2003 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit
7-22-2003 

# M a ddox v . S t P aul F ir e P r e c e de n t i al or N on-P r e c e de n t i al : N on-P r e c e de n t i al D ocke t N o . 02-2828

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Thi s de c i sion i s br ou gh t t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

. It h as be e n a c c e pt e d for inclusion in 2003 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

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w . v i l l a no va . e du . Re c omme nde d C it at ion
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w . v i l l a no va . e du/thir dc ir c uit_2003/351NOT PRE CEDENT IAL

UN ITED STA TES CO UR T O F A PPE AL S FO R T HE TH IRD CIR CU IT
No. 02-2828
WA LTE R L . MA DD OX , III, Appellant v. ST. PAUL F IRE AND MARINE INS URANCE COMP ANY; UNIT ED STA TES F IDE LI TY AND GUARANT Y COMPANY
On A ppeal from the Un ited States District Co urt for the We stern D istrict of P enns ylvania (D.C. Civi l No. 01-cv- 01264) Distric t Judg e: Ho n. D . Broo ks Sm ith Argued June 26, 2003 Be for e: S LO VI TE R a nd A M BR O, Circu it Judges , and PE TR ES E B . TU CK ER *, Distri ct Judge

(Fil ed: Jul y 22, 2003)
Leland P. Schermer (Argued) Leland Schermer & Associates 11 Stanwix Str eet, 7th Floor Pitt sburgh, PA 15222 Attorneyfor Appella nt

* Hon. Petres e B. Tucker, United States District Court for the Eas tern Dis tri ct of Pennsyl vania, sitting by designation.2

Alan S. Mill er (Argued) Picadio McCall Mil ler & Norton 4710 U.S. SteelTower 600 Grant Str eet Pitt sburgh, PA 15219
OPINI ON OF THE COURT
SL OV ITE R, Circuit

Judge
. We must decide whether we have juri sdiction over t his i nterl ocutoryappeal fi led by appel lant Walter L. Maddox, II I from the order of theDistri ct Court de nyi ng Maddox’s Motion to Continue with Counsel and gr anting i n part and de nyi ng in part the M otion o f def enda nt U nited S tates Fid elity and G uaran ty Com pany (“U SF& G” ) to Pro cee d w ith D efe nse of M add ox. Maddox v. St. Paul Fire & Marine Ins. Co. , C iv . A
. No . 01-1 264 (W .D. P a. M ay 29, 20 02). T he or der als o den ied U SF& G’s m otion to substi tute i ts prof

fered counseland ordered Maddox to se lect new, quali fied, and indep ende nt cou nsel, su bject to US F& G’s r easo nable appr oval. W e w ill dismiss this app eal f or la ck o f jur isdic tion
. I.

FACTS AN D PROCEDURAL B ACKGROUND On January 11, 2001, Sunny James Cvetnic file d a civi l sui t agai nst Maddox for trademark infri ngement and other clai ms in the United State s District Court for the Western Dist

rict of Pennsy lvania . Cvetni c clai med that Maddox, a musi cian, infri nged on3

Cvetnic’ s tra demark by pe rforming under the name “The Marcels. ” Mad do x h as pu rc ha se d a nn ua l ge ne ra l l i ab i l i t y i ns ur an ce po l i ci es fr om U SF &G and St. PaulFire and Marine Insuranc e Company (“St . Paul” ) sinc e September 1992. The polici es provi de coverage t o Maddox for claims bythir d parti es asser ting “Advert

isi ng Injuries. ” See , e.g. , Supp. App. at 352. The pol icie s also pr ovide USF&G and St. Paul the right and dutyto defend M addox in any suit seeking damages based on such injuries. Upon notice of the suit , Maddox’s ret ained counse l, Metz Schermer & Lewis, sent a letter t o St. Paul . The let ter pr ovided noti ce of the Cv etnic acti on and demanded complete def

ense and inde mnityin that lawsuit under the “ Advertis ing Inj uries ” coverage provisi on. On April 3, 2001, Maddox’s counselfile d an Answer in the Cv etnic actio n. On Ap ril 27, 20 01, D aria Fitz gerald , a St. Pa ul em ployee, lef t a voic e me ssage with Ma ddox’s c ounsel stating that S t. Paul wo uld provide a defen se for M addox under a
reserv ation o f rights and e xpre ssing its w illingne ss to allo w M etz Sc herm er & Lew is to repres ent Maddox in the Cv etnic actio n. On M ay 15, 2001, sl ightl y l ess tha n a month later, USF&G and St. Paul i ssued a
reservation of

