Seaway Food Town, Inc. v. Medical Mutual of Ohio

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

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

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

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

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

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Some of [BC/BS’s] contracts with Providers allow
discounts, allowances, incentives, adjustments and
settlements. These amounts are for the sole benefit of
[BC/BS], and [BC/BS] will retain any payments resulting
therefrom. All institutional claims submitted to [BC/BS]
will have co-payment and deductible amounts, when
applicable, calculated according to the Provider’s charges
for Covered Services without regard to [BC/BS’s]
discounts, allowances or incentives.
(J.A. at 753.)
Addenda I, II, and III were attached to the 1994 Group
Contract. Addendum III indicated that BC/BS passed along
100% of the estimated provider discounts to Seaway through
lower administrative fees, lower stop-loss premiums, and a
guaranteed discount of 7.98% against billed charges.
In 1995, BC/BS and Seaway switched from the billed
charges arrangement to the paid claims arrangement. The
contract years from 1995 to 1998 are not at issue.
F. The Audit
In 2000, Seaway employed Schmidt, Long & Associates,
Inc. (“Schmidt”) to perform an audit of BC/BS’s records.
Schmidt prepared a report in which it compared the provider
discounts BC/BS actually received against the provider
discounts BC/BS passed along to Seaway. Schmidt
concluded that Seaway was owed $714,879.25 for provider
discounts retained by BC/BS from 1991 to 1994, plus interest.
Seaway seeks restitution in that amount on appeal.
12 Seaway Food Town, Inc. v.
Medical Mutual of Ohio
No. 01-4285
DISCUSSION
A. Standard of Review
This Court reviews a district court’s grant or denial of
summary judgment de novo. Best v. Cyrus, 310 F.3d 932,
934 (6th Cir. 2002). Summary judgment is appropriate “if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
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
or denial of summary judgment, this Court “draw[s] all
justifiable inferences in the light most favorable to the
nonmoving party.” Best, 310 F.3d at 934 (citing Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986)).
B. ERISA Fiduciary Status
Under ERISA:
[A] person is a 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). “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

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

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

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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.

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