In Re: Pressman ( 2006 )

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
8-18-2006
In Re: Pressman
Precedential or Non-Precedential: Precedential
Docket No. 05-1012
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 05-1012 and 05-1026
IN RE: PRESSMAN-GUTMAN CO., INC.
EMPLOYER/SPONSOR OF THE PRESSMAN-GUTMAN CO.,
INC. PROFIT SHARING PLAN,
Petitioner in 05-1012
PRESSMAN-GUTMAN CO., EMPLOYER/SPONSOR
OF THE PRESSMAN-GUTMAN CO., INC.
PROFIT SHARING PLAN,
Appellant in 05-1026
v.
FIRST UNION NATIONAL BANK;
FOREFRONT CAPITAL ADVISORS, LLC.
ALVIN P. GUTMAN; JAMES C. GUTMAN
ALVIN P. GUTMAN; JAMES C. GUTMAN,
Third-Party Defendants
On Appeal from and on a Petition for
a Writ of Mandamus or Prohibition
directed to the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 02-08442)
Honorable Lawrence F. Stengel, District Judge
Argued March 7, 2006
BEFORE: RENDELL and GREENBERG, Circuit Judges, and
IRENAS, District Judge*
(Filed: August 18, 2006)
A. Richard Feldman (argued)
E. McCord Clayton
Bazelon Less & Feldman, P.C.
1515 Market Street, 7th Floor
Philadelphia, PA 19102
Attorneys for Appellant/Petitioner
Pressman-Gutman Co., Inc.
Zachary L. Grayson (argued)
The Lexington Law Group
1201 Chestnut Street, 10th Floor
Philadelphia, PA 19107
Attorneys for Appellee/Respondent
Forefront Capital Management, LLP
Joseph G. DeRespino (argued)
Derespino & Dougher, P.C.
1818 Market Street, Suite 2910
Philadelphia, PA 19103
Attorneys for Appellee/Respondent
First Union National Bank
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. INTRODUCTION
*Honorable Joseph E. Irenas, Senior Judge of the United States
District Court for the District of New Jersey, sitting by designation.
2
This matter comes on before the court on an appeal by plaintiff
Pressman-Gutman Co., Inc. (“PGI”) from certain orders of the district
court disqualifying counsel for PGI and appointing a guardian ad
litem to replace the administrators of the employee profit-sharing plan
on whose behalf PGI initiated this action under the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §1001
et. seq. Inasmuch as PGI recognizes that we may lack appellate
jurisdiction, it has filed a petition for a writ of mandamus or
prohibition (“Pl.’s pet.”) invoking our original jurisdiction and
seeking to prevent enforcement of the orders from which it appeals.
For the reasons explained below, we will dismiss the appeal for lack
of jurisdiction and deny the petition for a writ of mandamus.1
II. FACTUAL AND PROCEDURAL HISTORY
PGI is the employer sponsor and named fiduciary of the
Pressman-Gutman Co., Inc. Profit Sharing Plan (the “Plan”), on
whose behalf PGI in such capacities brought this action on November
13, 2002, against First Union National Bank (“First Union”) and
ForeFront Capital Advisors, LLC (“ForeFront”) (collectively
“defendants”). In the action PGI sought to recover damages on behalf
of the Plan and its participants and beneficiaries that PGI claimed the
Plan sustained as a result of defendants’ mismanagement of the Plan’s
assets.2 In sum, PGI alleged that First Union, as trustee of the Plan,
1
Throughout this opinion we will refer to the petition as seeking
only a writ of mandamus as all the relief PGI seeks is available through
mandamus.
2
“J.A.” refers to the joint appendix filed by PGI. Even though the
facts relating to defendants’ liability are in sharp dispute, the pertinent
facts material to our disposition of these matters are undisputed. We
note that each party in these contentious proceedings accuses its
opponent of improperly citing material outside the record in
contravention of the “black letter law that a United States court of
appeals may not consider material or purported evidence which was not
brought upon the record in the trial court.” United States ex rel.
Bradshaw v. Alldredge, 432 F.2d 1248, 1250 (3d Cir. 1970). We have
taken note of these reciprocal complaints and have considered only
materials that we believe are within the record. We observe, however,
that nothing of which we are aware outside the record, if considered,
3
and ForeFront, as First Union’s sub-advisor, breached fiduciary duties
they owed to the Plan by pursuing an imprudent investment course
contrary to various representations made to PGI on which it justifiably
relied. In initiating this litigation, PGI acted by and through its
secretary, Alvin Gutman, and its president, James Gutman, Alvin’s
son, then the sole members of the Plan’s Administrative Committee.
At the time that PGI filed this action, the law firm of Hamburg &
Golden, P.C. (“H&G”) represented it.
On April 22, 2003, First Union filed a third-party complaint
against the Gutmans asserting that they had participated in and
consented to defendants’ investment decisions and alleging that the
Gutmans breached fiduciary duties owed to the Plan under ERISA by
failing to take appropriate action with respect to the Plan’s
investments and assets.3 First Union further alleged that the Gutmans
were negligent in the discharge of their fiduciary duties. Therefore,
First Union sought judgment in its favor against the Gutmans “for
contribution and/or indemnity, in the event that First Union is found
liable to Plaintiff for any damages.” J.A. at 252.
The Gutmans retained H&G as their attorneys to defend them
against the third-party complaint. This retention led First Union to
file a motion on August 1, 2003, to disqualify H&G as attorneys in
this case alleging that it had an “inherent and unwaivable conflict of
interest resulting from [H&G’s] joint representation of both Plaintiff
and Third-Party Defendants.”4 J.A. at 277. The district court denied
the motion, finding that there was insufficient evidence to disqualify
H&G at that time. ForeFront later filed a renewed motion, in which
First Union joined, to disqualify H&G from representing both the
plaintiff, PGI, and the third-party defendants, the Gutmans, asserting
that new facts had emerged during the course of discovery to bolster
would have caused us to alter our result.
3
Forefront did not file a third-party complaint against the
Gutmans, but First Union and Forefront filed cross-claims against each
other.
4
The motion did not clearly indicate whether First Union sought
H&G’s total disqualification, but its supporting memorandum asked the
court to disqualify “[H&G] and its attorneys from any continued
representational role in this case.” Id. at 286.
4
the case for disqualification.5
Before the district court ruled on the renewed motion to
disqualify H&G, the Gutmans filed a motion for summary judgment
on the third-party complaint that the district court denied on May 13,
2004. The district court held that First Union raised triable issues
concerning the Gutmans’ control over the Plan’s assets and
management, explaining that “to the extent that the Gutmans may
have used their positions to cause First Union and/or ForeFront to
relinquish their independent discretion with respect to management of
the assets and exercised actual control over the assets, the Gutmans
may be liable as fiduciaries for investment decisions.” J.A. at 1770-
71 n.1 (internal citations omitted).
After denying the Gutmans’ motion for summary judgment,
the district court considered ForeFront’s renewed motion to disqualify
H&G. On August 30, 2004, the district court ordered that H&G be
“disqualified from serving as counsel for third-party defendants” and
further ordered that all pending motions be stayed for 30 days to allow
the Gutmans to obtain new counsel. J.A. at 3. The court, however,
did not disqualify H&G from representing PGI. In a memorandum
accompanying the order, the court analyzed the conflict issue under
Rule 1.7 of the Pennsylvania Rules of Professional Conduct (“Pa.
R.P.C.”), as the rule then read, which was applicable in the district
court and which pertains to simultaneous representation of clients
with adverse interests,6 and determined that disqualification was
5
Even though Forefront filed the renewed motion, as far as we
can ascertain only First Union filed the original motion to disqualify
H&G. Nevertheless, in its memorandum supporting its renewed motion
Forefront indicated that both defendants filed the original motion. For
purposes of this opinion we need not resolve this discrepancy.
6
The Local Rules of the United States District Court for the
Eastern District of Pennsylvania incorporate the Pa. R.P.C., which the
Supreme Court of Pennsylvania has adopted. See E.D. Pa. Local R. 83.6
(IV)(B).
Rule 1.7 though since amended effective January 1, 2005,
provided on August 30, 2004, that:
(a) A lawyer shall not represent a client if the
representation of that client will be directly adverse to
5
warranted because “plaintiff’s potential claims against third-party
defendants present directly adverse interests.” J.A. at 7. Specifically
the court explained:
This court finds it unreasonable for [H&G] to believe it
can adequately represent both plaintiff and third-party
defendants. . . . The court’s review of the record
reveals that plaintiff has not consented to [H&G’s]
joint representation of plaintiff and third-party
defendants. Therefore, H&G is disqualified from
representing third-party defendants in this action.
J.A. at 7. On September 17, 2004, Attorney Christopher M. Tretta
filed a notice of appearance on behalf of the Gutmans, and H&G
withdrew as their counsel four days later. On September 8, 2004,
ForeFront and First Union filed motions seeking reconsideration or
clarification of the August 30, 2004 order as they believed that the
court should have disqualified H&G completely while the order only
disqualified H&G from representing the Gutmans as third-party
defendants. In addition, the defendants requested that the court
appoint a “trustee ad litem” for the Plan as they argued, inter alia, that
the Gutmans, who had been in control of the Plan’s litigation, could
not represent its interests adequately.
1. The November 30, 2004 Order
another client, unless: (1) the lawyer reasonably believes
the representation will not adversely affect the
relationship with the other client; and (2) each client
consents after consultation.
(b) A lawyer shall not represent a client if the
representation of that client may be materially limited by
the lawyer’s responsibilities to another client or to a third
person, or by the lawyer’s own interests, unless: (1) the
lawyer reasonably believes the representation will not be
adversely affected; and (2) the client consents after full
disclosure and consultation. When representation of
multiple clients in a single matter is undertaken, the
consultation shall include explanation of the implication
of the common representation and the advantages and
risks involved.
