First Health Group Corp. v. BCE Emergis Corp.

• Decision Date: 16 October 2001
• Docket Number: No. 00-3833,00-3833
• Parties: (7th Cir. 2001) First Health Group Corp., formerly known as Healthcare Compare Corp., doing business as The First Health AFFORDABLE Medical Networks, Plaintiff-Appellant, v. BCE Emergis Corporation, formerly known as United Payors & United Providers, Inc., doing business as UP&UP, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 800

269 F.3d 800 (7th Cir. 2001)

First Health Group Corp., formerly known as Healthcare Compare Corp., doing business as The First Health AFFORDABLE Medical Networks, Plaintiff-Appellant, v. BCE Emergis Corporation, formerly known as United Payors & United Providers, Inc., doing business as UP&UP, Defendant-Appellee.

No. 00-3833

United States Court of Appeals, Seventh Circuit

Argued September 11, 2001

Decided October 16, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 96 C 2518--James B. Moran, Judge.

Before Cudahy, Easterbrook, and Williams, Circuit Judges.

Easterbrook, Circuit Judge.

What is a "preferred provider organization" (PPO)? Our litigants, two intermediaries between hospitals and insurers, disagree about the answer. Plaintiff, which we call First Health, believes that it is misleading, and actionable under § 43(a)(1)(B) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), to apply the label "PPO" or anything similar (such as "preferred provider network") to any business structure other than one in which the insurer compels its clients to use the "preferred" suppliers of medical care. Defendant, which we call UP&UP, labels First Health's business model a "directed PPO," to distinguish it from the "non-directed PPO" or "silent PPO" system that it manages. UP&UP negotiates price reductions with hospitals (often in exchange for a capital contribution as well as a promise of extra business) and signs up insurers at these favorable prices. Insurers are supposed to offer their clients some incentive to use the participating hospitals, for example by reducing copayments, but are not obliged to direct the insureds exclusively to the hospitals participating in the plan. Hospitals typically contract with First Health for a 40% discount from list price, while they allow UP&UP only 20% off, even though UP&UP offers direct financial support that First Health does not. Although the discrepancy in discount rates implies that hospitals well understand the difference in business-generation potential between the systems, First Health insists that it is deceptive for UP&UP to refer to its business as a form of "PPO." First Health also contends that UP&UP hoodwinked hospitals by promising that insurers would induce patients to use participating hospitals.

After the district court granted summary judgment to UP&UP under § 43(a)(1)(B) and some related theories, 95 F. Supp. 2d 845 (N.D. Ill. 2000); 2000 U.S. Dist. Lexis 5964 (N.D. Ill. Apr. 10, 2000), but held that one claim (for trademark infringement) requires additional factual development, the parties entered into an agreement under which First Health dismissed its trademark claim and the district court entered a judgment. The parties' agreement, which the district court incorporated into its judgment, provides that First Health will be free to reinstate the trademark claim, but only if we reverse at least in part with respect to the involuntarily dismissed theories. Both parties then briefed the appeal as if it had been taken from a judgment terminating the whole case. They did not mention the reservation of right to reinstate a claim, or address its jurisdictional significance, until this court noted the problem on its own and required the parties to file supplemental memoranda before argument.

A series of decisions, including ITOFCA, Inc. v. MegaTrans Logistics, Inc., 235 F.3d 360 (7th Cir. 2000); JTC Petroleum Co. v. Piasa Motor Fuels, Inc., 190 F.3d 775 (7th Cir. 1999); and Horwitz v. Alloy Automotive Co., 957 F.2d 1431 (7th Cir. 1992), show that the parties' strategy jeopardizes appellate jurisdiction. All of these cases hold that the dismissal of one claim or theory without prejudice, with a right to reactivate that claim after an appeal on the remaining theories, makes the judgment non-final. The parties' dispute has not been fully resolved, and the remaining elements are apt to come back on a second appeal. Sometimes a partial final judgment with respect to particular claims is authorized by Fed. R. Civ. P. 54(b), but when the requirements of that rule are not satisfied, the parties and district judge are not at liberty to home-brew their own approach to obtaining appellate review while portions of the case remain unresolved. Neither side suggested that Rule 54(b) could have been used in this case; there is too much overlap between the trademark-infringement and false-advertising theories. Another method of obtaining interlocutory appeal, the certification of an order under 28 U.S.C. § 1292(b), was tried by the district court, but a motions panel declined to accept the appeal. It is especially inappropriate for the parties and district judge to try a back-door approach to interlocutory review after we have turned them away at the front door.

