Massachusetts Laborers' Health and Welfare Fund v. Blue Cross Blue Shield of Massachusetts

66 F.4th 307

• Court: Court of Appeals for the First Circuit
• Decided: April 25, 2023
• Docket: 22-1317
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 22-1317

MASSACHUSETTS LABORERS' HEALTH AND WELFARE FUND; TRUSTEES OF THE MASSACHUSETTS LABORERS' HEALTH AND WELFARE FUND, as Fiduciaries,

Plaintiffs, Appellants,

v.

BLUE CROSS BLUE SHIELD OF MASSACHUSETTS,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. F. Dennis Saylor, IV, U.S. District Judge]

Before

Gelpí, Lynch, and Thompson, Circuit Judges.

D. Brian Hufford, with whom Jason S. Cowart, Leila Bijan, Zuckerman Spaeder LLP, Peter K. Stris, John Stokes, and Stris & Maher LLP were on brief, for appellants. Sarah M. Karchunas, Attorney, Plan Benefits Security Division, Office of the Solicitor, Department of Labor, with whom Seema Nanda, Solicitor of Labor, G. William Scott, Associate Solicitor for Plan Benefits Security, Jeffrey M. Hahn, Counsel for Appellate and Special Litigation, and Robin Springberg Parry, Senior Regulatory Attorney, were on brief, for the Secretary of Labor, amicus curiae. Jeffrey M. Harris, Steven C. Begakis, and Consovoy McCarthy PLLC on brief for PatientRightsAdvocate.org, Inc. and Families USA, amici curiae. Evan Miller, with whom David T. Raimer, Joseph P. Falvey, and Jones Day were on brief, for appellee. Anthony F. Shelley and Miller & Chevalier Chartered on brief for Blue Cross Blue Shield Association, amicus curiae. Allison S. Egan, Michael E. Kenneally, Deborah S. Davidson, Charles L. Solomont, Henry M. Marley, and Morgan, Lewis & Bockius LLP on brief for ERISA and Trust Law Professors, amici curiae.

April 25, 2023 LYNCH, Circuit Judge. From 2006 to 2022, Blue Cross

Blue Shield of Massachusetts ("BCBSMA") served under contract as

a third-party administrator (a "TPA") for the self-funded

multiemployer group health plan (the "Plan") administered by the

Massachusetts Laborers' Health and Welfare Fund (the "Fund").

BCBSMA was also a TPA for other benefit plans during this period.

By contracting with BCBSMA, the Fund made available to

the Plan's participants the discounted rates that BCBSMA

negotiates with a network of medical providers. Among other

contractual obligations, BCBSMA was responsible for repricing

participants' claims according to its provider arrangements and

transmitting approved claim payments to providers on behalf of the

Fund.

In 2021, the Fund sued BCBSMA, alleging that the Fund

had discovered various instances in which BCBSMA paid providers in

amounts exceeding the negotiated rates. The Fund brought three

claims under the Employee Retirement Income Security Act of 1974

("ERISA"), 29 U.S.C. § 1001 et seq., all of which depended on the

assertion that BCBSMA was a fiduciary of the Plan.

The district court granted BCBSMA's motion to dismiss

under Federal Rule of Civil Procedure 12(b)(6), holding that the

Fund had failed to plausibly allege that BCBSMA was an ERISA

fiduciary with respect to the actions subject to the Fund's

complaint. See Mass. Laborers' Health & Welfare Fund v. Blue Cross

- 3 - Blue Shield of Mass., No. 21-cv-10523, 2022 WL 952247, at *1 (D.

Mass. Mar. 30, 2022). We affirm.

I. Background

A. The Parties and Their Contractual Relationship

When reviewing the grant of a motion to dismiss for

failure to state a claim, "we accept as true all well-pleaded facts

alleged in the complaint and draw all reasonable inferences

therefrom in the [plaintiff]'s favor." Legal Sea Foods, LLC v.

Strathmore Ins. Co., 36 F.4th 29, 34 (1st Cir. 2022) (alteration

in original) (quoting Alston v. Spiegel, 988 F.3d 564, 571 (1st

Cir. 2021)).

The Fund operates the Plan for members of the Laborers'

Local Union in Massachusetts and parts of northern New England.

Because the Plan is self-funded, the Fund is responsible for paying

all covered healthcare claims submitted on behalf of the Plan's

participants. The Fund is financed from employer contributions,

which in turn are partly funded through deductions from

participants' paychecks.

In 2006, the Trustees of the Fund, on behalf of the Fund,

entered into a contract with BCBSMA to have BCBSMA help administer

the Plan as a TPA. As a preferred-provider organization (a "PPO"),

BCBSMA negotiates favorable rates with a network of healthcare

providers. This negotiation is independent from the relationship

between BCBSMA and the Fund. By contracting with BCBSMA, the Fund

- 4 - was able to make the discounted rates available to all participants

who received covered in-network medical care from BCBSMA's

preferred providers.

The terms of the Fund's and BCBSMA's agreement were laid

out in an administrative services agreement (the "ASA"),1 which

also referenced a summary plan description (the "SPD")2 which was

prepared by the Fund and distributed to Plan participants. We

describe the basic features of the ASA and SPD in turn and refer

to further provisions of the documents throughout our legal

analysis.3

1. The ASA

The parties executed the ASA in 2006 to govern the terms

of their relationship. The ASA provided that BCBSMA would "perform

certain administrative services in connection with" the Plan. "In

1 The ASA is titled "Administrative Services Account Agreement." 2 The SPD is titled "A Summary of Plan Features." ERISA requires the distribution of summary plan descriptions to participants and beneficiaries. See 29 U.S.C. § 1024(b). 3 Because the ASA and SPD were "cited in the complaint and attached to [BCBSMA's] motion to dismiss," In re Fid. ERISA Float Litig., 829 F.3d 55, 60 (1st Cir. 2016), and because no party challenges their authenticity, the district court properly reviewed the two documents, and we continue to consider them on appeal, see Beddall v. State St. Bank & Tr. Co., 137 F.3d 12, 17 (1st Cir. 1998) ("When . . . a complaint's factual allegations are expressly linked to -- and admittedly dependent upon -- a document (the authenticity of which is not challenged), that document effectively merges into the pleadings and the trial court can review it in deciding a motion to dismiss under Rule 12(b)(6).").

- 5 - performing [those] services," BCBSMA agreed to "be, and function

as, an independent contractor to the Fund and as a service provider

to the [Plan]." The ASA was "not intended to create an agency,

partnership or joint venture relationship between the parties."

The administrative services BCBSMA agreed to perform

included "arranging for a network of health care providers[4] whose

services [were] covered by the [Plan], providing services to

network providers, claims processing, individual case management,

medical necessity review, utilization review, quality assurance

programs and disease monitoring and management services." BCBSMA

"reserve[d] the right to make changes to its provider

network . . . at any time" and to "negotiate different claim

payment rates and arrangements with its providers." These rates

and arrangements were influenced by various factors that were

"based on all or a subset of [BCBSMA]'s book of business."

Of particular relevance here, BCBSMA agreed to "make its

PPO network of preferred health care providers available to

[p]articipants in the Plan." In essence, by selecting providers

from BCBSMA's PPO network, Plan participants could benefit from

the volume discounts that BCBSMA had previously negotiated. The

claims determination process proceeded as follows.

4 The ASA defined the term "health care providers" as including "hospital, physician and ancillary service providers."

- 6 - First, medical providers who administered care to Plan

participants would submit claims to BCBSMA, which would "receive

and reprice all covered claims . . . in accordance with [its]

provider reimbursement arrangements." To "reprice" the claims,

BCBSMA would "conduct a medical necessity and utilization review"

of the claims using the "medical policy, medical technology

assessment guidelines and utilization review policies as set forth

in" an attachment to the ASA.

After BCBSMA "repriced" the claims by calculating the

appropriate payment rate, it would transmit the repriced claims to

the Fund. The Fund would then enter the claims into its "claims

processing system" to "determine member eligibility, the

availability of benefits and claims adjudication." The Fund

"adjudicated" the claims by determining whether they were covered

under the Plan and by calculating deductibles and copayments.

"Following the Fund's adjudication, the final approval or denial"

was "forwarded by the Fund to [BCBSMA], including all applicable

deductible, copayment and coinsurance information and

limitations."

