Pipefitters Local 636 Ins. Fund v. Blue Cross Blue Shield of Mich.

• Decision Date: 20 September 2011
• Docket Number: No. 09–2607.,09–2607.
• Citation: 654 F.3d 618
• Parties: PIPEFITTERS LOCAL 636 INSURANCE FUND, Trustees of; John Green; Charles Inman; John O'Neil; Greg Sievert; E. Thomas Devlin; Gerald Hoover, Plaintiffs–Appellees,v.BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

654 F.3d 618

PIPEFITTERS LOCAL 636 INSURANCE FUND, Trustees of; John Green; Charles Inman; John O'Neil; Greg Sievert; E. Thomas Devlin; Gerald Hoover, Plaintiffs–Appellees,

v.BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant–Appellant.

No. 09–2607.

United States Court of Appeals, Sixth Circuit.

Argued: Jan. 11, 2011.Decided and Filed: Aug. 12, 2011.Rehearing and Rehearing En Banc Denied Sept. 20, 2011.

ARGUED: Francis R. Ortiz, Dickinson Wright PLLC, Detroit, Michigan, for Appellant. Ronald S. Lederman, Sullivan, Ward, Asher & Patton, Southfield, Michigan, for Appellees. ON BRIEF: Francis R. Ortiz, Phillip J. DeRosier, Toby A. White, Dickinson Wright PLLC, Detroit, Michigan, for Appellant. Ronald S. Lederman, Sharon S. Almonrode, Sullivan, Ward, Asher & Patton, Southfield, Michigan, for Appellees. Christopher L. Kerr, Office of the Michigan Attorney General, Lansing, Michigan, for Amicus Curiae.Before: SUHRHEINRICH, CLAY, and ROGERS, Circuit Judges.SUHRHEINRICH, J., delivered the opinion of the court, in which ROGERS, J., joined. CLAY, J. (pp. 633–37), delivered a separate opinion dissenting in part.

OPINION

SUHRHEINRICH, Circuit Judge.

Defendant–Appellant, Blue Cross Blue Shield of Michigan (“BCBSM”), brings this interlocutory appeal following the district court's certification of a class action on behalf of Plaintiffs–Appellees, Pipefitters Local 636 Insurance Fund and its Trustees (“Fund”), and the proposed class, in this action brought under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001 et seq. Because this class action is not the superior method of adjudication required under Federal Rule of Civil Procedure 23(b)(3), and prosecuting separate actions does not present the risk of inconsistent adjudications required under Federal Rule of Civil Procedure 23(b)(1)(A), we REVERSE.

I. BACKGROUND

This case is the subject of a prior appeal, Pipefitters Local 636 v. Blue Cross & Blue Shield of Mich. (Pipefitters I), 213 Fed.Appx. 473 (6th Cir.2007), as well as a companion appeal, decided on April 6, 2011, Pipefitters Local 636 Ins. Fund v. Blue Cross & Blue Shield of Mich. (Pipefitters II), 418 Fed.Appx. 430 (6th Cir.2011) (unpublished).¹ We adopt the background as set forth in our Pipefitters I opinion:

The [Fund] is a multiemployer trust fund administered pursuant to ERISA and the Labor Management Relations Act, 29 U.S.C. § 186, for the purpose of providing health and welfare benefits to its participants and beneficiaries. For several years, the Fund was an insured group customer of BCBSM, purchasing insurance coverage by paying premiums. The Fund converted in June 2002 to a self-funded plan, providing benefits by using fund assets. At that time, the Fund entered into an Administrative Services Contract (“ASC”) with BCBSM for services including: claims processing; financial management and reporting; negotiation of participating provider agreements; cost containment initiatives; maintenance of all necessary records; and provision of information through established audit procedures.

Under the terms of the ASC, the Fund agreed to pay claims and administrative charges, including amounts billed during the year, hospital prepayments, actual administrative charges and group conversion fee, any late payment charges, statutory and/or contractual interest, and “[a]ny other amounts which are the Fund's responsibility pursuant to this Contract.” The ASC also states that “[t]he Provider Network Fee, contingency, and any cost transfer subsidies or surcharges ordered by the State Insurance Commissioner as authorized pursuant to [Michigan law] will be reflected in the hospital claims cost contained in Amounts Billed.”

From June 2002 to January 2004, BCBSM collected from the Fund [a cost transfer subsidy fee, known as the Other–Than–Group (“OTG”) subsidy,] to subsidize coverage for non-group clients. The OTG subsidy was regularly collected from BCBSM's group clients. Self-insured clients, however, were not always required to pay the fee, and the parties dispute whether Michigan law authorized the imposition of OTG subsidy fees on such clients. In January 2004, BCBSM unilaterally eliminated the OTG subsidy charge to the Fund.

Id. at 474–475 (some alterations in original) (footnotes omitted) (citations omitted).

In September 2004, the Fund sued BCBSM, alleging that BCBSM breached its fiduciary duty under ERISA by imposing and failing to disclose the OTG subsidy from June 2002 to January 2004. Specifically, the Fund claimed that the OTG assessment violated Mich. Comp. Laws § 550.1211(2), which precludes some cost transfers between self-funded subscribers and BCBSM.

