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Donovan v. Robbins

decided: January 3, 1985.

RAYMOND J. DONOVAN, SECRETARY OF LABOR, PLAINTIFF-APPELLANT,
v.
LORAN W. ROBBINS, ET AL., DEFENDANTS, AND ALLEN M. DORFMAN, ET AL., DEFENDANTS-APPELLEES



Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 78 C 4075, 82 C 7951 -- Hubert L. Will, Judge.

Cudahy, Posner, and Coffey, Circuit Judges. Coffey, Circuit Judge, concurring in result.

Author: Posner

POSNER, Circuit Judge.

The Department of Labor sued the Central States, Southeast and Southwest Areas Health and Welfare Fund, an employee benefit fund sponsored by the Teamsters Union, along with current and former trustees of the fund, firms that had rendered services to the fund, and others, alleging violations of fiduciary obligations imposed by the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq., and seeking both damages and injunctive relief. (The case has a lurid background, unnecessary to examine in this opinion, in the efforts of organized crime, acting through Allen Dorfman, to plunder the pension fund. Dorfman's estate, and the company he controlled, Amalgamated, which processed the claims of the Fund's beneficiaries, are among the other defendants in the case.) The Department negotiated a settlement with the Fund and its current trustees, and embodied it in a consent decree that the parties to the decree then submitted to Judge Will, presiding over the litigation, for his approval. Other defendants objected to the terms of the decree, the judge refused to approve it, and the Department and the settling defendants appeal from his refusal.

We have first to examine our appellate jurisdiction. The judge's action in refusing to approve the decree was not a final decision, appealable under 28 U.S.C. § 1291. The suit in which the order was entered remains pending before him, and will soon be tried. It is as if he had denied a motion to dismiss the complaint; and such a denial is the classic example of a nonfinal order. Although 28 U.S.C. § 1292(a)(1) authorizes immediate appeal of an interlocutory order denying (as well as one granting or modifying, etc.) an injunction, the consent decree that the Department of Labor and the settling defendants asked the judge to sign contains a permanent rather than a temporary injunction, intended to wind up the litigation between the parties to the decree rather than to provide interim relief. It might seem that this could make no difference. The statute speaks not of interlocutory injunctions but of interlocutory orders denying (or granting, etc.) injunctions. Judge Will's order refused an injunction, and was interlocutory -- not only because the lawsuit is continuing against other defendants but also because the order did not finally deny the plaintiff's right to an injunction but merely deferred consideration to such later time as the parties submitted a revised decree. (For the sake of completeness we point out that an order granting a permanent injunction may be interlocutory too. The case may be continuing against other defendants; or the plaintiff may be seeking damages as well as an injunction, and the damages have yet to be assessed.) Thus it comes as no surprise that many cases, beginning with Smith v. Vulcan Iron Works, 165 U.S. 518, 41 L. Ed. 810, 17 S. Ct. 407 (1897) (construing section 7 of the Evarts Act, 26 Stat. 828 -- the original of 1292(a)(1)), hold or assume that interlocutory orders granting or denying permanent injunctions are indeed appealable under section 1292(a)(1). See 16 Wright, Miller, Cooper & Gressman, Federal Practice and Procedure § 3924, at pp. 67-69 (1977); id., 1983 Pocket Part, § 3924 (1984).

