David v. Hooker, Ltd., No. 75-2444

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBefore BARNES and ANDERSON, Circuit Judges, and CRAIG; BARNES; J. BLAINE ANDERSON
Citation560 F.2d 412
Decision Date06 September 1977
Docket NumberNo. 75-2444
PartiesJohn DAVID, Plaintiff-Appellee, v. The HOOKER, LTD; Hooker Music, Ltd., Defendant, Ronald Haffkine, Non-Party Defendant-Appellant.

Page 412

560 F.2d 412
John DAVID, Plaintiff-Appellee,
v.
The HOOKER, LTD; Hooker Music, Ltd., Defendant,
Ronald Haffkine, Non-Party Defendant-Appellant.
No. 75-2444.
United States Court of Appeals,
Ninth Circuit.
Sept. 6, 1977.

Page 414

Alan B. Axelrod, Axelrod, Blum & Lerch, San Francisco, Cal., for non-party defendant-appellant.

Neil Boorstyn, Mill Valley, Cal., for plaintiff-appellee.

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

Before BARNES and ANDERSON, Circuit Judges, and CRAIG, District Judge. *

BARNES, Circuit Judge:

FACTS:

On January 2, 1974, John David brought a breach of contract action in federal court based on diversity against Hooker Music, Ltd. ("Hooker Music"), a New York corporation. 1 Ronald Haffkine is the president, managing agent and sole officer of Hooker Music. 2

Page 415

On November 4, 1974, during pre-trial discovery, Hooker Music was found by the United States Magistrate to have failed to fully comply with a court order to produce materials and to answer plaintiff's initial set of interrogatories. The United States Magistrate ordered, inter alia, the defendant to answer the interrogatories by November 18, 1974. The district court adopted the order of the magistrate on December 5, 1974, but modified it to provide that the answers were to be filed by December 16, 1974.

On November 26, 1974, Hooker Music filed a petition in bankruptcy and was adjudicated a bankrupt on November 29, 1974. On December 17, 1974, after failing to answer the interrogatories, 3 the defendant filed a motion to stay the action due to the bankruptcy petition as automatically provided for in Rule 401 of the Federal Rules of Bankruptcy Procedure ("FRBP"). 4 On January 9, 1975, the district court granted the stay but reserved the right to compel answers to the interrogatories. The court ordered the defendant to file answers no later than ten days. Hooker Music failed to file within that time and the district court issued an order to show cause why Hooker Music and Haffkine should not be punished for contempt of court. Two days later, answers were filed.

At the hearing on the order to show cause, an objection was raised by Neil Boorstyn, attorney for the plaintiff, as to the sufficiency of the answers. At the close of the hearing, the district court ordered Hooker Music and Haffkine to answer "fully and completely all written interrogatories no later than May 1, 1975." In addition, Haffkine was personally ordered to pay to Boorstyn the sum of $2,000.00 "for expenses and reasonable counsel fees incurred by said attorney as a result of such failure to answer as ordered."

Haffkine appeals the order of the district court.

ISSUES:

1. Is the order issued by the district court an appealable order?

2. Did the district court have jurisdiction to issue the order after the bankruptcy petition was filed?

3. Was the order an abuse of discretion?

1. Appealability.

The order by the district court was a final decision so as to be appealable to this court. Although discovery orders and sanctions in the form of civil penalties are held in most cases to be interlocutory and hence non-appealable as to the parties involved in the suit, see, 8 Wright and Miller, Federal Practice and Procedure; Civil § 2006 at 29-31 ("Wright and Miller"); United States v. Ryan, 402 U.S. 530, 532-34, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971); In re Letters Rogatory from City of Haugesund, 497 F.2d 378, 380-81 (9th Cir. 1974), certain exceptions are recognized in cases involving orders and sanctions against non-parties. See 9 Moore's Federal Practice P 110.13(4) at 167 ("Moore's"), 8 Wright and Miller § 2006 at 30; Premium Service Corp. v. Sperry & Hutchinson Co., 511 F.2d 225, 227-29 (9th Cir. 1975); Fenton v. Walling, 139 F.2d 608, 610 (9th Cir. 1943), cert. denied, 321 U.S. 798, 64 S.Ct. 938, 88 L.Ed. 1086 (1944).

