Cromaglass Corporation, Williamsport, Pa. (A Pennsylvania Corporation) v. Carl Ferm

OPINION OF THE COURT

BIGGS, Circuit Judge.

This ease presents the issue of appeal-ability of sanctions imposed by the district judge for failure to comply with discovery orders. The original jurisdiction is stated in the complaint to be as follows: “This Court has jurisdiction of the claim of plaintiff for relief which involves damages in excess of Ten Thousand Dollars ($10,000.00); and which arises under the laws of the United States, to wit: Title 35, U.S.Code, Sections 281-287, 289 and 292; and Title 28, Sections 1331, 1338 and 1355.”

Plaintiff-appellant Cromaglass Corporation (Cromaglass) sued the defendant-appellees, Ferm, Sechler, and Plast-A-Form Corporation alleging patent infringement, false marking,' and unfair competition, in relation to the manufacture and sale of aerobic household sewage treatment units. The district court concluded on defendants’ motion that Cromaglass’ alleged failure to answer certain interrogatories warranted imposition of sanctions against it and ordered that a number of facts be taken as established, in favor of the defendants, in accordance with Rule 37(b)(2)(A) and that Cromaglass be precluded from supporting its claims or introducing certain designated matters in evidence in accordance with Rule 37(b) (2) (B). The court also made a finding of civil contempt against Cromaglass and its attorney Pattison and assessed against them as reasonable expenses and counsel fee the sum of $4,000.

Judge Muir filed his opinion, 344 F.Supp. 924, on June 27, 1972, and the order referred to is as follows:

“United States District Court For the Middle District of Pennsylvania

Cromaglass Corporation, Plaintiff ~j vs. I Civil Action

Carl Perm, Fred R. Sechler and | ^°’ 71-2^ Plast-A-Form Corporation, Defendants J

Order Imposing Sanctions

In accordance with the Opinion filed this day, It is Ordered and Adjudged that:

1. The Defendants’ amended motion for imposition of sanctions on Plaintiff for failure to answer Interrogatories 20, 21, 24 and 25 as directed by the court’s order of March 22, 1972, is granted.

2. The following facts shall be taken to be established for the purposes of this action in accordance with the claims of the Defendants.

2.1 Carl Ferm acquired no confidential or specialized knowledge or information respecting the fabrication or sale of aerobic sewage treatment equipment while in the employ of The Cromar Company, Plaintiff’s predecessor.

2.2 There is no confidential or specialized knowledge or information of the Plaintiff involved in the fabrication of Defendants’ aerobic sewage treatment equipment.

2.3 There is no confidential ór specialized knowledge or information involved in the sale of Defendants’ aerobic sewage treatment equipment to which Plaintiff has any right.

3. The Plaintiff shall not introduce into evidence anything relating to matters contained in Sub-Paragraph (8) of Count IV of the Complaint except that Plast-A-Form Corporation initiated the manufacture and sale of aerobic sewage treatments units subsequent to April 19, 1969.

4. The Plaintiff and its patent attorney, William H. Pattison, Jr., are in civil contempt of the lawful order of this court dated March 22, 1972, by reason of Plaintiff’s refusal to answer interrogatories 20, 21, 24, and 25 propounded to Plaintiff on June 4, 1971. This order shall not bar a finding of criminal contempt as to the same persons and Allan N. Young, Jr., President of Plaintiff, with respect to the same interrogatories.

5. The Plaintiff and the patent attorney, William H. Pattison, Jr., who advised it shall jointly and severally pay to the Defendants as reasonable expenses, including counsel fees, the sum of $4,000.00 within thirty days hereof, said expenses having been caused by the unjustified failure of Plaintiff to answer interrogatories 20, 21, 24, and 25 as required by the above order of March 22, 1972. There are no circumstances making the award unjust.

6. The Plaintiff is and has been since March 29, 1972 in default with respect to Paragraph 4 of the order of March 22, 1972, requiring submission of a proposal concerning inspection and photographing of parts of Plaintiffs’ premises located in the Wil-liamsport, Pa. area. Unless the default is cured within ten days from the date of this order, Defendants may move for additional sanctions.