6
On November 30, 2004, the district court granted defendants’
motions which sought to disqualify H&G completely and asked the
court to appoint a trustee ad litem to replace the Gutmans as
representatives of the Plan. At that time the court vacated its August
30, 2004 order. Notwithstanding the fact that two months earlier
H&G had withdrawn from representing the Gutmans and new counsel
had entered an appearance on their behalf, the district court reviewed
“the record as it existed on August 30, 2004,” J.A. at 19, the date that
the court originally partially disqualified H&G, and again analyzed the
conflict issue under Pa. R.P.C. 1.7. The district court explained that
[H&G] must also be disqualified from representing the
profit-sharing plan as plaintiff. Because of [H&G’s]
duty of loyalty to the Gutmans, who it represented on
August 30, 2004, [H&G] could not recommend to the
[P]lan that it act against the Gutmans, as well as, or
instead of, First Union and ForeFront. . . . Based on
[H&G’s] duty of loyalty to the Gutmans, who may well
be liable for the [P]lan’s losses, I conclude that it was
unreasonable for [H&G] to believe that it could
adequately represent the [P]lan. Moreover, since only
the Gutmans represented the [P]lan in this action, I find
that any consent given by the [P]lan to [H&G] for
[H&G’s] continued representation of the [P]lan was
invalid.
J.A. at 19. The district court based its disqualification order, in part,
on the circumstance that it found that there was “no record of
disclosure and waiver,” and because of what it regarded as the
“noteworthy” fact that H&G “has never once produced any evidence
that the members of the [P]lan have any idea about a possible conflict,
let alone full disclosure and waiver.” J.A. at 22. The court thus
disqualified H&G completely.
Notably, the district court further concluded that “the Gutmans
may well not be able to fulfill their duties as administrators and
fiduciaries of the plan because of their potential liability.” J.A. at 23.
In this regard the court explained:
Because the Gutmans may be liable to the [P]lan, the
duty to the [P]lan may include presenting claims
against the Gutmans. However, because the Gutmans
have an interest in protecting themselves from liability,
7
the Gutmans are not likely to act against themselves for
the benefit of the [P]lan, and the [P]lan’s avenues for
obtaining recovery may be adversely affected.
Accordingly, I will appoint a guardian ad litem who
will replace the Gutmans and serve as administrator of
the [P]lan for the limited purpose of this lawsuit. The
guardian ad litem will, in turn, appoint new counsel for
the [P]lan.
Id. at 23 (emphasis added). The court supported its decision to
appoint a guardian ad litem by explaining that Fed. R. Civ. P. 17(c)
gave it “the power to order the appointment of a representative for a
party whose interests may not be adequately represented.” See J.A. at
23 n.6.
Even though the district court had stated its intention to
appoint a guardian ad litem who would retain new counsel for it, PGI
retained A. Richard Feldman as counsel to replace H&G, and
Feldman filed a notice of appearance on December 14, 2004.
Feldman then promptly filed a motion requesting the district court to
reconsider its November 30, 2004 order.7
2. The December 15, 2004 Order
By order entered December 15, 2004, the district court
appointed Louis R. Pichini “as guardian ad litem for [the Plan] for the
limited purpose of this lawsuit.” J.A. at 31. The court further ordered
PGI to provide Pichini with contact information for all members of
the Plan, explaining that “Mr. Pichini shall contact the members . . .
7
In its petition for a writ of mandamus PGI notes that it retained
Feldman “to represent it for the limited purpose of overturning the
November 30, 2004 order on reconsideration, and any appellate
proceedings concerning that Order.” Pl.’s pet. at 10 n.2; see also J.A. at
1903 n.1 (Feldman’s firm “Bazelon, Less & Feldman, P.C. has been
retained” to file a motion for reconsideration of the November 30, 2004
order and for subsequent appellate proceedings). We are not implying
that we think it was improper for PGI to engage Feldman for this limited
purpose as we see no reason why the November 30, 2004 order should
have been insulated from the rather common procedural device of a
motion for reconsideration. In this regard we observe that PGI could not
have anticipated that the attorney for the guardian ad litem would make
such a motion.
8
for the purpose of retaining an attorney to advise the Plan regarding
this litigation and to represent the Plan in this litigation.” J.A. at 31-
32.
In a Memorandum and Order entered December 23, 2004, the
district court denied PGI’s motion to reconsider. The court explained
that PGI’s arguments discussed “the legality of removing a fiduciary
under ERISA,” but that its “December 15 order did not remove any
fiduciary.” J.A. at 37. Instead, according to the court, “[a]t most, the
December 15 order limits the ability of the Gutmans to direct the
efforts of the Plan in this discrete lawsuit because they have
themselves been sued in their capacities as managers or fiduciaries of
the Plan.” J.A. at 36. In another order also entered December 23,
2004, the court denied PGI’s request for an extension of time in which
to appeal the November 30, 2004 and December 15, 2004 orders
inasmuch as, in the court’s view, the orders were not appealable.
On December 30, 2004, PGI filed a notice of appeal, seeking
review of: (1) the November 30, 2004 order disqualifying H&G from
representing PGI and stating that the court intended to appoint a
guardian ad litem for the Plan; (2) the December 15, 2004 order
appointing Pichini guardian ad litem for the Plan; (3) the December
23, 2004 order denying PGI’s motion to reconsider the December 15,
2004 order; and (4) the December 23, 2004 order denying PGI’s
motion for an extension of time in which to appeal.8
In the alternative, “in the event that appellate jurisdiction is
found lacking,” PGI filed a petition for a writ of mandamus in this
8
By letter dated January 6, 2005, the clerk of this court advised
all counsel of record on the appeal that PGI’s appeal was being referred
to a panel of this court for possible dismissal on account of a
jurisdictional defect. The clerk directed counsel to submit in writing
their positions concerning our jurisdiction by January 18, 2005, and they
did so. We will refer to PGI’s “Memorandum of Law on this Court’s
Appellate Jurisdiction,” as “Appellant’s juris. br.”
On February 2, 2005, PGI filed a motion in this court for a stay
of the proceedings in the district court pending resolution of its appeal
and petition for mandamus, but before we ruled on the motion, the
district court issued an order staying the proceedings in that court in light
of these proceedings. Accordingly, we will deny as moot PGI’s February
2, 2005 motion for a stay.
9
court under 28 U.S.C. § 1651 “for the purpose of correcting the
District Court’s unauthorized exercise of judicial power.” Pl.’s pet. at
2, 13. PGI submits that we should issue a writ of mandamus because
the decisions of the district court “are indefensible and beyond its
power to achieve.” Pl.’s pet. at 15. No party or attorney has appealed
from or otherwise challenged the August 30, 2004 order precluding
H&G from representing the Gutmans.
On March 29, 2005, we consolidated PGI’s petition for
mandamus with its appeal, and by this opinion we adjudicate both
proceedings.9
III. JURISDICTION
The district court had jurisdiction over this matter under 28
U.S.C. § 1331 and section 502 of ERISA, 29 U.S.C. § 1132(e). The
parties dispute whether we have appellate jurisdiction. PGI contends
that the orders appointing a guardian ad litem and disqualifying H&G
amount to an injunction immediately appealable under 28 U.S.C. §
1292(a)(1) or, in the alternative, constitute the appointment of a
receiver immediately appealable under 28 U.S.C. § 1292(a)(2). As a
further alternative ground for our exercise of appellate jurisdiction at
this time, PGI submits that the orders appointing a guardian ad litem
are appealable under the collateral order doctrine the Supreme Court
recognized in Cohen v. Beneficial Industrial Loan Corp., 337 U.S.
541, 69 S. Ct. 1221 (1949), and that we have pendent appellate
jurisdiction over the order of disqualification of H&G. Defendants
contend that we do not have appellate jurisdiction and thus we should
dismiss the appeal. We unquestionably, however, have jurisdiction
over PGI’s petition for a writ of mandamus under the All Writs Act,
28 U.S.C. § 1651, and defendants do not contend otherwise.
IV. DISCUSSION
9
After PGI filed this appeal, the court-appointed guardian ad
litem selected new counsel, and on January 26, 2005, that attorney,
Mathieu Shapiro, filed a notice of appearance on behalf of PGI. We
note, however, that Feldman is representing PGI on its appeal and
petition for mandamus. See supra n.7.
10
1. Appellate Jurisdiction
We point out at the threshold of our discussion, that we are
obliged to determine whether we have jurisdiction over PGI’s appeal
before we reach the merits of its various challenges to the district
court orders through the exercise of our appellate jurisdiction, and that
if we do not have jurisdiction we cannot reach the merits of the
appeal. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 93-
94, 118 S. Ct. 1003, 1012 (1998); Firestone Tire & Rubber Co. v.
Risjord, 449 U.S. 368, 379, 101 S. Ct. 669, 676 (1981) (“A court lacks
discretion to consider the merits of a case over which it is without
jurisdiction[.]”); Sheet Metal Workers’ Int’l Ass’n Local 19 v. Herre
Bros. Inc., 201 F.3d 231, 237 (3d Cir. 1999). Of course, the
jurisdictional problem is the result of the undeniable fact that the
district court has not entered a final decision as that term
conventionally is understood under 28 U.S.C. § 1291, the basis on
which a court of appeals usually exercises appellate jurisdiction. For
the reasons we explain below, we find that we do not have appellate
jurisdiction at this time, and consequently we will dismiss the appeal.
A. 28 U.S.C. § 1292(a)(1)
PGI argues that the orders entered November 30, 2004, and
December 15, 2004, are appealable with respect to the removal of the
Gutmans, the appointment of the guardian ad litem, and the removal
of H&G, pursuant to 28 U.S.C. § 1292(a)(1), which grants the courts
of appeals jurisdiction over appeals from “[i]nterlocutory orders . . .
granting, continuing, modifying, refusing or dissolving injunctions . . .
except where a direct review may be had in the Supreme Court.”
According to PGI, though the orders it challenges lack the formal
trappings of injunctive orders, nevertheless “[b]ecause those Orders
prohibited [PGI] from allowing its duly appointed profit sharing plan
administrators to continue to exercise any authority or control over
[PGI’s] lawsuit, including the selection of replacement counsel, the
Orders amounted to a grant of an injunction.” Appellant’s juris. br. at
23; see also Appellant’s br. at 54-56. This argument lacks merit.
