Wilderman v. Cooper & Scully PC ( 2005 )

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
10-28-2005
Wilderman v. Cooper & Scully PC
Precedential or Non-Precedential: Precedential
Docket No. 04-1876
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-1876
BRUCE J. WILDERMAN, D.D.S.;
HEIDY D. WILDERMAN,
Appellants
v.
COOPER & SCULLY, P.C.
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 04-cv-00460)
District Judge: Honorable Stewart Dalzell
Submitted Under Third Circuit LAR 34.1(a)
September 30, 2005
Before: ALITO, and AMBRO, Circuit Judges
RESTANI,* Chief Judge
* Honorable Jane A. Restani, Chief Judge, United
States Court of International Trade, sitting by designation.
(Opinion filed October 28, 2005)
OPINION OF THE COURT
AMBRO, Circuit Judge
One Texas law firm sued another in a Texas court,
charging tortious interference with contract. Then, erstwhile
clients of the plaintiff firm—now clients of the defendant
firm—filed a declaratory judgment action in Pennsylvania
seeking determination of the fees they owed the plaintiff firm.
This declaratory action was removed to the District Court,
where it stayed the action to keep from duplicating or interfering
with the Texas suit.
Appellate jurisdiction over a stay exists when it has the
effect of a dismissal rather than the effect of delay. Is the
District Court’s stay appealable? As the stay here is but a delay,
we answer no and dismiss the appeal. We also deny issuance of
the writ of mandamus sought as an alternative means of bringing
before us the merits of the appeal.
I. Factual Background and Procedural History
Bruce and Heidy Wilderman retained the Texas law firm
Cooper & Scully to represent them in an environmental suit in
Pennsylvania. Their lawyer, Scott Summy, later left Cooper &
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Scully to join Baron & Budd, another Texas law firm. The
Wildermans left with Summy, retaining Baron & Budd to
complete their Pennsylvania litigation.
Cooper & Scully sued Summy and Baron & Budd in
Texas state court for damages, asserting various claims,
including interference with contract, usurpation of corporate
opportunity, and conversion. The Wildermans were not joined
in the Texas litigation and are not parties to that suit. One of the
issues in the Texas suit is how Cooper & Scully and Baron &
Budd will share the attorney’s fees from the Pennsylvania
environmental litigation.1
The Wildermans sued Cooper & Scully in Pennsylvania
state court in a declaratory judgment action, seeking a judicial
1
Apparently, the Wildermans’ suit is part of a several-
pronged strategy by Summy to prevail by any means necessary.
Summy’s Texas attorney, the one defending him against Cooper
& Scully, is also the Wildermans’ attorney in this suit.
Summy’s attorney is also representing another set of Summy’s
clients in a mirror-image suit, this one filed in Illinois. We note
that such forum-shopping subverts the policies of the
Declaratory Judgment Act. Cf. Nat’l Foam, Inc. v. Williams
Fire & Hazard Control, Inc., No. CIV. A. 97-3105, 1997 WL
700496, at *7 (E.D. Pa. Oct. 29, 1997) (holding that a district
court may dismiss a declaratory judgment action that “was filed
in anticipation of the impending litigation and motivated solely
by considerations of forum shopping”).
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determination of the fees the Wildermans owed that firm.
Cooper & Scully removed the suit to federal court on diversity
grounds and filed a motion to dismiss or stay the Wildermans’
suit.
The District Court stayed the Wildermans’ suit before it
so as to “not duplicate or interfere with the [Texas]
proceedings,” requiring Cooper & Scully to report on the status
of the Texas case every 60 days. The Wildermans appeal this
stay and, in the alternative, seek a writ of mandamus. Cooper &
Scully filed a motion with us to dismiss the appeal for lack of
jurisdiction.
II. Discussion
A. Is the Stay Entered by the District Court
Appealable?
The first issue we must decide is whether we have
appellate jurisdiction under 28 U.S.C. § 1291 over the stay
entered by the District Court. Section 1291 generally limits our
appellate jurisdiction to final orders. The “usual rule” is that a
stay is not a final order under § 1291. Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 10 n.11 (1983). A
stay is treated as a final order, however, if it “amounts to a
dismissal of the suit.” Id. at 10. This is the case when the stay
has the effect of putting the plaintiff “out of court” because it
“surrender[s] jurisdiction of a federal suit to a state court” by
“requir[ing] all or an essential part of the federal suit to be
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litigated in a state forum.” Id. at 11 n.11 (internal quotation
marks omitted). Our Court interprets the Supreme Court’s
opinion in Moses H. Cone as holding that stays involving
“parallel parties and parallel claims,” in which the state
decisions are likely to preclude the federal claims, are typically
appealable. Michelson v. Citicorp Nat’l Servs., Inc., 138 F.3d
508, 515 (3d Cir. 1998).
At bottom, we look at the effect of a stay to determine
whether it is final. Id. at 513. The stay in Michelson was not
appealable because the state-court determination was going to
have “little or no effect” on the federal suit. Id. at 516.