MUIR, United States District Judge DATED: June 27, 1972.”

An appeal in toto was taken from this order by the plaintiff Cromaglass and this constitutes the subject matter of what is presently before us. No appeal was taken by Cromaglass’ counsel, William H. Pattison, Jr., Esquire.

A motion to dismiss the appeal was filed by the appellees, as follows: “Ap-pellees, by their attorneys, hereby move the Court for an order dismissing the appeal filed herein by Appellant from the order of June 27, 1972 of the U.S. District Court for the Middle District of Pennsylvania in Civil Action No. 71-23, on the ground that such order is a non-appealable interlocutory order.”

On November 16, 1972, another panel of this court had before it this motion to dismiss the appeal on the ground that the order appealed from was a nonap-pealable interlocutory order. This motion was denied.¹ There was also a motion before that panel for a stay of appellate proceedings pending disposition of appellees’ motion to dismiss which also was denied, and the defendant was granted ten days to serve its brief and appendix. On November 24, 1972, an order was entered by that same panel referring the appellees’ motion to strike certain portions of appellant’s appendix to the panel which would consider the appeal on the merits.

It is apparent that if the appeal is dismissed, it is unnecessary to consider the motion to strike certain portions of appellant’s appendix.

Judge Muir denoted his order as one imposing sanctions in civil contempt. The parties apparently agree that the contempt order here appealed from sounds in civil contempt, and with this conclusion we have no dispute. See Shillitani v. United States, 384 U.S. 364, 86 S.Ct. 1531, 16 L.Ed.2d 622 (1966).

The appellate courts will look to the substance of the order rather than the form. See, e. g., Southern Railway Co. v. Lanham, 403 F.2d 119 (5 Cir. 1968). The distinction is whether the penalty compensates the injured party (civil) or whether it is solely punitive to vindicate the public justice (criminal). Civil contempt is wholly remedial. See Fireman’s Fund Ins. Co. v. Myers, 439 F.2d 834, 837 (3 Cir. 1971). A judgment in civil contempt serves only the purpose of a party litigant, and is intended to coerce compliance with an order of the court or to compensate for damage caused by noncompliance as here.

The previous panel denied the motion to dismiss the appeal in its totality. We had believed it to be well settled both in this circuit and other circuits that, at least with respect to a party to the litigation, an order holding a party in civil contempt was in fact an interlocutory order and was not appealable except on final judgment. This we thought was made clear by such cases as Fireman’s Fund Ins. Co. v. Myers, 439 F.2d 834 (3 Cir. 1971); Securities and Exchange Commission v. Naftalin, 460 F.2d 471, 475 (8 Cir. 1972). Appellants’ attorney is not a party to the litigation but on the other hand he has not appealed. See Southern Railway Co. v. Lanham, 403 F.2d 119, 124 (5 Cir. 1968); Fenton v. Walling, 139 F.2d 608 (9 Cir.), cert. denied, 321 U.S. 798, 64 S.Ct. 938, 88 L.Ed. 1086 (1943).

It is interesting to note that the ap-pellees in their brief supporting their motion to dismiss have made no specific reference whatsoever to the lack of ap-pealability of a civil contempt order.

Paragraphs 2 and 3 of Judge Muir’s order, based upon Rule 37(b)(2)(A) and (B), Fed.R.Civ.P., present an issue as to appealability which is not as easily determinable as that portion of the order which deals with civil contempt. Its disposition requires the discussion set out hereinafter. It is clear that these sanctions do not represent a “final order,” appealable as of right under 28 U.S.C. § 1291. suming the order to be “final” with respect to the claims involved, see Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 76 S.Ct. 895, 100 L.Ed.2d 1297 (1956), it adjudicates fewer than all the claims raised in the complaint. Hence, absent a Rule 54(b) certification by the district court, the general “finality” prerequisite of this statute has not been met, unless the order is deemed to fall within one of the exceptions to this rule. See Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949); Forgay v. Conrad, 47 U.S. (6 How.) 201, 12 L.Ed. 404 (1848). The sanctions imposed represent neither a collateral matter which could not be reviewed on final judgment nor a judgment which is final except for ministerial acts; therefore, an appeal will not lie under 28 U.S.C. § 1291. See Eisen v. Carlisle, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); United States v. Estate of Pearce, 498 F.2d 847 (3 Cir. 1974); 9 J. Moore, Federal Practice ¶¶110.08-110.11 (2d ed. 1973). As-

Cromaglass asserts that 28 U.S. C. § 1292(a)(1) provides a basis of appeal, urging that the imposed sanctions effectively eliminated its requests for both preliminary and permanent injunctive relief on a significant portion of the unfair trade practice claim.

