Rogal v. American Broadcasting Co., Inc.

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit

1-12-1996

Rogal v. American Broadcasting Co., Inc.
Precedential or Non-Precedential:

Docket 94-2060

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________

No. 94-2060
____________

OWEN ROGAL, D.D.S.; OWEN ROGAL, D.D.S., P.C.

v.

AMERICAN BROADCASTING COMPANIES, INC.; JOHN STOSSEL

Owen Rogal, D.D.S.;
Owen Rogal, D.D.S., P.C.
Appellants
____________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
____________________

(D.C. Civil No. 89-05235)

Argued September 15, 1995

Before: SLOVITER, Chief Judge, ALITO, Circuit Judge, and SEITZ,
Senior Circuit Judge

(Opinion Filed: January 12, 1996)
____________________

Ronald H. Surkin, Esq. (Argued)
Nancy C. DeMis, Esq.
Richard, DiSanti, Gallagher,

Schoenfeld & Surkin
25 West Second Street
Media, PA 10963-0900

Attorneys for Appellants

Jerome J. Shestack, Esq. (Argued)
Wolf, Block, Schorr and Solis-Cohen
Twelfth Floor Packard Building
15th and Chestnut Streets
Philadelphia, PA 19102

1
Burt M. Rublin, Esq.
Ballard Spahr Andrews & Ingersoll

2
 1735 Market Street, 51st Floor
Philadelphia, PA 19103

Attorneys for Appellees

____________________

OPINION OF THE COURT
____________________

ALITO, Circuit Judge:

The appellants in this case, Owen Rogal, D.D.S. and his

professional corporation (collectively, "Dr. Rogal"), appeal from

an order of the district court imposing sanctions pursuant to its

inherent power in the amount of $256,360. This amount represents

the defendants' attorneys' fees for trial and trial preparation

and one-half of the fees incurred in preparing their motion for

sanctions. Because we conclude that the district court erred in

declining to hold an evidentiary hearing in connection with the

motion for sanctions, we reverse the district court's order and

remand the matter to allow the district court to hold an

evidentiary hearing.

I.

Dr. Rogal is a Philadelphia dentist specializing in the

treatment of temporomandibular joint disorder (more commonly

known as "TMJ"), and specifically in the diagnosis and treatment

of "mandibular whiplash," i.e., TMJ caused by automobile

accidents. In 1989, Dr. Rogal was the subject of a critical

story that was presented on defendant American Broadcasting

Companies' ("ABC") news magazine program "20/20" and reported by

3
defendant John Stossel. In brief, the story highlighted the

aggressive advertising materials disseminated by Dr. Rogal to

personal injury lawyers, the controversial nature of his concept

of "mandibular whiplash," and other dentists' doubts about his

diagnoses of the condition. The story suggested that Dr. Rogal's

practice may have been motivated principally by a desire to

extract money from insurance companies.

Dr. Rogal subsequently sued ABC and Mr. Stossel for

defamation and false light invasion of privacy in Illinois state

court. The case was removed to the United States District Court

for the Northern District of Illinois, which transferred the case

to the Eastern District of Pennsylvania pursuant to 28 U.S.C.

§1404 in July 1989. In December 1992, after a trial in which the

defendants rested after the plaintiffs' case, the jury returned a

verdict in favor of the defendants.

After the jury had been excused, the district court

directed counsel for ABC to "review the record and document your

contentions with respect to your motion for sanctions," adding:

"I would like to look them over myself." App. 1387. ABC

submitted a motion seeking sanctions against Dr. Rogal and his

lead trial attorney, M. Mark Mendel, pursuant to the court's

inherent power. The motion alleged that Dr. Rogal had repeatedly

given false testimony at trial and that Mr. Mendel had disobeyed

court orders regarding post-verdict contact with jurors by

investigators and had committed numerous violations of ethical

4
and legal standards concerning closing arguments.1 Dr. Rogal's

attorneys filed a lengthy brief in opposition to the motion, App.

1458-1605, as well as a reply memorandum. App. 1667-73. The

district court granted ABC's motion, noting that, under Chambers

v. NASCO, Inc., 501 U.S. 32 (1991), it had "the inherent power to

impose sanctions upon parties and their attorneys where they

engage in bad faith conduct which abuses the judicial process,"

App. 1676. The court detailed ten separate subject areas in

which it found that Dr. Rogal had testified falsely. App. 1679-

89. In each of these areas, the court concluded that Dr. Rogal's

testimony was directly contradicted by his own words or

advertisements or by the testimony of his own witnesses. Id.

