Aetna Life Ins. Co. v. Alla Medical Services, Inc.

• Decision Date: 02 September 1988
• Docket Number: No. 87-6105,87-6105
• Citation: 855 F.2d 1470
• Parties: , 12 Fed.R.Serv.3d 173, RICO Bus.Disp.Guide 7022 AETNA LIFE INSURANCE COMPANY, Plaintiff-Appellee, v. ALLA MEDICAL SERVICES, INC.; Management Multi-Diagnostics, Inc.; Upland Medical Ancillary Services, Intelligent Health Systems, Inc.; David Smushkevich; Michael Smushkevich, et al., Defendants-Appellants, and The Law Firm of Case, Schroeder, Knowlson, Mobley & Burnett, Real Parties in Interest-Apellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1470

855 F.2d 1470

57 USLW 2210, 12 Fed.R.Serv.3d 173, RICO

Bus.Disp.Guide 7022

AETNA LIFE INSURANCE COMPANY, Plaintiff-Appellee, v. ALLA MEDICAL SERVICES, INC.; Management Multi-Diagnostics Inc.; Upland Medical Ancillary Services, Intelligent Health Systems, Inc.; David Smushkevich; Michael Smushkevich, et al., Defendants-Appellants and The Law Firm of Case, Schroeder, Knowlson, Mobley & Burnett Real Parties in Interest-Apellant.

No. 87-6105.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 6, 1988.

Decided Sept. 2, 1988.

Michael F. Wright, Case, Schroeder, Knowlson, Mobley & Burnett, Los Angeles, Cal., for defendants-appellants.

John L. Fort, John L. Fort, P.C., Long Beach, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Central District of California.

Before TANG, BOOCHEVER and NORRIS, Circuit Judges.

TANG, Circuit Judge:

The law firm of Case, Schroeder, Knowlson, Mobley and Burnett ("Case Schroeder") appeals the district court's imposition of $750.00 in sanctions against it under Rule 11 for filing a frivolous motion to dismiss. The underlying action was brought by Aetna Life Insurance Co. ("Aetna") against various individual defendants and medical testing firms (collectively "Defendants") represented by Case Schroeder. The complaint alleged state law fraud and federal RICO violations in connection with a scheme whereby the Defendants, through several medical testing laboratories, procured and submitted numerous fraudulent claims which were paid by Aetna.

PROCEDURAL BACKGROUND

Aetna filed its complaint in district court on October 24, 1986. On November 21, 1986, defendant Michael Smushkevich On February 23, 1987, the district court denied a motion by sixteen of the defendants to dismiss or stay the action, explicitly brought "pursuant to Rule 12 of Federal Rules of Civil Procedure," based upon concurrent state proceedings dealing with the same issues. The court found the arguments advanced by the defendants to be "disingenuous." It also found that defendant Michael Smushkevich filed a "false" affidavit contesting service, which the defendants relied upon to show that the time for filing motions addressed to the pleadings had not already ended. The district court found the motion to be in violation of Rule 11 and imposed a $750.00 sanction upon a member of the law firm then representing the moving defendants, Wyman, Bautzer, Christensen, Kuchel and Silbert ("Wyman Bautzer"). ¹ No appeal was taken from that order.

moved for a more definite statement pursuant to Rule 12(e), Fed.R.Civ.P. The motion was refused by the Clerk of the Court. On December 1, 1986, a second individual defendant, Victor DeGuzman, moved for a more definite statement. That motion was also rejected.

On March 16, 1987, Case Schroeder brought a Rule 12(b)(6) motion to dismiss on behalf of two defendants who had not joined in the earlier motion to dismiss. In the motion, the Defendants argued that Aetna's fraud claims failed to comply with the particularity requirements of Rule 9(b), Fed.R.Civ.P., and failed to adequately allege RICO violations. Case Schroeder then filed a "joinder" in the motion on behalf of fourteen additional defendants (the Joining Defendants) who had participated in the prior motion.

The district court imposed $750 in sanctions against Case Schroeder under Rule 11. The court found that the motion was filed in bad faith on the grounds that (1) the motion of the Joining Defendants was barred by Rule 12(g) because they had previously filed a pre-answer motion under Rule 12(b); (2) the motion was time-barred because it was filed more than 20 days after the Defendants were served with the Complaint; and (3) the motion was not warranted by existing law or a good faith argument for a change in the law. The Defendants, "by and through" their attorneys, Case Schroeder, appeal the sanction. Aetna, at the outset, claims that the sanction order against Case Schroeder is not a final decision appealable under 28 U.S.C. Sec. 1291. Aetna also contends that Case Schroeder failed to file a timely notice of appeal.

ANALYSIS

I.

The appealability of the sanction order

Aetna contends that the sanction order is not subject to appeal as a final judgment under 28 U.S.C. Sec. 1291 since the decision to impose sanctions is intertwined with the denial of the motion to dismiss on the merits. We hold that an interlocutory appeal may be entertained in this case.

