thirteen one seven seven three thirteen one eight five nine secretary of labor versus blue cross blue shield excuse me highlights america that's the blue cross and blue shield arguments that exceed fifteen minutes for defendant ten minutes for plaintiffs five minutes for me signed a contract with blue cross but called for the payment of certain fees that we've been calling access fees those fees were paid with high lex's money according to the s deed there were no plan assets to be used no five panels of the michigan court of appeals that construed the identical contract and said it was unambiguous and in forcible the district court however relying primarily if not soley on the testimony of a detection deception expert a psychologist from arizona named judy b found that the contract was misleading fraudulent even i think this court cannot rule that federal common law can look to shuck junk science and not state law argue deceptive practices even without an expert right i could could but that's the way it is at all times before a jury but the district court appointed only to judy berggruen and her finding that the contract was misleading and i quote that a basically a clearly erroneous kind of challenge that you're no construction of a contract is a question of law i find it interesting that this court both in pipefitter wasn't used to interpret a contract was it the issue was she said the way this contract was structured was misleading because different from what the contract says it's ms well i mean the district court attributed no meaning to the contract the key provision in the contract that authorizes the charging of these fees was quoted in both pipefitters three in pipefitters for my fitness for said the language was opaque and didn't cabin blue cross discretion but be the type it is three no pipefitters for said this language had no meaning or was misleading so i'm looking at your brief i think this is a brief of the blue cross blue shield yes your own argument are you making one two three or four i don't have those in front of me yellow first one is whether it's for do sherry and the second one is whether it's time barred in the third one is whether contractually authorized compensation cost itself dealing in the fourth one is whether whether you violated a fiduciary duty when reporting access fees consistent with the with the a s c which is a two page ar argument is that the one you're making now in the fourth two page argument and maybe you're on to let me turn to plan assets which i think is our strongest argument and there we find tremendous guidance from pipefitters three  said there couldn't be a making now i'm trying to track your argument to the to make the in your brief you know plant the plan asset or i'm sorry your honor i'm trying to make the plan asset argument which ones that would be the first argument your honor you had to look at the funding mechanism of each blue cross contract that couldn't be the case if the district court was right because it district court held when ever in employer since money to a third party administrator like blue cross could be used to pay employee health care claims all of that money is a plan assets if that were the case then this court was dead wrong in pipefitters three because this court said about pipefitters for i finished four there was no issue of planned assets remember the plaintiff there was a trust fund that make all the difference it makes a rationale no it makes a big difference your honor was there rationale not the case here the s p d said that this is being funded by the general assets of high lex corp we have twenty years of department of labor guidance that says unless the plan has a property interest in this payment it can't be planned assets now we heard in the amicus brief that there's a new theory called earmarking what we know from prior advisory opinions from the deal well earmarking setting up a separate account even does not create plan assets it belonged to the workers i know it belongs to the company the company was obligated under its  pilots transferred to us was a planned asset a refund would be a prohibitive transaction we would be using plan assets not for the exclusive benefit of the employees another example your honor is i guess i just don't follow that argument i don't see why something can be a plan asset but if you gave too much you got some back on with with the logic his money always was high likes is money and it's clear that in a risk the health care plan can be funded with out plan assets it can be funded from the general assets of the employer in the employer never surrenders its ownership interest in those funds and that was the case here that's the difference with pipefitters every dollar that the pipefitters trust fund held was by definition a planned asset i'd like to turn briefly to the statute of limitations because him there you have a situation where mr flack admit it that he never read anything annually he signed a schedule a that said your top hospital claims will be increased to pay for these fees right above his signature line he said i never read it he never read the mr contract yet the district court found due diligence what we have here your honor is the prospect of a multinational corporation recovering five thousand dollars shoes me five million dollars primarily because it hired employees who didn't bother to read the contracts they sign  i hope that doesn't become the law on the six circuit it's not the law anywhere else that employee can ignore what's in a contract and then claim well i can  the fraud or concealment exception anyone reading these contracts would say there's a charge being made they might not know everything about the charge but they know they're being charged and that is in the o t g d o t g was the subject the pipefitters but even pipefitters didn't challenge