Tesco Corporation v. National Oilwell Varco, L.P. , 804 F.3d 1367 ( 2015 )

United States Court of Appeals
for the Federal Circuit
______________________
TESCO CORPORATION,
Plaintiff
v.
NATIONAL OILWELL VARCO, L.P., OFFSHORE
ENERGY SERVICES, INC., FRANK’S
INTERNATIONAL, LLC,
Defendants-Appellees
v.
GLENN A. BALLARD, JR., JOHN F. LUMAN, III,
Interested Parties-Appellants
______________________
2015-1041
______________________
Appeal from the United States District Court for the
Southern District of Texas in No. 4:08-cv-02531, Judge
Keith P. Ellison.
______________________
Decided: October 30, 2015
______________________
JOHN WESLEY RALEY, III, Raley & Bowick, LLP,
Houston, TX, argued for defendant-appellee National
Oilwell Varco, L.P. Also represented by ROBERT MCGEE
BOWICK, JR., BRADFORD TURNER LANEY.
2 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
CLAYTON JAMES BUSHMAN, Bushman & Associates,
Houston, TX, for defendant-appellee Offshore Energy
Services, Inc. Also represented by ERIN WERNER.
LESTER L. HEWITT, Attorney at Law, Houston TX, for
defendant-appellee Frank’s International, LLC. Also
represented by SARAH J. RING, DAVID R. CLONTS, JAMES L.
DUNCAN, III, ASHLEY M. BROWN, Akin, Gump, Strauss,
Hauer & Feld, LLP, Houston, TX; REX S. HEINKE, Los
Angeles, CA.
GRANT HARVEY, Gibbs & Bruns, Houston, TX, argued
for interested parties-appellants. Also represented by
JEFFREY C. KUBIN, AYESHA NAJAM; WILLIAM F. LEE,
RICHARD WELLS O’NEILL, KATIE SAXTON, MICHAELA P.
SEWALL, CAITLIN LOOBY, Wilmer Cutler Pickering Hale
and Dorr LLP, Boston, MA.
______________________
Before NEWMAN, O’MALLEY, and CHEN, Circuit
Judges.
O’MALLEY, Circuit Judge.
Plaintiff Tesco Corporation (“Tesco”) and interested
parties-appellants Glenn A. Ballard, Jr. and John F.
Luman, III (collectively “the Attorneys”) filed this appeal
from a decision of the United States District Court for the
Southern District of Texas dismissing Tesco’s patent
infringement suit with prejudice pursuant to the court’s
inherent authority to sanction. Tesco Corp. v. Weather-
ford Int’l, Inc., No. H-08-2531, 2014 WL 4244215 (S.D.
Tex. Aug. 25, 2014) (“Sanctions Order”). During the
pendency of the appeal, Tesco and defendant-appellees
National Oilwell Varco, L.P., Offshore Energy Services,
Inc., and Frank’s Casing Crew & Rental Tools, Inc. (col-
lectively “NOV”) entered into a settlement resolving all
outstanding issues. The Attorneys also participated in
the settlement, with the parties and all counsel signing
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 3
mutual releases. The Attorneys contend that, despite the
settlement, the harm to their reputation from the district
court’s opinion justifies our continued jurisdiction over the
appeal. Because we find that there is no remaining case
or controversy to adjudicate, we dismiss the appeal.
BACKGROUND
I
Tesco filed a complaint against NOV for infringement
of U.S. Patent Nos. 7,140,443 and 7,377,324 on August 19,
2008. These patents involve a tool used in well drilling
technology—an apparatus and method for handling
sections of pipe used for lining a well bore. Id. at *1. The
purportedly innovative aspect of the technology is the
location of the point of connection for “link arms,” which
connect the Case Drilling System to the drill pipe that
will be placed in the well bore. U.S. Patent No. 7,377,324
col.1 l.31 – col.2 l.27. In the prior art systems, the link
arms attached to the top drive of a Case Drilling System,
but the patents-at-issue described a Case Drilling System
with the link arms attached to the lower pipe engaging
apparatus. Id. By lowering the point of connection, the
link arms could better reach and grab sections of the pipe.
In response to Tesco’s complaint, NOV filed an an-
swer, counterclaims, and a request for attorney’s fees
under 35 U.S.C. § 285. NOV subsequently filed a series of
motions to compel requesting, in part, information about
any relevant documents that evidence what occurred
during the six month period prior to the on-sale bar date
of November 2002. Tesco claimed that it had already
disclosed all relevant documents, but nevertheless even-
tually released a series of printed invoices for brochures
created shortly before November 2002. In light of these
invoices, NOV specifically requested any information
about the brochures, including the brochures themselves,
but Tesco denied the continuing existence of these bro-
chures. During a status conference, the district court
4 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
asked Tesco about the brochures, and Ballard, Tesco’s
attorney, insisted that Tesco had produced all responsive
documents. Joint Appendix (“J.A.”) 10703. Up until trial,
NOV continued to file motions requesting the brochures,
and Tesco continued to deny their existence. At the pre-
trial conference, the district court again reiterated his
concern about possible non-production of documents,
stating that “if there are documents that have been pro-
duced to others but not the adversaries, that’s, obviously,
very serious conduct.” J.A. 20111–12.
Trial began on October 25, 2010. On October 28,
NOV cross-examined one of the named inventors of the
patents-at-issue, Kevin Nikiforuk. NOV questioned
Nikiforuk about an image in Exhibit 851, which NOV
claimed was the missing brochure from August 2002 that
Tesco contended no longer existed. NOV explained that it
found the brochure in a box of documents from a prior
litigation between Tesco and one of the defendants, and
placed the document in their pretrial exhibit list. During
questioning, Nikiforuk agreed that, even though he could
not see the image clearly, the link arms in the image were
attached to the pipe engaging apparatus. The district
court instructed Nikiforuk not to speculate, and to answer
only if he authoritatively could identify the connection
point. Nikiforuk again stated that the image appeared to
show the claimed invention.
Tesco objected to this testimony and asked that it be
stricken as speculative and irrelevant. Ballard then
requested time to determine why the brochure was not
produced during discovery and if it actually represented
the claimed invention. The next day, Ballard informed
the court that Tesco had produced a low-resolution, black-
and-white, single-page version of the brochure during
discovery, and argued that none of the defendants had
asked for a clearer version of the produced document.
Ballard then told the court that the image in the brochure
did not show the claimed invention. In response, NOV
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 5
requested a curative instruction and a sanction switching
the burden of proof due to Tesco’s failure to disclose an
original, legible version of the brochure. Certain defend-
ants also refused an offer of a mistrial because they did
not want to give Tesco the opportunity to prepare Nikifo-
ruk for a new trial, insisting that they preferred entry of
judgment to a new trial. Ballard agreed to continue to
investigate the brochure over the weekend. J.A. 20724.
On November 1, Ballard explained that he had done
further research on the brochure, and that Luman had
contacted the alleged designers of the brochure. Ballard
then made the following declaration to the court:
As I told the Court, I would get to the bottom of
this August brochure issue, 4008, over the week-
end. We did so. We found the animator who ac-
tually did the rendering in question. That
animator is Don Carr [sic]. He says unequivocally
that this is not the invention in the brochure. We
explained that in the papers we filed this morn-
ing. He left Tesco four years ago. We didn’t have
his name until this weekend. He lives in Canada.
