Diaz v. Southern Drilling Corp.

• Decision Date: 06 May 1970
• Docket Number: No. 27197.,27197.
• Citation: 427 F.2d 1118
• Parties: Antonio A. DIAZ, Plaintiff, v. The SOUTHERN DRILLING CORP., also known as South-Eastern Drilling Inc., et al., Defendants, and Trefina, A.G., Intervenor-Appellant. GREAT AMERICAN INVESTMENT COMPANY, Limited, etc., Plaintiff, v. W. P. CLEMENTS, Jr., et al., Defendants, and United States of America, Intervenor-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

427 F.2d 1118 (1970)

Antonio A. DIAZ, Plaintiff, v. The SOUTHERN DRILLING CORP., also known as South-Eastern Drilling Inc., et al., Defendants, and Trefina, A.G., Intervenor-Appellant.

GREAT AMERICAN INVESTMENT COMPANY, Limited, etc., Plaintiff, v. W. P. CLEMENTS, Jr., et al., Defendants, and United States of America, Intervenor-Appellee.

No. 27197.

United States Court of Appeals, Fifth Circuit.

March 2, 1970.

As Modified on Denial of Rehearing May 6, 1970.

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D. Marshall Simmons, Thomas W. Luce, III, Special Counsel, Dallas, Tex., G. F. Smith, Weslaco, Tex., for intervenor-appellant, Jenkens, Anson, Spradley & Gilchrist, Dallas, Tex., of counsel.

Harry D. Shapiro, Asst. Atty., Dept. of Justice, Johnnie M. Walters, Asst. Atty. Gen., Howard M. Koff, Crombie J. D. Garrett, Jr., Attys., Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, Attys., Tax Div., Dept. of Justice, Washington, D. C., Eldon B. Mahon, U. S. Atty., Martha Joe Stroud, Asst. U. S. Atty., Dallas, Tex., for appellee.

Julian Mike Joplin, Mark Martin, Arthur S. Goldberg, Dallas, Tex., Harvey Rosenberg, Silver Spring, Md., Farrell D. Smith, Corpus Christi, Tex., Donald S. Weinstein, New York City, for other interested parties.

Before THORNBERRY, GODBOLD and MORGAN, Circuit Judges.

THORNBERRY, Circuit Judge:

The trial court granted default judgment against appellant Trefina, A.G., in this case, as a sanction for the repeated failure of that corporation's officer, Widmer, to make himself available for deposition. Trefina now appeals, contending (1) that the intervention of the United States, the party requesting the deposition below, was improper in this case, and (2) that the court's use of the harsh sanction of default judgment was an abuse of discretion. We find that the intervention was proper. Furthermore, we conclude that the default judgment was a foreseeable, just and appropriate response to Trefina's failure to comply with the orders of the court, and we accordingly affirm.

The appeal before us is a relatively simple portion of a lengthy, complicated case. The suit began with drilling contract work done in Argentina by Southeastern Drilling Company, a Panamanian corporation. Southeastern realized a substantial profit on the contract, and a number of persons sued it in the United States to recover commissions allegedly due them. Trefina, the appellant here, entered the case by intervention and claimed on an assignment from one of the original agents. Trefina is a Swiss corporation that does no business in the United States.

The performance of the commission agreement was rendered more complicated by a claim of the Internal Revenue Service that Southeastern owed income tax on the proceeds of the drilling contract. The Government moved to intervene in this case to assert a lien against the funds claimed by Trefina. The case had been divided into separate trials, one of which concerned a dispute between the claimants themselves and the other of which concerned Southeastern's liability; the Government had no interest in the claimant's dispute and sought to intervene in the second trial only. The court held a hearing on the intervention issue while the jury was out during the first trial. With counsel representing all parties present at the hearing, the court granted the Government's motion to intervene.

