Bacher v. Allstate Ins. Co. ( 2000 )

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit
4-20-2000
Bacher v. Allstate Ins. Co.
Precedential or Non-Precedential:
Docket 99-1572
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Recommended Citation
"Bacher v. Allstate Ins. Co." (2000). 2000 Decisions. Paper 83.
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Filed April 20, 2000
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-1572
MAUREEN BACHER;
RICHARD BACHER
v.
ALLSTATE INSURANCE COMPANY,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 97-03661)
District Judge: Honorable Robert S. Gawthrop
Argued March 20, 2000
BEFORE: MANSMANN, GREENBERG, and ALARCON,*
Circuit Judges
(Filed: April 20, 2000)
Joseph F. Roda (argued)
Eric L. Keepers
Roda & Nast
801 Estelle Drive
Lancaster, PA 17601
Attorneys for Appellees
_________________________________________________________________
* Honorable Arthur L. Alarcon, Senior Judge of the United States Court
of Appeals for the Ninth Circuit, sitting by designation.
Marshall J. Walthew (argued)
Michael Doluisio
Dechert, Price & Rhoads
1717 Arch Street
4000 Bell Atlantic Tower
Philadelphia, PA 19103
Attorneys for Appellant
OPINION OF THE COURT
GREENBERG, Circuit Judge.
This matter is before this court on appeal from an order
of June 9, 1999, in which the appellant, Allstate Insurance
Company, asserts that we have jurisdiction under 28
U.S.C. S 1291 pursuant to the collateral order doctrine.
Appellee, plaintiff Maureen Bacher, was involved in a two-
car accident on August 5, 1994. Allstate, which insured
both vehicles, paid Bacher the $15,000 policy limit as a tort
claimant under the policy covering the other car. In
addition, Bacher submitted a claim for underinsured
motorists benefits ("UIM") under her policy. A little over one
year later, after having made two offers to settle for less
than the policy limit, Allstate paid the full $30,000 allowed
by the policy for UIM benefits, thus pretermitting an
arbitration proceeding of her claim. Bacher and her
husband Richard subsequently instituted this action in the
district court seeking compensatory and punitive damages
alleging that Allstate processed her UIM claim in bad faith
contrary to Pennsylvania statutory law. See 42 Pa. Cons.
Stat. Ann. S 8371 (West 1998).
On July 6, 1998, a magistrate judge ordered Allstate to
comply with certain of the Bachers' discovery requests,
including a request for information regarding all prior
actions filed against Allstate in any jurisdiction since
January 1, 1994, alleging bad faith with respect to
uninsured or underinsured motorist claims. The order
instructed Allstate to disclose the amount paid to satisfy
any judgment or settlement in each prior action. Following
Allstate's motion for reconsideration, the magistrate judge
2
issued an order on February 9, 1999, limiting the discovery
to prior bad faith actions brought in Pennsylvania. The
district court affirmed the magistrate judge's order on
March 25, 1999. Allstate then moved for reconsideration
and on June 9, 1999, the district court issued an order
denying reconsideration but prohibiting Bacher or her
counsel from disclosing or using the settlement information
outside the boundaries of this litigation.
Allstate eventually complied with these orders to the
extent of identifying the prior bad faith actions except that
Allstate refused to disclose the amount which it paid to
settle any such action. Allstate filed a notice of appeal on
July 8, 1999, from the district court's order denying its
motion for reconsideration. The underlying action still is
pending in the district court leading the Bachers to urge
that we dismiss the appeal.
On this appeal, Allstate contends that it should not have
to disclose the amount it paid to settle other cases. In this
regard it points out that at least some of the settlements
were confidential so that their disclosure would violate
confidentiality agreements. Moreover, it contends that
disclosure of settlements is not reasonably calculated to
lead to the discovery of admissible evidence and is against
public policy.
Allstate, however, faces a jurisdictional hurdle for"[a]s a
general rule, discovery orders are not final orders of the
district court for purposes of obtaining appellate
jurisdiction under 28 U.S.C. S 1291." In re Ford Motor Co.,
110 F.3d 954, 958 (3d Cir. 1997), citing Hahnemann Univ.
Hosp. v. Edgar, 74 F.3d 456, 461 (3d Cir. 1996). It
contends, however, that we have jurisdiction pursuant to
the collateral order doctrine first recognized in Cohen v.
Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S. Ct.
