United States of America v. Prevezon Holdings Ltd. et al

Filing 529

OPINION #106144 re: #522 LETTER MOTION to Stay Proceedings and Certifying Appeal Under 28 U.S.C. 1292(b) addressed to Judge Thomas P. Griesa from Jacob W. Buchdahl dated January 11, 2016. On January 8, 2016, this court denied a motion by non-party Hermitage Capital Management Limited to disqualify John Moscow and BakerHostetler as defense counsel in this litigation. Dkt. 521. Hermitage had, in effect, been allowed to intervene for that limited purpose. Hermitage now moves to certify that order for immediate appeal. Dkt. 522. For the reasons stated above, the court declines to certify its disqualification decision for immediate appellate review under 28 U.S.C. 1292(b). (As further set forth in this Order.) (Signed by Judge Thomas P. Griesa on 1/15/2016) (adc) Modified on 1/20/2016 (ca).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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UNITED STATES OF AMERICA,
13-cv-06326 (TPG)

Plaintiff,

ECF CASE

V.

PREVEZON HOLDINGS LTD., et al.,

OPINION

Defendants.

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Background
On January 8, 2016, this court denied a motion by non-party Hermitage
Capital Management Limited to disqualify John Moscow and BakerHostetler as
defense counsel in this litigation.

Dkt. 521.

Hermitage had, in effect, been

allowed to intervene for that limited purpose. Hermitage now moves to certify
that order for immediate appeal. Dkt. 522.
Specifically, Hermitage requests that this court certify its order, pursuant
to 28 U.S.C. § 1292(b), so that the court of Court of Appeals may address two
questions:

(1) "whether the court's use of the 'substantially related' test was

correct in its first or second ruling;" and (2) "whether a lawyer should be
permitted to accuse a former client of the very crime it once defended that former
client against, simply because those false accusations now serve the interest of
a new client." Dkt. 522 at 2.

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BakerHostetler opposes Hermitage's motion to certify.
Government has taken no position on certification.

Dkt. 523.

The

For the reasons set forth

below, Hermitage's motion to certify is denied.

Analysis
Appeals from orders denying disqualification are neither reviewable as
final orders under 28 U .S.C. § 1291, nor are they appealable under the collateralorder doctrine.

See Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 434-35

(1985). However, such orders are immediately appealable if the district court
grants permission under 18 U.S.C. § 1292(b). In this context, only "exceptional
circumstances" warrant "departure from the basic policy of postponing appellate
review until after the entry of a final judgment."

See Coopers & Lybrand v.

Livesay, 437 U.S. 463, 475 (1978); Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d
21, 25 (2d Cir. 1990) (quoting Coopers & Lybrand); see also Genetech v. Novo
Nordisk A/S, 907 F. Supp. 97, 99 (S.D.N.Y. 1995) (quoting Klinghoffer in the
context of a§ 1292(b) appeal of a decision to disqualify counsel).
Section 1292(b) allows a district court to certify an immediate appeal of an
interlocutory order if the court is "of the opinion that such order involves a
controlling question of law as to which there is substantial ground for difference
of opinion and that an immediate appeal from the order may materially advance
the ultimate termination of the litigation." 28 U.S.C. § 1292(b). The decision as
to whether the movant has met the§ 1292(b) statutory requirements falls within
the district court's broad discretion. See Estevez-Yalcin v. Children's Vill., No.
01-cv-8784, 2006 WL 3420833, at *1 (S.D.N.Y. Nov. 27, 2006) ("District court

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judges have broad discretion to deny certification even where the statutory
criteria are met.").
While courts treat § 1292(b) as a unitary requirement, see 3-27 Moore's
Manual, Fed. Prac. & Proc. § 27.04 (2015), the statutory language is often
articulated as involving three elements. The movant must demonstrate that:
(i) there is a controlling question of law, (ii) as to which there is a substantial
ground for a difference of opinion, and (iii) an appeal would not prolong the
litigation, but instead would materially advance it. Id. None of these elements
favors certification in this case.

A. Hermitage May Not Immediately Appeal Issues of Fact
The first element is whether there is a controlling legal question.

A

controlling question of law must be distinguished from a controlling question of
fact.

See Harriscom Svenska AB v. Harris Corp., 947 F.2d 627, 631 (2d. Cir.

1991).

Where "controlling issues are factual rather than legal, ... section

1292(b) certification is unavailable."

Genentech, Inc., 907 F. Supp. at 99

(quoting Harriscom, 947 F.2d at 630)). Therefore, certification is unavailable
where the primary question for appeal is whether the trial court correctly applied
the law to the facts. See Estevez-Yalcin, No. 01-cv-8784, 2006 WL 3420833, at
*3 (S.D.N.Y. Nov. 27, 2006).
Mixed questions of law and fact are likewise impermissible grounds for
certification. Rather, the "question of law'' certified for interlocutory appeal must
refer to a 'pure' question of law that the reviewing court 'could decide quickly
and cleanly without having to study the record."' See Century Pac. Inc. v. Hilton

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Hotels Corp., 574 F. Supp. 2d 369 (S.D.N.Y. 2008) (quoting In re WorldCom, No.
M-47 HB, 2003 WL 21498904, at *10 (S.D.N.Y. 2003)); S.E.C. v. First Jersey
Sec., 587 F. Supp. 535, 536 (S.D.N.Y. 1984) (holding that, where an appeal
"would necessarily present a mixed question of law and fact, not a controlling
issue of pure law," the district court's order was "not appropriate for certification
pursuant to 28 U.S.C. § 1292(b)").
Accordingly, a requested appeal that involves a highly fact-specific
application of law may not be appropriate under 1292(b).

