June 28, 2012 Articles

The Future of Discretionary Interlocutory Review

It is time to revisit the rigidity of the final-order doctrine.

By Pierre H. Bergeron and Bruce A. Khula

Appellate courts, like their trial counterparts, are overworked and overburdened. Therefore, any effort to convince them to entertain additional discretionary interlocutory appeals would likely be greeted with skepticism. But is it time to revisit the rigidity of the final-order doctrine, which has been engrained into our heads since law school? The answer is yes. Nearly every case settles now. Only a small fraction go to trial. So what drives the settlement? Generally speaking, the trial court’s interlocutory rulings do. Forever insulating these rulings from appellate scrutiny, except in the context of a trial,  has a radical impact on the settlement calculus. A single errant ruling swings the settlement pendulum millions of dollars in one direction or the other. With that in mind, appellate courts should become less rigid in their discretionary interlocutory appeals. As a result, litigation would become more efficient.

The general rule for litigation in federal courts is that “a party is entitled to a single appeal, to be deferred until final judgment has been entered.” Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 868 (1994) (citation omitted). As the U.S. Supreme Court opined, this final-judgment rule is supposed to promote “‘efficient judicial administration’” and preserve “the prerogatives of district court judges, who play a ‘special role’ in managing ongoing litigation.” Mohawk Indus., Inc. v. Carpenter, 130 S. Ct. 599, 605 (2009) (quoting Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374 (1981)).

Congress has long recognized, however, that interlocutory review has a role to play in federal litigation. See Alexandra B. Hess, Stephanie L. Parker & Tala K. Toufanian, “Permissive Interlocutory Appeals at the Court of Appeals for the Federal Circuit: Fifteen Years in Review (1995–2010),” 60 Am. U. L. Rev. 757, 759–64 (2010–2011) (providing a historical accounting of Congress’s role in providing for interlocutory review in federal courts). Section 1292 of title 28 of the U.S. Code expressly carves out circumstances in which litigants can obtain interlocutory review in federal courts—automatically in very select circumstances and on a discretionary basis in most others. According to 28 U.S.C. § 1292(a), a few highly specific rulings—such as injunctions, the appointment of receivers, and certain admiralty orders—are considered by their very nature to justify immediate appellate review. In addition, according to 28 U.S.C. § 1292(b), a district court can give its blessing for other rulings involving a “controlling question of law” to be taken up for immediate review. And the appellate court can, at its discretion, undertake interlocutory examination of their merits.

Moreover, under Rule 23(f) of the Federal Rules of Civil Procedure, and under the Class Action Fairness Act, interlocutory appeal is available on a discretionary basis in class actions. See Fed. R. Civ. P. 23(f) (“A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule. . . .”); 28 U.S.C. § 1453(c) (“[A] court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed. . . .”). Likewise, based on rule, statute, and case law, avenues for interlocutory review exist for the following situations: bankruptcy litigants, rulings involving qualified immunity, judgments under Federal Rule of Civil Procedure 54(b), collateral orders, refusals to enforce an arbitration agreement, and petitions proceeding under Rule 5 of the Federal Rules of Appellate Procedure. 28 U.S.C. § 158(d)(2) (direct bankruptcy appeals); Mitchell v. Forsyth, 472 U.S. 511 (1985) (qualified immunity); Fed R. Civ. P. 54(b) (final judgment as to fewer than all the parties in a multiparty action); Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541 (1949) (collateral orders); 9 U.S.C. § 16(a) (arbitration); Fed. R. App. P. 5 (appeal by permission); Howard B. Eisenberg & Alan B. Morrison, “Discretionary Appellate Review of Non-Final Orders: It’s Time to Change the Rules,” 1 J. App. Prac. & Process 285, 290 (1999) (although petition for an extraordinary writ, such as mandamus or prohibition, could also be included as a type of “interlocutory appeal,” the Supreme Court has stated that “an extraordinary writ ‘is not to be used as a substitute for appeal,’ and ‘only exceptional circumstances amounting to a judicial “usurpation of power” will justify the invocation of this extraordinary remedy’”) (quoting Schlagenhauf v. Holder, 379 U.S. 104, 110 (1964), and Kerr v. U.S. Dist. Court, 426 U.S. 394, 402 (1976))).

