Rogal v. American Broadcasting Co., Inc. ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
1-12-1996
Rogal v. American Broadcasting Co., Inc.
Precedential or Non-Precedential:
Docket 94-2060
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 94-2060
____________
OWEN ROGAL, D.D.S.; OWEN ROGAL, D.D.S., P.C.
v.
AMERICAN BROADCASTING COMPANIES, INC.; JOHN STOSSEL
Owen Rogal, D.D.S.;
Owen Rogal, D.D.S., P.C.
Appellants
____________________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
____________________
(D.C. Civil No. 89-05235)
Argued September 15, 1995
Before: SLOVITER, Chief Judge, ALITO, Circuit Judge, and SEITZ,
Senior Circuit Judge
(Opinion Filed: January 12, 1996)
____________________
Ronald H. Surkin, Esq. (Argued)
Nancy C. DeMis, Esq.
Richard, DiSanti, Gallagher,
Schoenfeld & Surkin
25 West Second Street
Media, PA 10963-0900
Attorneys for Appellants
Jerome J. Shestack, Esq. (Argued)
Wolf, Block, Schorr and Solis-Cohen
Twelfth Floor Packard Building
15th and Chestnut Streets
Philadelphia, PA 19102
1
Burt M. Rublin, Esq.
Ballard Spahr Andrews & Ingersoll
2
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attorneys for Appellees
____________________
OPINION OF THE COURT
____________________
ALITO, Circuit Judge:
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.
I.
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
3
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.
§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
4
and legal standards concerning closing arguments.1 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
1
The district court eventually sanctioned Mr. Mendel by ordering
him to pay the defendants $13,573, an amount that represented
one-half of the fees that they incurred in preparing their motion
for sanctions, and also directed the Clerk to forward the court's
sanctions opinion to the Disciplinary Board of the Supreme Court
of Pennsylvania. App. 1938. Mr. Mendel did not file an appeal.
5
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
telephone calls from prospective patients urged them to refer to
him as a "doctor" and a "physician." App. 1688.
6
After the court scheduled a hearing to determine the
nature of the sanction to be imposed, Dr. Rogal retained new
counsel. Dr. Rogal's new lawyers filed motions seeking a vacatur
of the sanctions order, an evidentiary hearing, and a continuance
of the hearing. The court continued the disposition of the
motion until it had received new briefing from Dr. Rogal's new
lawyers, App. 1723-29, but decided that an evidentiary hearing
was not necessary for due process purposes, since the
sanctionable conduct had taken place in court. App. 1727-28. Dr.
Rogal's new lawyers filed a lengthy brief, with numerous
exhibits. App. 1730-1914.
After receiving these submissions and hearing argument,
the court again rejected Dr. Rogal's request for an evidentiary
hearing to explain his trial testimony. App. 1929. The court
subsequently issued the order imposing sanctions against Dr.
Rogal. The court restated its rationale for refusing to hold an
evidentiary hearing, noting that "[t]he actionable conduct took
place in the presence of the court and is documented by the
record," and that "[d]uring the trial, plaintiffs had every
opportunity to explain and attempt to justify the numerous
inconsistencies and contradictions" in Dr. Rogal's testimony.
District Court Order of September 27, 1994 at 1. Dr. Rogal's
motion for reconsideration was denied, and he appealed.
7
II.
We review a district court's determinations regarding
the imposition of sanctions for abuse of discretion. Chambers v.
NASCO, Inc., 501 U.S. at 55; Republic of Philippines v.
Westinghouse Elec. Corp., 43 F.3d 65, 75 (3d Cir. 1994); cf.
Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 399-405 (1990)
(Rule 11); Simmerman v. Corino, 27 F.3d 58, 62 (3d Cir. 1994)
(factual determinations, legal conclusions, and choice of
sanction under Rule 11 receive "substantial deference"). An
abuse of discretion in this context would occur if the district
court "based its ruling on an erroneous view of the law or a
clearly erroneous assessment of the evidence." Simmerman, 27 F.3d
at 63 (quoting Cooter & Gell, 496 U.S. at 405); Westinghouse, 43
F.3d at 75.
On appeal, Dr. Rogal argues that the district court
committed three separate reversible errors: declining to hold an
evidentiary hearing to allow Dr. Rogal to explain the apparent
contradictions in his testimony; failing to assure that Dr. Rogal
was informed of the conflict of interest that allegedly arose
between him and his attorney when ABC sought sanctions against
both of them; and failing to make an explicit finding of bad
faith on the part of Dr. Rogal. Dr. Rogal also argues that on
remand the case should be reassigned to a different district
court judge.