Finally, once BCBSMA received the Fund's final approval,

BCBSMA would "remit the appropriate claim payment[5] to the network

5 The ASA defined "[c]laim [p]ayments" as "the amounts [BCBSMA] pays on behalf of the Fund for [p]articipants' health care benefits when billed by the provider[s]."

- 7 - provider." For any adjudicated claim that was disputed by a Plan

participant, the Fund was solely "responsible to process and make

a decision regarding such [an] appeal."

To compensate BCBSMA for its administrative services,

the Fund agreed to pay BCBSMA an "administrative charge" in a

"fixed dollar amount." As the administrator of a self-funded plan,

the Fund also "retain[ed] the ultimate financial responsibility

and liability for all covered claims under the Plan." "Because

[BCBSMA] [would] pay providers . . . before being able to bill the

Fund," the Fund agreed to pay a "working capital amount" to BCBSMA

"for estimated [c]laim [p]ayments." This working capital amount

was "based on [BCBSMA]'s estimate of the amount needed to pay

claims on a current basis."

The agreed-upon payment process was as follows. First,

in "weekly installments," the Fund would "pay a fixed monthly

payment amount" which included both the working capital amount and

the estimated administrative charge. Then, in "one-month

intervals," BCBSMA would perform a "settlement calculation" to

determine whether the combined weekly payments had

undercompensated or overcompensated BCBSMA for the actual claim

payments it had transmitted to providers that month and the actual

administrative charges it had incurred.6 If the settlement

6 In particular, BCBSMA added "[t]otal paid claims" and "actual administrative charges due" and then subtracted the "sum

- 8 - calculation revealed that the Fund owed BCBSMA an additional

amount, the Fund would "wire to [BCBSMA] such amount . . . with

its next scheduled weekly payment." But if the settlement

calculation demonstrated that the paid amount had exceeded the

amount actually due to BCBSMA, then BCBSMA would "apply (credit)

such amount . . . to the Fund's next scheduled weekly payment,"

unless applying such a credit was "prohibited by applicable law,"

in which case BCBSMA would "promptly refund the difference . . .

to the Fund."

The ASA also contemplated recovery operations for

erroneously paid claims. The original version of the ASA provided

generally that each party would be "fully responsible" for its own

errors that caused a claim to be paid "to or on behalf of an

ineligible person," paid in "more or less than the correct amount"

due, or paid to an "incorrect provider."

Two amendments to the ASA added more specific recovery

provisions. First, a 2010 amendment provided that BCBSMA could

"pursue recoveries for claims paid as a result of fraud or abuse."

BCBSMA could seek recovery directly or "through other appropriate

recovery operations, including subrogation and provider claim

of weekly payments" received from the Fund. After applying "adjustments" based on the previous month's settlement calculation, BCBSMA arrived at the net amount owed to, or due from, the Fund, representing both provider payments and administrative charges.

- 9 - payment audits." If BCBSMA obtained recovery, it would credit to

the Fund "the amount of the recovery attributable to services for"

the Fund's participants, but would retain either a 20% "recovery

fee" or, if "outside support costs" (such as fees for engaging

outside counsel) were incurred in pursuing recovery, the Fund's

"pro rata share" of those costs. The Fund agreed that "neither

the [Fund], the [Plan], nor any [participant] ha[d] any legal or

beneficial ownership interest in these recovery amounts retained

by [BCBSMA]." However, BCBSMA was authorized to retain these

amounts only if the need for recovery was "attributable to a third

party and not attributable to an error made by [BCBSMA]."

Second, a 2016 amendment provided that if claim payments

were "too high or too low due [to] reasons such as the use of

incorrect claim payment rates," BCBSMA would "reprocess impacted

claims and bill or credit the [Fund]." But if it was "not

administratively practical or reasonable to reprocess impacted

claims due to the specific situation," BCBSMA could "instead

negotiate a settlement with the provider," in which case BCBSMA

would "credit or bill the [Fund] based on its pro rata share of

the settlement."

Although the ASA explicitly designated the Trustees of

the Fund as ERISA fiduciaries, it did not do so for BCBSMA. In

relevant part, the ASA provided the following:

- 10 - The Trustees are the "administrator" and "named fiduciary" of the Fund as that term is defined in Section 3(16)(A) and 402(a), respectively, of ERISA. [BCBSMA] is engaged as an independent contractor to perform the specific duties and responsibilities which the Trustees delegate to it. It is understood and agreed that [BCBSMA] exercises its duties within the framework of the Plan of Benefits established by the Trustees. [BCBSMA] and the Trustees of the Fund accept that the definitions of a fiduciary are contained in ERISA Section 3(21)(A).

2. The SPD

The Plan's terms were summarized in the SPD, which was

referenced in the ASA and distributed to Plan participants. The

SPD, which was prepared by the Fund, provided information to

participants on benefits, coverage eligibility, and various other

Plan terms.

The SPD informed participants that the Fund had "entered

into an arrangement with a [PPO] that contracts with hospitals,

physicians and other health care providers to provide

[participants] with medical services at discounted rates." The

SPD identified BCBSMA as "[t]he Fund's PPO . . . for most medical

expenses," and explained that participants should select providers

who participated in BCBSMA's network in order to "receive the

highest benefit level." The SPD stated to participants that if

they chose in-network providers, then the "billed charges that

[would] be considered covered expenses [would] never be more than

the negotiated rate." It also informed participants that "[a]ny

- 11 - provider in the PPO network [would] be paid directly by [BCBSMA]"

and that participants would be "responsible for [their] deductible

and copayment amounts."

The SPD further stated that the "Trustees, the Fund

Administrator and other individuals with delegated responsibility

for the administration of the Plan [would] have discretionary

authority to interpret the terms of the Plan and to determine

eligibility and entitlement to Plan benefits in accordance with the

terms of the Plan." It also notified participants that they were

"entitled to certain rights and protections under . . . ERISA,"

and stated the following:

In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of employee benefit plans. The people who operate your plan, called "fiduciaries" of the plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries.

B. The Allegations of Overpayment

The Fund regularly conducts performance audits of its

contractors. To that end, in July 2018, the Fund hired

ClaimInformatics, LLC ("ClaimInformatics"), a company that audits

healthcare claims to discover and recover improper payments. The

Fund asked ClaimInformatics to perform a "payment integrity

review" of the Fund's claims that were paid by BCBSMA to providers.

- 12 - After reviewing payments made between 2016 and 2018,7

ClaimInformatics allegedly discovered thousands of claims that

were erroneously paid or paid in the incorrect amount. In its

first stage of review, ClaimInformatics purportedly identified

5,574 such claims and found that providers had been overpaid by

over $1.4 million.

C. The Lawsuit

On March 26, 2021, the Fund sued BCBSMA in the U.S.

District Court for the District of Massachusetts. The Fund's

complaint, as later amended, asserted three claims under ERISA:

Count One alleged a breach of fiduciary duty in violation of 29

U.S.C. § 1109(a); Count Two alleged self-dealing with Plan assets

in violation of 29 U.S.C. § 1106(b)(2); and Count Three sought

injunctive relief under 29 U.S.C. § 1132(a)(3). The complaint

also asserted four state-law claims.

The complaint made two distinct sets of factual

allegations against BCBSMA in support of the Fund's ERISA claims.

The first concerned BCBSMA's behavior prior to paying providers;

the second concerned BCBSMA's actions after payment.8

7 Because ClaimInformatics' review was of claims from 2016 to 2018, all relevant claims were paid after the 2016 amendment to the ASA, which took effect on January 1, 2016. 8 Throughout the complaint, the Fund noted that BCBSMA refused to provide the Fund requested documents and other information concerning BCBSMA's internal policies, provider contracts, medical records, and audit results. The Fund does not argue that these quarrels over nondisclosure and confidentiality

- 13 - First, citing ClaimInformatics' audit results, the Fund

alleged that BCBSMA failed to accurately price claims, resulting

in millions of dollars in overpayments to providers. According to

the Fund, ClaimInformatics identified various errors that caused

the overpayments. First, ClaimInformatics allegedly noted a

pattern of BCBSMA calculating claim payments to be higher than the

amounts providers actually billed -- for example, ClaimInformatics

asserted that when one hospital billed $38,786 for a claim, BCBSMA

then priced that claim at $120,614. ClaimInformatics also

purportedly discovered instances in which BCBSMA erroneously

priced two hospital stays as separate admissions in contravention

of BCBSMA's inpatient readmission policy, which provided that if

a patient was readmitted to a hospital for a related diagnosis

within a week of discharge, the cost of readmission would be

included in the price of the initial admission. Similarly,

although BCBSMA's observation room billing policy was to charge a

one-day rate for observation room stays up to twenty-four hours

and a two-day rate for all longer stays, ClaimInformatics allegedly

identified cases where BCBSMA incorrectly charged the two-day rate

for stays shorter than twenty-four hours when those stays spanned

two calendar days. Further, with regard to the degree of patient

are relevant to the question of whether BCBSMA was a fiduciary. We thus decline to consider this aspect of the parties' dispute in our analysis.

