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MiLW Recognizes Varnum Case as a Largest Judgment of 2013

February 3, 2014

Michigan Lawyers Weekly released their 2013 Million-Dollar Verdicts and Settlements issue recognizing Varnum case Hi-Lex Controls Inc., et al.  v. Blue Cross Blue Shield of Michigan as the third largest judgment in the state.

Varnum partners Perrin Rynders and Aaron Phelps handled the three-week trial in federal court on behalf of Hi-Lex. They showed that for nearly twenty years, BCBSM collected hidden fees from money its self-insured customers entrusted to BCBSM to pay for employee health care claims. BCBSM marked up employee hospital claims by as much as 20 percent, and kept the markup (the hidden fees). Reports provided to Hi-Lex did not disclose the hidden fees. Internal company e-mails showed that BCBSM's managers knew customers were unaware of the markups, and that employees were trained to "downplay" the hidden fees if any customers discovered them.

U.S. District Court Judge Victoria A. Roberts ruled in favor of Hi-Lex, concluding that BCBSM violated the Employee Retirement Income Security Act (ERISA) through its practice of collecting additional compensation without customers' knowledge. The Court held that BCBSM engaged in illegal self-dealing and breached its fiduciary duties under ERISA, including that BCBSM "violated its fiduciary duty…to disclose information to the Plaintiffs about its compensation…" 

Judge Roberts entered judgment in favor of Hi-Lex for over $6 million, which included a return of all hidden fees taken from Hi-Lex since 1994 ($5,111,431) plus interest (an additional $914,241) and costs and attorneys' fees (TBD). The Hi-Lex case is the first to reach judgment in the over 35 cases pending in the Eastern District of Michigan filed by Varnum.

Michigan Lawyers Weekly 2013 Million-Dollar Verdicts and Settlements issue includes verdicts and settlement of $1 million or more obtained in Michigan courts in 2013 that were reported to Michigan Lawyers weekly and verified on or before Dec. 30, 2013.

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