Gross v. G.D. Searle & Co.

• Decision Date: 10 July 1984
• Docket Number: No. 83-5706,83-5706
• Citation: 738 F.2d 600
• Court: U.S. Court of Appeals — Third Circuit
• Parties: GROSS, Charles E. v. G.D. SEARLE & CO., a Delaware-corporation, and Searle Optical, Inc., a Texas Corporation. Appeal of EYELAB, INC.

Page 600

738 F.2d 600

39 Fed.R.Serv.2d 510

GROSS, Charles E. v. G.D. SEARLE & CO., a Delaware-corporation, and Searle

Optical, Inc., a Texas Corporation.

Appeal of EYELAB, INC.

No. 83-5706.

United States Court of Appeals, Third Circuit.

Argued May 21, 1984.

Decided June 29, 1984.

As Amended July 10, 1984.

Lee Alan Adlerstein (argued), Jerald D. Baranoff, David N. Buda, Sills, Beck, Cummis, Zuckerman, Radin & Tischman, P.A., Newark, N.J., for appellant.

Arthur R. Schmauder (argued), Stephen R. Long, Shanley & Fisher, P.C., Newark, N.J., for appellee.

Before GARTH and SLOVITER, Circuit Judges, and NEAHER, District Judge. ^*

OPINION OF THE COURT

GARTH, Circuit Judge.

The question presented here is whether Eyelab, a non-party witness which refused to comply with a subpoena, may nevertheless maintain this appeal where it is yet to be held in contempt.

Charles E. Gross filed this action against his former employer, Searle Optical, Inc., ["Searle"] to recover financial benefits after his employment with Searle was terminated. Searle refused to pay Gross certain claimed benefits, relying upon the terms of an agreement which provided that all benefits would be forfeit if an ex-employee entered into competition with his former employer within five years of leaving his job at Searle. Searle claimed that Gross's new job with Eyelab, Inc. placed him in competition with Searle, thus violating the terms of the benefits agreement. To prove this contention, Searle sought certain discovery materials from Eyelab by way of a subpoena duces tecum. Eyelab refused to comply with subpoena, and Searle sought a court order directing Eyelab to comply.

At Eyelab's insistence, the district court entered a protective order. The district court then affirmed the magistrate's determination that Eyelab, although not in contempt, had to comply with the subpoena. Eyelab then filed an appeal to this court, challenging the scope of review ¹ afforded the magistrate's determination by the district court and the protective order itself. Because we conclude that the order appealed from is not an appealable order, Eyelab's appeal will be dismissed.

I.

Plaintiff Gross is a former vice president of defendant, Searle Optical, Inc. ["Searle"], the eyecare products division of G.D. Searle & Co. ² In that position, Gross was in charge of eyeglass frame buying and marketing. As a high-level employee, Gross participated in an incentive program known as the Reward Retention Program which was funded by Searle. Under the terms of the incentive-program agreement, the employee promised not to engage in competition against Searle for a period of five years should he leave the company. The agreement did not seek to prevent competitive employment, but rather conditioned payment of benefits on the employee's agreement not to compete.

In October 1981, Gross ceased working for Searle and in April 1982, he applied for payment of benefits under the Reward Retention Program. However, Searle declined to pay Gross, claiming that Gross had started to work for Eyelab, Inc., one of Searle's competitors, and that he was in fact engaged in competition with his former employer. Gross claimed that his position at Eyelab was merely as an optician and as such, he did not violate the non-competition agreement. Searle continued in its refusal to pay and, on September 14, 1982, this action was instituted. ³

II.

During the course of discovery, Searle took the deposition of Mr. Hillman, the president of Eyelab. Mr. Hillman was willing to, and did, answer all of the questions posed to him concerning Gross' employment, but refused to respond to questions about other employees or to produce Eyelab's personnel files and records concerning the compensation and job responsibilities of other Eyelab employees. Two months later, Searle served a subpoena duces tecum on Eyelab, ⁴ stating that in order to maintain its defense, it must have some access to records and information known only to Eyelab, a non-party witness. Eyelab did not comply with the subpoena, and Searle brought a motion to compel compliance, for sanctions, and to find Eyelab in contempt.