But this principle is qualified in an important line of cases led by Switzerland Cheese Ass'n, Inc. v. E. Horne's Market, Inc., 385 U.S. 23, 25, 17 L. Ed. 2d 23, 87 S. Ct. 193 (1966), where the Supreme Court held that the denial of the plaintiff's motion for summary judgment, which if granted would have resulted in the entry of a permanent injunction, was not appealable under section 1292(a)(1), the denial being "strictly a pretrial order that decides only one thing -- that the case should go to trial." See also Plymouth County Nuclear Information Comm., Inc. v. Boston Edison Co., 655 F.2d 15, 17-18 (1st Cir. 1981); Williams Electronics, Inc. v. Artic Int'l, Inc., 685 F.2d 870, 871 (3d Cir. 1982). Behind these cases is the perceived lack of symmetry between an interlocutory order refusing to grant a permanent injunction and one refusing to grant a preliminary injunction. A request for a permanent injunction does not have the emergency character of a request for a preliminary injunction, which requires the plaintiff to show that he will suffer irreparable harm if the request is denied. See, e.g., American Can Co. v. Mansukhani, 742 F.2d 314, 325 (7th Cir. 1984). Obviously, if the plaintiff does not get the preliminary injunction his need for an immediate appeal, to avert claimed irreparable harm, is urgent. Less obviously, if he does get the injunction the defendant's need for an immediate appeal is urgent. Not only might the defendant suffer irreparable harm from having to obey the injunction but the speed with which the district court has to act on a request for a preliminary injunction makes its decision less reliable -- therefore more in need of appellate review -- than a more considered decision. And appellate review of its decision must be immediate to be effective; if it is postponed to the end of the case, the question whether the district court should have granted a preliminary injunction will be mooted by the entry of final judgment. See Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1422 (9th Cir. 1984).

The problem is to integrate this insight about the practical differences between interlocutory orders denying preliminary injunctions and interlocutory orders denying permanent injunctions with the language of section 1292(a)(1), which does not distinguish between the two types of order. The solution implied by Switzerland Cheese Ass'n is to distinguish "postponing" from "denying" a request for injunctive relief: if the request is merely postponed, as in Switzerland Cheese Ass'n, appeal is not automatically allowed. This distinction implies, and later cases confirm, that a definitive disposition of a request for a permanent injunction is appealable under section 1292(a)(1), consistently with the Smith v. Vulcan Iron Works line of cases. See, e.g., Milonas v. Williams, 648 F.2d 688 (10th Cir. 1981) (per curiam); EEOC v. International Longshoremen's Ass'n, 511 F.2d 273, 276-77 (5th Cir. 1975).

All this is by way of necessary background to the Supreme Court's decision in Carson v. American Brands, Inc., 450 U.S. 79, 83-84, 67 L. Ed. 2d 59, 101 S. Ct. 993 (1981), which allowed an appeal under section 1292(a)(1) from an order refusing to approve a consent decree that, as in the present case, included a permanent injunction. If Carson is read as conferring blanket permission to appeal under section 1292(a)(1) all refusals to approve consent decrees that have injunctive provisions (as all do, for reasons we shall explain -- and not only because the term "decree" is itself equitable), any doubt about appealability in this case disappears. Such a reading is suggested, but without discussion of the point, in our decision in United States v. City of Chicago, 663 F.2d 1354, 1359 n. 15 (7th Cir. 1981) (en banc); see also Williams v. City of New Orleans, 694 F.2d 987, 989 (5th Cir. 1982), on rehearing, 729 F.2d 1554 (5th Cir. 1984) (en banc); Gould v. Control Laser Corp., 650 F.2d 617, 621 (5th Cir. 1981); United States v. City of Alexandria, 614 F.2d 1358, 1361 n. 5 (5th Cir. 1980); Plummer v. Chemical Bank, 668 F.2d 654, 655 (2d Cir. 1982). Other cases, however, suggest that the appellant must show that the refusal to approve the decree caused him irreparable harm. See New York v. Dairylea Coop. Inc., 698 F.2d 567, 570 (2d Cir. 1983); In re Flight Transportation Corp. Securities Litigation, 730 F.2d 1128, 1133-34 (8th Cir. 1984); Roberts v. St. Regis Paper Co., 653 F.2d 166, 170 (5th Cir. 1981); cf. Plymouth County Nuclear Information Comm., Inc. v. Boston Edison Co., supra, 655 F.2d at 18.

