Baker v. Limber

Decision Date08 June 1981
Docket NumberNos. 79-3197,79-3270 and 78-3503,s. 79-3197
Citation647 F.2d 912
PartiesRobert A. BAKER et al., Plaintiffs/Appellees, v. Andrew A. LIMBER et al., Defendants, and Robert H. Fendler, Defendant/Claimant/Appellant. Robert A. BAKER et al., Plaintiffs/Appellees, v. Andrew A. LIMBER et al., Defendants, and Robert H. Fendler, Defendant/Counter-Claimant/Appellant. Robert A. BAKER et al., Plaintiffs/Counter-Defendants/Appellees, v. Andrew A. LIMBER et al., Defendants, and Robert H. Fendler, Defendant/Counter-Claimant/Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

L. Reid Southern (argued), Southern & Mulhall, Phoenix, Ariz., Robert H. Fendler, Phoenix, Ariz., on brief, for defendant/claimant/appellant.

John R. McDonough (argued), Beverly Hills, Cal., Michael J. Maloney, Ball, Hunt, Hart, Brown & Baerwitz, Los Angeles, Cal., on brief, for plaintiffs/appellees.

Appeal from the United States District Court for the District of Arizona.

Before KILKENNY and SNEED, Circuit Judges, and HANSON *, District Judge.

SNEED, Circuit Judge:

Robert H. Fendler brings three consolidated appeals from two orders of the district court imposing sanctions for his refusal to obey discovery orders. Appellant maintains that his refusals were protected by invocation of the Fifth Amendment privilege against self-incrimination. We hold that appellant failed to support his assertion of the privilege and that the district court did not abuse its discretion in imposing sanctions.

I. FACTUAL BACKGROUND

Appellees in each of these appeals are independent trustees for a group of related companies originally organized, owned, or managed by appellant and other individuals. The trustees were appointed pursuant to a final judgment of permanent injunction entered in a securities fraud suit brought against the companies and their managers by the Securities Exchange Commission. 1 Under the terms of the judgment, the trustees were authorized to bring suit for the recovery of assets loaned, wasted, or misappropriated by the former officers and directors of the trusteeship companies. The action from which these appeals arose was initiated by the trustees to recover funds allegedly diverted by appellant from the Ancillary Acceptance Corp., one of the trusteeship companies, to the Limber Company, a codefendant of appellant below. The trustees alleged that appellant had authorized a sham loan from Ancillary to Limber in return for an unsecured promissory note, which was later forgiven. Appellant filed an answer and permissive counterclaims. He also filed a third-party complaint against the trustees and other individuals alleging, among other things, defamation, civil rights violations, and breaches of fiduciary duty. This complaint was dismissed with prejudice on May 26, 1978. 2

On May 30, 1978, the trustees filed both a notice of their intent to depose appellant and a request for document production. At the deposition, which took place on June 7, 1978, appellant refused to answer questions or produce documents, asserting various constitutionally based privileges. He also challenged the authority of counsel for the trustees to conduct the deposition. The trustees then moved for an order compelling discovery. Appellant filed a motion in opposition, but failed to appear at the subsequent hearing, which was held on July 24, 1978. The district court found that appellant had failed to demonstrate the privileged nature of the requested discovery and that, in any event, appellant had waived his Fifth Amendment privilege by filing an answer, counterclaims, and papers in opposition to an earlier motion for summary judgment. The court therefore ordered appellant to comply with discovery.

A second deposition was taken on August 18, 1978. Appellant again refused to answer questions or produce documents, although he acknowledged the existence of the court's order. He also served handwritten notice of his intent to depose one of the trustees for the purpose of showing that the trustees were cooperating with the U.S. Attorney, who was conducting a grand jury investigation of appellant at the time. The trustees then filed a motion for sanctions. The district court issued an order staying all discovery sought by appellant pending resolution of the trustees' motion. On November 2, 1978, the court issued an order imposing sanctions. The order (1) dismissed appellant's counterclaims with prejudice; (2) struck appellant's answer and affirmative defenses without leave to amend; and (3) entered a default. The case was referred to a U.S. magistrate to determine damages, pursuant to Fed.R.Civ.P. 55(b)(2). On November 7, 1978, appellant filed his first notice of appeal.

