Appeal of Licht & Semonoff, 85-1996

• Decision Date: 03 July 1986
• Docket Number: No. 85-1996,85-1996
• Citation: 796 F.2d 564
• Parties: Appeal of LICHT & SEMONOFF.
• Court: U.S. Court of Appeals — First Circuit

Page 564

796 F.2d 564

6 Fed.R.Serv.3d 31

Appeal of LICHT & SEMONOFF.

No. 85-1996.

United States Court of Appeals First Circuit.

Argued April 7, 1986.

Decided July 3, 1986.

Susan M. Huntley with whom Licht & Semonoff, Providence, R.I., was on brief, for appellant.

Michael H. Feldhuhn with whom William A. Poore, Hodosh, Spinella & Angelone, Kenneth R. Neal and Coffey, McGovern, Noel & Neal, Ltd., Providence, R.I., were on brief, for appellees.

Before BOWNES, BREYER and TORRUELLA, Circuit Judges.

BOWNES, Circuit Judge.

The law firm of Licht & Semonoff (the firm) appeals from an order of the district court imposing monetary sanctions against it pursuant to Federal Rule of Civil Procedure 26(g) for abuse of discovery. Rule 26(g) states in pertinent part:

(g) Signing of Discovery Requests, Responses, and Objections. Every request for discovery or response or objection thereto made by a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated. ... The signature of the attorney or party constitutes a certification that he has read the request, response, or objection, and that to the best of his knowledge, information, and belief formed after a reasonable inquiry it is: (1) consistent with these rules and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; (2) not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; and (3) not unreasonable or unduly burdensome or expensive, given the needs of the case, the discovery already had in the case, the amount in controversy, and the importance of the issues at stake in the litigation....

If a certification is made in violation of the rule, the court, upon motion or upon its own initiative, shall impose upon the person who made the certification, the party on whose behalf the request, response, or objection is made, or both, an appropriate sanction, which may include an order to pay the amount of the reasonable expenses incurred because of the violation, including a reasonable attorney's fee.

The discovery in question was undertaken as part of the case of Providence Wholesale Drug Company v. Gerald R. Russeth, C.A. 85-0289(B). The firm is counsel for plaintiffs in that case but is not itself a party to the litigation. We find that we do not have jurisdiction over this interlocutory appeal, and dismiss it.

Background

The case from which this appeal arises involves a suit by the Providence Wholesale Drug Company (Providence) and some of its directors and shareholders against the former president of the company, Gerald Russeth, the former vice-president and treasurer, Elaine Barone, and New England Distribution Services, Inc. (New England). Defendants Russeth and Barone incorporated New England as a holding company for purposes of conducting a hostile takeover of Providence.

On May 14, 1985, Russeth and Barone, while still officers of Providence, issued a tender offer and proxy solicitation to Providence shareholders. They were discharged by the company the same day for alleged lack of integrity, and for misuse of company funds and credit cards. On May 17 the Providence Board of Directors filed an action in federal district court for material misstatements and omissions made in connection with the tender offer, and for breach of the fiduciary duty owed to Providence, alleging a violation of Sec. 14(e) of the Securities Exchange Act of 1934 ¹ and regulation 14E thereunder. ² The complaint requested immediate injunctive relief, damages, costs, and any other relief found appropriate under the circumstances.

The parties' bitter proxy battle swiftly spilled over into the legal arena, with the district court ordering expedited discovery and postponing the date of a crucial shareholders' meeting scheduled for May 28 until June 11. Depositions taken by plaintiffs of the defendants were long and acrimonious. Defendants objected vociferously to the length of the depositions--Russeth's extended over eleven hours--and to various questions put to Russeth, including whether he had sexual relations with Barone, and whether he used Providence funds to buy a large sloop he owns. Defendants also objected to the plaintiffs using information gained through discovery as ammunition in the proxy fight. Motions were made by the defendants for sanctions against alleged abusive practices and for misuse of discovery. Before these motions were ruled on, the district court issued a preliminary injunction barring any further action by the defendants on their tender offer until they provided certain information to shareholders. The scheduled shareholders' meeting was ordered cancelled until twenty days after that information was disseminated.

After a hearing, the district court issued an order on October 28, 1985, granting defendants' motion for sanctions. The district court found that plaintiffs' attorneys had misused the discovery process because their primary purpose in deposing defendants Russeth and Barone was to harass them and to gain information to disseminate to shareholders, not to advance the legal action. The district court ordered that plaintiffs' law firm, Licht & Semonoff, pay $1,000 to each of the two law firms representing the defendants. The firm appeals that order and asserts various errors below.

