G. Heileman Brewing Co., Inc. v. Joseph Oat Corp.

• Decision Date: 22 July 1988
• Docket Number: No. 86-3118,86-3118
• Citation: 848 F.2d 1415
• Parties: G. HEILEMAN BREWING CO., INC., Plaintiff-Appellee, v. JOSEPH OAT CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1415

848 F.2d 1415

57 USLW 2003

G. HEILEMAN BREWING CO., INC., Plaintiff-Appellee, v. JOSEPH OAT CORPORATION, Defendant-Appellant.

No. 86-3118.

United States Court of Appeals Seventh Circuit.

Argued May 20, 1987.

Decided June 13, 1988.

Order Granting Rehearing En Banc July 22, 1988.

Carroll Metzner, Bell, Metzner & Gierhart, S.C., Madison, Wis., for defendant-appellant.

Richard S. Florsheim, Foley & Lardner, Milwaukee, Wis., for plaintiff-appellee.

Before FLAUM, EASTERBROOK, and MANION, Circuit Judges.

MANION, Circuit Judge.

The district court sanctioned Joseph Oat Corporation (Oat) for failing to send a representative, besides its attorney, to a court-ordered settlement conference. Oat appeals, and we reverse. ¹

I.

In early 1980, Oat supplied a waste water pretreatment system for a waste water treatment plant that RME Associates (RME) built for G. Heileman Brewing Co.'s (Heileman) brewery in La Crosse, Wisconsin. N.V. Centrale Suicker Maatschappij (Centrale), a Dutch corporation, had developed the pretreatment system, and had made Oat its exclusive licensee in the United States.

The waste water treatment plant did not work as expected and disputes arose between Oat, Heileman, and RME. In December, 1982, Oat sued Heileman and RME in federal district court in New Jersey. RME counterclaimed. After the case was transferred to the Western District of Wisconsin, RME joined Centrale as a third-party defendant.

Early in the litigation, Oat and Heileman apparently settled their differences, and the district court dismissed Heileman. Oat also dismissed its claims against RME. After these dismissals, the proceedings consisted of RME's claims against Oat and Centrale.

The district court scheduled a January, 1985 trial for RME's claims. However, RME, Centrale, and Heileman, which was still involved in a parallel state court suit with RME and Centrale, had begun to discuss settlement. Oat, having no desire to settle, was not a party to those discussions. The magistrate, whom the district court had designated to hear pretrial matters pursuant to 28 U.S.C. Sec. 636(b)(1)(A), postponed the trial and ordered a settlement conference before him. The magistrate's order stated:

5. A settlement conference, which shall include the Heileman Brewing Company, shall be held herein on December 14, 1984, at 2:00 p.m.

....

(c) ... In addition to counsel, each party shall be represented at the conference by a representative having full authority to settle the case....

Attorney John Possi, Oat's counsel in the pending litigation, appeared for Oat at the December 14 conference. No other Oat representative appeared at the conference. Mr. Joseph McMahon, an independent adjuster, appeared on behalf of National Union Fire Insurance Company, Oat's liability insurer. Both Possi and McMahon informed the magistrate that they had no authority to pay any money to settle; presumably, though, both had authority to settle if Oat or National did not have to pay.

The magistrate, apparently miffed that neither Possi nor McMahon had what he considered "authority to settle," excluded Possi and McMahon from the settlement discussions he conducted on December 14. After the settlement discussions ended, the magistrate called all present into the courtroom and continued the conference until December 19. Possi and McMahon, who had remained at the courthouse despite being excluded from any discussions, were present when the magistrate continued the conference. The magistrate ordered each party, including RME's and Oat's liability insurers, to send a representative with "full authority to settle the case" to the December 19 conference.

Sometime between December 14 and December 19, Possi spoke by telephone to John Fitzpatrick, Oat's outside corporate counsel in Philadelphia (across the Delaware River from Oat's principal place of business in Camden, New Jersey). Possi and Fitzpatrick discussed the magistrate's oral order. Both Possi and Fitzpatrick appear to have interpreted the magistrate's order to require that someone other than trial counsel (either Fitzpatrick or one of Oat's officers) attend the December 19 conference on Oat's behalf. Fitzpatrick told Possi that National Union had indicated it was not willing to pay any money to settle the case and that it would not send anybody to the December 19 conference. Therefore, Fitzpatrick believed Oat could not pay any money to settle the case at that time. Fitzpatrick asked Possi to contact the magistrate and ask whether it was necessary for anybody from Oat to travel from Philadelphia to Madison, Wisconsin to attend the conference, given that Oat could not pay any money.

