Su v. BCBSM, Inc.

Background

The Secretary of Labor sued BCBSM, Inc., doing business as Blue Cross and Blue Shield of Minnesota. The opinion says BCBSM served as a third-party administrator for several self-funded employee health plans. BCBSM provided access to a provider network and negotiated rates, administered claims, and acted as a named fiduciary when deciding whether to approve claims.

The Secretary alleged that BCBSM charged the plans for a Minnesota tax imposed on providers’ gross revenues, violating its fiduciary duties. In an earlier order, the court found that the Secretary’s alleged $67 million loss was sufficient to establish standing at the pleading stage. The court also found that the Secretary plausibly alleged that BCBSM was a functional fiduciary—a party that becomes a fiduciary because it exercises authority or control over plan assets—even though BCBSM was not a named fiduciary for the plans.

The earlier ruling reasoned that when BCBSM paid a claim, plan funds were automatically encumbered. The court therefore concluded at the pleading stage that BCBSM exercised control over plan assets and owed fiduciary duties. The opinion states that BCBSM paid approved claims from its own funds and that the plans later reimbursed BCBSM weekly under their contractual obligations.

Motion to Certify an Interlocutory Appeal

BCBSM asked the court to certify its earlier order for an immediate, nonfinal appeal. Under 28 U.S.C. § 1292(b), certification requires: (1) a controlling question of law; (2) a substantial ground for disagreement about that question; and (3) a finding that an immediate appeal may materially advance the end of the litigation. The court explained that certification is discretionary, used sparingly, and generally reserved for exceptional cases.

BCBSM proposed the question whether fiduciary duties apply when a third-party administrator uses its own funds to pay claims and is later reimbursed by the plans under a mandatory reimbursement arrangement.

Court’s Analysis

The court found that BCBSM satisfied the first requirement. The proposed question was controlling because, if the appellate court rejected the district court’s conclusion about fiduciary status, the Secretary’s claims would fail. The court also treated the question as one of law rather than a mixed question of law and fact because the relevant payment arrangement was not disputed for purposes of the motion.

The court found that BCBSM did not satisfy the second requirement. The cited cases addressed third-party administrators that directly spent plan assets or needed plan authorization before making payments. The court said those cases did not resolve the different arrangement presented here, in which BCBSM used its own funds and later received reimbursement without plan oversight.

The court rejected BCBSM’s reliance on a First Circuit decision because that decision did not address the specific reimbursement arrangement at issue and had described its own holding as narrow. The court also found that another cited case, involving recordkeeping services and fees paid to an investment adviser, did not address control over plan assets in the circumstances presented here. The court concluded that speculation about how another court might decide the issue was not a substantial ground for disagreement.

The court nevertheless considered the third requirement and found that BCBSM satisfied it. If an appellate court ruled that the reimbursement arrangement did not create fiduciary duties, the ruling would end the litigation. The court noted, however, that an appeal could substantially delay the case if the appellate court upheld the imposition of fiduciary duties.

Disposition

The court held that BCBSM showed a controlling legal question and that an immediate appeal could materially advance the litigation, but it failed to show a substantial ground for difference of opinion. The court therefore denied BCBSM’s Motion to Certify Interlocutory Appeal [Docket No. 47]. This order addressed only whether the earlier fiduciary-status ruling could be immediately appealed; it did not decide the underlying claims against BCBSM.