But if the trial -- if they want to continue to main-
tain that 4008 is the invention, we’re going to
want to call him at some point in the trial.
J.A. 20885 (emphasis added). Ballard again argued that
Tesco sufficiently produced the image in black-and-white
form, but the district court disagreed, stating that the
black-and-white version was not equivalent to the color
version, especially with regards to the point of connection
for the link arms. Ballard then continued:
I hope to put – I think the issue has been put to
bed. It’s not the image. I can call Don Carr [sic] to
tell you that. We also talked to a guy last night,
Jim Orcherton, who was also an individual who
worked on the rendering. We didn’t have time to
put this in our papers. This was late last night.
6 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
He also confirms that it’s not the tool. And so we
could call both of them.
J.A. 20888 (emphasis added). Ballard reiterated that,
based on the statements of Karr and Orcherton, “there is
no doubt that [the image in the brochure is] not Mr.
Nikiforuk’s invention.” J.A. 20897. Ballard made this
same assertion to the jury in his closing argument.
In light of the non-production of the original brochure,
the district court sanctioned Tesco by reversing the bur-
den of proof on validity, and setting the burden to be a
preponderance of evidence. The jury concluded that NOV
infringed the relevant claims of the patents-at-issue,
found certain of those claims to be not invalid, and found
that the brochure was not enabling.
II
After trial, the district court issued an April 12, 2011
order permitting post-trial discovery on the brochure.
NOV filed what the parties characterize as post-trial
summary judgment motions of invalidity under 35 U.S.C.
§ 102(b) and § 103 based on, inter alia, what it asserts
was disclosed in the brochure. 1 NOV also filed further
motions to compel regarding the brochure, alleging bad
faith on the part of Tesco. The court held a series of
hearings regarding the brochure. The district court
denied NOV’s post-trial summary judgment motion
regarding the on-sale bar on October 19, 2012, Tesco v.
Weatherford Int’l, Inc., 904 F. Supp. 2d 622 (S.D. Tex.
2012), but granted NOV’s post-trial summary judgment
1 These motions more appropriately should be
characterized as motions for judgment as a matter of law
pursuant to Federal Rule of Civil Procedure 50, not as
Rule 56 motions for summary judgment.
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 7
motion for obviousness on December 6, 2012, 2 Tesco Corp.
v. Weatherford Int’l, Inc., 904 F. Supp. 2d 638 (S.D. Tex.
2012). The court did not base the obviousness determina-
tion on the brochure, but instead relied on an obvious-to-
try analysis. Id. at 643 n.2.
NOV continued its post-trial motions practice with a
focus on its request for attorney’s fees under § 285. Tesco
filed a motion seeking judgment in its favor regarding the
exceptional case determination, arguing that a “trial” was
unnecessary because all relevant allegations regarding
litigation misconduct had already been heard by the
court. 3 During a June 4, 2013 hearing, the court asked
Ballard if he currently believed that the brochure dis-
closed the invention, and Ballard admitted that it did, but
reiterated that Karr and Orcherton had told Luman
during trial that the brochure did not disclose the inven-
tion. At the same hearing, the district court expressed its
2 Tesco attempted to appeal the district court’s
summary judgment decision. The district court contacted
our court, however, informing the Clerk of Court that the
appeal was premature because he had not yet resolved a
pending counterclaim seeking a declaration of unenforce-
ability of the patents on inequitable conduct grounds or
ruled on NOV’s request for attorney’s fees. After briefing
by both parties, we dismissed the appeal as premature.
Order at 3, Tesco Corp. v. Nat’l Oilwell Varco, L.P., Nos.
2013-1155, -1262 (Fed. Cir. Oct. 3, 2013).
3 NOV filed what it characterized as a “counter-
claim” for attorney’s fees under § 285. Though that
procedural posture was odd, since a motion under § 285
can be filed without the assertion of an affirmative claim,
the parties treated it as if it were a true counterclaim
upon which they believed the court would conduct a trial.
Of course, while a hearing may or may not have been
needed, no “trial” was required.
8 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
concerns that Tesco may have brought suit without doing
the necessary due diligence to find a brochure that could
have been invalidating.
III
NOV deposed both Karr and Orcherton near the end
of 2013, focusing on the discussions between
Karr/Orcherton and the Attorneys during trial. Karr
testified that he did not say that the brochure failed to
disclose the invention. J.A. 40391. Karr explained that,
when he first spoke with Luman, he informed Luman that
he could not tell definitively where the link arms connect-
ed to the Case Drive System in the brochure because of
the low resolution of the image. J.A. 40391; see also
Sanctions Order, at *4–5 (presenting further relevant
portions of Karr’s deposition testimony). Once Luman
sent Karr a higher resolution picture three days later—
still during the trial—Karr says he then told Luman that
the image did show the invention. He further informed
Luman that he did not prepare the image. Orcherton also
was asked about the image, and this conversation with
Luman, and Orcherton responded that he explained to
Luman that he had no knowledge of who did the render-
ing of the image in the brochure. J.A. 40406.
After discovery was completed, the district court set a
trial date of March 17, 2014, for the exceptional case
“counterclaim,” and held a motions hearing on February
21, 2014, to discuss, in part, the litigation misconduct
issue.
IV
On August 25, 2014, the district court issued an order
sua sponte dismissing the case with prejudice under the
court’s inherent authority based on counsel’s inaccurate
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 9
representations “to the Court during trial.” 4 Sanctions
Order, at *1. The court found that Karr and Orcherton’s
testimony was “contrary to the representations Tesco
made to the Court during trial.” Id. The court concluded
that Karr did not “unequivocally” state that the brochure
did not include the invention. The court found that the
representation to the court during trial justified a finding
of bad faith. Id. The court said that had Karr and Or-
cherton’s actual statements been reported to the court, it
may have entered judgment for NOV at that point in the
trial. Id. Indeed, the Attorneys concede on appeal that
they knew that the brochure disclosed the invention
within days of telling the court that it did not and knew
that Karr did not prepare the rendering, despite telling
the court he did. See note 6, infra.
The court said it had an “independent obligation to
safeguard . . . the proceedings before it.” Id. It reasoned
that the brochure “might very well have been case dispos-
itive.” Id. The court explained that a lesser sanction
would be insufficient. Id. at *7. The court went on to
emphasize, however, that:
The Court reaches its decision with great reluc-
tance. The Court is entirely confident that the
conduct that it finds so troubling is entirely out of
character for the attorneys. However, the conduct
is serious and has had significant and costly rami-
fications to the Court and Defendants.
Id. The court did not award fees to NOV at this time, but
said it was reserving the question of whether fees might
be appropriate for later consideration in light of its Au-
4 Since the court already had entered judgment
against Tesco on invalidity grounds, it appears that this
dismissal was meant to operate as an alternative basis for
that judgment.
