381 F.3d 1251 (11th Cir. 2004), 03-13958, McFarlin v. Conseco Services, LLC

Docket Nº:03-13958.
Citation:381 F.3d 1251
Party Name:Danny McFARLIN, Neal Nielsen, Eleanor D. Newman, Dick Manley, Robert E. Taylor, et al., Plaintiffs-Appellees, v. CONSECO SERVICES, LLC, Conseco Health Insurance Company, f.k.a. Capitol American Life Insurance Company, et al., Defendants-Appellants.
Case Date:August 26, 2004
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

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381 F.3d 1251 (11th Cir. 2004)

Danny McFARLIN, Neal Nielsen, Eleanor D. Newman, Dick Manley, Robert E. Taylor, et al., Plaintiffs-Appellees,


CONSECO SERVICES, LLC, Conseco Health Insurance Company, f.k.a. Capitol American Life Insurance Company, et al., Defendants-Appellants.

No. 03-13958.

United States Court of Appeals, Eleventh Circuit

August 26, 2004

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[Copyrighted Material Omitted]

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Jamie L. Moore, Paul P. Bolus, Francis Asbury Flowers, III, Christian Nicole Watson, Gary L. Howard, Burr & Forman, LLP, Robert M. Lichenstein, James L. Goyer, III, John Norman Bolus, Maynard, Cooper & Gale, P.C., Birmingham, AL, for Defendants-Appellants.

Charlene P. Ford, Joe R. Whatley, Jr., Russell Jackson Drake, Whatley Drake, L.L.C., Birmingham, AL, for Plaintiffs-Appellees.

Appeals from the United States District Court for the Northern District of Alabama.

Before DUBINA, CARNES and CUDAHY[*], Circuit Judges.

CARNES, Circuit Judge:

One of the statutory exceptions to the final judgment rule is set out in 28 U.S.C. § 1292(b). Under that provision, three things must happen in order for a court of appeals to have jurisdiction where it would not otherwise. A district court must certify in writing that one of its orders "involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." A party must, within ten days of the district court's order, apply to the court of appeals for permission to appeal. And the court of appeals must decide in its discretion to exercise interlocutory review. All three of those things happened in this case.

A court of appeals' order granting permission for an interlocutory appeal under § 1292(b) is not irrevocable, however. In our court, at least, the decision to permit an interlocutory appeal under this provision is made by a motions panel. Like all motions initially ruled upon by a motions panel, it is subject to being vacated as improvidently granted by the merits panel to which the case is assigned for decision. 11th Cir. R. 27-1(g); Burrell v. Bd. of Trustees of Ga. Military College, 970 F.2d 785, 788-89 (11th Cir. 1992). That is what we are going to do in this case, because it presents a textbook example of when § 1292(b) discretionary jurisdiction should not be exercised.


In 1999 fifteen plaintiffs filed this lawsuit in federal district court against two sets of defendants: (1) Conseco, Inc., Conseco Health, Conseco Services, Performance Matters Associates (PMA), and Christopher Weaver (the Conseco defendants); and (2) Mike Foster, David King, Consolidated Marketing Group (CMG), and Suncoast Fringe Benefits (the CMG defendants). The plaintiffs were "executive directors" for Capitol American Life Insurance Company at the time it was acquired by Conseco, Inc. in 1997. Their claims arose from Conseco, Inc.'s purchase of Capitol American, and Conseco Health's subsequent consolidation of the plaintiffs into one large marketing organization.

Capitol American sold supplemental health insurance through door-to-door marketing and to employer and payroll groups. It was structured so that executive directors worked as its independent contractors to sell its insurance products. Executive directors were responsible for running individual marketing organizations (IMOs) and recruiting and training independent

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agents. Each executive director earned a commission on all the products sold by his IMO.

The arrangements between Capitol American and its IMOs were governed by marketing agreements. Between 1986 and 1996 each of the plaintiffs signed a marketing agreement with Capitol American, on behalf of themselves as individuals and/or on behalf of their IMOs. In 1996, plaintiffs McFarlin, Newman, Manley, and Nielsen executed an agreement with Capitol American entitled "business continuation plan." That plan allowed for continuation of an IMO's business even after the termination, retirement, or death of the executive director, and it required compliance with a non-compete agreement with Capitol American.