1221 (1949). See Smith v. Bic Corp., 869 F.2d 194, 198 (3d
Cir. 1989) ("We have never held as a blanket rule that
discovery orders are not appealable. Rather, we address
each issue using two vehicles: the collateral order doctrine
. . . and the petition for writ of mandamus."). We recently
described the collateral order doctrine as follows:
[T]he collateral order doctrine, first enunciated by the
Supreme Court in Cohen v. Beneficial Indus. Loan
3
Corp., 337 U.S. 541, 69 S. Ct. 1221, 93 L. Ed. 1528
(1949), provides a narrow exception to the general rule
permitting appellate review only of final orders. An
appeal of a nonfinal order will lie if (1) the order from
which the appellant appeals conclusively determines
the disputed question; (2) the order resolves an
important issue that is completely separate from the
merits of the dispute; and (3) the order is effectively
unreviewable on appeal from a final judgment.
Ford, 110 F.3d at 958.
We have held that the requirements of the collateral order
doctrine are satisfied when a party appeals a discovery
order involving information which the party claims to be
privileged or to constitute a trade secret. See Montgomery
County v. Microvote Corp., 175 F.3d 296, 300 (3d Cir. 1999)
(attorney-client and work product privileges); Ford, 110
F.3d at 957-64 (same); Smith, 869 F.2d at 198-99 (trade
secrets). Our most extensive discussion of the jurisdictional
issue was in Ford, where we addressed each of the
prerequisites for application of the collateral order doctrine.
We concluded that the doctrine was satisfied in that case
because (1) the order requiring production of allegedly
privileged documents left no room for further consideration
by the district court; (2) we could resolve the privilege issue
on appeal without delving into the issues in the underlying
litigation; (3) the interests protected by the attorney-client
and work product privileges are important as compared to
the interests favoring the final judgment rule; and (4) there
could not be effective review on appeal after final judgment
because the privileged information already would have been
disclosed. See Ford, 110 F.3d at 958-64. With regard to the
last of these prerequisites, we commented as follows:
Appeal after final judgment cannot remedy the breach
in confidentiality occasioned by erroneous disclosure of
protected materials. At best, on appeal after final
judgment, an appellate court could send the case back
for re-trial without use of the protected materials. At
that point, however, the cat is already out of the bag.
. . .
4
Attorneys cannot unlearn what has been disclosed to
them in discovery; they are likely to use such material
for evidentiary leads, strategy decisions, or the like.
More colorfully, there is no way to unscramble the egg
scrambled by the disclosure; the baby has been thrown
out with the bath water.
Id. at 963 (citation and internal quotation marks omitted).
Other courts of appeals have rejected our approach,
however, and have declined to exercise jurisdiction under
the collateral order doctrine over appeals from discovery
orders, even when privilege issues are involved. See, e.g.,
FDIC v. Ogden Corp., 202 F.3d 454, 458 & n.2 (1st Cir.
2000) ("[D]iscovery orders generally are not thought to come
within [the collateral order doctrine]"; the "perfect example"
of a discovery order that is not appealable under the
doctrine is one involving a party's claim of attorney-client
privilege.); Dellwood Farms, Inc. v. Cargill, Inc., 128 F.3d
1122, 1125 (7th Cir. 1997) ("[A] discovery order is not
deemed collateral even if it is an order denying a claim of
privilege. We so held emphatically in [two prior cases], and
this is the view of the other circuits as well, with the partial
exception of the Third Circuit [citing Ford ].") (citations
omitted); Simmons v. City of Racine, 37 F.3d 325, 327 (7th
Cir. 1994) ("Discovery orders are generally not appealable
. . . as collateral orders. This is true even of discovery
orders issued over an objection that the information at
issue is privileged. Defendants have suggested no reason
that the privilege they assert, the so-called ``informer's
privilege' . . . should stand on a different footing from the
attorney-client privilege or the executive privilege, neither of
which confers upon its holder the right to take an
immediate appeal under section 1291 from an adverse
discovery order.") (citations omitted); Boughton v. Cotter
Corp., 10 F.3d 746, 749-50 (10th Cir. 1993) (stating that
"virtually every case in other circuits" has held that orders
compelling disclosure of information claimed to be subject
to the attorney-client privilege are not reviewable as
collateral orders) (citing cases).
