Seaway Food Town Inc v. Medical Mutl of OH

• Court: Court of Appeals for the Sixth Circuit
• Decided: October 23, 2003
• Docket: 01-4285
• Status: Published

Opinion

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Seaway Food Town, Inc. v. No. 01-4285 ELECTRONIC CITATION: 2003 FED App. 0376P (6th Cir.) Medical Mutual of Ohio File Name: 03a0376p.06 _________________ UNITED STATES COURT OF APPEALS COUNSEL FOR THE SIXTH CIRCUIT ARGUED: Anastasia Kay Hanson, SPENGLER _________________ NATHANSON, P.L.L., Toledo, Ohio, for Appellant. James D. Thomas, SQUIRE, SANDERS & DEMPSEY, Cleveland, SEAWAY FOOD TOWN , INC. X Ohio, for Appellee. ON BRIEF: Anastasia Kay Hanson, Plaintiff-Appellant, - Lisa E. Pizza, Theodore M. Rowen, SPENGLER - NATHANSON, P.L.L., Toledo, Ohio, for Appellant. James - No. 01-4285 D. Thomas, Christopher R. Shea, SQUIRE, SANDERS & v. - DEMPSEY, Cleveland, Ohio, for Appellee. > , MEDICAL MUTUAL OF OHIO , _________________ - Defendant-Appellee. - OPINION - _________________ - N CLAY, Circuit Judge. Plaintiff, Seaway Food Town, Inc. Appeal from the United States District Court (“Seaway”), filed suit against Defendant, Medical Mutual of for the Northern District of Ohio at Toledo. Ohio (“Medical Mutual”), formerly known as Blue Cross & No. 98-07576—James G. Carr, District Judge. Blue Shield Mutual of Ohio (“BC/BS”), alleging that BC/BS breached its fiduciary duties to Seaway in violation of the Argued: May 1, 2003 Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. §§ 1001-1461. Seaway Decided and Filed: October 23, 2003 appeals from the district court’s order entered on October 10, 2001, granting Medical Mutual’s motion for summary Before: CLAY and GIBBONS, Circuit Judges; judgment and denying Seaway’s motion for summary CLELAND, District Judge.* judgment. For the reasons set forth below, we AFFIRM the district court’s order.

* The Ho norable Robert H. Cleland, United States District Judge for the Eastern District of Michigan, sitting by designation.

1 No. 01-4285 Seaway Food Town, Inc. v. 3 4 Seaway Food Town, Inc. v. No. 01-4285 Medical Mutual of Ohio Medical Mutual of Ohio

STATEMENT OF FACTS resulting from the provider discounts, and that BC/BS did not owe any fiduciary duties to Seaway during negotiations for Procedural History the contract terms. Seaway, on the other hand, argued that the contract terms were ambiguous, and that, because BC/BS was On September 28, 1998, Seaway filed a complaint against administering Seaway’s plan, BC/BS owed fiduciary duties Medical Mutual alleging that BC/BS breached its fiduciary to Seaway throughout their contractual relationship. The duties with respect to its administration of Seaway’s district court conducted a hearing on the parties’ motions for employee health benefit plan (“plan”) in violation of ERISA. summary judgment on September 20, 2001. Specifically, Seaway alleges that BC/BS breached its fiduciary duties to Seaway by failing to (1) use accurate data By order issued on October 10, 2001, the district court to estimate the amount of discounts (hereafter referred to as granted Medical Mutual’s motion for summary judgment and “provider discounts”1) BC/BS expected to receive from denied Seaway’s motion for summary judgment. The district healthcare providers, (2) disclose the true nature and extent of court held that BC/BS did not act as an ERISA fiduciary the provider discounts it actually received, and (3) pass along during negotiations with Seaway and that unambiguous to Seaway the provider discounts it actually received. contract terms authorized BC/BS to retain any funds resulting Seaway also alleged Ohio common law claims of breach of from the provider discounts for its sole benefit. The district contract and conversion. Seaway sought various relief, court therefore concluded that Seaway was not entitled to a including restitution in the amount of provider discounts pass-through of actual provider discounts. The district court retained by BC/BS. also held that Seaway’s state law claims were preempted by ERISA. On November 7, 2001, Seaway filed a notice of Medical Mutual filed an answer to the complaint on appeal, contesting the ruling that BC/BS did not act as an November 20, 1998. In its answer, Medical Mutual ERISA fiduciary. counterclaimed for contribution and indemnification of any judgment rendered against it and for attorney’s fees and costs Substantive History incurred in defending the suit. Seaway filed an answer to the counterclaims on December 1, 1998. A. The Parties Both Medical Mutual and Seaway filed motions for Seaway is an Ohio corporation with its principal place of summary judgment on June 1, 2001 and June 26, 2001, business in Maumee, Ohio. From 1990 to 1995, Seaway respectively. Medical Mutual argued that unambiguous terms employed approximately 4000 employees and operated contained in a series of contracts governing BC/BS and approximately sixty supermarkets throughout Michigan and Seaway’s relationship authorized BC/BS to retain any funds Ohio. Medical Mutual is an Ohio mutual organization with its principal place of business in Cleveland, Ohio. Medical 1 W hen providers join the health benefit plan, they agree to accept Mutual is the successor to BC/BS. From 1991 to 1998, discounted fees in lieu of payment in full. See, e.g., HC A H ealth Servs. BC/BS served as an administrator of Seaway’s plan pursuant of Georgia, Inc. v. Em ployers Health Ins. Co., 240 F.3d 982 , 987 (11th to a series of contracts. Cir. 2001). No. 01-4285 Seaway Food Town, Inc. v. 5 6 Seaway Food Town, Inc. v. No. 01-4285 Medical Mutual of Ohio Medical Mutual of Ohio