the provider network fee because the provider network fee is what buys groups like high links access to the best discounts in the state of michigan we know that over from the just from the pipe history that over five hundred employers in michigan have turned to blue cross in paid these fees for twenty years because by paying the fee they got the best discounts from hospitals and doctors across the state of michigan now after the fact after having the benefit of these discounts for twenty plus years highlights the corporation says i could watch it how about giving me back twenty years of these fees now that you're your opponent  brief says that many of the issues you raise are controlled by pipe fitters for which i guess the two thousand and thirteen decision so you have a long third brief and it's only mentions pipefitters once i believe remember pipefitters became an a s c customer in two thousand to suit in two thousand and four in this court has said you knew from the contract you signed that these fees were being charged for no question that their suit was timely that that group of for do sherry's was diligent here we have just the opposite mr flack was acting as the fiduciary for the health care plan waits until two thousand and eleven to challenge a contract that was signed in two thousand and two why did he wait because he testified when i took over the role of administering health care i didn't bother to read the company's contracts now how can this court condone that as sufficient due diligence especially when arista says someone like flack as a fiduciary has a heightened duty to understand the contracts that provide when it's concealed how was it concealed there's no doubt it's a factual issues all thing i don't argue about it i'm just asking about the nature of the issue i don't it's a legal issue and then start arguing about the facts but that's going on right i disagree your honor when what the district court has or pieces of paper in a contract and she assesses how those pieces of paper match up with the contract that that's not a factual question it's not a credibility question the only credibility question the district court credibility judgment the district court made was she found that ron crowfoot did not meet with a high looks official in two thousand and four we don't challenge that but when they when this court has only before pieces of paper contract and reports call for by the contract there's no basis for this court to give any deference to the district court that's not a credibility assessment but my question is whether was a factual or whether was quite well it's i'd facts based on the paper we still have to do or i don't think that's that's factual and there's no factual finding that  there's no testimony in the record that mr flack looked at something and said whom i think it means this his desk the money is i didn't look at anything ok the question thank you thank you morning your honour's me please the court my name is example of self dealing whether the t g was actually authorized under the contract the core issues the issues that are now on the fiduciary issue they distinguish it at oral argument at least on the grounds that there was a trust involved in that case and wasn't wasn't even an issue so true they did not challenge the question that those were planned assets infight fitters as i think they should not have challenged that they were pla assets just like they should have the reason they didn't was because there was a trust that it doesn't really control in a case where there's not a trust or does that i mean that's what i'm asking i hear you say it's controlling and they say it's not now i think that you have the court had to get to the question of whether those were planned assets and the court did conclude that they were planned assets because that is an essential piece to determining that blew true shield was functioning as a  that it was a holding even though they didn't explain it i have a problem with apple they say it's distinguishable because there was a trust in that case and there is no trust in this case i would it is their argument right that is their argument and i would really response to that ok i would respectfully suggest that that's not a material distinction that that's not a principal distinction that makes a difference i know in a risky case well my my colleague this morning used the word talked about the source of the funds and he said that the source of the funds in this case was high lacks and that the source of the funds in the pie for the case was his trust that's not true the source of the funds in the pipefitters case was a variety of employers that was a joint multi employer  arrangement multiple employers with the union under taft hartly so the money the source of the money was not just one employer it was a group of employers and they and they established the you pardon me just so that i can understand the argument  if you owe some money and you're paying it in dribs and drabs and occasionally get refunds back because you go some money you could argue that kind of a legal situation there's no trust involved it's just a contract on the other hand if you owe some money and you put it into a received doesn't require the establishment of a trust the responder stand that requires a fiduciary having some way in which their fiduciary the only question is whether these are assets of the plant or as blue cross would argue that they're the assets of the employer and when the employer takes its money because it's that was the source of the money segregates that money and sends it to the third party administrator and the third party administrator now has control of that money what for the payment of claims for the payment of the plan costs for administrator for the payment plans cost for stopping are saying in effect when the ministry