An “injunction” for the purposes of section 1292(a)(1) is an
order “[1] directed to a party, [2] enforceable by contempt, and [3]
designed to accord or protect ‘some or all of the substantive relief
sought by the complaint’ in more than a [temporary] fashion.” Cohen
v. Bd. of Trustees, 867 F.2d 1455, 1465 n.9 (3d Cir. 1989) (en banc)
(quoting Wright & Miller, et al., Federal Practice and Procedure §
11
3922, at 29 (1977)); see also Saudi Basic Indus. Corp. v. Exxon Corp.,
364 F.3d 106, 110 (3d Cir. 2004). We have held that section
1292(a)(1) “should be construed narrowly so as not to swallow the
final-judgment rule.” Hershey Foods Corp. v. Hershey Creamery Co.,
945 F.2d 1272, 1276 (3d Cir. 1991).
In this case, the district court has not granted or denied all or
part of the substantive relief sought by any party in this action. We
find unpersuasive PGI’s contention that because, as the district court
explained, the orders replacing the Gutmans with a guardian ad litem
were intended to prevent adverse effects upon “the [P]lan’s avenues
for obtaining recovery,” see J.A. at 23, the orders can be said “to
protect” the substantive relief sought by PGI and therefore granted
injunctive relief. See Appellant’s juris. br. at 25-26; Appellant’s br. at
54-56. Such a broad reading of section 1292(a)(1) would undermine
the “limited exception to the final judgment rule” that section
1292(a)(1) carves out. See Hershey Foods Corp., 945 F.2d at 1276
(internal quotation marks and citation omitted). Moreover, even
accepting PGI’s reasoning, there is no connection between the
substantive relief PGI is seeking in the district court and the
essentially procedural relief it seeks here. In this regard we reiterate
our observations from the outset of this opinion, i.e., that PGI has
brought this action against defendants to recover damages on account
of their alleged mismanagement of the Plan’s assets whereas this
appeal is from an order disqualifying counsel for PGI and appointing a
guardian ad litem to replace the administrators of the Plan in this
litigation.
Instead of being injunctive in character, the orders from which
PGI appeals are better understood as being “restraints or directions . . .
concerning the conduct of parties or their counsel,” unrelated to the
substantive relief sought. Id. at 1278 (quoting Int’l Prod. Corp. v.
Koons, 325 F.2d 403, 406 (2d Cir. 1963)). We have deemed orders of
such character to fall outside of section 1292(a)(1). Id. Moreover, if
the court issued the orders “to protect and maximize the Plan’s
recovery of damages,” as PGI claims, Appellant’s br. at 55, their
practical effect is less like the effect flowing from an injunction and
more like the effect created by traditional interim security orders, such
as orders granting a writ of replevin or attachment pending disposition
of an action which fall outside the scope of section 1292(a)(1). See,
e.g., Nutrasweet Co. v. Vit-Mar Enters., Inc., 176 F.3d 151, 154 (3d
Cir. 1999). Overall, it is clear that we do not have jurisdiction under
section 1292(a)(1).
12
Barb. 28 U.S.C. § 1292(a)(2)
PGI next argues that the orders entered November 30, 2004,
and December 15, 2004, are appealable pursuant to 28 U.S.C. §
1292(a)(2), which provides for appeals from the appointment of a
receiver. But section 1292(a)(2) “is interpreted narrowly to permit
appeals only from the three discrete categories of receivership orders
specified in the statute, namely [1] orders appointing a receiver, [2]
orders refusing to wind up a receivership, and [3] orders refusing to
take steps to accomplish the purposes of winding up a receivership.”
SEC v. Black, 163 F.3d 188, 195 (3d Cir. 1998). PGI asserts that
“[a]lthough the Court characterized Mr. Pichini as a ‘guardian ad
litem,’ the court has in fact appointed a receiver to safeguard the
Plan’s property interest in its causes of action for damages.”
Appellant’s br. at 48 (footnote omitted). We find this argument
unpersuasive.
As is true for a determination of whether an order is
appealable under section 1292(a)(1), the label used by the district
court is not dispositive in a determination of the appealability of an
order under section 1292(a)(2). See United States v. Sylacauga
Props., Inc., 323 F.2d 487, 490 (5th Cir. 1963) (“A receiver by any
other name, or by no name, is still a receiver.”). In determining
whether a receiver has been appointed, a court must take into account
“the purposes of the receivership and the extent of the powers possible
in the situation.” 16 Wright, Miller & Cooper, Federal Practice and
Procedure: Jurisdiction 2d § 3925, at 220 (1996). In this regard, PGI
recognizes that a receiver “take[s] possession of and preserves,
pendent lite, and for the benefit of the party ultimately entitled to it,
the fund or property in litigation.” FTC v. World Wide Factors, Ltd.,
882 F.2d 344, 348 (9th Cir. 1989) (internal quotation marks and
citation omitted).
The powers of the guardian ad litem in this case, however, are
unlike the powers given the officers in the cases PGI cites in which
courts have given receivers control over property and have tasked the
receivers with preserving it. Thus, in World Wide Factors, 882 F.2d
at 348, a special master was, in reality, a receiver for certain purposes
insofar as the master was ordered to account for and preserve the
assets of the defendant to be available at time of trial in the event the
defendant was found liable in the action. In Sylacauga Properties, 323
F.2d at 490, in an action to foreclose a mortgage which included a
provision for the appointment of a receiver during a foreclosure
13
proceeding, the court appointed a receiver to receive and collect rents
and to preserve the property pending resolution of the dispute.
Clearly, World Wide Factors and Sylacauga Properties differ from
this case because we see no suggestion here that the Plan’s assets
must be “preserved” or otherwise managed by the guardian ad litem
pending litigation.
It is, of course, significant that the district court narrowly
circumscribed the role of the guardian ad litem, explaining in its
November 30, 2004 order that it planned “[to] appoint a guardian ad
litem who will replace the Gutmans and serve as administrator of the
[P]lan for the limited purpose of this lawsuit,” J.A. at 23 (emphasis
added). The district court, in fact, promptly made the appointment. In
asserting that it has suffered a “substantial intrusion” on its property
rights in its cause of action, see Appellant’s juris. br. at 19-20, PGI
overstates the role of the guardian ad litem by seizing upon the word
“replace” used by the district court and ignoring the phrase that
expressly limits the role of the guardian to “the limited purpose of this
lawsuit.” J.A. at 23. The district court reiterated this express
limitation in its subsequent orders of December 15, 2004, see J.A. at
31-32 (appointing Pichini “guardian ad litem for [the Plan] for the
limited purpose of this lawsuit”) (emphasis added), and of December
23, 2004, see J.A. at 35-36 (explaining that guardian ad litem does not
replace the Gutmans as Plan administrators but merely “limits the
ability of the Gutmans to direct the efforts of the Plan in this discrete
lawsuit”) (emphasis added). There is no question that the functions of
the guardian ad litem in this case fall far short of those of a receiver
for in each of its several orders the district court expressly limited the
role of the guardian ad litem and otherwise did not disturb the
Gutmans in their capacity as fiduciaries and administrators of the
Plan.
Lastly, with respect to the applicability of section 1292(a)(2),
we find unpersuasive PGI’s argument that the guardian ad litem is, in
fact, a receiver because he is “the recipient of a court-ordered transfer
of another’s property” in the form of PGI’s cause of action.
Appellant’s br. at 48; Appellant’s juris. br. at 19. We reject PGI’s
assertion that it is of no consequence that “in the usual case, the
property is the subject matter of the litigation,” whereas here, “the
property is the cause of action itself.” Appellant’s juris. br. at 19 n.8.
If we adopted PGI’s expansive interpretation of what type of officer is
a receiver, we effectively would eliminate the distinction between
guardians ad litem and receivers, and, for that matter, between
14
fiduciaries and receivers. We have no intention of doing any such
thing.10
We primarily have considered the appointment of the guardian
10
In his dissent, Judge Irenas submits that we have jurisdiction
over this appeal pursuant to 28 U.S.C. § 1292(a)(2) inasmuch as the so-
called “guardian ad litem” is, in fact, a receiver. But rather than focusing
on how or why the district court’s orders amount to orders appointing a
receiver, he devotes his analysis largely to challenging the accuracy of
the label “guardian ad litem” as used by the district court. As we have
made clear, we recognize that labels are certainly not dispositive and that
a receiver by any name or no name is still a receiver. Thus, contrary to
Judge Irenas’ suggestion, we do not base our decision regarding the
applicability, or lack thereof, of section 1292(a)(2), simply on some
unconscious assumption arising from repeated use of the descriptive
term employed by the district court. It well may be that the label
“guardian ad litem” is less accurate than, for example, “trustee ad litem,”
the term the defendants used in their September 8, 2004 motion that
resulted in Pichini’s appointment, but simply removing the district
court’s “guardian ad litem” label does not render the appointee a
receiver. Instead, as we explained, we are concerned primarily with the
function and responsibilities of the “guardian ad litem” rather than the
name used to refer to the position. To that end, we note that even though
the guardian ad litem has control over the cause of action in this case,
there remain myriad duties, functions and responsibilities related to
managing the Plan’s assets over which the guardian ad litem does not
have any control. For this reason, the district court’s orders do not
amount to orders appointing a receiver for the Plan, whether or not the
district court employed an accurate term in describing Pichini’s position.
Finally, we note that Judge Irenas’ analysis, and, in particular, his
example of the benevolent grandmother trustee, misses the mark
inasmuch as the analysis is based on the assumptions that the trustee
grandmother is blameless and that the trust beneficiaries would not want
to pursue a frivolous claim against their own trustee grandmother. But
to assume the preferences of the Plan beneficiaries in this case, or those
of the grandchildren in Judge Irenas’ analogy, is to engage in
speculation. The bottom line is that it remains unclear what claims, if
any, the Plan beneficiaries would have or desire to pursue against the
Plan administrators, and those are precisely the questions that the district
court sought to put in the hands of an independent representative of the
Plan rather than the conflicted Plan administrators.
15
ad litem in our section 1292(a)(2) discussion, but we have not
overlooked PGI’s contention that the scope of review under that
section also includes the order disqualifying H&G. Of course,
inasmuch as we do not find that section applicable even as to the
appointment of the guardian ad litem, the section does not give us
jurisdiction over an appeal from the disqualification of H&G. On this
point we state only that it could not be argued seriously that in itself
an order disqualifying an attorney has anything to do with a
receivership. Consequently, the disqualification order could not
possibly be within section 1292(a)(2).