B. Seaway’s Selection of BC/BS indicated that BC/BS would estimate the provider discounts it expected to receive in 1991, and would then pass along the In 1990, Seaway began searching for a new claims estimated provider discounts to Seaway through lower administrator for its employee health benefit plan for the administrative fees and stop-loss premiums.3 coming year. To assist in the search, Seaway employed Findley, Davies and Company (“FDC”), a health benefits In October of 1990, Seaway selected BC/BS’s traditional consulting firm headquartered in Toledo, Ohio. FDC, on indemnity plan proposal, and selected BC/BS to administer its behalf of Seaway, solicited health maintenance organization plan in 1991. BC/BS began administering Seaway’s plan in plan proposals and traditional indemnity plan proposals from January of 1991 pursuant to the terms of two memoranda six companies, including BC/BS. After receiving the dated October 4, 1990 and November 5, 1990, respectively. proposals, FDC prepared a written report in which it analyzed the financial aspects of each company’s proposal and C. The 1991 Group Contract recommended that Seaway give further consideration to the companies that submitted the most competitive proposals. BC/BS and Seaway executed a “Group Contract” on April FDC presented the report to Seaway at a meeting on August 16, 1991, which was effective from January 1, 1991 to 29, 1990. During the meeting, Seaway instructed FDC to December 31, 1991 (“the 1991 Group Contract”). Under the solicit proposals from two additional companies that Seaway 1991 Group Contract, BC/BS’s duties included paying specifically identified. Shortly thereafter, FDC solicited and providers for claims made by Seaway’s employees, and received proposals from the two companies. Several billing Seaway on a weekly basis for the claims paid, meetings between FDC and Seaway followed. administrative fees, and stop-loss premiums. Section 9.5 of the 1991 Group Contract provides: FDC began negotiations, on behalf of Seaway, with the companies that submitted the most competitive proposals, Some of the Plan’s [4] contracts with Providers [5] allow including BC/BS. According to the deposition testimony of discounts, allowances, incentives, adjustments and Waldo E. Yeager, Seaway’s Senior Vice President of Finance, settlements. These amounts are for the sole benefit of the one of the issues discussed during negotiations between Plan and the Plan will retain any payments resulting 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 3 The phrase “stop-loss premiums” refers to prem iums for stop-loss BC/BS would pass along provider discounts to Seaway. insurance coverage–insurance coverage that caps the amount of charges According to the deposition testimony of Floyd C. Melby,2 a for which Seaway could be held liable per contract period. Seaway employee who assisted FDC in soliciting proposals 4 and who reported to Yeager, BC/BS’s proposal indicated the The 199 1 G roup Contract refers to BC/BS as the “P lan” and to method by which BC/BS would pass along the provider Seaway as the “Group ” or the “Employer.” (J.A. at 638 .) discounts to Seaway. Yeager testified that BC/BS’s proposal 5 Section 1.13 of the 1991 Group Contract defines the term “Provider” as “a ho spital, facility other provider, physician or professional 2 other provider as stated in the Certificate, Schedule of Benefits, Riders At the time of his deposition, Melby was an employee of BC/BS. and Indo rsements.” (J.A. at 639.) No. 01-4285 Seaway Food Town, Inc. v. 7 8 Seaway Food Town, Inc. v. No. 01-4285 Medical Mutual of Ohio Medical Mutual of Ohio

therefrom. All claims submitted to the Plan will have Addenda I and II were attached to the 1991 Group Contract, copayment and deductible amounts calculated according and were both incorporated by reference into the 1991 Group to the Provider’s charges for Covered Services [6] Contract. Addendum II provided that “[a]ll of the terms, without regard to the Plan’s discounts, allowances or conditions and provisions of the [1991 Group] Contract apply incentives. to this Addendum unless specifically modified herein.” (J.A. at 650.) In addition, Addendum II detailed the reimbursement (J.A. at 646.) The contract fell within the definition of an arrangement between BC/BS and Seaway, which is referred ERISA-covered plan, as it “was established . . . for the to as the “billed charges”8 arrangement. Under this purpose of providing for its participants or their beneficiaries, arrangement, BC/BS charged Seaway the amount that through the purchase of insurance or otherwise . . . medical, providers actually billed for rendering covered services to surgical, or hospital care or benefits, or benefits in the event Seaway’s employees. Addendum II also detailed the amount of sickness, accident, disability, [or] death . . . .”7 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 6 premiums. Section 1.7 of the 1991 Group Contract defines the term “Covered Service” as “a Provider’s service, supply, product or accommodation described in a Co vered Person’s Certificate or Schedule of Benefits, Rider At his deposition, Yeager testified that the 1991 Group or Ind orsem ent for which the Plan pays.” (J.A. at 6 38.) Contract “appeared to be . . . a boilerplate type of agreement . . . which we . . . understood to be representing all of the 7 details that had been discussed . . . .” (J.A. at 528.) Yeager In full, the ap plicab le pro vision states: testified that he could not recall whether FDC reviewed the The terms “employee welfare benefit plan” and “welfare plan” mean 1991 Group Contract, but he was “pretty sure” that FDC did any plan, fund, or program which was heretofore or is hereafter so. (J.A. at 528.) Yeager also testified that he could not established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or recall whether he had discussed the terms of the 1991 Group program was established or is maintained for the purpose of Contract with FDC before he signed it on behalf of Seaway. providing for its participants or their beneficiaries, through the purchase of insurance o r otherwise, (A) med ical, surgical, or hospital care or benefits, or benefits in the event of sick ness, acciden t, disab ility, death or une mplo yment, or vacation ben efits, app renticeship or other training program s, or day care ce nters, scholarship funds, or prepaid legal services, o r (B) any benefit described in section 186(c) of this title (other than pensions on retirement or death, and insurance to provide such pensions). 8 29 U.S.C. § 1002(1). An “employee welfare benefit plan” may also be Section 1(a) of Addendum II defines the term “Billed Charges” as deemed an “employee benefit plan” or a “plan.” Id. § 1002(3). T he term “a Provider’s published charges for Covered Services, before any am ounts “plan” is used in the provision defining a “fiduc iary,” as discussed infra. for Provid er discounts, inc entives, allowances or settleme nts or for Id. § 1002(21 )(A). ded uctibles or co paym ents.” (J.A. at 650.) No. 01-4285 Seaway Food Town, Inc. v. 9 10 Seaway Food Town, Inc. v. No. 01-4285 Medical Mutual of Ohio Medical Mutual of Ohio