The source of confusion is that Carson seems to be about two different things -- the appealability of orders disapproving consent decrees that contain permanent injunctions, and the appealability of orders of any sort that have the same consequences as orders denying preliminary injunctions. See, e.g., South Bend Consumers Club, Inc. v. United Consumers Club, Inc., 742 F.2d 392, 393-94 (7th Cir. 1984) (applying Carson to summary judgment that precluded injunctive relief as matter of law); Winterland Concessions Co. v. Trela, 735 F.2d 257, 261 (7th Cir. 1984) (dismissal of counterclaim that sought injunction). The order in Carson partook of both types, since the proposed decree was not captioned "injunction" but did include a permanent injunction. Switzerland Cheese Ass'n had rejected the idea that every interlocutory order turning down a request for a permanent injunction is immediately appealable, but it did not say that no such orders were appealable, and indeed it implied (consistently with our suggested interpretation of it) that some were. See 385 U.S. at 25. Carson interprets Switzerland Cheese Ass'n to hold that an interlocutory order refusing a permanent injunction is appealable immediately if but only if the order has the same effect ("serious, perhaps irreparable, consequence," in the language of an earlier case) as the denial of a preliminary injunction. See 450 U.S. at 84-85. This test -- which we take to be the heart of Carson -- makes excellent sense when we consider that in both Carson and Switzerland Cheese Ass'n the order sought to be appealed postponed, rather than definitively denied, the request for a permanent injunction. If a consent decree is rejected, the parties may be able to persuade the judge to accept a modified decree; or the plaintiff may be able to obtain such a decree after the trial, just as a plaintiff whose request for summary judgment granting a permanent injunction is denied may be able to obtain the same injunction after trial.

Carson, we conclude, requires that irreparable harm be shown whenever a party wants to appeal immediately either an interlocutory order deferring the entry of a permanent injunction, whether free-standing or contained in a proposed consent decree, or an interlocutory order that while not explicitly the grant or denial of a preliminary injunction may have consequences (summed up in the words "irreparable harm") similar to those of such an order.

The Second Circuit's Dairylea opinion offers a refinement of Carson. Concerned lest the courts of appeals be flooded with appeals challenging trivial reservations made by district judges to proposed consent decrees, reservations that could easily have been met by the parties' modifying the decree and then resubmitting it, the court in Dairylea held that the appellant must show that the judge's reservations cannot be met easily in that way. See 698 F.2d at 570. We doubt whether this particular refinement is necessary. In regard to appeals from orders expressly denying preliminary injunctions, courts of appeals have not found it necessary to make it a condition of appeal that the plaintiff try to satisfy any technical objection to the proposed injunction that the district judge might have. The reason is not just that preliminary injunctions tend to be simpler than the injunctive provisions written into many modern consent decrees; it is also that a party seeking an injunction (or parties, if the injunction is contained in a consent decree) who could get it by satisfying minor reservations of the district court would do so voluntarily in order to avoid the delay and uncertainty of the appellate process.

But we need not decide in this case whether to follow the lead of Dairylea and limit the rule of Carson to cases where the parties to the consent decree shoulder the burden of actually proving that they are at an impasse with the district judge. Although Judge Will did invite the settling parties to resubmit the decree with changes responding to his concerns, prompt approval of a resubmitted decree was not in the cards. This is true, as we shall see, even though the judge's main concern was with the damage provisions of the decree rather than the injunctive provisions. The decree requires the Fund's current trustees to pay $1.8 million into the Fund, an amount calculated as follows. The parties estimated that the judgment that would be brought in against these trustees at the conclusion of the trial, when discounted by the probability that the Department of Labor would win at trial, was worth $2.1 million, but that the trustees' insurance coverage allocable to the Department's claim was only $1.8 million. Thus the settlement was, in effect, for the limits of the settling defendants' insurance coverage. The decree adds that the settlement is not an admission or declaration regarding those defendants' liability, if any, to pay contribution or indemnity to any nonsettling defendants eventually made to pay damages to the plaintiff. Concerned that the settlement might affect the rights of the nonsettling defendants, the judge asked the parties to present evidence that the settlement was reasonable in light of the relative culpability of the settling and nonsettling defendants.