10 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
gust 25 findings. Tesco and the Attorneys again filed
notices of appeal. 5 During the pendency of the appeal,
Tesco, with new counsel, reached a settlement and a
mutual release with all defendants, including a release of
the request for attorney’s fees under § 285. Oral Argu-
ment at 29:04–29:48, Tesco v. Nat’l Oilwell Varco, L.P.,
No. 15-1041 (Fed. Cir. July 7, 2015). Tesco subsequently
dismissed their appeal. Order at 2, Tesco Corp. v. Nat’l
Oilwell Varco, L.P., No. 15-1040 (Fed. Cir. April 23, 2015).
The Attorneys joined the settlement, including the mutu-
al releases. Appellants Reply Br. 6-7. The Attorneys
maintain, however, that the releases they executed explic-
itly carved out the Attorneys’ right to continue to pursue
this appeal.
DISCUSSION
I
We determine our jurisdiction over a case or contro-
versy according to Federal Circuit law, not regional circuit
law. Nisus Corp. v. Perma-Chink Sys., 497 F.3d 1316,
1318 (Fed. Cir. 2007) (“We resolve questions as to our
jurisdiction by applying the law of this circuit, not the
regional circuit from which the case arose.”); Sanders
Assocs., Inc. v. Summagraphics Corp., 2 F.3d 394, 395
(Fed. Cir. 1993) (“[B]ecause the appealability of the sanc-
tion order relates directly to the issue of our own jurisdic-
tion, this court will determine its own jurisdiction to hear
this appeal.”); Woodard v. Sage Prods. Inc., 818 F.2d 841,
844 (Fed. Cir. 1987) (en banc) (“This court has the duty to
determine its jurisdiction and to satisfy itself that an
5 The parties do not mention any formal ruling on
or dismissal of the inequitable conduct counterclaims. It
was clearly mooted by the court’s invalidity judgment,
however, and would, thus, no longer affect our jurisdiction
over this appeal.
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 11
appeal is properly before it.”). “We may, of course, look
for guidance in the decisions of the regional circuit to
which appeals from the district court would normally lie,
as well as those of other courts. However, our decision to
follow another circuit’s interpretation . . . results from the
persuasiveness of its analysis, not any binding effect.”
Woodard, 818 F.3d at 844.
The Attorneys argue that there remains an Article III
case or controversy because the statements made in the
district court’s opinion constitute a sanction against the
Attorneys, and the subsequent reputational harm to the
Attorneys is a sufficient injury-in-fact to justify our juris-
diction. The Attorneys further claim that the district
court erred, as a procedural matter, in issuing a sanctions
order under its inherent authority without providing the
Attorneys notice and an opportunity to be heard. The
Attorneys believed that the result of the hearings held in
early 2014 would be, at worst, a trial on NOV’s exception-
al case motion, and they claim to have been taken by
surprise by the sanctions order. On the merits of the
sanctions order, the Attorneys argue that the district
court erred in finding bad faith because Ballard relied on
Karr’s statements during trial when Ballard made the
representations to the court about the brochure, and Karr
was equivocal during his deposition testimony about what
he told Luman. According to the Attorneys, the deposi-
tion evidence of Karr and Orcherton was an insufficient
basis upon which to premise an exercise of the court’s
inherent authority. They contend, moreover, that this is
especially true because the court chose to dismiss the case
with prejudice.
NOV responds that, due to the settlement agreement,
there is no enduring case or controversy. All parties
mutually released each other, including the Attorneys,
from any further liability, and NOV claims that state-
ments made in an opinion issuing formal sanctions
against Tesco, not the Attorneys, cannot justify our juris-
12 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
diction. NOV also argues that the Attorneys received
more than sufficient due process, including multiple
opportunities to recant their statements to the court, and
that the trial court informed the Attorneys on multiple
occasions that he was considering issuing sanctions for
litigation misconduct. And for the merits of the sanctions
order, NOV asserts that the district court acted well
within its inherent powers. 6
Because we conclude that there is no on-going case or
controversy sufficient to justify our jurisdiction, we de-
cline to engender a discussion of either the sufficiency of
the district court’s notice before entering the order, or the
merits of the district court’s use of its inherent authority
to dismiss the case. 7
6 At oral argument, the Attorneys contended that,
even though they admit they knew during trial that the
statements made to the district court turned out to be
incorrect, they had no affirmative duty to correct the
misimpression to the court under the Texas Disciplinary
Rules of Professional Conduct. Oral Argument at 41:50–
42:15, Tesco Corp. v. Nat’l Oilwell Varco, L.P., No. 15-
1041, available at http://oralarguments.cafc.uscourts.gov/
default.aspx?fl=2015-1041.mp3.
7 The dissent argues that it is “unfair” to describe
the background facts giving rise to this appeal and then
dismiss the appeal on jurisdictional grounds. What the
dissent fails to recognize is that, like all judgments, a
legal determination regarding our jurisdiction—or lack
thereof—over this appeal turns on the facts presented. As
our cases in this area reveal, even fine factual distinctions
can alter the jurisdictional analysis. As noted later, the
dissent’s failure to recognize the importance of factual
distinctions to legal outcomes is further evidenced by its
citation to cases that are materially factually distinguish-
able from this one.
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 13
III
Article III, section 2 of the Constitution extends the
“judicial Power of the United States” to an enumerated
list of cases or controversies. Under this framework, a
party must have standing to resolve the dispute, and
there must be an on-going case or controversy throughout
the trial and appeals. Lujan v. Defenders of Wildlife, 504
U.S. 555, 560–61 (1992) (recognizing three elements
necessary for a federal court to have Article III standing:
(1) an injury-in-fact that is “actual or imminent, not
conjectural or hypothetical”; (2) “a causal connection
between the injury and the conduct complained of”; and
(3) a likelihood that the “injury will be redressed by a
favorable decision”). We have generally held that nonpar-
ties “may not appeal from judgments or other actions of a
district court.” Nisus, 497 F.3d at 1319. We have made
an exception, however, for an attorney “held in contempt
or otherwise sanctioned by the court in the course of
litigation,” concluding that, once the court has specifically
punished an attorney, the injury “becomes personal to the
sanctioned individual and is treated as a judgment
against him.” Id.
This appeal presents two questions that must be re-
solved in order for us to have jurisdiction over the dispute:
(1) can the sanctions order that was explicitly issued
against Tesco be considered a formal reprimand against
the Attorneys so as to provide them with standing to
pursue this appeal; and (2) what is the effect of the set-
tlement by all parties on the redressability of the Attor-
neys’ request for relief? In order for us to have
jurisdiction over this appeal, we would have to conclude
that the order was the equivalent of a formal reprimand
against the Attorneys and that we can redress the injury
to their reputation. Because we do not find we can re-
dress the Attorneys’ claimed injury, we need not decide
whether the sanctions order in this case is the type of
14 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
reprimand that could confer standing to pursue this
appeal.
A
We have twice recently addressed the appealability of
a sanctions order. In Precision Specialty Metals, Inc. v.
United States, 315 F.3d 1346 (Fed. Cir 2003), we held that
we had jurisdiction when the Court of International Trade
formally reprimanded a Department of Justice attorney.
In an unpublished opinion, the Court of International
Trade found that the attorney violated Rule 11 of the
Rules of the Court of International Trade due to misrep-
resentations made to the court, including the omission of
language from quotations. Id. at 1349–50. The Court of
International Trade opinion concluded with the state-
ment: “Accordingly, the court hereby formally reprimands
her.” Id. The Court of International Trade did not,
however, impose any monetary sanctions. Id.