III.
8
The imposition of monetary sanctions by a court
implicates fundamental notions of due process and thus requires
"fair notice and an opportunity for a hearing on the record."
Roadway Express, Inc. v. Piper, 447 U.S. 752, 767 (1980); see
also Eavenson, Auchmuty & Greenwald v. Holtzman, 775 F.2d 535,
540 (3d Cir. 1985); Eash v. Riggins Trucking Co., 757 F.2d 557,
570 (3d Cir. 1985) ("[A]s a general practice a monetary detriment
should not be imposed by a court without prior notice and some
occasion to respond."). Here, there is no dispute that Dr. Rogal
had fair notice of the possibility of sanctions. The issue
before us is whether the required "opportunity for a hearing on
the record" should have included an evidentiary hearing at which
Dr. Rogal would have had the opportunity to explain the apparent
contradictions and inconsistencies in his testimony.
We have repeatedly emphasized that the requirements of
due process are not reducible to a static formula, but rather are
sensitive to the facts and circumstances of a given case. While
"the fundamental requirement of due process is the opportunity to
be heard at a meaningful time and in a meaningful manner[,] the
concept is flexible, calling for procedural protection as
dictated by the particular circumstance." Kahn v. United States,
753 F.2d 1208, 1218 (3d Cir. 1985) (citing Morrissey v. Brewer,
408 U.S. 471, 481 (1972)). The determination of the appropriate
form of procedural protection requires "an evaluation of all the
circumstances and an accommodation of competing interests. The
individual's right to fairness must be respected as must the
9
court's need to act quickly and decisively." Eash, 757 F.2d at
570 (citations omitted).
In Jones v. Pittsburgh Nat. Corp, 899 F.2d 1350 (3d
Cir. 1990), where sanctions had been imposed under Fed. R. Civ.
P. 11 and 28 U.S.C. § 1927, we had occasion to address the
requirements of due process in a context similar to that
presented here. Eschewing "any rigid rule[, which] would, to say
the least, be undesirable," we recognized that "[t]he
circumstances must dictate what is required." Id. at 1358. We
therefore announced a flexible rule under which
a district court in the sound exercise of its
discretion must identify and determine the legal basis
for each sanction charge sought to be imposed, and
whether its further resolution requires further
proceedings, including the need for an evidentiary
hearing.
Id. at 1359. Under the particular facts and circumstances of the
case before us, we conclude that the imposition of sanctions
against Dr. Rogal without holding an evidentiary hearing was not
consistent with sound exercise of the district court's
discretion.
Our holding is a narrow one and depends heavily on the
specific nature of Dr. Rogal's alleged misrepresentations and the
relationship of each instance of contradictory or inconsistent
testimony to the central issues of the litigation. We recognize
that in many instances in which sanctionable conduct occurs in
the court's presence, no hearing is required. Cf. Kapco Mfg. Co.
v. C & O Enterprises, Inc., 886 F.2d 1485, 1495 (7th Cir. 1989).
However, the present appeal presents an instance in which,
10
despite the fact that the sanctionable conduct took place in
court, "a hearing could [have] assist[ed] the court in its
decision." Id. This is so because we do not entirely agree with
the district court's conclusion that "[d]uring the trial,
plaintiffs had every opportunity to explain and attempt to
justify the numerous inconsistencies and contradictions" in Dr.
Rogal's testimony. District Court Order of September 27, 1994 at
1.
Given the nature of the disputed testimony, we are
persuaded by Dr. Rogal's contention that he did not have the same
incentive at trial to try to clear up all of the apparent
contradictions and inconsistencies in his testimony or to try to
show his good faith as he would have had at an evidentiary
hearing on the question of sanctions. At trial, Dr. Rogal was
attempting to prove that the defendants had committed the torts
of defamation and false light invasion of privacy. In order to
prove these claims, it was not necessary for him to establish the
truth of every one of the matters asserted in the portions of his
testimony that the district court found to be false or
misleading, and as a matter of trial strategy his attorneys might
well have concluded that trying to clear up all of these points
might have unduly diverted the jury's attention from Dr. Rogal's
own claims. To be sure, Dr. Rogal's credibility was undoubtedly
an important factor at trial, and we assume that his attorneys
were concerned about seeming inconsistencies and contradictions
that undermined his credibility. Nevertheless, the fact remains
that their interest in clearing up apparent inconsistences and
11
contradictions and in demonstrating their client's good faith was
different in some potentially significant respects at the trial
from what it would have been at an evidentiary hearing focused
squarely on the question whether Dr. Rogal gave false or
misleading testimony and acted in bad faith.