Recent statistical sampling suggests that, of all the types of interlocutory appeals taken, the most common are appeals pursuant to section 1292(b) and Rule 23(f). See “‘Can We Appeal That Now?’—Discretionary Interlocutory Appeals at the Sixth Circuit,” Sixth Circuit Appellate Blog (May 4, 2012), http://www.sixthcircuitappellateblog.com/news-and-analysis/can-we-appeal-that-now---interlocutory-appeals-at-the-sixth-circuit/ (examining interlocutory appeals lodged before the U.S. Court of Appeals for the Sixth Circuit during the 2008–2011 calendar years). A statistical analysis specific to Rule 23(f) appeals can be found at Richard D. Freer, “Interlocutory Review of Class Action Certification Decisions: A Preliminary Empirical Study of Federal and State Experience,” 35 W. St. U. L. Rev. 13, 16–22 (2007–2008) (examining Rule 23(f) appeals from 1998 through 2007).

But, while the theoretical roads to interlocutory appeal may be several, litigants’ practical ability to traverse them has narrowed considerably in recent years. Most recently, in Mohawk Industries, Inc. v. Carpenter, 130 S. Ct. 599 (2009), the U.S. Supreme Court unanimously ruled that the collateral-order doctrine permitting interlocutory appeal does not reach disclosure orders adverse to the attorney-client privilege. Significantly, the Court acknowledged that the underlying issue involving attorney-client privilege was of great actual and historical significance. Id. at 606 (“We readily acknowledge the importance of the attorney-client privilege, which ‘is one of the oldest recognized privileges for confidential communications.’” (quoting Swidler & Berlin v. United States, 524 U.S. 399, 403 (1998))). Yet, the Court nevertheless found that the “crucial question” was whether deferred appellate review of a district court ruling undercutting the privilege “so imperils the interest as to justify the cost” of permitting an immediate appeal. Id. The ruling in Mohawk represents the latest contraction of the practical availability of interlocutory review in federal courts.

This contraction is in tension with the dominant trend in civil litigation over the past several decades, in which fewer cases go to trial or even reach an identifiable final judgment. Thus, even as the practical ability of litigants to seek interlocutory review narrows, the amount of litigation subject to review upon final judgment diminishes. The ultimate result of these trends is that fewer and fewer district court decisions are scrutinized by the appellate courts. Shifting the decisional locus to district courts allows significant issues of law to escape appellate review and jeopardizes the uniformity of federal law (which is aided by appellate review).

Other commentators have drawn attention to this problem. For instance, multidistrict litigation (MDL) has become increasingly important in the invention and application of “creative case-aggregation and judicial-management tools, particularly in the mass tort context.” See Andrew S. Pollis, “The Need for Non-Discretionary Interlocutory Appellate Review in Multidistrict Litigation,” 79 Fordham L. Rev. 1643, 1645 (2010–2011). For example, in the litigation involving the Deepwater Horizon oil spill of 2010, the district court concentrated hundreds of federal actions under a single MDL. And that case is by no means unusual in that regard. See, e.g., id. at 1646 (citing In re Oil Spill by the Oil Rig “Deepwater Horizon, MDL No. 2179, 2010 U.S. Dist. LEXIS 83268 (J.P.M.L. Aug. 10, 2010)). Yet, “there is no appellate jurisdiction over most interlocutory MDL orders.” Id.; see also Melissa A. Waters, “Common Law Courts in an Age of Equity Procedure: Redefining Appellate Review for the Mass Tort Era,” 80 N.C. L. Rev. 527, 530–31 (2002) (“[F]or the most part, mass tort trial judges are creating, systematizing, and refining the genre alone, without the guidance of appellate courts. . . . Because mass tort litigation almost exclusively emphasizes pretrial maneuvering and settlement, appellate courts never effectively review many of the most controversial rulings and innovations of mass tort trial judges.”).

Similarly, discovery and discovery-related matters—in addition to capturing enormous amounts of parties’ time, money, and resources—frequently produce significant rulings by district courts. But the general rule remains that discovery rulings are not reviewable until—and if—a final judgment issues. See Church of Scientology of Cal. v. United States, 506 U.S. 9 (1992) (holding that a discovery order was not appealable in the absence of defiance resulting in a contempt order, from which an appeal could be taken). Apart from a party suffering a contempt violation and then appealing on that basis, discovery rulings may be appealed only when the goal of the proceeding itself is for discovery. See, e.g., Phillips v. Beierwaltes, 466 F.3d 1217 (10th Cir. 2006); Ash v. Cort, 512 F.2d 909 (3d Cir. 1975); see also 15A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3907, at 280 (3d ed. 1992) (“Some matters of procedure, such as discovery, may elude review on appeal from final judgments; if the courts of appeals are to participate in the process of developing the law, interlocutory appeal may prove the only effective means available.”).

