United States Court of Appeals
Fifth Circuit
F I L E D
No. 05-20462
-1- March 16, 2006
IN THE UNITED STATES COURT OF APPEALS Charles R. Fulbruge III
Clerk
FOR THE FIFTH CIRCUIT
_____________________
No. 05-20462
_____________________
MARK NEWBY; ET AL.,
Plaintiffs,
v.
ENRON CORPORATION; ET AL,
Defendants;
ARTHUR ANDERSEN LLP,
Defendant - Appellant
v.
TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY,
Intervenor - Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________________________________________________
Before KING, BARKSDALE, and PRADO, Circuit Judges.
EDWARD C. PRADO, Circuit Judge:
Appellants Arthur Andersen and John Does I and II
(collectively, “Arthur Andersen”) appeal the grant of
intervention given to Appellee Texas Board of Public Accountancy
(“Board”) in In re Enron for the purpose of accessing discovery
protected by court order. For the reasons stated below, we hold
that we have jurisdiction to hear this interlocutory appeal and
No. 05-20462
-2-
that the district judge did not abuse her discretion in allowing
the Board to intervene.
I
Due to the magnitude and complexity of In re Enron, the
parties in that case agreed to accept service via a website (“ESL
website”). The parties stipulated that access to the website
would be limited to judges, parties, and the parties’ attorneys
in In re Enron. The district court later issued an order
requiring the confidentiality of deposition transcripts and
exhibits, prohibiting disclosure of protected information to
anyone other than “parties, counsel for the parties, employees of
the parties or their counsel, witnesses, experts retained by the
parties, the Depository Administrator, and the Court-appointed
mediator.” These instruments are confidential for 30 days after
the close of the deposition, and certain types of information are
automatically protected even after 30 days have passed. Parties
or witnesses also may seek broader protection for information
that is proprietary or for which there is good cause.
On February 24, 2005, the Board filed its motion for
permissive intervention in In re Enron pursuant to Federal Rule
of Civil Procedure 24(b)(2), for the purpose of gaining access to
discovery protected by court order in In re Enron. On June 6,
2005, the district court entered an Opinion and Order (“Order”)
granting the Board’s motion to intervene to gain access to the
No. 05-20462
-3-
ESL website and ordered that the Board comply with the court’s
July 2, 2004 confidentiality order for deposition testimony and
exhibits and all subsequent orders granting confidential
treatment to specified exhibits and testimony. Arthur Andersen
LLP (“Andersen”), the former auditor of Enron Corporation, filed
an appeal on June 12, 2005; and, on June 13, 2005, it filed a
motion to stay the Order pending appellate review with the
district court. At the hearing for the motion to stay, the Board
agreed not to access the website or use its party status to
access the depositions and related exhibits. The Board extended
its agreement through February 7, 2006, after which this Court
granted Arthur Andersen’s motion to stay pending appeal.
John Does I and II, two former Andersen Certified Public
Accountants (“CPAs”) who participated in the Enron audits, moved
to intervene in the appeal on July 13, 2005. Their motion was
granted on August 22, 2005. Andersen and the John Does are the
only parties objecting to the Board’s intervention in In re
Enron.
II
The Board is a state regulatory authority charged under the
Texas Public Accountancy Act (“Act”) with the duty of licensing
and disciplining Texas CPAs as well as promulgating accounting
rules. 22 TEX. ADMIN. CODE §§ 501.51, 505.2; TEX. OCC. CODE §
No. 05-20462
-4-
901.151.1 The Board may initiate disciplinary proceedings
against a Texas licensed CPA for violations of rules of
professional conduct adopted by the Board as well as for conduct
indicating lack of fitness to serve the public as a professional
accountant. TEX. OCC. CODE § 901.502(6), (11) and (12).
Furthermore, the Board is authorized to open investigations if it
determines that there is a potential violation of its rules,
regulations, or orders. 22 TEX. ADMIN. CODE § 519.21; see also
id. § 519.20.
The Act contemplates that the Board will gather and receive
information from third parties regarding licensees. See TEX.