On appeal, we concluded that “we have jurisdiction to
review the Court of International Trade’s formal repri-
mand of [an attorney] for attorney misconduct.” Id. at
1352 (noting that the reprimand was “explicit and formal,
imposed as a sanction”). We explained that a formal
reprimand, even without monetary sanctions, could have
a “seriously adverse effect . . . upon a lawyer’s reputation
and status in the community and upon his career.” Id.
Because of this, we concluded that the attorney had
standing to appeal the order independently of any appeal
by the parties. Id. at 1352–53. We noted, however, that
our jurisdiction did have limits—“judicial statements that
criticize the lawyer, no matter how harshly, that are not
accompanied by a sanction or findings, are not directly
appealable.” Id. at 1352; see also id. at 1353 (“Nothing in
this decision should be taken as suggesting . . . that other
kinds of judicial criticisms of lawyers’ actions, whether
contained in judicial opinions or comments in the court-
room, are also directly reviewable.”).
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 15
We again addressed our jurisdiction over an appeal
from a potential sanction against an attorney in Nisus. In
Nisus, the district court concluded that the patent-at-
issue was unenforceable because of inequitable conduct,
in part due to the actions of one of the attorneys who
prosecuted the patent and participated in the trial as a
witness. 497 F.3d at 1318. The parties settled, but the
prosecuting attorney appealed the inequitable conduct
determination and the denial of his motion to intervene in
the litigation. Id. We recognized that:
[A] court’s power to punish is not exercised simply
because the court, in the course of resolving the
issues in the underlying case, criticizes the con-
duct of a nonparty. Critical comments, such as in
an opinion of the court addressed to the issues in
the underlying case, are not directed at and do not
alter the legal rights of the nonparty. We recog-
nize that critical comments by a court may ad-
versely affect a third party’s reputation. But the
fact that a statement made by a court may have
incidental effects on the reputations of nonparties
does not convert the court’s statement into a deci-
sion from which anyone who is criticized by the
court may pursue an appeal.
Id. at 1319. We reiterated our conclusion in Precision
Specialty Metals that criticisms of attorneys intended to
be “a formal judicial action” are appealable, but not other
kinds of judicial criticisms. Id. at 1320. Because the
district court did not enter any formal judicial action
against the attorney, we concluded that we did not have
jurisdiction over the appeal. Id. at 1321. We held that:
[A]bsent a court’s invocation of its authority to
punish persons before it for misconduct, actions by
the court such as making adverse findings as to
the credibility of a witness or including critical
language in a court opinion regarding the conduct
16 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
of a third party do not give nonparties the right to
appeal either from the ultimate judgment in the
case or from the particular court statement or
finding that they find objectionable.
Id. Allowing appeals based solely on concerns about
professional reputation would open the floodgates to
appeals “by any nonparty who feels aggrieved by some
critical statement made by the court.” Id. at 1320.
Precision Specialty Metals and Nisus thus require a
formal sanction or reprimand to justify our jurisdiction
over an appeal by an attorney from an order criticizing
the attorney’s conduct. The Attorneys argue that the
present order should be considered the equivalent of a
formal reprimand because the dismissal was predicated
on the conduct of the Attorneys. The Attorneys further
say that having their client’s case dismissed is more
harmful to them than would be a small monetary sanc-
tion, which they contend surely would justify the exercise
of our jurisdiction under Precision Specialty Metals. NOV
responds that Nisus makes clear that, when counsel’s
conduct is criticized in the course of rendering judgment
against a party, that counsel lacks standing to pursue an
appeal. The present case does not fit nicely within the
facts of either Precision Specialty Metals or Nisus, howev-
er.
Neither Precision Specialty Metals nor Nisus ad-
dressed the effect of a subsequent settlement agreement.
If Tesco, NOV, and the Attorneys had not entered into a
settlement absolving all parties of any further liability,
we would be required to determine if the statements made
in the district court order are functionally equivalent to a
formal reprimand, and thus provide the Attorneys with
the standing necessary to pursue this appeal. The inter-
vening settlement, however, renders that determination
unnecessary to the resolution of this appeal.
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 17
B
Our court has not previously determined the effect of
an intervening settlement on an appeal of an order con-
taining critical statements about the conduct of an attor-
ney. Our sister circuits have, however, addressed the
effect of a change in circumstances which removes or
moots the underlying judgment. We agree with their
conclusion that an intervening settlement can abrogate
the case or controversy justifying appellate jurisdiction.
For example, in In re Williams, 156 F.3d 86, 87 (1st
Cir. 1998), the United States Court of Appeals for the
First Circuit had to determine if “a trial court’s published
findings of attorney misconduct [are] . . . independently
appealable, notwithstanding that the monetary sanctions
imposed by the court for that conduct have been nulli-
fied.” There, a bankruptcy court judge imposed Rule 37(b)
sanctions against the government and two government
attorneys for failing to timely produce certain documents
during discovery. Id. at 88. In his opinion, the bankrupt-
cy judge “harshly criticized” the two attorneys, and or-
dered them to each pay $750 to the court. Id. But on
reconsideration, the judge vacated one of the monetary
sanctions, and instructed that the other attorney pay the
$750 to the aggrieved party, not the court. Id. The bank-
ruptcy judge refused, however, to vacate his findings, and
the district court also declined to vacate any of the bank-
ruptcy court’s factual findings. Id. at 89.
The First Circuit concluded that it did not have juris-
diction to review the factual finding from the original
bankruptcy judge’s opinion. Id. at 89–92. Once the
monetary sanctions were removed from the case, the only
remaining “sanctions” were the statements made in the
published opinion that had not been vacated. Id. at 89.
The court recognized the reputational harm such state-
ments could have on the attorneys, but reiterated that
“federal appellate courts review decisions, judgments,
18 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
orders, and decrees—not opinions, factual findings, rea-
soning, or explanations.” Id. at 90. Because the monetary
sanctions were ameliorated and no reprimands were
imposed, the court found it “lack[ed] jurisdiction to con-
sider the propriety of the offending findings.” Id. The
attorneys argued that the court should hold that “harsh
words that reflect adversely on a lawyer’s professionalism
always should be treated as a reprimand (and, therefore,
as a sanction),” but the court concluded that trying to
draw a line between “routine judicial commentary” and
“commentary that is inordinately injurious to the lawyer’s
reputation” would be too burdensome to manage effective-
ly. Id. at 91. The court did not want to invite litigation
over the issue of when statements become sufficiently
harsh, and the court could not determine how to limit this
analysis to just statements made against attorneys and
not other third parties. Id. (“Lawyers, witnesses, victori-
ous parties, victims, bystanders—all who might be subject
to critical comments by a district judge—could appeal
their slight if they could show it might lead to a tangible
consequence such as a loss of income.” (quoting Bolte v.
Home Ins. Co., 744 F.2d 572, 573 (7th Cir. 1984)) (internal
quotation marks omitted)). The First Circuit said it did
not want to turn an appellate court into “some sort of
civility police charged with enforcing an inherently unde-
finable standard of what constitutes appropriate judicial
comment on attorney performance.” Id.; see also Weiss-
man v. Quail Lodge, Inc., 179 F.3d 1197, 1200 (9th Cir.