right s letter t o Maddox, reservi ng the ri ght to deny coverage, withdraw from Maddox’s defense, seek rei mbursement from Maddox for uncovere d clai ms, and deny i ndemnificat

ion. On June 20, 2001, USF&G notifi ed Maddox’s counsel byletter1 So me of t he l ett er s i n the Su pp l em en t al App en di x wh i ch we a t t ribu t e t o US F&G app ear to be w ritten on S t. Pa ul’s l etter hea d bu t sign ed b y repre sen tativ es o f U SF & G. For p urpo ses of our a nalysis, any disp ute ov er the s ourc e of th e letters is in cons eque ntial. 4 that i t was withdr awing from providi ng Maddox’s defense. 1 USF& G based its decisi on on information acqui red from paper s fil ed in a pri or 1981 acti on betw een T he M arcels and their reco rd la bel, Knauss, et al. v. Colpi x Records , N o. 80 C iv . 2 255 (S .D .N .Y
. 198 1). Maddox filed sui t agai nst USF&G and St. Paul in t he Court of Common Pleas of AlleghenyCounty on J uly 9, 2001. Maddox’s Complai nt sought declar ation of USF& G/St. Paul ’s duty to defend Maddox in the Cv etnic acti on, as wellas rel ief for ot her clai ms, including breac h of contra ct and bad fai th. USF&G and St. Paul re moved the acti on to the Dis tri ct Court f or the Weste rn District of Pennsyl vania. Maddox filed a
mo tion fo r a tem pora ry restraining orde r, pend ing a p relimin ary injunc tion, to e njoin USF& G and St. Paul from withdrawing the ir defe nse and requi ring t hem to pay M add ox’ s co uns el fe es. The Distri ct Court gr anted the motion bythe ins urance companie s to seve r the dec larat ory jud gm ent c oun t con cern ing the is sue of th eir d uty to d efe nd M add ox. Maddox v. St. Paul Fire & Marine Ins. Co. , Civ. A. No. 01-1264 (W.D. Pa. Aug. 8, 2001). O n De cemb er 27, 200 1, the District Cou rt granted M addox ’s motion fo r summ ary judgment i n part, finding t hat USF&G has a dutyto defend Maddox in the Cv etnic actio n. Maddox v. St. Paul Fire & Marine Ins. Co. , 179 F. S upp . 2d 5 27 ( W .D. P a. 20 01)
.5

Subsequentl y, USF& G sent Maddox’s counsel a letter advi sing hi m that i t had retai ned new counsel for hi s defense i n the Cv etnic lawsuit . USF&G reasse rted i ts pri or reservation of rights, except for the prior publication e xclusion w hich the D istrict Court had rejected. O n Janua ry 28, 2002, U SF& G filed a m otion to proce ed w ith Mad dox’s defense . Mad dox op posed the motion a nd requ ested retention of Me tz Scherm er & Le wis
. On M ay 29, 2002, the Distri ct Court gr anted i n part USF&G’s motion, fi nding that it had th e right to reject M etz Sc herm er & Lew is due to an a crimo niou s relation ship between counsel and USF& G caused by t he lit igati on over Maddox’s dutyto defend and bad faith clai ms. It

also sus taine d Maddox’s objecti on to the ne w counsel the i nsurance
com pany so ugh t to retain . The Distric t Cou rt orde r gran ted M addo x the o ppo rtunity to choose new, qual ifie d counsel, subject to reas onable appr oval byUSF& G. Maddox filed a time ly appea l. Maddox has complied with t he District Court ’s order and selec ted al ternat

ive counsel, although i n this appeal he cont inues t o assert

his obj ecti on to the order that requir ed him to fi nd new counsel. USF&G has objected t o Maddox’s newly se lect ed counsel bas ed solel y on an i nabili ty to reac h an agreement c oncerning a reasonabl e fee rate. II. DIS CUSS ION6