- 14 - illness –- for which hospitals use numeric codes to classify

severity, ranging from 1 (minor) to 4 (extreme) -- ClaimInformatics

purportedly found that BCBSMA accepted a "statistically improbable

number of claims" with level 4 severity, leading to excessively

high payments to hospitals. Finally, as alleged by the Fund,

ClaimInformatics noted various other idiosyncratic errors; for

example, BCBSMA accepted a hospital's designation of a procedure

as a "foot amputation" despite the doctor's billing it as a "toe

amputation," and BCBSMA processed a claim without inquiry where a

provider charged three hours for a procedure known to take no more

than five minutes.

Second, the Fund's complaint alleged that BCBSMA's

recovery operations entailed self-dealing by BCBSMA at the expense

of the Fund. The Fund principally contended that BCBSMA collected

wrongful and excessive recovery fees. For example, the Fund

claimed that there were "numerous instances of BCBSMA causing an

error itself, catching it, fixing it, and collecting a recovery

fee," such that BCBSMA retained a recovery fee even when

overpayments stemmed from its own errors. According to the Fund,

BCBSMA also once retained a recovery fee despite not recovering

any overpayment (rather, a hospital had adjusted a claim amount

prior to payment), and once retained an inflated recovery fee by

applying the recovery fee percentage to the original claim amount

instead of the recovered amount. The complaint further alleged

- 15 - that BCBSMA, without authorization, increased the recovery fee

percentage from 20% to 30% for all recoveries and began charging

a 19% "Coding Advisor Program Fee" on savings to the Fund from

BCBSMA's post-payment audits of out-of-network claims. Finally,

in relation to the alleged observation room billing errors, the

Fund claimed that BCBSMA pursued provider settlements (rather than

full recoveries via reprocessing claims) even when it was

"administratively practical [and] reasonable" to reprocess the

claims. These settlements would, allegedly, "grossly

undercompensate" the Fund.

BCBSMA moved to dismiss the Fund's complaint under

Federal Rule of Civil Procedure 12(b)(6), and in a carefully

reasoned opinion issued on March 30, 2022, the district court

granted the motion. Mass. Laborers' Health & Welfare Fund, 2022

WL 952247, at *1. The district court noted that the Fund's ERISA

claims were premised on BCBSMA's being a "fiduciary" under the

statute.9 Id. at *7, *16. After rejecting the Fund's argument

that BCBSMA was named as a fiduciary in the SPD (an argument that

9 The court noted that although nonfiduciaries can incur liability under § 1132(a)(3) if they "participate[] in a fiduciary breach" by another person, the Fund had not alleged that BCBSMA participated in any breach by other fiduciaries, so Count Three, like Counts One and Two, was based on the proposition that BCBSMA was itself a fiduciary. Mass. Laborers' Health & Welfare Fund, 2022 WL 952247, at *16. On appeal, the Fund does not challenge the district court's approach as to Count Three; rather, it continues to argue that BCBSMA was, in fact, a fiduciary.

- 16 - the Fund does not pursue on appeal), id. at *7-8, the district

court turned to the question of whether BCBSMA was a "functional

fiduciary" under ERISA, id. at *8. The court held that BCBSMA was

not a functional fiduciary. Id. at *15. First, the court held

that because BCBSMA was required to apply its negotiated rates,

its alleged failure to do so did not reflect an exercise of

"discretion" such as would make BCBSMA a fiduciary due to

discretionary control over the management of the Plan. Id. at *9;

see id. at *9-12. Second, the court found that the working capital

amount was not an asset of the Plan and thus rejected the Fund's

contention that BCBSMA was a fiduciary due to its authority over

the management or disposition of Plan assets. See id. at *12-15.

The court also held that even if the working capital amount was a

Plan asset, BCBSMA had not exercised sufficient "authority or

control" over the working capital amount to render BCBSMA a

fiduciary. Id. at *15. The district court dismissed the Fund's

ERISA claims and declined to exercise supplemental jurisdiction

over the Fund's state-law claims. See id. at *16.

The Fund timely appealed.

II. Analysis

We review de novo the district court's dismissal of the

complaint on the basis that BCBSMA lacked fiduciary status. See

In re Fid. ERISA Fee Litig., 990 F.3d 50, 55 (1st Cir. 2021). In

conducting this inquiry, we evaluate whether the complaint

- 17 - "state[s] a claim to relief that is plausible on its face." In re

Fid. ERISA Float Litig., 829 F.3d 55, 59 (1st Cir. 2016) (quoting

Saldivar v. Racine, 818 F.3d 14, 18 (1st Cir. 2016)). We first

"distinguish the complaint's factual allegations (which must be

accepted as true) from its conclusory legal allegations (which

need not be credited)," and then "determine whether the factual

allegations are sufficient to support the reasonable inference

that the defendant is liable." Id. (quoting Saldivar, 818 F.3d at

18). "[W]e need not credit the complaint's statement that [the

working capital amount] [was] a '[P]lan asset,' for that label

represents a legal conclusion, not a factual assertion." Id.

Likewise, the complaint's assertion that BCBSMA exercised control

respecting the management or disposition of the working capital

amount, and the complaint's statement that BCBSMA exercised

discretionary control respecting Plan management, are legal

assertions that we need not credit. See In re Fid. ERISA Fee

Litig., 990 F.3d at 56-57.

A person10 can be a fiduciary under ERISA in two ways.

See id. at 55. First, a person is a "named fiduciary" if identified

as such in a plan instrument or pursuant to a procedure specified

10 ERISA defines the term "person" to include individuals and various business entities. See 29 U.S.C. § 1002(9).

- 18 - in the plan. 29 U.S.C. § 1102(a). The Fund does not contend that

BCBSMA was a named fiduciary.11

Second, a person can become a "functional fiduciary" by

"performing at least one of several enumerated functions with

respect to a plan." Beddall v. State St. Bank & Tr. Co., 137 F.3d

12, 18 (1st Cir. 1998); see 29 U.S.C. § 1002(21)(A). A person is

a functional fiduciary

with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

29 U.S.C. § 1002(21)(A) (emphasis added).

The statutory language establishes that "functional

fiduciary status is not an all-or-nothing designation." In re

Fid. ERISA Fee Litig., 990 F.3d at 55. Rather, a person can be a

fiduciary "for some purposes and not for others." Id. "In every

case charging breach of ERISA fiduciary duty, then, the threshold

question is . . . whether [a] person was acting as a fiduciary

11 The Fund made this argument to the district court, but the district court rejected it, see Mass. Laborers' Health & Welfare Fund, 2022 WL 952247, at *7-8, and the Fund does not renew it on appeal.

- 19 - (that is, was performing a fiduciary function) when taking the

action subject to complaint." Pegram v. Herdrich, 530 U.S. 211,

226 (2000); see also Beddall, 137 F.3d at 18 ("[F]iduciary

liability arises in specific increments correlated to the vesting

or performance of particular fiduciary functions in service of the

plan, not in broad, general terms."). Accordingly, we must analyze

separately whether BCBSMA was a fiduciary when taking the two

distinct actions subject to the Fund's complaint: first, when

pricing claims and allegedly overpaying providers, and second,

when pursuing recoveries of overpaid amounts and retaining

associated fees before reimbursing the Fund.

In arguing that BCBSMA was a fiduciary, the Fund cites

only subsection (i) of ERISA's definition of functional fiduciary.

The Fund argues both that BCBSMA exercised "discretionary

authority or discretionary control respecting management of [the]

[P]lan"12 and that BCBSMA exercised "authority or control

respecting management or disposition of [the Plan's] assets." 29

U.S.C. § 1002(21)(A)(i). We address these two arguments in turn.

12 The Fund does not contend that BCBSMA had "discretionary authority or discretionary responsibility in the administration" of the Plan under subsection (iii) of the definition, 29 U.S.C. § 1002(21)(A)(iii), so we need not decide the extent to which this portion of the definition differs from subsection (i).