C. Collateral Order Doctrine
As a “further alternative ground for jurisdiction,” PGI
contends that the district court’s orders appointing a guardian ad litem
are immediately appealable under 28 U.S.C. § 1291 via the collateral
order doctrine recognized in Cohen v. Beneficial Industrial Loan
Corp., 337 U.S. 541, 69 S. Ct. 1221. Appellant’s juris. br. at 28; see
also Appellant’s br. at 57-60.11 Under the collateral order doctrine,
the authority of the courts of appeals in section 1291 to review “all
final decisions,” “includes appellate jurisdiction over a narrow class
of decisions that do not terminate the litigation, but are sufficiently
important and collateral to the merits that they should nonetheless be
treated as final.” Will v. Hallock, U.S. ,126 S. Ct. 952, 956
(2006) (internal quotation marks omitted). For the collateral order
doctrine to apply, the order in question must: “(1) conclusively
determine the disputed question, (2) resolve an important issue
completely separate from the merits of the action, and (3) be
effectively unreviewable on appeal from a final judgment.” Id. at 957
(internal quotation marks and citation omitted).
The three criteria that must be met for the collateral order
doctrine to apply are “stringent,” and the Supreme Court repeatedly
has emphasized the doctrine’s “modest scope.” Id.; see also Digital
Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 868, 114 S. Ct.
1992, 1996 (1994) (“[W]e have . . . repeatedly stressed that the
11
PGI concedes that the orders disqualifying H&G are “not
appealable under the collateral order doctrine,” Appellant’s br. at 57
n.35, as it must. See Richardson-Merrell, Inc. v. Koller, 472 U.S. 424,
438-39, 105 S. Ct. 2757, 2765 (1985) (holding that attorney
disqualification orders in civil cases are not reviewable under the
collateral order doctrine).
16
‘narrow’ exception should stay that way 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[.]”) (internal
citation omitted). We have explained that a failure to meet any one of
the three factors renders the doctrine inapplicable as a basis for
appeal, no matter how compelling the other factors may be. Virgin
Islands v. Hodge, 359 F.3d 312, 320 (3d Cir. 2004).
Clearly the collateral order doctrine is inapplicable here
because the orders PGI challenges do not involve an issue completely
separate from the merits of the action. On the contrary, the orders
appointing a guardian ad litem for the Plan are enmeshed with the
factual and legal issues comprising the third-party claim against the
Plan administrators alleging breach of fiduciary duties owed to the
Plan, and review of the orders would draw this court into the
substance of the third-party complaint. In its order of November 30,
2004, the district court recognized as much, explaining that its denial
of the third-party defendants’ motion for summary judgment on the
basis that genuine issues of material fact existed “concerning the
Gutmans’ control over the plan assets and investment decisions” was
“significant to the disqualification issue.” J.A. at 14.
PGI cites Collinsgru v. Palmyra Board of Education, 161 F.3d
225, 229 (3d Cir. 1998), to illustrate an order that raises an issue
completely separate from the merits of the litigation, but Collinsgru is
distinguishable and provides no support for PGI’s position. In
Collinsgru, we concluded that we had jurisdiction under the collateral
order doctrine over an order dismissing a child’s claims under the
Individuals with Disabilities Education Act (“IDEA”) after his parents
were denied permission to represent him in the district court. Id. at
230. We explained that the issue of whether the appellants could
represent their son in the district court was completely separate from
the merits of the underlying IDEA claim alleging inappropriate denial
of special education services. Id. But Collinsgru did not present any
question of whether the parents adequately could represent the
interests of their son. Moreover, the son did not have any claims
against his parents, and the case did not otherwise raise the specter of
conflicting interests between parents and child. Thus, the procedural
context here renders Collinsgru inapposite.
We have not overlooked our discussion with respect to section
1292(a)(1) in which we pointed out that there is no connection
between the relief PGI sought in bringing this action and the effect of
17
the district court orders from which PGI now appeals. That
observation is not in any way inconsistent with our conclusion that the
orders from which the appeal has been taken relate to the substantive
issues raised by the third-party complaint. In this regard we point out
that the Cohen v. Board of Trustees test indicates that the grant or
denial of relief can be injunctive for purposes of section 1292(a)(1)
only if it is designed to accord or protect some or all of the substantive
relief sought in the action. Here, on the other hand, we are concerned
with procedural steps leading to a substantive disposition rather than
the disposition itself.
We realize that one of the criteria for finding the collateral
order doctrine to be applicable is that the issue to be considered on the
appeal is important. Nevertheless, neither the vagaries of this
particular case nor the importance of rights purportedly compromised
warrants us reaching a different result for the Supreme Court has
“consistently eschewed a case-by-case approach to deciding whether
an order is sufficiently collateral.” Cunningham v. Hamilton County,
527 U.S. 198, 206, 119 S. Ct. 1915, 1921 (2000); see also Digital
Equip. Corp., Inc., 511 U.S. at 868, 114 S.Ct. at 1996 (“[T]he issue of
appealability under § 1291 is to be determined for the entire category
to which a claim belongs . . . . ”). The importance of the issue comes
into consideration only if the issue is completely separate from the
merits of the action, and here it is not separate. Thus, even if PGI
somehow has a more compelling objection to the appointing of a
guardian ad litem than the “ordinary” party seeking to appeal from an
order making such an appointment, controlling precedent counsels
against such a case-by-case application of the collateral order
doctrine. See Bacher v. Allstate Ins. Co., 211 F.3d 52, 57 (3d Cir.
2000).
Finally, we see no reason to conclude that the orders
appointing the guardian ad litem effectively will be unreviewable on
appeal from a final judgment. In our view, the appointment of a
substitute Plan representative to replace the otherwise conflicted Plan
administrators is similar to an order disqualifying conflicted counsel,
which is not appealable under the collateral order doctrine. See
Richardson-Merrell, Inc. v. Kohler, 472 U.S. 424, 438-39, 105 S. Ct.
2757, 2765 (1985). But just as a party suffering an unsatisfactory
judgment with substituted counsel can challenge an order
disqualifying its earlier choice of counsel on an appeal following the
entry of final judgment, so, too, will the Plan be able to appeal should
it suffer an unsatisfactory judgment with a substitute Plan
18
representative.12 See Comuso v. Nat’l R.R. Passenger Corp., 267 F.3d
331, 336-37 (3d Cir. 2001).13
We recognize that sometimes essentially procedural orders can
be effectively unreviewable on appeal from a final judgment, and that
in such situations we have allowed earlier appeals predicating our
jurisdiction on the collateral order doctrine. Perhaps our leading case
within that category is In re Ford Motor Co., 110 F.3d 954, 963
(1997), in which we allowed an immediate appeal from an order
denying a motion seeking the protection from release on discovery of
documents claimed to be protected by the attorney-client privilege or
12
We do not imply that we have any opinion as to what an
appropriate disposition would be on that appeal if it is ever taken. We
are only saying that the disqualification issue can be raised on an appeal
after a final judgment. We recognize that the guardian ad litem will
control the litigation until final judgment and that we have indicated that
we think it unlikely that the guardian ad litem would have filed a motion
seeking reconsideration of the November 30, 2004 order that lead to his
appointment. See supra n.7. Plainly, however, the situation would be
different following unsuccessful litigation, and we do not doubt that if
PGI is unsatisfied with the result in the district court and it attributes the
poor result to the appointment of the guardian ad litem it will find a way
to appeal.
13
We need not address the issue of whether we have pendent
appellate jurisdiction over the order disqualifying H&G because we do
not have jurisdiction under the collateral order doctrine to review the
orders resulting in the appointment of a guardian ad litem to which PGI
has sought to tie its appeal of the disqualification order. See Appellant’s
juris. br. at 41 (“In the event the Court . . . predicates jurisdiction upon
the collateral order doctrine, plaintiff further submits that the Court
should exercise pendent appellate jurisdiction over the disqualification
of H&G.”). We have not discussed separately the appealability of the
December 23, 2004 order denying reconsideration as PGI does not focus
on the appealability of that order and does not suggest that it is
appealable now even if the November 30 and December 15, 2004 orders
are not now appealable. Plainly, however, it is not now appealable,
either in relationship to those orders or standing alone. Furthermore, we
have not discussed the appealability of the December 23, 2004 order
denying PGI an extension of time to appeal as it is moot inasmuch as this
appeal is timely. In any event PGI acknowledges that it is not
“independently appealable.” Appellant’s juris. br. at 10 n.4.
19
as work product. We reached this result because a delay in allowing
the appeal would have permitted the very disclosure that the appellant
claimed applicable rules precluded. See also Whiting v. Lacara, 187
F.3d 317 (2d Cir. 1999) (per curiam) (jurisdiction order under
collateral order doctrine for order denying attorney’s motion to
withdraw).
This case, however, is different from Ford Motor Co. It well
may be that if this litigation goes ahead in the control of the guardian
ad litem and replacement counsel and there is a reversal after final
judgment, events in this litigation before the appeal could have some
impact on later proceedings in the district court.14 Yet such an effect
is always possible following a reversal, but it differs in character from
the situation in Ford Motor Co. where the right to be protected has
been irretrievably lost when the materials are released.
2. Petition for Writ of Mandamus
Dismissal of PGI’s interlocutory appeal for want of
jurisdiction does not end our consideration of this case for, as we
explained above, PGI also filed a petition for a writ of mandamus
under the All Writs Act, 28 U.S.C. § 1651, which we have
consolidated with its appeal. In brief, PGI asserts that we should issue
a writ of mandamus to correct the district court’s errors in replacing
the Gutmans with a guardian ad litem and disqualifying H&G from
representing PGI.
We have the power to issue a writ of mandamus pursuant to 28
U.S.C. § 1651(a), “in exceptional cases where the traditional bases for
jurisdiction do not apply.” In re Pasquariello, 16 F.3d 525, 528 (3d
Cir. 1994). However, as we have explained, “mandamus is not a mere
alternative to an appeal” and instead properly is viewed as a “safety
valve in the final-judgment rule” providing a “drastic remedy . . . only
in extraordinary circumstances in response to an act amounting to a
14
We have no reason to believe that the guardian ad litem and the
attorney he has selected, see supra n.9, will be any less diligent than Plan
administrators and their attorneys would be in pursuing this litigation.
