Bacher v. Allstate Ins. Co.

• Decision Date: 20 April 2000
• Docket Number: No. 99-1572,99-1572
• Citation: 211 F.3d 52
• Parties: (3rd Cir. 2000) MAUREEN BACHER; RICHARD BACHER v. ALLSTATE INSURANCE COMPANY, Appellant
• Court: U.S. Court of Appeals — Third Circuit

Page 52

211 F.3d 52 (3rd Cir. 2000)

MAUREEN BACHER; RICHARD BACHER v. ALLSTATE INSURANCE COMPANY, Appellant

No. 99-1572

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued March 20, 2000

Filed April 20, 2000

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. No. 97-03661) District Judge: Honorable Robert S. Gawthrop

Attorneys for Appellees: Joseph F. Roda (argued) Eric L. Keepers Roda & Nast 801 Estelle Drive Lancaster, PA 17601

Attorneys for Appellant: Marshall J. Walthew (argued) Michael Doluisio Dechert, Price & Rhoads 1717 Arch Street 4000 Bell Atlantic Tower Philadelphia, PA 19103

BEFORE: MANSMANN, GREENBERG, and ALARCON,^* Circuit Judges

OPINION OF THE COURT

GREENBERG, Circuit Judge.

This matter is before this court on appeal from an order of June 9, 1999, in which the appellant, Allstate Insurance Company, asserts that we have jurisdiction under 28 U.S.C. S 1291 pursuant to the collateral order doctrine. Appellee, plaintiff Maureen Bacher, was involved in a two car accident on August 5, 1994. Allstate, which insured both vehicles, paid Bacher the $15,000 policy limit as a tort claimant under the policy covering the other car. In addition, Bacher submitted a claim for underinsured motorists benefits ("UIM") under her policy. A little over one year later, after having made two offers to settle for less than the policy limit, Allstate paid the full $30,000 allowed by the policy for UIM benefits, thus pretermitting an arbitration proceeding of her claim. Bacher and her husband Richard subsequently instituted this action in the district court seeking compensatory and punitive damages alleging that Allstate processed her UIM claim in bad faith contrary to Pennsylvania statutory law. See 42 Pa. Cons. Stat. Ann. S 8371 (West 1998).

On July 6, 1998, a magistrate judge ordered Allstate to comply with certain of the Bachers' discovery requests, including a request for information regarding all prior actions filed against Allstate in any jurisdiction since January 1, 1994, alleging bad faith with respect to uninsured or underinsured motorist claims. The order instructed Allstate to disclose the amount paid to satisfy any judgment or settlement in each prior action. Following Allstate's motion for reconsideration, the magistrate judge issued an order on February 9, 1999, limiting the discovery to prior bad faith actions brought in Pennsylvania. The district court affirmed the magistrate judge's order on March 25, 1999. Allstate then moved for reconsideration and on June 9, 1999, the district court issued an order denying reconsideration but prohibiting Bacher or her counsel from disclosing or using the settlement information outside the boundaries of this litigation.

Allstate eventually complied with these orders to the extent of identifying the prior bad faith actions except that Allstate refused to disclose the amount which it paid to settle any such action. Allstate filed a notice of appeal on July 8, 1999, from the district court's order denying its motion for reconsideration. The underlying action still is pending in the district court leading the Bachers to urge that we dismiss the appeal.

On this appeal, Allstate contends that it should not have to disclose the amount it paid to settle other cases. In this regard it points out that at least some of the settlements were confidential so that their disclosure would violate confidentiality agreements. Moreover, it contends that disclosure of settlements is not reasonably calculated to lead to the discovery of admissible evidence and is against public policy.

Allstate, however, faces a jurisdictional hurdle for"[a]s a general rule, discovery orders are not final orders of the district court for purposes of obtaining appellate jurisdiction under 28 U.S.C. S 1291." In re Ford Motor Co., 110 F.3d 954, 958 (3d Cir. 1997), citing Hahnemann Univ. Hosp. v. Edgar, 74 F.3d 456, 461 (3d Cir. 1996). It contends, however, that we have jurisdiction pursuant to the collateral order doctrine first recognized in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221 (1949). See Smith v. Bic Corp., 869 F.2d 194, 198 (3d Cir. 1989) ("We have never held as a blanket rule that discovery orders are not appealable. Rather, we address each issue using two vehicles: the collateral order doctrine . . . and the petition for writ of mandamus."). We recently described the collateral order doctrine as follows:

[T]he collateral order doctrine, first enunciated by the Supreme Court in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), provides a narrow exception to the general rule permitting appellate review only of final orders. An appeal of a nonfinal order will lie if (1) the order from which the appellant appeals conclusively determines the disputed question; (2) the order resolves an important issue that is completely separate from the merits of the dispute; and (3) the order is effectively unreviewable on appeal from a final judgment.