- 20 - A. Discretionary Authority or Discretionary Control Respecting Plan Management

The Fund first contends that BCBSMA was a fiduciary to

the extent that it exercised discretionary authority over the

Plan's management. The Fund does not argue that BCBSMA's

management of its PPO network and negotiation of rates with

providers made it a fiduciary with respect to the Plan. Nor does

the Fund challenge the ASA's provision that BCBSMA "reserved the

right to make changes to its provider network at any time" and to

"negotiate different claim payment rates and arrangements with its

providers." Rather, the Fund maintains that BCBSMA exercised

discretion in applying already negotiated rates to claims

submitted on behalf of the Plan's participants. It further

contends that BCBSMA's control over recovery and settlement

operations amounted to discretionary authority over Plan

management.

The Department of Labor has issued an interpretive

bulletin concerning ERISA fiduciary status, which has been

published in the Federal Register.13 See 29 C.F.R. § 2509.75-8.

The interpretive bulletin provides that a person who has "no power

to make any decisions as to plan policy, interpretations, practices

13 As part of its analysis and interpretation of an agency's applicable federal statute, a court may consider, along with other relevant legal sources, the agency's interpretive bulletins on the matter. See, e.g., Reich v. Newspapers of New Eng., Inc., 44 F.3d 1060, 1071-73 (1st Cir. 1995).

- 21 - or procedures, but who perform[s] [various] administrative

functions for an employee benefit plan, within a framework of

policies, interpretations, rules, practices and procedures made by

other persons" is not a fiduciary because that person is performing

"purely ministerial functions." Id. § 2509.75-8(D-2); see also

Pharm. Care Mgmt. Ass'n v. Rowe, 429 F.3d 294, 301 (1st Cir. 2005)

(noting that "purely ministerial" duties are "not sufficient" to

render an individual a fiduciary); Beddall, 137 F.3d at 18 ("[T]he

mere . . . performance of mechanical administrative tasks generally

is insufficient to confer fiduciary status."). These

nondiscretionary administrative functions include, inter alia, the

"[a]pplication of rules determining eligibility for participation

or benefits," the "[c]alculation of benefits," and the

"[p]rocessing of claims." 29 C.F.R. § 2509.75-8(D-2); see also

Livick v. Gillette Co., 524 F.3d 24, 29 (1st Cir. 2008) (holding

that providing estimate of future benefits did not involve

discretion); Baxter v. C.A. Muer Corp., 941 F.2d 451, 455 (6th

Cir. 1991) (per curiam) ("[A] person without the power to make

plan policies or interpretations but who performs purely

ministerial functions such as processing claims, applying plan

eligibility rules, communicating with employees, and calculating

benefits, is not a fiduciary under ERISA."); Schmidt v. Sheet Metal

Workers' Nat'l Pension Fund, 128 F.3d 541, 544 n.1, 547 (7th Cir.

- 22 - 1997) (declining to attribute fiduciary status to an individual

who "determin[ed] benefit amounts due under the plan").

An entity is a fiduciary when it exercises discretionary

authority or control over plan management, even if pursuant to the

terms of a contract. See Ed Miniat, Inc. v. Globe Life Ins. Grp.,

Inc., 805 F.2d 732, 737 (7th Cir. 1986) ("[I]f a specific term

(not a grant of power to change terms) is bargained for at arm's

length, adherence to that term is not a breach of fiduciary duty.

No discretion is exercised when an insurer merely adheres to a

specific contract term. When a contract, however, grants an

insurer discretionary authority, even though the contract itself

is the product of an arm's length bargain, the insurer may be a

fiduciary."); Rozo v. Principal Life Ins. Co., 949 F.3d 1071, 1074

(8th Cir. 2020) ("A service provider may be a fiduciary when it

exercises discretionary authority, even if the contract authorizes

it to take the discretionary act."); Seaway Food Town, Inc. v.

Med. Mut. of Ohio, 347 F.3d 610, 619 (6th Cir. 2003) ("[W]here

parties enter into a contract term at arm's length and where the

term confers on one party the unilateral right to retain funds as

compensation for services rendered with respect to an ERISA plan,

that party's adherence to the term does not give rise to ERISA

fiduciary status unless the term authorizes the party to exercise

discretion with respect to that right.").

- 23 - Case law, including from other circuits, demonstrates

that this type of "discretion" often arises when contractual terms

allow a party to select from a range of options in performing its

obligations.14 See, e.g., David P. Coldesina, D.D.S, P.C., Emp.

Profit Sharing Plan & Tr. v. Est. of Simper, 407 F.3d 1126, 1132

(10th Cir. 2005) ("Discretion exists where a party has the 'power

of free decision' or 'individual choice.' On the other hand, non-

discretionary or ministerial functions are those that do not

require individual decisionmaking." (citations omitted) (quoting

Webster's Ninth New Collegiate Dictionary 362 (1991))). For

example, courts have found discretion to exist when a contract

allows a party to unilaterally change the value of a fee or rate.

See, e.g., Rozo, 949 F.3d at 1073, 1075 (provider of a 401(k) plan

had the contractual right to "unilaterally calculate[]" a rate of

return every six months); Ed Miniat, 805 F.2d at 734, 738 (insurer

had the "unilateral right to reduce the rate of return that [the

insurer] was to pay on account to [the plan sponsor] to a scheduled

14 Courts also sometimes find discretion to exist unmoored from contractual obligations or even contrary to them. See, e.g., Peters v. Aetna Inc., 2 F.4th 199, 231 (4th Cir. 2021) (finding that a hidden fee may have been "imposed upon [a plan participant] and the [p]lan at [the TPA]'s discretion, but without authority under the [p]lan and in direct violation of the [contract]"). But that is not our case. Rather, the Fund's central premise is that the ASA and SPD granted BCBSMA significant discretion, and that BCBSMA breached fiduciary duties when operating within that discretion. We thus analyze the Fund's allegations through that framework.

- 24 - minimum . . . and to increase significantly the annual premium

rates to a scheduled maximum"); Golden Star, Inc. v. Mass. Mut.

Life Ins. Co., 22 F. Supp. 3d 72, 80-82 (D. Mass. 2014) (service

provider to 401(k) plans was contractually authorized to

"determine[] where in the range of 0.0 to 1.0% the fee percentage

rate [would] be set"); Glass Dimensions, Inc. ex rel. Glass

Dimensions, Inc. Profit Sharing Plan & Tr. v. State St. Bank & Tr.

Co., 931 F. Supp. 2d 296, 304 (D. Mass. 2013) (bank was given

"discretion to set its [lending] fee anywhere from 0% to 50%").

Similarly, courts have found discretion to exist if a contract

contains broad language that affords a party flexibility in

determining its course of action. See, e.g., Pipefitters Loc. 636

Ins. Fund. v. Blue Cross & Blue Shield of Mich., 722 F.3d 861, 867

(6th Cir. 2013) (contract had "opaque language" stating that fees

would be "reflected" in the amounts billed by a TPA, but

"[n]owhere . . . set forth the dollar amount . . . or even a method

by which the . . . fee [was] to be calculated," and thus "in no

way cabin[ed] [the TPA]'s discretion to charge or set" the fees);

Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Mich., 751 F.3d

740, 744, 748 (6th Cir. 2014) (similar); Six Clinics Holding Corp.,

II v. Cafcomp Sys., Inc., 119 F.3d 393, 402 (6th Cir. 1997)

(contract allowed a TPA to unilaterally amend the plan and to

conduct certain activities "as [the TPA] deem[ed] necessary" and

"as required in the judgment of [the TPA]" (emphases omitted)); IT

- 25 - Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415, 1417-18, 1420 (9th

Cir. 1997) (contract allowed a TPA to decide which claims were

"contested or doubtful" such that they should be referred to the

plan sponsor for adjudication, thus giving the TPA discretion in

"interpret[ing] the plan to determine whether a benefits claim

ought to be referred back").

In contrast, courts typically find discretion to be

lacking when a contract merely requires "adhere[nce] to a specific

contract term," Ed Miniat, 805 F.2d at 737, even when adhering to

that term requires expertise in complex subject matter. See, e.g.,

Briscoe v. Fine, 444 F.3d 478, 489 (6th Cir. 2006) (finding, where

a TPA "operated pursuant to an administrative services agreement

that conferred upon it the responsibility for determining

eligibility for benefits, processing claims, and assisting the

plan administrator in producing reports required by federal and

state law," that such duties were "insufficient to convert [the

TPA] into an ERISA fiduciary"); Seaway, 347 F.3d at 616, 619

(finding that a TPA did not exercise discretion when retaining

discounts and various fees, because the contract stated that those

"amounts [were] for the sole benefit of [the TPA], and [the TPA]

[would] retain any payments resulting therefrom" (emphasis

added)); cf. Rowe, 429 F.3d at 301 (finding that entities lacked

discretion when disclosing "conflicts of interests and payments

from drug manufacturers" as specifically required by statute).