The Court of Appeals for the Fourth Circuit explained the
reasons for prohibiting immediate review of discovery
orders:
5
[T]he considerations underlying the rule against review
of interlocutory orders apply with particular force in
the discovery context because that process has a
special potential for spawning rulings that aggrieved
parties would seek to appeal. The process of turning
over private-and often damaging-information to an
adversary inevitably creates friction. The sheer number
of discovery rulings and the myriad procedural
requirements governing them, provide fertile soil for the
growth of appealable orders. Allowing immediate appeal
of the orders resolving discovery disputes would only
disrupt and delay district court proceedings and clog
the courts of appeals with matters more properly
managed by trial courts familiar with the parties and
their controversy.
. . .
The dangers of a trade secrets exception to the
nonappealability of discovery orders should be
apparent. A judicially created exception to
nonappealability for categories of sensitive information
is the quintessential slippery slope. Many parties faced
with discovery requests are apt to regard the
information sought as sensitive or confidential and seek,
at a minimum, to delay its disclosure through an
interlocutory trip to an appellate court.
MDK, Inc. v. Mike's Train House, Inc., 27 F.3d 116, 119-20
& n.2 (4th Cir. 1994) (citation omitted) (emphasis added)
(declining to follow our holding in Smith).
The question before us, then, is whether we should
extend our holdings in Smith, Ford, and Montgomery County
to Allstate's appeal, in light of the narrower approach to the
collateral order doctrine taken by other courts of appeals.
Allstate is not claiming protection of trade secrets, nor is it
claiming a traditionally recognized "privilege" such as the
attorney-client privilege. Allstate does claim, however, that
the district court's discovery order will force it to turn over
highly sensitive information which, notwithstanding the
district court's confidentiality order, someday may be used
against it by the Bachers' attorneys to bring about a larger
settlement in this action or in future bad faith actions.
6
There is some force to Allstate's jurisdictional argument
for, as our opinion in Ford indicates, "the cat [will] already
[be] out of the bag" regardless of whatever relief we could
provide on an appeal after final judgment. See Ford, 110
F.3d at 963. Nevertheless, we must be careful not to open
the door to a flood of collateral order appeals from discovery
orders requiring disclosure of unprivileged information
which might be characterized as "sensitive." Thus, while
there may be very good reasons to overturn the district
court's order, if we take jurisdiction here we may have
difficulty drawing the jurisdictional line in future cases.
We conclude that we should draw the line in this case
and thus should dismiss this appeal for lack of jurisdiction.
In this regard, we are influenced by the Supreme Court
opinions in Cunningham v. Hamilton County, 119 S. Ct.
1915 (1999), and Digital Equipment Corp. v. Desktop Direct,
Inc., 511 U.S. 863, 114 S. Ct. 1992 (1994). In Cunningham,
the Court held that an order imposing sanctions on a
party's attorney for discovery abuses was not immediately
appealable under the collateral order doctrine.
Cunningham, 119 S. Ct. at 1919-23. In so ruling, the Court
indicated that the separability requirement of the collateral
order doctrine was not met:
We do not think . . . that appellate review of a
sanctions order can remain completely separate from
the merits
. . .
[A] Rule 37(a) sanctions order often will be inextricably
intertwined with the merits of the action. An evaluation
of the appropriateness of sanctions may require the
reviewing court to inquire into the importance of the
information sought or the adequacy or truthfulness of
a response. Some of the sanctions in this case were
based on the fact that petitioner [the sanctioned
attorney] provided partial responses and objections to
some of the defendants' discovery requests. To evaluate
whether those sanctions were appropriate, an appellate
court would have to assess the completeness of
petitioner's responses. Such an inquiry would differ
only marginally from an inquiry into the merits and
7
counsels against application of the collateral order
doctrine. Perhaps not every discovery sanction will be
inextricably intertwined with the merits, but we have
consistently eschewed a case-by-case approach to
deciding whether an order is sufficiently collateral.
Id. at 1920-21 (citations omitted). Similarly, on this appeal
review of the district court's order necessarily will entail
some determination as to whether the settlement
information sought by the Bachers is relevant to the merits
of the bad faith claim and/or their claim for punitive
damages. Accordingly, it is questionable as to whether the
separability requirement is satisfied.
Further, the Court's statement in Cunningham that we
should not apply the collateral order doctrine on a"case-
by-case" basis indicates that we should not attempt to
carve out case-by-case exceptions to the general rule that
discovery orders are not immediately appealable. We believe
that the Supreme Court would not approve an approach
which requires a determination in each case as to whether
the particular material to be produced is sufficiently
"sensitive" to warrant immediate appellate review. See also
MDK, 27 F.3d at 120 ("A judicially created exception to
nonappealability for categories of sensitive information is
the quintessential slippery slope."). Further, the Court
indicated in Digital Equipment that the collateral order
doctrine should apply to broad categories of interlocutory
orders, without concern for the individual circumstances of
particular cases. See Digital Equipment, 511 U.S. at 868,
114 S.Ct. at 1996 ("We have accordingly described the
conditions for collateral order appeal as stringent, and have
warned that the issue of appealability under S 1291 is to be
determined for the entire category to which a claim belongs,
without regard to the chance that the litigation at hand
might be speeded, or a particular injustice averted, by a
prompt appellate court decision.") (citations and internal
quotation marks omitted).