here gets the money it's like a trust when it's holding on to that money and deciding what to do with no question about that the these monies are not for the employer the employer has taken its money has fulfilled its obligation required to do so absolutely in pipefitters for you had multiple employers that have negotiated with the union and so to make that work because that plan is administered jointly by the by the employers and the union they have they have that intermediary structure or it's the difference between that and the situation in this case i would say legally zero in this case it's a single employer plan single employer is the sponsor so it is that the only fiduciary in terms of the employer side of the of the equation on behalf of and for the benefit of all the employees that are covered by the plan and it takes its monies to fulfill its obligations instead of being one of multiple employers sending images in the money into this intermediary arrangement it send some money directly to blue cross blue shield for this court to not follow briscoe not follow guy and not follow pipefitters for not follow a host of cases i'm not aware of any case that has said that money held by a t p a is not planned assets but  fact i would like to point out that the summary plan description addresses that and i think something that was not identified in the briefs but it's in the summary plan description which is of course a part of the record on page twenty two of the summary plan description which is in the appendix at page seven sixty two the summary plan description notifies participants participants that they may and i quote file suit in federal bargain by funding the plan obligations there would be an issue there and a receipt issue and if the third party administrator has control over those planned assets  fiduciary duties towards beneficiaries or for the plants that benefit the beneficiaries set right no question that that's the vast majority of cases it seems a little bit anomalous the that that this for the duty towards the employer surely duty is not to the employer you fiduciary duty is to the plant i represent today right this minute the plan i represented the plan and we tried this case the money that the employer pays is not the employer's money just paying something it's the employer paying on behalf of the plane to fulfill its obligations to the plan to fund that plan so when blue cross blue shield but i far as the plan is paying health benefits which is the benefit to the employees there's no allegation that was short changed at all well or even potentially short changed imagine it's just that they mean i would like to make two points your honor one is that the the as soon as the employer fulfills its obligation by sending the money to blue cross blue shield it's not the employer's money it's the plan's money and now when the when blue cross blue shield misuses that money it's misusing the plan's money period if that money had been misused there would have been more money available for benefits there but the benefits would have been paid it just would have gone back to iowa right no maybe maybe maybe high is able to pave provide big bigger benefits maybe the plan it it it doesn't really matter when those plan assets are misused by blue cross blue shield they are misusing the plans money not the employer's money and in any event pipefitters resolve that in your favor it did but in the context of a trust that it did which i will if we find the trust to be an artist distinction then we're just controlled by pipefitters on this marriage i believe that's correct your honor and i would point the court to cases like diana briscoe where there was no trust the telco where there is no trust that the you know any number of cases where t p s hold money there's never a question about glad you brought that up there was the other point i wanted to make mr flack was the third of three c f o's that work for highlights during this time period that we're talking about there is a mr sholes in the mr welsh and then mr flack that the two thousand  c was signed before mr flack became the c f o signed by mr during mr walsh's tenure and that was mr welch is the one who through the use of a consultant asked our asked blue cross blue shield specifically what does this language there are now relying on what does that mean and he got no good answer he got the runaround is what he got and so then he and the c f o was supervisor over an p process and that's where we hear about blue cross blue shield actually representing to hi lex specifically and in the response to an express question that these charges network access and the like are not applicable at least they are not applicable to high lex so mr flack comes into that arrangement the a s c has already been signed the a s c is already been described as not involving these network access fees or whatever they like to call it so it's not mr flaks falling down on the job the question's been asked and the question's been answered in mr flack continues to get the false reports month after month and quarter after quarter and year after year not only misrepresenting the amount of cla misrepresenting the amount of the compensation being taken by blue cross blue shield and before you sit down i like to address a comment that i have personally not reflecting my colleagues necessarily about complying with the spirit as well as the letter of the appellate briefing rules we have across appeal in this case which is i think you both would agree a fairly minor issue compared to the other issues total briefing on that appeal from all parties together less ten pages but that cross appeal was sort of a tool under the rules to enable the briefing on the other issues to greatly exceed what the other wise would have been there so a reply brief they were normally reading that's