OCC. CODE § 901.160.2 The Board must keep information it gathers
or receives regarding disciplinary actions confidential before a
public hearing on the matter. Id. § 901.160(c).
Texas Occupations Code section 901.166 grants the Board
subpoena power. In pertinent part, the statute states:
1
The Public Accountancy Act (“Act”) states, “[t]he policy
of this state and the purpose of this chapter are to provide that
. . . a person licensed as a certified public accountant: (A)
maintain high standards of professional competence, integrity,
and learning; and (B) demonstrate competence and integrity in all
dealings with the public . . . .” TEX. OCC. CODE §
901.005(e)(3). The Board is authorized to administer the Act.
Id. § 901.151(a)(1); 22 TEX. ADMIN. CODE § 505.2.
2
Texas Occupations Code section 901.160 states in pertinent
part, “(a) The board shall make available at the board’s offices
in Austin any file maintained or information gathered or received
by the board from a third party regarding a license applicant or
current or former license holder . . . .”
No. 05-20462
-5-
(a) The board may issue a subpoena to compel the attendance
of a relevant witness or the production . . . of relevant
documents . . . .
. . .
(c) If a person fails to comply with a subpoena, the board,
acting through the attorney general, may file suit to
enforce the subpoena in a district court in Travis County or
in a county in which a hearing conducted by the board may be
held.
Id. § 901.166.
Texas Administrative Code section 501.93 dictates that
individuals must substantively respond in writing to any
communication from the Board requiring a response and provide
copies of documents pursuant to the Board’s requests. It states,
“Failure to timely respond substantively to written board
communications, or failure to furnish requested documentation
and/or working papers constitutes conduct indicating lack of
fitness to serve the public as a professional accountant.” TEX.
ADMIN. CODE § 501.93.
The Board is currently investigating suspected audit
failures that may have led to the financial collapse of Enron and
its eventual bankruptcy to determine if any violations of the Act
or the Board’s rules were committed by Texas licensees.
III
On August 22, 2005, a motions panel of this Court denied the
Board’s motion to dismiss this appeal for lack of jurisdiction in
a one sentence order; still, the Board urges dismissal of this
case. “In this circuit, an oral argument panel is not bound by a
No. 05-20462
-6-
motions panel’s denial of a motion to dismiss.” In re Grand Jury
Subpoena, 190 F.3d 375, 378 n.6 (5th Cir. 1999) (citing Ventana
Invs. v. 909 Corp., 65 F.3d 422, 425 n.7 (5th Cir. 1995)). Thus,
the motions panel’s denial of the Board’s motion to dismiss is
subject to reconsideration by this panel. We first determine
whether the district court’s grant of intervention is appealable
before reaching the merits.
The Board argues that the district court’s order granting
its motion to intervene is not a final judgment and that we are
without jurisdiction under 28 U.S.C. section 1291 to consider
this appeal.3 The Board relies on a Fifth Circuit opinion from
1978: “It is well settled that ‘[a]n order allowing intervention
is interlocutory and may not be appealed immediately.’” In re
1975-2 Grand Jury Investigation of Associated Milk Producers,
Inc., 566 F.2d 1293, 1301 (5th Cir. 1978) (citing In re Estelle,
516 F.2d 480, 484 (5th Cir. 1976)). In Associated Milk
Producers, we analyzed the final judgment rule exhaustively.
The final judgment rule is a “dominant rule of federal appellate
practice.” Id. at 1297. We noted that “[f]inality as a
condition of review . . . written into the first Judiciary Act
and has been departed from only when observance of it would
3
Section 1291 states, in pertinent part, “The court of
appeals . . . shall have jurisdiction of appeals from all final
decisions of the district courts of the United States . . . .”
28 U.S.C. § 1291.
No. 05-20462
-7-
practically defeat the right to any review at all.” Id.