1999) (agreeing with the court in Williams that “words
themselves do not constitute sanctions” and do not inde-
pendently trigger a right to appeal).
The United States Court of Appeals for the Seventh
Circuit reached a similar conclusion in Clark Equipment
Co. v. Lift Parts Manufacturing Co., 972 F.2d 817 (7th
Cir. 1992). The district court awarded attorney’s fees and
costs to be paid by the sanctioned attorney due to the
attorney’s role in contributing to the absence of a crucial
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 19
witness at trial and for re-arguing an issue that had
previously been resolved. Id. at 818. The attorney imme-
diately appealed the sanctions, but the parties entered a
settlement during the pendency of the appeal that includ-
ed a commitment by one of the parties to pay all of the
attorney’s fees owed by the offending attorney. Id. The
court recognized that district courts have an interest in
guaranteeing that the rules of procedure were followed,
but that interest cannot keep a compensatory consent
award “alive for appeal after the parties have settled.” Id.
at 819 (“[T]he beneficiary of a compensatory sanction may
bargain away the court’s interest in seeing its rules
enforced.”). The court explained how, normally when an
appeal becomes moot, the appellate court vacates the
district court’s judgment and remands with instructions
to dismiss the complaint. Id. But, because of the settle-
ment, the court clarified that there was no need to dismiss
the complaint or vacate the judgment. It pointed out that
the attorney was requesting that the court vacate the
opinion, not the judgment. Id. at 819–20. The court
declined to take that step, explaining that appellate
courts review judgments, not opinions. Id.
We agree with the reasoned analysis of our sister
circuits. The Attorneys, in essence, face a redressability
problem. Once all parties entered into the settlement
agreement, no party—except the Attorneys for reputa-
tional reasons—had any enduring interest in the underly-
ing order dismissing the case with prejudice. The case
was, for all purposes, complete, considering that the
settlement resolved the outstanding motion for attorney’s
fees under 35 U.S.C. § 285. The fact that the sanction
was directed at Tesco in the opinion, not the Attorneys,
further supports the conclusion that no party retains an
interest in the judgment by the district court. Our options
20 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
for redressing the reputational injury of the Attorneys are
therefore greatly limited. 8
Walker v. City of Mesquite, 129 F.3d 831 (5th Cir.
1997) is not to the contrary. In Walker, the Fifth Circuit
merely concluded that the court had jurisdiction to hear
an appeal of a formal sanctions order premised solely on
damage to the attorney’s reputation. Id. at 832 (“We have
heretofore held that monetary penalties or losses are not
an essential for an appeal.”). We have similarly held that
our jurisdiction does not require a monetary sanction. See
Precision Specialty Metals, 315 F.3d at 1352–53. Alt-
hough Walker may be relevant to determining when
formal non-monetary sanctions which have not been
vacated or mooted by later developments are sufficient to
justify appellate jurisdiction, Walker does not provide
insight into the redressability issues faced by the Attor-
neys.
Nor do the other cases upon which the dissent relies
help the Attorneys’ cause. Fleming & Associates v. Newby
& Tittle, 529 F.3d 631 (5th Cir. 2008), was concerned with
a district court’s continuing authority to impose sanctions
predicated on counsel’s misconduct even after a case has
settled. The Fifth Circuit simply affirmed the trial court’s
right to impose non-compensatory sanctions in such
circumstances and its own ability to review any sanction
so imposed. Id. at 640. Perkins v. General Motors Corp.,
965 F.2d 597 (8th Cir. 1992) was to the same effect.
Neither case dealt with a circumstance where no sanction
8 We note that the parties, but not the intervening
attorney, in Nisus also settled their dispute prior to
appeal. Rather than decide the question of whether the
district court’s dismissal order amounted to the type of
formal judicial action over which we could exercise juris-
diction, we instead decide this case on redressability
grounds.
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 21
remained in place. Indeed, both recognized that sanctions
designed to compensate a party for the harm it incurred
because of the misconduct of its adversary or its counsel—
such as the burden shifting sanction and dismissal order
at issue here—are mooted by any subsequent settlement.
Kirkland v. National Mortgage Network, Inc., 884
F.2d 1367 (11th Cir. 1989), Analytica, Inc. v. NPD Re-
search, Inc., 708 F.2d 1263 (7th Cir. 1983), Grider v.
Keystone Health Plan Central, Inc., 580 F.3d 119 (3rd Cir.
2009), Sheppard v. River Valley Fitness One, L.P., 428
F.3d 1, 6 (1st Cir. 2005), and Obert v. Republic Western
Insurance Co., 398 F.3d 138, 143 (1st Cir. 2005), remand
order modified, 2005 U.S. App. LEXIS 4793 (1st Cir. Mar.
24, 2005), were all cases where formal sanctions and/or
reprimands were imposed upon counsel, leaving an order
in place which could be reviewed and presumably vacated.
For example, Sheppard v. River Valley Fitness One, 428
F.3d at 6, involved a monetary sanction against an attor-
ney for misrepresenting his client’s settlement in a closely
related case to the plaintiff. Although the dissent cites
Sheppard as demonstrating that the First Circuit permits
review of “factual findings by themselves (i.e. unattached
to any sanctions),” the court in fact preceded this state-
ment with, “if an appellate tribunal has jurisdiction to
review [a sanctions] order, its examination will encompass
the underlying findings.” Id. (emphasis added). The court
affirmed the monetary sanction in that case, but vacated
a single factual finding accompanying it. In Obert v.
Republic Western Insurance Co., 398 F.3d 138, 143 (1st
Cir. 2005), remand order modified, 2005 U.S. App. LEXIS
4793 (1st Cir. Mar. 24, 2005), the attorneys appealed
orders sanctioning their conduct. The court granted
review of formal rulings that the attorneys violated state
ethics rules and Rule 11, while confirming that the set-
tlement of the underlying case mooted the award of
attorneys’ fees and the revocation of pro hac vice status.
22 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
The only two cases where it appears reputational in-
jury without more was deemed sufficient to justify the
exercise of jurisdiction, Butler v. Biocare Medical Tech-
nologies, Inc., 348 F.3d 1163 (10th Cir. 2003) and Johnson
v. Board of County Commissioners, 85 F.3d 489 (10th Cir.
1996)—both out of the Tenth Circuit—lacked any discus-
sion of the redressability concern upon which our decision
is predicated. This is perhaps understandable since, in
both cases, the district courts’ orders were affirmed,
obviating the need to assess what relief the court of
appeals might fashion.
The Attorneys request that we remedy their injury in
one of three ways: (1) vacate the underlying order; (2)
remove the district court’s finding of bad faith; or (3)
remand for a full hearing on litigation misconduct. There
is no need to vacate the district court’s judgment and
underlying order because the settlement rendered that
step unnecessary by making the judgment moot. See
Clark Equip., 972 F.2d at 819–20. And we decline to
address the predicate findings in the trial court’s opinion.
