Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield Michigan

Decision Date17 January 2018
Docket NumberCase No. 16-cv-10317
PartiesSAGINAW CHIPPEWA INDIAN TRIBE OF MICHIGAN, el al., Plaintiffs, v. BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant.
CourtU.S. District Court — Eastern District of Michigan

Honorable Thomas L. Ludington

ORDER DENYING DEFENDANT'S MOTION FOR ATTORNEY FEES, GRANTING IN PART PLAINTIFFS'S MOTION FOR ATTORNEY FEES, AND GRANTING IN PART MOTION TO REVIEW TAXED BILL OF COSTS

On January 29, 2016, Plaintiffs Saginaw Chippewa Indian Tribe of Michigan and the Welfare Benefit Plan ("Plaintiffs" or "the Tribe") brought suit against Blue Cross Blue Shield of Michigan ("BCBSM"). Plaintiffs' suit took issue with BCBSM's management of Plaintiffs' "self-insured employee benefit Plan." Am. Compl. at 1, ECF No. 7. On April 10, 2017, the parties filed cross motions for partial summary judgment on the remaining claims. See ECF No. 79, 81. Both Defendant's and Plaintiffs' motions for partial summary judgment were granted in part. ECF No. 112. Now, both parties have filed motions for attorney fees and costs. ECF Nos. 118, 119. BCBSM has also filed a motion, ECF No. 123, seeking review of the taxed bill of costs issued against it, ECF No. 120. BCBSM seeks an award of attorney fees and costs in the amount of $1,588,720.31 and $17,734.83, respectively. BCBSM also seeks sanctions against the Tribe in the amount of $493,055 in fees and $8,658.54 in costs. The Tribe seeks an award of $1,179,721.13 in fees and nontaxable costs. For the reasons that follow, BCBSM's motion for attorney fees and costs will be denied, the Tribe's motion for attorney fees and costs will be granted in part, and BCBSM's motion for review of the bill of costs will be granted in part.

I.

The procedural history and underlying facts were summarized in the July 14, 2017, opinion and order. ECF No 112. That summary will be adopted as if restated in full in this order. For clarity, several relevant facts will be repeated here.

A.

This action is one of many that has been brought against BCBSM alleging that BCBSM breached its fiduciary duty by charging its clients "hidden fees." In Hi-Lex Controls Inc. et. al v. BCBSM, 2013 WL 2285453, No. 11-12557 (E.D. Mich. May 23, 2013), Plaintiff Hi-Lex Inc. brought suit on a "hidden fees" theory. After a bench trial, United States District Judge Roberts entered judgment for Hi-Lex. In the findings of fact, Judge Roberts explained that, to regain financial stability, BCBSM started charging various fees to self-funded customers in the early 1990s. After receiving extensive complaints from customers, the fees were replaced with a "'hidden' administrative fee buried in marked-up hospital claims." Id. at 8. These charges were invisible to the consumer and were never disclosed. BCBSM had "complete discretion to determine the amount of the Disputed Fees, as well as which of its customers paid them." Id. at 11. As a result of the hidden nature of the fees, the savings from using BCBSM as an administrator appeared greater to customers than they truly were. Judge Roberts found that BCBSM was an ERISA fiduciary and that BCBSM violated its fiduciary duties through fraudulent concealment and self-dealing. On appeal, Judge Robert's decision was affirmed. Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Michigan, 751 F.3d 740 (6th Cir. 2014). The Hi-Lex decision has been treated as establishing BCBSM's liability as an ERISA fiduciary for charging the hidden fees.

B.

Typically, BCBSM has settled post-Hi-Lex cases alleging that BCBSM charged hidden fees. This suit proceeded to the summary judgment stage, however, because the Tribe has two health insurance group policies associated with BCBSM. Specifically, the Tribe has a health insurance policy for its employees (which includes some individuals who are not members of the Tribe), and a health insurance policy for its members (a group which excludes some employees of the Tribe). At summary judgment, the parties disputed whether the two policies should be construed as a single plan or two separate plans and, relatedly, whether the two policies were both covered by ERISA.1

Both the Tribe and BCBSM agreed that, if the plans were considered separately under ERISA, "the Employer Plan is governed by ERISA and BCBSM is liable for the hidden fees paid for the Tribe for that plan." July 14, 2017, Op. & Order at 16. In response to the Tribe's argument that the two benefit policies should be construed as alternative coverage options, not separate plans, BCBSM did briefly argue that such a holding would mean ERISA did not cover the (combined) plan. But that argument was not the focus of the briefing on the motions for summary judgment. The Court concluded that both plans should be analyzed separately under ERISA. Accordingly, and because BCBSM admitted to charging hidden fees under the Employee Plan, judgment on those uncontested claims was entered for the Tribe. Id. at 17.