A sampling of the district court's findings will serve

to illustrate the breadth of Dr. Rogal's alleged

misrepresentations. One subject area cited by the district court

concerned Dr. Rogal's use of the notation "D•" on patient

examination forms. The district court noted that Dr. Rogal had

initially testified that this notation meant that the patient's

symptoms were "decreased." The next day, however, after being

shown out-takes of the examination of a patient on whose form Dr.

Rogal had written "D•" but who said in the out-takes that most of

her symptoms were absent, Dr. Rogal stated that he had used "D•"

to denote "absent." He made this statement even though the

1
The district court eventually sanctioned Mr. Mendel by ordering
him to pay the defendants $13,573, an amount that represented
one-half of the fees that they incurred in preparing their motion
for sanctions, and also directed the Clerk to forward the court's
sanctions opinion to the Disciplinary Board of the Supreme Court
of Pennsylvania. App. 1938. Mr. Mendel did not file an appeal.

5
examination form stated that "A = Absent" and even though, when a

reimbursement form was submitted to an insurer for a patient with

"D•" notations on his or her examination form, the reimbursement

forms stated that the symptoms were "decreased." This practice,

the court found, enabled Dr. Rogal to continue administering (and

billing for) numerous additional treatments and increased the

settlement value of the patient's personal injury lawsuit by

allowing the patient to claim (falsely) that the injury was

permanent. App. 1679-81.

In several other subject areas, the district court

found that Dr. Rogal had contradicted his own answers to

interrogatories and to requests for admissions, as well as his

own deposition testimony, when he testified at trial. The

subjects of this testimony included Dr. Rogal's income, a dispute

between Dr. Rogal and state licensing authorities, Dr. Rogal's

examination of Mr. Stossel, and his reasons for agreeing to be

interviewed by 20/20. App. 1682-85.

The district court also noted contradictions regarding

the way in which Dr. Rogal held himself out to the public.

According to the district court, Dr. Rogal denied ever

advertising himself as Dr. Owen Rogal without adding that he was

a dentist rather than a physician. However, his own promotional

materials and advertisements frequently omitted any reference to

"D.D.S." and his instructions to office personnel regarding

telephone calls from prospective patients urged them to refer to

him as a "doctor" and a "physician." App. 1688.

6
 After the court scheduled a hearing to determine the

nature of the sanction to be imposed, Dr. Rogal retained new

counsel. Dr. Rogal's new lawyers filed motions seeking a vacatur

of the sanctions order, an evidentiary hearing, and a continuance

of the hearing. The court continued the disposition of the

motion until it had received new briefing from Dr. Rogal's new

lawyers, App. 1723-29, but decided that an evidentiary hearing

was not necessary for due process purposes, since the

sanctionable conduct had taken place in court. App. 1727-28. Dr.

Rogal's new lawyers filed a lengthy brief, with numerous

exhibits. App. 1730-1914.

After receiving these submissions and hearing argument,

the court again rejected Dr. Rogal's request for an evidentiary

hearing to explain his trial testimony. App. 1929. The court

subsequently issued the order imposing sanctions against Dr.

Rogal. The court restated its rationale for refusing to hold an

evidentiary hearing, noting that "[t]he actionable conduct took

place in the presence of the court and is documented by the

record," and that "[d]uring the trial, plaintiffs had every

opportunity to explain and attempt to justify the numerous

inconsistencies and contradictions" in Dr. Rogal's testimony.

District Court Order of September 27, 1994 at 1. Dr. Rogal's

motion for reconsideration was denied, and he appealed.

7
 II.

We review a district court's determinations regarding

the imposition of sanctions for abuse of discretion. Chambers v.

NASCO, Inc., 501 U.S. at 55; Republic of Philippines v.

Westinghouse Elec. Corp., 43 F.3d 65, 75 (3d Cir. 1994); cf.

Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 399-405 (1990)

(Rule 11); Simmerman v. Corino, 27 F.3d 58, 62 (3d Cir. 1994)

(factual determinations, legal conclusions, and choice of

sanction under Rule 11 receive "substantial deference"). An

abuse of discretion in this context would occur if the district

court "based its ruling on an erroneous view of the law or a

clearly erroneous assessment of the evidence." Simmerman, 27 F.3d

at 63 (quoting Cooter & Gell, 496 U.S. at 405); Westinghouse, 43

F.3d at 75.