Having intervened, the Government sought to take the deposition of Trefina's officer Widmer. It gave Trefina notice, through its attorney of record, that it intended to take the deposition on a fixed date in Dallas, Texas. Mr. Widmer did not appear. Instead, Trefina filed a motion to quash the deposition notice on the day set for the taking of the deposition. The Government promptly moved for default judgment. The trial court denied both motions and ordered that the deposition be taken within 60 days. Again the Government gave proper notice for the deposition; again Mr. Widner failed to appear without prior communications from Trefina; and again the Government moved for default judgment. Trefina filed a "medical certificate" (consisting of a letter written by a doctor in Zurich) advising that because of his health Mr. Widmer would not undertake any trip "of major importance." For the first time, Trefina also opposed the intervention of the United States, eight months after the trial court's allowance of that intervention. The trial court again sustained the intervention and ordered for the third time that the deposition be taken, this time within 30 days. As a pointed hint to Trefina, the court did not deny the Government's motion for default judgment this time, but stated that it would delay ruling on the motion until after the 30-day period. When this time had elapsed, having been presented with an affidavit of the Government to the effect that Trefina had been "unable" on two occasions to specify a date for the deposition, the trial court held a hearing on the default judgment motion and granted it.

I. THE APPEALABILITY OF THE ORDER

Before considering the merits of appellant's case, we are faced with a jurisdictional question. We must decide whether this order, disposing of only a part of the case, is appealable in the context of this multiple-party, multiple-claim litigation. There is no question that the order is final in the sense that it completely determines the priority of the United States' rights as against Trefina, but Rule 54(b), Fed.R.Civ.P., adds another dimension to the determination of finality in cases in which multiple claims are presented. It states that any order "which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties * * *." Ordinarily, therefore, an order of the type appealed from in this case would not be final absent an express direction of the trial court entering judgment and finding that there is no just cause for delay, in accordance with Rule 54(b).

It has long been recognized, however, that there is a narrow class of orders, known as "collateral orders," that may be considered final for purposes of appeal even though they issue in the context of incomplete multiple-claim or multiple-party suits. The Supreme Court has defined collateral orders as "that small class which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated. * * * We hold this order appealable because it is a final disposition of a claimed right which is not an ingredient of the cause of action and does not require consideration with it." Cohen v. Beneficial Industrial Loan Corp., 1949, 337 U.S. 541, 546, 69 S.Ct. 1221, 1225, 93 L.Ed. 1528; see C. Wright, Federal Courts, 398-99 (1963). See also Local No. 438, Const. & Gen. Laborers' Union v. Curry, 1963, 371 U.S. 542, 83 S.Ct. 531, 9 L.Ed.2d 514; Radio Station WOW v. Johnson, 1945, 326 U. S. 120, 65 S.Ct. 1475, 89 L.Ed. 2092. These authorities indicate that (1) the substance of collateral orders must be independent and easily separable from the substance of other claims, (2) at least part of the question of collateralness is determined by the need to secure prompt review in order to protect important interests of any party, and (3) the finality issue is to be examined in light of practical, rather than narrowly technical, considerations.

The default judgment here was issued as a sanction for appellant's failure to produce its officer for deposition, an issue that depends entirely on the circumstances surrounding that failure as considered in light of a procedural rule, Fed.R.Civ.P. Rule 37(d). The record discloses little about the underlying claims for commissions, and we do not need to know about the merits of those claims. The intervention issue is somewhat more closely intertwined with the merits of the other substantive issues, but only as regards the practical relationship of the Government's interest in the case to interests of other parties, and we think that this question can be determined without reference to the merits of the other issues. Thus the order appealed from is collateral in the sense that it is completely separable and independent from all other claims of all other parties. As a practical matter, furthermore, there is a need to secure prompt review to protect the legitimate interests of the appealing party, since Trefina's commission would be subject to the claims of the United States unless the default judgment were vacated on appeal. Trefina cannot make important decisions about its further participation in this suit without having its rights determined now. For these reasons, we hold that the default judgment is an appealable collateral order and that Trefina may also attack the intervention, which was prior to and necessary for the default judgment, on this appeal.

II. THE INTERVENING ISSUE

We turn next to consideration of the question whether intervention by the United States was proper under Fed.R. Civ.P. Rule 24. The Government intervened here not because the underlying issues were of public concern, but simply because it wanted to assert a lien (unrelated to the underlying issues) on a fund before the court. Subsection (a) of Rule 24 provides for intervention of right upon timely application when either (1) a statute of the United States confers an unconditional right to intervene or (2) the applicant claims an interest relating to the subject of the action which may as a practical matter be impaired unless intervention is allowed and which is not adequately represented by existing parties.

A. The Government's Right to Intervene

The Government asserts that a statute, Int.Rev.Code of 1954 § 7424, afforded it an unconditional right to intervene in this case. Section 7424 provides that ...