Of the numerous claims for relief, the Rule 37(b) (2) (A) • and (B) sanctions were directed solely to Count IV(8). The claim alleged that Plast-A-Form Corporation utilized confidential information, acquired by Carl Ferm while in the employ of the appellant’s predecessor, in the manufacture and sale of aerobic sewage treatment equipment. The corresponding request for relief sought preliminary and permanent injunctive relief against the appellees for such continued unfair competitive practices.

In determining whether an order is appealable as of right under 28 U.S.C. § 1292(a)(1), a practical view of the consequences of permitting appeal must be taken with due regard to the purposes of the statute, the effect on the rights of the parties and the inconvenience of piecemeal review. Cf. Eisen v. Carlisle, supra. Several Second Circuit decisions are illustrative of the analysis.

In Western Geophysical Co. of America v. Bolt Associates, Inc., 440 F.2d 765 (2 Cir. 1971), the plaintiff moved for judgment on the pleadings and for summary judgment in respect to certain antitrust defenses based on the Sherman Act and the Clayton Act. The court denied the motion in respect to the Sherman Act defenses and counterclaim but granted it in respect to the Clayton Act claim. After this occurrence, the district court reiterated its earlier rulings in respect to the amended complaint and answer and ordered a separate trial on a newly pleaded sixth counterclaim. The appeal followed and on a motion to dismiss the appeal, Judge Friendly, speaking for the court, held in effect that where the second and sixth counterclaims were only two of the four counterclaims which sought injunctive relief and where Section 7 of the Clayton Act was only one of several alleged bases for relief asserted in the counterclaims and where the injunctive relief sought was almost identical except for a slightly broader prayer in the sixth counterclaim which was based upon alleged violations of the Sherman Act as well as the Clayton Act, the order of the trial court dismissing so much of the counterclaim as rested on the Clayton Act was not ap-pealable since no single counterclaim had been dismissed in its entirety and the li-censor, Bolt, could still obtain the full extent of the injunctive relief sought in the respective claims. Judge Friendly said at 769-771: “We turn next to Bolt’s contention that so much of the order as struck the portions of the second and sixth counterclaims grounded upon § 7 of the Clayton Act was appealable as an interlocutory order refusing an injunction within 28 U.S.C. § 1292(a)(1), a section whose history is traced in Stewart-Warner Corp. v. Westinghouse Electric Corp., 325 F.2d 822, 829-830 (2 Cir. 1963) (dissenting opinion), cert. denied sub nom. Stewart-Warner Corp. v. Canadian Westinghouse Co., 376 U.S. 944, 84 S.Ct. 800, 11 L.Ed.2d 767 (1964). If the issue had not previously arisen, something could be said for the proposition that when a complaint and answer present several claims, an order dismissing one of them which seeks an injunction, either on the merits or for lack of jurisdiction or improper venue, is not interlocutory but rather final with respect to that claim and is subject to appeal only if the district court properly certifies its action as a final judgment under F.R.Civ.P. 54(b). However, there are weighty arguments on the other side, and the division among the courts was settled in favor of appealability as from an interlocutory order refusing an injunction, prior to adoption of the Rules of Civil Procedure, in General Electric Co. v. Marvel Rare Metals Co., 287 U.S. 430, 53 S.Ct. 202, 77 L.Ed. 408 (1932). We applied that principle, after adoption of the rules, in Cutting Room Appliances Corp. v. Empire Cutting Machine Co., 186 F.2d 997 (2 Cir. 1951), in Telechron, Inc. v. Parissi, 197 F.2d 757 (2 Cir. 1952), and, in the writer’s view improperly, in Stewart-Warner Corp. v. Westinghouse Electric Corp., supra, 325 F.2d 822. Hence, if Bolt had asserted only one counterclaim seeking injunctive relief and this had been based solely on § 7 of the Clayton Act, an order striking the counterclaim for failing to state a claim on which relief could be granted or rendering summary judgment against Bolt would have been appealable under 28 U.S.C. § 1292(a)(1).

