James P. Kartell, M.d., et al., Plaintiffs-appellees,andgrant v. Rodkey, M.d., et al., Intervenor-plaintiffs-appellants, v. Blue Shield of Massachusetts, Inc., et al., Defendants-appellees, 687 F.2d 543 (1st Cir. 1982)

This appeal brings to the court an internecine dispute among members of the Massachusetts Medical Society (Society) regarding how best to challenge payment practices of Blue Cross of Massachusetts, Inc. (Blue Cross) and Blue Shield of Massachusetts, Inc. (Blue Shield) that effectively limit the fees that can be earned by Massachusetts physicians who render services to Blue Cross and Blue Shield subscribers. The case comes to us in an unusual posture. The Society, having lost control of litigation brought by four individual physicians but with its full financial support, moved, along with two individual physicians, to intervene in order to protect its interests in the action. By their complaint in intervention the Society and the two individual physicians also sought to enlarge the scope of the claims against Blue Cross and Blue Shield, a litigation strategy disagreement which had contributed to the schism between them and the original plaintiffs. The district court in an unexplicated order allowed the intervention, but because it denied plaintiff-intervenors (intervenors) the opportunity to raise their new claims, they have appealed. We conclude that no final order from which appeal would lie exists, and that the district court's order did not effectively deny the intervenors preliminary injunctive relief so as to create a risk of irreparable injury pendente lite. We therefore dismiss the appeal for lack of jurisdiction.

Blue Shield is a nonprofit medical service corporation that offers prepaid plans that provide coverage for the cost of medical services rendered by physicians. Blue Cross is a nonprofit hospital service corporation that offers plans covering the cost of hospital and related medical care. The organizations together issue and administer joint subscriber contracts offering their services to the public under authority of Massachusetts law.

The original plaintiffs and intervenors primarily object to two basic restrictions promulgated by Blue Shield in concert with Blue Cross. First, Blue Shield, which enters into contracts with physicians and other health care providers in Massachusetts, requires "participating physicians" to accept as full payment for any covered services an amount equal to 95% of their usual and customary charges, the latter unilaterally determined by Blue Shield. Participating physicians must therefore agree not to bill a Blue Shield subscriber for the difference between what the physician would normally charge and the amount allowed by Blue Shield ("balance billing"). The second restriction promulgated by Blue Shield, which effectively enforces the ban on balance billing, is contained in its contracts with its subscribers. In these contracts Blue Shield states that it will not cover the cost of either nonemergency medical services rendered in Massachusetts by any physicians with whom Blue Shield has not entered into a contract or emergency care provided by such "nonparticipating physicians" when a participating physician could have rendered the service. Thus only participating physicians, who in their contracts with Blue Shield have agreed to the ban on balance billing, are entitled to claim reimbursement from Blue Shield.¹ 

To challenge these practices, the Society sponsored a series of actions against Blue Cross and Blue Shield. The instant lawsuit, commenced on March 10, 1978, is the third of four such actions.²  It was brought by four Massachusetts physicians represented at the Society's expense by two law firms, Warner & Stackpole and Dickstein, Shapiro & Morin. Although it did not name the Society as a plaintiff, the Society paid for substantially all counsel fees and the case was conducted in many respects as if the Society were the client.³  Like its predecessor antitrust action, Hedberg v. Blue Cross of Massachusetts, Inc., see supra note 2, the instant action alleges violations of §§ 1 and 2 of the Sherman Act. Unlike its predecessor, the instant action did not seek damages but only injunctive relief. And unlike its predecessor, the instant action was not brought as a class action.

The action proceeded by first amended complaint, and on March 31 the original plaintiffs filed a motion for a preliminary injunction. Thereafter defendants filed a motion to dismiss, relying primarily on the "state action" defense of Parker v. Brown, 317 U.S. 341, 63 S. Ct. 307, 87 L. Ed. 315 (1943), and on McCarran-Ferguson Act immunity from the antitrust laws, see 15 U.S.C. §§ 1011-15. On August 3, 1978, the district court granted defendants' motion to dismiss on the ground that defendants were compelled by state law, M.G.L. c. 176A and c. 176B § 7, to refrain from compensating nonparticipating physicians, thereby rendering their arguably anticompetitive conduct immune from prosecution under the state action doctrine enunciated in Parker v. Brown, supra.