Aetna acknowledges that this court has previously found orders imposing sanctions against non-party attorneys to be immediately appealable. See Unioil, Inc. v. E.F. Hutton & Co., 809 F.2d 548, 556 (9th Cir.1986) ("[a]n order imposing sanctions solely upon counsel, a non-party to the underlying action, is immediately appealable as a final order"), cert. denied, --- U.S. ----, 108 S.Ct. 83, 98 L.Ed.2d 45 (1987); Algeran, Inc. v. Advance Ross Corp., 759 F.2d 1421, 1425 (9th Cir.1985) (same); Reygo Pacific Corp. v. Johnston Pump Co., 680 F.2d 647, 648 (9th Cir.1982) (same). Cf. Kordich v. Marine Clerks Ass'n, 715 F.2d 1392, 1393 (9th Cir.1983) (refusing to allow appeals of sanctions before the end of the litigation where both the client and counsel are liable for payment of sanctions because of the "congruence of interest" between client and counsel). Aetna argues that we should Our prior holding that sanction orders issued solely against non-party attorneys are immediately appealable is controlling absent overruling by the Supreme Court or an en banc panel. Le Vick v. Skaggs Companies, 701 F.2d 777, 778 (9th Cir.1983). We note that our holding that Rule 11 sanctions against non-party attorneys are immediately appealable has been reaffirmed subsequent to the Supreme Court's most recent pronouncement in 1985 of the appealability of rulings on motions to disqualify attorneys. See Unioil, 809 F.2d at 556. Absent overruling, we must follow the law of this Circuit. Fenton v. Freedman, 748 F.2d 1358, 1359 n. 1 (9th Cir.1984). Accordingly, this sanction order, imposed solely against the non-party law firm, is an immediately appealable order under section 1291.

                reexamine our approach given the increasing frequency with which sanctions are being imposed, and in light of Supreme Court authority narrowing the reach of the collateral order doctrine.   See Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 431, 105 S.Ct. 2757, 2761, 86 L.Ed.2d 340 (1985) (orders disqualifying counsel in civil cases are not collateral orders subject to appeal as final judgments within the meaning of 28 U.S.C. Sec. 1291);  Flanagan v. United States, 465 U.S. 259, 265, 104 S.Ct. 1051, 1054-55, 79 L.Ed.2d 288 (1984) (same for an order disqualifying counsel in a criminal case);  and Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374, 101 S.Ct. 669, 673-74, 66 L.Ed.2d 571 (1981) (same for an order denying a motion to disqualify counsel in a civil case)
                

II. Case Schroeder's Notice of Appeal

Aetna contends that Case Schroeder, the appellant herein, failed to file a timely notice of appeal. The Notice of Appeal states that the Defendants "by and through their attorney's of record, Case, Schroeder" appeal the sanction order. Federal Rule of Appellate Procedure 3(c) provides in pertinent part that "[t]he notice of appeal shall specify the party or parties taking the appeal." Fed.R.App.P. 3(c).

The Supreme Court recently held that the failure to file a notice of appeal in accordance with Rule 3(c) presents a jurisdictional bar to appeal. Torres v. Oakland Scavenger Co., --- U.S. ----, 108 S.Ct. 2405, 101 L.Ed.2d 285 (1988). See also Farley Transp. Co. v. Santa Fe Trail Transp. Co., 778 F.2d 1365, 1368-70 (9th Cir.1985) (failure to specify party to the appeal is a jurisdictional bar). In Torres, however, the Court observed that "[t]he purpose of the specificity requirement of Rule 3(c) is to provide notice both to the opposition and to the court of the identity of the appellant or appellants.... The specificity requirement of Rule 3(c) is met only by some designation that gives fair notice of the specific individual or entity seeking to appeal." Id.

In this case Case Schroeder is listed in the notice of appeal as the party "by and through" which the appeal is being taken. This is not a case in which more than one party is entitled to bring an appeal and only one party was designated as actually taking the appeal. Cf. Torres, --- U.S. at ----, 108 S.Ct. at 2409-11 (Torres, one of sixteen intervening plaintiffs, failed to sufficiently indicate his intention to appeal by the use of "et al." following the name of one of the plaintiffs in the notice of appeal); and Farley Transp. Co., 778 F.2d at 1368 (Farley Terminal held not to be a proper party to the appeal where only its related company, Farley Transportation, was listed in the notice of appeal). In this case, the only appealable judgment is the order imposing sanctions against Case Schroeder. There is no opportunity for confusion or prejudice.

Rule 3(c) provides that "[a]n appeal shall not be dismissed for informality of form or title of the notice of appeal." The Advisory Committee's Note observes that "it is important that the right to appeal not be lost by mistakes of mere form." Aetna and this court were aware of the issue on appeal and of the fact that Case Schroeder was the appellant. Case Schroeder's appeal is not barred by Rule 3(c).

III.

Rule 11 Sanctions

Rule 11 provides in pertinent part:

The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay...