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D ock e t 96-1704

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. e du/thir dc ir c uit_1997/279Filed December 22, 1997

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 96-1704

IN RE: ORTHOPEDIC "BONE SCREW" PRODUCTS

LIABILITY LITIGATION (MDL No. 1014)

WILLIAM MICHAEL RAY,

Appellant.

v.

ROBERT L. EYSTER, M.D.; ST. JOSEPH MEDICAL CENTER, INC.; SOFAMOR, INC., a Foreign Corpo ration (D.C. Civil No. 95-cv-03865)

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 95-cv-03865)

Argued on September 23, 1997

BECKER, SCIRICA, and ROTH, Circuit Judges.

(Opinion filed: December 22, 1997)Gary A. Eaton, Esquire (Argued)

Eaton & Sparks

1717 East 15th Street Tulsa, OK 74104

and
Green & Stites

3739 East 3lst Street Tulsa, OK 74135 Attorneys for Appellant

David W. Steed, Esquire
Turner & Boisseau

825 North Waco

P.O. Box 397 Wichita, KS 67203 Attorney for Appellee Eyster

Stephen S. Phillips, Esquire Philip H. Lebowitz, Esquire (Argued) Pepper, Hamilton & Scheetz

18th & Arch Streets 3000 Two Logan Square Philadelphia, PA 19103-2799 Attorneys for Appellee Sofamor,

Inc.

OPINION OF THE COURT

ROTH, Circuit Judge.

This appeal is a part of multi-district product lia bility litigation, involving manufacturers of orthopedic b one screw devices. The district court, sitting as the transfe ree court, imposed the ultimate sanction of dismissing plainti ff's suit with prejudice for failure to comply with discovery orders. Because we find that the district court lacked subj ect matter jurisdiction of the case, we must determine whether it had the ability to impose the sanction of dismis sal with prejudice.

Facts and Procedural Background

The appellant, William Michael Ray, originally file d this action as a pro se petition in Kansas state court, seeking

2damages for personal injuries allegedly incurred as the

result of the implantation of an internal spinalfix ation device. Ray sued Sofamor, Inc., a Tennessee manufac turer and distributor of pedicle screw devices; his physi cian, Dr. Robert Eyster of Kansas; and St. Joseph Medical Cen ter, a Kansas hospital where Ray underwent surgery. Four months later, defendants removed the case to federa l court in the District of Kansas, alleging federal questio n jurisdiction. They contended that the case presente d a federal question because it arose under the Medical Devices Amendments and Safe Medical Device Act ("MDA") to t he Federal Food, Drug and Cosmetic Act, 21 U.S.C. S 30 1, et. seq. The action was then transferred to the United States District Court for the Eastern District of Pennsylv ania as part of Multi-District Litigation ("MDL") 1014, kno wn as the Bone Screw Litigation.

After Ray filed his pro se petition, he became a pl aintiff in a separate action filed in Tennessee, also alleging bone screw related claims. Ray is represented by counsel in the Tennessee action, Eugene Haffey, et al. v. Danek Me dical, Inc., which was also transferred to MDL 1014. Couns el for Ray in Haffey is now representing him in this appea l. Counsel maintains, however, that he was not aware o f the pro se action or of its removal and transfer to the MDL until
after defendants had filed a motion to dismiss it a s a result of Ray's failure to comply with discovery.

Prior to the transfer of Ray's pro se action, the m ultidistrict transferee court had issued several orders governing pretrial procedures and discovery. In particular, P retrial Order 6 required plaintiffs in MDL 1014 to provide defendants with answers to a questionnaire and with
authorizations for the release of medical records. When Ray's pro se action was transferred to MDL 1014, it was covered by PTO 6.1 Ray failed, however, to submit t he required documents. On September 15, 1995, defendan ts informed the Plaintiffs' Legal Committee (appointed by the District Court to represent plaintiffs in MDL 1014) that Ray had failed to comply with PTO 6 and that, if noncom pliance continued, defendants would file a motion to dismis s. App.

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1. Ray was served with PTO 6 on June 12, 1995. See App. 67.

3at 80. Defendants also wrote Ray a letter. On Novem ber 13,

1995, defendants moved to dismiss Ray's petition fo r failure to comply with PTO 6. It is at this point that Ray' s counsel in Haffey claims to have become aware of Ray's pro se action. Counsel then filed a motion in opposition t o the
motion to dismiss.

Because motions to dismiss for noncompliance with pretrial orders had been filed in other MDL 1014 ac tions as well as Ray's, the court had appointed a Special Di scovery Master. The Special Discovery Master recommended th at dismissal with prejudice be the sanction used to re solve these motions. The district court adopted this recommendation and ordered that Ray and other noncompliant plaintiffs appear to show cause why th eir actions should not be dismissed with prejudice.

Counsel for Ray appeared at the show cause hearing. Ray, however, was not present. The record reveals t he district court's understandable confusion during th is proceeding due to the fact that Ray was a pro se li tigant in one case and was represented by counsel in another. App. 121-138. The district court ordered a subsequent he aring at which Ray was specifically and pointedly instruc ted to be present. Notice was mailed the following day to Ray
, notifying him of the July 9, 1996, hearing. On July 8, counsel for Ray filed a motion for continuance on t he grounds that he had been unable to contact Ray. Nei ther counsel nor Ray was present at the July 9 proceedin g. The district court therefore imposed the sanction of di smissing this case with prejudice for failure to comply with discovery. The court also held Ray in contempt for his failure to appear and imposed a $500 monetary sanction on him. 2

At the same time that the discovery motions were be ing

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2. The order dismissing Ray's petition does not ind icate under which rule the judge imposed the sanction of dismissal for Ray 's failure to comply
with an order of the court. We have held that Rule 37 is the applicable rule in such cases. In addition, Rule 16(f), which provides sanctions for failure to comply with pretrial and scheduling orde rs of the court, incorporates the sanctions under Rule 37 by referen ce, including the Rule 37(b)(2)(C) provision for dismissal for failur e to comply with discovery orders. Fed. R. Civ. P. 16(f).

4resolved, the district court was also considering s everal

motions by other MDL plaintiffs to remand their act ions to
state court. These actions had been removed to fede ral court on the basis of federal preemption under the MDA. On June 20, 1996, the district court issued Pretria l Order 409, finding that "[b]ecause the [Medical Devices Amendments to the Federal Food Drug and Cosmetic Ac t] do not completely preempt state law, they do not pr ovide Federal jurisdiction." In re Orthopedic Bone Screw Products Liability Litigation, MDL 1014. 1996 WL 900348 (E.D . Pa. June 20, 1996). The district court then granted the motions and remanded these cases to their respective state courts.

Analysis

Ray bases his appeal on his contention that, becaus e the district court did not have subject matter jurisdic tion over his claim, it did not have the authority to impose the sanction of dismissal with prejudice for failure to comply with discovery orders. We will begin our discussion with the issue of subject matter jurisdiction. The parties c oncede that there is no federal question jurisdiction in t his case. The parties also agree that there is no diversity o f citizenship. Thus, the district court did not have subject matter jurisdiction of Ray's action. For this reaso n, Ray questions the ability of the district court to have sanctioned him by dismissing his action with prejudice.

The defendants argue, however, that Ray's petition was properly before the court at the time it was dismis sed and that, even if the court lacked jurisdiction, it had the inherent authority to dismiss the case with prejudi ce for failure to comply with court orders. As transferee court in MDL 1014, the district court was dealing with hundr eds of transferred actions which had been brought by plain tiffs in courts all over the country. Ray filed his pro se p etition in January of 1995 in state court. In April, the defen dants removed Ray's action to federal district court in K ansas on the basis of complete preemption by federal law und er the MDA. In June, Ray's case was transferred to MDL 101 4 in the Eastern District of Pennsylvania. Although Ray did not move to remand, the district court did decide in nu merous other actions that no such preemption existed under the

5MDA.3 The defendants contend that, since the defini tive

Supreme Court ruling in Medtronic v. Lohr, 116 S.Ct . 2240, 2254-58 (1996) (finding that the MDA does not compl etely preempt state causes of action) was issued on June 26, 1996, only days before the district court sanctione d Ray with dismissal, his pro se action was properly befo re the district court. We disagree.