See, e.g., In re

Facebook, Inc., IPO Sec. & Derivative Litig., 986 F. Supp. 2d 524, 533 (S.D.N.Y.
2014); Stone v. Patchett, No. 08-cv-5171, 2009 WL 1544650, at *2-3 (S.D.N.Y.
June 2, 2009); Multi-Juice, S.A. v. Snapple Beverage Corp., 2003 WL 21998970,
at *3 (S.D.N.Y. Aug. 21, 2003).
Courts also look to several other factors when deciding whether a question
of law is controlling. One such factor is whether "reversal of the district court's
order would terminate the action or if it substantially affects a large number of
cases." Tyco Int'l, Ltd. v. Kozkowski, No. 02-cv-7317, 2011 WL 2038763, at *4
(S.D.N.Y. May 24, 2011) (citing In re Payroll Exp. Corp., 921 F. Supp. 1121, 1126
(S.D.N.Y. 1996) (internal quotation marks omitted)).

Courts also assess the

status of the underlying legal doctrine. See, e.g., DeVittorio v. Hall, No. 07-cv0812, 2008 WL 273981, at *3 (S.D.N.Y. Jan. 29, 2008); Decora Inc. v. DW
Wallcovering, Inc., 901 F. Supp. 161, 165 (S.D.N.Y. 1995). Where the controlling
law is settled, purely legal questions are less likely to arise. Notably, courts can

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rely on "fairly well-settled" law in the attorney disqualification context.
Genentech, Inc., 907 F. Supp. at 100.
In this case, Hermitage wishes the Court of Appeals to address the
question of whether this court correctly applied the "substantial relationship"
test to the facts of this case.

Dkt. 522 at 2. This is a plainly impermissible

attempt to seek early review as to whether this court properly applied the law to
the facts.

Moreover, attorney disqualification rests on a "highly fact-specific

inquiry," Genetech, Inc., 907 F. Supp. at 99, as does the "substantial
relationship" test that courts apply to determine if disqualification is appropriate,
see Dkt. 521 at 6 (citing Silver Chrysler Plymouth, Inc. v. Chrysler Motors Corp.,
518 F.2d 751 (2d Cir. 1975)). This makes Hermitage's question even less apt for
certification.
Hermitage would also like the Court of Appeals to address "whether a
lawyer should be permitted to accuse a former client of the very crime it once
defended that former client against, simply because those false accusations now
serve the interest of a new client." Dkt. 522 at 2. This is a factual question
styled as a legal one. Hermitage has described in general terms the fact-specific
question presented by its motion to disqualify.

In so doing, Hermitage is

prematurely asking for a second opinion on this court's denial of its
disqualification motion. This is also an improper use of§ 1292(b).
Finally, Hermitage has not argued as part of this element that resolution
of either question would advance the termination of this action or that it would
solve a complex problem of law whose solution would affect many cases. Rather,

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Hermitage's questions are specific to Hermitage and, as such, they are not
appropriate for interlocutory appeal.

B. Hermitage Does Not Show There Is Substantial Ground for a Difference
of Opinion on a Controlling Question of Law
Since the court has found that Hermitage has not raised controlling
questions of law, it need not go into the second element-whether there is a
substantial ground for difference of opinion about the controlling question oflaw.
But for the sake of a complete analysis, the court notes that Hermitage has not
shown that there is a substantial ground for difference of opinion about a
controlling question of law. This exists "when there is conflicting authority on
the question, or the question is particularly difficult and of first impression for
the circuit." Tyco Int'l Ltd, No. 02-cv-7317, 2011 WL 2038763, at *5 (citation
omitted). The Second Circuit has cautioned, however, that "the mere presence
of a disputed issue that is a question of first impression, standing alone, is
insufficient to demonstrate a substantial ground for difference of opinion." In re
Flor, 79 F.3d 281, 284 (2d Cir. 1996). Instead, it is the court's duty to evaluate
the strength of the arguments in opposition to the challenged ruling when
deciding whether the issue for appeal is truly one about which there is a
substantial ground for dispute. Id.
"A mere claim that a district court's decision was incorrect does not suffice
to establish substantial ground for a difference of opinion. Rather, there must
be 'substantial doubt' that the district court's order was correct." Estevez-Yalcin,
No. 01-cv-8784, 2006 WL 3420833, at *4 (finding that "substantial doubt"

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requires the movant to advance a meritorious argument that governing law relied
upon in the court's order was in error).
Hermitage has not argued that its interlocutory appeal would present any
particularly difficult issues or questions of first impression. Instead, Hermitage
argues that there is substantial difference of opinion simply because the court
withdrew its previous decision on the disqualification motion to allow full briefing
by the parties. But the order does not become immediately appealable merely
because this court reexamined its decision. If that were true, every decision to
grant an ordinary motion for reconsideration should be certified for appeal
simply because the court came to a different conclusion the second time around.
That is not the law of this circuit, nor is it consistent with the Supreme Court's
view that certification under § 1292(b) is justified only in "exceptional
circumstances." See Coopers & Lybrand, 437 U.S. at 475; Klinghoffer, 921 F.2d
at 25.
It should also be noted that Hermitage has not provided independent
reasons for why there is a substantial ground for a difference of opinion as to
this court's order denying disqualification.

