On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civil No. 84-848).
Present HIGGINBOTHAM and BECKER, Circuit Judges, and LACEY, District Judge*fn*
This case presents the question whether we have appellate jurisdiction over an order of a district court imposing a monetary sanction against an attorney pursuant to Fed. R. Civ. P. 11 where the sanctionee has since withdrawn his appearance in favor of substituted counsel and the district court has not yet entered a final judgment in the underlying action. For the reasons that follow, we conclude that the district court's order is appealable as a collateral order under 28 U.S.C. § 1291 (1982). We further conclude that the district court's ruling upon which the sanction order was based was ambiguous; hence, the imposition of sanctions upon counsel for failing to conform to the court's understanding of the order constituted an abuse of discretion. We therefore reverse.
For this court to entertain the present appeal, the jurisdictional requirements of 28 U.S.C. § 1291 must be met.*fn1 Section 1291 provides that courts of appeal may review only "final" decisions of the district courts. The Supreme Court has, however, established a narrow exception to the rule of finality. See Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S. Ct. 1221, 93 L. Ed. 1528 (1949). Under Cohen and its progeny, "a decision of a district court is appealable if it falls within 'that small class [of pre-judgment orders] which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated.'" Mitchell v. Forsyth, 472 U.S. 511, 105 S. Ct. 2806, 86 L. Ed. 2d 411 (1985) (citing Cohen, 337 U.S. at 546, 69 S. Ct. at 1225); Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 105 S. Ct. 2757, 86 L. Ed. 2d 340 (1985). For an order to be collateral, therefore, it must meet the following three-part test: 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). Construing the collateral order doctrine narrowly, we have required that each of the three independent requirements be met before appellate review is permitted. Metex Corp. v. ACS Industries, Inc., 748 F.2d 150, 153 (3d Cir. 1984); Lusardi v. Xerox Corp., 747 F.2d 174, 177 (3d Cir. 1984); Gross v. G.D. Searle & Co., 738 F.2d 600, 602 (3d Cir. 1984); Yakowicz v. Commonwealth of Pennsylvania, 683 F.2d 778, 783 (3d Cir. 1982). This showing is necessary in order to further the important congressional goal of avoiding piecemeal litigation. Gross, 738 F.2d at 604.
The sanctions order under appeal in this case was entered on October 5, 1984, when the district court granted the defendant's motion for attorneys fees and costs under Rule 11*fn2 and imposed sanctions against appellant William Sumner Scott, Esquire, personally in the amount of $1,642.50.*fn3 Appellant promptly withdrew as counsel for plaintiff Eavenson Auchmuty & Greenwald, Inc., on whose behalf he had filed and litigated to that point a suit for defamation and tortious interference with business against a number of foreign defendants. Scott then filed a motion for new trial or for alternative relief and stay pursuant to Fed.R.Civ.P. 62(b) and (d), which was denied by the district court on October 16, 1984. On October 30, 1984, he filed a notice of appeal. Eavenson Auchmuty & Greenwald then obtained new counsel and the underlying action continued to be litigated in the district court. Appellant is no longer associated with the case in any capacity.*fn4
Given these facts, this present appeal presents a jurisdictional question of first impression in this court. In a similar case, Eastern Maico Distributors v. Maico-Fahrzeugfabrik, 658 F.2d 944 (3d Cir. 1981), we declined to exercise jurisdiction over an appeal from a non-final order of the district court pursuant to Fed.R.Civ.P. 37*fn5 which imposed a monetary sanction against the defendant's attorney personally for filing repeated and dilatory requests for the production of documents. However, the order appealed in Eastern Maico clearly failed to satisfy two of the three Cohen criteria. First, the sanctioned activity was not completely collateral to the underlying action; in order to address the question of whether the documents requested were truly relevant, we would have had to examine the claims underlying the litigation and reach some conclusions as to the relative importance of the material repeatedly requested by the appellant. Second, the sanction order could have been effectively reviewed on appeal from final judgment, since the parties to the order would still have been before the court and would still have retained the same interest in challenging the order. 658 F.2d at 947.
