The statutory right to appeal an adverse judgment is a critical litigation weapon. Yet, litigants must grapple with more than just the merits of their appeals. They must also overcome numerous procedural hurdles just to get their feet into the appellate courtroom doors. This article explores one such obstacle to appellate review in federal courts—the often overlooked or misunderstood Federal Rule of Civil Procedure 54(b)—application of which, in consolidated cases, has resulted in a circuit split that may soon be resolved by the Supreme Court.
(Please note the UPDATES at the end of this article.)
The Basics of Rule 54(b) and Its Application to Consolidated Cases
In federal court, an appeal as of right only may follow a “final decision of the district courts.” 28 U.S.C. § 1291. Interlocutory decisions typically require permission to appeal (this is in contrast to some state courts, such as those in New York). Once final judgment has been entered in the district court, any adversely affected party can take another shot at everything in the court of appeals. Easy, right?
Not always. In more complex cases, FRCP 54(b) can throw a monkey wrench into the best laid appellate plans. The rule precludes an appeal of any decision or order that disposes of some, but not all, claims or parties in a case. Unless the district court certifies that there is “no just reason for delay” and enters a partial final judgment, a party will not be able to appeal until the district court disposes of all remaining claims or parties. Consider what this pesky rule of procedure might mean: while different litigants duke it out or the same parties hotly contest pending claims, even the most meritorious appeal cannot even be heard (let alone decided), in some cases, for years!
Rule 54(b) is therefore a delicate balancing act. On the one hand, it is a rule of judicial efficiency aimed at avoiding piecemeal appeals. On the other, it recognizes that justice delayed is often justice denied. Within a single case, although striking this balance is sometimes difficult and the rule has many nuances, courts apply it rather uniformly.
Where it wreaks havoc is in consolidated cases, such as complex, multidistrict litigation (or MDLs). In such cases, the issue that has vexed and split the circuit courts for more than a quarter of a century is whether, for purposes of Rule 54(b), each original action should retain its separate identity (in which case, an appeal of any one action within the consolidated case may follow once the district court entirely disposes of all clams and parties in that action) or whether the original actions should be treated as a single action (in which case, an appeal may follow, absent a finding that there is “no just reason for delay,” only when the district court disposes of all actions within the consolidated proceeding.) A similar problem also arises where a previously unified action is severed into multiple actions in the same court.
Recent Petition for Certiorari
The Supreme Court may soon have the chance to resolve this circuit split if it grants a petition for certiorari that was filed and considered recently in the London Interbank Offered Rate (LIBOR) MDL in the Second Circuit. The LIBOR MDL demonstrates the significance of Rule 54(b) in consolidated cases. After multiple groups of plaintiffs filed separate actions against various banks who allegedly manipulated LIBOR, these actions were consolidated for pre-trial purposes in the MDL. The Southern District of New York allowed some claims asserted by some plaintiffs to go forward, but it entirely dismissed the claims brought by certain other plaintiffs.
The plaintiffs whose claims were dismissed in their entirety appealed to the Second Circuit. Yet, the Court of Appeals said “not so fast!” The Second Circuit, on its own initiative, dismissed their appeals for lack of appellate jurisdiction. The culprit: Rule 54(b). The Second Circuit found that jurisdiction over the appeals was lacking because “the orders appealed from did not dispose of all claims in the consolidated action.”
The Second Circuit’s sua sponte consideration of this issue was not unusual given that litigants sometimes are so eager to proceed with an appeal that they fail to ensure that they have cleared all procedural hurdles. Yet, what may puzzle some observers is that the Second Circuit dismissed the appeal even though there were no remaining claims or parties in the actions that were appealed. In other words, they were final. So why the reason for delaying the appeal?
The answer is that in the Second Circuit, “when there is a judgment in a consolidated case that does not dispose of all the claims which have been consolidated, there is a strong presumption that the judgment is not appealable absent Rule 54(b) certification.” Hageman v. City Investing Co., 851 F.2d 69, 71 (2d Cir. 1988). That presumption may be overcome only in “highly unusual circumstances.” Id. Thus, the mere fact that one part of the LIBOR MDL had been resolved (even where consolidation was only for pre-trial purposes) was insufficient to overcome the strong presumption that a Rule 54(b) certification was required to appeal under those circumstances. Evidently, this group of plaintiffs did not seek such a certification until after their appeal was dismissed (and that request was denied). No 54(b) certification, no appeal. Plain and simple.