Ford, 110 F.3d at 958.

We have held that the requirements of the collateral order doctrine are satisfied when a party appeals a discovery order involving information which the party claims to be privileged or to constitute a trade secret. See Montgomery County v. Microvote Corp., 175 F.3d 296, 300 (3d Cir. 1999) (attorney-client and work product privileges); Ford, 110 F.3d at 957-64 (same); Smith, 869 F.2d at 198-99 (trade secrets). Our most extensive discussion of the jurisdictional issue was in Ford, where we addressed each of the prerequisites for application of the collateral order doctrine. We concluded that the doctrine was satisfied in that case because (1) the order requiring production of allegedly privileged documents left no room for further consideration by the district court; (2) we could resolve the privilege issue on appeal without delving into the issues in the underlying litigation; (3) the interests protected by the attorney-client and work product privileges are important as compared to the interests favoring the final judgment rule; and (4) there could not be effective review on appeal after final judgment because the privileged information already would have been disclosed. See Ford, 110 F.3d at 958-64. With regard to the last of these prerequisites, we commented as follows:

Appeal after final judgment cannot remedy the breach in confidentiality occasioned by erroneous disclosure of protected materials. At best, on appeal after final judgment, an appellate court could send the case back for re-trial without use of the protected materials. At that point, however, the cat is already out of the bag.

. . .

Attorneys cannot unlearn what has been disclosed to them in discovery; they are likely to use such material for evidentiary leads, strategy decisions, or the like. More colorfully, there is no way to unscramble the egg scrambled by the disclosure; the baby has been thrown out with the bath water.

Id. at 963 (citation and internal quotation marks omitted).

Other courts of appeals have rejected our approach, however, and have declined to exercise jurisdiction under the collateral order doctrine over appeals from discovery orders, even when privilege issues are involved. See, e.g., FDIC v. Ogden Corp., 202 F.3d 454, 458 & n.2 (1st Cir. 2000) ("[D]iscovery orders generally are not thought to come within [the collateral order doctrine]"; the "perfect example" of a discovery order that is not appealable under the doctrine is one involving a party's claim of attorney-client privilege.); Dellwood Farms, Inc. v. Cargill, Inc., 128 F.3d 1122, 1125 (7th Cir. 1997) ("[A] discovery order is not deemed collateral even if it is an order denying a claim of privilege. We so held emphatically in [two prior cases], and this is the view of the other circuits as well, with the partial exception of the Third Circuit [citing Ford ].") (citations omitted); Simmons v. City of Racine, 37 F.3d 325, 327 (7th Cir. 1994) ("Discovery orders are generally not appealable . . . as collateral orders. This is true even of discovery orders issued over an objection that the information at issue is privileged. Defendants have suggested no reason that the privilege they assert, the so-called `informer's privilege' . . . should stand on a different footing from the attorney-client privilege or the executive privilege, neither of which confers upon its holder the right to take an immediate appeal under section 1291 from an adverse discovery order.") (citations omitted); Boughton v. Cotter Corp., 10 F.3d 746, 749-50 (10th Cir. 1993) (stating that "virtually every case in other circuits" has held that orders compelling disclosure of information claimed to be subject to the attorney-client privilege are not reviewable as collateral orders) (citing cases).

The Court of Appeals for the Fourth Circuit explained the reasons for prohibiting immediate review of discovery orders:

[T]he considerations underlying the rule against review of interlocutory orders apply with particular force in the discovery context because that process has a special potential for spawning rulings that aggrieved parties would seek to appeal. The process of turning over private-and often damaging-information to an adversary inevitably creates friction. The sheer number of discovery rulings and the myriad procedural requirements governing them, provide fertile soil for the growth of appealable orders. Allowing immediate appeal of the orders resolving discovery disputes would only disrupt and delay district court proceedings and clog the courts of appeals with matters more properly managed by trial courts familiar with the parties and their controversy.

. . .

The dangers of a trade secrets exception to the nonappealability of discovery orders should be apparent. A judicially created exception to nonappealability for categories of sensitive information is the quintessential...