D&H Marketers, Inc. v. Freedom Oil & Gas, Inc.

• Decision Date: 03 October 1984
• Docket Number: 83-1841,Nos. 83-1720,s. 83-1720
• Citation: 744 F.2d 1443
• Parties: D&H MARKETERS, INC., an Oklahoma corporation, Joe Lee Investors, a partnership, Delbert Lee, John Pinion, John L. Horne and David Fike, Plaintiffs-Appellees, v. FREEDOM OIL & GAS, INC., an Oklahoma corporation, Cherryvale Well Service, Inc., a Kansas corporation, Co-Kan Oil & Gas, Inc., a Colorado corporation, John R. Housel, Ron Curran, Tim Housel, Ken Darling, and Stan Karstetter, Defendants-Appellants, John Campbell, Wayne Moore, Larry Forshee, Harry Cunningham and James Bolt, Defendants. D & H PETROLEUM MARKETERS, INC., an Oklahoma corporation, Plaintiff-Appellant, Joe Lee Investors, a partnership, Delbert Lee, John Pinion, John L. Horne, and David Fike, Plaintiffs, v. FREEDOM OIL & GAS, INC., an Oklahoma corporation, Cherryvale Well Service, Inc., a Kansas corporation, Co-Kan Oil & Gas, Inc., a Colorado corporation, John R. Housel, Ron Curran, Ken Darling, and Stan Karstetter, Defendants-Appellees, John Campbell, Wayne Moore, Larry Forshee, Harry Cunningham and James Bolt, Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1443

744 F.2d 1443

40 Fed.R.Serv.2d 162

D&H MARKETERS, INC., an Oklahoma corporation, Joe Lee

Investors, a partnership, Delbert Lee, John

Pinion, John L. Horne and David Fike, Plaintiffs-Appellees, v. FREEDOM OIL & GAS, INC., an Oklahoma corporation, Cherryvale

Well Service, Inc., a Kansas corporation, Co-Kan Oil & Gas,

Inc., a Colorado corporation, John R. Housel, Ron Curran,

Tim Housel, Ken Darling, and Stan Karstetter, Defendants-Appellants,

John Campbell, Wayne Moore, Larry Forshee, Harry Cunningham

and James Bolt, Defendants.

D & H PETROLEUM MARKETERS, INC., an Oklahoma corporation, Plaintiff-Appellant, Joe Lee Investors, a partnership, Delbert Lee, John Pinion, John L. Horne, and David Fike, Plaintiffs, v. FREEDOM OIL & GAS, INC., an Oklahoma corporation, Cherryvale

Well Service, Inc., a Kansas corporation, Co-Kan Oil & Gas,

Inc., a Colorado corporation, John R. Housel, Ron Curran,

Ken Darling, and Stan Karstetter, Defendants-Appellees,

John Campbell, Wayne Moore, Larry Forshee, Harry Cunningham

and James Bolt, Defendants.

Nos. 83-1720, 83-1841.

United States Court of Appeals Tenth Circuit.

Oct. 3, 1984.

Michael L. Fought, Bartlesville, Okl., for defendants-appellants/cross appellees.

Jay O. Gregg, Herrold, Gregg, Shelton & Herrold, Inc., Tulsa, Okl., for plaintiffs-appellees/cross appellants.

Before HOLLOWAY, SETH, BARRETT, DOYLE, McKAY, LOGAN, SEYMOUR and McWILLIAMS, Circuit Judges.

McKAY, Circuit Judge.

In accordance with 10th Cir.R. 9(e) and Fed.R.App.P. 34(a), these appeals came on for consideration on the briefs and record on appeal.

These two matters arise out of a complicated proceeding in the trial court involving multiple plaintiffs and defendants. The substantive allegations relate to state and federal securities violations, as well as common law fraud, in connection with the sale of working interest units in various oil and gas leases.

After several pretrial conferences and attempts by plaintiffs to secure discovery without judicial intervention, plaintiffs were forced to petition the court for assistance to obtain proper responses to their interrogatories, request for admissions and production of documents. Defendants were sanctioned once by the court for failure to comply with discovery orders, at which time defendants paid a portion of plaintiffs' attorneys' fees and costs. Both orally and in writing the judge warned counsel for the eight delinquent defendants that he would utilize whatever sanctions were statutorily available to him to keep the case progressing toward trial, absent good cause for delay. These eight defendants never did properly and fully respond to plaintiffs' discovery requests. Pursuant to Federal Rule of Civil Procedure 37(b)(2)(C), the judge entered a default judgment as a sanction against the eight defendants for the amounts plaintiffs prayed for in their complaint. The default order did not adjudicate all the claims or rights and liabilities of all the parties. The order did not explicitly determine that there was no just reason for delay, or direct the entry of final judgment as required by Federal Rule of Civil Procedure 54(b) to effectuate an immediate appeal.