“Bolt’s difficulty is that its appeal does not mirror the hypothetical just stated. The second and sixth counterclaims were only two of four which sought injunctive relief under the antitrust laws, and § 7 of the Clayton Act was only one of several bases for relief asserted in these two counterclaims. The prayers for injunctive relief in counterclaims Two, Three, and Four are virtually identical. Although the Sixth counterclaim’s injunctive prayer is somewhat broader than that stated in the others, it — like the Second counterclaim —rests upon alleged violations of the Sherman Act as well as of Clayton Act § 7. Hence, the decision of a divided court in Glenmore v. Ahern, 276 F.2d 525, 545 (2 Cir.), cert. denied sub nom. Tri-Continental Financial Corp. v. Glenmore, 362 U.S. 964, 80 S.Ct. 877, 4 L.Ed.2d 878 (1960), does not mandate appellate jurisdiction here. In Glenmore, the district court had granted defendant’s motion to dismiss the sixth count of a multi-count complaint. The dismissed count had sought the same injunctive relief as several other counts but on ‘a distinct legal theory,’ indeed, a distinct claim— failure to obtain I.C.C. authorization for significant changes in the rights and privileges of the holders of railroad preferred stock as required by § 20(a) of the Interstate Commerce Act, cf. Original Ballet Russe, Ltd. v. Ballet Theatre, Inc., 133 F.2d 187, 189 (2 Cir. 1943). Although other counts seeking an injunction on non-statutory grounds remained undetermined, we held the dismissal of the sixth count to be appealable under § 1292(a)(1). Here, by contrast, no single counterclaim on Bolt’s has been dismissed in its entirety. Bolt may still secure the full extent of injunctive relief prayed for in each claim that it has stated. Cf. Cott Beverage Corp. v. Canada Dry Ginger Ale, Inc., 243 F.2d 795 (2 Cir. 1957); Backus Plywood Corp. v. Commercial Decal, Inc., 317 F.2d 339, 341 (2 Cir.), cert. denied, 375 U.S. 879, 84 S.Ct. 146, 11 L.Ed.2d 110 (1963); Rabekoff v. Lazere & Co., 323 F.2d 865 (2 Cir. 1963); McNellis v. Merchants Nat. Bank & Trust Co., 385 F.2d 916 (2 Cir. 1967), all dealing with the related problem under F.R.Civ.P. 54(b). Under these circumstances, we cannot see that the judge’s striking the references to § 7 of the Clayton Act differed essentially from the exclusion of evidence or refusal to hear arguments relating solely to violation of that section.”

To abbreviate and perhaps over simplify the ruling in Western Geophysical, the court held in substance that the in-junctive relief could be granted on pleadings which were not dismissed by the trial court; that therefore the motion to dismiss the appeal should be granted. This was done. Since equivalent injunctive relief remained available the court deemed this to be sufficient and granted the motion to dismiss the appeal. The contents of the opinion inspire the belief that if other pleadings had not offered a basis for the relief sought the court of appeals would have refused to dismiss the appeal.²