This court vacated the judgment of the district court in Kartell v. Blue Shield of Massachusetts, Inc., 592 F.2d 1191 (1st Cir. 1979). The court held that the district court should have abstained from deciding the state law question, namely whether defendants' conduct was in fact compelled by statute, and directed the court to await the outcome of cases then pending before the Supreme Judicial Court of Massachusetts. This court also indicated that if the decisions in the pending cases did not resolve the state law question, the district court might consider certifying it to the Massachusetts court. The district court eventually adopted this suggestion.⁴ 

Meanwhile, during the summer of 1981 the Society, upset at the slow progress of the Kartell action and legal fees it had incurred in excess of $500,000, determined that the interests of its constituents would best be served by changing counsel and litigation strategy. The original individual plaintiffs disagreed,⁵  however, and refused to cooperate with the Society.⁶  The Society therefore found itself in the awkward position of having lost control of a lawsuit it had financed for three years. It retained new counsel. Shortly thereafter, the Supreme Judicial Court filed its opinion answering the certified questions. The intervenors, a participating physician, a nonparticipating physician, and the Society, then moved to intervene in the instant action pursuant to both Fed. R. Civ. P. 24(a), as of right, and 24(b), by permission. In conjunction with their motion to intervene they filed a "Complaint of Intervenor-Plaintiffs." The proposed complaint in intervention differs from original plaintiffs' first amended complaint in three principal respects. First, the proposed complaint seeks relief on behalf of two classes of physicians, participating and nonparticipating. It also adds claims for damages as well as injunctive relief. Finally, the proposed complaint appears to assert broader legal theories than does the first amended complaint.⁷ 

The district court, in a cryptic order, dismissed the Hedberg action, allowed the intervention in this proceeding, but barred intervenors from introducing any new claims in their complaint in intervention.⁸  The court did not indicate whether it had acted under authority of Rule 24(a) or 24(b).

Intervenors filed a timely notice of appeal. Defendants moved to dismiss under Local Rule 12 for lack of appellate jurisdiction. Expressing some doubts about the appealability of the court's order, on April 14, 1982, this court issued a Memorandum and Order "hold(ing) the motion to dismiss for lack of jurisdiction in abeyance pending full briefing of the case." Because we now conclude that we are without jurisdiction of the appeal we do not reach the substantive question whether the district court properly allowed the intervention without allowing intervenors to raise any new claims at this stage of the litigation.

The intervenors on appeal maintain that the district court erred in barring them from raising the claims in their complaint in intervention not already before the court. They argue that as intervenors of right under Fed. R. Civ. P. 24(a) (2) they are entitled to assert all claims relating to the nature of the relationship between Massachusetts physicians and Blue Cross and Blue Shield. In support of their claim that this court has jurisdiction to hear the appeal, notwithstanding that the underlying action is still pending in the district court, intervenors assert two bases of appellate jurisdiction. They argue that the district court's order is appealable as a final order because it denied them the full intervention of right to which they are entitled. Alternatively, intervenors assert that the district court's order is immediately appealable under 28 U.S.C. § 1292(a) (1) as the denial of injunctive relief. Neither ground is adequate to support the appellate jurisdiction of the court at this time.

Intervenors' first argument for jurisdiction is predicated on their asserted status as intervenors of right. They argue that once entitled to intervene of right they are entitled to raise all claims that relate to the restrictive policies of Blue Cross and Blue Shield. Because they have not been granted full intervention, the argument continues, they are entitled to immediate appellate review of the district court's refusal to allow them to raise the claims in their complaint in intervention.

A division of authority exists regarding whether immediate appeal lies from the denial of a motion to intervene of right under Rule 24.⁹  The circuits are in accord, however, that no immediate appeal lies from a grant of intervention. See, e.g., Brown v. New Orleans Clerks & Checkers Union, 590 F.2d 161 (5th Cir. 1979); EEOC v. American Telephone & Telegraph Co., 506 F.2d 735 (3d Cir. 1974); Ionian Shipping Co. v. British Law Insurance Co., 426 F.2d 186 (2d Cir. 1970).

The case at bar poses the question of the appealability of an order making intervenors party to the action but limiting the claims that can be asserted by them. Whether such an order should be treated as a final, appealable order was directly addressed in Shore v. Parklane Hosiery Co., 606 F.2d 354 (2d Cir. 1979). In Parklane Hosiery, members of a class who were dissatisfied with the terms of a settlement agreement arrived at by the named parties in an action brought to challenge an allegedly fraudulent freeze-out merger moved to intervene to challenge the settlement. The district court granted the motion to intervene so that the intervenors could participate in the settlement approval hearings but denied their requests for a stay or a hearing. On appeal the Second Circuit examined the policies underlying intervention as of right and interlocutory appeals, and concluded that permitting intervention adequately protected a party's interests and rendered inappropriate an interlocutory appeal from an order granting intervention but withholding other relief. Characterizing the district court's action as a grant, and not a partial denial, of intervention under Rule 24, the court concluded that it had no jurisdiction over the appeal. Id. at 356. Cf. Van Hoomissen v. Xerox Corp., 497 F.2d 180 (9th Cir. 1974) (grant of partial intervention under Rule 24(b) not appealable).

