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Martin v. Brown

filed: August 23, 1995.

LEON M. MARTIN
v.
HAROLD ED BROWN, AN INDIVIDUAL; KYLE ENERGY, INC., A PENNSYLVANIA CORPORATION; KYLE ENERGY AND KYLE ENERGY CORPORATION, A PENNSYLVANIA CORPORATION, REBECCA E. BENDER, *FN* APPELLANT



Appeal from the United States District Court for the Western District of Pennsylvania. (D.C. Civil Action No. 86-cv-01239).

Present: Stapleton, Hutchinson and Rosenn, Circuit Judges.

Author: Hutchinson

Opinion OF THE COURT

HUTCHINSON, Circuit Judge.

I. Introduction

Appellant, Rebecca E. Bender ("Bender"), an attorney who represented the defendants, Harold E. Brown, Kyle Energy, Inc. and Kyle Energy and Kyle Energy Corporation,*fn1 in this action, appeals orders of the United States District Court for the Western District of Pennsylvania sanctioning her for refusing to comply with a discovery order and for refiling two motions the court reserved for trial after denying them without prejudice.*fn2 The discovery sanctions required Bender and Brown to pay $500 each plus the costs plaintiff Leon M. Martin ("Martin") incurred in connection with the discovery request. Bender's and Brown's liability for these costs was joint and several. The sanction for refiling the two motions required Bender individually to pay an additional $500. In an accompanying memorandum, the district court stated that it was imposing these sanctions under Rule 11, Rule 37, 28 U.S.C.A. § 1927 (West 1994) and the court's inherent power.

Brown shortly thereafter filed for bankruptcy in the Middle District of Florida Bankruptcy Court. Martin's case against Brown was stayed under the automatic stay of Bankruptcy Code § 362, 11 U.S.C.A. § 362 (West Supp. 1995), and the district court entered an order dismissing Martin's case against Brown without prejudice. Bender does not represent Brown in the bankruptcy, which is still pending.

Under the circumstances of this case, we hold that we have appellate jurisdiction over Bender's appeal despite the fact that the district court dismissed the underlying action "without prejudice." Appellant's Appendix ("App.") at 664. We also hold that the manner in which the district court Judge imposed these sanctions deprived Bender of the essentials of procedural due process, viz, fair notice and an opportunity to be heard. Because of our Disposition of this appeal on procedural grounds, it is unnecessary for us to decide the propriety of the sanctions imposed on Bender. We will therefore vacate the district court's orders imposing sanctions on Bender and remand the case to it for further proceedings consistent with this opinion.

II. Statement of the Case and Facts

In November 1992, Brown retained Bender as defense counsel in an ongoing case in which Martin claimed Brown violated federal securities laws, the Racketeering Influenced and Corrupt Organizations Act ("RICO"),*fn3 and engaged in state common law fraud and breach of contract by selling or offering to sell interests in numerous gas well properties.

On December 30, 1992, the district court issued an order disposing of several of Martin's discovery motions. The order included a provision granting Martin permission to inspect certain real property Brown owned. This part stated, "the defendants shall make arrangements with plaintiff for inspection [of the real property] on or before February 1, 1993." App. at 106. The real estate covered included Brown's personal residence and a laundromat he owned. Bender refused to permit inspection of the real property because she believed it was irrelevant to any liability Brown might have to Martin or any damages he might owe after the RICO claim had been dismissed.

On January 22, 1993, Martin's counsel sent a telex to Bender informing her of Martin's continuing insistence on inspecting these properties. Bender responded the next day by denying the request for inspection and reiterating her contention that inspections of the real property had no relevance to any of Martin's surviving claims. Then, in February 1993, Bender sent a letter to Martin's attorney asking him to clarify or justify the inspection of these properties.

In March 1993, Bender filed ten in limine motions. They were unrelated to the discovery dispute. She also filed a motion to dismiss the federal security claim arguing that the interests in gas wells Martin claimed Brown fraudulently offered for sale were not securities as defined by federal law. Alternatively, Bender moved to certify this issue for immediate appeal believing an interlocutory determination could expeditiously dispose of Martin's only remaining federal claim. See 28 U.S.C.A. § 1292(b) (West 1993). This was the third time Brown had raised the lack-of-a-security question.*fn4 One of the ten in limine motions Bender had filed was yet a fourth attempt to relitigate the security issue. In another of Bender's ten in limine motions, she also raised for the second time the statute of limitations as a defense.*fn5

On March 31, 1993, with the dispute over inspection of Brown's real estate unresolved, Martin filed a Rule 37 motion to sanction Brown for her refusal to comply with the December 30, 1992 order. In April 1993, Bender filed a response and Martin thereafter filed a reply. In an order entered April 30, 1993, the district court decided to keep Martin's Rule 37 motion for sanctions under advisement, "subject to the parties' and attorneys' compliance with discovery directives set forth" in the memorandum supporting its order. App. at 593. The memorandum criticized both parties for their conduct in discovery, warned them that sanctions would be imposed for future noncompliance with the letter or spirit of the discovery rules and cautioned them about the use of "unnecessary verbiage," "superfluous language" and the filing of unwarranted motions and excessively long papers. App. at 587.