thirty pages comes from you in the fifty six page so and then there's the server reply brief which deals primarily with an issue which should have even been in the syrup library for so i can just tell you when when judges are reading these things and they feel like the rules are been taken advantage of that doesn't make them sympathetic to your arguments well i appreciate the court's honesty there and i'll take it to heart thank you you thank  benefits and expenses now all of the facts here go to the actions and representations of the parties which is one of the factors that deal well in its twenty years ago adams has said to look at as to whether something is planned assets in this case blue cross had sole control over the funds sole check writing authority over the account containing the funds highlights transmitted the funds for planned purposes and both blue cross and highlights knew this once the funds were segregated from the employer's general assets and transferred to satisfy plan obligations they were plan assets you're on this issue you're posing counsel says that your position is different from prior rulings by the department that's incorrect your honor your marking as we describe it here is not a new theory it's part of the actions and representations of the parties what to do with the specific citations that they make are they distinguishable happened before me but they refer to a particular rulings that they say are inconsistent with oh yes your honor because they are ignoring the fact that those ayos those advisory opinions refer to the actions and representations of the parties and they refer to various factors you look at including the plan documents in a trust but nowhere h we ever said that those are the only factors to look at that if there's no trust that they're not planned assets we have never said that your honor and this case has many of the industry that we have looked at in prior cases we say when it's been segregated from the employer and sent to a separate accounts in this case the separate account was held by blue cross and it wasn't combined account a multi plan account but that does not make it  that does not mean that it didn't have plan assets and in fact we have set in our advisory guidance in a riser opinion ninety two twenty four a we discussed a combined claims account that contained funds f multiple self funded welfare plans that's actually one of the citations that they use but they don't point to that in this case blue cross was expressly permitted to withhold funds from the account the contract refers many times to health care coverage and benefits so it's clearly discussing payments that will be made for the purpose of providing plan benefits and admitted plan expenses agreed to plan expenses it's very clear that the payments are only made for the purpose of providing health claims and benefits and blue cross meticulous though misleading apparently discussion accounting  showed how every dollar that highly accented was spent for planned expenses and for plan claims except that they did not make clear that they were hiding some of the fees as found by the district court this out on a court found that some of that hospital claims was actually hidden fees that were not referred to in the contract there any daylight between your position on that of highlands no you're on a not on or on the issues in this case here them all down the line on the issue of plan assets and on the issue of fraud or concealment your honor there may be some points here or there i'm not sure about on everything that we've discussed so but the department labor's position and it has been for a long this summary plan description that pilot's corporation prepared said there is no trust we pay benefits out of our general assets the department of labor in  by paying plan benefits exclusively from the general assets of the employer in advisory opinion ninety two deaths twenty four eight that's that's what they did here right no they they paid it from their general assets they set on a weekly basis by wire funds to a general blue cross account that did not have the name of highlights on it did not have the name of pipefitters on it did not have anybody's name i was just at vital because it will have some by his name and that's very critical under the case law and the guidance remember in briscoe the money that was improperly paid was from a planned account established at a bank guy again likewise each contract between the employer in the third party and ministry to said the third party administrative will set up a separate account in the name of the plan in the deal well tells us that you can either have a trust and i'm reading from the ninety two days twenty four a day or a separate account with the bank or other third party in the name of the plan that's how you create property interest on behalf of the plan you don't have that in that's critical and let me correct one mistake my friends made said he said i want to get the full force of your argument found plan assets have had that critical factor a separate account in the name of the plant you're saying we don't have a separate cap it's not applicable here at all it's not planned assets when we deal with those money circuit that applied those principles to find that something was not a planned asset slightly different context but it applied those instances of the guidance and it's cited in their brief one point your honor my friend said that from this weekly wire funds were taken to pay i think he said the plan's cost for stop loss stop loss was an asset of high lex it protected highlights it's like the case of taylor chivalry where i think your honor was up on that panel that said a fight between an employer and the stop loss carrier doesn't implicate the rissa and that's what we have here out of those weekly transfers monies went to blue