ABA ARTICLE OUTLINES “FINALITY TRAP”[Posted April 27, 2010] Those of you who are ABA members have access to the Appellate Practice Committee’s excellent newsletter, Appellate Practice Journal. The current issue features an article on a little-known danger in federal practice, which danger the authors call the “finality trap.” While I won’t recite the article fully here, I will briefly mention what the trap is, to prevent your falling into it.
Let’s assume that you have filed a three-count complaint in US District Court, asserting claims of negligence, fraud, and nuisance. The district court grants partial summary judgment (or, more likely these post-Iqbal days, a motion to dismiss) in favor of the defendant on your negligence and fraud counts, but says it will allow you to proceed to trial on your nuisance claim.
You’re normally one to take your small victories where you can find them. But in this instance, you believe that the learned judge’s decision to strike 2/3 of your case is demonstrably wrong. And besides, your best case for big damages is on the fraud count. You decide that instead of spending the time and effort to try the case once and then appeal, you’d like to get Fourth Circuit review of the dismissal of those two claims, and then try the case just once.
The problem is that the dismissal isn’t a final order, so you can’t appeal it yet because of that pesky finality requirement in 12 USC §1291. Then a solution reveals itself, with all the clarity of an autumn sunrise: You can voluntarily dismiss your remaining nuisance claim, rendering the summary-judgment order effectively final and permitting you to appeal.
Don’t do it.
As the authors of the Journal article point out, an overwhelming majority of federal circuit courts will rule that by dismissing your nuisance claim without prejudice, the resulting order isn’t final, because the nuisance claim can still be litigated in the future. That means that the appellate court can’t take up the question of the learned district judge’s hasty ruling on your negligence and fraud claims, because it won’t have jurisdiction.
If that sounds like trouble, let’s examine the real “trap” aspect of the case. Your two most valuable claims are now gone forever, because you can’t raise them again even if you refile your nuisance claim (since those claims were dismissed with prejudice). You can’t appeal them and you can’t replead them. That’s the trap.
The authors cite one Fourth Circuit case that has applied the trap – Talley v. Farrell, 43 Fed. Appx. 657 (2002). That’s a short per curiam order that says exactly what I’ve described above. They also note, with perhaps a glimmer of optimism, that the Fourth last year requested briefing on the issue, at least potentially signaling that it might be willing to revisit the doctrine. Independence News, Inc. v. City of Charlotte, 568 F.3d 148, 153 n.2 (4th Cir. 2009). But the parties mooted the question by agreeing that the dismissal of the plaintiff’s final claim was with prejudice.
So what’s a litigant to do? There are a few options, none of which is perfect, but all of which are better than sending your dismissed claims into eternal limbo. You can seek certification for an interlocutory appeal under 12 USC §1292(b), or ask the district court to make the interlocutory rulings final under Fed.R.Civ.P. 54(b). You can, of course, proceed to trial on your nuisance claim and then appeal the dismissals at the conclusion of the case. You can swallow hard and agree to dismiss your nuisance claim with prejudice, as was the case in the Independence News appeal. The authors also set forth several “improvised solutions” adopted by the appellate courts to preserve jurisdiction in close cases. (Despite what you may have heard, appellate jurists are not savage, lawyer-eating monsters; sometimes they try to avoid unduly harsh consequences.)
For further details, you should check out the article, which is the lead story in the Winter 2010 issue of the Journal. You’ll need to be an ABA member in order to see it online, but if you aren’t one of those, you should probably join anyway.
One last point: If you limit your practice to state court and are worried about whether the same trap applies here in Virginia, you can probably relax. While the Supreme Court has not, to my knowledge, formally disavowed the federal approach, it has implicitly done so by repeatedly considering on the merits cases where a sole remaining claim has been nonsuited in order to create finality. See, e.g., Andrews v. Browne, 276 Va. 141, 146 (2008), The Country Vintner, Inc. v. Louis Latour, Inc., 27 Va. 402, 410 (2006), and Washburn v. Clara, 263 Va. 586, 589 n.2 (2002). Since appellate jurisdiction cannot be waived, if the justices felt that this was a problem they would have spoken up, sua sponte if necessary.