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Federal Partial Final Judgments

By Thomas R. Newman and Steven J. Ahmuty, Jr.
November 3, 2004
New York Law Journal

This month, we examine Computech International, Inc. v. Compaq Computer Corp.,1 which contains an excellent discussion of partial final judgments pursuant to Rule 54[b] of the Federal Rules of Civil Procedure [FedRCivP] ["Judgment Upon Multiple Claims or Involving Multiple Parties"].

Computech arose out of a commercial dispute between Compaq as supplier and CTI as buyer of computer equipment. In a prior order, the district court [1] granted Compaq's motion under FedRCivP 56 to dismiss CTI's amended complaint alleging fraud, libel and breach of contract to the extent of dismissing CTI's contract claim against Compaq and [2] granted summary judgment to Compaq on its contract counterclaims against CTI. The court stated, "If either party desires certification of the claims adjudicated to date pursuant to Federal Rule of Civil Procedure 54[b], a motion to that effect shall be brought within ten [10] days of the entry of this opinion and order."2 Compaq moved for entry of judgment on the counterclaims pursuant to Rule 54[b].

By way of background, in most instances only a "final decision" of the district court -- "one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment"3 -- is appealable to the court of appeals as a matter of right [28 USC §[1292[a]]. Certain interlocutory orders and partial final judgments are immediately appealable, however, either as a matter of right or as a matter of judicial discretion.

Interlocutory orders "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions" and certain orders in receivership and admiralty proceedings are appealable as of right [28 USC §[1292[a]]. Other interlocutory orders are appealable only if the district court certifies that the order "involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation" and "[t]he Court of Appeals * * * thereupon, in its discretion, permit[s] an appeal to be taken from such order" [28 USC §[1292[b]]. In an action involving multiple claims or multiple parties, an order disposing of fewer than all claims against all parties is not appealable as a final decision under 28 USC §[1291 unless the district court certifies that "there is no just reason for delay" and directs the entry of a partial final judgment [FedRCivP 54[b]].

The U.S. Court of Appeals for the Second Circuit summarized these basic principles of federal appellate jurisdiction in Chappel v. Levinsky.4

When the decision of the district court does not pertain to an injunction, a receivership, or a case in admiralty, see 28 USC §[1292[a] [1988], and is not an interlocutory order as to which we have granted leave to appeal, see 28 USC §[1292[b] [1988], the court of appeals lacks jurisdiction to hear the appeal unless the decision is a 'final' order within the meaning of 28 USC §[1291 [1988]. An order that adjudicates fewer than all of the claims remaining in the action or adjudicates the rights and liabilities of fewer than all of the parties is not a final order unless the court directs the entry of a final judgment as to the dismissed claims or parties 'upon an express determination that there is no just reason for delay.' FedRCivP 54[b].

Rule 54[b] Certification Factors

Rule 54[b] provides in pertinent part:

When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment.

Thus, Rule 54[b] requires that "[1] multiple claims or multiple parties must be present, [2] at least one claim, or the rights and liabilities of at least one party, must be finally decided within the meaning of 28 USC §[1291 and [3] the district court must make 'an express determination that there is no just reason for delay' and expressly direct the clerk to enter judgment."5 With respect to appellate review of a district court's entry of a partial final judgment, "Because '[f]actors [1] and [2] address the issue of whether rule 54[b] applies at all to the circumstances of the case,' they are reviewed de novo. 'Factor [3], on the other hand, is addressed to the ultimate decision to direct the entry of judgment; given the permissive nature of [R]ule 54[b] ..., this decision is left to the sound judicial discretion of the district court and is to be exercised in the interest of sound judicial administration.' "6

In Computech, Judge Robert W. Sweet analyzed the discretionary factors that guide the district court's determination whether to direct the entry of a partial final judgment pursuant to Rule 54[b], as well as the requirements for a proper certification:

Once the application of Rule 54[b] to the circumstances of the case has been established, the question of whether to direct entry of judgment is committed to the sound discretion of the district court, see Ginett, 962 F2d at 1092, although it "must be considered in light of the goal of judicial economy as served by the 'historic federal policy against piecemeal appeals.' " O'Bert ex rel. Estate of O'Bert v. Vargo, 331 F3d 29, 41 [2d Cir. 2003] [quoting Curtiss-Wright Corp. v. Gen. Elec. Co., 446 US 1, 8 [1980]] [internal quotation marks omitted]. "[I]t does not suffice for the district court to announce its determination that 'there is no just cause for delay' in conclusory form. Rather, its certification must be accompanied by a reasoned, even if brief, explanation of its conclusion." Id.; see also Harriscom Svenska AB v. Harris Corp., 947 F2d 627, 629 [2d Cir. 1991]; Hudson River Sloop Clearwater, Inc. v. Dept. of Navy, 891 F2d 414, 419 [2d Cir. 1989].