Supplemental briefing was ordered by us on the issue of jurisdiction. Both appellant and appellees agree that we have jurisdiction over this appeal. They assert three alternative jurisdictional grounds: (1) that the sanction order was a "final decision" under 28 U.S.C. Sec. 1291; ³ (2) that the order falls under the Cohen ⁴ "collateral order" exception to the final decision requirement of Sec. 1291; and (3) that the appeal may be treated as a petition for a writ of mandamus pursuant to 28 U.S.C. Sec. 1651(a) (1982). ⁵ In addition, appellees assert that Federal Rule of Civil Procedure 26(g) authorizes us to award them appellate costs and attorney's fees if we uphold the district court's order or if we dismiss the appeal for lack of jurisdiction. Appellant disputes this.

Before turning to the precise issues raised by the parties, we note that the case law on the question of appellate jurisdiction under Sec. 1291 to review sanction orders of the district court turns on whether the appellant is a party, nonparty, or attorney to one of the parties in the underlying litigation.

The law is substantially settled that neither a party nor a nonparty to litigation may bring an immediate appeal of a discovery order. Alexander v. United States, 201 U.S. 117, 121, 26 S.Ct. 356, 357-58, 50 L.Ed. 686 (1906); 9 J. Moore & B. Ward, Moore's Federal Practice p 110.13, at 153-55 (1985); but see Covey Oil Co. v. Continental Oil Co., 340 F.2d 993, 996 (10th Cir.), cert. denied, 380 U.S. 964, 85 S.Ct. 1110, 14 L.Ed.2d 155 (1965). A nonparty witness may refuse to comply with a discovery order, be held in contempt, and then appeal the contempt order, which is considered a "final decision" under Sec. 1291. Alexander v. United States, 201 U.S. at 121-22, 26 S.Ct. at 357-58 Cobbledick v. United States, 309 U.S. 323, 326-28, 60 S.Ct. 540, 541-42, 84 L.Ed. 783 (1940). A party, however, may appeal only an order of criminal contempt before final judgment, not one of civil contempt. Doyle v. London Guarantee & Accident Co., 204 U.S. 599, 607-08, 27 S.Ct. 313, 315-16, 51 L.Ed. 641 (1907); Bessette v. W.B. Conkey Co., 194 U.S. 324, 326-30, 24 S.Ct. 665, 666-68, 48 L.Ed. 997 (1904); Matter of Christensen Engineering Co., 194 U.S. 458, 460-61, 24 S.Ct. 729, 730-31, 48 L.Ed. 1072 (1904); 9 Moore's Federal Practice p 110.13 at 154. It follows that a party may not appeal a sanction order other than criminal contempt before final judgment. Coleman v. Sherwood Medical Industries, 746 F.2d 445, 447 (8th Cir.1984); Mulay Plastics, Inc. v. Grand Trunk Western R.R. Co., 742 F.2d 369, 370-71 (7th Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 1409, 84 L.Ed.2d 798 (1985); Eastern Maico Distributors, Inc. v. Maico-Fahrzeugfabrik, 658 F.2d 944, 947 (3d Cir.1981); Evanson v. Union Oil Co. of Calif., 619 F.2d 72, 74 (Temp.Emer.Ct.App.), cert. denied, 449 U.S. 832, 101 S.Ct. 102, 66 L.Ed.2d 38 (1980); but see State of Ohio v. Arthur Andersen & Co., 570 F.2d 1370, 1372 (10th Cir.), cert. denied, 439 U.S. 833, 99 S.Ct. 114, 58 L.Ed.2d 129 (1978).

The cases generally permit nonparties to appeal sanction orders other than contempt immediately, but use different rationales. Two cases, by drawing an analogy to civil contempt, hold that nonparties can immediately appeal a discovery sanction because it is a "final decision" under Sec. 1291. Liew v. Breen, 640 F.2d 1046, 1048 (9th Cir.1981); David v. Hooker, Ltd., 560 F.2d 412, 415-17 (9th Cir.1977); but see Gross v. G.D. Searle & Co., 738 F.2d 600, 604-06 (3d Cir.1984). Two other cases, involving sanctions against former counsel to parties in the underlying litigation, are silent on the finality requirement of Sec. 1291, but hold that the sanction orders are appealable under the Cohen collateral order exception to the finality rule. Eavenson, Auchmuty & Greenwald v. Holtzman, 775 F.2d 535, 537-39 (3d Cir.1985); Knorr Brake Co. v. Harbil, Inc., 738 F.2d 223, 225-26 (7th Cir.1984).

In cases such as the one before us, involving an immediate appeal of a sanction order against present counsel to one of the parties to the case, the law is not settled. Some cases permit an immediate appeal. They do so on the theory that while the order is not a final decision under Sec. 1291, it is a collateral order under the Cohen exception. Frazier v. Cast, 771 F.2d 259, 261-62 (7th Cir.1985); Cheng v. GAF Corp., 713 F.2d 886, 888-90 (2d Cir.1983); cf. Optyl Eyewear Fashion International Corp. v. Style Companies, 760 F.2d 1045, 1047 n. 1 (9th Cir.1985). Two cases in the Ninth...