D. The 1992 and 1993 Renewals BC/BS and Seaway executed a renewal, which was effective from January 1, 1993 to December 31, 1993 (“the On behalf of Seaway, in mid-1991, FDC began 1993 renewal”). Yeager signed the 1993 renewal on behalf negotiations, with BC/BS for a renewal of the 1991 Group of Seaway. The 1993 renewal was contained in a new Contract for the following year. An issue frequently Addendum II, which was incorporated by reference into the discussed during the negotiations was whether BC/BS would 1991 Group Contract. The terms of the 1993 renewal are pass along a higher percentage of the estimated provider identical, in all relevant respects, to the terms of the 1992 discounts to Seaway than the percentage BC/BS typically renewal, except the 1993 renewal changed the guaranteed offered customers. In a letter dated November 1, 1991, discount against billed charges from 13.56% to 7.74%. BC/BS informed Seaway that estimated provider discounts were being passed along to Seaway through lower E. The 1994 Group Contract and Subsequent administrative fees, lower stop-loss premiums, and a Contracts guaranteed discount against billed charges. BC/BS also informed Seaway that BC/BS was “at risk financially” due to In 1993, FDC began negotiations with BC/BS regarding its estimation of the provider discounts. (J.A. at 668.) contract terms for the coming year. In a letter dated September 3, 1993, FDC requested that BC/BS assure that it BC/BS and Seaway executed a renewal, which was would pass along 100% of the estimated provider discounts effective from January 1, 1992 to December 31, 1992 (“the to Seaway in the same manner as the past renewals. FDC also 1992 renewal”). Yeager signed the 1992 renewal on behalf requested that BC/BS explain the distinction between the of Seaway. The 1992 renewal was contained in a new existing billed charges arrangements, under which Seaway Addendum II, which was incorporated by reference into the received a guaranteed discount against billed charges, and a 1991 Group Contract. The 1992 renewal provided that “[a]ll “paid claims” arrangement, under which Seaway would of the terms, conditions and provisions of the [1991 Group] receive a pass-through of the actual provider discounts. Contract apply to this Addendum unless specifically modified BC/BS complied with FDC’s requests in a letter dated herein.” (J.A. at 673.) The 1992 renewal indicated that September 13, 1993. BC/BS and Seaway had a billed charges arrangement. The 1992 renewal also indicated that BC/BS passed along the Instead of executing a renewal, on August 8, 1994, BC/BS estimated provider discounts to Seaway through lower and Seaway executed a “Group Contract” which was effective administrative fees, lower stop-loss premiums, and a from January 1, 1994 to December 31, 1994 (“the 1994 guaranteed discount of 13.56% against billed charges. Group Contract”). Section 9.5 of the 1994 Group Contract provides: On behalf of Seaway, in mid-1992, FDC began negotiations with BC/BS for a renewal of the 1991 Group Contract for the The Group is obligated to pay the premiums specified by following year. During the negotiations, BC/BS represented this Contract when due, and [BC/BS] shall have no right that it would continue to pass along 100% of the estimated to any additional amounts from the Group. [BC/BS] is provider discounts to Seaway. obligated to pay for Covered Services pursuant to this Contract, and the Group shall have no right to any additional amounts from [BC/BS]. No. 01-4285 Seaway Food Town, Inc. v. 11 12 Seaway Food Town, Inc. v. No. 01-4285 Medical Mutual of Ohio Medical Mutual of Ohio

Some of [BC/BS’s] contracts with Providers allow DISCUSSION discounts, allowances, incentives, adjustments and settlements. These amounts are for the sole benefit of A. Standard of Review [BC/BS], and [BC/BS] will retain any payments resulting therefrom. All institutional claims submitted to [BC/BS] This Court reviews a district court’s grant or denial of will have co-payment and deductible amounts, when summary judgment de novo. Best v. Cyrus, 310 F.3d 932, applicable, calculated according to the Provider’s charges 934 (6th Cir. 2002). Summary judgment is appropriate “if the for Covered Services without regard to [BC/BS’s] pleadings, depositions, answers to interrogatories, and discounts, allowances or incentives. admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that (J.A. at 753.) the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). In reviewing the district court’s grant Addenda I, II, and III were attached to the 1994 Group or denial of summary judgment, this Court “draw[s] all Contract. Addendum III indicated that BC/BS passed along justifiable inferences in the light most favorable to the 100% of the estimated provider discounts to Seaway through nonmoving party.” Best, 310 F.3d at 934 (citing Matsushita lower administrative fees, lower stop-loss premiums, and a Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 guaranteed discount of 7.98% against billed charges. (1986)).

In 1995, BC/BS and Seaway switched from the billed B. ERISA Fiduciary Status charges arrangement to the paid claims arrangement. The contract years from 1995 to 1998 are not at issue. Under ERISA:

F. The Audit [A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or In 2000, Seaway employed Schmidt, Long & Associates, discretionary control respecting management of such Inc. (“Schmidt”) to perform an audit of BC/BS’s records. plan or exercises any authority or control respecting Schmidt prepared a report in which it compared the provider management or disposition of its assets, (ii) he renders discounts BC/BS actually received against the provider investment advice for a fee or other compensation, direct discounts BC/BS passed along to Seaway. Schmidt or indirect, with respect to any moneys or other property concluded that Seaway was owed $714,879.25 for provider of such plan, or has any authority or responsibility to do discounts retained by BC/BS from 1991 to 1994, plus interest. so, or (iii) he has any discretionary authority or Seaway seeks restitution in that amount on appeal. discretionary responsibility in the administration of such plan.

