Cordoza v. Pacific States Steel Corp.

• Decision Date: 20 February 2003
• Docket Number: No. 01-16638.,No. 02-15110.,01-16638.,02-15110.
• Parties: Eldon T. CORDOZA, Plaintiff-Appellee, Bruce Train; Hans Lemcke; Theodore Sorensen; Passco Administrative Services, Inc.; Passco Development, LLC, Appellants, v. PACIFIC STATES STEEL CORPORATION, Defendant, and Rust Remedial Services Holding Company, Inc.; Community Redevelopment Agency for the City of Union City, Real Parties in Interest-Appellees. Eldon T. Cordoza; John Franco; Theodore Kutsuki; Santos Mora; Eugene Luna; Ray Seccombe, on behalf of themselves and all others similarly situated, Plaintiff-Appellee, v. Bruce Train, Defendant-Appellant, Rust Remedial Services Holding Company, Inc.; Community Redevelopment Agency for the City of Union City, Real Parties in Interest-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

320 F.3d 989

Eldon T. CORDOZA, Plaintiff-Appellee, Bruce Train; Hans Lemcke; Theodore Sorensen; Passco Administrative Services, Inc.; Passco Development, LLC, Appellants, v. PACIFIC STATES STEEL CORPORATION, Defendant, and Rust Remedial Services Holding Company, Inc.; Community Redevelopment Agency for the City of Union City, Real Parties in Interest-Appellees.

Eldon T. Cordoza; John Franco; Theodore Kutsuki; Santos Mora; Eugene Luna; Ray Seccombe, on behalf of themselves and all others similarly situated, Plaintiff-Appellee, v. Bruce Train, Defendant-Appellant, Rust Remedial Services Holding Company, Inc.; Community Redevelopment Agency for the City of Union City, Real Parties in Interest-Appellees.

No. 01-16638.

No. 02-15110.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 4, 2002.

Filed February 20, 2003.

COPYRIGHT MATERIAL OMITTED

Robert A. Goodin, San Francisco, CA, for defendants-appellants, Bruce Train, Hans Lemcke, Theodore Sorensen, Passco Administrative Services, Inc., and Passco Development Co., LLC.

Arthur Lazear, Oakland, CA, for plaintiffs-appellees, Eldon T. Cordoza, et al.

Charles Reese, Oakland, CA, for real party in interest-appellee, Community Redevelopment Agency-Union City.

Larry W. Telford, San Franciso, CA, and Walter J. Sears, III and Scott Smith, Birmingham, AL, for real party in interest-appellee Rust International Inc.

Tamar Pachter, San Francisco, CA, for amicus curiae U.S. District Court for the Northern District of California.

Appeal from the United States District Court for the Northern District of California; Marilyn H. Patel, District Judge, Presiding. D.C. Nos. CV-82-04209-MHP/BZ, CV-82-04209-MHP.

Before: McKEOWN and PAEZ, Circuit Judges, and POLLAK, District Judge.^*

McKEOWN, Circuit Judge:

This appeal comes to us from the midst of lengthy post-judgment proceedings in an Employee Retirement Income Security Act case. For nearly two decades, the district court has overseen efforts by a series of special masters to transform an insolvent company's contaminated steel plant site into a means of funding the former steelworkers' medical plan. After other parties accused the special master of serious misconduct, the district court launched an investigation, held a hearing, and finally relieved the special master of his duties, requiring him to disgorge a portion of the considerable sum he had already retained as compensation.

The terminated special master now appeals these orders, although development of the steel plant site continues under a new special master. As a threshold matter, we address whether we have jurisdiction over this interlocutory appeal. We consider whether a special master has the right to appeal orders affecting his termination and compensation and whether the orders are final or meet the requirements of the collateral order exception recognized in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546-47, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). Although the special master may appeal orders affecting him, the orders here are neither final nor do they fall within the Cohen exception. We do, however, treat the appeal as a petition for a writ of mandamus. Having reviewed the considerable record and the district court's lengthy and careful findings, we conclude that a writ is not appropriate because the district court did not make a clear error or exceed its authority under Federal Rule of Civil Procedure 53 in supervising the special master and setting his compensation.

BACKGROUND AND PROCEDURAL HISTORY

The Pacific States Steel Corporation ("PSSC") operated a plant in Union City, California, that shut down in 1978, leaving a parcel of contaminated land and a bankrupt medical plan for retired steelworkers and their dependents. These pensioners filed a class action in the United States District Court for the Northern District of California with now-Chief Judge Marilyn Hall Patel presiding over the case. Judge Patel ordered PSSC to continue paying the pensioners' medical benefits, but the company had few assets from which to obtain the necessary funding. Judge Patel and the parties decided that the best way to fund the medical plan was to clean up and develop the toxic land on which the plant had been located.