Arthur Andersen argues that the district court’s order
granting intervention is appealable under the collateral order
doctrine. The collateral order doctrine applies only when there
is “an order, otherwise nonappealable, determining substantial
rights of the parties which will be irreparably lost if review is
delayed until final judgment.” See, e.g., United States v. Wood,
295 F.2d 772, 778 (5th Cir. 1961). To fall within the collateral
order doctrine, the district court’s order granting intervention
must fulfill three requirements. First, it must resolve an issue
separate from the merits of the underlying action. In re Grand
Jury Subpoena, 190 F.3d at 383. Second, it must be conclusive.
Id. at 381. Third, the order must be be effectively unreviewable
on appeal from a final judgment in the underlying action. Id.
The district court’s order passes this three-prong test for
appealability.
The general rule articulated in Associated Milk Producers,
Inc. against appealability of grants of intervention is not
applicable to the instant case. See 566 F.2d at 1301. Under
Rule 24(b), intervention is typically available when a party
seeks to litigate its own “claim or defense” within the context
of an ongoing litigation. Thus, ordinarily, a grant of
intervention is only one step along the path to reaching a final
judgment on the intervenor’s claim. See Cohen v. Beneficial Ind.
No. 05-20462
-8-
Loan Corp., 337 U.S.541, 546 (1949)(stating that section 1291
“disallow[s] appeal from any decision which is tentative,
informal or incomplete” and permits no appeal of decisions “where
they are but steps towards final judgment in which they will
merge”). In such cases, the grant of intervention is most
appropriately and efficiently appealed along with any final
judgment rendered on the intervenor’s claims. However, the
question of whether or not the Board may intervene is plainly
independent from the underlying case. The Board is not seeking
to litigate any claim in In re Enron and no final judgment on any
claim by the Board will ever be had in the action. Whether the
Board should have access to the ESL website and confidential
deposition transcripts and exhibits has no bearing on the merits
of the underlying securities fraud action.
The proposition, invoked by the Board, that “a discovery
order incident to a pending action is not subject to appeal,”
Honig v. E.I. duPont de Nemours & Co., 404 F.2d 410, 410 (5th
Cir. 1968), does not dictate the outcome in the instant case. In
Honig and its successors, the discovery at issue involved the
principal parties, not an intervening party that has no stake in
the merits of the underlying action. We find the instant order
granting intervention conclusively determines the disputed
question because there is “no ‘plain prospect that the trial
court may itself alter the challenged ruling(s).’” S. Methodist
No. 05-20462
-9-
Univ. Assoc. of Women Law Students v. Wynne & Jaffe, 599 F.2d
707, 712 (5th Cir. 1979)(citing United States v. Gurney, 558 F.2d
1202, 1207 (5th Cir. 1977)).
The district court order granting intervention is
effectively unreviewable on appeal from a final judgment. An
appeal from a final judgment in the underlying securities fraud
action will not bear on the Board for the reason that the Board
is not a principal party to that underlying action. In the
meantime, the Board will have had access to the ESL website.
Thus, it is appropriate to hear Arthur Andersen’s appeal of the
order granting intervention at this stage of the litigation. We
turn to the merits.
IV
The decision to permit intervention under Rule 24(b)(2)
requires a threshold determination that the “applicant’s claim or
defense and the main action have a question of law or fact in
common.” Howse v. S/V “Canada Goose I”, 641 F.2d 317, 322 (5th
Cir. 1981) (citing FED. R. CIV. P. 24(b)(2)). “The determination
is not discretionary; it is a question of law.” Id. (citing
Stallworth v. Monsanto Co., 558 F.2d 257, 269 (5th Cir. 1977).
Arthur Andersen argues that, under Deus v. Allstate
Insurance Co., 15 F.3d 506 (5th Cir. 1994), the Board did not
meet the criteria for intervention set forth in Rule 24(b)(2)
requiring it to have a claim or defense with a question of law or
No. 05-20462
-10-
fact in common with the main action. While Deus remains good
law, it is distinguishable from the instant case on its facts.
Arthur Andersen’s argument fails.
