Appeals of interlocutory orders to the Appellate Division are liberally permitted under CPLR 5701(a), a real benefit when an important matter needs review prior to final judgment.1 But it often is unnecessary to take such an appeal, because CPLR 5501 provides a broad scope of review on an appeal from a final judgment. Such an appeal will bring up for review all the prior, non-final orders in the case, so long as they “necessarily affect the final judgment,” and have not been previously reviewed on appeal.
The CPLR 5501 requirement that a reviewable prior order have some impact on the final judgment seems reasonable enough—an innocuous legislative effort to inhibit appeals on academic matters. (Why waste the court’s time on review of issues that don’t impact the judgment?) In practice, however, this provision actually promotes inefficiency, risk and unnecessary appeals, as is made clear in a recent decision by the Court of Appeals in Siegmund Strauss Inc. v. East 149th Realty.2
In Strauss, an incentive for multiple appeals was caused by the interaction (or more precisely the possible lack of interaction) between an appeal on a final judgment with two interlocutory orders in the case.3 The dispute arose out of business negotiations between plaintiff Strauss and defendants Rodríguez, a husband and wife who owned a corporate lessee and a corporate operator of a business in the Bronx. The parties proposed to merge their corporations, obtain a new lease and operate out of a building located in the Bronx. Although the merger and business agreement was drafted, it was not signed.
Nevertheless, Strauss obtained a new lease for the premises and began performing under the proposed agreement. The Rodríguezes’ corporations terminated their business operations at the premises, and their employees became employees of Strauss. Soon thereafter, the relationship soured, with Strauss suing first, seeking to firm up its rights to the property.
The Interlocutory Orders
Strauss sued the Rodríguezes and the landlord for a judgment declaring that it was the lawful tenant for the real property in question. The Rodríguezes answered, but also counterclaimed against Strauss and asserted a third-party complaint against Strauss’ principals, alleging fraud, conversion and tortious interference with a contractual relationship. Strauss and its principals moved to dismiss the counterclaims and third-party complaint, for failure to state a cause of action. That motion was granted. A later motion by the Rodríguezes sought to amend their pleadings to add a cause of action for breach of contract, but that also was denied. No appeal was taken from the first order, and the appeal from the second order was not perfected.
The Final Judgment
After trial, the Supreme Court held that the plaintiff Strauss was the lawful tenant of the premises and judgment was accordingly entered. The defendants appealed to the Appellate Division, seeking review not only of the judgment, but also of the prior interlocutory orders which had dismissed the Rodríguezes’ claims and denied them leave to amend the pleadings. Did these prior orders necessarily affect the final judgment and therefore become reviewable under CPLR 5501?
The Appellate Complications
The Appellate Division held no. While it affirmed the judgment awarding possession of the premises to Strauss, it also held that the appeal from the judgment did not bring up for review the prior orders. The Appellate Division reasoned that these prior orders could not “necessarily affect” the judgment within the meaning of CPLR 5501, because even if those orders had been reversed, they only would have permitted the pursuit of claims against Strauss, but would not have affected the judgment awarding Strauss possession of the real property.
The defendants successfully argued in the Court of Appeals that the prior orders did affect the final judgment and were reviewable, because claims had been dismissed. The Court of Appeals acknowledged that it is “difficult to distill a rule of general applicability regarding the necessarily affects requirement,” but explained, “because Supreme Court’s dismissal of the counter-claims and third-party claim necessarily removed that legal issue from the case (i.e., there was no further opportunity during the litigation to raise the question decided by the prior non-final order), that order necessarily affected the final judgment.”
The clarification of the scope of review under CPLR 5501 is certainly welcome, but perhaps an amendment to CPLR 5501 can do more, by removal of the “necessarily affects the final judgment” condition. The expense and difficulty of perfecting appeals will deter parties from pursuit of trivial matters on interlocutory appeals, and in the absence of a change in CPLR 5501, the uncertainty in identifying orders that have such impact is likely to continue to prompt unnecessary appeals.