The Parklane Hosiery court began by noting that unlike persons denied intervention, who cannot appeal from any subsequent order or judgment in the litigation, successful intervenors acquire full status as parties and can therefore prosecute a subsequent appeal. 606 F.2d at 356. The court also adverted to the advisory committee note on the Rule which suggests that intervention as of right may be "subject to appropriate conditions or restrictions responsive among other things to the requirements of efficient conduct of the proceedings. 28 U.S.C.A., Fed. R. Civ. P. 24, Notes of Advisory Committee on Rules, at 18." Id. It then held that the order of the district court constituted a grant of intervention and that the order was not a final order appealable under 28 U.S.C. § 1291. As the court noted, for an order to be appealable it must be a final decision which " 'ends the litigation on the merits and leaves nothing for the court to do but execute the judgment,' " 606 F.2d at 357 (quoting Catlin v. United States, 324 U.S. 229, 233, 65 S. Ct. 631, 633, 89 L. Ed. 911 (1945)), or, to qualify as an exception to the finality requirement, the order must " 'conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment.' " Id. (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S. Ct. 2454, 2457, 57 L. Ed. 2d 351 (1978)). The Parklane Hosiery court then concluded:

The order appealed from does not meet these requirements. It made appellants parties to the litigation, thus giving them the right to appeal from an unsatisfactory final order. On that appeal, this Court may review the district court's refusal to grant all of appellants' requested relief, including their application for a stay which was incorporated in the notice of motion for intervention. The district court's order is therefore interlocutory and cannot now be reviewed on appeal.

Id. (citations omitted).

The court also held, alternatively, that even if the order appealed from were construed as a partial denial of intervention, the better practice would be to dismiss for lack of jurisdiction, since such a practice both would insure the intervenors full review when the merits of the underlying claims were also before the court and would comport with the Supreme Court's "(long established) policy against piecemeal appeals." Id. (quoting Gardner v. Westinghouse Broadcasting Co., 437 U.S. 478, 480, 98 S. Ct. 2451, 2453, 57 L. Ed. 2d 364 (1978).¹⁰ 

Intervenors argue that Parklane Hosiery is inapposite, and they attempt to derive a right of immediate appeal of the order from what they argue is their right as intervenors of right under Rule 24(a) to raise all related claims. Such immediate review is necessary, they maintain, to protect their full right of intervention.

We find the reasoning of Parklane Hosiery persuasive¹¹  and conclude that the district court's order in the case at bar should be treated as a grant of intervention, and as such is not now appealable. The intervenors were allowed to intervene and, as parties to the suit with full appellate rights in this action, can adequately protect their interests on appeal from a final decision. See Newport News Shipbuilding & Drydock Co. v. Peninsula Shipbuilders' Assoc., 646 F.2d 117 (4th Cir. 1981); Wheeler v. American Home Products Corp., 582 F.2d 891, 896-97 (5th Cir. 1977). They are therefore distinguishable from would-be intervenors who if denied intervention altogether are without appellate rights unless allowed immediately to appeal. Regardless of whether intervenors are in fact intervenors of right or whether they are entitled to raise the new claims contained in their complaint in intervention, these questions can be resolved upon completion of the proceedings before the district court with no more prejudice to the intervenors than is caused to any litigant properly denied interlocutory review of an unfavorable order. Their asserted need to protect their right of full intervention does not justify circumventing the strong federal policy against piecemeal appeals. See also infra Part II.B.

Our conclusion that an appeal is impermissible at this juncture is reinforced by a consideration of the nature of the dispute between the plaintiff factions underlying this litigation. The basis for the intervention is, at bottom, the recent antagonism that has developed between the Society and the original plaintiffs. By allowing the Society a circumscribed reentry into the lawsuit, the district court essentially reestablished the status quo ante.¹² 

In proffering their new claims, however, intervenors are attempting to go beyond simply protecting their interests as they existed before the rift developed between the Society and the original plaintiffs. Rather, they seek the functional equivalent of an amendment to the complaint now before the district court. Because the original plaintiffs amended their complaint once as of right while acting on behalf of the Society, allowance of further amendment lies in the discretion of the district court, Fed. R. Civ. P. 15; see Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 91 S. Ct. 795, 802, 28 L. Ed. 2d 77 (1971). And denial of a request to amend a complaint is not usually appealable as an interlocutory matter. 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3914, at 538 (1976). Were we to take jurisdiction of the appeal on the ground that the district court order denied intervenors the complete intervention which is their due, we would in effect afford intervenors interlocutory appellate review that would not have been available had the dispute not developed between original plaintiffs and intervenors. The Society should not be allowed so to take advantage of the rift that has developed.¹³ 

We therefore hold that the district court's order allowing intervention without leave to file an amended complaint is not appealable as the denial of intervention.