The district court had considered the issue of fede ral preemption by the MDA with regard to other cases wh ich

had been removed to federal court and then transfer red to the Eastern District of Pennsylvania as part of MDL 1014. The only basis for removal of these cases was the a lleged existence of a federal question based on the MDA. T his was also the basis for the removal of Ray's petition. I n PTO 409,
the district court concluded that there was no fede ral question jurisdiction and remanded the challenged c ases back to the state courts where they had originated. As Ray did not move for remand of his case, his petition w as not among those cases remanded by PTO 409.

Nevertheless, the defendants contend that, until a
determination was made that the district court lack ed jurisdiction in Ray's case, the court properly exer cised its inherent authority to order discovery and conduct proceedings. This authority, they contend, included the authority to sanction Ray for lack of procedural co mpliance by dismissing the action with prejudice. The defend ants make much of the fact that Ray never moved to reman d his case and did not raise subject matter jurisdiction in the district court. Had Ray moved to remand his pro se action for lack of jurisdiction, no doubt the jurisdiction al issue would have been resolved expeditiously. However, it is fundamental that a court may consider jurisdiction on its own. The issue of jurisdiction is always open for determination by the court. Underwood v. Maloney, 2 56 F.2d 334 (3d Cir.), cert. denied, 358 U.S. 864 (195 8).

If a court then determines that it lacks subject ma tter jurisdiction, it cannot decide the case on the meri ts. It has no authority to do so. A federal court can only exe rcise that

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3. Pretrial Order 409, 1996 WL 900348 (E.D. Pa.) ( June 20, 1996), citing Michael v. Shiley, 46 F.3d 1316 (3d Cir. 1995).

6power granted to it by Article III of the Constitut ion and by

the statutes enacted pursuant to Article III. Bende r v. Williamsport, 475 U.S. 534, 541 (1986); Marbury v. Madison, 1 Cranch (5 U.S.) 137, 173-80 (1803); see also Willy v. Coastal Corp., 503 U.S. 131, 137 (1992) (n oting that "[a] final determination of lack of subject-ma tter jurisdiction of a case in a federal court, of cours e, precludes further adjudication of it."). If a case, over whic h the court lacks subject matter jurisdiction, was originallyfi led in federal court, it must be dismissed. If it was remo ved from state court, it must be remanded. See Bradgate Asso ciates v. Fellows, Read & Associates, 999 F.2d 745, 750-51 (3d Cir. 1993) (finding that, where the district court lacks subject matter jurisdiction, it must remand a remov ed state court case, and it must dismiss a case, originallyf iled in federal court). The disposition of such a case will , however, be without prejudice. See, e.g., Winslow v. Walters , 815 F.2d 1114, 1116 (7th Cir. 1987) (holding that "a ru ling granting a motion to dismiss for lack of subject ma tter jurisdiction is not on the merits; its res judicata effect is limited to the question of jurisdiction."); Verret v. Elliot Equip. Corp., 734 F.2d 235, 238 (5th Cir. 1984) ("i t would be inappropriate to enter any judgment on the merit s when the dismissal is based on lack of subject matter jurisdiction").

However, despite this inability of a court to decid e the merits of a case over which it lacks jurisdiction, a court does have inherent authority both over its docket a nd over the persons appearing before it. It has long been r ecognized that courts are vested with certain inherent powers that are not conferred either by Article III or by statute, but rather are necessary to all other functions of courts. U.S . v. Hudson, 7 Cranch 32, 34 (1812); Roadway Express Inc . v. Piper, 447 U.S. 752, 64, 100 S.Ct. 2455, 63 (1980). Of course, implicit in all these powers is the power t o sanction.

The Supreme Court has recognized the inherent power of courts to impose sanctions in order to manage their own affairs and achieve orderly and expeditious disposi tion of cases. Chambers v. NASCO Inc., 501 U.S. 32, 43; 111 S. Ct. 123, 32 (1991). These powers include the power to m anage their dockets and impose silence and order on those before

7the court. Link v. Wabash, 370 U.S. 626, 30-31, 82 S.Ct.