Clearly, the orders in Siegmund Strauss were important enough to the defendants to justify an appeal, but probably the incentive to do so was impacted greatly by the result of the trial. Thus, there may have been good reason to wait. At the same time, there was a line of analysis to persuade the Appellate Division that the impact of those orders on the final judgment was not sufficient to allow review on an appeal from that judgment. The party who waits to appeal such orders plays a dangerous game.
The safe course where there is any doubt on whether an order affects the final judgment is to file and perfect the interlocutory appeal.4 This presumably leads to many unnecessary interlocutory appeals, sometimes in the same case. The Advisory Committee has proposed a bill that would eliminate the “necessarily affects” language from CPLR 5501 and, in addition, would address the Matter of Aho problem.
‘Matter of Aho’
Matter of Aho5 presents the reciprocal to the Siegmund Strauss complication—while Siegmund Strauss examines the impact of prior orders on the judgment, Aho deals with the impact of the judgment on prior orders. In Aho the Court of Appeals held that interlocutory orders are subsumed into the final judgment, which causes any pending appeal from an interlocutory order to be terminated by the final judgment.
An appellant aggrieved by an interlocutory order may have difficulty completing the appellate process before the case proceeds to judgment, but as soon as the final judgment is entered, all the work by the parties and the court is for naught, and must be repeated on the appeal from the final judgment. This can be bad enough, but it is worse in the context of the “necessarily affects the final judgment” requirement of CPLR 5501.
Unless the practitioner is absolutely sure of the impact on the final judgment (and as the Court of Appeals notes in Siegmund Strauss, who can be positive?), they are reluctant to wait and may be induced to proceed on an interlocutory appeal that they otherwise would have deferred. Such an appeal may be terminated after substantial wasted effort under the Matter of Aho rule, if it does impact on the final judgment. On the other hand, such an order may not be reviewable at all, if it does not have this impact, and was not the subject of an interlocutory appeal. For these reasons, the careful practitioner is induced to appeal every order in sight.
The Advisory Committee proposal addresses both the Siegmund Strauss and Aho issues by deleting the “necessarily affects” clause and adding a new subdivision (e) to CPLR 5501,6 providing that for non-final judgments and orders, “the entry of a final judgment shall not affect the appealability of a party’s pending appeal of any non-final judgment or order.” This amendment would have the salutary impact of allowing an important interlocutory appeal to continue to its disposition, which in turn may result in a resolution of the case, notwithstanding a final judgment that might be appealed. There certainly are cases in which it makes sense to pursue the interlocutory appeal, and wait for its resolution prior to deciding whether to perfect the appeal from the final judgment.
Therefore, the proposed amendment to CPLR 5501 would not only further the result that the Court of Appeals endorsed in Siegmund Strauss, but also would improve flexibility of appellate practice on interlocutory appeals in a way that promotes judicial economy.
Thomas F. Gleason is a member of Gleason, Dunn, Walsh & O’Shea, in Albany and an adjunct professor at Albany Law School.
1. Compare 28 USC §1291, which provides for appeals from the U.S. District Court to the U.S. Court of Appeals. They are much more limited than in New York practice. For comparison between federal and New York practice, see Siegel, New York Practice, §642, p. 1190 (5th Ed.).
2. —NY3d—; 2012 WL5199393 (N.Y.), 2012 N.Y. Slip. Op. 07048 (Oct. 23, 2012).
3. 81 AD3d 260 (1st Dept. ), mod. —NY3d—; 2012 WL5199393 (N.Y.), 2012 N.Y. Slip. Op. 07048 (Oct. 23, 2012).
4. For a thorough discussion of these strategic concerns, see Siegel, McKinney’s Practice Commentary to CPLR 5501, C:5501:6.
5. Matter of Aho, 39 NY2d 241, 347 NE2d 647 (1976).
6. See Senate Bill No. S06648, which can be viewed at www.assembly.state.us/leg.