The contested issues in the motions for summary judgment were three-fold. First, the parties disputed whether the two policies were a single plan with multiple coverage options or two separate plans. As already explained, the Court found that the two policies represented two separate plans. The second issue was whether the Member Plan, considered on its own, was covered byERISA. The Court concluded that "the Member Plan must have been created to provide healthcare coverage to non-employee members" and thus did not qualify as an ERISA plan. Id. at 23. Third, the parties disputed whether BCBSM's operation of its Physician Group Incentive Program (PGIP) violated BCBSM's fiduciary duties. By way of summary explanation, the PGIP was a program wherein BCBSM reallocated payments to specific providers that would have otherwise been shared among all providers, thus creating performance incentives. After finding that "[t]he Tribe is . . . effectively challenging BCBSM's negotiation and administration of a performance-based rewards program with its in-network physicians," the Court held that BCBSM's operation of PGIP did not violate its fiduciary duties. Id. at 30.

Accordingly, the Court granted both motions for summary judgment in part. Judgment was entered for the Tribe on its access fee claims related to the Employee Plan. Judgment was granted for BCBSM on the Tribe's claims related to the Member Plan and PGIP.

Now, both BCBSM and the Tribe have moved for an award of attorney fees. ECF No. 118, 119. Plaintiffs and Defendant both assert that they achieved substantial success on the merits and thus that the opposing party should cover their fees and costs. BCBSM has also requested review of the Taxed Bill of Costs issued by the Clerk's Office directing BCBSM to pay $5,248.75 of the Tribe's deposition costs. ECF No. 123.

II.

Both BCBSM and the Tribe seek an award of fees and costs, relying upon 29 U.S.C. § 1132(g). Pursuant to § 1132(g), "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." The party seeking fees need not be a "'prevailing party' to be eligible for an attorney's fees award." Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252 (2010). Rather, they must simply achieve "some success on the merits." Id. at 256. Importantly,there is "no presumption as to whether attorney fees will be awarded." Foltice v. Guardsman Prod., Inc., 98 F.3d 933, 936 (6th Cir. 1996). One purpose of awarding attorney fees is to punish bad faith litigants, but punishment is not the only legitimate purpose. Armistead v. Vernitron Corp., 944 F.2d 1287, 1304 (6th Cir. 1991). Rather, "[t]he authorization was intended to enable pension claimants to obtain competent counsel and to distribute the economic burden of litigation in a fair manner." Ford v. N.Y. Cent. Teamsters Pension Fund, 506 F. Supp. 180, 182 (W.D.N.Y. 1980). When determining whether to award fees, courts consider the following five factors:

(1) the degree of the opposing party's culpability or bad faith; (2) the opposing party's ability to satisfy an award of attorney's fees; (3) the deterrent effect of an award on other persons under similar circumstances; (4) whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and (5) the relative merits of the parties' positions.

Sec'y of Dep't of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985).

"The King factors—as they have been dubbed in this Circuit—are not statutory and thus should be viewed flexibly, with no one factor being "'necessarily dispositive.'" Geiger v. Pfizer, Inc., 549 F. App'x 335, 338 (6th Cir. 2013) (quoting Foltice, 98 F.3d at 937.

III.

BCBSM contends that it obtained "some success on the merits" because it prevailed in defending against the Tribe's claims regarding the Member Plan, PGIP, and the Medicare-like Rates. Hardt, 560 U.S. at 256. The Tribe argues that it achieved some success on the merits because it obtained an $8.5 million judgment on its claims involving the Employee Plan.

The initial question is whether either party has achieved "some" success on the merits. That standard requires a showing of more than "trivial success on the merits, or purely procedural victories." Ruckelshaus v. Sierra Club, 463 U.S. 680, 688 n.9 (1983). But a district court has discretion to award attorney fees "if the court can fairly call the outcome of the litigation somesuccess on the merits without conducting a 'lengthy inquir[y] into the question whether a particular party's success was 'substantial' or occurred on a 'central issue.'" Hardt, 560 U.S. at 255 (quoting Ruckelshaus, 463 U.S. at 688 n.9).

Here, both parties can fairly be said to have achieved partial success. The Tribe obtained an $8.5 million dollar judgment, while BCBSM successfully defended against claims of liability for access fee payments made by the Member Plan, for the PGIP program, and for the failure to pay Medicare-like rates.2 It is unclear whether...

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