As the court in Williams correctly explained, and we have
noted in many contexts, Courts of Appeals review judg-
ments, not opinions. 156 F.3d at 90; cf. OSRAM Sylvania,
Inc. v. Am. Induction Techs., Inc., 701 F.3d 698, 707 (Fed.
Cir. 2012) (“we review judgments not opinions”); Man-
gosoft, Inc. v. Oracle Corp., 525 F.3d 1327, 1330 (Fed. Cir.
2008) (same); Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d
1530, 1540 (Fed. Cir. 1983) (“We sit to review judgments,
not opinions.”). We also will not remand for a full hearing
on litigation misconduct. That would be an unnecessary
use of the district court’s and the parties’ resources.
Although the Attorneys claim that a full hearing would
allow them the opportunity to clear their name, we have
no authority to order a court to conduct a hearing in a
case that is closed and cannot be reopened.
We agree that statements made in a judicial opinion
can harm the reputation of attorneys, and that an attor-
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 23
ney’s reputation is one of his or her most valuable assets.
But that concern alone is insufficient to justify our juris-
diction where there is no judgment that remains. There is
no remaining sanction which could be vacated or punish-
ment imposed upon the Attorneys which could be re-
versed. There is simply no Article III case or controversy
that allows us to redress any reputational harm the
Attorneys may have suffered.
CONCLUSION
Because we find that, in light of the settlement en-
tered by all parties to the litigation, including the Attor-
neys, there remains no on-going case or controversy, we
dismiss the appeal for lack of jurisdiction.
DISMISSED
United States Court of Appeals
for the Federal Circuit
______________________
TESCO CORPORATION,
Plaintiff
v.
NATIONAL OILWELL VARCO, L.P., OFFSHORE
ENERGY SERVICES, INC., FRANK’S
INTERNATIONAL, LLC,
Defendants-Appellees
v.
GLENN A. BALLARD, JR., JOHN F. LUMAN, III,
Interested Parties-Appellants
______________________
2015-1041
______________________
Appeal from the United States District Court for the
Southern District of Texas in No. 4:08-cv-02531, Judge
Keith P. Ellison.
______________________
NEWMAN, Circuit Judge, dissenting.
The issue on this appeal is whether these two
sanctioned attorneys should have, and do have, the right
and opportunity to “clear their name” by appealing the
sanctions order. My colleagues on this panel hold that
they do not, for the reason that “a full hearing on
litigation misconduct” would be “an unnecessary use of
2 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
the district court’s and the parties’ resources.” Maj. Op.
at 22. Thus this court holds that an appeal to bring out
potentially mitigating information is not available.
These sanctioned attorneys ask for the opportunity to
provide privileged records that they say will clear their
name, stating that these records were proffered to the
district court judge, who declined to receive them. These
sanctioned attorneys are surely entitled to an appeal (or
remand to the district court, as alternatively requested).
Precedent in all of the other circuits would so allow, and
fundamentals of due process so require. From my
colleagues’ contrary ruling, I respectfully dissent.
I
A lawyer’s reputation is the lawyer’s most valuable
asset. These two lawyers were publicly sanctioned, with
imposition of the most severe punishment: dismissal of
the client’s case with prejudice. The reason was that two
witnesses testified contrary to what these lawyers had,
three years earlier, told the trial judge would be the
witnesses’ testimony concerning a Tesco brochure related
to the patented device.
The panel majority refuses the attorneys’ request for
appeal or proceedings to allow them to provide these
privileged records. My colleagues cite “jurisdictional”
grounds, stating that the case is over because the parties
“settled.” Every other circuit that has considered this
aspect has held that settlement does not bar an attorney’s
right to appeal a sanctions order.
The panel majority not only rules that no appeal is
available and that the proffered exculpatory evidence
cannot be received, but the majority also presents, in
prejudicial and pejorative detail, the statements of
counsel that led to their sanctions. If this issue is to be
retried only in appellate dictum, the victims should at
least have the opportunity to tell their side of the story.
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 3
The closest that the Appellants have gotten to this
opportunity is in their appellate brief, where they
summarize this history:
The Sanctions Order found that Attorney-
Appellants had willfully misled the district court .
. . . The district court’s finding was based upon its
decision to credit the 2013 post-trial deposition
testimony of one former Tesco employee above and
against Attorney-Appellants’ own in-trial
statements made in 2010. Specifically, on
November 1, 2010, Mr. Ballard relayed to the
district court the contents of several out-of-court
conversations Mr. Luman had with two witnesses
and described their expected testimony.
Appellant’s Br. 2. These witnesses later diverged from
the described testimony, leading the district court to
impose sanctions and to dismiss the Tesco case with
prejudice. The Appellants summarize these events:
Three years later, when deposed, one of the
witnesses apparently remembered these
conversations differently, and the other did not
remember them at all, even though
contemporaneous evidence not only showed that
their conversations occurred but also supported
what Attorney-Appellants conveyed to the district
court. Without reviewing this evidence, the
district court concluded on the basis of what one
witness could remember years later that
Attorney-Appellants must therefore have lied to
the court.
Appellant’s Br. 2–3. This appeal arises from the district
court’s refusal to review the proffered evidence that,
according to the sanctioned attorneys, would show that
they did not misrepresent what they were told by the two
witnesses. The Appellants raise due process concerns as
to the sanctions procedure, and summarize:
4 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
The district court entered the Sanctions Order
without conducting a trial or even a show cause
hearing on the issues covered by the order, and
without reviewing the contemporaneous evidence
offered to the district court no less than three
times for in camera inspection.
Appellant’s Br. 3. The district court dismissed the case
with prejudice “outright,” an action that the Supreme
Court has called “a particularly severe sanction.”
Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991).
The Appellants describe their proffer of evidence as
follows:
The deposition testimony that forms the sole
evidentiary basis for the Sanctions Order did not
accurately reflect what the witnesses had said
years earlier. Attorney-Appellants could have
proven so with their privileged notes and emails
from 2010 had the district court given them notice
and an opportunity to do so.
Appellant’s Br. 4. My colleagues on this panel refuse to
review this evidence, or to require the district court to
review it, stating that we do not have jurisdiction of this
appeal at all, because the case was settled. Nonetheless,
my colleagues describe, in exhaustive detail, the course of
the proceedings below, apparently to demonstrate
counsels’ malfeasance. Not only is no mention made of
the proffered exculpatory information, but the majority
reiterates selected parts of the district court’s criticisms,
reinforcing the injury while denying the requested
hearing.
Precedent and due process require that sanctioned
attorneys be permitted appellate review of the sanctions
order. In the Fifth Circuit, whose law controls this
procedural issue, the imposition of attorney sanctions is
subject to the processes of law. Hazeur v. Keller Indus.,
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 5
1993 U.S. App. LEXIS 38258, *12 (5th Cir. Jan. 11, 1993)
(“[W]hen a district court imposes sanctions under its
inherent authority, due process considerations
undoubtedly are implicated.”) (citing Roadway Express v.
Piper, 447 U.S. 752, 767 (1980)). With all respect to my
colleagues, their one-sided approach to this appeal, where
they deny jurisdiction due to settlement, but nonetheless
make adverse findings while simultaneously denying all
opportunity of exculpation, is not only prejudicial, but also
unfair.