Following the magistrate's determination of damages, the court entered judgment against the appellant and awarded compensatory and punitive damages in accordance with the magistrate's findings. Appellant filed a notice of appeal from this judgment on April 13, 1979. Thereafter, the trustees applied for discovery in aid of judgment and execution pursuant to Fed.R.Civ.P. 69(a). On May 7, 1979, the court entered an order compelling discovery from appellant as a judgment-debtor. An examination was held on May 11 for the purpose of identifying assets from which the judgment might be satisfied. After answering preliminary questions, appellant then refused to answer any questions relating to the amount or location of his assets, asserting that he was acting on the advice of counsel. The parties then adjourned to the district court, where appellant identified the Fifth Amendment as the source of his privilege. From the bench, the court ordered appellant to answer questions regarding the amount and location of proceeds realized from the sale of stock in one of appellant's corporations, which had been authorized by the court in connection with other proceedings. Counsel for appellant indicated that his client still would refuse to answer and invited the court to "shorten the proceedings" by holding appellant in contempt. The court did so, but permitted ten days in which to file an appeal. The court also enjoined appellant from disposing of the proceedings of the stock sale pending resolution of the appeal. Appellant then filed his third notice of appeal.

II. NOS. 78-3503 AND 79-3197 JURISDICTION

In their briefs and at oral argument the trustees maintained that this court was without jurisdiction to hear the November 7, 1978, appeal (No. 78-3503) from the district court's order imposing discovery sanctions. 3 They argue, for two reasons, that the order was not "final" for purposes of 28 U.S.C. § 1291. First, at the time appellant filed his first notice of appeal, the district court had ordered a default but had not yet entered judgment. The determination of damages was still pending. The trustees are correct in this argument and appellant's first appeal is dismissed as premature. However, appellant's April 13, 1979, appeal (No. 79-3197), which followed the district court's entry of judgment following the determination of damages, is from an order final as to the appellant.

A serious question exists concerning the finality of the district court's judgment, however. The trustees' suit from which these appeals arose was an action against several parties. The court's entry of a default judgment against the appellant adjudicated only those claims pending against him. Rule 54(b) of the Federal Rules provides that an order adjudicating the rights and liabilities of fewer than all the parties is not final unless the district court makes (1) "an express determination that there is no just reason for delay," and (2) "an express direction for the entry of judgment." The district court's judgment contains neither certification required by Rule 54(b). Accordingly, at the time this appeal was taken, the judgment was not final for purposes of 28 U.S.C. § 1291. See Chacon v. Babcock, 640 F.2d 221, 222 (9th Cir. 1981); Lockwood v. Wolf Corp., 629 F.2d 603, 608 (9th Cir. 1980); Curlott v. Campbell, 598 F.2d 1175, 1179-80 (9th Cir. 1979).

That portion of the case remaining before the district court, however, subsequently has been reduced to final judgment. On September 30, 1980, the trustees obtained a final judgment against the remaining defendants. Both parties agree that no claims now remain to be adjudicated in the action from which the April 13 appeal arose. We recently held that judgments whose finality normally would depend upon a Rule 54(b) certificate may be treated as final if remaining claims subsequently have abeen finalized, even by developments occurring after appeal. Anderson v. Allstate Insurance Co., 630 F.2d 677, 680-81 (9th Cir. 1980). Therefore, we hold that we have jurisdiction under 28 U.S.C. § 1291 to hear the April 13 appeal. We now turn to the merits.

III. NO. 79-3197 THE MERITS

The Federal Rules provide that any party to a civil action is entitled to all information relevant to the subject matter of the action unless the information is privileged. Fed.R.Civ.P. 26(b)(1). The privilege against self-incrimination may be invoked in civil as well as criminal proceedings. Kastigar v. United States, 406 U.S. 441, 445, 92 S.Ct. 1653, 1656, 32 L.Ed.2d 212 (1972), Campbell v. Gerrans, 592 F.2d 1054, 1057 (9th Cir. 1979). Thus, by operation of both the Federal Rules and the Constitution, a party is shielded from compulsory discovery in a civil action if a risk of self-incrimination is involved. Whether the district court erred in imposing discovery sanctions depends largely on whether the appellant justified his assertion of the Fifth Amendment privilege.

"(T)he privilege normally is not asserted properly by merely declaring that an answer will incriminate." Brunswick Corp. v. Doff, 638 F.2d 108, 110 (9th Cir. 1981).

It is not necessary, of course, that the person to whom the question has been put establish the precise manner in which he will incriminate himself...

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