cross to pay for stop loss insurance coverage if that's the case then every time it sent the wire high lex finally did the exclusive benefit but that assumes that when it transfers were planned assets if it transferred its own money it had every right to take part of that in pape stop loss premiums if it transferred its own money it had every right to agree with blue cross consistent with all the michigan case law that we're going to pay the separate fees calculated according to blue cross a standard operating procedures and that's another issue if blue cross calculates something and it did this for hundreds of hundreds of employers like highlights at standard rates that's not the exercise of discretion under the case law it didn't make a decision specific to highlights it didn't say this week i'm in charge high lex twenty percent know it said for all of my a s c customers except once who mates separate arrangements i'm going to charge a set percentage in that set percentage will bring the benefit of big discounts to these employers ask kylix today who provides the administration in discounts for your employee health care plan blue cross they us i would think if they really believed they were defrauded they'd want to be as far away from us as possible but no they're still with us today and that's why i think you've got look at the basic issues or are they using plan assets no did the exercise diligence flat may not have signed the two thousand and two a s c but every year thereafter he signed that schedule  spotted these fees and said how much are they and we said well they're edit to the hospital claims we didn't hide the fact and then it's an e mail exchange that just disappears at some point but we didn't there's no lie there now i don't know if imposes a duty on service providers to provide answers to employers because i think you're on a point to the issue here this is a stranger rissa case no beneficiary has suffered at all they've gotten everything only argument as they sort of them directly suffer because if if it's costing the the  that out to its logical extreme every expense the employer has could be converted to benefit point expense that's that's that's taken away from him by a fiduciary who owes some sort of a do share obligation they disagree that's the basic issue in this case and i think if your honor looks at the deal well guidance as applied you had the control over that money before it got to the beneficiaries didn't they in some real sense they had the control because they took the money out and we paid the hospitals we paid the doctors but we paid them with say we blue cross paid blue cross paid but that doesn't make it plan money money from selves that you dispute that the parties dispute the extent to which a we took all they had the money when they took it out of it in a sense right the question is who's money wasn't it was high like this money that's our position and we think the case law in the deal well guidance backs us up it's high less money that you had powerful that you had in your hand if they didn't but it's no different than taylor shifa lead not only do you have a year you have complete control over  long as we deal with it according to our contract we have we have significant contractual restraints on our ability to deal with that money we have to pay the hospitals we have to pay the hospitals a certain amount in many ways this is no different than the did look at case there we had complete control over the discounts we negotiated with hospitals but we still had the restraints of our contract with our c customers we're not saying there might be a breach of contract that's what the state law cases where counties in cities said we breached the contract court of appeal michigan court of appeal said we did we don't have free reign your honor we're highly regulated michigan is well you have some discretion and it seems it looks like you're exercising your discretion when you just the bank exercises discretion when it takes out fees but it's according to a fee schedule that we have a set rate for all of our a s c customers it's not set by record doesn't bear that out your honor not at all that's what they're saying here because how else to defend a c f o who gets up on the stand and says you know i don't read these things i just signed him he did not read the e contract according to his testimony to after suit was filed now if that's going to be the six circuit standard of diligence s e contract before the suit all it said was there are some other fees that we're charging you service provider has some special obligation of candor to an employer that we may valid that the discovery or shadow had a discovery started in two thousand and seven that's that's that's what the  it all and that's when the statute of limitations began to run but but the only the only way that makes sense is if there is a duty under a risk on our part to disclose a precise dollar amount to our customer keep in mind every case they cite on disclosure i don't know whether asked be a precise dollar amount or of a formula for how it's calculated it could be well it's not like that in there we have a full well we have a formula said individual underwriters if requested could make a separate arranger with a particular group in other words of the pilots had said instead of paying the percentage we'd like to pay a set amount per employee we could have worked at a range no but we still had to get from some things where the money that allows us to maintain these networks these networks are what provide the discounts and that's why people keep coming back to us now in the world the business it was a completely satisfactory arrangement that's why they want to put the original overlay but their wrists overlay is to protect employees not employers that's the fundamental problem with this case thank you