It may well be that at an evidentiary hearing Dr.
Rogal's attorneys could not have done any better in attempting to
rehabilitate him than they did at trial, but we conclude that the
dictates of due process require that they be given that chance.
At least on reconsideration, Dr. Rogal's attorneys expressly and
strenuously sought a hearing and made a proffer of the evidence
they would introduce. We recognize that the district court, in
ruling on these requests, did not have the benefit of a precedent
from our court specifically requiring a hearing under these
circumstances, and in the absence of such a precedent we can
understand why the court ruled as it did. We now hold, however,
that under the circumstances of this case, an evidentiary hearing
should be held to allay due process concerns. The evidence cited
in the district court's opinion, unless rebutted, is sufficient
to show that Dr. Rogal gave false or misleading testimony and
proceeded in bad faith. Dr. Rogal should, however, be given the
opportunity to rebut the inferences that the district court drew
from this evidence. See Healy v. Chelsea Resources, Ltd., 947
F.2d 611, 617 (2d Cir. 1991).
In light of our conclusion that the current award of
sanctions should be vacated and that the case should be remanded
for an evidentiary hearing, we need not decide whether, as Dr.
12
Rogal argues, the district court was obligated to advise him of a
potential conflict of interest with his former attorney, Mr.
Mendel, before deciding whether sanctions should be imposed on
either or both of them. On remand, Dr. Rogal will be represented
by new counsel. We also need not decide whether, as Dr. Rogal
asserts, the current award of sanctions is defective because the
district court did not say in so many words that it found that
Dr. Rogal acted in bad faith. We have no reason to assume that
the court on remand will not make an express finding one way or
the other on this question.
Several other arguments raised by Dr. Rogal should be
addressed at this time, however, because they concern matters
that may well arise on remand. None of these arguments, however,
requires extended discussion. First, contrary to Dr. Rogal's
suggestion, the district court, in order to sanction Dr. Rogal
for "bad faith" conduct under Chambers based on his trial
testimony, need not apply the standards that would be applicable
at a criminal trial for perjury. See, e.g., United States v.
Dunnigan, 507 U.S. 87 (1993); Bronston v. United States, 409 U.S.
352 (1973). Dr. Rogal cites no precedent holding that these
standards must be applied in his context, and we are aware of
none. Under Chambers, what is required is a determination that
the party acted in "bad faith, vexatiously, wantonly, or for
oppressive reasons." 501 U.S. at 45-46.
Second, contrary to Dr. Rogal's argument, should the
district court on remand again determine that Dr. Rogal's trial
testimony was pervasively false or misleading and that he acted
13
in bad faith, an award of sanctions comparable in amount to the
award now before us would not be excessive. See Chambers, 501
U.S. at 56; Maddox v. E.F. Hutton Mortgage Corp., 723 F. Supp.
1246, 1249-50 (M.D. Tenn. 1989); Eppes v. Snowden, 656 F. Supp.
1267 (E.D. Ky. 1986).
Finally, we see no basis whatsoever for Dr. Rogal's
argument that this case should be assigned on remand to a
different district court judge. Such reassignments are ordered
only "infrequently and with the greatest reluctance," Nobel v.
Morchesky, 697 F.2d 97, 103 n.11 (3d Cir. 1982), and we see no
ground for doing so here. Contrary to Dr. Rogal's assertions,
the record contains no evidence that the district judge developed
a "bias" against him. We recognize that the district court drew
certain conclusions regarding Dr. Rogal's testimony from the
record evidence and that on remand the judge will be required to
give fair reconsideration to those conclusions in light of the
new evidence that Dr. Rogal wishes to present. We have no doubt,
however, that the judge can and will do so. Nor is the amount of
the sanction imposed on Dr. Rogal by itself a reason to question
the district court's impartiality. To the contrary, the district
court was reacting to what it perceived as repeated and serious
instances of false testimony on the part of Dr. Rogal. We thus
see no ground for ordering reassignment.
VI.
For the foregoing reasons, we reverse the district
court's order imposing sanctions against Dr. Rogal, and we remand
the case for an evidentiary hearing.
14
15
16