On appeal, Dr. Rogal argues that the district court

committed three separate reversible errors: declining to hold an

evidentiary hearing to allow Dr. Rogal to explain the apparent

contradictions in his testimony; failing to assure that Dr. Rogal

was informed of the conflict of interest that allegedly arose

between him and his attorney when ABC sought sanctions against

both of them; and failing to make an explicit finding of bad

faith on the part of Dr. Rogal. Dr. Rogal also argues that on

remand the case should be reassigned to a different district

court judge.

III.

8
 The imposition of monetary sanctions by a court

implicates fundamental notions of due process and thus requires

"fair notice and an opportunity for a hearing on the record."

Roadway Express, Inc. v. Piper, 447 U.S. 752, 767 (1980); see

also Eavenson, Auchmuty & Greenwald v. Holtzman, 775 F.2d 535,

540 (3d Cir. 1985); Eash v. Riggins Trucking Co., 757 F.2d 557,

570 (3d Cir. 1985) ("[A]s a general practice a monetary detriment

should not be imposed by a court without prior notice and some

occasion to respond."). Here, there is no dispute that Dr. Rogal

had fair notice of the possibility of sanctions. The issue

before us is whether the required "opportunity for a hearing on

the record" should have included an evidentiary hearing at which

Dr. Rogal would have had the opportunity to explain the apparent

contradictions and inconsistencies in his testimony.

We have repeatedly emphasized that the requirements of

due process are not reducible to a static formula, but rather are

sensitive to the facts and circumstances of a given case. While

"the fundamental requirement of due process is the opportunity to

be heard at a meaningful time and in a meaningful manner[,] the

concept is flexible, calling for procedural protection as

dictated by the particular circumstance." Kahn v. United States,

753 F.2d 1208, 1218 (3d Cir. 1985) (citing Morrissey v. Brewer,

408 U.S. 471, 481 (1972)). The determination of the appropriate

form of procedural protection requires "an evaluation of all the

circumstances and an accommodation of competing interests. The

individual's right to fairness must be respected as must the

9
court's need to act quickly and decisively." Eash, 757 F.2d at

570 (citations omitted).

In Jones v. Pittsburgh Nat. Corp, 899 F.2d 1350 (3d

Cir. 1990), where sanctions had been imposed under Fed. R. Civ.

P. 11 and 28 U.S.C. § 1927, we had occasion to address the

requirements of due process in a context similar to that

presented here. Eschewing "any rigid rule[, which] would, to say

the least, be undesirable," we recognized that "[t]he

circumstances must dictate what is required." Id. at 1358. We

therefore announced a flexible rule under which
a district court in the sound exercise of its
discretion must identify and determine the legal basis
for each sanction charge sought to be imposed, and
whether its further resolution requires further
proceedings, including the need for an evidentiary
hearing.

Id. at 1359. Under the particular facts and circumstances of the

case before us, we conclude that the imposition of sanctions

against Dr. Rogal without holding an evidentiary hearing was not

consistent with sound exercise of the district court's

discretion.

Our holding is a narrow one and depends heavily on the

specific nature of Dr. Rogal's alleged misrepresentations and the

relationship of each instance of contradictory or inconsistent

testimony to the central issues of the litigation. We recognize

that in many instances in which sanctionable conduct occurs in

the court's presence, no hearing is required. Cf. Kapco Mfg. Co.

v. C & O Enterprises, Inc., 886 F.2d 1485, 1495 (7th Cir. 1989).

However, the present appeal presents an instance in which,

10
despite the fact that the sanctionable conduct took place in

court, "a hearing could [have] assist[ed] the court in its

decision." Id. This is so because we do not entirely agree with

the district court's conclusion that "[d]uring the trial,

plaintiffs had every opportunity to explain and attempt to

justify the numerous inconsistencies and contradictions" in Dr.

Rogal's testimony. District Court Order of September 27, 1994 at

1.

Given the nature of the disputed testimony, we are

persuaded by Dr. Rogal's contention that he did not have the same

incentive at trial to try to clear up all of the apparent

contradictions and inconsistencies in his testimony or to try to

show his good faith as he would have had at an evidentiary

hearing on the question of sanctions. At trial, Dr. Rogal was

attempting to prove that the defendants had committed the torts

of defamation and false light invasion of privacy. In order to

prove these claims, it was not necessary for him to establish the

truth of every one of the matters asserted in the portions of his

testimony that the district court found to be false or

misleading, and as a matter of trial strategy his attorneys might

well have concluded that trying to clear up all of these points

might have unduly diverted the jury's attention from Dr. Rogal's

own claims. To be sure, Dr. Rogal's credibility was undoubtedly

an important factor at trial, and we assume that his attorneys

were concerned about seeming inconsistencies and contradictions

that undermined his credibility. Nevertheless, the fact remains

that their interest in clearing up apparent inconsistences and

11
contradictions and in demonstrating their client's good faith was

different in some potentially significant respects at the trial

from what it would have been at an evidentiary hearing focused

squarely on the question whether Dr. Rogal gave false or

misleading testimony and acted in bad faith.

