International Business Machines Corp. v. United States

• Citation: 493 F.2d 112
• Decision Date: 17 December 1973
• Docket Number: 73-2145-6.,Dockets 73-2126-7,No. 1133 to 1136,1133 to 1136
• Parties: INTERNATIONAL BUSINESS MACHINES CORPORATION, Appellant, v. UNITED STATES of America, Appellee. INTERNATIONAL BUSINESS MACHINES CORPORATION, and Cravath, Swaine & Moore, Appellants, v. UNITED STATES of America, Appellee. INTERNATIONAL BUSINESS MACHINES CORPORATION, Appellant, v. David N. EDELSTEIN, Chief Judge, United States District Court for the Southern District of New York, and United States of America, Appellees.
• Court: U.S. Court of Appeals — Second Circuit

493 F.2d 112 (1973)

INTERNATIONAL BUSINESS MACHINES CORPORATION, Appellant, v. UNITED STATES of America, Appellee.

INTERNATIONAL BUSINESS MACHINES CORPORATION, and Cravath, Swaine & Moore, Appellants, v. UNITED STATES of America, Appellee.

INTERNATIONAL BUSINESS MACHINES CORPORATION, Appellant, v. David N. EDELSTEIN, Chief Judge, United States District Court for the Southern District of New York, and United States of America, Appellees.

Nos. 1133 to 1136, Dockets 73-2126-7, 73-2145-6.

United States Court of Appeals, Second Circuit.

Argued August 8, 1973.

Decided December 17, 1973.

Certiorari Denied May 13, 1974.

Frederick A. O. Schwarz, Jr., New York City (Nicholas deB. Katzenbach, Armonk, N.Y., David Boies, Robert F. Mullen, Ronald S. Rolfe and George A. Vradenburg, III, New York City, of counsel), for appellant International Business Machines Corp.

Simon H. Rifkind, New York City (Edward N. Costikyan and Mark A. Belnick, New York City, of counsel), for appellant Cravath, Swaine & Moore.

Howard E. Shapiro, Atty., Dept. of Justice, Washington, D.C. (Thomas E. Kauper, Asst. Atty. Gen., and James I. Serota, Washington, D.C., on the brief), for appellees.

Before MULLIGAN, OAKES and TIMBERS, Circuit Judges.

Certiorari Denied May 13, 1974. See 94 S.Ct. 2409.

OAKES, Circuit Judge:

These appeals are by International Business Machines Corporation (IBM) and Cravath, Swaine & Moore (Cravath), a law firm which has represented IBM throughout the proceedings involved in this Government civil antitrust suit. In No. 73-2126 IBM seeks review of an adjudication of civil contempt against it for failure to comply with the very pretrial discovery order which IBM unsuccessfully sought to appeal or have vacated through a petition for an extraordinary writ in International Business Machines Corp. v. United States, 480 F.2d 293 (2d Cir.1973) (en banc), petition for cert. filed, 42 U.S.L.W. 3033 (U.S. June 11, 1973) (No. 72-1662). In that case the appeal and petition for mandamus were dismissed on the basis of a lack of jurisdiction under the Expediting Act (15 U.S.C. § 29) and it was held that in no event was there any basis to review the trial court's interlocutory order either by appeal or mandamus. 480 F.2d at 299. On petition of the Government filed June 25, 1973, Chief Judge Edelstein, after a hearing, entered an opinion, findings and order imposing a contingent, coercive fine of $150,000 per day until IBM complies with his discovery order, Pretrial Order No. 5. This order directed IBM to produce for the Government certain documents which IBM had previously delivered to a third party, Control Data Corporation, in the course of discovery in a civil antitrust action in the United States District Court for the District of Minnesota. IBM's claim both in the prior appeal and in this one is that the documents were protected from discovery by the attorney-client and work-product privileges. The trial judge, however, had ruled that, for purposes of the Government's antitrust suit, IBM had waived its claims of privilege by delivering the documents to Control Data in the Minnesota suit.

In No. 73-2127, IBM and Cravath assert that the district court has erroneously denied Cravath's petition to intervene in its own behalf as a party in the civil contempt hearing, for the purpose of asserting an attorney's work-product privilege against production of some of the documents and to require the district court to impose civil contempt sanctions upon Cravath or its partner, Mr. Bromley, so that it can obtain appellate review of the district court's rulings in connection with Pretrial Order No. 5.

Nos. 73-2145-6 is a petition for an extraordinary writ pursuant to 28 U.S.C. § 1651 and Fed.R.App.P. 21 in which IBM asks us to direct Chief Judge Edelstein to vacate the contempt order.

It should be noted that a direct appeal from the district court to the Supreme Court under the Expediting Act, 15 U.S.C. § 29, challenging the validity of Pretrial Order No. 5 is presently pending, appeal filed, 42 U.S.L.W. 3031 (U.S. Feb. 24, 1973) (No. 72-1173). There is also pending before the Supreme Court an extraordinary writ to review the district court's pretrial order, petition filed, 42 U.S.L.W. 3033 (U.S. June 11, 1973) (No. 72-1661), and a petition for a writ of certiorari to review International Business Machines Corp. v. United States, supra.