The judge described his objections to the injunctive provisions of the decree as going to "less central" aspects of it -- though the injunctive provisions are extensive. They not only require compliance with ERISA by the Fund and its current and future trustees, under penalty of contempt for noncompliance, but alter the policies and even structure of the Fund, for example by requiring it to create an internal audit staff. The judge registered no objection to these provisions; his objections center on the provision for an "Independent Special Counsel." He is to be William Saxbe, a former attorney general of the United States, and is to play a broad "watchdog" role over the management of the Fund, subject to supervision by the district court, which is to retain jurisdiction to make sure that the terms of the decree are carried out. Some of the objections the judge himself described as "technical," an apt description of minor problems that the parties could easily have been left to work out between themselves after the decree was in effect. His larger objections were four:

1. Although the decree denies the Independent Special Counsel "any right of participation in, or attendance at, collective bargaining meetings at which such contribution rates [i.e., the rates at which employers or employees contribute money to the Fund] are negotiated or at management or union prenegotiation meetings at which their respective bargaining positions as to contribution rates are determined," it does not in so many words exclude the Independent Special Counsel from all collective bargaining meetings where benefit levels are discussed but not contribution rates. In fact the decree allows the Independent Special Counsel to "attend any other meetings of any type whatsoever at which [Fund-related] matters are discussed or considered."

2. There is an exception to the last-quoted authorization for meetings, or parts of meetings, "conducted for the sole purpose of negotiation of contribution rates or the determination of management and union negotiating strategy as regards such contribution rates." But it does not explicitly bar the Independent Special Counsel from attending meetings of the executive boards of local unions.

3. The judge was concerned that the presence of the Independent Special Counsel at meetings attended by nonsettling defendants and their lawyers could lead to those defendants' losing their attorney-client privilege.

4. The decree authorizes the district judge to modify it in accordance with "changed legal or factual circumstances, as and to the extent appropriate under United States v. Swift & Co., 286 U.S. 106, 119-20 [76 L. Ed. 999, 52 S. Ct. 460] (1932)." The judge thought this traditional test for the modification of consent decrees (see 11 Wright & Miller, Federal Practice and Procedure § 2961, at pp. 601-05 (1973)) too confining given the Independent Special Counsel's novel role and broad authority.

All of these objections could be met by wording changes that the Department and the settling defendants should have little difficulty (but for the dynamics of negotiation, about which more later) in agreeing on in short order. If they were the judge's only objections to the decree we would be baffled as to why the parties had appealed to us rather than resubmitted the decree, appropriately modified, to the district judge, and then we would have to decide whether we agree with Dairylea that a refusal to approve a consent decree cannot be appealed when based on minor flaws in the decree. But they were not the judge's only or major objections. His big objection was to what he considered the inadequate justification for the monetary settlement. And to overcome that objection the settling parties would have had to undertake an ambitious project of estimating the relative blameworthiness of the numerous defendants in this complex litigation. Counsel for one of the nonsettling defendants conceded at argument that this project might have to be deferred to the end of the trial because the relative blameworthiness of the defendants will be extremely speculative until then. That might be many months away. The settlement might not hold together that long; if it did, it might become moot, as in Santana v. Collazo, 714 F.2d 1172, 1175 (1st Cir. 1983). The coming into effect of equitable provisions designed to protect the pension rights of thousands of workers would be delayed for a long time -- perhaps forever. Thus the judge's action has -- given his grounds -- imposed an indefinite delay having enough of the practical consequences of denying a preliminary injunction to allow an appeal under section 1292(a)(1) if Carson is interpreted, as we think it should be, to require that an interlocutory order deferring action on, rather than ...


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