Hi-Lex Controls, Inc. v. Blue Cross and Blue Shield of Mich.
751 F.3d 740
| 6th Cir. | 2014Background
- Hi-Lex sued BCBSM in 2011 for ERISA fiduciary breach and self-dealing regarding Disputed Fees retained by BCBSM under the ASC/Schedule A arrangements.
- BCBSM acted as Hi-Lex’s health plan TPA and deducted Disputed Fees (Provider Network, contingency/risk, OTG, retiree surcharge) in addition to the admin fee.
- The Disputed Fees were not universally charged and appeared discretionary, with some self-funded clients being charged differently or not at all.
- Hi-Lex’s SPD and plan documents showed BCBSM as holder of plan funds for paying claims and administering the plan; Hi-Lex contends those funds were plan assets.
- Hi-Lex discovered the fees in 2007 and filed suit in 2011; the district court held BCBSM was a fiduciary, breached §1104(a), and that the claims were not time-barred; prejudgment interest was awarded.
- The Sixth Circuit affirmed, addressing fiduciary status, statute-of-limitations defenses, self-dealing, and prejudgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BCBSM was an ERISA fiduciary. | Hi-Lex: BCBSM held and controlled plan assets as a fiduciary. | BCBSM: No fiduciary status; terms declined fiduciary exposure. | Yes; BCBSM was an ERISA fiduciary. |
| Whether the Disputed Fees were plan assets and subject to ERISA duties. | Disputed Fees were plan assets under ERISA. | Fees were contractual compensation, not plan assets. | Disputed Fees were plan assets. |
| Whether BCBSM’s discretion to impose Disputed Fees constitutes self-dealing under § 1106(b)(1). | Fees were imposed for BCBSM’s own benefit rather than plan beneficiaries. | Fees were ordinary compensation under ASC terms. | Yes; §1106(b)(1) self-dealing barred. |
| Whether Hi-Lex’s ERISA claims are time-barred under § 1113 and the fraud/concealment exception. | Discovery in 2007; six-year extension applies due to concealment. | No timely discovery; limitations should apply. | Hi-Lex timely under fraud or concealment exception. |
| Whether prejudgment interest award was proper. | Discretionary interest should reflect lost interest value. | District court erred in interest calculation. | Affirmed; district court’s blended-rate approach within discretion. |
Key Cases Cited
- Briscoe v. Fine, 444 F.3d 478 (6th Cir. 2006) (imposed fiduciary duties on entities with authority over plan assets)
- Pipefitters Local 636 Ins. Fund v. Blue Cross & Blue Shield of Mich., 722 F.3d 861 (6th Cir. 2013) (fiduciary status where TPA retained plan assets and charged discretionary fees)
- McLemore v. Regions Bank, 682 F.3d 414 (6th Cir. 2012) (ERISA-fiduciary status and duties standard applied)
- Seaway Food Town, Inc. v. Med. Mut. of Ohio, 347 F.3d 610 (6th Cir. 2003) (contract terms that authorize discretion can create fiduciary duties)
- Libbey-Owens-Ford Co. v. Blue Cross & Blue Shield Mut. of Ohio, 982 F.2d 1031 (6th Cir. 1993) (plan assets exist when plan funds are earmarked or held for plan)
- Merck & Co. v. Reynolds, 559 U.S. 633 (2010) (discovery of facts and discovery-rule considerations in statute of limitations)
- Schumacher v. AK Steel Corp. Ret. Accumulation Pension Plan, 711 F.3d 675 (6th Cir. 2013) (prejudgment interest requires case-specific factors, not mechanical rate)