29 U.S.C. § 1002(21)(A). “ERISA also defines a ‘person’ to include a corporation.” Hamilton v. Carell, 243 F.3d 992, 998 (6th Cir. 2001) (citing 29 U.S.C. § 1002(9)). “The Supreme Court has recognized that ERISA ‘defines No. 01-4285 Seaway Food Town, Inc. v. 13 14 Seaway Food Town, Inc. v. No. 01-4285 Medical Mutual of Ohio Medical Mutual of Ohio

“fiduciary” not in terms of formal trusteeship, but in was not yet in existence . . . . During negotiations, functional terms of control and authority over the plan . . . .’” Seaway was free to seek and chose a different Id. (quoting Mertens v. Hewitt Assocs., 508 U.S. 248, 262 administrator with a better plan and lower costs. (1993)). This Court has stated: .... ERISA regulates the management and administration of [W]e must examine the conduct at issue to determine employee benefit plans. Here, Seaway asks this Court to whether it constitutes “management” or “administration” regulate the establishment of a plan. ERISA is not of the plan, giving rise to fiduciary concerns, or merely intended to regulate such conduct. To reiterate, ERISA a business decision that has an effect on an ERISA plan is not involved in regulating conduct affecting the not subject to fiduciary standards. establishment of a plan or with its terms. Simply put, ERISA’s concern is with the elements of a plan and its Hunter v. Caliber Sys., Inc., 220 F.3d 702, 718 (6th Cir. administration after it has been established. 2000) (internal quotation marks and alterations omitted) (citing Sengpiel v. B.F. Goodrich Co., 156 F.3d 660, 666 (6th (J.A. at 222) (emphasis in original) (internal quotation marks Cir. 1998)). Thus, and citations omitted). The district court also held that Section 9.5 of the 1991 and 1994 Group Contracts authorized [i]n every case charging breach of ERISA fiduciary duty BC/BS to retain the actual provider discounts for its sole . . . the threshold question is not whether the actions of benefit. The district court reasoned: some person employed to provide services under a plan adversely affected a plan beneficiary’s interest, but The administrative services contract[s] clearly state[] that whether that person was acting as a fiduciary (that is, was provider discounts are for the “sole benefit” of [BC/BS]. performing a fiduciary function) when taking the action Seaway cannot point to any language in the contract[s] subject to complaint. that would provide Seaway with a right to the actual provider discounts during 1991 through 1994. Pegram v. Herdrich, 530 U.S. 211, 226 (2000); see also According to the terms of the administrative services Mich. Affiliated Healthcare Sys., Inc. v. CC Sys. Corp., 139 contract[s], Seaway had no right to a pass through of F.3d 546, 549 (6th Cir. 1998) (recognizing that the definition actual provider discounts. of an ERISA fiduciary not only includes persons specifically .... named as fiduciaries by the plan, but also any person who On its face, § 9.5 is clear and unambiguous. exercises discretionary control or authority over a plan’s Nonetheless, Seaway asks that I look past the face of the management, administration, or assets). administrative services contract[s] to extrinsic evidence. Seaway contends that there is a “latent” ambiguity in In its October 10, 2001 order, the district court held that § 9.5 . . . . I decline, however, to have recourse to BC/BS did not act as an ERISA fiduciary when negotiating extrinsic evidence to create ambiguity in § 9.5. contract terms with Seaway. The district court reasoned: (J.A. at 224-25.) In its order, the district court only At that point[,] [BC/BS] was in no position to exercise considered whether BC/BS acted as a fiduciary when discretion or authority or administer the plan. The plan No. 01-4285 Seaway Food Town, Inc. v. 15 16 Seaway Food Town, Inc. v. No. 01-4285 Medical Mutual of Ohio Medical Mutual of Ohio