The Distri ct Court ha d subject matter juri sdiction over t

his act ion pursua nt to 28 U.S .C. § 133 2. USF& G has agreed that it will pay for Maddox’s defense i n the Cv etnic law suit. M addo x arg ues th at the D istrict Co urt’s ord er requ iring him to selec t new coun sel for his defe nse in that ac tion de prives him o f his rig ht to be repres ented by the co unse l of his choice. Specificall y, Maddox raises two issues: (1) whether an insur ance company whic h breaches its duty to defend un der an insu rance po licy has a right to object to the insured ’s chosen indepe ndent counseland (2) whether an insur ance company’ s iss uance of
reservation of

right s letters creat es a confl ict of interest wit

h the ins ured that

gives t he insu red a rig ht to sele ct ind epe nde nt co uns el. The prelim inary que stion b efore us is wh ether w e hav e jurisd iction to hear M addo x’s ap peal. It is i nterlocutorybecause Maddox’s breach of cont ract a nd bad faith clai ms are stillpending befor e the Dist rict Court. The Cv etnic actio n ha s be en d elayed pen din g th e ou tcom e of this a ppe al. A. Colla teralOrder Doctri ne Under 28 U.S.C. § 1291, our revi ew is li mited t o “final decisi ons of the di stri ct courts .” We , Inc. v. C ity of Phila delph ia , 174 F .3d 32 2, 324 (3d C ir. 1999 ). It is und ispu ted th at the Dis trict C our t’s or der wa s a c ollat eral o rde r an d no t a fin al jud gm ent. See M add ox’ s B r. at 1 8 (th e “d istrict cou rt’s M ay 29 , 200 2 or der is a c ollat eral o rde r”). A final j udgment “ends the lit igati on on the meri ts and l eaves nothi ng for the c ourt t o do7

but execut e the j udgment.” Cu nnin gham v. H amilto n C oun ty, Ohio , 527 U.S. 198, 204 (1999). Inasmuch as t

he District Court

sti ll has before i t Maddox’s breach of c ontract and bad faith claim s ag ains t US F& G a nd S t. Pa ul, th e or der at iss ue is not a fin al de cisio n. In li mited ci rcumstance s, a col late ral or der may be deemed a final decisi on under 28 U .S.C . § 12 91. We, Inc. , 174 F.3d at 324. To quali fy for

immediate review, t

he order must: ( 1) “concl usivel y determine the disput ed questi on;” (2) “resol ve an import ant is sue
com pletely sep arate f rom the m erits of th e actio n;” an d (3) “ be ef fectiv ely unrev iewa ble on appeal fr om a final j udgment.” Coopers & Lybrand v. Livesay , 437 U.S. 463, 468 (1978). “If the order at issue f ails to satisfyany one of t hese requi rements, it i s not an appealabl e coll atera l order .” We, Inc. , 174 F.3d at 324. We ha ve s ta te d t hat

for purpos es of t

he c ol la te ra l o rd erdoc trin e, th e Su pr eme Court has i nstruc ted that “‘t he issue of appealabi lit

y under § 1291 is t o be determined for the entire categoryto which a cl aim belongs. ’” Id. at 325 (citation om itted). A n ana lysis by ca tego ry prev ents cas e-b y-case dete rmin ation s. See Richardson- Merrell I nc. v. Koller , 472 U.S. 424, 439 ( 1985) (“This Court, however, has expres slyrejec ted efforts t o reduce the fi nalit

y r equirement

of § 1291 to a cas e-by -case determination of whether a parti cular ruling shou ld be subjec t to appeal.”). The Sup reme Co urt has held th at orde rs disqu alifying co unse l are no t imm ediate ly app eala ble. See id. In Rich ardso n-M errell , the Court held t hat a di squali fication order
wa s not im med iately appe alable beca use th e issue of d isqua lification wa s not se parate8

from the meri ts of the underlying action and becaus e it c ould be appeal ed at fi nal jud gm ent. Id. at 435, 439. Simil arly , in Cunningham , the Court held t hat an orde r imposing s ancti ons on an att orney under Fed. R. Civ. P. 37 and disqual ify ing that attorney fro m th e ca se w as n ot im me diate ly app eala ble f or th e sa me reas ons . 527 U.S . at 20 5-0 7. USF& G argues that

the Dist rict Court’s order here fi ts within the c ategory of disqual ific ation orders and t hat order s disqual ify ing counsel , as a category , are not imm ediate ly appea lable . In this action, the District Court’s or der effectivelyacts as a disqual ific ation order. The or der bars Metz Schermer & Lewis from defending Maddox in the Cv etnic actio n an d re qui res M add ox t o se lect a ltern ative cou nse l. In rul ing that