The Court's decision in Digital Equipment warns that the
collateral order doctrine is "narrow" and that claims for its
applicability should be subjected to "broad scrutiny." See
id. at 868, 114 S. Ct. at 1996 ("[W]e have. . . repeatedly
stressed that the ``narrow' exception should stay that way
8
and never be allowed to swallow the general rule that a
party is entitled to a single appeal, to be deferred until final
judgment has been entered . . . .") (citation omitted); see
also We, Inc. v. City of Philadelphia, 174 F.3d 322, 324-25
(3d Cir. 1999) (emphasizing that the collateral order
doctrine is to be construed narrowly). The following passage
from Digital Equipment indicates that the doctrine should
not be applied to the myriad of district court orders which
arguably will cause the irretrievable loss of a party's rights:
[T]he strong bias of S 1291 against piecemeal appeals
almost never operates without some cost. A fully
litigated case can no more be untried than the law's
proverbial bell can be unrung, and almost every
pretrial or trial order might be called ``effectively
unreviewable' in the sense that relief from error can
never extend to rewriting history. Thus, erroneous
evidentiary rulings, grants or denials of attorney
disqualification, and restrictions on the rights of
intervening parties, may burden litigants in ways that
are only imperfectly reparable by appellate reversal of
a final district court judgment; and other errors, real
enough, will not seem serious enough to warrant
reversal at all, when reviewed after a long trial on the
merits . . . . But if immediate appellate review were
available every such time, Congress's final decision rule
would end up a pretty puny one, and so the mere
identification of some interest that would be
``irretrievably lost' has never sufficed to meet the third
Cohen requirement.
Digital Equipment, 511 U.S. at 872, 114 S.Ct. at 1998
(citations omitted).
In light of Cunningham and Digital Equipment and the
approach taken by other courts of appeals we determine
that we should not extend our case law beyond the narrow
categories of trade secrets and traditionally recognized
privileges, such as attorney-client and work product. While
the sensitive nature of the material at issue here may
separate Allstate from the "ordinary" party who seeks to
appeal a discovery order, Cunningham and Digital
Equipment counsel against application of the collateral
order doctrine on such a case-by-case basis. Accordingly,
9
we are constrained to resist any temptation to extend
Smith, Ford, and Montgomery County any further.1
We make one final point on this appeal. The parties
should not infer from our opinion that we in any way are
motivated by the belief that the requirement for disclosure
of the details of the settlements was appropriate. Quite to
the contrary, we find the disclosure order troubling because
so many factors may lead to a settlement in any particular
case. Accordingly, it is not immediately evident why
revealing the amount of settlements in other cases can be
helpful here. Indeed, we can foresee that an attempt to use
evidence of these settlements at trial could require
significant exploration of the proceedings in other cases,
thereby causing the parties to lose the proper focus in this
case. Moreover, we can understand how by allowing a party
to use evidence of settlements a court could discourage
settlements in the future. Nevertheless in light of our
absence of jurisdiction we cannot intercede.
For the foregoing reasons we will dismiss the appeal for
lack of jurisdiction.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________
1. Of course, immediate appellate review of discovery orders may be
available under appropriate circumstances by means of a petition for a
writ of mandamus or a permissive interlocutory appeal under 28 U.S.C.
S 1292. See Simmons 37 F.3d at 328-29 & n.2. While we recognize that
we can treat a notice of appeal as a petition for mandamus, we will not
consider that possibility here because Allstate in its extensive briefing
and in response to our clerk's inquiry on the jurisdictional issue has not
requested that we do so. See br. at 26-35; reply br. 15-18. This omission
must have been intentional as Allstate has cited and relied heavily on
Ford, a case in which the appellant as an alternative to invoking
appellate jurisdiction, sought mandamus relief. We also point out that
Allstate did not file a motion asking for a district court certification
so
that it could have sought permission to file an interlocutory appeal
under 28 U.S.C. S 1292 from the order of June 9, 1999.
10