In reaching a reasoned conclusion, "[t]he proper guiding star, as the Supreme Court has emphasized, is 'the interest of sound judicial administration.' " Ginett, 962 F2d at 1095 [quoting Curtiss-Wright, 446 US at 8]. "[N]ow that the garden variety civil complaint often involves multiple claims and/or multiple parties, we cannot, as the Supreme Court has recognized, hide behind the old 'infrequent harsh case' chestnut" previously used to limit the application of Rule 54[b]. Id. With the interest of sound judicial administration as the goal,

Only those claims "inherently inseparable" from or "inextricably interrelated" to each other are inappropriate for rule 54[b] certification. When the claims are "separable" or "extricable" from each other, there is generally no reason to disturb the district court's exercise of its discretion. Ginett, 962 F2d at 1096; see, e.g., Hudson River Sloop Clearwater, 891 F2d at 418 [concluding that the certification of a judgment on certain claims was proper where the claims "involve a unique factual scenario ... and raise legal issues wholly distinct from those that remain for trial" and "any subsequent appeals on the remaining claims ... will involve questions of fact and law entirely distinct" from those at stake in the certified claims].7

Interrelatedness of Claims

Judge Sweet observed that multiple claims were at stake in the Computech litigation and that the grant of summary judgment on Compaq's counterclaims qualified as a final decision for purposes of Rule 54[b], thereby satisfying the first and second Rule 54[b] factors. CTI argued that the entry of judgment should be denied, however, because the issues underlying Compaq's counterclaims were "inextricably intertwined" with CTI's claims for fraud and libel against Compaq, both of which survived Compaq's summary judgment motion. The court disagreed, noting that "the factual and legal issues raised by CTI's fraud and libel claims are unrelated to Compaq's counterclaims. CTI's fraud and libel claims 'are not related to whether CTI owes Compaq money for goods CTI admits it received and resold.' " The court noted that "inseparability" of claims, not "mere interrelatedness," was the test for denial of Rule 54[b] certification:

The mere interrelatedness of claims does not connote their inseparability. As the Court of Appeals for this circuit explained in Ginett, if the interrelatedness present in multiparty and multiclaim cases were sufficient to render claims inextricably interwoven, then "every multiparty case [and virtually every multiclaim case] would elude the entry of a rule 54[b] judgment, and rule 54[b] would be meaningless."8

Next, CTI argued that Rule 54[b] certification should be denied because it may have claims for damages against Compaq that would offset any judgment entered in Compaq's favor. The court rejected this argument, noting once again that "CTI's claims are not related to whether CTI owes Compaq money for goods CTI admits it received and resold" and, thus, "the grounds for the potential setoff bear no relation to the substance of Compaq's counterclaims."9

Finally, noting that Compaq is a "multi-million dollar company with global operations," CTI argued that a delay in entering judgment would not cause financial hardship to either party. The court treated this factor as neutral in weighing the equities involved. If anything, the court observed, "CTI's allegations of Compaq's solvency suggest that CTI's concerns regarding potential offset damages are unwarranted, as there is no reason to believe that Compaq will be unable to pay any such damages should judgment on CTI's remaining claims be entered in CTI's favor."10

The same considerations led the court to deny CTI's cross-motion pursuant to FedRCivP 62[h] for a stay of enforcement of any Rule 54[b] judgment entered on Compaq's counterclaims, pending the trial of CTI's surviving fraud and libel claims. The court held that no grounds for a Rule 62[h] stay had been established since "CTI has alleged that Compaq is not in danger of becoming insolvent and, thus, there is no basis for concluding here that CTI would be unable to collect any damages that CTI may have in excess of the amount of the judgment on Compaq's counterclaims."11

  1. 2004 WL 2291496 [SDNY, Oct. 12, 2004 [Sweet, U.S.D.J.]].
  2. 2004 WL 1126320, *13 [SDNY, May 21, 2004 [Sweet, U.S.D.J.]].
  3. Catlin v. United States, 324 US 229, 233 [1945].
  4. 961 F2d 372, 373 [2d Cir. 1992].
  5. Ginett v. Computer Task Group Inc., 962 F2d 1085, 1091 [2d Cir. 1992].
  6. Information Resources, Inc. v. Dun and Bradstreet Corp., 294 F3d 447, 451 [2d Cir. 2002] [citations omitted].
  7. 2004 WL 2291496, *1-*2 [SDNY]
  8. Id. at *2-*3, citing Ginett, supra, 962 F2d at 1095-96.
  9. Id. at *3-*4.
  10. Id. at *4.
  11. Id. at *5.
Thomas R. Newman is of counsel to Duane Morris and author of New York Appellate Practice [Matthew Bender]. Steven J. Ahmuty, Jr. is a partner at Shaub, Ahmuty, Citrin & Spratt. They are both members of the American Academy of Appellate Lawyers.

This article originally appeared in the New York Law Journal and is republished here with permission from law.com.