Maddox’s counsel coul d be repla ced, the District Court consider ed whether an i nsurance companythat breaches i ts duty t o defend subsequently has the right to rejec t the insu red’s c hose n cou nsel an d w hethe r US F& G w aived that righ t wh en it withdrew from provi ding Maddox a defense in t he Cv etnic acti on. These quest ions
necessarily

involve a n inquiry i nto USF&G ’s brea ch of the i nsurance cont ract, the ext ent of the brea ch, and U SF& G’s attem pts to remed y the breach. Th e District Cou rt concluded, “because USF&G is attempti ng to rei nstat e its defense [i n the Cv etnic acti on] while the litigati on is stillongoing, Maddox does not have an unfettered ri ght to force USF& G to pay fut

ure attorney fees for hi s curre nt counsel .” Maddox v. St. Paul Fire & Marine Ins. Co. , Civ. A. No. 01-1264, at *7 (W.D. Pa. M ay 29, 2002). These
con si der at io ns o verlap wi th Maddo x’ s r emai ni ng b re ach of c ont ra ctand bad fai th cl ai ms9

in th is ac tion
. Because the i ssue of whether USF& G could object

to Maddox’s sel ected couns el is not completel y se parable from the meri ts of Maddox’s re maining bre ach of contr act and b ad fa ith claim s, the situa tion is an alogo us to th at prov ided to the C ourt in Rich ardso n-M errell and its reasoni ng for dis allowing t he coll atera l appealof the counse l disqu alificatio n ord er in tha t case is e qually ap plicab le here . Con sequ ently, just as in Rich ardso n-M errell , we d o no t have jurisdictio n ov er M addo x’s inte rlocuto ry appea l. Maddox argues that

the Dist rict Court’s order willbe unrevie wable on appeal from final judgment i f the Cv etnic acti on is deci ded before the underlying action here. He cites United States v. Whittaker , 268 F.3d 185 ( 3d Cir. 2001) , where we found we had juri sdiction over a c ollateral appeal of an or der dis qualif yi ng a U.S. Attorney bec ause the government, in a cri minal cas e, “cannot appeal fr om a judgment of not gui lty .” Id. at 192. The si tuati ons are not comparable. While Maddox would not be able t o retry the Cv etnic acti on, he may be able t o include any damages caused by his i nabili ty to use t he
cou nse l of h is ch oice as a n ele me nt o f his inju ry in the und erlying actio n he re. Eve n m ore im portan t, we h ave c onclu ded th at the D istrict Co urt’s ord er is eff ect iv el y an a tt or neydi squ al if ic at io n or der , acatego ryof o rd er s f orwhi ch t

he S upr eme Court has deemed col late ral r eview inappr opriate. Therefore, we have no jurisdi ction
over this interlo cutory ap peal. B.10 Writ of Mandamus Maddox also request s that we exercise juri sdiction over t his appealby i ssuing an extraordinarywrit of mandamus. Maddox argues that by gr anting USF&G some control over Maddox’s choice of counsel, the Dist rict Court necess aril y determined that USF& G’s breach of t

he insur ance contr act was immater ial, and consequent ly deprived Maddox of his consti tuti onal ri ght to a j ury tri al for t he resol ution of di sputed i ssues of fact. Writs of mandamus ar e extra ordinary r elie f which should be us ed spari ngly and only in cases where the di stri ct court has engaged i n an act amounti ng to a judi cial
usu rpa tion of p ow er. Whittaker , 268 F.3d at 193. This i s not one of t hose rar e cases where a writ of mandamus i s necessary . The District Court did not

make a finding on t

he materi alit

y of USF&G’s breach. Rather, t he District Court

determi ned that

USF& G had some right to control Maddox’s defense as a matt er of la w, apart f rom any br each. The materi alit

y of USF&G’s breach, and a ny r esulting damages, will be de termine d on the
me rits in M add ox’ s rem ainin g ac tion aga inst U SF & G. U nde r the se c ircu ms tanc es, a grant of awrit of mandamus would be i nappropri ate. III. CONCLU SI ON Because we do not have j urisdi ction to hear thi s appeal, we cannot reach t he2 We are concerned that the Cv etnic action has b een a wa iting reso lution o f this

dispu te. W e are c onf ident th at wh en this a ction is re turned to the D istrict Co urt, it will ensure pro mpt resolution of the rem aining issue as to the fee requ ested by M addox ’s newly chos en counsel s o that t he Cv etnic actio n ca n pr oce ed. merits . For the reasons set forth, we di smiss Maddox’s appealfor lac k of juri sdiction. 2

_________________________ TO THE C LERK: Please fi le the forgoing opi nion.

/s/ Dolores K. Sl oviter Circuit Judge