Gough v. Perkowski

• Decision Date: 01 December 1982
• Docket Number: No. 80-3519,80-3519
• Citation: 694 F.2d 1140
• Parties: 95 Lab.Cas. P 13,881 Stephen GOUGH, James Kinney, Elder Lebert and Donald Porter, and Concerned Carpenters of Local 1243 on behalf of Local 1243, United Brotherhood of Carpenters and Joiners of America, Plaintiffs-Appellees v. Edward D. PERKOWSKI, Art Flannagan, Lawrence Jefferson, Ralph Kraus, Gary Slay, Allen Sparks, Donald Swarner, Charles Vogel and Joe Volker, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1140

694 F.2d 1140

95 Lab.Cas. P 13,881

Stephen GOUGH, James Kinney, Elder Lebert and Donald Porter and Concerned Carpenters of Local 1243 on behalf of Local 1243, United Brotherhood of Carpenters and Joiners of America, Plaintiffs-Appellees v. Edward D. PERKOWSKI, Art Flannagan, Lawrence Jefferson Ralph Kraus, Gary Slay, Allen Sparks, Donald Swarner, Charles Vogel and Joe Volker Defendants-Appellants.

No. 80-3519.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 4, 1982.

Decided Dec. 1, 1982.

Bradley D. Owens, Jermain, Dunnagan & Owens, Anchorage, Alaska, for defendants-appellants.

William B. Schendel, Fairbanks, Alaska, for plaintiffs-appellees.

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

Before SNEED, ANDERSON and REINHARDT, Circuit Judges.

REINHARDT, Circuit Judge.

Edward Perkowski and other officers of Carpenters Local 1243 named as defendants in this lawsuit appeal directly from the district court's order granting a motion to disqualify defendants' counsel. Several members of Carpenters Local 1243 brought suit on behalf of the Local against the union officers for breach of fiduciary duty. 29 U.S.C. Sec. 501(a) (1976). The plaintiffs moved to disqualify defendants' counsel on the ground of a potential conflict of interest. The district court granted the motion. We hold that an order disqualifying counsel in a civil case is immediately appealable under 28 U.S.C. Sec. 1291 (1976), and that the district court did not abuse its discretion in disqualifying defendants' counsel. In this opinion for publication, we discuss the single precedential issue of whether the disqualification order is immediately appealable under 28 U.S.C. Sec. 1291. The remaining issues are discussed in a simultaneously filed Memorandum that will not be published.

Generally, interlocutory orders are not appealable until after final judgment and in the absence of a "final order" from the district court we have no jurisdiction. 28 U.S.C. Sec. 1291. However, in Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949) the Supreme Court developed a collateral order exception to the final judgment rule of 28 U.S.C. Sec. 1291. ¹ In Coopers & Lybrand v. Livesay, 437 U.S. 463, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978), the Supreme Court summarized the Cohen three part test for appealability under the collateral order exception as follows:

[T]he order must conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment.

Id. at 468, 98 S.Ct. at 2457 (citations and footnote omitted).

There is no doubt that the first two parts of the Cohen test are satisfied here. First, the order disqualifying counsel conclusively determines that question. After disqualification, counsel may not proceed with the case. The litigation continues on with new counsel. The order is not the kind which the court reconsiders from time to time during the course of the proceedings. Second, an order granting a disqualification motion serves to "resolve an important issue completely separate from the merits of the action." Coopers & Lybrand, 437 U.S. at 468, 98 S.Ct. at 2457. The issue whether counsel should be disqualified is completely separate from the merits of the suit. Determinations regarding the disqualification of counsel will ordinarily not require courts to become "enmeshed in the factual and legal issues comprising the plaintiff's cause of action," Coopers & Lybrand, 437 U.S. at 469, 98 S.Ct. at 2458, (quoting Mercantile National Bank v. Langdeau, 371 U.S. 555, 558, 83 S.Ct. 520, 522, 9 L.Ed.2d 523 (1963)). The question is "too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated." Cohen, 337 U.S. at 546, 69 S.Ct. at 1225.

The more difficult question is presented by the third part of the test: whether an order disqualifying counsel can be effectively reviewed after final judgment.

In Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 376, 101 S.Ct. 669, 674, 66 L.Ed.2d 571 (1981) the Supreme Court held that an order denying a motion to disqualify counsel in a civil case did not satisfy the Cohen test. Its rationale was that such an order may be effectively reviewed after final judgment. ² However, in Firestone, the Court specifically reserved the question whether an order granting a motion to disqualify counsel in a civil case is appealable under Cohen. 449 U.S. at 372 n. 8, 101 S.Ct. at 672 n. 8.

