Seaway Food Town, Inc. v. Medical Mut. of Ohio
| Decision Date | 23 October 2003 |
| Docket Number | No. 01-4285.,01-4285. |
| Citation | 347 F.3d 610 |
| Parties | SEAWAY FOOD TOWN, INC., Plaintiff-Appellant, v. MEDICAL MUTUAL OF OHIO, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Anastasia Kay Hanson, SPENGLER NATHANSON, P.L.L., Toledo, Ohio, for Appellant.
James D. Thomas, SQUIRE, SANDERS & DEMPSEY, Cleveland, Ohio, for Appellee.
ON BRIEF:
Anastasia Kay Hanson, Lisa E. Pizza, Theodore M. Rowen, SPENGLER NATHANSON, P.L.L., Toledo, Ohio, for Appellant.
James D. Thomas, Christopher R. Shea, SQUIRE, SANDERS & DEMPSEY, Cleveland, Ohio, for Appellee.
Before: CLAY and GIBBONS, Circuit Judges; CLELAND, District Judge.*
Plaintiff, Seaway Food Town, Inc. ("Seaway"), filed suit against Defendant, Medical Mutual of Ohio ("Medical Mutual"), formerly known as Blue Cross & Blue Shield Mutual of Ohio ("BC/BS"), alleging that BC/BS breached its fiduciary duties to Seaway in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. §§ 1001-1461. Seaway appeals from the district court's order entered on October 10, 2001, granting Medical Mutual's motion for summary judgment and denying Seaway's motion for summary judgment. For the reasons set forth below, we AFFIRM the district court's order.
On September 28, 1998, Seaway filed a complaint against Medical Mutual alleging that BC/BS breached its fiduciary duties with respect to its administration of Seaway's employee health benefit plan ("plan") in violation of ERISA. Specifically, Seaway alleges that BC/BS breached its fiduciary duties to Seaway by failing to (1) use accurate data to estimate the amount of discounts (hereafter referred to as "provider discounts"1) BC/BS expected to receive from healthcare providers, (2) disclose the true nature and extent of the provider discounts it actually received, and (3) pass along to Seaway the provider discounts it actually received. Seaway also alleged Ohio common law claims of breach of contract and conversion. Seaway sought various relief, including restitution in the amount of provider discounts retained by BC/BS.
Medical Mutual filed an answer to the complaint on November 20, 1998. In its answer, Medical Mutual counterclaimed for contribution and indemnification of any judgment rendered against it and for attorney's fees and costs incurred in defending the suit. Seaway filed an answer to the counterclaims on December 1, 1998.
Both Medical Mutual and Seaway filed motions for summary judgment on June 1, 2001 and June 26, 2001, respectively. Medical Mutual argued that unambiguous terms contained in a series of contracts governing BC/BS and Seaway's relationship authorized BC/BS to retain any funds resulting from the provider discounts, and that BC/BS did not owe any fiduciary duties to Seaway during negotiations for the contract terms. Seaway, on the other hand, argued that the contract terms were ambiguous, and that, because BC/BS was administering Seaway's plan, BC/BS owed fiduciary duties to Seaway throughout their contractual relationship. The district court conducted a hearing on the parties' motions for summary judgment on September 20, 2001.
By order issued on October 10, 2001, the district court granted Medical Mutual's motion for summary judgment and denied Seaway's motion for summary judgment. The district court held that BC/BS did not act as an ERISA fiduciary during negotiations with Seaway and that unambiguous contract terms authorized BC/BS to retain any funds resulting from the provider discounts for its sole benefit. The district court therefore concluded that Seaway was not entitled to a pass-through of actual provider discounts. The district court also held that Seaway's state law claims were preempted by ERISA. On November 7, 2001, Seaway filed a notice of appeal, contesting the ruling that BC/BS did not act as an ERISA fiduciary.
Seaway is an Ohio corporation with its principal place of business in Maumee, Ohio. From 1990 to 1995, Seaway employed approximately 4000 employees and operated approximately sixty supermarkets throughout Michigan and Ohio.
Medical Mutual is an Ohio mutual organization with its principal place of business in Cleveland, Ohio. Medical Mutual is the successor to BC/BS. From 1991 to 1998, BC/BS served as an administrator of Seaway's plan pursuant to a series of contracts.
