348 F.3d 417 (4th Cir. 2003), 01-2419, Gunnells v. Healthplan Services, Inc.

Docket Nº:01-2419
Citation:348 F.3d 417
Party Name:Gunnells v. Healthplan Services, Inc.
Case Date:October 30, 2003
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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348 F.3d 417 (4th Cir. 2003)

Mary B. GUNNELLS; William A. Gunnells; Tele Tech Corporation; Cynthia Mullinax; W & W Truck and Tractor Company, Incorporated; Jerry Freeman; AAA Transmissions, Incorporated; Pamela B. Robertson; Avionics/Seaonics International, Incorporated; James E. Cassleman; Larry Strickland; Brenda Workman; Helen Clark; Bobby F. Buchanan; Joanne Buchanan; Brian Hansen; James E. Wise; John N. Stanley; Daniel L. Driggers; Brenda Vowels; David J. Vowels; Livingston Auto Parts, Incorporated; Philip Livingston; Lukes Cycle Services, Incorporated; Jeff Lucarelli; HH Moorman & Sons; Harold Moorman; Oakland Club; Mark B. Buxton; Stylon Of Charleston; Mary Parker; Terry Hensley; Earl Singletary; Ora Singletary, Individually and as Representatives of all Persons and Entities Similarly Situated, Plaintiffs-Appellees,

v.

HEALTHPLAN SERVICES, INCORPORATED, individually and as successor in interest to Third Party Claims Management, Incorporated; Third Party Claims Management, Incorporated, Defendants-Appellants,

and

Fidelity Group Inc.; International Workers Guild, Incorporated; National Association Of Business Owners And Professionals; Iwg Health and Welfare Fund; Fidelity Claims Management, Incorporated; Executive Consultants Insurance Agency; Raymond R. Olivi; John Branham; Steven Broughton; John Collins; Rex Culbertson; Robert Davies; Richard Dextaze; Kenneth Every Andrews; Frankie Fort; Robert German; Gary Geitler; Melissa Geitler; Martin T. Geitler; Michael D. Geitler; George Gradek; Hubert G. Greene; Phillip S. Hodgsen; Earl Isabell; Stephen Lacy; Frederick Malone; David E. Martin; Michael Massey; Henry Merchant; Tina Messinger; Michael R. Requa; Bruce Rowan; Pamela Regopoulus; Bruce Ryals; Barbara A. Scott; Henry K. Skinner, Jr.; Elmer Stone; Kenneth R. Tallmadge; Lee Taylor; 2 Michael Thomas; Scott Todd; Arnold H. Valentine; Richard M. Vann; Lewis H. Wade; David M. White; Herbert L. Williams; Ben L. Wells; Jack E. Wilson, Individually and in his Representative Capacity; Anchor Insurance Agency; Branham And Geitler Associates; Diversified Insurance; Legend Equities Corporation; Financial Benefits, Incorporated; The Taylor Agency Incorporated; Truett and Associates; Colonial Life & Accident Insurance Company, A Unum Company; Dwayne A. Samuels; Eugene O. Duncan; David Spooner; Charles L. Bradley; Terrence E. Rhue; Noel Shaw; Paul D. Askew; Phillip Stashin; Ken Averies, Defendants. 3 Mary B. Gunnells; William A. Gunnells; Cynthia Mullinax; Jerry Freeman; Pamela B. Robertson; James E. Cassleman; Larry Strickland; Brenda Workman; Helen Clark; Bobby F. Buchanan; Joanne Buchanan; Brian Hansen; James E. Wise; John H. Stanley; Daniel L. Driggers; Brenda Vowels; David J. Vowels; Philip Livingston; Jeff Lucarelli; Harold Moorman; Mark B. Buxton; Mary Parker; Terry Hensley; Earl Singletary; Ora Singletary, Individually and as Representatives of All Persons and Entities Similarly Situated; W & W Truck And Tractor Company, Incorporated; Lukes Cycle Services, Incorporated; AAA Transmissions, Incorporated; Livingston Auto Parts, Incorporated; HH Moorman & Sons; Tele Tech Company, Incorporated; Avionics Seaonics International, Incorporated; Oakland Club; Stylon of Charleston, entities similarly situated, Plaintiffs-Appellees,

v.

Michael R. Requa; Arnold H. Valentine; Financial Benefits, Incorporated; Lewis H. Wade; Bruce Ryals; George Gradek; Tina Messinger; Kenneth Every Andrews; Raymond R. Olivi; Executive Consultants Insurance Agency; Michael Massey; Anchor Insurance Agency; John Collins, individually and in their representative capacities, Defendants-Appellants,