In contrast, there can be no dispute that the first two prongs of the Cohen test are met in this appeal. The sanctions order challenged by Scott finally and conclusively determines the sanctions issue, and the resolution thereof is completely separate from the merits of the case as our discussion of the sanctions order, see discussion infra at part II.B., will make clear.*fn6 What is at issue therefore is the effective reviewability of the issue on appeal from final judgment, and, on that score, the circumstances which compelled our decision in Eastern Maico are absent in the case at bar.
We must determine, therefore, whether the appeal brought by Scott meets the third requirement for collateral orders -- that the sanctions order would be effectively unreviewable on appeal from a final order in the litigation period. We note first that the circumstances that compelled our conclusion in Eastern Maico, that effective appellate review of the Rule 37 order would be possible following final judgment, are absent in this appeal. Unlike Eastern Maico, where the appeal was taken by both the sanctioned attorney and the party, the instant appeal is taken only by the sanctioned attorney, who has since withdrawn as counsel in the underlying action. Because appellant Scott is no longer connected with the merits of the case, he has an immediate interest in challenging the sanction which is not shared by the parties to the suit or by counsel to a party. First, the possibility exists that appellant's former client may ultimately prevail on the merits, or settle the case; in either of those situations, it is not clear that appellant would be able to appeal from final judgment. Second, it is quite possible, even likely, that appellant, as a non-party, may be unaware that the suit has been terminated so as to be able to filed a timely appeal. Thus, appellant might never be able to receive any appellate review of the sanctions order if he is denied that opportunity now.
Based upon similar considerations, the Seventh Circuit recently accepted the proposition that an order assessing attorney's fees against a party's former counsel was effectively unreviewable on appeal from final judgment, and that, provided the other two requirements of Cohen were satisfied, such a sanction could be immediately appealed by counsel as a collateral order. See Knorr Brake Corp. v. Harbil, Inc., 738 F.2d 223 (7th Cir. 1984). We find the reasoning of the Seventh Circuit, which is limited to a sanction order against a party's former counsel who has withdrawn from representation at the time of appeal, to be persuasive.
A conclusion that the Rule 11 sanction order against Scott is an appealable collateral order is also supported by prior decisions of this court, establishing the principle that contempt sanctions against non-parties may be appealed immediately. In Eastern Maico, we stated that
in civil contempt proceedings or Rule 37(b) sanctions against a non-party, even against an attorney to or an officer of a party, an appeal generally need not wait until final judgment in the case as a whole. See In re Fish & Neave, 519 F.2d 116 (8th Cir. 1975) (attorney may appeal civil contempt sanction); David v. Hooker, Ltd., 560 F.2d 412, 416-17 (9th Cir. 1977) (officer of party may appeal Rule 37(b) sanction for violation of discovery order).
658 F.2d at 949. Other decisions, relying upon Alexander v. United States, 201 U.S. 117, 26 S. Ct. 356, 50 L. Ed. 686 (1906), have held that a non-party witness adjudicated in contempt of a district court order has an immediate right of appellate review. See Gross v. G.D. Searle & Co., 738 F.2d 600, 603-04 (3d Cir. 1984); DeMasi v. Weiss, 669 F.2d 114, 122 (3d Cir. 1982). Finally, a non-party, unlike a party, may immediately appeal a contempt sanction under § 1291 because the progress of the underlying litigation is not impeded and because the non-party may not be notified of a final judgment in the case or may lack standing to appeal that judgment. See, e.g., Liew v. Breen, 640 F.2d 1046, 1048 (9th Cir. 1981); ITT Community Dev. Corp. v. Barton, 569 F.2d 1351, 1352 n.1 (5th Cir. 1978). See also Eastern Maico, 658 F.2d at 949-50. We conclude that appellant's position as a non-party to ...