In 1990, Seaway began searching for a new claims administrator for its employee health benefit plan for the coming year. To assist in the search, Seaway employed Findley, Davies and Company ("FDC"), a health benefits consulting firm headquartered in Toledo, Ohio. FDC, on behalf of Seaway, solicited health maintenance organization plan proposals and traditional indemnity plan proposals from six companies, including BC/BS. After receiving the proposals, FDC prepared a written report in which it analyzed the financial aspects of each company's proposal and recommended that Seaway give further consideration to the companies that submitted the most competitive proposals. FDC presented the report to Seaway at a meeting on August 29, 1990. During the meeting, Seaway instructed FDC to solicit proposals from two additional companies that Seaway specifically identified. Shortly thereafter, FDC solicited and received proposals from the two companies. Several meetings between FDC and Seaway followed.
FDC began negotiations, on behalf of Seaway, with the companies that submitted the most competitive proposals, including BC/BS. According to the deposition testimony of Waldo E. Yeager, Seaway's Senior Vice President of Finance, one of the issues discussed during negotiations between 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 BC/BS would pass along provider discounts to Seaway. According to the deposition testimony of Floyd C. Melby,2 a Seaway employee who assisted FDC in soliciting proposals and who reported to Yeager, BC/BS's proposal indicated the method by which BC/BS would pass along the provider discounts to Seaway. Yeager testified that BC/BS's proposal indicated that BC/BS would estimate the provider discounts it expected to receive in 1991, and would then pass along the estimated provider discounts to Seaway through lower administrative fees and stop-loss premiums.3
In October of 1990, Seaway selected BC/BS's traditional indemnity plan proposal, and selected BC/BS to administer its plan in 1991. BC/BS began administering Seaway's plan in January of 1991 pursuant to the terms of two memoranda dated October 4, 1990 and November 5, 1990, respectively.
BC/BS and Seaway executed a "Group Contract" on April 16, 1991, which was effective from January 1, 1991 to December 31, 1991 ("the 1991 Group Contract"). Under the 1991 Group Contract, BC/BS's duties included paying providers for claims made by Seaway's employees, and billing Seaway on a weekly basis for the claims paid, administrative fees, and stop-loss premiums. Section 9.5 of the 1991 Group Contract provides:
Some of the Plan's[4] contracts with Providers[5] allow discounts, allowances, incentives, adjustments and settlements. These amounts are for the sole benefit of the Plan and the Plan will retain any payments resulting therefrom. All claims submitted to the Plan will have copayment and deductible amounts calculated according to the Provider's charges for Covered Services[6] without regard to the Plan's discounts, allowances or incentives.
(J.A. at 646.) The contract fell within the definition of an ERISA-covered plan, as it "was established ... for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise ... medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, [or] death...."7
Addenda I and II were attached to the 1991 Group Contract, and were both incorporated by reference into the 1991 Group Contract. Addendum II provided that "[a]ll of the terms, conditions and provisions of the [1991 Group] Contract apply to this Addendum unless specifically modified herein." (J.A. at 650.) In addition, Addendum II detailed the reimbursement arrangement between BC/BS and Seaway, which is referred to as the "billed charges"8 arrangement. Under this arrangement, BC/BS charged Seaway the amount that providers actually billed for rendering covered services to Seaway's employees. Addendum II also detailed the amount 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 premiums.
At his deposition, Yeager testified that the 1991 Group Contract "appeared to be... a boilerplate type of agreement ... which we ... understood to be representing all of the details that had been discussed...." (J.A. at 528.) Yeager testified that he could not recall whether FDC reviewed the 1991 Group Contract, but he was "pretty sure" that FDC did so. (J.A. at 528.) Yeager also testified that he could not recall whether he had discussed the terms of the 1991 Group Contract with FDC before he signed it on behalf of Seaway.
On behalf of Seaway, in mid-1991, FDC began negotiations, with BC/BS for a renewal of the 1991 Group Contract for the following year. An issue frequently discussed during the negotiations was whether BC/BS would pass along a higher percentage of the estimated provider discounts to Seaway than the percentage BC/BS typically offered customers. In a letter dated November 1, 1991, BC/BS informed Seaway that...
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