This motion was heard by a magistrate, who denied the contempt motion but issued a protective order requiring compliance with the subpoena and the assessment of costs against Eyelab. That order was affirmed by the district court judge, who reviewed the magistrate's decision and order under 28 U.S.C. Sec. 636(b)(1)(A) and found it neither clearly erroneous nor contrary to law. Eyelab then filed this timely appeal challenging each aspect of the magistrate's pretrial order as affirmed by the district court.

III.

Eyelab recognizes that the order appealed from is not final within the meaning of 28 U.S.C. Sec. 1291, but it asserts that this court nevertheless has jurisdiction over this appeal based on the collateral order doctrine first announced in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). Cohen requires a three-fold showing, each element of which must be met for the doctrine to apply. Yakowicz v. Pennsylvania, 683 F.2d 778, 783 (3d Cir.1982). The challenged 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." Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2458, 57 L.Ed.2d 351 (1978). We conclude that Eyelab cannot satisfy the Cohen test in this case.

"It is settled in this court that discovery matters generally are not reviewable until after final judgment." DeMasi v. Weiss, 669 F.2d 114, 121 (3d Cir.1982); Eastern Maico Distributors, Inc. v. Maico-Fahrzeugfabrik, G.m.b.H., 658 F.2d 944, 947 (3d Cir.1981). Eyelab argues that under Cohen, however, as to a nonparty witness, a discovery order does conclusively determine the disputed question (in this case, to comply with a subpoena) and does resolve an important issue completely separate from the merits of the action between Gross and Searle.

This court has recently held that "[a] non-party witness may not obtain appellate review of the mere issuance of a discovery order requiring production of information or other action." DeMasi, 669 F.2d at 122; Borden v. Sylk, 410 F.2d 843, 846 (3d Cir.1969). In DeMasi, an osteopathic physician brought an antitrust action against a Pennsylvania hospital after his application for staff privileges at that hospital was rejected. As relevant to this appeal, the district court issued a discovery order requiring 97 non-party allopathic physicians and 10 individual defendant physicians on the hospital staff to submit sworn statements on their gross incomes derived from the practice of medicine for five years previous, 669 F.2d at 116, ostensibly for the purpose of providing a data base for plaintiffs' expert witnesses who would offer opinions on damage issues. Id. at 119. All 107 physicians challenged this discovery order as an invasion of their privacy rights, a claim which this court found to be "serious." Examining the discovery order which was challenged by a petition for mandamus filed by the non-party and defendant physicians, this court distinguished between their situations. We stated that unlike the defendant physicians who "have no immediate right to appeal from civil contempt citations imposed to gain compliance with a discovery order," the non-party witnesses had a remedy by appeal, "but that right must await their willingness to stand in contempt of the district court's order." Id. at 122.

A similar result was reached in Borden. In that case, Borden sued the endorsers of certain outstanding promissory notes. The maker of the notes, Penrose, was joined as a third-party defendant. Penrose filed cross-claims against Borden, one of which involved Sylvan, a wholly-owned subsidiary of Borden. Penrose moved to depose certain of Sylvan's officers and during the deposition, the president of Sylvan refused to comply, claiming prejudicial disclosure of confidential information. Penrose moved to compel answers, and the district court granted the motion after finding the information relevant to the litigation, and fashioning a protective order to accommodate Sylvan's concerns. Sylvan appealed under Cohen, and this court rejected that argument, finding Cohen to be "readily distinguishable."

The Borden court reasoned that the appellant's argument that the information sought was not relevant to the issues raised in the litigation betrayed itself, "for if the propriety of the lower court's order can be determined only by making reference to the substantive litigation, then clearly it is not a 'collateral' matter within the Cohen meaning." 410 F.2d at 846. The Borden court also discussed and rejected the appellant's argument, present in this case as well, that the "order should be viewed as appealable because of the potentially harmful impact on its competitive status." Id. The court pointed to the protective provisions of the order entered by the district court, and the doctrine that pecuniary injury alone is insufficient to justify appellate review, noting:

Every interlocutory order involves, to some degree, a potential loss. That risk, however, must be balanced against the need for efficient federal judicial administration as evidenced by the Congressional prohibition of piecemeal litigation. To accept the appellant's view is to invite the inundation of appellate dockets with what have heretofore been regarded as nonappealable matters. It would constitute the courts of appeals as second-stage motion courts reviewing pretrial applications of all non-party witnesses alleging some damage because of the litigation.

To accept the appellant's view is also to invite a geometrical increase in the already unacceptable delay between the date of filing and trial in the metropolitan district courts.... Our overburdened courts have little time or...