The majority argues that this dissent “fails to
recognize” the “fine factual distinctions” upon which
sanctions are based. Maj. Op. at 12 n.7. On this ground,
the majority justifies ignoring the vast body of precedent
in which sanctioned attorneys have had the right and
opportunity to defend their reputations. To the contrary,
precedent demands that fine facts be found. My concern
is that the district court repeatedly refused to receive the
Appellants’ proffered evidence, although that evidence
could affect the factual weight and perhaps even change
the conclusion.
The appellate obligation is to assure an adequate and
fair factual foundation to which the law is applied. I
dissent for precisely this reason: the incompleteness of the
record renders the sanction possibly unfair. All of the
precedents that I cite are founded on the position that
when the trial judge issues a reprimand, it is incumbent
on the appellate tribunal to assure that the processes of
law are fully recognized.
II
On the question of loss of appellate jurisdiction based
on settlement, my colleagues err in ruling that there is no
jurisdiction to review the issue of sanctions. The Supreme
Court has made it clear: “It is well established that
federal courts may consider collateral issues after an
action is no longer pending.” Cooter & Gell v. Hartmarx
6 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
Corp., 496 U.S. 384, 395 (1990). See also Willy v. Coastal
Corp., 503 U.S. 131, 139 (1992) (a district court’s
sanctions regarding violations of the court’s rules are
sustainable, and reviewable by appellate courts, even
where the court is later held to lack jurisdiction over the
case).
The appealability of a severe sanction, such as
dismissal with prejudice, is recognized in all of the
circuits. Appealability is not defeated by an intervening
settlement. The courts have reasoned that settlement
does not “moot” an attorney sanction, for the reputational
damage is perpetual.
As the district court resides within the Fifth Circuit, I
start with their decisions. The Fifth Circuit, like all the
other circuits, recognizes that injury to an attorney’s
professional reputation is a cognizable and legally
sufficient cause for appellate review, for reputation is the
attorney’s “most important and valuable asset.” Walker v.
City of Mesquite, 129 F.3d 831, 832–33 (5th Cir. 1997).
In Fleming & Associates v. Newby & Tittle, 529 F.3d
631 (5th Cir. 2008) the district court had awarded
attorney fees as a sanction for improper procedures
concerning an expert report; the parties then settled, and
agreed that each side would bear its own attorney fees.
The district court nonetheless wrote a written opinion
that described attorney misconduct during the
proceedings. Id. at 641. The circuit court held that the
sanctions order, and its appealability, survive settlement,
stating that “[w]e should not deprive the . . . counsel of
the right to equity when the party he represents chose to
settle its suit.” Id. at 638 n.3. The court concluded that
“any nonmonetary portion of the sanctions not rendered
moot by settlement is appealable for its residual
reputational effects on the attorney.” Id. at 640.
Other circuits have dealt with the effect of settlement
on the appeal of an attorney sanction. The First Circuit
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 7
explicitly allows review of “factual findings by themselves
(i.e. unattached to any sanctions)” due to the ‘“serious
practical consequences’ they may have on counsel’s
reputation.” Sheppard v. River Valley Fitness One, L.P.,
428 F.3d 1, 6 (1st Cir. 2005) (quoting Obert v. Republic W.
Ins. Co., 398 F.3d 138, 143 (1st Cir. 2005), remand order
modified, 2005 U.S. App. LEXIS 4793 (1st Cir. Mar. 24,
2005). In Obert, the First Circuit held that while
settlement had mooted the sanctions imposed, “given the
substance of the underlying rulings, the reputations of
counsel are affected by the findings that individual
counsel and their firms violated state ethics rules or Rule
11,” the “serious practical consequences of such
findings . . . [were] sufficient to avoid mootness.” 398 F.3d
at 142–143. Here, the district court’s action of dismissal
of the entire case underscores the seriousness of the
charges to which the Appellants were not permitted to
respond.
In Cheng v. GAF Corp., 713 F.2d 886, 890 (2d Cir.
1983), counsel was sanctioned by the district court for
filing an inappropriate motion. The Second Circuit
recognized that “[i]f the case is settled, or if appellant
succeeds on the merits, it is not clear that appellant's
lawyer will be able to appeal.” To address this concern,
the Second Circuit permitted an immediate appeal of the
fee award.
The Second Circuit has also considered a situation
close on its facts to the case at bar, and declined to hold
that settlement mooted the attorney’s right to appeal from
a sanction, “because his reputation—the basis of the
attorney’s livelihood—is at stake and, unlike his client, he
did not voluntarily enter into the settlement in question.”
Agee v. Paramount Commc’ns, Inc., 114 F.3d 395, 399 (2d
Cir. 1997).
Also contrary to the majority’s ruling herein, the
Eighth Circuit directly ruled that settlement does not
8 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
moot the appeal of an attorney sanction. In Perkins v.
General Motors Corp., 965 F.2d 597 (8th Cir. 1992), the
court rejected the argument that “the district court lost
jurisdiction to enforce the sanctions when the parties
settled the case.” Id. at 599. The court held that the
district court had authority to levy the sanction and the
circuit court had authority to review it, stating that, even
though there was no monetary consequence, “[t]he
interest in having rules of procedure obeyed does not
disappear merely because an adversary chooses not to
collect the sanctions.” Id.
The Eighth Circuit brought pragmatic reasoning to
the effect of settlement of the underlying case, on the
right of an attorney to appeal a sanction order:
If an attorney is unable to appeal a sanction order
after the underlying case has been settled, the
attorney is left with no avenue of challenging the
sanction order. The law encourages parties to
settle disputes. An attorney must be free to settle
cases when settlement is in the client’s best
interest. The refusal to grant jurisdiction over an
appeal of sanctions after the underlying suit has
been settled thrusts a personal conflict upon the
attorney—by settling a case in the client’s interest
he may have to forfeit a personal right to appeal
the sanctions levied against him.
Id. at 600.
The circuits have also held that an attorney has
standing to appeal a sanctions order, based on the injury
to professional reputation, whether or not other
punishment is also levied. In Butler v. Biocare Medical
Technologies, Inc., 348 F.3d 1163 (10th Cir. 2003), the
court stated “we believe that the position taken by the
majority of the circuits, that an order finding attorney
misconduct but not imposing other sanctions is
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 9
appealable under §1291 even if not labeled as a
reprimand, is the proper position.” Id. at 1168.
The circuits stress the reputational aspect of
sanctions awards in cases that were settled. In Gruder v.
Keystone Health Plan Central, Inc., 580 F.3d 119, 133 (3d
Cir. 2009) the court agreed that “the settlements did not
moot the appeals because the Appellants experienced (and
continue to experience) reputational harm.”
In Johnson v. Board of County Commissioners, 85
F.3d 489 (10th Cir. 1996), the court held that “settlement
of an underlying case does not preclude appellate review
of an order disqualifying an attorney from further
representation insofar as that order rests on grounds that
could harm his or her professional reputation.” Id. at 492.
In Kirkland v. National Mortgage Network, Inc., 884
F.2d 1367 (11th Cir. 1989) the court held that an
attorney’s appeal of an order revoking his pro hac vice
status survived dismissal because “the ‘brand of
disqualification’ on grounds of dishonesty and bad faith
could well hang over his name and career for years to
come.” Id. at 1370.