In Deus, an insurance agent brought suit against his
employer for breach of contract and workers’ compensation
benefits. Id. at 511-12. First, the plaintiff’s original
attorneys sought to intervene in order to collect on their
retainer contract with plaintiff. Id. at 520-21. The district
court did not address the pending intervention in a ruling that
set aside the jury verdict against the employer and granted the
employer’s Rule 50(a) motion for judgment as a matter of law.
Id. at 521. The intervenors filed a motion to amend the court’s
order, but the court denied their motion “because the
intervention issue was collateral for the purpose of the finality
of the judgment.” Id. The Court reasoned that “[a]n order that
adjudicates fewer tha[n] all the claims or rights of fewer than
all the parties does not terminate the action as to any claims or
parties” and that “[a] claim for attorneys’ fees generally is not
part of the merits to which the fees pertain.” Id. Thus, the
Court held that its order was merely interlocutory and not
appealable until final judgment was entered. Id. at 522.
Meanwhile, the National Neighborhood Office Agents’ Club
(“NNOAC”), a program of the employer, also sought to intervene so
that it could unseal the record. Id. at 525. The district court
No. 05-20462
-11-
record was sealed during most of the discovery process and
throughout the trial. Id. The district court denied NNOAC’s
motion to intervene, claiming it lacked jurisdiction because it
mistakenly thought that its order in which it set aside the jury
verdict was a final judgment. Id. On appeal, the Court decided
that while it usually would remand for the district court to
consider the intervention on the merits, as a matter of law it
would be an abuse of discretion to grant the intervention to
NNOAC. Id. The Court reasoned that NNOAC had no rights or
claims that it wanted the district court to adjudicate. Id.
The only purpose of the attempted intervention was to gain
access to documents and testimony that are subject to the
protective order. The desire to intervene to pursue the
vacating of the protective order and/or the unsealing of the
record is not a justiciable controversy or claim, absent
some underlying right creating standing for the movants.
Id.
Arthur Andersen maintains that Deus establishes that, as a
matter of law, it is an abuse of discretion to allow intervention
merely to obtain access to discovery–even if the objective is to
use that discovery in a similar or related lawsuit. However, the
Court in Deus arrived at its holding, with respect to the latter
intervening parties, in light of its having just dismissed the
plaintiff’s claims.4 Thus, the Court summarized “[the parties
4
The Court in Deus illustrated its point with Cunningham v.
Rolfe, 131 F.R.D. 587 (D. Kan. 1990). “[I]n Cunningham . . . ,
the court found that permissive intervention was not appropriate
where the applicants were merely trying to gain access to
No. 05-20462
-12-
seeking intervention] have no personal interest affording them
standing to intervene.” Id. at 526. In the absence of a live
controversy in a pending case, an intervenor would need standing
to intervene.
In contrast, there is no Article III requirement that
intervenors have standing in a pending case. Therefore, Deus is
inapplicable. In Ruiz v. Estelle, 161 F.3d 814 (5th Cir. 1998),
we held “that Article III does not require intervenors to
independently possess standing where the intervention is into a
subsisting and continuing Article III case or controversy and the
ultimate relief sought by the intervenors is also being sought by
at least one subsisting party with standing to do so.” Id. at
830 (emphasis added). This approach is consistent with the
outcomes in Diamond v. Charles, 476 U.S. 54 (1986) (holding that
intervenor could not pursue an appeal without establishing his
standing where the party on whose side he had intervened had
decided not to appeal) and Kendrick v. Kendrick, 16 F.2d 744, 745
(5th Cir. 1926) (“An existing suit within the court’s
jurisdiction is a prerequisite of an intervention.”).
Arthur Andersen further argues that the Board, through its
statutory grant of authority, has other means of obtaining the
discovery materials generated in an earlier products liability
suit for use in their own products liability case against the
same defendant.” Deus, 15 F.3d 506, 525 (5th Cir. 1994)
(emphasis added).
No. 05-20462
-13-
information it seeks. Again, it relies on Deus: “Intervention
generally is not appropriate where the applicant can protect its
interests and/or recover on its claim through some other means.”