The most pertinent recent decision of the Court of Appeals for the Second Circuit cited and relied on by Cromaglass is Abercrombie & Fitch Co. v. Hunting World, Inc., 461 F.2d 1040 (2 Cir. 1972). In this case the cause of action was based upon infringement of Abercrom-bie’s trademark “Safari” by Hunting World. Hunting World moved for summary judgment under Rule 56(b), Fed. R.Civ.P., on the ground that it had not infringed the trademark. The district court granted partial summary judgment, denying a Rule 54(b) certification. The appeal to the Second Circuit Court was on the basis of § 1292(a)(1), which reads in pertinent part as follows: “(a) The courts of appeals shall have jurisdiction of appeals from: (1) Interlocutory orders of the district courts of the United States * * * granting, continuing, modifying, refusing or dissolving injunctions * * Judge Timbers stated: “If the relief sought below by plaintiff had been cast in the form of a claim for preliminary injunction, rather than for summary judgment, then I take it that the court’s interlocutory order refusing such injunction quite clearly would be appealable under § 1292(a)(1). That being so, it seems to me that the order here under review which finally dismissed certain of plaintiff’s claims for injunctive relief with respect to the alleged infringement of plaintiff’s trademark rights a fortiori is appealable under § 1292(a)(1). Although other claims for injunctive relief are still pending, the dismissed claims sought relief on a legal theory distinct from the retained claims. I find the instant case to be indistinguishable from Glenmore v. Ahern, 276 F.2d 525, 545 (2 Cir.), cert. denied sub nom. Tri-Continental Financial Corp. v. Glenmore, 362 U.S. 964, 80 S.Ct. 877, 4 L.Ed.2d 878 (1960), where our Court held appealable under § 1292(a)(1) an order of a district court which had dismissed one count of a multi-count complaint, the dismissed count having sought the same injunctive relief as several other counts but on a distinct legal theory. 276 F.2d at 545-547.” The statement by Judge Timbers seems to sum up briefly and adequately the rationale of the Second Circuit decisions.³

The reasoning of earlier decisions of this court⁴ need not be elaborated at length here but can be summed up adequately, we think, on the basis of Cohen v. Beneficial Loan Corp., supra, 337 U.S. at 545, 69 S.Ct. at 1225, where Mr. Justice Jackson stated that Section 1292 indicates “ * * * the purpose to allow appeals from orders other than final judgments when they have a final and irreparable effect on the rights of the parties.” See also the authorities cited in the 12th paragraph of Judge Hastie’s opinion in Morgenstern Chemical Co. v. Schering Corp., 181 F.2d 160 (3 Cir. 1950). It is interesting to note that there was no denial of an injunction here. No order has been made directly denying preliminary or permanent injunctive relief. Cromaglass could have insisted on a Rule 65 hearing and had the trial judge refused such a hearing, mandamus would lie. If the Rule 65 hearing resulted in a denial of an injunction, Cromaglass indeed would have an appealable order. We should not broaden the scope of review of the decisions of the district court.

We believe the law to be correctly stated by the following two authorities: 4 J. Moore, Federal Practice ¶ 26.83 [7], at 26-601 (2d ed. 1972), states “Other orders [made pursuant to the Discovery Rules] however, are clearly interlocutory, and not final or appealable, such as an order that a particular matter be taken as established [Rule 37(b)(2)(A)] or refusing to allow a party to support or oppose designated claims or defenses or prohibiting him from introducing certain evidence [Rule 37(b)(2)(B)] or striking pleadings or staying proceedings [Rule 37(b)(2) (C)].” (Citing Hartley Pen Co. v. United States District Court, 287 F.2d 324 (9 Cir. 1961).)

14 Bender’s Forms of Discovery § 9.12 at 58 (1968), states: “Directly contrasted with order dismissing an action or directing the entry of a default judgment, some sanction orders are clearly interlocutory and are thus neither ‘final’ nor appealable. These are orders that particular matter be taken as established (pursuant to Rule 37(b)(2)(i)); denying a party the right to support or oppose specified claims or defenses or prohibiting the introduction of certain evidence (pursuant to Rule 37(b) (2) (ii)), or striking out pleadings or staying proceedings (pursuant to Rule 37(b)(2) (iii)).” See also cases cited in the text. Cf. Wright & Miller, Federal Practice and Procedure, Section 2962, “Appeals — Injunctive Relief.”