Thus, we do not believe that if there is a reversal of the orders appointing
the guardian ad litem the Plan will have been prejudiced by his
prosecution of the case prior to the reversal. But if PGI believes
otherwise we do not doubt that it will be able to advance its contentions
on appeal. See supra n.12.
20
judicial usurpation of power.” In re Briscoe, 448 F.3d 201, 211 (3d
Cir. 2006) (internal quotation marks and citations omitted). But
mandamus is an extraordinary remedy, and “[a]s the adjective
‘extraordinary’ implies . . . courts of appeals must be chary in
exercising that power,” so as to avoid having mandamus used as a
substitute for appeal. In re Sch. Asbestos Litig., 977 F.2d 764, 772
(3d Cir. 1992). “Mandamus is disfavored because its broad use would
threaten the policy against piecemeal appeals.” Id. (citing Kerr v.
United States Dist. Court, 426 U.S. 394, 403, 96 S. Ct. 2119, 2124
(1976)).
Courts have used mandamus “to confine an inferior court to a
lawful exercise of its prescribed jurisdiction or to compel it to
exercise its authority when it is its duty to do so.” In re Sch. Asbestos
Litig., 977 F.2d at 773 (quoting Roche v. Evaporated Milk Ass’n, 319
U.S. 21, 26, 63 S. Ct. 938, 941 (1943)). Mandamus may lie to prevent
a district court from usurping a power that it lacks and to rectify clear
abuses of discretion. Id.; see also Hahnemann Univ. Hosp. v. Edgar,
74 F.3d 456, 461 (3d Cir. 1996) (mandamus constitutes a “drastic
remedy that a court should grant only in extraordinary circumstances
in response to an act amounting to judicial usurpation of power”)
(internal quotation marks omitted). Three conditions must be satisfied
for the issuance of a writ of mandamus: (1) there must be “no other
adequate means to attain the relief sought;” (2) the right to issuance of
the writ must be “clear and indisputable;” and (3) the issuing court, in
the exercise of its discretion, must be satisfied that “the writ is
appropriate under the circumstances.” In re Briscoe, 448 F.3d at 212
(citing Cheney v. United States Dist. Court, 542 U.S. 367, 380-81,
124 S. Ct. 2576, 2587 (2004)).15
A. Appointment of Guardian ad litem
15
We have noted on several occasions that “[w]here interlocutory
appeal seems a practical but untried avenue, we will ordinarily deny a
petition for mandamus.” In re School Asbestos Litig., 977 F.2d at 774;
see also In re Briscoe, 448 F.3d at 213 n.7. Although PGI tried
unsuccessfully to obtain interlocutory appeal under 28 U.S.C. § 1292(a),
certification for an interlocutory appeal under section 1292(b) remained
an untried avenue. Nonetheless, given the district court’s response in
denying PGI’s Motion for Extension of Time to File Appeal, it seems
abundately clear that the district court would have denied such a request,
rendering such review an “impractical avenue” for PGI to pursue. See
In re Briscoe, 448 F.3d at 213 n.7.
21
PGI cannot demonstrate that its claimed right to a writ of
mandamus is “clear and indisputable” with respect to the several
orders replacing the Gutmans with a guardian ad litem for purposes of
the litigation. PGI devotes a substantial portion of its briefs in this
court to arguing that the district court improperly removed the
Gutmans as Plan administrators absent any finding of substantial
breach of fiduciary duty, as required by ERISA sections 409(a) and
502(a)(2), 29 U.S.C. §§ 1109(a), 1132(a)(2).16 But PGI’s argument is
misplaced because the district court did not apply ERISA sections
409(a) and 502(a)(2) for the excellent reason that it did not remove a
fiduciary, and thus the sections were not applicable. Our conclusion
in this regard cannot be avoided because, despite PGI’s persistent
effort to recast the district court’s orders as removing the Gutmans
from their capacity as ERISA fiduciaries, the court made clear in
express terms that the orders at issue did not remove them as Plan
fiduciaries or otherwise disturb their role as Plan administrators.
Instead, the orders merely suspended their role managing this
litigation on behalf of the Plan. See, e.g., J.A. at 36 (clarifying that
role of guardian ad litem is limited “to direct[ing] the efforts of the
Plan in this discrete lawsuit”) (emphasis added).
Moreover, PGI recognizes the limited nature of the
appointment in its petition for mandamus, conceding that “[w]hile it is
16
Section 409(a) of ERISA provides:
Any person who is a fiduciary with respect to a plan who
breaches any of the responsibilities, obligations, or duties
imposed upon fiduciaries by this subchapter shall be
personally liable to make good to such plan any losses to
the plan resulting from each such breach, and to restore
to such plan any profits of such fiduciary which have
been made through use of assets of the plan by the
fiduciary, and shall be subject to such other equitable or
remedial relief as the court may deem appropriate,
including removal of such fiduciary. A fiduciary may
also be removed for a violation of section 1111 of this
title.
29 U.S.C. § 1109(a). Section 502(a)(2) further provides that a civil
action “for appropriate relief under section [409],” may be brought “by
the Secretary, or by a participant, beneficiary or fiduciary.” 29 U.S.C. §
1132(a)(2).
22
true that the Court did not remove the Gutmans completely from
serving as members of the Plan’s Administrative Committee, it is
undeniable that it removed them in part.” Pl.’s pet. at 25 (emphasis
added). This so-called removal “in part” is a far cry from the removal
of an ERISA fiduciary governed by section 409(a), particularly when,
as here, the only administrative capacity affected is the Gutmans’
ability to direct litigation in which their interests may conflict with
those of the Plan they purport to represent. Section 409(a), by its
terms, pertains to the sanction of removal in cases where a fiduciary
breaches any of the responsibilities, obligations, or duties imposed by
ERISA. See 29 U.S.C. § 1109(a). Here, however, the district court’s
appointment of a guardian ad litem was not a sanction at all but rather
was a prophylactic measure to ensure adequate representation for the
real party-in-interest, the Plan. Thus, the district court removed the
Gutmans without finding that they breached their duties in any way.
As a leading treatise explains, federal courts always have had
the power to appoint special representatives for persons whose general
representative has conflicting interests. 6A Wright, Miller & Kane,
Federal Practice and Procedure: Civil 2d § 1570, at 498 (1990).
Moreover, the common law of trusts, “which offers a starting point for
analysis of ERISA unless it is inconsistent with the language of the
statute, its structure, or its purposes,” Harris Trust & Sav. Bank v.
Salomon Smith Barney, Inc., 530 U.S. 238, 250, 120 S. Ct. 2180, 2189
(2000) (internal citations and quotation marks omitted), contemplates
the appointment of an independent representative to replace a
conflicted trustee. See, e.g., Getty v. Getty, 205 Cal. App. 3d 134,
140-42 (Cal. Ct. App. 1988) (affirming appointment of trustee ad
litem with limited powers to conduct discrete litigation in lieu of
conflicted trustee).
Nor can we dismiss as unfounded the district court’s
determination that a potential conflict of interest necessitates a special
representative for the Plan in this litigation. In one noteworthy case,
the Court of Appeals for the Fifth Circuit remarked that an ERISA
fiduciary violates sections 404(a)(1) and 406(b)(2) as a matter of law
by actively participating in the decision-making process concerning
whether to pursue legal remedies against himself. Iron Workers Local
No. 272 v. Bowen, 624 F.2d 1255, 1261 (5th Cir. 1980). This case
presents obvious potential for a similar conflict of interest inasmuch
as the Plan’s administrators have been sued in their capacities as Plan
fiduciaries in a third-party complaint, thus potentially compromising
their ability to act “solely in the interest of the participants and
23
beneficiaries” of the Plan. 29 U.S.C. § 1104(a)(1). By appointing a
guardian ad litem as a prophylactic measure, the district court sought
to obviate a problem like that which occurred in Iron Workers Local
No. 272. While the appointment of a guardian ad litem later may
prove to have been an unnecessary precaution should the third-party
claims against the Gutmans fail, the potential problems created by the
Gutmans acting for PGI are such that, whatever we may conclude on a
later appeal if there is one, PGI hardly can be said to possess a present
“clear and indisputable” right to extraordinary mandamus relief with
respect to the appointment.17
PGI raises various due process claims challenging the
appointment of a guardian ad litem but its arguments in this respect
lack merit, and we need not belabor them. With regard to procedural
due process, PGI had adequate notice of and an opportunity to
respond to the contemplated appointment of an independent
representative for the Plan. Indeed, the district court when denying
reconsideration of the orders appointing Pichini noted that PGI “did
not respond in substance to the requests heard earlier . . . to disqualify
counsel and appoint an independent party to represent the [P]lan,” and
instead chose to “attack[] the motives of the defendants and
vehemently den[y] the existence of any conflict of interest.” J.A. at
37.18 Nor can we conclude that the appointment of a guardian ad
litem violates substantive due process because we reject PGI’s
17
PGI submits that “potential conflicts of interest on the part of
plan administrators are so common as to be routine.” Appellant’s br. at
31. We note, however, that the case PGI cites as an example of this
point, Smathers v. Multi-Tool, Inc., 298 F.3d 191, 197-99 (3d Cir. 2002),
is inapposite. Smathers involved a former employee who sued to obtain
benefits after an ERISA claims review fiduciary denied his request for
benefits. We explained that “[t]he potential for a conflict of interests
ar[ose] because [the employer] both fund[ed] and administer[ed] the
welfare benefits plan.” Id. at 197. While the case before us now
involves a potential conflict of interest in an ERISA case, the similarity
with Smathers ends there, for here we have a wholly different species
within the genus of potential ERISA conflicts.
18
The docket sheets indicate that PGI availed itself of its
opportunity to file a submission in opposition to the motion to appoint
a “trustee ad litem” and that the court conducted a hearing on the motion
at which counsel for PGI and replacement counsel for the Gutmans
addressed the court.