Little did Judge Patel know that these post-judgment proceedings would become a miniature Jarndyce v. Jarndyce, grinding on for more than two decades after the steel plant had closed its doors.¹ The first special master, appointed in 1984 to determine the assets and liabilities of PSSC, tried unsuccessfully to develop the plant site. He was then replaced in 1990 by the appellants, Bruce Train and his associates, Theodore Sorensen and Hans Lemcke (collectively referred to as "Train" or "the Special Master").

In 1995, Train proposed, and Judge Patel adopted, an Amended Plan under which Train would form two companies, PASSCO Administrative Services and PASSCO Development Company, to obtain funding, develop the plant site, and use the resulting profits to pay the medical benefits. Services were to be billed on an hourly basis. In a somewhat unusual arrangement, Train was to receive other kinds of compensation, including an interest in the developed land. But the Amended Plan's terms, including Train's compensation, were always subject to further modification by the district court.

Train reached agreements in 1994 and 1995 with the Redevelopment Agency for the City of Union City ("RDA") for funding that resulted in the development of a small part of the plant site, where homes have now been built. Train also persuaded Rust Remedial Services, Inc. ("Rust") to perform clean-up work on the site for deferred compensation.

By 1996, negotiations between Train and all of the other parties involved in developing the rest of the plant site had bogged down amid mutual antagonism. A major sticking point seemed to be the amount of Train's compensation. Three years later, after the parties failed to reach a compromise in settlement conferences before a magistrate, Judge Patel conducted a settlement conference herself. Upon observing the parties during the conference, she began to have "grave concerns" about Train's motivations and "whether he could in fact accomplish the task assigned him — development of the property for the benefit of the pensioners."

Judge Patel then started an investigation, consulting with outside real estate experts, ordering Train to produce his books and records, directing him not to spend any more of PSSC's money, and appointing an independent auditor. She also suspended Train pending the outcome of the investigation and appointed court overseers to manage PSSC. After learning that Train was still speaking to potential developers, the district court again issued an order reminding Train that he had been suspended.

In August 2000, after the auditor's report was released, RDA filed a motion requesting that the district court set the Special Master's final compensation at $3 million and order disgorgement of all compensation received in excess of that amount. Although determined to avoid having "satellite litigation spawned" over the compensation issue, Judge Patel permitted limited discovery. Train filed a motion requesting that Judge Patel recuse herself. The court held a hearing on the recusal motion and the compensation motion in mid-September 2000. Train was finally terminated as Special Master on December 1, 2000. At the same time, Judge Patel denied the recusal motion and established discovery procedures.

After four days of hearings, in early 2001, the district court entered a lengthy order, complete with detailed findings, examples, and record references. While acknowledging that Train had resolved some of the infrastructure problems and had initially obtained some funding from the RDA for the site, Judge Patel found that, in the end, Train had not accomplished the primary tasks for which he was appointed — the development of the plant site and the funding of the medical plan.

In the meantime, Judge Patel concluded, Train had (1) rejected valid offers from the RDA in order to hold out for more compensation for himself, (2) misappropriated creditors' funds by forming a $1 million litigation war chest, (3) paid for personal tax advice with PSSC funds, and (4) overbilled for a legal assistant. Judge Patel also noted that Train had failed to keep records or attempt to track down the medical fund recipients, preventing the pensioners from being identified even when there were funds to pay them.

In the final order setting the Special Master's compensation, Judge Patel accepted that the Special Master's work could be valued at $3.6 million ($1.2 million already received by each of the individual appellants Train, Lemcke, and Sorensen), but ordered Train personally to disgorge $48,035 for personal legal services he charged to PSSC and $65,034 for overbilling the services of the legal assistant. Judge Patel later awarded $24,634 in attorney's fees. Train appeals the termination, compensation, and attorney's fees orders and the denial of the motion to recuse.

DISCUSSION

The threshold issue is whether we have jurisdiction to hear this appeal. We conclude that we lack jurisdiction because the orders Train now appeals are not final judgments under 28 U.S.C. § 1291, nor do they fit within the narrow exception for review of collateral orders. See Cohen, 337 U.S. at 546-47, 69 S.Ct. 1221. Although we may consider the notice of appeal as a petition for a writ of mandamus, we decline to issue the writ because the district court's orders were not "a clear abuse of discretion." See Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 383, 74 S.Ct. 145, 98 L.Ed. 106 (1953).

I. A SPECIAL MASTER'S RIGHT TO APPEAL

This is the rare situation in which an officer of the court is appealing from an order of the court. Federal Rule of Civil Procedure 53 gives the district court authority to appoint a special master, to ...