Michelson, the federal plaintiff, was not a party to the state suit
and therefore was not subject to res judicata because of the state
decision. Id. The state claim was based on Missouri law, while
the federal claim was based on federal law, so the state decision
was not going to be “determinative of the similar issue” in the
federal suit. Id. We therefore held that, because the stay would
not put the plaintiff out of federal court, it was not a final
judgment and not appealable. Id. at 516–17.
In other cases, we have used similar factors to conclude
stays were not appealable. In Marcus v. Township of Abington,
the causes of action in two proceedings—a state criminal suit
and a federal § 1983 suit—were different, and we held the stay
was not a final, appealable order. 38 F.3d 1367, 1371–72 (3d
Cir. 1994). We also noted in Marcus that stays are not
appealable just because they have the effect of delaying a
federal suit. Id. Where a stay order required periodic reports on
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the progress of the state litigation, suggesting the district court’s
“intention to monitor the stay periodically,” that order was not
final and thus not appealable. Cheney State Coll. Faculty v.
Hufstedler, 703 F.2d 732, 736 (3d Cir. 1983). Where a state
decision was likely not going to make the federal suit res
judicata, the district court’s stay was not appealable. Arny v.
Phila. Transp. Co., 266 F.2d 869, 870 (3d Cir. 1959).
On the other hand, when a state court decision would
render the federal suit subject to res judicata, stays are more
likely to be final, appealable orders. See, e.g., Trent v. Dial
Med. of Fla., Inc., 33 F.3d 217, 221 (3d Cir. 1994) (finding a
stay final and appealable when the state decision would
“constitute res judicata as to at least the two major issues” in the
federal suit); In re Grand Jury Proceedings (U.S.
Steel—Clairton Works), 525 F.2d 151, 155 (3d Cir. 1975)
(finding a stay appealable because the state suit was likely to
“continue beyond” the expiration of the federal grand jury’s
term, with “the practical effect of a dismissal of the
proceedings”).
Here the Wildermans have clearly conceded that the
Texas action will have little, if any, effect on their federal suit.
They note that it would be “impossible for [their] declaratory
judgment action to duplicate or interfere with the Texas
litigation because the issues and parties are different.”
Appellants’ Br. at 5. They also note that “the Texas court
cannot address the legal relations between [themselves] and
Cooper & Scully. No judgment rendered . . . in the Texas
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litigation will determine [their] liability to Cooper & Scully for
attorney’s fees.” Id. at 6. The Wildermans also concede that “a
judgment against Baron & Budd in Texas will not operate to bar
an action by Cooper & Scully against the Wildermans for pre-
discharge attorney’s fees.” Id.
The characteristics of the two different actions also make
clear that this action will not be rendered res judicata by the
Texas suit. The causes of action are different, and the parties
are not parallel. Cooper & Scully sued only Baron & Budd and
Summy, claiming interference with contract, usurpation of
corporate opportunity, and conversion. The federal claim is
between the Wildermans and Cooper & Scully and is a
declaratory judgment action for the Wildermans’ attorney’s fee
liability to Cooper & Scully. Thus, both suits share the same
factual background, but the same facts are not at issue in them.
The District Court’s stay order also shows that the effect
of its stay is not akin to a dismissal. The Court ordered the stay
to ensure that the federal action would not “duplicate or interfere
with” the Texas suit and required Cooper & Scully to report on
the status of the Texas suit every 60 days. That hardly has the
effect of a final determination, as it suggests that the Court will
periodically review the stay.
The Wildermans claim that the District Court’s stay is
appealable “based upon the belief or assumption that the Texas
litigation would resolve all issues between the parties and would
operate as res judicata to the federal action.” Resp. to Mot. to
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Dismiss at 1–2. But we look to the effect of the stay, not the
hypothetical basis for it: “[O]ur jurisdiction does not turn on the
authority cited by the district court. It turns, rather, on the effect
of the order that the district court has entered.” Marcus, 38 F.3d
at 1372 (emphasis in original).
The District Court’s stay does not dismiss; it simply
delays the federal suit until the state litigation comes to a clearer
resolution. This posture does not confer finality under § 1291,
and thus we lack jurisdiction to entertain this appeal.
B. Should We Issue a Writ of Mandamus?
The Wildermans ask us, as an alternative, to take
jurisdiction under 28 U.S.C. § 1651 by issuing a writ of
mandamus. This “extraordinary writ [can be] granted to review
a stay order issued in a clear abuse of discretion.” Cheyney, 703
F.2d at 736. The Wildermans have the burden of establishing
their “‘clear’” and “‘indisputable’” right to such a writ.
Commonwealth Ins. Co. v. Underwriters, Inc., 846 F.2d 196,
199 (3d Cir. 1988) (quoting Gulfstream Aerospace Corp. v.
Mayacamas Corp., 485 U.S. 271, 289 (1988)). Because the
District Court retained oversight of the stay, requiring periodic
reports on the state suit’s status, we conclude easily that the
District Court did not abuse its discretion, and we deny issuance
of a writ of mandamus. See Cheyney, 703 F.2d at 738 (denying
mandamus where the district court “impos[ed] a moderate and
actively monitored stay”).
III. Conclusion
The Wildermans will not be put out of federal court by
the stay entered in their case because the outcome of the state
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case will not determine their federal suit. As such, the stay is
not final and thus not appealable. In addition, we deny issuance
of a writ of mandamus.
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