In 1996 Capitol American announced that it was going to be acquired by Conseco, Inc, a large corporation that owns a number of insurance companies. During the acquisition, defendant Christopher Weaver was an executive at Capitol American. He was responsible for keeping communication open among the management of both companies and Capitol American's executive directors. After the acquisition, Capitol American became known as Conseco Health, and this new entity assumed Capitol American's agreements with the plaintiffs. Weaver became Executive Vice President of Marketing at Conseco Health.

Soon after the acquisition, the Conseco defendants began to restructure Conseco Health's marketing plan. Weaver proposed that most of the smaller IMOs be brought into one large IMO. Conseco Health followed that proposal, consolidating all the former Capitol American IMOs with less than $2 million in annual sales into one marketing organization. Defendant Suncoast Fringe Benefits, a very successful IMO for Capitol American owned by defendants Foster and King, was renamed Consolidated Marketing Group (CMG), and between 100 and 200 of the small IMOs were consolidated into it. Foster and King continued to own and operate CMG. Six larger IMOs did remain separate entities under Conseco Health.

After the CMG consolidation, the executive directors received less in commissions. Under the marketing agreements, Conseco Health was allowed to change the plaintiffs' commission structure so long as written notice was provided, and it had been. All of the plaintiffs had been sent a letter on June 9, 1997, stating that the commission structure would be changed in 30 days and that the IMOs were being consolidated. After the consolidation, all the IMOs dealt with CMG rather than directly with Conseco Health.

Weaver stopped working for Conseco Services in June 1998 and started working for TLC National Marketing, Inc, which is one of the six IMOs that had not been consolidated with CMG. In June 1999 Conseco, Inc. (the parent of the Conseco companies) bought TLC and several other of these IMOs, and combined them under the name Performance Matters Associates, Inc. (PMA). The marketing agreements still remained in effect. CMG was subsumed under PMA, which now performs the same function CMG had been performing. The formation of PMA was announced in a letter to the executive directors of the affected IMOs, including plaintiffs. Changes in commissions and hierarchies were allowed under the marketing agreements.


The complaint asserted claims for breach of contract, unjust enrichment, tortious interference with contractual and business relations, fraud, RICO violations,

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and conspiracy against the two sets of defendants we have already described. The plaintiffs voluntarily dismissed their claims against Conseco, Inc. The remaining Conseco defendants and the CMG defendants then filed separate motions for summary judgment.

On May 27, 2003, the district court granted the Conseco defendants' motion for summary judgment as to the tortious interference claim against Conseco Health, and as to the breach of contract claims against all defendants other than Conseco Health. It denied the Conseco defendants' motion for summary judgment as to all the other claims against them. The court also denied the CMG defendants' motion for summary judgment in its entirety.

On June 19, 2003, the district court on its own motion entered an order certifying its May 27, 2003 order for appeal pursuant to 28 U.S.C. § 1292(b). In doing so, the court failed to specify what it thought the controlling question of law that qualified for interlocutory appeal was. Both sets of defendants filed with us petitions for permission to appeal under § 1292(b), which did specify controlling questions. Each petition was presented to a different motions panel of this Court, and each panel entered an order granting the petition before it. The plaintiffs filed a motion to vacate the orders permitting the appeal, and that motion has been carried with the case.


Section 1292(b) says this:

When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order....

28 U.S.C. § 1292(b). As that language indicates, whether to permit this appeal to go forward is not a question of jurisdiction or power. In its order denying the motions for summary judgment the district court certified the matter as required for § 1292(b) treatment, and within ten days the defendants filed applications with this Court for permission to appeal. That is enough to give us discretion to exercise appellate jurisdiction now instead of waiting until after final judgment.

The district court's failure to specify the controlling question or questions of law it had in mind when certifying that the case meets the requirements of § 1292(b) is a factor we may consider in deciding how to exercise our discretionary power to review. It does not, however, remove our power of review. Under the statute, "appellate jurisdiction applies to the order certified to the court of appeals, and is not tied to the particular question formulated by the district court." Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S....

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