As noted above, the law of

disqualification is fairly well settled. Hermitage is merely arguing with how this
court apply that law to the relevant facts.

C. Interlocutory Appeal Would Delay This Litigation
The final element is whether an appeal would materially advance the
ultimate termination of the litigation. The requirement that an immediate appeal
must materially advance the termination of the litigation is strictly construed.

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See Westwood Pharm., Inc. v. Nat'll Fuel Gas Distrib. Corp., 964 F.2d 85, 88 (2d
Cir. 1992) (dismissing appeal under § 1292(b) because it was "not clear" that
appeal would advance the termination of the litigation); In re 105 East Second
St. Assoc.'s, No. M-47, 1997 WL 311919, at *2 (S.D.N.Y. 1997). Its purpose is
to "avoid protracted litigation." Koehler v. Bank of Bermuda Ltd., 101 F.3d 863,
865-66 (2d Cir. 1996). To that end, "[a]n immediate appeal is considered to
advance the ultimate termination of the litigation if that appeal promises to
advance the time for trial or to shorten the time required for trial." In re Oxford
Health Plans, Inc., 182 F.R.D. 51, 53 (S.D.N.Y. 1998) (internal quotation marks
and citation omitted).
Courts have not thoroughly analyzed this element in cases where an order
regarding disqualification is up for interlocutory appeal. Assessing the likelihood
of delay in the disqualification context is challenging because all disqualification
motions "inevitably cause delay." See Bd. of Educ. of N.Y.C. v. Nyquist, 590 F.2d
1241, 1246 (2d Cir. 1979).

But the initial delay caused by disqualification

litigation, including any appeal stemming from that litigation, may ultimately be
shorter than the time needed to relitigate and retry the case entirely, should the
Court of Appeals overturn the order denying disqualification after final judgment.
Thus, from the standpoint of this court, it is not possible to determine with
certainty whether certification would "materially advance" this litigation by
averting a re-trial, or whether certification would merely slow down the litigation
because the Court of Appeals will affirm this court's disqualification order. See
also Telectronics Proprietary, Ltd. v. Medtronic, Inc., 690 F. Supp. 170, 176

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(S.D.N.Y. 1987) (noting that disqualification motions cause delay but that
immediate appeal may avoid further delay).
While the "material advancement" element may not fit neatly in context of
disqualification, that element does not appear in a vacuum. Rather, it is closely
tied to the requirement that the order involve a controlling question of law as to
which there is a substantial ground for a difference of opinion. In re Duplan
Corp., 591 F.2d 139, 148 n.11 (2d Cir. 1978); Primavera Familienstifung v.
Askin, 139 F. Supp. 2d 567, 570 (S.D.N.Y. 2001); see also 16 Wright & Miller,
Fed. Prac. & Proc. Juris. § 3930 (3d ed. 2015) ("The three factors [of§ 1292(b)]
should be viewed together as the statutory language equivalent of a direction to
consider the probable gains and losses of immediate appeal.").
Nor must this court mechanically apply the statutory language. Instead,
the relevant standard here is whether the "district judge . .. shall be of the

opinion that ... an immediate appeal from the order may materially advance the
ultimate termination of the litigation."

See 18 U.S.C. § 1292(b) (emphasis

added). Assessing the movant's arguments and their likelihood of success on
the merits of those arguments, then, is left to the district court's judgment.
Here, Hermitage writes that appellate review of this matter "will not
necessarily delay, but instead might well advance the ultimate termination of
this litigation." Dkt. 522 at 3. This statement falls short of the required showing
that appellate review would "materially advance" trial. Isra Fruit Ltd., 804 F.2d
at 26. Moreover, the court believes that an immediate appeal would likely have
precisely the opposite effect. Not only would certification result in a delay of the

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trial, but certification is unlikely to advance proceedings g1ven Hermitage's
unsuccessful history of seeking to disqualify and sanction defendants' counsel.
The court has now twice found there is no conflict that warrants disqualification,
and this court's disciplinary committee reached the same conclusion. See Dkt.
523 at 10.

Hermitage's complaints have been adequately heard and

resoundingly rejected.

Conclusion
For the

reasons

stated above,

the

court declines

to

certify its

disqualification decision for immediate appellate review under 28 U.S.C.
§ 1292(b).

SO ORDERED.
Dated: New York, New York
January 15, 2016
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