Our position is somewhat analogous to that taken by the Supreme Court in Switzerland Cheese Ass’n., Inc. v. E. Horne’s Market, Inc., 385 U.S. 23, 87 S.Ct. 193, 17 L.Ed.2d 23 (1966). That decision resolved a conflict between the circuits as to the appealability, under 28 U.S.C. § 1292(a)(1), of a denial of a motion for summary judgment requesting injunctive relief. The Second Circuit deemed it appealable in Federal Glass Co. v. Loshin, 217 F.2d 936 (1954), opinion by Judge Learned Hand, concurring opinion by Judge Frank, and dissenting opinion by Judge Clark. Judge Learned Hand decided in substance, after discussing inter alia our decision in Morgenstern Chemical Co. v. Schering, 181 F.2d 161 (1950), that when the district court had entered an order denying a motion of the plaintiff for summary judgment the order was appealable on the ground that injunctive relief was thereby ultimately denied. Judge Frank took a somewhat similar view, stating, however, 217 F.2d at 938: “A contrary conclusion, by sheer ritualism, would waste time. For plaintiff, the next minute after the denial of the summary judgment motion, could present the same papers unchanged except for a new label, ‘Motion for a preliminary injunction.’ For that reason, I disagree with Morgenstern Chemical Co. v. Schering Corp., 3 Cir., 181 F.2d 160, where the court said at page 162: ‘Nothing has occurred in or as a result of the denial of the motion [for summary judgment] which precludes plaintiff from seeking a temporary injunction in accordance with established procedure if he believes immediate injunctive relief is necessary and proper.’ ”

Responding to this position in Horne’s Market Mr. Justice Douglas stated: “Unlike some state procedures, federal law expresses the policy against piecemeal appeals. See Baltimore Contractors, Inc. v. Bodinger, 348 U.S. 176, 75 S.Ct. 249, 99 L.Ed. 233. Hence we approach this statute somewhat gingerly lest a floodgate be opened that brings into the exception many pretrial orders. It is earnestly argued, however, that,' although this order denied a permanent injunction, it was nonetheless ‘interlocu- • tory’ within the meaning of § 1282(a)(1) because the motion for summary judgment did service for a motion for a preliminary injunction, and that therefore ‘interlocutory’ must also include a denial of a permanent injunction.

“We take the other view not because ‘interlocutory’ or preliminary may not at times embrace denials of permanent injunctions, but for the reason that the denial of a motion for summary judgment because of unresolved issues of fact does not settle or even tentatively decide anything about the merits of the claim.” But compare Gillespie v. United States Steel Corp., 379 U.S. 148, 85 S.Ct. 308, 13 L.Ed.2d 199 (1964).

We conclude the appeal must be dismissed.

1 . It is noteworthy that under revised procedures of this Court, if the motion panel is of the view that a motion to dismiss an appeal be not granted, it is referred by order, without decision or without prejudice, to the panel which is to determine the appeal on the merits. Internal Operating Procedures of the United States Court of Appeals for the Third Circuit § Q5 (1974).

2 . For another ease throwing some light on this difficult issue and the approach of the Second Circuit Court of Appeals see Stewart-Warner Corp. v. Westinghouse Electric Corp., 325 F.2d 822, 828 (1963), Judge Lumbard writing the majority opinion and Judge Friendly dissenting.

3 . See also Drittel v. Friedman, 154 F.2d 653 (2 Cir. 1946); Betmar Hats v. Young America Hats, 116 F.2d 956 (2 Cir. 1941); In re Finkelstein, 102 F.2d 688 (2 Cir. 1939); Jones v. St. Paul Fire & Marine Ins. Co., 108 F.2d 123 (2 Cir. 1939); Knickerbocker Toy Co. v. Faultless Starch Co., 467 F.2d 501 (Cust. & Pat.App.1972).

4 . See, e. g., Morgenstern Chemical Co. v. Schering Corp., 181 F.2d 160 (3 Cir. 1950); Albert v. School District of Pittsburgh, 181 F.2d 690 (3 Cir. 1950); American Airlines v. Forman, 204 F.2d 230 (3 Cir. 1953); Hook v. Hook & Ackerman, Inc., 213 F.2d 122 (3 Cir. 1954); District 65, Distributive, Processing and Office Workers Union of New York and New Jersey v. McKague, 216 F.2d 153 (3 Cir. 1954). See also, Hackett v. General Host Corp., 455 F.2d 618 (3 Cir.), cert. denied, 407 U.S. 925, 92 S.Ct. 2460, 32 L.Ed.2d 812 (1972), wherein Judge Gibbons held that an order denying confirmation of an action as a class action was interlocutory and not appealable.