It has long been held that a non-party in a pending suit may appeal a sentence for civil contempt. Bessette v. W. B. Conkey Co., 194 U.S. 324, 338, 24 S.Ct. 665, 48 L.Ed. 997 (1904); Fenton, supra, 139 F.2d at 610 (9th Cir. 1943). Because he is not a party, he cannot appeal from the final judgment in the action, and so the contempt

Page 416

judgment is regarded as final as to him. 9 Moore's P 110.13(4) at 167; Southern Railway Company v. Lanham, 403 F.2d 119, 124 (5th Cir. 1968). 5 However, while the courts have recognized the finality of civil contempt orders against non-parties, the rule embodied in those cases has not been extended to the mere issuance of discovery orders to non-parties. To obtain a right of review, the non-party must refuse to comply with the order, and the district court must find the non-party to be in contempt and apply sanctions against him. 9 Moore's P 110.13(2) at 153-55; Alexander v. United States, 201 U.S. 117, 121-22, 26 S.Ct. 356, 50 L.Ed. 686 (1906); Borden v. Sylk, 410 F.2d 843, 846 (3rd Cir. 1969); United States v. Fried, 386 F.2d 691, 694 (2d Cir. 1967).

The order issued by the district court below consisted of two parts. The first required Hooker Music and Haffkine to answer "fully and completely all written interrogatories no later than May 1, 1975." Under the rule established in the Alexander line of cases, that initial order is interlocutory and non-appealable. The second part of the order required Haffkine to personally pay Boorstyn $2,000.00 for expenses and reasonable counsel fees incurred by the failure to answer the interrogatories. Rule 37(b)(2) of the Federal Rules of Civil Procedure ("FRCP") provides in part:

"If a party or an officer, director, or managing agent of a party . . . fails to obey an order to provide or permit discovery, . . . the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following:

(five subsections of various permissible sanctions)

"In lieu of any of the foregoing orders or in addition thereto, the court shall require the party failing to obey the order or the attorney advising him or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust."

The question therefore arises as to whether the Rule 37(b)(2) sanction of expenses and reasonable attorney's fees is an appealable order when applied to a non-party. 6 No cases resolving the issue could be located, although two cases were discovered with conflicting dicta on the issue. 7

As the Supreme Court has stated, "the requirement of finality is to be given a 'practical rather than technical construction.' . . . the most important considerations are 'the inconvenience and costs of

Page 417

piecemeal review on the one hand and the danger of denying justice by delay on the other.' " Gillespie v. United States Steel Corp., 379 U.S. 148, 152-53, 85 S.Ct. 308, 311, 13 L.Ed.2d 199 (1964). An order to pay attorney's fees and expenses under Rule 37(b)(2) is similar in both its purpose and effect to fines imposed for civil contempt which are made payable to an opponent to compensate the latter for loss sustained as a result of the contemnor's conduct. See Advisory Committee Note of 1970 to Amended Rule 37. As in the case of a civil contempt order, the non-party cannot argue the propriety of the Rule 37(b)(2) sanction for attorney's fees in an appeal from the final judgment as a party to the suit would be able to do. Unless he can obtain a review of the order and sanction at the time it is imposed, a non-party will have no right of review at all. There is no danger of piecemeal review in this type of case as such orders are, for all practical purposes, final. Thus, the order requiring Haffkine to pay the attorney's fees and expenses incurred by the failure to answer is appealable as it is final as to a non-party.

Appellee, however, argues that the officer, director or managing agent of a party is to be treated as a party under Rule 37. Appellee's Brief, page 5. While Rule 37 does make reference to officers, directors, and managing agents of a party as well as to individual parties themselves, there is no language to indicate that they are to be treated as identical entities. Likewise, even if Rule 37 did create such a rule, there is no indication that that treatment would carry over to control the distinction between parties and non-parties for purposes of determining finality for appeal. Indeed, this court in Fenton, supra, 139 F.2d at 610, rejected the contention that, in determining the finality of judgments for appeal, officers of corporate defendants must be considered as parties even though the suit is filed against the corporation. Appellee fails to cite, and no cases have been found, which support his argument on this issue.

