "rule is ironclad only with respect to dismissal without prejudice." Id. at 354. An exception arises when the dismissal is with prejudice and "designed only to expedite review of an order which had in effect dismissed appellant's complaint." Raceway Properties, Inc. v. Emprise Corp., 613 F.2d 656, 657 (...