Opinion ID: 520665
Heading Depth: 2
Heading Rank: 1

Heading: jurisdiction

Text: 9
10 We have jurisdiction to review an order granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions under 28 U.S.C. Sec. 1292(a)(1). Appellee Quan contends that the district court's order of March 16, 1988, qualifies neither as an injunction, nor as an order modifying an injunction. He therefore concludes that the order is unappealable for lack of finality. We disagree. 11 An injunction may be defined as an order that is directed to a party, enforceable by contempt, and designed to accord or protect some or all of the substantive relief sought by a complaint in more than temporary 1 fashion. 16 C. Wright, A. Miller, E. Cooper, & E. Gressman, Federal Practice & Procedure: Jurisdiction Sec. 3922 at 29 (1977). It is to be contrasted with an order by a court that regulates the conduct of the litigation, which is not considered an injunction for purposes of appellate jurisdiction, even though punishable by contempt. Orders relating to discovery are examples of the latter. See id. at 30 (and cases cited within). 12 The original order of November 23, 1987, directed First State to pay defense expenses in the FSLIC litigation as they were incurred. The order met the general definition of an injunction in that it was directed to First State, was enforceable by contempt, and provided most of the substantive relief the insureds sought. It did not concern only the conduct of the litigation, as Quan contends. The order of December 15, 1987, clearly modified the original order by directing that expenses be apportioned so that First State need only pay covered expenses as they were incurred. Finally, the order of March 16, 1988, from which this appeal was taken, again modified the original injunction by providing that First State pay all defense expenses, subject to later reimbursement after a post-trial apportionment. Having concluded that the original order was an injunction, we have no difficulty characterizing the March 16th order as a modification of that injunction. The March 16th order substantially changed the terms and force of the injunction as it stood immediately prior to March 16; the change was a modification, not a mere clarification. See Movie Systems, Inc. v. MAD Minneapolis Audio Distributors, 717 F.2d 427, 429-30 (8th Cir.1983). It is therefore appealable under 28 U.S.C. Sec. 1292(a)(1). 13
14 The original injunction ordering First State to pay defense expenses as they were incurred was entered on November 23, 1987. First State did not appeal that injunction, but did request clarification on December 11, 1987. The district court responded with an order of clarification on December 15, 1987, which modified the injunction by providing that First State was entitled to apportion defense costs and not pay those that were clearly excluded by the policy or that related to non-covered individuals. First State did not appeal that order. Then, on March 16, 1988, after the parties could not agree on an apportionment formula, the district court entered its order requiring First State to pay all defense costs as incurred, subject to apportionment after judgment in the FSLIC trial. From this order, First State took a timely appeal. 15 The insureds argue that, because First State did not appeal the earlier orders, it is precluded from attacking the ruling, embodied in the first order, that First State must pay potentially covered defense expenses as they are incurred. The insureds contend that the only issue properly before us is the modification made by the March 16th order: the ruling that First State must wait until after trial to apportion covered and uncovered defense expenses. While there is something to be said on both sides of this argument, we conclude that First State's appeal is not so narrowly confined as the insureds would have it. 16 It is true that a party that has failed to appeal from an injunction cannot regain its lost opportunity simply by making a motion to modify or dissolve the injunction, having the motion denied, and appealing the denial. In such a case, the appeal is limited to the propriety of the denial, and does not extend to the propriety of the original injunction itself. Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1418 n. 4 (9th Cir.1984). See also Denley v. Shearson/American Express, Inc., 733 F.2d 39, 42-43 (6th Cir.1984). As a result, review of denials of motions to modify or dissolve injunctions are generally limited to the new matter presented by the motion. Sierra, 739 F.2d at 1418 n. 4. 17 A somewhat more delicate question is presented when a motion to modify an injunction is granted. It is still true that one who has long since foregone a right to appeal an injunction ought not to regain it simply because a separable modification, appealable in its own right, has occurred. On the other hand, a modification may be so fundamental to the original injunction, or may otherwise present issues so inextricable from the validity of the original injunction, that review must include the whole package. Indeed, even denials of motions to modify can present such problems of entanglement, and the appellate court may decide to review the original injunction when it perceives a substantial abuse of discretion or when the new issues raised on reconsideration are inextricably intertwined with the merits of the underlying order. Sierra, 739 F.2d at 1418 n. 4; see Cerro Metal Products v. Marshall, 620 F.2d 964, 972 (3d Cir.1980). In order to determine whether review of the original injunction is justified in the case before us, we must turn to its particular facts and exercise a pragmatic judgment. See Fern v. Thorp Public School, 532 F.2d 1120, 1129 (7th Cir.1976). 18 The facts here, and the manner in which the issues are framed, lead us to conclude that we must review the major earlier rulings of the district court in order properly to decide the validity of the last modification of March 16th. First State's original position was that its policy was one of indemnification and contained no duty to defend, and that accordingly it need pay no expenses of defense until after final judgment in the FSLIC trial. The district court firmly rejected that position in its order of November 23, 1987, holding that the policy required contemporaneous payments of covered defense expenses as they were incurred, and that California law imposed a duty to defend. The court's actual order, however, did not impose a duty to defend; it simply required payment of defense expenses as they were incurred. Before the time for appeal of that ruling expired, First State obtained a clarification that permitted it to apportion expenses, and not to pay those that fell within clear policy exclusions or that were incurred by non-covered persons. It was only after negotiations over an apportionment formula broke down that the district court issued its March 16th order requiring First State to pay all defense expenses, subject to apportionment only after final judgment. 19 Now, in attacking the March 16th order on appeal, First State argues that a requirement that all expenses be paid prior to judgment is improper, even for a policy requiring payment of legal expenses as they are incurred, unless the policy embodies a duty of the insurer to defend--a duty that First State emphatically denies. Whether or not this argument proves to be meritorious, it is almost impossible to address it without examining the merits of the district court's earlier rulings. And it is unreasonable to hold the question of a duty to defend foreclosed by First State's failure to appeal the November 23rd order. At the time that order was issued, and after it was clarified on December 15th, the presence or absence of a duty to defend had no effect on the timing of apportionment. It is a close question whether First State should be foreclosed from challenging its duty to pay at least covered defense expenses as they are incurred, but the nature and extent of its duties in that regard similarly may affect the question whether the district court abused its discretion in ordering all expenses to be paid when incurred, subject to later apportionment. Thus the new issues raised on reconsideration are inextricably intertwined with the merits of the underlying order. Sierra, 739 F.2d at 1418 n. 4. We conclude, therefore, that First State, in this appeal of the March 16th modification, may dispute the earlier rulings of the district court relating to the existence of a duty to defend, and the existence and scope of the duty to pay defense expenses as they are incurred. Whether any of these points is determinative is a matter for the merits, which we address below; our ruling at this point is simply that the arguments may properly be raised by First State. 20