ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 89-05235)
Before: SLOVITER, Chief Judge, ALITO, Circuit Judge, and SEITZ,
Argued September 15, 1995
Opinion Filed: January 12, 1996)
The appellants in this case, Owen Rogal, D.D.S. and his professional corporation (collectively, "Dr. Rogal"), appeal from an order of the district court imposing sanctions pursuant to its inherent power in the amount of $256,360. This amount represents the defendants' attorneys' fees for trial and trial preparation and one-half of the fees incurred in preparing their motion for sanctions. Because we conclude that the district court erred in declining to hold an evidentiary hearing in connection with the motion for sanctions, we reverse the district court's order and remand the matter to allow the district court to hold an evidentiary hearing.
Dr. Rogal is a Philadelphia dentist specializing in the treatment of temporomandibular joint disorder (more commonly known as "TMJ"), and specifically in the diagnosis and treatment of "mandibular whiplash," i.e., TMJ caused by automobile accidents. In 1989, Dr. Rogal was the subject of a critical story that was presented on defendant American Broadcasting Companies' ("ABC") news magazine program "20/20" and reported by defendant John Stossel. In brief, the story highlighted the aggressive advertising materials disseminated by Dr. Rogal to personal injury lawyers, the controversial nature of his concept of "mandibular whiplash," and other dentists' doubts about his diagnoses of the condition. The story suggested that Dr. Rogal's practice may have been motivated principally by a desire to extract money from insurance companies.
Dr. Rogal subsequently sued ABC and Mr. Stossel for defamation and false light invasion of privacy in Illinois state court. The case was removed to the United States District Court for the Northern District of Illinois, which transferred the case to the Eastern District of Pennsylvania pursuant to 28 U.S.C. Section(s) 1404 in July 1989. In December 1992, after a trial in which the defendants rested after the plaintiffs' case, the jury returned a verdict in favor of the defendants.
After the jury had been excused, the district court directed counsel for ABC to "review the record and document your contentions with respect to your motion for sanctions," adding: "I would like to look them over myself." App. 1387. ABC submitted a motion seeking sanctions against Dr. Rogal and his lead trial attorney, M. Mark Mendel, pursuant to the court's inherent power. The motion alleged that Dr. Rogal had repeatedly given false testimony at trial and that Mr. Mendel had disobeyed court orders regarding post-verdict contact with jurors by investigators and had committed numerous violations of ethical and legal standards concerning closing arguments. *fn1 Dr. Rogal's attorneys filed a lengthy brief in opposition to the motion, App. 1458-1605, as well as a reply memorandum. App. 1667-73. The district court granted ABC's motion, noting that, under Chambers v. NASCO, Inc., 501 U.S. 32 (1991), it had "the inherent power to impose sanctions upon parties and their attorneys where they engage in bad faith conduct which abuses the judicial process," App. 1676. The court detailed ten separate subject areas in which it found that Dr. Rogal had testified falsely. App. 1679-89. In each of these areas, the court concluded that Dr. Rogal's testimony was directly contradicted by his own words or advertisements or by the testimony of his own witnesses. Id.
A sampling of the district court's findings will serve to illustrate the breadth of Dr. Rogal's alleged misrepresentations. One subject area cited by the district court concerned Dr. Rogal's use of the notation "D" on patient examination forms. The district court noted that Dr. Rogal had initially testified that this notation meant that the patient's symptoms were "decreased." The next day, however, after being shown out-takes of the examination of a patient on whose form Dr. Rogal had written "D" but who said in the out-takes that most of her symptoms were absent, Dr. Rogal stated that he had used "D" to denote "absent." He made this statement even though the examination form stated that "A = Absent" and even though, when a reimbursement form was submitted to an insurer for a patient with "D" notations on his or her examination form, the reimbursement forms stated that the symptoms were "decreased." This practice, the court found, enabled Dr. Rogal to continue administering (and billing for) numerous additional treatments and increased the settlement value of the patient's personal injury lawsuit by allowing the patient to claim (falsely) that the injury was permanent. App. 1679-81.
In several other subject areas, the district court found that Dr. Rogal had contradicted his own answers to interrogatories and to requests for admissions, as well as his own deposition testimony, when he testified at trial. The subjects of this testimony included Dr. Rogal's income, a dispute between Dr. Rogal and state licensing authorities, Dr. Rogal's examination of Mr. Stossel, and his reasons for agreeing to be interviewed by 20/20. App. 1682-85.
The district court also noted contradictions regarding the way in which Dr. Rogal held himself out to the public. According to the district court, Dr. Rogal denied ever advertising himself as Dr. Owen Rogal without adding that he was a dentist rather than a physician. However, his own promotional materials and advertisements frequently omitted any reference to "D.D.S." and his instructions to office personnel regarding ...