Varnum LLP secured a significant appellate victory on behalf of Tiara Yachts, Inc., in a high-profile ERISA dispute with Blue Cross Blue Shield of Michigan (BCBSM). The U.S. Court of Appeals for the Sixth Circuit reversed the lower court’s dismissal of Tiara Yachts’ claims, ruling that BCBSM plausibly acted as a fiduciary and must face claims that it mismanaged and profited from the company’s self-funded employee health plan. The litigation team consisted of Aaron Phelps, Perrin Rynders, Herman Hofman, and Neil Youngdahl.
The court’s opinion, issued May 21, found that Tiara Yachts sufficiently alleged BCBSM used an undisclosed “flip logic” to systematically overpay medical claims and later profited from its own mismanagement through a so-called “Shared Savings Program,” in which it clawed back over-payments and kept a percentage for itself.
“ERISA imposes strict duties on those who manage plan assets, and the court rightly recognized that overpayment of claims—followed by self-enrichment—demands accountability,” said Aaron Phelps, lead appellate counsel and Varnum partner.
Tiara Yachts alleges that over several years, BCBSM exercised control over plan funds and failed to implement adequate safeguards, resulting in millions of dollars in overpayments. The appellate court found that those allegations, combined with BCBSM’s retained discretion over its own compensation, plausibly stated violations of ERISA’s fiduciary and anti-self-dealing provisions.
The case now returns to the Western District of Michigan for further proceedings.