After fully considering Firestone, the Fifth Circuit determined that an order granting disqualification of counsel in a civil case is an appealable order under Cohen. Duncan v. Merrill, Lynch, Pierce, Fenner, & Smith, 646 F.2d 1020 (5th Cir.), cert. denied, 454 U.S. 895, 102 S.Ct. 394, 70 L.Ed.2d 211 (1981). The Fifth Circuit reasoned that the order was "effectively unreviewable" because:

[T]he appellate court's power to vacate the judgment appealed from and order a new trial would seldom provide any solace to the party erroneously deprived of his chosen counsel. As the Second Circuit recently observed, "[i]f the order [granting disqualification] is erroneous, correcting it by an appeal at the end of the case might well require a party to show that he lost the case because he was improperly forced to change counsel. This would appear to be an almost impossible burden." (Citation omitted). Furthermore, if the party who suffers the erroneous grant of a disqualification motion prevails in the action, the disqualified counsel is not likely to find any remedy for the damage to his reputation or to his pocketbook. Thus, ... the harm caused by postponing review of an order granting disqualification of counsel would in most instances be irreparable.

646 F.2d at 1027.

We find the reasoning in Duncan to be highly persuasive. However, before determining whether to join in the Fifth Circuit's view, we must carefully consider what we have said in two recent cases in which we addressed closely related issues.

In United States v. Greger, 657 F.2d 1109 (9th Cir.1981), we considered the appealability of an order disqualifying defense counsel in a criminal case. We found the order to be effectively reviewable after final judgment and for that reason held that it did not fall within the collateral order exception. Id. at 1112. Our decision relied heavily on the special policies that militate against piecemeal appeals in criminal cases. Id. The Greger holding was specifically limited to criminal cases and did not address the issue presented here. Id. at 1113.

Shortly after Greger was decided, we again considered the appealability of an order disqualifying counsel, but this time in a civil case. In In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 658 F.2d 1355 (9th Cir.1981), cert. denied, --- U.S. ----, 102 S.Ct. 1615, 71 L.Ed.2d 850 (1982), we held that an order disqualifying a non-party's counsel in a civil case was appealable under the collateral order exception. We distinguished the Greger holding by reasoning that:

[D]istinct reasons for a different result apply in this civil case. The special policies which counsel against piecemeal appeals in criminal cases have no counterpart here. Cf. Greger, supra, at 1112. An appeal of a disqualification order in a civil case does not necessarily disrupt the litigation because activity must be postponed in any case while new counsel is obtained. Furthermore, in a civil case an order disqualifying attorneys for nonparties is effectively unreviewable by appeal from a final judgment. Finally, in a civil case, the presumption of prejudice which would mandate a new trial if error were established under the criminal law does not exist. Cf. Greger, supra, at 1113; Slappy v. Morris, 649 F.2d 718 at 723 n. 4 (9th Cir.1981).

Id. at 1358.

The reasoning of Petroleum Products is equally applicable here. In a civil case it is at least as important for a party to be able to obtain immediate review of an order disqualifying his counsel as it is for a non-party. ³

We hold that an order disqualifying a party's counsel in a civil case is "effectively unreviewable" after final judgment. The burden a party would be required to meet in order to obtain a reversal could not, practicably, be met after final judgment in most civil cases. The fact that counsel was improperly disqualified would not, in itself, be sufficient to warrant a new trial since, as we said in Petroleum Products, there is no presumption of prejudice which attaches to such disqualification.

There are valid reasons why, if an appeal were delayed until after final judgment, the judgment should not be reversed in the absence of a showing of prejudice. A per se rule requiring reversal whenever the disqualification of counsel in a civil case is held to be erroneous would be unfair to litigants and contrary to the interests of orderly judicial administration. The adoption of such a rule would allow the party whose counsel was disqualified erroneously a free run at a verdict. He would have everything to gain and nothing to lose at the first trial. He could await its outcome and, if he did not like the result, could belatedly assert his right to a trial with the counsel he originally chose. On the other hand, if the results were acceptable, he could stand pat. His opponent, however, would be in a no-win situation. If the opponent obtained a favorable result at the first trial, the party whose counsel was erroneously disqualified would have the verdict overturned. If the opponent lost the first time, the party whose counsel was erroneously disqualified would forego his right to automatic reversal and accept his victory.

While a per se rule of reversal might conceivably prove a deterrent to unjustified challenges of parties' counsel, we do not believe such a rule is either...