Intervenors' second argument urges jurisdiction because the district court's order had the effect of denying injunctive relief. For an order of the district court to be appealable on an interlocutory basis under 28 U.S.C. § 1292(a) (1)¹⁴  it is not necessary that the order by its terms refuse an injunction. Rather, orders that have the "practical effect" of denying an injunction will sometimes be appealable under section 1292(a) (1). Carson v. American Brands, Inc., 450 U.S. 79, 83-84, 101 S. Ct. 993, 996-997, 67 L. Ed. 2d 59 (1981). The availability of interlocutory review on that basis is, however, strictly limited.

For an interlocutory order to be immediately appealable under § 1292(a) (1) ... a litigant must show more than that the order has the practical effect of refusing an injunction. Because § 1292(a) (1) was intended to carve out only a limited exception to the final-judgment rule, we have construed the statute narrowly to ensure that appeal as of right under § 1292(a) (1) will be available only in circumstances where an appeal will further the statutory purpose of "permit(ting) litigants to effectually challenge interlocutory orders of serious, perhaps irreparable, consequence." Baltimore Contractors, Inc. v. Bodinger, (348 U.S.) at 181, 75 S. Ct. at 252. Unless a litigant can show that an interlocutory order of the district court might have "serious, perhaps irreparable, consequence," and that the order can be "effectually challenged" only by immediate appeal, the general congressional policy against piecemeal review will preclude interlocutory appeal.

Id. at 84, 101 S. Ct. at 997 (emphasis added). As the Carson decision indicates, it is not enough for section 1292(a) (1) review that a party seeks to appeal an order having the effect of denying injunctive relief. In addition, Carson requires the party to establish that he would be entitled to preliminary injunctive relief, that is, the existence of a bona fide threat of irreparable injury pendente lite. Id. at 85, 101 S. Ct. at 997.¹⁵  The intervenors must therefore also establish that unless allowed an immediate appeal they "will lose their opportunity to 'effectually challenge' an interlocutory order that denies them injunctive relief and that plainly has 'serious, perhaps irreparable consequence.' " Id. at 86, 101 S. Ct. at 997.¹⁶ 

Although intervenors seem to satisfy the first prong under Carson, because the district court's order appears to have had the effect of denying injunctive relief,¹⁷  they do not lose their ability fully to protect themselves if denied immediate appellate review. Notwithstanding intervenors' assertion that the district court's order "threatens permanently to deprive (intervenors) of any opportunity to litigate the excluded issues or ever obtain the broad injunctive relief they seek," having been made full parties to the action, they can later appeal from the district court's order upon the entry of a final order. And unlike the appellants in Carson, intervenors have not been irreparably harmed by being made to appeal at a later stage in the proceedings. Intervenors have not irretrievably lost an important tactical litigation advantage. Nor do they represent, for example, that unless immediate relief is obtained from Blue Shield's compensation practices doctors will be forced to stop practicing medicine in Massachusetts or that others will be denied entry into the profession.

In an attempt to establish the kind of immediate, irreparable injury necessary for us to take jurisdiction of this appeal under section 1292(a) (1), the intervenors do raise one claim of injury that must be addressed. Because the Society has financed the instant litigation, both the Society and its members who supported the litigation may be bound by the rule of res judicata as though they were a party. See General Foods Corp. v. Massachusetts Department of Public Health, 648 F.2d 784 (1st Cir. 1981).¹⁸  Intervenors argue that the ability of the Society and its members to seek injunctive and class relief in another action may be foreclosed by the instant action. The injury they allege is thus the risk that consideration of the additional claims in their complaint in intervention will be foreclosed, a risk that they maintain has materialized in the Rodkey action, see supra note 2, in which intervenors filed their proposed complaint in an attempt to preserve their right to raise the additional claims.