24
assertion that the appointment of a non-conflicted representative for
the Plan was “conduct that shocks the conscience and violates the
decencies of civilized conduct.” County of Sacramento v. Lewis, 523
U.S. 833, 846, 118 S. Ct. 1708, 1717 (1998) (internal quotation marks
and citation omitted); United Artists Theatre Circuit, Inc. v. Township
of Warrington, 316 F.3d 392, 399-402 (3d Cir. 2002). In point of fact
we regard the substantive due process argument as insubstantial.19
B. Disqualification of H&G
PGI correctly notes that the Supreme Court has left open the
door to mandamus relief in certain cases involving erroneous
disqualification of counsel. See Richardson-Merrell, Inc., 472 U.S. at
435, 105 S.Ct. at 2763 (citing Firestone Tire & Rubber Co., 449 U.S.
at 378 n.13, 101 S. Ct. at 676 n.13); see also In re Sandahl, 980 F.2d
1118, 1121-22 (9th Cir. 1992) (granting petition for writ of mandamus
to vacate “patently erroneous” disqualification order). It does not
follow, however, that merely because such an extraordinary writ may
be available in some instances when counsel has been disqualified,
that it is available here. Clearly, each petition for a writ of mandamus
must be considered taking into account the circumstances surrounding
the particular disqualification. Here, as with its challenge to the
appointment of a guardian, PGI cannot demonstrate that its right to a
writ of mandamus to override the disqualification of counsel is “clear
and indisputable.”
We have not overlooked a belated challenge that PGI makes in
its reply brief to the defendants’ standing to have sought
disqualification of H&G. Inasmuch as PGI did not make this
challenge in its opening brief, it has waived this argument. See
United States v. Pelullo, 399 F.3d 197, 222 (3d Cir. 2005) (“It is well
settled that an appellant’s failure to identify or ague an issue in his
opening brief constitutes waiver of that issue on appeal.”).20
19
PGI in its brief acknowledges that the “shocks the conscience”
standard is applicable to the substantive due process claim. Appellant’s
br. at 17 (“[T]he challenged actions of the [district court] satisfy the
conscience-schocking test of Lewis and United Artists.”).
20
We also point out that as far as we are aware PGI did not raise
the standing issue with respect to removal of H&G in the district court
and that, in contrast to its belated attorney disqualification claim, in its
opening brief in this court PGI extensively argued that defendants lacked
25
Turning to the merits of PGI’s petition with respect to the
complete removal of H&G, even if the district court should have
applied Pa. R.P.C. 1.9, as PGI submits, PGI nonetheless cannot
demonstrate that it is entitled to mandamus relief. Rule 1.9 prohibits
a lawyer from taking a position adverse to a former client in the same
or a related matter unless the former client consents after consultation.
Here, it has not been shown that its former clients, the Gutmans,
consented to H&G representing PGI let alone consented after
appropriate consultation as required by Rule 1.9. Rather, portions of
the record suggest just the opposite– both Alvin Gutman and James
standing to seek the Gutmans’ removal. On the other hand, PGI in its
opening brief in this court implied that defendants did have standing to
bring the motion to disqualify H&G as it argued, citing a comment to Pa.
R.P.C. 1.7, “that a disqualification motion filed by an opposing party
‘should be viewed with caution . . . for it can be misused as a technique
of harassment.’” Appellant’s br. at 43. It is important to keep in mind
that standing in this disqualification context is distinct from Article III
standing, which, of course, is not subject to waiver, United States v.
Hays, 515 U.S. 737, 742, 115 S. Ct. 2431, 2435 (1995), and is, instead,
more akin to standing to assert rights under the Fourth Amendment, a
challenge to which can be waived. See, e.g., United States v. Price, 54
F.3d 342, 346 (7th Cir. 1995); cf. Arbaugh v. Y&H Corp., U.S. ,
126 S. Ct. 1235, 1245 (2006) (holding that the Title VII numerosity
requirement is not “jurisdictional” but rather is an element of plaintiff’s
claim an objection to which can be waived.). Moreover, several courts
of appeals have jettisoned rigid standing rules to allow opposing counsel
to move for disqualification even though the movant does not represent
the aggrieved client, see, e.g., Kevlik v. Goldstein, 724 F.2d 844, 848
(1st Cir. 1984); CK-Brown & Williamson Tobacco Corp. v. Daniel Int’l
Corp., 563 F.2d 671, 673 (5th Cir. 1977), a conclusion that is
contemplated by both the American Bar Association’s Model Rules of
Professional Conduct. See Model Rules of Prof’l Conduct R. 1.7 cmt.
(2002), and the Pennsylvania Rules of Professional Conduct, see Pa.
R.P.C. 1.7 cmt. (2002) (stating that opposing counsel properly may raise
disqualification “[w]here the conflict is such as clearly to call in question
the fair or efficient administration of justice”). We seem not to have
resolved the standing issue definitively. See In re: Congoleum Corp.,
426 F.3d 675, 686-87 (3d Cir. 2005); In re Corn Derivatives Antitrust
Litig., 748 F.2d 157, 161 (3d Cir. 1984). In view of PGI’s belated effort
to raise the issue, it will remain unresolved, and we will assume without
deciding that defendants have standing to raise the disqualification issue.
26
Gutman in deposition testimony expressly denied that consent was
given since, in their view, there was no potential conflict. See J.A. at
1318, 1324.21 Moreover, inasmuch as we believe that the
beneficiaries of the Plan have an interest in the Plan being represented
separately from an attorney aligned or even previously aligned with
the Gutmans, we would not grant a writ of mandamus to require the
district court to undo the disqualification of H&G even if the Gutmans
had consented to H&G representing PGI.22
In closing we make some final comments with respect to the
denial of the petition for a writ of mandamus. First, we point out that
in denying the petition we are not affirming the district court’s orders.
Rather, we are holding only that PGI’s claim for issuance of the writ
is not “clear and indisputable,” and our holding is not intended to
prejudice a later appeal, if there is one, after entry of final judgment.
See In re Briscoe, 448 F.3d at 226. Second, our opinion should not be
overread. We do not invite defendants in ERISA actions unjustifiably
to bring third-party complaints in an attempt to manufacture
circumstances justifying the appointment of a guardian ad litem for
the plaintiff or the disqualification of the plaintiff’s original counsel.
We would expect that the district court would view such a third-party
action with great caution and only in cases in which it is fully justified
to do so will appoint a guardian ad litem for the plaintiff and remove
its counsel.
V. CONCLUSION
21
Ironically, the deposition testimony expressly disclaiming any
conflict and waiver was the product of notable revisions. For example,
James Gutman originally testified that he signed a conflict waiver but
later submitted an errata sheet changing his testimony to state that “[he]
did not sign a waiver of conflict letter because there was no conflict.”
Compare J.A. 547-48 with J.A. at 1324.
22
We are not suggesting, however, that we question either the
Gutmans’ or H&G’s motives or integrity. What we are saying is that
even with the Gutmans’ consent to H&G representing PGI, PGI’s right
to mandamus relief would not be “clear and indisputable,” and, in any
event, it would not be appropriate in the circumstances of this case for
us to grant the writ it seeks.
27
For the foregoing reasons, we will dismiss the appeal for want
of jurisdiction and deny the petition for a writ of mandamus.
IRENAS, Senior District Judge, dissenting.
I.
I respectfully dissent from Judge Greenberg’s opinion to the extent
that it holds we have no jurisdiction to hear Pressman-Gutman Co.,
Inc.’s (“PGI”) appeal from the decision of the trial court appointing a
purported guardian ad litem23 to replace the members of the
Administrative Committee of the PGI Profit Sharing Plan (the “Plan”)
for purposes of the conduct and control of this litigation. The trial
judge’s action did not have a sound basis in the law or the Federal
Rules of Civil Procedure; it was based on a misapplication of the
Pennsylvania Rules of Professional Conduct designed to govern the
actions of lawyers acting in a legal capacity - not litigants; it destroyed
the structural integrity of a trial which is based on the assumption that,
where possible, a plaintiff should be able to press its, his or her own
case;24 and, most significantly, it erroneously labeled the designee as a
guardian ad litem, which he is not, rather than as a receiver, which he
is. Letting that decision stand creates the very realistic potential for
significant mischief in future litigation. I would hear the appeal and
reverse the order of the trial court, although in this dissent I will
discuss the merits only to the extent needed to resolve the question of
this Court’s right to hear the controversy.
23
In numerous places this dissent refers to the “guardian ad
litem” appointed by the District Court. Use of this designation should
not be deemed to indicate that the person designated by the District
Court’s order is, in fact, properly designated as a “guardian ad litem.”
24
“In all courts of United States the parties may plead and
conduct their own cases personally or by counsel as, by the rules of such
courts, respectively, are permitted to manage and conduct causes
therein.” 18 U.S.C. § 1654.
28
II.
The facts and procedural history are ably set forth in the Majority
Opinion and will only be briefly summarized here. PGI is the
employer sponsor and named fiduciary of the Plan established for the
benefit of the company’s employees. Management of the Plan was
vested in an Administrative Committee whose sole members were
Alvin and James Gutman, PGI’s Secretary and President,
respectively. First Union National Bank (“First Union”) and
ForeFront Capital Advisors, LLC (“ForeFront”) were retained to give
investment advice to the Plan.25 In its complaint, PGI alleges that it
sustained losses as a result of First Union’s breach of its fiduciary
duty in making investment decisions. In addition to denying any
breach of fiduciary duties, First Union filed a third-party complaint
against the Gutmans seeking contribution or indemnity on the theory
that they were solely or partly responsible for the losses sought to be
recovered from First Union. On the Gutmans’ motion for summary
judgment the District Court denied relief and held that there were
triable issues of fact.26
Following the denial of summary judgment, a lengthy procedural
wrangling over possible conflicts of interest of PGI’s lawyers ensued.
The wrangling eventually spilled over to the issue of whether conflicts
should bar the Gutmans from managing and controlling the litigation
through their positions as the sole members of the Administrative
25
The relationship between First Union and Forefront is not
relevant to the discussion in this dissent and they will hereafter
collectively be referred to as “First Union.” The third-party complaint
which has given rise to the current dispute was filed only by First Union,
although the motion to replace the Gutmans on the Administrative
Committee of the Plan was filed by ForeFront.