Another increasingly common issue in federal litigation arises in the context of removal, when the district court denies a motion to remand back to state court. Such a ruling comes very early in litigation and has a significant impact on the direction that a case takes. Yet, it is not appealable unless it is certified as such under 28 U.S.C. § 1292(b) and the court of appeals exercises discretion to accept it. See Rory Ryan, Luke Meier & Jeremy Counseller, “Interlocutory Review of Orders Denying Remand Motions,” 63 Baylor L. Rev. 734 (2011).

Which brings us back to section 1292(b), the most widely applicable statute permitting interlocutory review. But section 1292(b)—though potentially broad in terms of the subject matter that it may embrace—is wholly discretionary, requiring the assent of both the district court and the appellate court. The statute provides that the district court may allow appeal of an otherwise unappealable order if that order involves a “controlling question of law,” if there is “substantial ground for difference of opinion,” and if an immediate appeal may “materially advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b). And even if the district court allows an appeal, the court of appeals must also agree. See Fed. R. App. P. 5. Perhaps not surprisingly, some commentators have therefore observed that such discretion tends to be exercised primarily in the context of so-called big cases, potentially leaving unreviewed many significant rulings in cases that are never reported as front-page news. See Michael E. Solimine, “Revitalizing Interlocutory Appeals in the Federal Courts,” 58 Geo. Wash. L. Rev. 1165, 1167, 1193 (1990); see also Kraus v. Bd. of Cnty. Comm’rs, 364 F.2d 919, 922 (6th Cir. 1966) (“[Section 1292(b)] was not intended to authorize interlocutory appeals in ordinary suits for personal injuries or wrongful death that can be tried and disposed of on their merits in a few days.”).

The problem with the relative scarcity of review under section 1292(b) is, in fact, the same general problem for interlocutory review in the modern era, which “focus[es] the energies and resources of trial judges, lawyers, and litigants on pretrial and settlement, rather than on the trial itself.” Waters, supra, at 539. Unlike its counterpart of the nineteenth century—the era in which the final-judgment rule was born and quickly became doctrine—so much of modern civil litigation is conducted outside the confines of a courtroom. And, in such circumstances, many pretrial rulings by district courts prove both decisive and effectively unappealable. See James E. Pfander & David R. Pekarek Krohn, “Interlocutory Review by Agreement of the Parties: A Preliminary Analysis,” 105 Nw. U. L. Rev. 1043, 1043–44 (2011) (“In the comparatively simple world of the nineteenth century, the final judgment rule worked reasonably well as a means of regulating access to appellate review. Much civil litigation involved two opposing parties and many cases went to trial, usually before a jury. The final judgment rule deferred appellate oversight until the trial court entered judgment on the jury’s verdict. . . . [But] [w]ith the growing influence of managerial judges, the transformation of questions of fact into questions of law, and the rise of settlement, the final judgment rule and its existing exceptions no longer provide an entirely satisfactory trigger for the exercise of appellate oversight.” (footnotes omitted)); Adam M. Steinman, “Reinventing Appellate Jurisdiction,” 48 B.C. L. Rev. 1237, 1240-41 (2007). As Wright, Miller, and Cooper have succinctly put it, “[i]nterlocutory orders can affect the real world as well as the course of individual litigation and the development of the law.” 15A Wright, Miller & Cooper, supra, § 3907, at 280. Indeed, that observation is probably truer today than when it was written 20 years ago.

Now, when researching a critical issue for a case, it is not unusual to find only a smattering of district court opinions and nothing from the circuit level. Likewise, one is not surprised to find conflicts between district courts within the same circuit on some of these questions. But because district judges are reluctant to certify appeals under section 1292(b), it may be years before the issue finally arrives at the circuit level. Earlier intervention by the appellate courts, however, should streamline and better shape litigation (or perhaps convince some parties not to sue at all).

Limited interlocutory review of district court decisions may have been a good fit in a judicial system that favored resolution of disputes by trial, a system in which a significant number of disputes were, in fact, resolved in that fashion. And there is no denying that it would be impracticable, undesirable, and inefficient to permit appeals of all, or even most, categories of district court rulings. Yet, the fact is that, in modern times, an increasing number of cases produce significant rulings by district courts in cases that never reach a point where a final judgment is rendered and are, therefore, appealable. Under these conditions, we now need to evaluate how—not whether—we should change the historical approach to discretionary interlocutory appeals.

Keywords: litigation, appellate practice, interlocutory appeals, discretionary review, final-judgment rule, 28 U.S.C. section 1292, Rule 23(f), Federal Rules of Civil Procedure

Pierre H. Bergeron is a partner and Bruce A. Khula is an associate at Squire Sanders.

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