I. Character of the Contempt Order.

An order finding a party in criminal contempt is appealable. This is true because, in the language of the Supreme Court in Bloom v. Illinois, 391 U.S. 194, 201, 88 S.Ct. 1477, 1481, 20 L.Ed.2d 522 (1968), "criminal contempt is a crime in the ordinary sense; it is a violation of the law, a public wrong which is punishable by fine or imprisonment or both." See Gompers v. United States, 233 U.S. 604, 610, 34 S.Ct. 693, 58 L.Ed. 1115 (1914); Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 444, 31 S.Ct. 492, 55 L.Ed. 797 (1911). Hence an order punishing one criminally for contempt is a final judgment and review may immediately be obtained. Union Tool Co. v. Wilson, 259 U.S. 107, 111, 42 S.Ct. 427, 66 L.Ed. 848 (1922); Bessette v. W. B. Conkey Co., 194 U.S. 324, 336-338, 24 S.Ct. 665, 48 L.Ed. 997 (1904). The procedure in relation to criminal contempts is prescribed by 18 U.S.C. §§ 401 and 402 and Fed.R.Crim. P. 42. Appeals from criminal contempt orders are governed by Fed.R.Crim.P. 37. See generally Dobbs, Contempt of Court: A Survey, 56 Cornell L.Rev. 183, 235-45 (1971).

Generally speaking, however, an order of civil contempt is interlocutory and may not be challenged on an appeal until the entry of final judgment. Fox v. Capital Co., 299 U.S. 105, 107, 57 S.Ct. 57, 81 L.Ed. 67 (1936) (supplementary proceedings; contempt for failure to disclose assets); Doyle v. London Guarantee Co., 204 U.S. 599, 608, 27 S. Ct. 313, 51 L.Ed. 641 (1907). See also Mulligan, J., dissenting in International Business Machines Corp. v. United States, 471 F.2d 507, 519 n.3 (2d Cir.1972) (panel decision reversed en banc).¹

Appellant IBM argues first that Judge Edelstein's contempt order, although styled as a "civil" order, is in reality a criminal contempt order and is hence appealable. This argument has three underlying premises: (1) vindication of a court's authority is a characteristic of criminal, not civil, contempt and such was the purpose of the order here; (2) if the order were civil, it could not be entered without consideration of "the character and magnitude of the harm threatened by continued contumacy," United States v. UMW, 330 U.S. 258, 303-304, 67 S.Ct. 677, 701, 91 L.Ed. 884 (1947); and (3) the severity of the penalties imposed here, i. e., $150,000 per day for noncompliance, is so great that necessarily the contempt order is criminal.

None of these premises are correct. The hallmark of civil contempt is that the sanction imposed is only contingent and coercive. Shillitani v. United States, 384 U.S. 364, 370, 86 S. Ct. 1531, 16 L.Ed.2d 622 (1966); Penfield Co. v. SEC, 330 U.S. 585, 590, 67 S.Ct. 918, 91 L.Ed. 1117 (1947); United States v. UMW, 330 U.S. at 303, 67 S.Ct. 677, 91 L.Ed. 884; Gompers v. Bucks Stove & Range Co., 221 U.S. at 442, 31 S.Ct. 492, 55 L.Ed. 797. See Dobbs, 56 Cornell L.Rev. at 237. Civil contempt, moreover, has a remedial purpose—compelling obedience to an order of the court for the purpose of enforcing the other party's rights, or obtaining other relief for the opposing party. Nye v. United States, 313 U.S. 33, 42, 61 S.Ct. 810, 85 L.Ed. 1172 (1941); McCrone v. United States, 307 U.S. 61, 64, 59 S.Ct. 685, 83 L.Ed. 1108 (1939); Gompers v. Bucks Stove & Range Co., 221 U.S. at 441, 31 S.Ct. 492, 55 L.Ed. 797. The distinction between civil and criminal contempt is, in short, "usually based on the purpose for which the contempt sentence is meted out." Dobbs, 56 Cornell L.Rev. at 235.

The district court did not leave in doubt the purpose which the contempt citation here was to serve. The order, dated August 1, 1973, makes it clear that the fine is for each day that IBM "fails to comply with Pretrial Order No. 5" and that IBM is "entitled to purge itself of this contempt at any time" by compliance with the discovery order. The order of July 10, 1973, requiring that the hearing proceed in respect to the possibility of contempt, clearly states that the hearing is to be "on the issue of a coercive fine . . . ." Thus the order was both coercive and contingent, indicating a civil rather than criminal contempt.

In regard to the amount of the coercive fine it was proper for the court to take into account the contemnor's resources and ability to pay. This it did, noting in the contempt order that its 1972 annual report showed earnings for that year in excess of $1,279,000,000 as against $1,078,000,000 in 1971 and that the stockholders' equity as of December 31, 1972, was reported at $7,565,000,000. While $150,000 a day is a substantial sum, in reference to IBM's financial resources and the consequent seriousness of the burden to IBM, the sum represents only 5 per cent of any given day's earnings.² In any case, we fail to see how the magnitude of such a sum can turn a civil contempt into a criminal one, any more than the sending of an individual to jail turns a civil contempt into criminal contempt. See Shillitani v. United States, 384 U.S. at 370, 86 S.Ct. 1531, 16 L.Ed.2d 622. In neither case does the severity of the penalty change the nature of the contempt. See Gompers v. Bucks Stove & Range Co., 221 U.S. at 443, 31 S.Ct. 492. It is not as if there were any punitive aspect in this contingent fine. Indeed, this is a classic case of using the court's power to afford "full remedial relief," McComb v. Jacksonville Paper Co., 336 U.S. 187, 193, 69 S.Ct. 497, 93 L.Ed. 599 (1949), so as to enforce the right of the opposing party—here the right to discover certain documents.

IBM also claims that language in United States v. UMW, supra, compels a finding of...