2. Jurisdiction after the Filing of the Bankruptcy Petition.

Rule 401(a) of the FRBP provides that the filing of a bankruptcy petition operates as a stay on the commencement or continuation of any action against the bankrupt if the action is founded on an unsecured provable debt except for certain specific exceptions not relevant to this case. Here, prior to any such filing, the United States Magistrate determined that Hooker Music had failed to answer plaintiff's initial set of interrogatories and ordered it to do so by November 18, 1974. Plaintiff subsequently moved for sanctions under Rule 37 of the FRCP. On November 26, 1974, the bankruptcy petition was filed. In response to the defendant's motion to stay the proceedings, the district court judge recognized that the suit had to be stayed pursuant to Rule 401(a). He nevertheless granted the stay subject to an order requiring the defendant to answer the interrogatories within ten days. The order and sanction which are the subject of the present appeal arose from the failure of the defendant and its managing agent to answer.

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150 practice notes
  • International Horizons, Inc., Matter of, No. 82-8024
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • October 21, 1982
    ...Cir. 1979) (remedy for witness who claims a privilege is to refuse to answer and subject himself to civil contempt); David v. Hooker Ltd., 560 F.2d 412 (9th Cir. 1977) (mere issuance of discovery order not appealable; party may only appeal from sentence for civil contempt); Arthur Andersen ......
  • Sutton Woodworking Mach. v. Mereen-Johnson Mach., No. CIV. 1:03CV01133.
    • United States
    • United States District Courts. 4th Circuit. Middle District of North Carolina
    • July 29, 2004
    ...to a dismissal of [the debtor] as a party defendant in this action but merely suspends the proceedings.")(citing David v. Hooker, Ltd., 560 F.2d 412 (9th Cir.1977)); see also 14B Charles A. Wright, Arthur R. Miller, and Edward H. Cooper, Federal Practice and Procedure § 3723, at 585-86 (3d ......
  • Irving, In re, Nos. 740-741
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • April 12, 1979
    ...have no appeal from a final judgment, they have no right of review unless they can appeal independently); Accord, David v. Hooker, Ltd., 560 F.2d 412, 417 (9th Cir. 1977). See generally 9 J. Moore, Federal Practice P 110.13(4), at 167 (2d ed. 1975). Therefore, it is significant, as the Boar......
  • S.E.C. v. Wencke, No. 78-1395
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • June 9, 1980
    ...laws. Finally, the stay does not deprive the state court judgment of effect; it merely postpones that effect. See David v. Hooker, Ltd., 560 F.2d 412, 418 (9th Cir. 1977). For all of the above reasons, therefore, we hold that the district court had jurisdiction to enter the orders it F. The......
  • Request a trial to view additional results
150 cases
  • International Horizons, Inc., Matter of, No. 82-8024
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • October 21, 1982
    ...Cir. 1979) (remedy for witness who claims a privilege is to refuse to answer and subject himself to civil contempt); David v. Hooker Ltd., 560 F.2d 412 (9th Cir. 1977) (mere issuance of discovery order not appealable; party may only appeal from sentence for civil contempt); Arthur Andersen ......
  • Sutton Woodworking Mach. v. Mereen-Johnson Mach., No. CIV. 1:03CV01133.
    • United States
    • United States District Courts. 4th Circuit. Middle District of North Carolina
    • July 29, 2004
    ...to a dismissal of [the debtor] as a party defendant in this action but merely suspends the proceedings.")(citing David v. Hooker, Ltd., 560 F.2d 412 (9th Cir.1977)); see also 14B Charles A. Wright, Arthur R. Miller, and Edward H. Cooper, Federal Practice and Procedure § 3723, at 585-86 (3d ......
  • Irving, In re, Nos. 740-741
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • April 12, 1979
    ...have no appeal from a final judgment, they have no right of review unless they can appeal independently); Accord, David v. Hooker, Ltd., 560 F.2d 412, 417 (9th Cir. 1977). See generally 9 J. Moore, Federal Practice P 110.13(4), at 167 (2d ed. 1975). Therefore, it is significant, as the Boar......
  • S.E.C. v. Wencke, No. 78-1395
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • June 9, 1980
    ...laws. Finally, the stay does not deprive the state court judgment of effect; it merely postpones that effect. See David v. Hooker, Ltd., 560 F.2d 412, 418 (9th Cir. 1977). For all of the above reasons, therefore, we hold that the district court had jurisdiction to enter the orders it F. The......
  • Request a trial to view additional results

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