1386, 88-89 (1962). In addition courts have the aut hority to punish contempt whether the sanctioned conduct is b efore the court or beyond it. Ex parte Robinson, 19 Wall. 505, 510 (1874). Nevertheless, even though the choice of sanction may be within the court's discretion, this power is not without limit. Link v. Wabash, 447 U.S. at 765.

The question we face here is whether the inherent p ower to sanction extends in a case, over which the court lacks subject matter jurisdiction, to permit the court to impose a sanction which will be dispositive of the merits of the case.
We think not.

We come to this conclusion despite the fact that we recognize that there is abundant authority permitti ng the imposition of sanctions in the absence of jurisdict ion over a case. The Supreme Court held unanimously in Willy v. Coastal Corp. that the absence of jurisdiction will not operate automatically to invalidate all proceedings below. The Willy Court, however, addressed the imposition of Rule 11 sanctions, awarding attorneys' fees incurred in responding to sanctionable conduct. Willy did not i nvolve a dismissal with prejudice. In approving the sanction in Willy, the Court relied in large measure on the principle that Article III concerns are not implicated by Rule 11 sanctions since they are collateral to the merits and do not result in the Court assessing the legal merits of a complaint over which it lacks jurisdiction. Courts have an interes t in maintaining order. For this reason, Rule 11 sanctio ns, which are imposed on persons appearing before the c ourt, may be upheld in the absence of jurisdiction where they are consistent with a court's inherent power to manage its docket and maintain order. Permitting the impositio n of Rule 11 sanctions by a court, later found to lack jurisdiction over the case, does not affect the appropriateness of such sanctions. Willy, 503 U.S. at 138.

Defendants contend that the Supreme Court's holding in Willy is applicable to this case. We conclude, howe ver, that Willy is not controlling here because Willy involve d a
sanction collateral to the merits of the case. The sanction of dismissal with prejudice, imposed on Ray, is not co llateral
to the merits. It acts to terminate the cause of ac tion. A

8court's power to determine the merits of a case is distinct

from its power to exercise its authority over a per son appearing before the court. This distinction is inh erent in the reliance by the Court in Willy on the notion th at Rule 11 sanctions could stand in the absence of jurisdic tion because they were collateral to the merits of the a ction and did not signal a legal conclusion by the sanctionin g court.
The defendants seek to obscure this difference. We conclude, however, that where, as here, the court l acks subject matter jurisdiction, it may not act in a wa y that determines the cause of action even though it may s till--as in Willy--exercise its authority over the person be fore the court in the interest of enforcing compliance with the court's procedures. A court has an interest in enfo rcing cooperation with its orders by persons appearing be fore the court whether it has jurisdiction or not. A court a lso has an interest in deterring noncompliant behavior by futu re litigants. National Hockey League v. Metropolitan H ockey Club, Inc., 427 U.S. 639, 643; 96 S.Ct. 2778, 2781 (1976). However, where jurisdiction is found to be lacking, there can be no adjudication of the merits of the case. T his prohibition must bar the imposition of a sanction w hich will terminate the case on the merits. For this reason, we will leave undisturbed the District Court's $500 monetar y sanction against Ray but we will vacate the dismiss al with prejudice.4

Conclusion

In this case, the already complicated task of the transferee court in multi-district litigation was m ade more so by Ray's failure to comply with the district cou rt's orders. We recognize the need for the district cour t to be able to enforce compliance with its rules. Where, h owever, the district court lacked subject matter jurisdicti on, it could

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4. For the reasons we have stated, we disagree with the conclusion reached by the Ninth Circuit in In re Exxon Valdez, 102 F.3d 429 (9th Cir. 1996) and by the Second Cicuit in Hernandez v. Conriv Realty Assoc., 116 F.3d 35 (2d Cir. 1997) that, despite a lack of subject matter jurisdiction, a district court may dismiss a case w ith prejudice as a sanction for repeated discovery violations.

9not impose a sanction that has the effect of adjudi cating

the merits of the case. We will, therefore, affirm the imposition of the monetary sanction, but we will va cate the dismissal of the case with prejudice and remand thi s case to the District Court with instructions to remand i t to the

state court.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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