and

Frankie Fort; Fidelity Group Inc.; International Workers Guild, Incorporated; National Association of Business Owners and Professionals; Iwg Health And Welfare Fund; Fidelity Claims Management, Incorporated; John Branham; Steven Broughton; Rex Culbertson; Robert Davies; Richard Dextaze; Robert German; Gary Geitler; Martin T. Geitler; Gary Geitler; Michael D. Geitler; Hubert G. Greene; Phillip S. Hodgsen; Earl Isabell; Stephen Lacy; Frederick Malone; David E. Martin; Henry Merchant; Bruce Rowan; Pamela Regopoulus; Barbara A. Scott; Henry K. Skinner, Jr.; Elmer Stone; Kenneth R. Tallmadge; Lee Taylor; 5 Michael Thomas; Scott Todd; Richard M. Vann; David M. White; Herbert L. Williams; Ben L. Wells; Jack E. Wilson; Branham and Geitler Associates; Diversified Insurance; Legend Equities Corporation; The Taylor Agency, Incorporated; Truett and Associates; Colonial Life & Accident Insurance Company, A Unum Company; Healthplan Services, Incorporated, Individually and as Successor in Interest to Third Party Claims Management, Incorporated; Third Party Claims Management, Incorporated; Dwayne A. Samuels; Eugene O. Duncan; David Spooner; Charles L. Bradley; Terrence E. Rhue; Noel Shaw; Paul D. Askew; Phillip Stashin; Ken Averies, individually and in their representative capacities, Defendants.

Nos. 01-2419, 01-2420.

United States Court of Appeals, Fourth Circuit

October 30, 2003

Argued: Sept. 23, 2002.

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ARGUED:

William R. Lewis, Nelson, Mullins, Riley & Scarborough, L.L.P., Charleston, South Carolina; James Y. Becker, Haynsworth Sinkler Boyd, P.A., Columbia, South Carolina, for Appellants.

Christian Hancock Hartley, Richardson, Patrick, Westbrook & Brickman, L.L.C., Charleston, South Carolina; Justin S. Kahn, Kahn Law Firm, Charleston, South Carolina, for Appellees.

ON BRIEF:

Charles R. Norris, Nelson, Mullins, Riley & Scarborough, L.L.P., Charleston, South Carolina; John H. Tiller, Elizabeth J.V. Speidel, Haynsworth Sinkler Boyd, P.A., Columbia, South Carolina; H. Michael Bowers, Young, Clement, Rivers & Tisdale, Charleston, South Carolina; Thomas J. Keaveny, II, Simons & Keaveny, Charleston, South Carolina, for Appellants.

Before NIEMEYER, MOTZ, and KING, Circuit Judges.

Affirmed in part, reversed in part, and remanded by published opinion, Judge MOTZ wrote the opinion, in which Judge KING concurred. Judge NIEMEYER wrote an opinion concurring in part and dissenting in part.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

This appeal presents the question of whether the district court abused its discretion in conditionally certifying a class action in a suit brought by purchasers and beneficiaries of a multi-employer health care plan for claims growing out of the plan's collapse. The district court conditionally granted class certification against the plan's claims administrator, Healthplan Services Inc., as successor in interest to Third Party Claims Management, Inc. (collectively, "TPCM") and against individual and corporate insurance agents who marketed and sold the plan. The court properly applied controlling legal principles and made well-supported factual findings supporting its decision to certify a class action against TPCM; thus, we see no abuse of discretion in that decision. However, because the court rested its class certification against the individual agents on findings grounded in a misapprehension of governing law, we must conclude that the court did abuse its discretion in certifying those separate class actions. Accordingly, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

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I.

Since this is an interlocutory appeal, filed even before the parties have completed discovery, the facts surrounding the claims of the purchasers and beneficiaries (collectively, "Plaintiffs") have not been fully developed. Thus, the record to date reveals only the following rough outline of the events leading up to the present lawsuit.

Sometime in 1995, Fidelity Group, Inc., the National Association of Business Owners and Professionals ("NABOP"), and the International Workers Guild, Inc. ("IWG"), created the IWG Health and Welfare Fund (the "Fund"), which in turn offered a health care and dental plan (the "Plan") to interested purchasers. From August 1996 until June 1997, when the South Carolina Department of Insurance ordered marketing to cease, the agents marketed and sold the Plan. Although it was purportedly marketed as an ERISA plan, the Plan never complied with ERISA requirements.

In April 1995, Fidelity hired TPCM to process claims under the Plan as a third party administrator. TPCM failed to keep pace with the claims received, creating a huge backlog of unprocessed claims. In May 1997, Fidelity fired TPCM for incompetence and attempted to transfer the claims management process to an in-house operation. Assertedly, difficulties in obtaining data from TPCM and the massive backlog it had created ultimately led to the Plan's collapse.

Approximately 1400 employees and their families contracted for coverage under the Plan. As many as 2900 claims have gone unpaid, amounting to millions of dollars in unpaid medical bills.

In August 1998, Plaintiffs sued Fidelity Group, NABOP, IWG, and the Fund (collectively, "the Fidelity Defendants") in state court in South Carolina. The defendants removed the case to federal court. Later in the year, Plaintiffs amended their complaint to add TPCM and the agents as defendants. In that complaint, Plaintiffs allege that one or more of the defendants engaged in negligent undertaking, fraud, negligent misrepresentation, breach of contract, civil conspiracy, and violated the South Carolina Unfair Trade Practices Act, S.C.Code Ann. § 39-5-140 (1985), and Title IX of the Organized Crime Control Act of 1970, 18 U.S.C.A. §§ 1961-68 (West 2000 & Supp.2000) ("RICO"). 1 In short, Plaintiffs assert that the agents breached contractual and fiduciary duties owed to the Plaintiffs and misrepresented the Plan's attributes through their marketing efforts, which caused Plaintiffs to purchase the woefully deficient Plan. As to TPCM, Plaintiffs allege that it mismanaged...

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