- 26 - Another relevant factor in cases involving TPAs is whether the

plan sponsor retains the final authority to determine whether

claimants are entitled to benefits. See, e.g., Briscoe, 444 F.3d

at 489 (discussing various cases that found that a TPA lacked

discretion where the plan sponsor reserved the right to review the

TPA's eligibility decisions and/or retained control over claims

appeals processes); cf. Varity Corp. v. Howe, 516 U.S. 489, 511

(1996) ("[A] plan administrator engages in a fiduciary act when

making a discretionary determination about whether a claimant is

entitled to benefits under the terms of the plan documents.").

A review of the ASA, the SPD, and the Fund's complaint

demonstrates that the present lawsuit falls firmly into the latter

category of cases. BCBSMA lacked discretion when taking the

actions subject to the Fund's complaint, and so although BCBSMA's

actions may have constituted a breach of contract, they were not

the actions of a fiduciary under ERISA.

First, as for BCBSMA's pricing of claims, the ASA and

SPD required BCBSMA to apply payment rates according to schedules

that had already been negotiated with providers. Under the ASA,

BCBSMA was required to "receive and reprice all covered

claims . . . in accordance with [the] provider reimbursement

arrangements" it had previously negotiated. And the SPD informed

Plan participants that if they chose in-network providers, then

the "billed charges that [would] be considered covered expenses

- 27 - [would] never be more than the negotiated rate." The documents

thus clearly contemplated that there were "negotiated rate[s]" to

which BCBSMA was required to conform when pricing claims; BCBSMA

was afforded no discretion to deviate from those rates. Further,

the Fund retained full authority over eligibility determinations:

once BCBSMA had "repriced" the claims, the ASA required BCBSMA to

transmit those claims to the Fund, which would enter the claims

into its own "claims processing system" to "determine member

eligibility, the availability of benefits and claims

adjudication." After calculating deductibles and copayments, the

Fund would forward the "final approval or denial" to BCBSMA,

authorizing BCBSMA's payment to providers. And for all claims

that were disputed by participants, the Fund -- not BCBSMA -- was

solely "responsible to process and make a decision regarding such

[an] appeal." See Briscoe, 444 F.3d at 489 (declining to attribute

fiduciary status to a TPA where the plan sponsor "retained the

final authority to determine whether a claim should be paid and

was the entity to which dissatisfied employees were instructed to

direct their appeal of a claim denial").

Indeed, the Fund's complaint is fundamentally premised

on the notion that there were "correct" rates to be applied to

each submitted claim, but that BCBSMA failed to apply them.15

15 As we previously noted, the Fund does not take issue with BCBSMA's negotiation of rates with providers or the fact that

- 28 - Pointing to the SPD's provision that "billed charges that w[ould]

be considered covered expenses w[ould] never be more than the

negotiated rate," the complaint alleges that BCBSMA "paid claims

in violation of the Plan's written terms, which require adherence

to negotiated rates and prohibit billed charges that exceed

negotiated rates." With respect to hospital readmission pricing

errors, the complaint alleges that "BCBSMA incorrectly priced such

events as two separate hospital admissions in direct violation of

BCBSMA's policy" (emphasis added), and with respect to observation

room pricing errors, the complaint states that BCBSMA's "payments

exceeded the amount permitted and owed under the Plan, in which

the benefits are limited to the rates negotiated by BCBSMA."

Similar language abounds throughout the complaint. These

allegations may buttress a claim that BCBSMA breached its

contractual obligation under the ASA and SPD to price claims

according to its negotiated schedules, but they do not support an

inference that BCBSMA had discretion on whether to do so.

The Fund argues that BCBSMA's exercise of medical

judgment in repricing claims was an exercise of discretion

sufficient to confer fiduciary status. It points out that under

the ASA, BCBSMA was required to "conduct a medical necessity and

BCBSMA reserved the right to renegotiate those rates. Rather, the Fund focuses only on BCBSMA's application of those rates to participants' claims.

- 29 - utilization review" of participants' claims using the "medical

policy, medical technology assessment guidelines and utilization

review policies" that were developed by BCBSMA and attached to the

ASA.

Most of the factual allegations presented by the Fund in

its complaint, however, do not reflect an exercise of significant

medical judgment by BCBSMA. On the contrary, many of them describe

clerical errors. For example, the complaint alleges that

ClaimInformatics identified a "pattern of BCBSMA calculating

covered charges in amounts higher than the amounts healthcare

providers actually billed," including one instance of pricing a

claim at $120,614 despite the hospital's billing only $38,786.

Similarly, the complaint alleges that BCBSMA repeatedly priced

hospital readmissions as separate admissions in contravention of

its policy that certain readmissions would be included in the

initial admission price, and that BCBSMA regularly and erroneously

charged a two-day rate for observation room stays under twenty-

four hours when those stays spanned two calendar days. In one

instance, BCBSMA purportedly failed to inquire about a discrepancy

in which a hospital billed a procedure as a "foot amputation"

despite the doctor's billing it as a "toe amputation." These

alleged errors concern instances where BCBSMA allegedly failed to

follow straightforward contractual obligations.

- 30 - We focus more specifically on two allegations in the

complaint. First, the complaint alleges that BCBSMA accepted a

"statistically improbable number of claims" in which a hospital

had classified patient illness to be of "level 4" severity.

Second, the complaint alleges that in one instance, BCBSMA failed

to inquire why a provider charged three hours for a procedure known

to take no more than five minutes. These two allegations have to

do with knowledge of specific medical statistics (i.e., the average

number of hospital patients with severe illness and the average

length of a certain procedure, respectively). We need not decide

what level of medical judgment might rise to the level of

"discretion" under ERISA, because we are satisfied that neither of

these alleged actions do so. Cf. Pegram, 530 U.S. at 231-32

(finding that HMOs are not fiduciaries "to the extent that [they]

make[] mixed eligibility [and treatment] decisions acting through

[their] physicians," partly because "[a]t common law, fiduciary

duties characteristically attach to decisions about managing

assets and distributing property to beneficiaries"). And in any

event, there is an additional reason to reject the Fund's argument:

the Fund confuses the complexity of the medical issues involved

with the question of whether BCBSMA had discretion. The complaint

alleges throughout that BCBSMA failed to reach the "correct"

outcome when pricing claims, not that it had the discretion to

reach different conclusions.

- 31 - Next, the Fund argues that BCBSMA was a fiduciary when

taking the recovery and settlement actions alleged in the Fund's

complaint. The complaint's allegations concern actions alleged to

violate BCBSMA's contractual obligations, but as to which BCBSMA

had no discretion. The complaint alleges, for example, that BCBSMA

would at times retain a recovery fee even when the overpayments

necessitating recovery had been caused by BCBSMA's own errors.

The ASA did not grant BCBSMA discretion to take such an action,

however; rather, the ASA clearly provided that BCBSMA was

authorized to retain a recovery fee only if the need for recovery

was "attributable to a third party and not attributable to an error

made by [BCBSMA]." Similarly, the complaint's allegations that

BCBSMA once retained a recovery fee despite not recovering any

overpayment, and once miscalculated a recovery fee by applying the

recovery fee percentage to the original claim amount instead of

the recovered amount, both amount to claims that BCBSMA breached

the plain terms of the ASA, which allowed BCBSMA to retain a

recovery fee only when it pursued and obtained a recovery, and

provided that the recovery fee percentage would be applied to the

"recovery amount." The complaint further alleges that BCBSMA

wrongfully increased the recovery fee percentage from 20% to 30%

for all recoveries and began charging a 19% "Coding Advisor Program

Fee" on savings to the Fund from BCBSMA's post-payment audits of

out-of-network claims. Again, these acts are alleged to be in

- 32 - violation of the ASA, which provides for a 20% recovery fee.

Indeed, BCBSMA's explanation for charging these fees was that it

believed the Fund had signed separate amendments allowing the fees

to be exacted; neither party argues that BCBSMA had the discretion

under the ASA to charge these fees.