Deus, 15 F.3d at 526. Because Deus relies on Diaz v. Southern
Drilling Corporation, 427 F.2d 1118 (5th Cir. 1970), for this
proposition, its holding is limited to intervention as of right.
In Diaz, the appellant argued, inter alia, that the intervention
of the United States for the purpose of requesting a deposition
was improper. Id. at 1124. The Court found that the
intervention was proper. Id. at 1125. The Court held that
because the United States Government would have difficulty
getting in personam jurisdiction in the United States over
appellant, a Swiss corporation, practicality dictated that the
intervention should stand. Id. at 1124-25. Diaz was an appeal
of a motion to intervene as of right under Rule 24(a)(2). That
rule, unlike Rule 24(b)(2), makes an applicant’s ability to
protect his interests a criteria for intervention.5
5
Rule 24(a)(2) states:
Intervention of Right. Upon timely application anyone shall
be permitted to intervene in an action . . . (2) when the
applicant claims an interest relating to the property or
transaction which is the subject of the action and the
applicant is so situated that the disposition of the action
may as a practical matter impair or impede the applicant’s
ability to protect that interest, unless the applicant’s
interest is adequately represented by existing parties.
FED. R. CIV. P. 24(a)(2).
No. 05-20462
-14-
The Board has questions of fact and law in common with the
Enron litigation since it is investigating alleged audit failures
that may have led to Enron’s collapse to determine whether any
Texas-licensed CPAs violated the Public Accountancy Act or the
Board’s rules. This holding comports with the observation that
the “claim or defense” portion of Rule 24(b)(2) has been
construed liberally. In re Estelle, 516 F.2d at 485; see also
SEC v. United States Realty & Improvement Co., 310 U.S. 434, 459
(1940) (“This provision [Rule 24(b)(2)] plainly dispenses with
any requirement that the intervenor shall have a direct personal
or pecuniary interest in the subject of the litigation.”).
V
We now address Arthur Anderson’s contention that the
district judge improperly granted the Board intervention. We
review the district court’s grant of intervention for abuse of
discretion. Stallworth v. Monsanto Co., 558 F.2d 257, 269-70
(5th Cir. 1977).
In addition to the aforementioned arguments, Arthur Anderson
puts forth several policy arguments contending that the district
judge abused her discretion. It claims the district court abused
its discretion by disregarding the policies of federalism and
comity that Arthur Andersen alleges are implicated in the Order
granting intervention. Arthur Andersen contends that, prior to
its intervention in In re Enron, the Board had already used its
No. 05-20462
-15-
state law investigative powers to conduct exhaustive
investigations of Appellant Andersen and numerous individual
Texas CPAs relating to the alleged abuses resulting in the In re
Enron litigation. Andersen maintains that it has repeatedly
allowed the Board to access its document storage facility,
resulting in the Board’s filing and settling an administrative
action against Andersen that resulted in the revocation of its
license to practice accounting in Texas. Andersen further
maintains that, after the revocation of its license, the Board
continued making additional discovery demands on it and acquired
electronic documents. In addition, the Board required Appellants
John Doe I and II, and other third-party witnesses who have been
or will be deposed in In re Enron, to provide written responses
to questions; required these individuals to appear before the
Board for questioning under oath; and has access to the “massive
public record” compiled by other governmental bodies.
Arthur Andersen complains that despite this four-year
investigation, the Board has not filed any formal complaint
against the Does or any other third-party witness.6 Arthur
Andersen further complains that the Board filed its motion of
intervention in this case days after a state court in Travis
6
After the close of briefing in this appeal, the Board in
fact issued a complaint in which it alleges violations of the
Board’s rules and statutes in connection with audits of the
financial statements of Enron and related entities.
No. 05-20462
-16-
County refused its motion to enforce subpoenas it served on the
Does and others. Later, as part of a settlement, the Board
withdrew its investigatory subpoenas and agreed that it would not
reissue those subpoenas or seek testimony from the CPAs unless it
later filed an administrative complaint pursuant to Texas state
law.7 As a result, Arthur Andersen argues that the district
court’s order granting intervention to the Board effectively
expanded the investigative powers of a state agency beyond those
granted by state law, and interfered with the ability of Texas
state courts to oversee the agency’s exercise of such powers.