Nonetheless, the parties insist, the right to reinstate the dismissed theories here differs from the stratagems disapproved in ITOFCA, JTC Petroleum, and Horwitz, because reinstatement is contingent on a remand of at least one theory. If no appeal had been taken, then the litigation would have been over; in this sense the judgment must be final, the parties insist. Moreover, if we affirm the case stays over, and there can be no succession of appeals. This shows that First Health has taken a larger gamble than the appellants did in our prior cases, but does the difference matter to jurisdiction? Sometimes it does. Suppose, for example, that a plaintiff is unable to obtain discovery on which its case depends. Rather than go through the formality of a trial, the parties may stipulate that the defendant would prevail on the existing record. Then the court would enter a judgment for the defendant based on the stipulation, allowing the plaintiff to appeal. Decisions such as Martin v. Franklin Capital Corp., 251 F.3d 1284, 1288-89 (10th Cir. 2001), hold that the judgment is final under these circumstances, even though a reversal on the discovery matter would reactivate the main dispute and likely lead to another appeal down the road. Cf. Downey v. State Farm Fire & Casualty Co., 266 F.3d 675, ___ _ ___ (7th Cir.2001).

To decide whether we have appellate jurisdiction given the events as they stood in the district court, we would have to decide whether the principle that allows a dispositive issue to come up, when the plaintiff is willing to stake the entire case on its resolution, extends to multiple claims for relief. But events are no longer what they were. First Health offered in its memorandum addressing jurisdiction to dismiss its trademark claim, if we first determined that the existing judgment is non-final. At oral argument the court made it clear that First Health would not be given that opportunity; the court is not willing to make a decision about appellate jurisdiction only to have the effect of that decision manipulated after the event by the parties. It would become an advisory opinion. There are only two options, we informed counsel: if the judgment is final, we resolve the appeal on the merits; if the judgment is not final, we dismiss the appeal, which stays dismissed until the litigation is wrapped up in the district court. At that point First Health elected to dismiss its trademark claims unconditionally, so that they cannot be reinstated no matter what happens on this appeal. JTC Petroleum held that such an election, by averting any possibility of a future appeal on a different claim, permits the appeal to proceed. So on the authority of JTC Petroleum we shall resolve this appeal, without deciding whether the appeal would have been dismissed had First Health retained its right to reinstate an additional claim following any remand.

First Health's claims arise out of UP&UP's description of its system as creating a "preferred" provider organization or network. Applying the PPO label to a system that lacks a list of hospitals that the insureds must use is misleading, according to First Health--and, although no hospital, insurer, or patient has joined this suit, First Health believes that its competitive losses to UP&UP enable it to obtain relief under § 43(a)(1)(B) of the Lanham Act, as a business harmed by UP&UP's false advertising. Section 43(a)(1) provides in part:

Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . . (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

First Health contends that use of the term "PPO" in connection with UP&UP's system is a "false or misleading description of fact" that appears "in commercial advertising or promotion" and "misrepresents the nature . . . of [UP&UP's] services". Moreover, First Health believes, UP&UP has further deceived hospitals by promising that insurers will provide additional business by inducing patients to use their services. This is false, or at least misleading, First Health submits, because UP&UP does not tell the hospitals that it views the discounts themselves as inducements to use the hospitals, even if the financial benefits of these inducements are not passed on to patients (as by reductions in copayments), and even if patients do not learn about the discounts until they have used a particular hospital for the first time. The prospect of repeat business after a given patient knows about the discount is not enough to satisfy UP&UP's contractual promises to hospitals, First Health insists. Once again it claims injury as a competitor, this time redressable under...