With respect to recovery and settlement operations, only

one allegation in the complaint entails any exercise of judgment

by BCBSMA. The complaint alleges, in relation to BCBSMA's

erroneously charging a two-day rate for observation room stays

that spanned two calendar days but were shorter than twenty-four

hours, that BCBSMA obtained partial recoveries via provider

settlements even though it was "administratively practical [and]

reasonable" to reprocess the claims instead for full recoveries.

The settlements, according to the complaint, "grossly

undercompensate[d]" the Fund.

It is true that the ASA granted BCBSMA the ability to

exercise some measure of judgment in determining whether

reprocessing a claim would be "not administratively practical or

reasonable" such that BCBSMA could instead pursue a settlement

with the provider. But even if this provision grants BCBSMA

"discretion" under ERISA, the Fund has failed to plausibly allege

that this discretion involves Plan management. See 29 U.S.C.

§ 1002(21)(A)(i) (designating as fiduciaries persons who exercise

"discretionary authority or discretionary control respecting

- 33 - management of [the] plan" (emphasis added)). On the contrary, the

ASA contemplated that BCBSMA typically would undertake such

settlements on behalf of all or a subset of its book of business,

with each client (including the Fund) receiving "its pro rata share

of the settlement." The Fund fails to plausibly allege that such

settlements constituted management of the Plan, as opposed to

broader business decisions that simply affected the Plan and its

participants. See Pegram, 530 U.S. at 226 ("[T]he threshold

question is not whether the actions of some person employed to

provide services under a plan adversely affected a plan

beneficiary's interest, but whether that person was acting as a

fiduciary (that is, was performing a fiduciary function) when

taking the action subject to complaint." (emphasis added));

Merrimon v. Unum Life Ins. Co. of Am., 758 F.3d 46, 60 (1st Cir.

2014) ("Discretionary acts trigger fiduciary duties under ERISA

only when and to the extent that they relate to plan management or

plan assets."); DeLuca v. Blue Cross Blue Shield of Mich., 628

F.3d 743, 747 (6th Cir. 2010) (holding that a TPA was not a

fiduciary when negotiating rates with providers, "principally

because those business dealings were not directly associated with

the benefits plan at issue . . . but were generally applicable to

a broad range of health-care consumers"); id. ("[I]n determining

liability for an alleged breach of fiduciary duty in an ERISA case,

the courts 'must examine the conduct at issue to determine whether

- 34 - it constitutes management or administration of the plan, giving

rise to fiduciary concerns, or merely a business decision that has

an effect on an ERISA plan not subject to fiduciary standards.'"

(internal quotation marks omitted) (quoting Hunter v. Caliber

Sys., Inc., 220 F.3d 702, 718 (6th Cir. 2000))). The Fund has not

alleged that any observation room error settlements were specific

to the Plan, let alone shown that such Plan-specific settlements

would have involved "management" of the Plan. Cf. Merrimon, 758

F.3d at 60 (finding that an insurer's discretion in setting

interest rates on retained asset accounts used to pay life

insurance benefits "did not relate to plan management but, rather,

related to the management of the [retained asset accounts]").

As the Department of Labor's interpretive bulletin

notes, a "person who performs purely ministerial functions . . .

within a framework of policies, interpretations, rules, practices

and procedures made by other persons is not a fiduciary." Livick,

524 F.3d at 29 (omission in original) (quoting 29 C.F.R. § 2509.75-

8(D-2)). The Fund tries to turn this interpretive bulletin on its

head by arguing that it was BCBSMA, not "other persons," that set

up the relevant "framework." The Fund contends that this is so

because BCBSMA negotiated rates with providers and used its own

procedures to pursue recoveries. This argument fails. It is

accurate that BCBSMA itself negotiated its PPO provider rates, but

this negotiation was not the action that was the subject of the

- 35 - Fund's complaint. Rather, the relevant "framework" was the

framework for applying the negotiated PPO rates. The ASA specified

that BCBSMA must apply its already negotiated PPO rates, and then

provided in-depth instructions on how and when BCBSMA was

authorized to pursue recoveries and provider settlements. It was

the Fund which, in the ASA, created this "framework."

The Fund has failed to plausibly allege that BCBSMA

exercised discretionary authority or control over management of

the Plan when taking the actions subject to the Fund's complaint.

B. Authority or Control Respecting Management or Disposition of Plan Assets

The Fund next turns to the issue of "plan assets,"

arguing that BCBSMA was a fiduciary to the extent that it

"exercise[d] any authority or control respecting management or

disposition of [the Plan's] assets." 29 U.S.C. § 1002(21)(A)(i).

The Fund contends that the working capital amount was a Plan asset

and that BCBSMA exercised "authority or control respecting

management or disposition" of the working capital amount.16

16 In a single paragraph of its brief, the Fund also posits that recovered amounts from overpaid providers constituted Plan assets over which BCBSMA exercised the requisite control. But the Fund never raised this theory before the district court, so the Fund forfeited the argument. See Massó-Torrellas v. Municipality of Toa Alta, 845 F.3d 461, 466 (1st Cir. 2017) ("Appellants cannot raise an argument on appeal that was not squarely and timely raised in the trial court. [L]itigants must spell out their legal theories face-up and squarely in the trial court . . . . [Otherwise,] that claim ordinarily is deemed unpreserved for purposes of appellate review." (alterations and omission in

- 36 - As previously described, the working capital amount was

an amount paid by the Fund to BCBSMA "for estimated [c]laim

[p]ayments." It was paid in weekly installments as part of a fixed

monthly sum that consisted of both the working capital amount and

estimated administrative charges. Each month, BCBSMA would

determine whether actual claim payments and incurred

administrative fees that month had been lower than or higher than

the combined weekly payments. If the combined payments had

overestimated actual claims and fees, BCBSMA would apply a credit

to the Fund's next weekly payment; if the combined payments were

too low, the Fund would increase its next payment accordingly.

The parties agreed to this arrangement in the ASA.

In their briefing, the parties and their amici

vigorously dispute the question of whether the working capital

amount remained a Plan asset once paid to BCBSMA.17 We assume,

without deciding, that the working capital amount did remain an

asset of the Plan, and that, as the Fund alleges, the working

capital amount (as opposed to other funds) was actually used by

BCBSMA to pay claims on behalf of the Plan's participants. Even

if the working capital amount was a Plan asset, the Fund has failed

to plausibly allege that BCBSMA exercised "any authority or control

original) (quoting Thomas v. Rhode Island, 542 F.3d 944, 949 (1st Cir. 2008))). 17 We thank all amici to this appeal for their briefs.

- 37 - respecting management or disposition" of the working capital

amount. 29 U.S.C. § 1002(21)(A)(i).

Every circuit to have directly addressed the issue has

concluded that "discretionary" control or authority is not

required with respect to the management or disposition of plan

assets. See LoPresti v. Terwilliger, 126 F.3d 34, 40 (2d Cir.

1997); Bd. of Trs. of Bricklayers & Allied Craftsmen Loc. 6 of

N.J. Welfare Fund v. Wettlin Assocs., Inc., 237 F.3d 270, 272-74

(3d Cir. 2001); Briscoe v. Fine, 444 F.3d 478, 490-91 (6th Cir.

2006); Leimkuehler v. Am. United Life Ins. Co., 713 F.3d 905, 912-

13 (7th Cir. 2013); FirsTier Bank, N.A. v. Zeller, 16 F.3d 907,

911 (8th Cir. 1994); IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d

1415, 1421 (9th Cir. 1997); David P. Coldesina, D.D.S, P.C., Emp.

Profit Sharing Plan & Tr. v. Est. of Simper, 407 F.3d 1126, 1132

& n.2 (10th Cir. 2005); Chao v. Day, 436 F.3d 234, 235-37, 237 n.1

(D.C. Cir. 2006).18 Finding otherwise would "do[] violence to the

statutory text," Chao, 436 F.3d at 236, which provides that "any"

authority or control suffices, 29 U.S.C. § 1002(21)(A)(i) ("[A]

person is a fiduciary with respect to a plan to the extent . . .

he [(a)] exercises any discretionary authority or discretionary

18 To our knowledge, the Fourth and Fifth Circuits have not considered the question, and the Eleventh Circuit has declined to decide it, see Carolinas Elec. Workers Ret. Plan v. Zenith Am. Sols., Inc., 658 F. App'x 966, 970 n.3 (11th Cir. 2016) (per curiam) (unpublished decision).

