Computer and Engineering Services, Inc. et al v. Blue Cross and Blue Shield of Michigan
Filing
61
OPINION AND ORDER granting 36 Motion to Dismiss Counterclaims. Signed by District Judge Patrick J. Duggan. (MOre)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
COMPUTER AND ENGINEERING
SERVICES, INC., et al.,
Plaintiffs,
Civil Action No.
12-CV-15611
vs.
Honorable Patrick J. Duggan
BLUE CROSS AND BLUE SHIELD
OF MICHIGAN,
Defendant.
_________________________________/
OPINION AND ORDER GRANTING PLAINTIFFS’
MOTION TO DISMISS COUNTERCLAIMS
On December 21, 2012, Plaintiffs Computer and Engineering Services, Inc.
and C.E.S., Inc. and Trillium Staffing Welfare Benefit Plan filed this lawsuit – one
of numerous nearly identical civil actions filed in this District – against Defendant
Blue Cross Blue Shield of Michigan (“BCBSM”) alleging violations of state and
federal law arising out of BCBSM’s administration of Plaintiffs’ self-funded
employee health benefit plans. Specifically, Plaintiffs allege that BCBSM has for
years been charging hidden administrative fees (“Disputed Fees”), in addition to the
disclosed contractual fees, for administering Plaintiffs’ plans. Plaintiffs contend
that, by charging the Disputed Fees, BCBSM violated the Employee Retirement
Income Security Act of 1974 (“ERISA”) (Counts I and II) and Michigan law
(Counts III-IX).
The claims arising under Michigan law were dismissed as
preempted by ERISA. See Computer & Eng’g Servs., Inc. v. Blue Cross Blue
Shield of Mich., No. 12-CV-15611, 2013 WL 1976234, at *5 (E.D. Mich. May 13,
2013).
A bench trial was held before the Honorable Victoria A. Roberts in one of the
related actions. Judge Roberts ruled in favor of the plaintiffs in that case and
against BCBSM, awarding the plaintiffs more than five million dollars, plus costs,
interest, and attorney fees. See Hi-Lex Controls, Inc. v. Blue Cross & Blue Shield of
Mich., No. 11-CV-12557, 2013 WL 2285453 (E.D. Mich. May 23, 2013). Judge
Roberts concluded, among other things, that BCBSM: (1) “suppl[ied] false and
misleading information to Plaintiffs about the nature and extent of the Disputed
Fees,” id. at *22, (2) “engaged in knowing misrepresentations and omissions of
Disputed Fees in the contract documents,” id. at *27, (3) “actively concealed [its]
knowing misrepresentations and omissions in the contract documents in order to
allay Plaintiffs’ suspicion and prevent inquiry into Disputed Fees,” id. at *29, and
(4) “exhibited bad faith” by assessing and concealing the Disputed Fees. Id. at *30.
In sum, Judge Roberts concluded that “BCBSM violated ERISA’s prohibition
against self-dealing,” “breached its fiduciary duties,” and “engaged in fraud and
concealment to hide its violations from Plaintiffs.” Id.
2
Shortly after Judge Roberts issued her ruling in Hi-Lex, BCBSM filed what it
calls “conditional counterclaims” in the present case. BCBSM alleges that if it
violated ERISA by collecting the Disputed Fees, Plaintiffs also violated ERISA
because they “negotiated, knew about, and benefitted from [their] payment of the
Disputed Fees.” BCBSM Resp. to Pls.’ Mot. to Dismiss Counterclaims at 2-3 (ECF
No. 39).
Through its counterclaims, BCBSM seeks contribution and
indemnification from Plaintiffs.
BCBSM appealed Judge Roberts’ decision in Hi-Lex. At the request of
BCBSM, this Court stayed the present lawsuit pending the appeal. In advocating
for the stay, BCBSM argued persuasively that the complaint in the present case is
“essentially identical” to the complaint in Hi-Lex and that the outcome of the present
case “will likely be controlled by the outcome of . . . Hi-Lex.” BCBSM Mot. to
Stay at 1 (ECF No. 33).
On appeal, the Sixth Circuit affirmed Judge Roberts’ decision in Hi-Lex. In
pertinent part, the Sixth Circuit agreed with Judge Roberts that, by charging the
Disputed Fees, BCBSM engaged in self-dealing, breached its fiduciary duty,
committed fraud, and concealed its fraudulent actions from the plaintiffs. See
Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Mich., 751 F.3d 740 (6th Cir.
2014), cert. denied, 135 S. Ct. 404 (2014).
3
Now before the Court is Plaintiffs’ motion to dismiss BCBSM’s
counterclaims.
The motion is fully briefed. 1
Having determined that oral
argument would not significantly aid the decisional process, the Court dispensed
with oral argument pursuant to Eastern District of Michigan Local Rule 7.1(f)(2).