26
The order, entered on May 13, 2004, contained five lines of
text and a page and a half footnote. The legal discussion was cursory,
and the factual discussion was mainly limited to the allegations of the
parties. J.A. at 1770-72. However, it is not surprising that summary
judgment was denied. Resolution of the motion would have likely
involved myriad discussions and communications between the Gutmans
and representatives of First Union - a resolution unsuited to a Rule 56
motion. This dissent expresses no opinion on the merits of the legal
arguments raised by the Gutmans and denied by the District Judge in the
summary judgment motion.
29
Committee. This procedural history is set forth in detail in the
Majority Opinion. However, for purposes of this dissent, the case
took an unacceptable procedural twist when the District Court entered
an opinion and order on November 30, 2004, disqualifying the law
firm of Hamburg & Golden from participating in the case in any
fashion and removing the Gutmans (and perforce the plaintiff itself)
from controlling the lawsuit by appointing “a guardian ad litem who
will replace the Gutmans and serve as administrator of the plan for the
limited purpose of the lawsuit. The guardian ad litem will, in turn,
appoint new counsel for the plan.” J.A. at 23. In an order dated
December 14, 2004, the District Court appointed Louis Pichini, Esq.
of Philadelphia as the guardian ad litem. J.A. at 31.
The trial court justified removal of the lawyers based on Rule 1.7 of
the Pennsylvania Rules of Professional Conduct dealing with conflicts
of interest. This discussion covers eleven pages of a fourteen page
opinion (J.A. at 12-22), and I agree with the Majority Opinion that
neither a direct appeal, an interlocutory appeal or mandamus relief is
an appropriate route to challenge this ruling. However, the opinion
devotes only one page (J.A. at 13) to discussing the separate decision
to appoint a guardian ad litem. In a three line footnote the District
Court finds authority for this draconian action in Fed R. Civ. P. 17(c)
which provides for the appointment of a guardian ad litem “for an
infant or incompetent person not otherwise represented.” As authority
for the action taken, Rule 17(c) is a dubious foundation. Nothing in
the record suggests there was an infant or incompetent who could
possibly be the guardian’s ward. Although the trial court removed the
Gutmans from the Administrative Committee, effectively wresting
control of the litigation from plaintiff PGI itself, it did not actually
identify the person for whom, in fact, the guardian ad litem was
guardian.
The entire basis for this action appears to be contained in three
sentences of the District Court’s Opinion:
The Gutmans’ duty to the plan includes seeking full compensation for
the plan’s losses. Because the Gutmans may be liable to the plan, the
duty to the plan may include presenting claims against the Gutmans.
However, because the Gutmans have an interest in protecting
themselves from liability, the Gutmans are not likely to act against
themselves for the benefit of the plan, and the plan’s avenues of
obtaining recovery may be adversely affected.
30
This rationale appears to be based on the conflict of interest
provisions of Pennsylvania Rule of Professional Conduct 1.7 which
applies only to lawyers who are acting in their roles as attorneys.
Clearly the Gutmans, as officers of PGI and members of the
Administrative Committee, and PGI itself, are acting as litigants, not
lawyers. The persons presumably protected by this action are the
employees of PGI who are the beneficiaries of the Plan, apart from
any interests the Gutmans may hold.
Once appointed, the guardian ad litem necessarily will bring a direct
action to recover Plan losses against the Gutmans. The net effect of
that action is, of course, that the employee beneficiaries of the PGI
Plan will be suing the principals and officers of their employer - a
result which they may or may not desire. By the remarkable alchemy
of the District Court’s action, a fiduciary seeking to recover damages
from an investment advisor is not only barred from pursuing the
action, but finds himself being directly sued by the beneficiaries of the
trust, who may not in the least be interested in following that course
of action.27
Consider a grandmother who is the trustee of a trust established for
the benefit of her many grandchildren, most of whom are over the age
of eighteen. She hires an investment advisor who proceeds to
recommend actions which cause significant losses to the trust. On
advice of counsel the trust sues the investment advisor who follows
the course of action followed by First Union: the investment advisor
files a third-party complaint against the grandmother; the trial court
replaces her with a guardian ad litem for the “limited” purpose of
pursuing the litigation; and then she is promptly sued by the guardian
for the same losses for which the suit was started in the first place.
We now have the spectacle of the beneficiary grandchildren suing
their grandmother who may have funded the trust in the first place,
27
If the guardian ad litem does not bring a direct action against
the Gutmans to recover the Plan’s losses, the District Court’s rationale
for his appointment disappears, since the principal basis for that action
was the improbability that the Gutmans would cause PGI to seek a
recovery against them. Ironically, as beneficiaries of the Plan the
Gutmans would be paying for the suit against themselves since the
District Court’s December 14, 2004, order requires that the guardian ad
litem be paid from the “Plan’s trust fund.” The other Plan beneficiaries
are likewise forced to pay some of the cost of a suit against the Gutmans
even if they have no desire to bring such a suit.
31
even though these grandchildren may have no desire to bring such an
action.
Given the large number of entities controlled by persons deemed
by law to be fiduciaries (trusts, estates, pension plans, profit sharing
plans, various union health and benefit plans, corporations, etc.) and
the proliferation of individuals and organizations who offer
investment advice, it is easy to see how even meritorious actions
could be derailed by the actions taken by the District Court. It may be
that in certain situations a trial court may become concerned that a
fiduciary bringing an action on behalf of an entity to recover losses
from a third party might also be a proper target for recovery of those
same losses. In that instance the court could easily require the
fiduciary to provide notice of the litigation to the possibly affected
beneficiaries, thereby permitting such persons to make their own
decision as to whether they wish to intervene in the litigation to
pursue claims against the fiduciary.28
It is respectfully suggested that if the Majority Opinion is allowed to
stand, not only will it be allowing a legally unjustified action to go
uncorrected, it will be a roadmap for investment advisors seeking to
frustrate suits against them for breach of their duties to the fiduciaries
who have placed their trust in them. However, the question now
remains: Is there a legal basis for the Court of Appeals to remedy this
wrong?
III.
A.
Strong jurisprudential considerations counsel that only final
decisions of trial courts are appealable as of right to the Court of
Appeals. Thus, 28 U.S.C. § 1291 grants a general right of appeal only
from “final decisions of the district courts.” Interlocutory appeals are
authorized in certain limited circumstances under 28 U.S.C. § 1292,
including orders granting or denying an injunction (§ 1292(a)(1)) and
28
This dissent does not suggest that such a notice is required
every time the defendant seeks contribution or indemnity from the
fiduciary, or that even defendant’s defeat of a summary judgment motion
by plaintiff is sufficient to warrant this action.
32
orders appointing a receiver (§ 1292(a)(2)). PGI asserts that this
Court has appellate jurisdiction under either of these provisions.
An appeal as of right under § 1292(a)(1) for trial court decisions on
injunction applications requires that the challenged order grant or
deny substantive relief sought by a litigant. There is agreement that
this appeal does not involve a District Court determination that either
grants or denies any of the substantive relief sought by any party to
this litigation. Even if the District Court’s action could be described
as an injunction, the Majority Opinion correctly determines that §
1292(a)(1) does not vest this Court with appellate jurisdiction.
PGI argues that the appointment of a guardian ad litem to exercise the
powers of the Plan’s Administrative Committee is tantamount to
appointing a receiver for the cause of action against First Union and
the possible cause of action against the Gutmans. The Majority
Opinion agrees that “[a] receiver by any other name, or by no name is
still a receiver.” United States v. Sylacauga Props., Inc., 323 F.2d
487, 490 (5th Cir. 1963). It further correctly notes that in determining
whether someone is a receiver we consider “the purposes of the
receivership and the extent of the powers possible in the situation,” 16
Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction
2d § 3925, at 220 (1996) and whether the receiver “take[s] possession
of and preserves, pendent lite, and for the benefit of party entitled to
it, the fund or property in litigation,” FTC v. World Wide Factors,
Ltd., 882 F.2d 344, 348 (9th Cir. 1989)(internal quotation marks and
citation omitted).
B.
The Majority Opinion distinguishes the holdings in World Wide
Factors and Sylacauga Properties by reasoning that these cases “differ
from this case because we see no suggestion here that the Plan’s assets
must be ‘preserved’ or otherwise managed by the guardian ad litem
pending litigation.” Maj. Op. at 17. Judge Greenberg relies strongly
on the word “limited” in the District Court’s November 30, 2004,
opinion which stated that the guardian ad litem replacing the Gutmans
“will . . . serve as administrator of the [P]lan for the limited purpose
of this lawsuit.” J.A. at 23; Maj. Op. at 18. It is respectfully
suggested that the Majority’s reasoning does not withstand scrutiny.
33
An entity may own a wide variety of property interests: tangible
personal property, real property, intangible personal property such as
stocks or bonds, and unliquidated claims against third parties which
will require litigation to realize the value of those claims. No one
suggests that a litigation claim cannot be transferred to a receiver, nor
can it be challenged that managing, preserving or realizing on that
asset, may require more time and effort than managing other types of
assets. Legal counsel must be found; there has to be intensive
interaction between the claimant and counsel; the claimant has
ongoing duties in discovery and in gathering evidence in support of
the claim; and the claimant must assist counsel in developing
litigation strategy. Every litigator knows that an engaged, energetic
and cooperative client is an important ingredient to a successful
litigation. When a receiver takes over responsibility for pursuing and
monetizing a litigation claim against a third party, the burden of
preserving and managing that asset is considerable indeed. In this
case Mr. Pichini has actually been given total control over two assets
of the Plan, the claim against First Union and the claim against the
Gutmans to recover losses sustained by the Plan in its investment
decisions.
The Majority first argues that the guardian ad litem cannot be a
receiver “because we see no suggestion here that the Plan’s assets
must be ‘preserved’ or otherwise managed by the guardian ad litem
pending litigation.” Maj. Op. at 17. There are actually two arguments
apparently buried in this short sentence. First, the reference to the
Plan’s “assets” in the plural suggests that the guardian ad litem is less
than a receiver because he has no responsibility for any Plan asset
other than the claims against First Union and the Gutmans. Nobody
has pointed to any authority for the proposition that the transfer of less
than all the assets of a particular entity to a third party for
management and preservation somehow precludes that third party
from legally being a receiver. The issue is not the volume or character
of the assets not transferred, but rather the responsibilities of that third
party with respect to the assets which are in fact transferred.