Possi called the magistrate's office and explained Oat's predicament to either the magistrate's clerk or secretary. After consulting the magistrate, that person told Possi, "The magistrate stands by his order. He expects someone from Joseph Oat to be at that conference." Possi relayed the magistrate's message to Fitzpatrick. Fitzpatrick then discussed the matter with Maurice Holtz, Oat's vice president. Holtz authorized Fitzpatrick to travel to Madison to attend the conference and inform the court that Oat was not willing at that time to pay any money to settle.

The magistrate did not reduce his order to writing until December 18. The written order stated:

2. In addition to counsel, each party and the insurance carrier of plaintiff Oat and defendant RME, shall be represented at the conference in person by a representative having full authority to settle the case or to make decisions and grant authority to counsel....

3. The attention of the parties and their counsel is directed to Rule 16, Federal Rules of Civil Procedure, and particularly subparagraphs (c) and (f) thereof.

The written order did not arrive at Oat's attorneys' offices until the afternoon of December 19; by that time, Possi was already at the courthouse for the conference.

Possi and Fitzpatrick both appeared on Oat's behalf at the December 19 conference. Neither, however, had authority to offer any payment. Deciding that Oat had violated his December 14 oral order, the magistrate ordered Oat (and National Union, which sent nobody to the conference) to show cause why they should not be subject to sanctions under Fed.R.Civ.P. 16(f). In June, 1985, after a hearing on the order to show cause, the magistrate ordered Oat and National Union, jointly and severally, to pay RME, Centrale, General Accident Company (RME's insurer), and Heileman the expenses they incurred in attending the December 19 conference, including attorneys' fees. See G. Heileman Brewing Co. v. Joseph Oat Corp., 107 F.R.D. 275, 277-83 (W.D.Wis.1985) (magistrate's opinion attached as appendix to the district court's opinion).

Oat asked the district court to reconsider the magistrate's order. The district court upheld the sanctions. The court reasoned, as did the magistrate, that Fed.R.Civ.P. 16 authorized the district court to order parties to appear at settlement conferences with full authority to settle. 107 F.R.D. at 277. The district court also held that Oat had waived any objection to the magistrate's order to appear because Oat "simply [chose] to ignore" the order rather than ask the district court to vacate or modify the order before December 19. Id. ²

II.

Centrale, RME, and Heileman eventually settled. As part of that settlement, RME assigned its claims against Oat to Heileman. On March 20, 1985, the magistrate substituted Heileman for RME as a party to the action. On July 17, 1985 (after the magistrate ordered Oat to pay sanctions but before the district court affirmed that order) the district court dismissed Centrale from the case with prejudice pursuant to the settlement.

Oat and Heileman also ultimately settled. On December 5, 1985, the district court entered an order dismissing Heileman's claims against Oat with prejudice. That order was attached to a document that Oat's and Heileman's attorneys had submitted entitled "Stipulation and Order for Dismissal." The order itself stated that the dismissal was upon the attached stipulation and upon Heileman's motion. Both the stipulation and order expressly reserved Oat's right to appeal the sanctions against it.

Although the sanctions judgment against Oat was not final when the district court entered it, G. Heileman Brewing Co. v. Joseph Oat Corp., No. 85-2538 (7th Cir., Oct. 16, 1985) (unpublished order) (dismissing Oat's appeal for lack of finality), all the parties have now settled and the district court has dismissed the case. The case is over, the sanctions judgment is now final, and we have jurisdiction under 28 U.S.C. Sec. 1291. Oat has not waived its right to appeal the sanctions by settling because Oat expressly reserved its right to appeal the sanctions award. See Dorse v. Armstrong World Industries, Inc., 798 F.2d 1372, 1374-77 (11th Cir.1986); but see Amstar Corp. v. Southern Pacific Transport Co., 607 F.2d 1100 (5th Cir.1979).

In a one-paragraph argument citing no authority, Centrale argues that Oat has waived its right to appeal as to Centrale. Centrale notes that Oat did not object to Centrale's dismissal or reserve its right to appeal as to Centrale when the district court dismissed Centrale. Centrale failed to note, however, that Oat was not a party to the agreement to dismiss Centrale. In any event, Centrale has waived its waiver argument by raising it in a perfunctory manner and by citing no authority. See Fed.R.App.P. 28; Ordower v. Feldman, 826 F.2d 1569, 1576 (7th Cir.1987). Thus, Centrale is a proper party to this appeal.

Finally, before reaching the merits, we reject the district court's alternate holding that Oat waived its right to object to the magistrate's order to appear because Oat "ignored" the order. Since the issue here is the magistrate's power to order Oat to appear, we believe it is appropriate to reach the merits. Furthermore, Fitzpatrick did attend the conference as Oat's representative....