Taking the Second Circuit’s “strong presumption” a step further, the Ninth, Tenth and Federal Circuits have established a bright line rule that interim appeals of only one, final part of a consolidated case are never permitted without a proper Rule 54(b) certification. In contrast, the First and Sixth circuits have established a contrary bright line rule that such appeals are always allowed in consolidated cases because the original actions maintain their separate identities. While the above rules have the advantage of clarity, the majority of circuits (the D.C., Third, Fifth, Seventh, Eighth, and Eleventh) employ a more flexible, or case-by-case, test in which the question is answered in light of the purposes or extent of the consolidation. (In fact, both the First and Sixth Circuits recently have restated their positions, suggesting that they fall more in line with this authority). Under this approach, Rule 54(b) only applies where consolidation was intended to be, or was effectively utilized for, all purposes (though that question, itself, is not always clear, in which case some courts presume full consolidation). Obviously, the courts have been unable to agree on the best way, in consolidated cases, to balance the concerns of judicial efficiency against the risk of unfairly delaying a litigant’s appellate rights.
The plaintiffs whose appeals were dismissed in the LIBOR MDL petitioned for certiorari. They essentially argue that the judicially made rules requiring a Rule 54(b) certification in consolidated cases are inconsistent with Supreme Court precedent making clear that actions that have been consolidated do not lose their separate identity and that, even though this precedent predates the adoption of the Federal Rules of Civil Procedure, the Federal Rules continue to make clear that consolidation does not merge separate lawsuits into one. Therefore, petitioners appear to be asking the Supreme Court to hold that no Rule 54(b) certification is required to appeal any one part of a consolidated case that has been finally determined, particularly in an MDL proceeding in which consolidation is only for pre-trial purposes.
For their part, the defendants opposing the petition note that the issue has rarely been presented to the Supreme Court (the Court last received, and denied, a petition to review this issue in 1991) because, as a practical matter, district courts have adequately used their inherent authority to manage their own dockets (particularly MDLs) and have certified appeals under Rule 54(b) where appropriate. Defendants also suggest that any revision to the Federal Rules is best reserved for the Civil Rules Advisory Committee, not the Supreme Court. In any event, they say that this is the wrong case in which to review the issue because plaintiffs never pressed their current arguments below and because the petition could be moot once the district court rules on the pending motions to dismiss the remaining claims in the LIBOR MDL, or, if necessary, then certifies an appeal under Rule 54(b) once the risk of piecemeal appeals is mitigated.
If the Supreme Court establishes a bright line test, it might be easier for counsel to determine their appellate options, but it may also require them to reevaluate their appellate approach. For instance, if the Court decides that appeals in consolidated cases may always occur when any one original part of such cases is resolved, counsel should be prepared for their appellate time to run immediately upon resolution of such claims and will not be able to wait until the rest of the case is over to appeal. Thus, counsel must be prepared to pursue an appeal without the benefits of coordinated litigation that may have been ongoing for quite some time.
Conversely, if the court decides that appeals in consolidated cases must always await resolution of the entire case, counsel must be sure to advise their clients that their appellate rights in such cases are likely to be delayed – perhaps substantially. Obviously, from the perspective of the prevailing parties below, either rule would impact when they could achieve finality. (A winning party sometimes moves for Rule 54(b) certification, itself, to start the loser’s appellate clock as soon as possible).
If the Court eschews a bright line rule in favor of a more flexible approach, then litigants will have to be especially attentive to ensuring that the purposes of consolidation are clearly delineated at the earliest possible time in the litigation, with a view towards the particular appellate strategy that they might want to use later in the case (which view, at a preliminary stage, might be cloudy, at best).
Of course, Rule 54(b) may continue to trip up litigants in consolidated cases if the Court declines to review the issue—echoing the Second Circuit’s cry of “not so fast!”—and there will be no appealing that.
UPDATE (6/23/2014): The petition for certiorari has been relisted for consideration at a future conference. Given the upcoming summer recess, if it is not resolved by the next conference, it may remain pending at least until the Long Conference in September. For an interesting general discussion on the significance of relisting, see here and for current information about relisted cert petitions see here.
UPDATE (6/30/2014): The Supreme Court granted the petition for certiorari. The full order list is here.
(Note: This material is intended for general information purposes only and does not constitute legal advice.)