- 38 - control respecting management of such plan or [(b)] exercises any

authority or control respecting management or disposition of its

assets . . . ." (emphases added)); see also Wettlin, 237 F.3d at

274 ("That Congress established a lower threshold for fiduciary

status where control of assets is at stake is not surprising, given

that '[a]t common law, fiduciary duties characteristically attach

to decisions about managing assets and distributing property to

beneficiaries.'" (alteration in original) (quoting Pegram, 530

U.S. at 231)). We join our sister circuits in concluding that

even nondiscretionary control or authority over plan assets

suffices to render a person a fiduciary.

Nevertheless, the statute imparts fiduciary status only

to persons who "exercise[] . . . authority or control" with respect

to the "management or disposition" of plan assets. 29 U.S.C.

§ 1002(21)(A)(i). This court has thus noted that "the mere

exercise of physical control or the performance of mechanical

administrative tasks generally is insufficient to confer fiduciary

status." Beddall, 137 F.3d at 18. Rather, a degree of "meaningful

control" is required. Id.; see also Cottrill v. Sparrow, Johnson

& Ursillo, Inc., 74 F.3d 20, 22 (1st Cir. 1996) (finding the

"simpl[e] perform[ance]" of "a purely administrative act"

insufficient to render a person a fiduciary), abrogated on other

grounds by Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242

(2010); 29 C.F.R. § 2509.75-8(D-2) (noting that "administrative

- 39 - functions" do not constitute control over the management or

disposition of plan assets). This conclusion is consistent with

case law from other circuits. See, e.g., Chao, 436 F.3d at 237

(declining to "extend fiduciary status to every person who

exercises 'mere possession, or custody' over [plan] assets");

Briscoe, 444 F.3d at 494 (same); Wettlin, 237 F.3d at 275 ("ERISA

does not consider as a fiduciary an entity such as a bank when it

does no more than receive deposits from a benefit fund on which

the fund can draw checks."); IT Corp., 107 F.3d at 1422 ("Authority

over a plan's money is not the same thing as being a depository of

the money. If the plan's money is deposited in a bank, that does

not ipso facto make the bank a fiduciary.").

The Fund develops no argument with respect to the

"management" of the working capital amount,19 so our analysis is

limited to determining whether BCBSMA exercised authority or

control respecting the "disposition" of the working capital

amount. Cf. Cottrill, 74 F.3d at 21-22 (analyzing the terms

"management" and "disposition" separately). Further, because

ERISA confers fiduciary status only "to the extent" that the

19 The Fund's brief makes cursory reference to the phrase "management or disposition," but the relevant section of its brief develops only an argument that BCBSMA "was a fiduciary because it exercised authority over the disposition of [P]lan assets." (Emphasis added). Any argument about the "management" of the working capital amount is thus waived. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990).

- 40 - requisite control is exercised, 29 U.S.C. § 1002(21)(A), our

analysis is confined to resolving whether BCBSMA "act[ed] as a

fiduciary . . . when taking the action subject to complaint,"

Pegram, 530 U.S. at 226. Here, that action was BCBSMA's allegedly

erroneous pricing of claims. We thus must decide only whether the

Fund has plausibly alleged that BCBSMA's repricing of claims

constituted "authority or control respecting . . . disposition" of

the working capital amount.20 29 U.S.C. § 1002(21)(A)(i). It has

not, for several reasons.

First, the act of repricing claims was not itself an

exercise of authority over the "disposition" of the working capital

amount. The Fund cites no authority supporting the notion that

determining the amount of plan assets to be paid is equivalent to

controlling the actual payment -- i.e., the disposition -- of those

assets. See Webster's Third New International Dictionary 654

(1971) (defining "disposition" as "a placing elsewhere, a giving

over to the care or possession of another, or a relinquishing").

On the contrary, the pricing process was separate from and

antecedent to the act of payment. Cf. Leimkuehler, 713 F.3d at

20 The Fund does not argue that BCBSMA's recovery and settlement operations constituted control over the working capital amount. And as we previously noted, see supra note 16, the Fund forfeited its argument that the amounts recovered from overpaid providers constituted Plan assets. We thus analyze only BCBSMA's pricing activities, not its actions pertaining to recovery and settlement.

- 41 - 913-14 (declining to attribute fiduciary status to an insurance

company based on actions it took "well before" it invested plan

assets); Carolinas Elec. Workers Ret. Plan v. Zenith Am. Sols.,

Inc., 658 F. App'x 966, 971 (11th Cir. 2016) (per curiam)

(unpublished decision) (concluding that a TPA was not a fiduciary

when the allegations against it "all relate[d] to [its] role in

accounting for the plan's assets" but not to whether it "exercised

authority or control over the assets"); 29 C.F.R. § 2509.75-8(D-

2) (noting that the "[c]alculation of benefits," "[c]ollection of

contributions and application of contributions as provided in the

plan," and "[p]rocessing of claims" do not constitute control over

the management or disposition of plan assets). Even if BCBSMA's

pricing of claims affected the disposition of the working capital

amount, it did not amount to "meaningful control" over such

disposition. Beddall, 137 F.3d at 18; cf. Livick, 524 F.3d at 29

(noting that whether a service provider's actions "adversely

affected a plan beneficiary's interest" does not determine whether

that entity was acting as an ERISA fiduciary (quoting Pegram, 530

U.S. at 226)).

We turn, then, to the actual "disposition" of the working

capital amount. The Fund does not argue that BCBSMA used the

working capital amount for its own benefit, see, e.g., Guyan Int'l,

Inc. v. Pro. Benefits Adm'rs, Inc., 689 F.3d 793, 796, 798 (6th

Cir. 2012) (attributing fiduciary status to a TPA that "commingled

- 42 - and misappropriated . . . [p]lan funds for its own purposes");

Chao, 436 F.3d at 235, 238 (holding that an insurance company

president was a fiduciary when he promised to use plan funds to

purchase insurance policies but instead "pilfered" the funds and

provided fake policies), or billed the Fund for other fees, see,

e.g., Hi-Lex, 751 F.3d at 743, 747 (concluding that a TPA that

"retain[ed] additional revenue by adding certain mark-ups to

hospital claims paid by its . . . clients" was a fiduciary);

Pipefitters, 722 F.3d at 864-65, 867 (similar). Nor does the Fund

contend that BCBSMA paid any portions of the working capital amount

to anyone other than providers pursuant to adjudicated claims.

See, e.g., Srein v. Frankford Tr. Co., 323 F.3d 214, 221-22 (3d

Cir. 2003) (finding that a company that distributed plan funds to

a different plan was a fiduciary); LoPresti, 126 F.3d at 40

(concluding that a company officer who "use[d] . . . plan assets

to pay [c]ompany creditors" was a fiduciary). Rather, the Fund

argues only that BCBSMA overpriced claims, leading to overpayments

to providers who were entitled to a lower amount of compensation.

But as to the actual payment of claims to these

providers, the Fund has failed to plausibly allege that BCBSMA

exercised any authority or control over the payment process beyond

the "mere exercise of physical control or the performance of

mechanical administrative tasks." Beddall, 137 F.3d at 18. On

the contrary, the ASA unambiguously gave the Fund full control

- 43 - over claims eligibility determinations and thus the authority to

approve the transmission of claim payments. After BCBSMA repriced

each claim according to its provider network rates, the Fund

entered that claim into its own claims processing system to

"determine member eligibility." Only once the "final approval or

denial" of the claim was "forwarded by the Fund to [BCBSMA]" was

BCBSMA entitled to remit portions of the working capital amount to

providers. Further, if a Plan participant disputed any adjudicated

claim, the Fund -- not BCBSMA -- was solely "responsible to process

and make a decision regarding such [an] appeal."

The fact that BCBSMA could make claim payments only with

the Fund's authorization, along with the fact that the Fund

retained full control over the appeals process, weighs toward

finding that BCBSMA lacked authority respecting the disposition of

the working capital amount. See, e.g., id. at 20 (holding that a

bank was not a fiduciary when investing plan assets according to

the binding directions of an investment manager); Cottrill, 74

F.3d at 22 (finding that the "simpl[e] perform[ance] [of] a

transfer specified by [a plan] trustee" did not amount to an

exercise of control over the disposition of plan assets); cf.