It may well be that at an evidentiary hearing Dr.

Rogal's attorneys could not have done any better in attempting to

rehabilitate him than they did at trial, but we conclude that the

dictates of due process require that they be given that chance.

At least on reconsideration, Dr. Rogal's attorneys expressly and

strenuously sought a hearing and made a proffer of the evidence

they would introduce. We recognize that the district court, in

ruling on these requests, did not have the benefit of a precedent

from our court specifically requiring a hearing under these

circumstances, and in the absence of such a precedent we can

understand why the court ruled as it did. We now hold, however,

that under the circumstances of this case, an evidentiary hearing

should be held to allay due process concerns. The evidence cited

in the district court's opinion, unless rebutted, is sufficient

to show that Dr. Rogal gave false or misleading testimony and

proceeded in bad faith. Dr. Rogal should, however, be given the

opportunity to rebut the inferences that the district court drew

from this evidence. See Healy v. Chelsea Resources, Ltd., 947

F.2d 611, 617 (2d Cir. 1991).

In light of our conclusion that the current award of

sanctions should be vacated and that the case should be remanded

for an evidentiary hearing, we need not decide whether, as Dr.

12
Rogal argues, the district court was obligated to advise him of a

potential conflict of interest with his former attorney, Mr.

Mendel, before deciding whether sanctions should be imposed on

either or both of them. On remand, Dr. Rogal will be represented

by new counsel. We also need not decide whether, as Dr. Rogal

asserts, the current award of sanctions is defective because the

district court did not say in so many words that it found that

Dr. Rogal acted in bad faith. We have no reason to assume that

the court on remand will not make an express finding one way or

the other on this question.

Several other arguments raised by Dr. Rogal should be

addressed at this time, however, because they concern matters

that may well arise on remand. None of these arguments, however,

requires extended discussion. First, contrary to Dr. Rogal's

suggestion, the district court, in order to sanction Dr. Rogal

for "bad faith" conduct under Chambers based on his trial

testimony, need not apply the standards that would be applicable

at a criminal trial for perjury. See, e.g., United States v.

Dunnigan, 507 U.S. 87 (1993); Bronston v. United States, 409 U.S.

352 (1973). Dr. Rogal cites no precedent holding that these

standards must be applied in his context, and we are aware of

none. Under Chambers, what is required is a determination that
the party acted in "bad faith, vexatiously, wantonly, or for

oppressive reasons." 501 U.S. at 45-46.

Second, contrary to Dr. Rogal's argument, should the

district court on remand again determine that Dr. Rogal's trial

testimony was pervasively false or misleading and that he acted

13
in bad faith, an award of sanctions comparable in amount to the

award now before us would not be excessive. See Chambers, 501

U.S. at 56; Maddox v. E.F. Hutton Mortgage Corp., 723 F. Supp.

1246, 1249-50 (M.D. Tenn. 1989); Eppes v. Snowden, 656 F. Supp.

1267 (E.D. Ky. 1986).

Finally, we see no basis whatsoever for Dr. Rogal's

argument that this case should be assigned on remand to a

different district court judge. Such reassignments are ordered

only "infrequently and with the greatest reluctance," Nobel v.

Morchesky, 697 F.2d 97, 103 n.11 (3d Cir. 1982), and we see no

ground for doing so here. Contrary to Dr. Rogal's assertions,

the record contains no evidence that the district judge developed

a "bias" against him. We recognize that the district court drew

certain conclusions regarding Dr. Rogal's testimony from the

record evidence and that on remand the judge will be required to

give fair reconsideration to those conclusions in light of the

new evidence that Dr. Rogal wishes to present. We have no doubt,

however, that the judge can and will do so. Nor is the amount of

the sanction imposed on Dr. Rogal by itself a reason to question

the district court's impartiality. To the contrary, the district

court was reacting to what it perceived as repeated and serious

instances of false testimony on the part of Dr. Rogal. We thus

see no ground for ordering reassignment.

VI.

For the foregoing reasons, we reverse the district

court's order imposing sanctions against Dr. Rogal, and we remand

the case for an evidentiary hearing.

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