Arguing that the guardian ad litem has no duty to preserve or manage
the assets which were in fact transferred to him is unfathomable. As
noted above, preserving and managing two litigation claims can be
extraordinarily difficult and often involves a high level of skill and
energy. By replacing the Gutmans on the Plan’s Administrative
Committee for purposes of pursuing the claims against First Union
and the Gutmans, the District Court has divested PGI, through the
34
Plan’s chosen Administrative Committee, of any role in managing or
preserving the litigation claims (which includes, as well, the right not
to pursue a particular claim in court). The Plan cannot sell, transfer or
hypothecate its interest in the claims; it cannot choose to abandon or
settle those claims; it cannot select its own counsel; and it cannot
determine litigation strategy with its chosen counsel.29 Only the
guardian ad litem - the receiver- can take these steps to manage and
preserve the assets within its control.
As noted above, the Majority Opinion also points to the wording of
the order providing for a guardian ad litem “for the limited purposes
of this lawsuit.” That the appointment of the “guardian ad litem” may
be temporally limited to the duration of the lawsuit, is hardly relevant
the issue of whether such guardian is in fact a receiver, since the
appointment of almost all receivers is for a designated period.
Nothing in the facts of this particular case or the order of the District
Court limits the power or authority of the appointed guardian ad litem
in preserving, managing or monetizing the assets entrusted to his
stewardship.
C.
The District Court used the term “guardian ad litem” to describe the
individual who was to assume the role of the Gutmans on the
Administrative Committee with respect to the claims against either
First Union or the Gutmans to recover investment losses. The
29
It is spurious to argue that the Gutmans can still fully cooperate
with the guardian ad litem in pursuing the claims against the First Union.
The whole premise of the American system of adversary litigation is that
a litigant can interact with counsel completely loyal to the litigant. Just
as the District Court assumed that that PGI would not pursue the
Gutmans to recover Plan losses, it is equally foolish to assume that the
Gutmans can fully cooperate with the guardian ad litem or his attorney
who were appointed for the express purpose of pursuing claims against
the Gutmans. When the Plan’s designated Administrative Committee
was running the litigation, the Gutmans’ communications with counsel
presumably would have been protected the attorney client privilege. It is,
to put it mildly, a murky issue as to whether the Gutmans’
communications with counsel for the guardian ad litem would be
similarly protected.
35
Majority Opinion uses that term throughout. So does the dissent. If a
particular descriptive term is used often enough, we may
unconsciously assume that it is being used accurately. The Majority
Opinion makes one final argument to buttress its contention that the
District Court’s appointee is not a receiver:
If we adopted PGI’s expansive interpretation of what type of officer is
a receiver, we effectively would eliminate the distinction between
guardian ad litem and receivers, and, for that matter, between
fiduciaries and receivers. We have no intention of doing such thing.
Maj. Op. at 19. The unstated premise of this argument is that Mr.
Pichini, who was designated by the District Court to replace the
Gutmans on the Plan’s Administrative Committee, is in fact a
“guardian ad litem.” That he was given this designation by the trial
court is hardly dispositive.
A “guardian” is defined as “One who has the legal authority and duty
to care for another’s person or property, esp. because of the other’s
infancy, incapacity, or disability.” Black’s Law Dictionary (8th ed.
2004). The person protected, the “ward,” is defined as “A person,
usu. a minor, who is under a guardian’s charge or protection.” Id. A
“guardian ad litem” is a special type of guardian “usu. a lawyer,
appointed by the court to appear in a lawsuit on behalf of the
incompetent or minor party.” Id. “Ad litem” is translated from the
Latin as “for the specific lawsuit.” Richard A. Branyon, Latin
Phrases & Quotations (Hippocrene Books, 1994) at 6. Fed. R. Civ. P.
17(c) uses similar language: “An infant or incompetent person who
does not have a duly appointed representative may sue by . . . a
guardian ad litem. The court shall appoint a guardian ad litem for an
infant or incompetent person not otherwise represented in an action or
shall make such other order as it deems proper for the protection of
the infant or incompetent person.” The question is: exactly for whom
was Mr. Pichini appointed as guardian ad litem?
First we can eliminate the Gutmans as suspects. Guardians ad litem
protect their wards - they do not investigate and sue them. We turn
next to PGI, the named plaintiff, or the Plan itself. Neither PGI nor
the Plan is an infant or an incompetent. More generally, the wards of
guardians ad litem are natural persons, not corporations or other legal
entities. Legal entities have receivers - not guardians. Indeed, the
phrase in Rule 17(c), “infant or incompetent person” also appears in
Fed. R. Civ. P. 4(e) where reference is made to “an individual . . .
36
other than an infant or an incompetent person . . .” There are literally
thousands and thousands of state and federal cases dealing in one way
or another with guardians ad litem. While it would take hubris to
make a statement about every single case, one would be hard-pressed
to find a case in which a guardian ad litem was appointed to represent
a corporation or other legally created entity.
There remains one more candidate for Mr. Pichini’s ward: the
employees of PGI who are beneficiaries of the Plan, other than the
Gutmans, presumably the parties the District Court was trying to
protect. There is no evidence in the record that these employees are
minors or incompetents. Even less do we know whether they are
aware of the litigation or whether they have any interest in pursuing
the Gutmans for losses sustained by the Plan. Even if they were
unhappy with the Gutman stewardship of the Plan, there is no
indication of whether they want to pay part of the cost of suing the
Gutmans by having the Plan pay a guardian and lawyer in part from
their share of the Plan assets. Guardians ad litem are appointed to
make litigation decisions for those who by reason of infancy or mental
incapacity cannot make those decisions themselves. PGI’s employees
meet neither of these criteria.
At root this case involves a profit sharing Plan which sustained
market or trading losses and may have two causes of action: one
against the retained outside investment advisor; the other against the
two administrators of the Plan. It chose to pursue only the cause
against the outside advisor. Based on the notion that the Gutmans had
a conflict of interest, the trial judge transferred those to assets to Mr.
Pichini for the purpose of realizing whatever monetary value they may
have. The District Court may have called him a guardian ad litem, but
in truth he was a receiver for the Plan with respect to those two choses
in action. That Mr. Pichini was not the receiver of all the Plan’s
assets is of no moment. I am aware of no authority for the proposition
that unless a proposed receiver takes control of every asset owned by a
particular party he cannot be deemed a receiver. The proper inquiry
looks to his powers with respect to the assets he does control - not the
assets he does not control.
Footnote 10 of the Majority Opinion takes the dissent to task for
focusing on the label “guardian ad litem,” rather than on the “how or
why of the district court’s orders .” Judge Greenberg suggests that:
“It well may be that the label ‘guardian ad litem’ is less accurate than,
for example, ‘trustee ad litem’.” This is, to put it mildly, a remarkable
37
statement. “Receiver” is almost a synonym for “trustee.” Both hold,
manage and preserve property for the benefit of third parties. Adding
the phrase “ad litem” is not relevant since, as noted earlier, this
translates as “for the specific lawsuit,” which defines only the
duration of the trusteeship or receivership. If, as Judge Greenberg
proffers, we can call Mr. Pichini a “trustee ad litem”, it is tantamount
to conceding that we can also call him a “receiver ad litem” - which
is certainly a receiver for purposes of § 1292(a)(2).30
What’s in a name? that which we call a rose
By any other name would smell as sweet.
The Tragedy of Romeo and Juliet, Act II, Scene 1, lines 90-91, The
Yale Shakespeare (Barnes & Noble Books, 1993); See also discussion
in last ¶ of Part III, A., supra.
D.
I do not join the portions of the Majority Opinion dealing with the
collateral order doctrine or mandamus, because they are based on the
premise that the District Court designated a guardian ad litem when in
fact, in my view as outlined above, this is not an accurate description.
In a case where there is an interlocutory challenge to the appointment
of a real guardian ad litem on the basis, for instance, that the ward is
neither a minor nor incompetent, it would appear that the collateral
order doctrine would provide a basis for an immediate appeal. See
Richards v. Duke University, No. 05-1170, 2006 WL 162652 (3d Cir.
January 23, 2006) (non-precedential).
IV.
There are countless individuals who act as fiduciaries for entities they
operate or control. In their role as both managers of the entities and
30
The other arguments in footnote 10 have been dealt with
elsewhere in this opinion, particularly the argument that because the Plan
has assets which were not transferred to Mr. Pichini, he is somehow not
a receiver of the assets which were entrusted to his care.
38
fiduciaries they may seek to recover from third parties losses
sustained by their entities. In many of these instances there may be a
theory that the fiduciary is also responsible for all or part of the same
losses. While this scenario may cause conflict of interest problems
for lawyers who represent more than one interested party, ethics rules
governing lawyers do not govern the conduct of persons acting as
litigants. If every charge by a defendant that the plaintiff fiduciary
was, in fact a partial or complete cause of the loss could result in the
appointment of a receiver to pursue the third party claim and also sue
the fiduciary, the defendant will have won a huge tactical victory
without actually proving anything.
By turning the plaintiff’s fiduciary into another defendant, the ability
of the fiduciary to cooperate with and help plaintiff prevail against the
original defendant is severely impaired. It is precisely this type of
serious and potentially irreparable harm that may be avoided by
allowing interlocutory appeals pursuant to § 1292(a)(2). See Federal
Practice and Procedure: Jurisdiction 2d § 3925 (“A receivership can
drastically curtail existing property rights, foreclosing independent
action and decision in irreparable ways.”).
When the District Court appointed Mr. Pichini to serve as the
Administrative Committee of the Plan and hire his own counsel to
chase both First Union and the Gutmans, it effectively appointed him
a receiver of those causes of action and gave him the exclusive
authority to manage and preserve those assets. The decision
appointing Mr. Pichini is thus properly appealable under 18 U.S.C. §
1292(a)(2). Therefore, I respectfully dissent from the Majority
Opinion which holds otherwise.
39