Pacific Harbor v. Carnival Air Lines

• Decision Date: 16 September 1999
• Docket Number: No. 98-35633,98-35633
• Citation: 210 F.3d 1112
• Parties: (9th Cir. 2000) PACIFIC HARBOR CAPITAL, INC.,Plaintiff-Appellee, v. CARNIVAL AIR LINES, INC.,Defendant, and JEFFREY M. HERMAN; STUART S. MERMELSTEIN, Movants-Appellants
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1112

210 F.3d 1112 (9th Cir. 2000)

PACIFIC HARBOR CAPITAL, INC.,Plaintiff-Appellee, v. CARNIVAL AIR LINES, INC.,Defendant, and JEFFREY M. HERMAN; STUART S. MERMELSTEIN, Movants-Appellants.

No. 98-35633

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Submitted September 16, 1999¹

Filed April 27, 2000

COUNSEL: Paul T. Fortino, Perkins Coie, Portland, Oregon, for plaintiff-appellee Pacific Harbor Capital, Inc.

Jeffery M. Herman, Stuart S. Mermelstein, Miami, Florida, for the appellants.

Appeal from the United States District Court for the District of Oregon; Malcolm F. Marsh, District Judge, Presiding. D.C. No.CV-97-00924-MFM

Before: Andrew J. Kleinfeld and William A. Fletcher, Circuit Judges, and Nora Manella,² District Judge.

Opinion by Judge Manella; Partial Concurrence and Partial Dissent by Judge Kleinfeld

MANELLA, District Judge:

Appellants Jeffrey M. Herman and Stuart S. Mermelstein are attorneys with the law firm of Herman Grubman & Moore in Miami, Florida. They appeal the district court's order ("Order dated June 3, 1998"), barring both attorneys from appearing pro hac vice before Malcolm F. Marsh, District Judge for the District of Oregon, and requiring any member of their law firm to attach copies of Judge Marsh's sanction order when petitioning for pro hac vice admission. We have jurisdiction of this appeal of a post-judgment order under 28 U.S.C. S 1291, and we affirm in part and vacate in part.

I FACTUAL AND PROCEDURAL BACKGROUND

Appellee Pacific Harbor Capital, Inc. ("Pacific Harbor") leased an airplane and related equipment to defendant Carnival Airlines, Inc. ("Carnival"). Carnival fell behind on its payments, and on June 17, 1997 Pacific Harbor brought suit in the District of Oregon for breach of the lease and recovery of the airplane.

A few weeks later, on July 3, 1997, Carnival, through its attorneys, appellants Herman and Mermelstein, filed for and obtained a temporary restraining order ("TRO") from a Florida state court judge prohibiting Pacific Harbor from asserting any possessory rights or interest in the airplane. Herman and Mermelstein sought the Florida TRO ex parte, without attempting to notify Pacific Harbor. The two attorneys also failed to inform the Florida state court judge that the Oregon action was pending, that their client, Carnival, was behind in its lease payments, or that the lease had a forum selection clause designating Oregon as the venue for any dispute.

Once Pacific Harbor learned of the Florida TRO, it removed the case to federal court. On July 10, the Florida district court dissolved the TRO and transferred the case to the District of Oregon.

On Friday, July 11, Pacific Harbor moved for its own TRO to preclude Carnival from continuing to fly the plane. Judge Marsh, district judge for the District of Oregon, heard the matter that afternoon. Carnival was represented by local counsel, Keith Ketterling, and Herman, who appeared telephonically. Following argument, the district court granted the TRO as to the airplane, two engines, and all logs, manuals, certificates, and technical data pertaining to the airplane and the engines. The TRO prohibited Carnival from using Pacific Harbor's airplane, engines, and parts and further required Carnival to assemble the airplane promptly at one of Carnival's primary maintenance facilities in Fort Lauderdale, Florida. The court required Pacific Harbor to post a bond of $250,000 as a condition of the TRO. Pacific Harbor's attorney had a bond for $2,000,000 that he posted immediately and was given permission to replace it the following Monday with a bond for $250,000.

During the hearing on the application for the TRO, Judge Marsh stated on four separate occasions that the TRO was granted and was effective as of that date. The four statements made by Judge Marsh included: 1) "I am going to enter the TRO,"; 2) "[a]t this time I am going to sign this TRO,"; 3) "the TRO is in effect,"; and 4) "I will direct that [the] TRO is now in [e]ffect."³

The order granting the TRO was dated Friday, July 11, 1997 and stated that it was effective upon service by facsimile on defendant's counsel in Miami, Florida. At no time during the hearing did Herman express confusion over, or seek clarification of, the effective date of the TRO.