BCBSM moved for dismissal under Federal Rule of Civil Procedure 12(b)(6), asserting that it was not acting as an ERISA fiduciary when it assessed the OTG fee. The district court dismissed the claim and the Fund appealed. On appeal, we decided that the Fund had sufficiently stated a claim for a breach of fiduciary duty under ERISA and reversed and remanded for further proceedings. Pipefitters I, 213 Fed.Appx. at 480. Specifically, we set forth rules for defining what constituted an ERISA fiduciary:

Under ERISA, a third-party administrator such as BCBSM is deemed a fiduciary to the extent that it exercises “discretionary authority or discretionary control respecting management of [a] plan or ... any authority or control respecting management or disposition of its assets.” 29 U.S.C. § 1002(21)(A)(i)....

ERISA defines “fiduciary” in functional terms with regard to each action in question. See Hamilton v. Carell, 243 F.3d 992, 998 (6th Cir.2001).... ERISA “does not describe fiduciaries simply as administrators of the plan,” but evaluates the fiduciary role “to the extent that [an administrator] acts in such a capacity in relation to the plan.” [ Pegram v. Herdrich, 530 U.S. 211, 225, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000) ] (quotation marks and citation omitted).

....

Under ERISA, fiduciary duties arise where an administrator exerts “any authority or control respecting management or disposition of [a fund's] assets.” [29 U.S.C.] § 1002(21)(A). An administrator is deemed a fiduciary when it exercises “ ‘practical control over an ERISA plan's money.’ ”

[ Briscoe v. Fine, 444 F.3d 478, 494 (6th Cir.2006) ]

(quoting IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415, 1421 (9th Cir.1997)). The administrator's “disposition of funds held in an account over which it exerted control makes it a fiduciary to the extent that it exercised such control.” Id. at 490. Discretion in the disposition of plan assets is not required; it is “irrelevant whether [the administrator] exercised ‘discretion’.... ‘[A]ny authority or control’ is enough.” Chao v. Day, 436 F.3d 234, 236 (D.C.Cir.2006).

A fiduciary relationship does not exist, however, where an administrator “performs purely ministerial functions such as processing claims, applying plan eligibility rules, communicating with employees, and calculating benefits.” Baxter v. C.A. Muer Corp., 941 F.2d 451, 455 (6th Cir.1991). Fiduciary authority must amount to more than “mere possession, or custody over the plan ['s] assets.” Briscoe, 444 F.3d at 494 (quotations omitted). In addition, fiduciary status under ERISA does not apply where “parties enter into a contract term at arm's length and where the term confers on one party the ... right to retain funds as compensation for services rendered with respect to an ERISA plan.” Seaway Food Town, Inc. v. Med. Mut. of Ohio, 347 F.3d 610, 619 (6th Cir.2003). Fiduciary status does not extend to an administrator that exercised authority solely over funds that “belonged to [itself] and not to the plan.” Id. at 618.

Id. at 476–77 (some alterations in original) (footnote omitted). We then found that the Fund's complaint stated a viable claim as to BCBSM's assessment of the OTG fee such that dismissal of the complaint was inappropriate:

The Fund's complaint sets forth allegations that BCBSM's role in assessing the OTG subsidy fee was an exercise of authority and control over the fund assets, and was not merely ministerial or contractual in nature. The complaint alleges that the monetary assets at issue were “entrusted” to BCBSM, which administered them within its authority as “a fiduciary under ERISA.” The complaint further states that BCBSM “improperly imposed an OTG subsidy on these funds,” and that it “imposed the fee ... claiming it was a mandatory fee.” The complaint alleges that “[t]he ASC contracts prohibit the OTG subsidy.... [and] BCBSM was not legally required to assess this OTG fee.” According to the complaint, BCBSM “selectively elected to assess [the] OTG fee,” and “in its discretion indicated it would unilaterally stop charging the OTG subsidy [on January 1, 2004].”

....

In sum, the Fund has alleged in its complaint and attached documents that it entrusted BCBSM with the authority to control and disburse fund assets, and that BCBSM exercised such authority by allocating a portion of the money to itself in the form of the OTG subsidy fee and by failing to disclose this allotment to the Fund. The Fund's complaint also alleges that BCBSM's unilateral decision to discontinue imposing the fee further demonstrates BCBSM's control and authority over the assets' disposition. Therefore, the Fund has set forth sufficient allegations that BCBSM owed a fiduciary duty under ERISA with regard to its disposal of these assets, and that BCBSM breached its duty by imposing and failing to disclose the fee....

Id. at 477 (alterations in original) (citations omitted).

In 2008, on remand in the district court, the Fund moved for certification of a class action of “members of a putative class that consists of all similarly situated self-insured employee health and welfare plans / ‘groups' / ‘groups' [sic] which contract with BCBSM pursuant to an ASC to provide administrative services for the plans / ‘groups' and which were improperly assessed the cost transfer / OTG subsidy.”...