Newby v. Enron Corp.

• Decision Date: 16 March 2006
• Docket Number: No. 05-20462.,05-20462.
• Citation: 443 F.3d 416
• Parties: Mark NEWBY; et al., Plaintiffs, v. ENRON CORPORATION; et al., Defendants, Arthur Andersen LLP, Defendant-Appellant, v. Texas State Board of Public Accountancy, Intervenor-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

443 F.3d 416

Mark NEWBY; et al., Plaintiffs, v. ENRON CORPORATION; et al., Defendants, Arthur Andersen LLP, Defendant-Appellant, v. Texas State Board of Public Accountancy, Intervenor-Appellee.

No. 05-20462.

United States Court of Appeals, Fifth Circuit.

March 16, 2006.

Peter Wald (argued), Latham & Watkins, San Francisco, CA, Russell Hardin, Jr., Andrew Lee Ramzel, Lara Hudgins Hollingsworth, Rusty Hardin & Associates, Houston, TX, Miles N. Ruthberg, James J. Farrell, Ethan J. Brown, Latham & Watkins, Los Angeles, CA, for Defendant-Appellant.

Charles B. McDonald (argued), David Calvin Mattax, Asst. Atty. Gens., Austin, TX, for Intervenor-Appellee.

Russell Hardin, Jr., Andrew Lee Ramzel, Rusty Hardin & Associates, Houston, TX, for Intervenors.

Appeal from the United States District Court for the Southern District of Texas.

Before KING, BARKSDALE and PRADO, Circuit Judges.

PRADO, Circuit Judge:

Appellants Arthur Andersen and John Does I and II (collectively, "Arthur Andersen") appeal the grant of intervention given to Appellee Texas Board of Public Accountancy ("Board") in In re Enron for the purpose of accessing discovery protected by court order. For the reasons stated below, we hold that we have jurisdiction to hear this interlocutory appeal and that the district judge did not abuse her discretion in allowing the Board to intervene.

I

Due to the magnitude and complexity of In re Enron, the parties in that case agreed to accept service via a website ("ESL website"). The parties stipulated that access to the website would be limited to judges, parties, and the parties' attorneys in In re Enron. The district court later issued an order requiring the confidentiality of deposition transcripts and exhibits, prohibiting disclosure of protected information to anyone other than "parties, counsel for the parties, employees of the parties or their counsel, witnesses, experts retained by the parties, the Depository Administrator, and the Court-appointed mediator." These instruments are confidential for 30 days after the close of the deposition, and certain types of information are automatically protected even after 30 days have passed. Parties or witnesses also may seek broader protection for information that is proprietary or for which there is good cause.

On February 24, 2005, the Board filed its motion for permissive intervention in In re Enron pursuant to Federal Rule of Civil Procedure 24(b)(2), for the purpose of gaining access to discovery protected by court order in In re Enron. On June 6, 2005, the district court entered an Opinion and Order ("Order") granting the Board's motion to intervene to gain access to the ESL website and ordered that the Board comply with the court's July 2, 2004 confidentiality order for deposition testimony and exhibits and all subsequent orders granting confidential treatment to specified exhibits and testimony. Arthur Andersen LLP ("Andersen"), the former auditor of Enron Corporation, filed an appeal on June 12, 2005; and, on June 13, 2005, it filed a motion to stay the Order pending appellate review with the district court. At the hearing for the motion to stay, the Board agreed not to access the website or use its party status to access the depositions and related exhibits. The Board extended its agreement through February 7, 2006, after which this Court granted Arthur Andersen's motion to stay pending appeal.

John Does I and II, two former Andersen Certified Public Accountants ("CPAs") who participated in the Enron audits, moved to intervene in the appeal on July 13, 2005. Their motion was granted on August 22, 2005. Andersen and the John Does are the only parties objecting to the Board's intervention in In re Enron.

II

The Board is a state regulatory authority charged under the Texas Public Accountancy Act ("Act") with the duty of licensing and disciplining Texas CPAs as well as promulgating accounting rules. 22 TEX. ADMIN. CODE §§ 501.51, 505.2; TEX. OCC. CODE § 901.151.¹ The Board may initiate disciplinary proceedings against a Texas licensed CPA for violations of rules of professional conduct adopted by the Board as well as for conduct indicating lack of fitness to serve the public as a professional accountant. TEX. OCC. CODE § 901.502(6), (11) and (12). Furthermore, the Board is authorized to open investigations if it determines that there is a potential violation of its rules, regulations or orders. 22 TEX. ADMIN. CODE § 519.21; see also id. § 519.20.