For the reasons follow, the Court will grant Plaintiffs’ motion to dismiss BCBSM’s
counterclaims.
As mentioned, BCBSM seeks through its counterclaims contribution and
indemnification from Plaintiffs. As the parties recognize in their respective briefs,
there is a circuit split as to whether one ERISA fiduciary may pursue a contribution
action against a co-fiduciary. Compare Kim v. Fujikawa, 871 F.2d 1427, 1432 (9th
Cir. 1989) (rejecting contribution), and Travelers Cas. & Sur. Co. of Am. v. IADA
Servs., Inc., 497 F.3d 862, 867 (8th Cir. 2007) (same), with Chemung Canal Trust
Co. v. Sovran Bank/Maryland, 939 F.2d 12, 16 (2d Cir. 1991) (recognizing
contribution). Although the Sixth Circuit has acknowledged the circuit split, it has
not adopted a position. See McDannold v. Star Bank, N.A., 261 F.3d 478, 485 (6th
Cir. 2001). However, to this Court’s knowledge, every one of the numerous district
courts within the Sixth Circuit to have addressed the issue, including Judge Roberts
1
Plaintiffs’ motion and BCBSM’s response thereto were filed before the case was
stayed and thus before the Sixth Circuit issued its decision affirming Judge Roberts’
decision in Hi-Lex.
4
in Hi-Lex, has sided with the Eighth and Ninth Circuit view rejecting a right of
contribution among ERISA co-fiduciaries. See, e.g., Gilbert v. Nat’l Emp. Benefit
Cos., Inc., 466 F. Supp. 2d 928, 931 (N.D. Ohio 2006); Toledo Blade Newspaper
Unions-Blade Pension Plan v. Inv. Performance Servs., LLC, 448 F. Supp. 2d 871,
872 (N.D. Ohio 2006); May v. Nat’l Bank of Commerce, 390 F. Supp. 2d 674, 677
(W.D. Tenn. 2004); Williams v. Provident Inv. Counsel, Inc., 279 F. Supp. 2d 894,
900 (N.D. Ohio 2003); Daniels v. Nat’l Emp. Benefit Servs., Inc., 877 F. Supp. 1067,
1074 (N.D. Ohio 1995); Hi-Lex Controls Inc. v. Blue Cross & Blue Shield of Mich.,
Nos. 11-12557, 11-12565, 2013 WL 228097, at *3 (E.D. Mich. Jan. 22, 2013).
This Court adopts the view of the other district courts in this circuit. Therefore,
BCBSM’s contribution claim is not a viable legal theory and Plaintiffs’ motion to
dismiss BCBSM’s counterclaims must be granted.
Alternatively, even if the Court recognized the right of an ERISA fiduciary to
seek contribution from a co-fiduciary, BCBSM would not be entitled to contribution
from Plaintiffs in the present case. Under the body of law that BCBSM argues
governs its contribution claim (i.e., traditional trust law), “[a] trustee who commits a
breach of trust in bad faith is not entitled to contribution or indemnity from his
co-trustee.”
Restatement (Second) of Trusts § 258 (1959).
Judge Roberts
determined that BCBSM acted in “bad faith” with regard to the Disputed Fees.
5
That finding, which was affirmed by the Sixth Circuit, precludes BCBSM’s
contribution claim, even if the claim existed.2
For these reasons, Plaintiffs’ motion to dismiss BCBSM’s counterclaims is
GRANTED.
Dated: July 10, 2015
s/PATRICK J. DUGGAN
UNITED STATES DISTRICT JUDGE
Copies to:
Counsel of Record
2
In its response brief, BCBSM argues that it did not act in bad faith. See BCBSM
Resp. to Pls.’ Mot. to Dismiss Counterclaims at 18 (“[BCBSM] did not commit any
alleged breaches in ‘bad faith’”). However, the argument overlooks both Judge
Roberts’ explicit findings to the contrary in Hi-Lex, reached about two months
before BCBSM filed its response brief in the present case, and the Sixth Circuit’s
decision affirming Judge Roberts’ findings. Any attempt by BCBSM to argue that
the findings in Hi-Lex do not apply here is foreclosed by BCBSM’s previous
argument in connection with its motion to stay that the present case and Hi-Lex are
“essentially identical” such that “[t]his case’s outcome will likely be controlled by
the outcome of Blue Cross’s appeal in the Hi-Lex case.” BCBSM Mot. to Stay at 1.
BCBSM’s attempt to distance itself from Hi-Lex now that the case was not resolved
in BCBSM’s favor is disingenuous in light of its earlier argument that the Sixth
Circuit’s then-forthcoming decision in Hi-Lex would be controlling of this case.
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?