The Board contends that the Order granting intervention is
strictly within the province of the district court and in no way
impedes the ability of any state court to effectively enforce
state law governing the Board. We agree. State law governing
the Board’s investigatory powers does not comment on what tactics
the Board may not take in conducting its investigations. In
granting the Board subpoena powers, Texas Occupations Code
section 901.166 states that a person may challenge a subpoena
issued by the Board in state court. It does not create any other
substantive limit on the Board’s investigatory power.
7
The settlement order resulting from the state court
litigation is severely redacted, and it is unclear if the Board
agreed to these terms. In any event, the Board has filed an
administrative complaint pursuant to Texas state law. Thus, it
appears that the Board may reissue those subpoenas pursuant to
the settlement order.
No. 05-20462
-17-
Further, Arthur Andersen argues that the Order is contrary
to important federal policies. It claims that protective orders
are often entered by the court pursuant to a stipulation among
the parties so that the parties and the court can forego
discovery disputes. Arthur Andersen emphasizes that it had
settled expectations of confidentiality. However, we have
previously addressed modification of protective orders,
supporting the district court’s exercise of discretion here. In
United States v. United Fruit Co., 410 F.2d 553 (5th Cir. 1969),
we addressed the district court’s denial of a competitor’s
attempt to access court protected divestiture plans and other
documents. We said, “[t]he Supreme Court in Ex Parte Uppercu has
decreed that so long as the object of the motion physically
exists, anyone needing it as evidence at a trial has a right to
call for it, unless some exception is shown to the general
rule.”8 Id. at 556 (internal footnote omitted). Further, the
Board itself must adhere to the order requiring the
confidentiality of deposition transcripts and exhibits.
Finally, the Board argues that this Court owes deference to
the district court since the district court is best situated to
determine if anyone would be harmed by the Board’s access to this
information. The Board emphasizes that the district judge has
8
Ex Parte Uppercu, 239 U.S. 435 (1915), involved a motion
for access to sealed depositions in a settled case.
No. 05-20462
-18-
overseen this case for several years, knows the common issues of
law and fact presented by the main action and the claims of the
Board, and found no prejudice or harm. It also urges deference
to the district judge’s evaluation of whether the Board’s
intervention will unduly delay or prejudice the adjudication of
the rights of the original parties. United Fruit supports the
proposition that this court should defer to the district court’s
judgment in deciding whether to enforce the protective order,
given the judge’s detailed knowledge of the record. Id. at 557.
Nonparties to a case routinely access documents and records
under a protective order or under seal in a civil case through
motions for permissive intervention under Rule 24(b)(2). See,
e.g., San Jose Mercury News, Inc., 187 F.3d 1096, 1100 (9th Cir.
1999); EEOC v. National Children’s Center, 146 F.3d 1042, 1045
(D.C. Cir. 1998). The Board’s intervention does not “unduly
delay or prejudice the adjudication of the rights of the original
parties.” FED. R. CIV. P. 24(b). Further, permissive
intervention is within a court’s discretion. See EEOC, 146 F.3d
at 1046). Texas granted the Board broad powers of investigation
to oversee the public interest in maintaining high standards of
competence and integrity in the practice of public accountancy.
Since state law does not explicitly limit the Board’s
investigatory powers through the mechanism of its intervening in
this case, federalism and comity concerns are not implicated.
No. 05-20462
-19-
The state statutes governing the Board do not indicate any
intention by the state that the Board’s investigatory powers are
to be scrutinized and strictly regulated by the state.9 The
district judge did not abuse her discretion.
For the foregoing reasons we AFFIRM the district court’s
Order.
9
Moreover, the Texas Court of Appeals has found the statute
to be constitutional, “not amount[ing] to an unwarranted
regulation of private business.” Texas State Bd. of Pub.
Accountancy v. Fulcher, 515 S.W.2d 950, 956 (Tex. Civ. App.
1974).