Despite the court order, Carnival continued to use the plane and engine for commercial purposes throughout the weekend following issuance of the TRO. On Monday, July 14, plaintiff filed a motion for contempt, citing Carnival's continued use of the plane on Saturday, Sunday, and Monday and the continuing failure to return the engines and documentation as ordered.⁴ On Wednesday, July 16, the district court conducted a hearing on plaintiff's contempt motion. Messrs. Herman and Mermelstein appeared telephonically. At the hearing, Herman advised the court that he had misunderstood when the TRO was to go into effect and was under the impression that the TRO would not be effective until Monday, July 14. ⁵ When questioned by Judge Marsh, Carnival's local counsel, Ketterling, acknowledged that he had understood the TRO to be effective as of the date of the motion hearing, Friday, July 11. The judge made clear he did not believe Herman's explanation.⁶

As of Wednesday, July 16, Carnival still had not complied with the terms of the TRO. The two engines and the documentation pertaining to the aircraft had not been delivered to Fort Lauderdale. However, Herman assured the court that he was trying to get the engines to Fort Lauderdale and stated "[w]e can do the exchange [of the engines] on Friday." The court found Carnival in contempt of the court's TRO as to the airplane and scheduled a show cause hearing for Friday, July 18, concerning the engines and airplane documentation. Pacific Harbor's attorney requested that "the Court make it perfectly clear in its order that the engines are not to be used for any purpose." The court did so. The court also ordered the Florida attorneys to appear personally for the Friday hearing, along with Carnival's CEO or the person directly responsible for compliance with the TRO.

Herman did not appear at the Friday, July 18 show cause hearing, but Mermelstein did. Tom Fay, chief pilot for Carnival and manager of its A300 fleet, was also present. A week after the TRO had been granted and despite Herman's previous assurances to the court, Carnival still had not complied with the TRO. Neither the two engines nor the airplane documentation had been returned to Pacific Harbor. At the Friday hearing, Mermelstein argued that it was "an impossibility" for Carnival to comply with the terms of the TRO, and that a third company, Babcock & Brown, was conspiring with Pacific Harbor to "thwart" Carnival's efforts to comply with the TRO.⁷

Carnival's chief pilot, Mr. Fay, confirmed that the two airplanes to which Pacific Harbor's engines were attached had been in use since the Wednesday contempt hearing to fly revenue passengers from New York to Los Angeles, San Juan and the Bahamas. Judge Marsh thereupon questioned Mermelstein's credibility, held both Mermelstein and Carnival Air in contempt, and disqualified Mermelstein from appearing in his court. Judge Marsh orally advised Mermelstein that based on his conduct, the judge would enter an order permanently banning Mermelstein and his firm from pro hac vice admission to the District of Oregon. In addition, the court warned Mermelstein and Fay that they were not to leave the District of Oregon until the TRO was fully complied with, and that they would be arrested on civil contempt charges if the engines and documentation were not produced for Pacific Harbor's inspection by Saturday morning, July 19, 1997.⁸

On July 22, the district court issued a written order memorializing and narrowing the sanctions. Relying on Local Rule 110-2(b) and the court's inherent power, Judge Marsh barred members of appellants' firm from appearing pro hac vice in his court, and required appellants and other members of their firm to attach a copy of the sanctions order to any future pro hac vice application submitted in the District of Oregon. In explaining the order, Judge Marsh noted that he found defense counsel Herman's representation concerning his understanding of the effective date of the TRO to have been made in bad faith. (The judge had made clear at the July 16 hearing that he found Herman's explanation incredible.) The court further found that Herman and Mermelstein had effectively sanctioned their client's violation of his court order. (Herman admitted having advised Carnival it could continue to fly the planes over the weekend; Mermelstein claimed Carnival's compliance with the court order had been an "impossibility" -a representation later shown to be untrue.) Finally, the court found Herman and Mermelstein's failure to advise the Dade County court of the pending federal case in Oregon and to advise the Florida court of their client's default on lease payments to have been in bad faith. The court concluded that defense counsel's "frivolous arguments and misrepresentations" were more than mere technical violations -they had interfered with the court's ability to maintain effective control over court processes.

The underlying case was dismissed without prejudice April 13, 1998, after Carnival filed for Chapter 11 protection. On April 17, appellants filed a motion for reconsideration of the sanctions order and supported their motion with argument, affidavits, and other exhibits. In an affidavit supporting the motion, Herman for the first time stated that there had been a poor telephone connection during the Friday telephonic TRO hearing, and claimed that during the hearing he had informed the court that he was having difficulty hearing some of the proceedings.⁹

On June 3, 1998, after considering these arguments, the court adopted a modified sanction order that barred only Herman and Mermelstein from appearing before him. The order further required...