The affected defendants filed a notice of appeal from the trial court's order for default judgment. Plaintiffs filed a notice of cross-appeal from the trial court's refusal to enter an order for judgment awarding punitive damages against the involuntarily defaulted defendants.

These cases come to us at a time of widening concern in both trial and appellate courts about the fair and effective management of ever burgeoning dockets. There is a perceived growth in the use of sanctions at both levels to insure the performance of the recently heightened duties of attorneys and parties in the process of reasonable and expeditious disposition of cases. ¹ We are concerned that the trial court's inherent powers, reinforced by the rules, including the employment of sanctions, to manage its docket be taken seriously. Thus, we consider this case in banc to determine whether we have jurisdiction to review sanction orders having a substantially preclusive effect on claims of one party but not terminating the entire action. Our objective is to decide whether we can provide more immediate support to the trial court's efforts by reviewing such sanctions on an interlocutory basis. ² Although these sanctions did not terminate the entire matter, we must consider whether they are reviewable under the Cohen exception to the general rule of finality imposed on our jurisdiction by 28 U.S.C. Sec. 1291 (1982). Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). We recently applied the Cohen exception to a case involving preclusive sanctions imposed because of abusive conduct in discovery matters. Ohio v. Arthur Andersen & Co., 570 F.2d 1370 (10th Cir.1978).

Jurisdiction to consider an appeal is not discretionary but is circumscribed by 28 U.S.C. Sec. 1291, which has consistently been held to require the termination of all matters as to all parties and causes of action before an appeal may be taken. Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373, 101 S.Ct. 669, 673, 66 L.Ed.2d 571 (1981). If we find "that the order from which a party seeks to appeal does not fall within the statute, [our] inquiry is over." Id. at 379, 101 S.Ct. at 676. The only exception to that rule, known as the "collateral order" exception, was originally set out in the Cohen decision. The Supreme Court has recently emphasized that this exception only applies to a "small class" of orders. Id. at 374, 101 S.Ct. at 673. Since the case below has not been finally terminated, the only question before us is whether the imposition of preclusive sanctions in this case falls within the narrow Cohen exception. That exception requires the congruence of three distinct components before an order can be considered "collateral" and thereby appealable. "[T]he 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." Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2458, 57 L.Ed.2d 351 (1978) (footnote omitted).

The Supreme Court has emphasized the limited circumstances which satisfy the stringent requirements of the Cohen exception. This is particularly evident in the narrowing view of the exception's applicability in criminal cases, even where important constitutional considerations are involved. The Court has applied the exception in only three instances: refusal to dismiss an indictment for violation of the double jeopardy clause, Abney v. United States, 431 U.S. 651, 97 S.Ct. 2034, 52 L.Ed.2d 651 (1977), the speech or debate clause, Helstoski v. Meanor, 442 U.S. 500, 99 S.Ct. 2445, 61 L.Ed.2d 30 (1979), and orders denying a motion to reduce bail, Stack v. Boyle, 342 U.S. 1, 72 S.Ct. 1, 96 L.Ed. 1 (1951). The Court has refused to apply the exception to such important interests as a claim that a defendant's sixth amendment right to a speedy trial has been violated, United States v. MacDonald, 435 U.S. 850, 98 S.Ct. 1547, 56 L.Ed.2d 18 (1978). The Court recently reaffirmed the narrowness of the exception by holding that a district court's pretrial disqualification of defense counsel in a criminal prosecution was not immediately appealable. Flanagan v. United States, --- U.S. ----, 104 S.Ct. 1051, 79 L.Ed.2d 288 (1984).

Although the order entered by the trial court in this case is subject, pursuant to Federal Rule of Civil Procedure 54(b), to revision at any time before the entry of judgment adjudicating the balance of the claims, for present purposes we can assume that the first element of the Cohen test, as refined in Coopers & Lybrand, is met. The trial court has effectively terminated the case as to these defendants. Likewise, we can...