negotiating contract terms with Seaway, and when complying excess premiums were to be refunded to the plaintiffs. The with Section 9.5 of the 1991 and 1994 Group Contracts. Seventh Circuit held that BC/BS was not an ERISA fiduciary because BC/BS did not exercise discretionary authority with On appeal, Seaway argues that the district court erred in respect to the setting of the premium rates. Id. at 1132. The failing to consider whether BC/BS acted as an ERISA Seventh Circuit reasoned that the parties had entered into an fiduciary when exercising control over Seaway’s plan assets. “arm’s length bargain presumably governed by competition Medical Mutual argues that Seaway waived for appellate in the marketplace” that specified the premium rates. Id. review the argument that BC/BS acted as fiduciary when exercising control over Seaway’s plan assets because Seaway In Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805 F.2d did not raise the argument in the district court. Regardless of 732, 737 (7th Cir. 1986), the Seventh Circuit clarified its whether Seaway raised the argument in the district court, we holding in Schulist as follows: hold that the argument is without merit. Schulist stands for the proposition that if a specific Seaway argues that BC/BS exercised continuing control [contract] term (not a grant of power to change terms) is over Seaway’s plan assets inasmuch as Seaway paid funds to bargained for at arm’s length, adherence to that term is BC/BS on a weekly basis, BC/BS in turn paid a portion of the not a breach of fiduciary duty. No discretion is exercised funds to providers for payment of billed charges incurred by when an insurer merely adheres to a specific contract Seaway’s employees, and BC/BS retained the remaining term. When a contract, however, grants an insurer portion of the funds for its sole benefit. Seaway claims that discretionary authority, even though the contract itself is the remaining portion of the funds arose from the provider the product of an arm’s length bargain, the insurer may discounts received by BC/BS. Seaway further argues that be a fiduciary. BC/BS’s control over funds in the form of plan assets gave rise to ERISA fiduciary status. The plaintiffs in Ed Miniat were participating employers in a retirement life reserve insurance plan issued by the Medical Mutual argues that because Section 9.5 of the 1991 defendants. The plaintiffs argued that the defendants and 1994 Group Contracts authorized BC/BS to retain any breached their fiduciary duties under ERISA by retaining funds resulting from the provider discounts for its sole more than one-half of the premiums paid by the plaintiffs, benefit, such funds belonged to BC/BS and not to the plan. without having issued any insurance under the plan. The Medical Mutual therefore argues that BC/BS’s control over Seventh Circuit held that the plaintiffs alleged a claim that the such funds did not give rise to ERISA fiduciary status. We defendants were ERISA fiduciaries. Ed Miniat, 805 F.2d at agree. 738. The Seventh Circuit reasoned that the defendants’ power to amend or alter the terms of the plan constituted the In Schulist v. Blue Cross & Blue Shield, 717 F.2d 1127 (7th requisite discretionary authority over plan assets. Id. Cir. 1983), the plaintiffs were trustees of employee health and welfare benefit plans issued by BC/BS. The plaintiffs argued We agree with the Seventh Circuit’s reasoning that where that BC/BS breached its fiduciary duties under ERISA by parties enter into a contract term at arm’s length and where retaining excess premiums paid by the plaintiffs. The series the term confers on one party the unilateral right to retain of contracts between the parties did not provide that the funds as compensation for services rendered with respect to No. 01-4285 Seaway Food Town, Inc. v. 17 Medical Mutual of Ohio

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. See Ed Miniat, 805 F.2d at 737; Schulist, 717 F.2d at 1132; see also F.H. Krear & Co. v. Nineteen Named Trs., 810 F.2d 1250, 1259 (2nd Cir. 1987) (stating that “after a person has entered into an agreement with an ERISA-covered plan, the agreement may give it such control over factors that determine the actual amount of its compensation that the person thereby becomes an ERISA fiduciary with respect to that compensation”).

Contrary to Seaway’s argument, we find that Section 9.5 of the 1991 and 1994 Group Contracts does not authorize BC/BS to exercise discretion with respect to any funds resulting from the provider discounts. Section 9.5 specifically authorizes BC/BS to retain such funds for its “sole benefit.” The “sole benefit” language precludes BC/BS from exercising discretion with respect to such funds. We therefore hold that BC/BS’s adherence to Section 9.5 did not give rise to ERISA fiduciary status. See Ed Miniat, 805 F.2d at 737; Schulist, 717 F.2d at 1132.

CONCLUSION

For the forgoing reasons, we AFFIRM the district court’s order.