The Act contemplates that the Board will gather and receive information from third parties regarding licensees. See TEX. OCC. CODE § 901.160.² The Board must keep information it gathers or receives regarding disciplinary actions confidential before a public hearing on the matter. Id. § 901.160(c).

Texas Occupations Code section 901.166 grants the Board subpoena power. In pertinent part, the statute states:

(a) The board may issue a subpoena to compel the attendance of a relevant witness or the production ... of relevant documents ....

...

(c) If a person fails to comply with a subpoena, the board, acting through the attorney general, may file suit to enforce the subpoena in a district court in Travis County or in a county in which a hearing conducted by the board may be held.

Id. § 901.166.

Texas Administrative Code section 501.93 dictates that individuals must substantively respond in writing to any communication from the Board requiring a response and provide copies of documents pursuant to the Board's requests. It states, "Failure to timely respond substantively to written board communications, or failure to furnish requested documentation and/or working papers constitutes conduct indicating lack of fitness to serve the public as a professional accountant." TEX. ADMIN. CODE § 501.93.

The Board is currently investigating suspected audit failures that may have led to the financial collapse of Enron and its eventual bankruptcy to determine if any violations of the Act or the Board's rules were committed by Texas licensees.

III

On August 22, 2005, a motions panel of this Court denied the Board's motion to dismiss this appeal for lack of jurisdiction in a one sentence order; still, the Board urges dismissal of this case. "In this circuit, an oral argument panel is not bound by a motions panel's denial of a motion to dismiss." In re Grand Jury Subpoena, 190 F.3d 375, 378 n. 6 (5th Cir.1999) (citing Ventana Invs. v. 909 Corp., 65 F.3d 422, 425 n. 7 (5th Cir.1995)). Thus, the motions panel's denial of the Board's motion to dismiss is subject to reconsideration by this panel. We first determine whether the district court's grant of intervention is appealable before reaching the merits.

The Board argues that the district court's order granting its motion to intervene is not a final judgment and that we are without jurisdiction under 28 U.S.C. section 1291 to consider this appeal.³ The Board relies on a Fifth Circuit opinion from 1978: "It is well settled that `[a]n order allowing intervention is interlocutory and may not be appealed immediately.'" In re 1975-2 Grand Jury Investigation of Associated Milk Producers, Inc., 566 F.2d 1293, 1301 (5th Cir.1978) (citing In re Estelle, 516 F.2d 480, 484 (5th Cir.1975)). In Associated Milk Producers, we analyzed the final judgment rule exhaustively. The final judgment rule is a "dominant rule of federal appellate practice." Id. at 1297. We noted that "[f]inality as a condition of review ... written into the first Judiciary Act and has been departed from only when observance of it would practically defeat the right to any review at all." Id.

Arthur Andersen argues that the district court's order granting intervention is appealable under the collateral order doctrine. The collateral order doctrine applies only when there is "an order, otherwise nonappealable, determining substantial rights of the parties which will be irreparably lost if review is delayed until final judgment." See, e.g., United States v. Wood, 295 F.2d 772, 778 (5th Cir.1961). To fall within the collateral order doctrine, the district court's order granting intervention must fulfill three requirements. First, it must resolve an issue separate from the merits of the underlying action. In re Grand Jury Subpoena, 190 F.3d at 383. Second, it must be conclusive. Id. at 381. Third, the order must be be effectively unreviewable on appeal from a final judgment in the underlying action. Id. The district court's order passes this three-prong test for appealability.

The general rule articulated in Associated Milk Producers, Inc. against appealability of grants of intervention is not applicable to the instant case. See 566 F.2d at 1301. Under Rule 24(b), intervention is typically available when a party seeks to litigate its own "claim or defense" within the context of an ongoing litigation. Thus, ordinarily, a grant of intervention is only one step along the path to reaching a final judgment on the intervenor's claim. See Cohen v. Beneficial Ind. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949)(stating that section 1291 "disallow[s] appeal from any decision which is tentative, informal or incomplete" and permits no appeal of decisions "where they are but steps towards final judgment in which they will merge"). In such cases, the grant of intervention is most appropriately and efficiently appealed along with any final judgment rendered on the intervenor's claims. However, the question of whether or not the Board may intervene is plainly independent from the underlying case. The Board is not seeking to litigate any claim in In re Enron and no final judgment on any claim by the Board will ever be had in the action. Whether the Board should have access to the ESL website and confidential deposition transcripts and exhibits has no bearing on the merits of the underlying securities fraud action.

The proposition, invoked by the Board, that "a discovery order incident to a pending action is not...