Although it is possible that intervenors' additional claims will merge with those raised by the original plaintiffs, that threat does not justify preliminary injunctive relief and, concomitantly, interlocutory appellate review. Having failed to convince the district court to allow them to inject their additional claims, intervenors are not precluded from appealing the adverse determination at the conclusion of this action. Thus, whether intervenors are entitled to raise additional claims for injunctive and class relief will be fully decided in this action. Intervenors should not be allowed to bootstrap a claim of "immediate, irreparable injury" by asserting that a rejection at this point in time of their additional claims in the instant action may prejudice their ability to go forward in Rodkey or any other action.¹⁹ 

A recent decision of this court confirms that in the circumstances of this case intervenors cannot now allege irreparable injury adequate to support jurisdiction under section 1292(a) (1). In Plymouth County Nuclear Information Committee, Inc. v. Boston Edison Co., 655 F.2d 15 (1st Cir. 1981), the district court had granted a motion to strike that portion of the plaintiffs' complaint seeking injunctive relief. Although the district court's decision had had the effect of denying preliminary injunctive relief, this court concluded that the court was without jurisdiction to hear the appeal. It noted that the plaintiffs had first been denied preliminary injunctive relief over a year and a half before the entry of the district court order striking their claim for an injunction.²⁰  The court concluded,

Under the circumstances, we think plaintiffs are hard pressed to demonstrate that the instant order has any immediate consequences of a serious nature, or that they will suffer "irreparable harm" pending final disposition of the case in the district court. To be sure, the district court may have "finally" determined the "legal sufficiency" of plaintiffs' claims for injunctive relief. Even so, its order has the "practical effect" only of denying permanent injunctive relief, and as such may be "effectually challenged" on appeal from final judgment.

Id. at 18 (footnotes and citations omitted) (emphasis in original). See also Shirey v. Bensalem Township, 663 F.2d 472, 476-77 (3d Cir. 1981).

The case at bar has a procedural history similar to Plymouth County in certain key respects. This is not the first time that the Society through its nominees has been in court advancing claims on behalf of Massachusetts physicians for injunctive relief against the defendants. Those efforts stretch back over a period of four years. Under the circumstances, intervenors, like the plaintiffs in Plymouth County, are hard pressed to demonstrate that the district court's order has any immediate consequences of a serious nature, or that they will suffer irreparable harm pending final disposition of the case in the district court.²¹ 

A second, related basis exists for holding that plaintiffs are not entitled to immediate review notwithstanding that the effect of the district court's order is to deny them injunctive relief. In Gardner v. Westinghouse Broadcasting Co., 437 U.S. 478, 98 S. Ct. 2451, 57 L. Ed. 2d 364 (1978), the Supreme Court carefully distinguished between

an order denying an injunction on the merits and "one based on alleged abuse of a discretionary power over the scope of the action."

"Where the order is of the former type, the danger of serious harm from the court's erroneous belief in the existence of a legal barrier to its entertaining a claim for an injunction has been thought to outweigh the general undesirability of interlocutory appeals. The very fact that the second type of order hinges on the trial court's discretion is itself an indication that such orders, relating primarily to convenience in litigation, carry a lesser threat of harm."

Id. at 481 n.7, 98 S. Ct. at 2453 n.7 (quoting with approval Stewart-Warner Corp. v. Westinghouse Electric Corp., 325 F.2d 822, 829 (2d Cir. 1963) (Friendly, J., dissenting)). See also General Electric Co. v. Marvel Rare Metals Co., 287 U.S. 430, 53 S. Ct. 202, 77 L. Ed. 408 (1932). Cf. Switzerland Cheese Association v. E. Horne's Market, Inc., 385 U.S. 23, 87 S. Ct. 193, 17 L. Ed. 2d 23 (1966) (order denying summary judgment relates only to pretrial procedures, does not touch on merits of claim, is not "interlocutory" within meaning of section 1292(a) (1), and therefore is not appealable).

In the present case, the trial court's order falls squarely within the category of discretionary orders which control the scope of the action and therefore do not justify interlocutory review.²²  The district court did not hold on the merits that injunctive relief was inappropriate; it simply held that intervenors could not inject injunctive claims into the action at this stage of the litigation. Cf. Commodity Futures Trading Commission v. Preferred Capital Investment Co., 664 F.2d 1316, 1321 (5th Cir. 1982) (Fed. R. Civ. P. 37(b) (2) (C) dismissal not interlocutorily appealable because complaint sought injunctive relief against dismissed defendant).

We therefore hold that the district court's order is not appealable under either 28 U.S.C. § 1291 or 28 U.S.C. § 1292(a) (1) and dismiss the appeal for lack of jurisdiction.

So ordered.