The cases cited by the majority do not support their
position that settlement removes the sanction from
appellate review. The majority relies primarily on In re
Williams, 156 F.3d 86 (1st Cir. 1998), where the court
held a bankruptcy judge’s sanctions order unappealable
on the facts of that case, the court explaining that
appealability of the sanction “depends on whether the
findings comprise a decision, order, judgment, or decree.”
Id. at 89. The court observed that the monetary fine
against counsel had been withdrawn, and let stand the
chastisement of counsel. The court held that since there
was no consequence and no punishment, there was no
appeal.
10 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
Although my colleagues recognize that in Williams
there was no adverse consequence to the criticism of
counsel “[b]ecause the monetary sanctions were
ameliorated and no reprimands were imposed,” Maj. Op.
at 18, the panel majority nonetheless holds that Williams
supports non-appealability for absence of jurisdiction.
There is, however, a critical space separating the
Williams ruling that without a formal reprimand or other
adverse consequence, ordinary criticism of an attorney is
not appealable. In contrast, in the case at bar, the
ultimate sanction of dismissal of the client’s case was
imposed, accompanied by a published Sanctions Order
recounting the transgressions by counsel.
The other cases that the majority says supports its
bar to appeal, are inapposite here. In Bolte v. Home
Insurance Co., 744 F.2d 572 (7th Cir. 1984), the circuit
court found that only because no sanctions were actually
imposed by the district court upon settlement and
dismissal was the issue moot. Here, sanctions, harsh
sanctions, were imposed. And even there, the court
questioned whether defamatory statements alone were
never sufficient to raise a claim for appellate relief, citing
to Analytica, Inc. v. NPD Research, Inc., 708 F.2d 1263
(7th Cir. 1983), where the court alluded that the
reputational damage to attorneys in that case was an
argument worth consideration. Id.
The panel majority also relies on Weissman v. Quail
Lodge, Inc., 179 F.3d 1194 (9th Cir. 1999). The district
court statements at issue in Weissman and the present
appeal are far apart. In Weissman, the district court
stated the attorney’s behavior reflected “a serious lack of
professionalism and good judgment.” Id. The circuit
court found that that statement did not constitute a
formal reprimand and so avoided appellate review. Here,
in contrast, the district court issued a separate Sanctions
Order, accompanied by the dramatic act of dismissing the
client’s case with prejudice.
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 11
Also in Clark Equipment Co. v. Lift Parts
Manufacturing Co., 972 F.2d 817 (7th Cir. 1992), after the
client agreed to pay the entire attorney fee sanction levied
against the offending attorney, the court declined to
accept the attorney’s appeal of the sanction, the court
stating that the entire consequence of his transgression
had been “bargained away.” Id. at 819. Yet still, the
circuit court found sufficient purchase to vacate the
district court’s judgment to the extent it imposed
sanctions. On the facts of that case, the circuit court’s
treatment was not a matter of “jurisdiction” but of
pragmatic judicial wisdom.
In sum, there is no support for the majority’s general
theory that there is no “jurisdiction” to appeal an
otherwise appealable sanction, after the case has been
settled. Review of all the circuits reveals a logical pattern
whereby the integrity of the judicial process is preserved
not only by authorizing the imposition of sanctions, but
also by assuring due process in the imposition itself. And
when there is a settlement, the courts have recognized
that jurisdiction is present, and have reviewed the
imposition of sanctions as appropriate to the specific
situation.
In today’s ruling the Federal Circuit stands alone.
Indeed, this panel stands alone among Federal Circuit
rulings.
III
The law of this circuit is also on the side of judicial
review. In Precision Specialty Metals, Inc. v. United
States, 315 F.3d 1346 (Fed. Cir. 2003), this court stated
that “a judicial reprimand is likely to have a serious
impact upon a lawyer’s professional reputation and
career,” and is “directly appealable” when “accompanied
by a sanction or findings.” Id. at 1352–53. We elaborated
in Nisus Corp. v. Perma-Chink Sys., holding that
Precision Specialty Metals made “clear that the phrase
12 TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P.
‘sanctions or findings’ referred to the formal imposition of
the court’s inherent power to penalize those who appear
before it.” 497 F.3d 1316, 1321 (Fed. Cir. 2007) (quoting
Precision Specialty Metals, 315 F.3d at 1352).
Here, the attorneys were “before the court as a
participant in the underlying litigation, and the court’s
action was directed at regulating proceedings before the
court or over which the court had supervisory authority.”
Id. Indeed, this court has “taken the position that a
court’s order that criticizes an attorney and that is
intended to be ‘a formal judicial action’ in a disciplinary
proceeding is an appealable decision.” Id. at 1320.
The majority seeks to avoid the issue of “whether the
district court’s dismissal order amounted to the type of
formal judicial action over which we could exercise
jurisdiction . . . instead deciding this case on
redressability grounds.” Maj. Op. at 20 n.8. That issue is
at the heart of this matter, for a district court’s dismissal
of the underlying action with prejudice based on alleged
attorney misconduct is a sanction accompanying a judicial
reprimand, and is directly appealable as provided in
Precision Specialty Metals and Nisus.
IV
The district court invoked its inherent power to
punish what it saw as bad faith and willful misconduct.
Such power is available “only if clear and convincing
evidence supports the court’s finding of bad faith or willful
abuse of the judicial process.” In re Moore, 739 F.3d 724,
729–30 (5th Cir. 2014). The issue is not whether the
district court has such inherent disciplinary power, but
whether these sanctioned attorneys are entitled to appeal
and to bring forth privileged documents to defend
themselves. My colleagues hold we do not have
jurisdiction to consider this issue.
TESCO CORPORATION v. NATIONAL OILWELL VARCO, L.P. 13
Common to all circuits is the requirement that
sanctionable behavior must be established by clear and
convincing evidence on the record as a whole. There
cannot be clear and convincing evidence without an
opportunity to present contrary evidence. Although my
colleagues state that the Appellants had adequate
opportunity to “recant their statements to the court,” it
was not until three years after these attorneys’
conversations, that the witnesses were deposed.
The Fifth Circuit explains that: “For this court to
affirm inherent power sanctions on grounds other than
those expressly chosen by the imposing court would
constitute an encroachment upon that court’s discretion
unwarranted by the concerns for order and necessity
inherent in their use.” Crowe v. Smith, 151 F.3d 217, 240
(5th Cir. 1998). The Appellees, scouring the record for
damaging communications not mentioned by the district
court, have presented grounds upon which the majority’s
affirmance affixes this court’s imprimatur, exceeding this
safeguard—again, while insisting that we do not have any
jurisdiction at all.
My colleagues ignore the vast body of circuit
reasoning, and instead hold that “a full hearing on
litigation misconduct” would be “an unnecessary use of
the district court’s and the parties’ resources.” Maj. Op.
at 22. Indeed, some aspects of due process of law do
consume resources. The settlement did not eradicate the
right of these Appellant attorneys to appeal the sanction
against them. They have the right to clear their name in
appropriate further proceedings. From my colleagues’
contrary ruling, I respectfully dissent.