Cordoza v. Pacific States Steel Corp.
2003 WL 359791, 320 F.3d 989 (2003)
Rule of Law:
A special master may appeal orders affecting their termination and compensation, but such orders are generally not immediately appealable as final judgments under 28 U.S.C. § 1291 or under the collateral order doctrine unless they conclusively determine a separable issue that would be unreviewable later; however, a court of appeals may treat such an appeal as a petition for a writ of mandamus, which requires a showing of clear error or usurpation of judicial power.
Facts:
- Pacific States Steel Corporation (PSSC) operated a plant in Union City, California, which shut down in 1978, leaving behind contaminated land and an unfunded medical plan for retired steelworkers.
- Pensioners filed a class action lawsuit against PSSC, leading the district court to order PSSC to continue paying medical benefits.
- Judge Patel and the parties decided the best way to fund the medical plan was to clean up and develop the contaminated plant site.
- In 1990, Bruce Train and his associates, Theodore Sorensen and Hans Lemcke (collectively "Train"), were appointed as special masters to develop the plant site and fund the medical plan.
- In 1995, Train proposed an Amended Plan, adopted by Judge Patel, under which Train would form two companies to obtain funding, develop the site, and use profits for medical benefits, with compensation terms subject to court modification.
- By 1996, negotiations between Train and other parties involved in site development stalled due to mutual antagonism, with Train's compensation being a major point of contention.
- Judge Patel developed "grave concerns" about Train's motivations and ability to accomplish the task after observing the parties during a settlement conference.
- During an investigation, Judge Patel found that Train had rejected valid offers from the Redevelopment Agency (RDA) in order to hold out for more compensation for himself, misappropriated creditors' funds, paid for personal tax advice with PSSC funds, and over-billed for a legal assistant.
Procedural Posture:
- Pensioners filed a class action in the United States District Court for the Northern District of California (trial court) against Pacific States Steel Corporation (PSSC) regarding an unfunded medical plan.
- The district court ordered PSSC to continue paying medical benefits.
- In 1984, the district court appointed a special master to determine PSSC's assets and liabilities, who was later replaced in 1990 by Bruce Train and his associates.
- In August 2000, after an independent auditor's report was released, the Redevelopment Agency for the City of Union City (RDA) filed a motion requesting the district court set Train's final compensation and order disgorgement of excess amounts.
- Train filed a motion requesting Judge Patel recuse herself from the case.
- The district court held a hearing on the recusal and compensation motions in mid-September 2000.
- On December 1, 2000, the district court terminated Train as Special Master, denied the recusal motion, and established discovery procedures.
- After four days of hearings in early 2001, the district court entered a lengthy order with detailed findings regarding Train's performance and conduct.
- The district court issued a final order setting Train's compensation, ordering him personally to disgorge $48,035 for personal legal services charged to PSSC and $65,034 for over-billing a legal assistant, and later awarded $24,634 in attorney's fees.
- Train appealed the termination, compensation, attorney's fees orders, and the denial of the motion to recuse to the Ninth Circuit Court of Appeals.
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Issue:
Does a court of appeals have jurisdiction to hear an interlocutory appeal from a district court's orders terminating a special master and setting his compensation, either as a final judgment, under the collateral order exception, or through a writ of mandamus?
Opinions:
Majority - McKeown, Circuit Judge
No, a court of appeals does not have jurisdiction to hear an interlocutory appeal from a district court's orders terminating a special master and setting his compensation as they are neither final judgments under 28 U.S.C. § 1291 nor do they fall within the narrow collateral order exception; however, such an appeal may be considered as a petition for a writ of mandamus, which is denied if the district court did not make a clear error or exceed its authority. The court first established that a special master, despite being an officer of the court, has the right to appeal orders affecting their compensation, citing Hinckley v. Gilman, Clinton, and Springfield Ry. Co. and its reaffirmation in Devlin v. Scardelletti. This right arises because the special master is bound by such an order, making them a "quasi-party" for that limited purpose. However, the orders here are not final judgments under 28 U.S.C. § 1291 because the underlying post-judgment proceedings, including property development and fund allocation, are ongoing. The court distinguished this from Hinckley, where the underlying case had concluded. Furthermore, the orders do not meet the Cohen v. Beneficial Indus. Loan Corp. collateral order exception. While the orders conclusively determine Train's termination and compensation, they fail the other two requirements: they are not "completely separate from the merits of the action" as Train's compensation is intertwined with the allocation of funds among other parties, and they are not "effectively unreviewable on appeal from a final judgment" because the compensation issue can be reviewed at the conclusion of the entire post-judgment proceedings. The court emphasized that the importance of the issue to the special master alone does not meet Cohen's "strict" importance requirement. Despite lacking appellate jurisdiction, the court exercised its discretion to treat the notice of appeal as a petition for a writ of mandamus. Reviewing under the "clear error" standard for mandamus, the court found no clear error or abuse of discretion in Judge Patel's orders. Regarding the recusal motion, the court held that Judge Patel's impartiality could not reasonably be questioned under 28 U.S.C. § 455(a) or (b)(1) because her actions (investigation, consultation with experts, suspension) were part of her inherent supervisory role over a special master under Federal Rule of Civil Procedure 53. Such actions are judicial in nature, not "extrajudicial," and do not indicate personal bias. The court noted that a judge overseeing a special master wears both administrative and deliberative hats, which allows for broader latitude in gathering information to ensure the integrity of the judicial process and protect the beneficiaries' interests, especially when allegations of misconduct arise. As for the compensation and attorney's fees orders, the court found no clear error. Judge Patel's detailed forty-page order, supported by abundant evidence, cataloged Train's improprieties and justified adjusting his compensation despite earlier agreements, as Rule 53 grants broad discretion to the court over special master pay. The court rejected Train's argument that findings were unsupported, stating this at best raises a factual dispute, not a clear error for mandamus.
Analysis:
This case clarifies the narrow scope of appellate jurisdiction for special masters challenging their termination or compensation. It reinforces that such orders are typically interlocutory and do not fit the Cohen collateral order exception unless they are truly independent of the main litigation and unreviewable later. The decision also strongly affirms the broad supervisory authority of district courts over special masters under Federal Rule of Civil Procedure 53, including the right to investigate, adjust compensation, and receive information in an administrative capacity without automatically triggering recusal. This balance protects the integrity of judicial proceedings and the interests of beneficiaries in complex, long-running cases where special masters play a critical administrative role.