Also on April 30, 1993, the district court denied Bender's motion to dismiss on the security issue and refused to certify it for interlocutory appeal. Concurrently, it also rejected Bender's in limine motion concerning the security issue, reasoning that it was "in part a disguised motion to relitigate the 'securities' issue," App. at 588, and once more denied the statute of limitations issue as repetitive, but again without prejudice to Brown's right to raise it at trial. The court warned, however: "Counsel is instructed not to make any further attempts to relitigate this issue prior to trial on the merits." App. at 589.

After the April 30, 1993 order, counsel on each side seemed to have made an effort to resolve the outstanding discovery issues. Sometime around July 1993, Martin's original counsel, Thomas E. Rodgers ("Rodgers"), was hospitalized. Thereafter Martin was represented by a lawyer named David H. Cullis ("Cullis"). Bender contends that Cullis's unfamiliarity with her Discussions with Rodgers revived the inspection problem.*fn6

In January 1994, the district court dismissed without prejudice Bender's remaining in limine motions and Martin's motion for sanctions. With the resurfacing of the dispute concerning inspection of Brown's real estate, the district court once more directed the parties to negotiate outstanding matters and to resubmit formal motions, on or before April 1, 1994, for judicial resolution of any pre-trial matters then in dispute. The district court instructed counsel to append to any such motions a certification that they had tried, in good faith, to resolve their dispute.

On March 16, 1994, Bender sent a letter directly to the Judge presiding over the case. In it, she enclosed all ten of the in limine motions she had presented in March 1993, including for the fifth time the securities issue and, also, the statute of limitations defense that the district court, in its April 30, 1993 order, explicitly directed her not to resubmit until trial. Martin also refiled several of his motions, including the Rule 37 motion for sanctions for Brown's failure to afford inspection of his real estate.

On April 8, 1994, the district court entered another order. It again directed the parties to meet in an effort to resolve Martin's outstanding discovery requests and Brown's ten in limine motions. The court also noted that Bender had failed to file with the clerk the motions forwarded with her March 16, 1994 letter. The order scheduled an April 15, 1994 hearing for unresolved matters. In its April 8, 1994 order, the district court echoed its warning to the parties and their counsel that sanctions could be imposed for conduct that "is in violation of the Rules of Civil Procedure and/or the Rules of Professional Conduct." App. at 647.

Bender did not appear personally at the April 15 hearing. She had yet to refile her in limine motions with the clerk of the district court, but Brown's local counsel was present and tried to argue their merits. The district court questioned him pointedly about Bender's persistent refiling of motions denied without prejudice pending trial, as well as her refusal to permit inspection of all the real estate included in the court's December 30, 1992 order. It ordered Bender, on or before April 20, 1994, to file with the clerk the motions that she previously mailed to the Judge with her March 16, 1994 letter before it would consider them. On April 20, 1994, Bender again filed all ten in limine motions.*fn7 On that day the district court entered its initial April 20, 1994 order imposing sanctions on Bender and Brown and, on April 25, revised the April 20 order by adding the docket numbers of the in limine motions.

Bender appeals from those portions of both orders sanctioning her for "willful and flagrant" disregard of the court's orders by "resurrecting and advocating defendants' motions in limine regarding 'lack of a security' and the 'statute of limitations defense'"; App. at 654-55, and "for refusal to permit meaningful inspection of real property in compliance with [the] court's orders . . . ." Id. at 652-53. For her persistence in raising questions the district court had decided, or indicated it wished to defer to trial, the court ordered Bender to pay $500 personally. For prohibiting Martin from inspecting certain properties, the court ordered Bender and Brown each to pay $500 and, jointly and severally, any costs Martin had incurred in attempting to arrange an inspection.

III. Jurisdiction

The district court had subject matter jurisdiction over the underlying dispute between Martin and Brown under 15 U.S.C.A. § 78a et seq. (West Supp. 1995) and 28 U.S.C.A. §§ 1341 and 1343 (West 1993). Bender contends that the district court's orders of April 20 and 25, 1994 are "final decisions" over which we have appellate jurisdiction under 28 U.S.C.A. § 1291 (West 1993). Although no appellee is present to refute her contention,*fn8 we have a threshold obligation to consider our appellate jurisdiction. See, e.g., Hoots v. Commonwealth of Pa., 639 F.2d 972, 978 (3d Cir. 1981).

A. Strict Finality

Our appellate jurisdiction is generally limited to the review of final decisions of the district courts. United States v. Bertoli, 994 F.2d 1002, 1010 (3d Cir. 1993); see also 28 U.S.C.A. § 1291.*fn9 Section 1291 states: "The courts of appeals . . . shall have jurisdiction of appeals from all final decisions of the district courts of the United States . . . except where a direct review may be had in the Supreme Court." 28 U.S.C.A. ยง 1291. "A final decision is one which disposes of the whole subject, gives all the relief that was contemplated, provides with reasonable completeness, for giving effect to the judgment and leaves nothing to be done in the cause save to superintend, ministerially, the ...


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