Humana Plan, Inc. v. Nguyen, 785 F.3d 1023, 1028 (5th Cir. 2015)

(noting that "a requirement that [a] [service provider] submit a

recommendation to the plan administrator for approval before the

[service provider] takes further action" weighs toward finding

- 44 - that the service provider is a "ministerial employee," not a

fiduciary). With respect to the actual payment of the working

capital amount (as opposed to the repricing of claims), BCBSMA

essentially acted as a "conduit, performing a ministerial act

directed by [the Fund]." Cottrill, 74 F.3d at 22. The parties'

arrangement is distinguishable from instances in which a TPA has

the ability to convey plan funds unilaterally. Compare, e.g.,

Carolinas, 658 F. App'x at 971 (holding that a TPA was not a

fiduciary where the TPA "was not a signatory on the plan's bank

account and . . . could not dispose of plan assets without the

[plan] trustees' approval"), with, e.g., Wettlin, 237 F.3d at 271,

275 (holding that a TPA was a fiduciary where the TPA "wrote

checks[] and disbursed assets from the fund's bank account" and

"was not required to seek approval from the [plan] [t]rustees in

advance").21

Our holding is a limited one. We do not hold, for

example, that a TPA lacks fiduciary status whenever the plan

sponsor is responsible for claims adjudication. See Humana, 785

21 Like Wettlin, various cases attributing fiduciary status have involved defendants that apparently had relatively unconstrained check-writing authority over an account containing plan assets. See, e.g., Guyan, 689 F.3d at 796, 798; Briscoe, 444 F.3d at 483, 494; Coldesina, 407 F.3d at 1133-35; LoPresti, 126 F.3d at 38, 40; IT Corp., 107 F.3d at 1418-21. BCBSMA neither had nor attempted to exercise such authority; its ability to convey the working capital amount was circumscribed by the requirement of first obtaining the Fund's approval for each claim payment.

- 45 - F.3d at 1030 ("We do not hold . . . that a third-party service

provider must have final decision-making authority to be an ERISA

fiduciary."). Rather, our holding is fact-specific: it is based

on, inter alia, the Fund's failure to develop an argument about

the "management" of Plan assets; the fact that BCBSMA's control

over the pricing process (which is the sole "action subject to

complaint," Pegram, 530 U.S. at 226) does not plausibly constitute

authority or control with respect to the "disposition" of the

working capital amount; the fact that the Fund has not alleged

that BCBSMA used the working capital amount for its own purposes

or paid it to unauthorized recipients; and the fact that BCBSMA

lacked "meaningful control" over remitting claim payments to Fund-

approved providers, Beddall, 137 F.3d at 18.

We conclude that even if the working capital amount was

a Plan asset, the Fund has failed to plausibly allege that BCBSMA

exercised "any authority or control respecting management or

disposition" of that amount. 29 U.S.C. § 1002(21)(A)(i). The

Fund's contention that BCBSMA was a fiduciary fails.

III. Implications

Because the parties and their amici have dedicated

extensive briefing to the practical implications of our ruling, we

briefly address those arguments here. Doing so is consistent with

Supreme Court and First Circuit case law. See, e.g., Varity Corp.,

516 U.S. at 513-15 (discussing the "basic purposes" of ERISA);

- 46 - Shields v. United of Omaha Life Ins. Co., 50 F.4th 236, 251-52

(1st Cir. 2022) (addressing a debate between two amici regarding

the purposes of ERISA); Beddall, 137 F.3d at 21 (examining

potential risks and incentives created by the attribution of

fiduciary status).

The Supreme Court has recognized that ERISA was enacted

primarily "to promote the interests of employees and their

beneficiaries in employee benefit plans" and "to protect

contractually defined benefits." Firestone Tire & Rubber Co. v.

Bruch, 489 U.S. 101, 113 (1989) (first quoting Shaw v. Delta

Airlines, Inc., 463 U.S. 85, 90 (1983); and then quoting Mass.

Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985)). But

there exists a "tension between the primary [ERISA] goal of

benefiting employees and the subsidiary goal of containing . . .

costs." Mertens v. Hewitt Assocs., 508 U.S. 248, 262-63 (1993)

(alteration in original) (quoting Alessi v. Raybestos–Manhattan,

Inc., 451 U.S. 504, 515 (1981)). For example, another aim of ERISA

was "to create a system that is [not] so complex that

administrative costs, or litigation expenses, unduly discourage

employers from offering [ERISA] plans in the first place."

Conkright v. Frommert, 559 U.S. 506, 517 (2010) (alterations in

original) (quoting Varity Corp., 516 U.S. at 497).

BCBSMA and its amici persuasively argue that attributing

fiduciary status to BCBSMA on this case's facts could interfere

- 47 - with BCBSMA's business model in a manner that could also harm plan

participants and beneficiaries. The Fund contracted with BCBSMA

primarily to take advantage of its network of providers, with whom

BCBSMA negotiates discounted rates in volume. Indeed, amici for

BCBSMA note that some TPAs offer both TPA services and insurance

services and generally make the same network available to both

sets of clients, serving the goal of uniformity. If BCBSMA were

required here to adhere to strict fiduciary duties in the interests

of individual plans, it arguably would need to restructure its

networks and procedures based on the needs of each plan,

undermining its ability to act in the overall interest of its book

of business. Cf. DeLuca, 628 F.3d at 747 ("The financial advantage

underlying [a TPA]'s rate negotiations arises from the market power

that [the TPA] has as a large purchaser of health-care

services. . . . If, however, [the TPA] would be required to

negotiate solely on a plan-by-plan basis, as a practical matter

its economic advantage in the market would be destroyed, damaging

its ability to do business on a system-wide basis, ultimately to

the [plan] beneficiaries' disadvantage.").

Such restructuring could ultimately come at a steep

price to plans and their participants. Indeed, one current

industry practice allows plan sponsors to purchase contract

"riders" that require a TPA to act as final claims adjudicator,

rendering the TPA a fiduciary. According to amici for BCBSMA, the

- 48 - cost of these riders is "not insubstantial," given the expenses

and risks associated with being an ERISA fiduciary. Finding that

fiduciary status stems from arrangements like the one here could

lead TPAs to increase fees to account for the imposition of

fiduciary obligations.22 See Beddall, 137 F.3d at 21 (noting the

importance of avoiding a "climate in which [entities] would

routinely increase their fees to account for the risk that

fiduciary liability might attach to nonfiduciary work" (quoting

Ariz. State Carpenters Pension Tr. Fund v. Citibank, (Ariz.), 125

F.3d 715, 722 (9th Cir. 1997))). TPAs might have difficulty

avoiding such a result -- for example, under the Fund's view of

the "plan assets" inquiry, TPAs for self-funded plans would perhaps

need to pay claims in advance and only later be reimbursed by the

plans to avoid becoming functional fiduciaries. As the district

court noted, such an arrangement would force the TPA to "play[]

the role of an unsecured lender to the plan." Mass. Laborers'

Health & Welfare Fund, 2022 WL 952247, at *15. That outcome could

constitute an unnecessary "upheaval" in the TPA industry. Pegram,

530 U.S. at 233.

22 We do not hold that contract riders are required to render a TPA a fiduciary. Such a holding would obviate ERISA's provision that entities can be functional fiduciaries even if not named as fiduciaries in plan documents or via plan procedures. See 29 U.S.C. § 1002(21)(A). We hold only that the arrangement between the Fund and BCBSMA did not confer functional fiduciary status on BCBSMA.

- 49 - Amici for the Fund contend that finding BCBSMA to be a

nonfiduciary on these facts may allow TPAs and insurers to

perpetuate various anticompetitive practices, such as the

inclusion of "anti-steering clauses," "anti-tiering clauses,"

"all-or-nothing clauses," and "gag clauses" in their contracts

with plans. We do not doubt that such practices can harm plans

and their participants; nor do we question that ERISA could

potentially offer relief for those harms. Nevertheless, these

concerns cannot override the statutory language. See Mertens, 508

U.S. at 263 ("We will not attempt to adjust the balance between

those competing goals that the text adopted by Congress has

struck."). And our decision still allows plans to structure their

contracts with TPAs in various ways that will give rise to

functional fiduciary status. Further, plans remain able to

purchase contract riders to name TPAs as fiduciaries.

IV. Disposition

For the foregoing reasons, the judgment of the district

court is affirmed.23

23 Because we affirm the district court's dismissal of the Fund's ERISA claims, we also affirm the court's dismissal of the Fund's state-law claims upon declining to exercise supplemental jurisdiction. See Mass. Laborers' Health & Welfare Fund, 2022 WL 952247, at *16. The Fund does not argue that the dismissal of its state-law claims was an abuse of discretion.

- 50 -