September 25, 2013 Articles

Untangling Appellate Jurisdiction

The key to cases involving multiple rulings on multiple claims? Simple: find the final judgment

By Michael R. Lied

A recent decision by the United States Court of Appeals for the Seventh Circuit in a case involving multiple rulings on multiple claims against multiple defendants reveals the difficulties in untangling appellate jurisdiction. The key? Simple—find the final judgment.

The appeal stemmed from a breach-of-contract suit filed by a construction company, Tradesmen International, Inc., against four of Tradesmen’s former employees who founded a new construction company, Professional Labor Support (PLS). Tradesmen Int’l, Inc. v. Black, 2013 WL 3949020 (7th Cir. 2013). In the suit, Tradesmen alleged 10 counts, including breach of contract, misappropriation of trade secrets, misappropriation of confidential information, and violation of the defendants’ covenants not to compete. After the suit was filed, one of the defendants filed for bankruptcy, and proceedings against him were stayed. The lawsuit proceeded against the remaining defendants, and the district court ultimately granted summary judgment in their favor on all counts except with respect to the covenant-not-to-compete claim, which the court dismissed as moot. The remaining (and successful) defendants filed a motion for attorney fees; the district court denied their motion.

Then things got complicated. Tradesmen filed a timely notice of appeal of the summary judgment order, but it never sought certification of final judgment given that the order did not end the action as to all of the parties. See Fed. R. Civ. P. 54(b) (providing that “the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay”). On the other hand, the prevailing defendants filed a timely cross-appeal in turn on the court’s order denying their motion for attorney fees, and they  obtained Rule 54(b) certification for their cross-appeal.

On appeal, Tradesmen argued that the court of appeals had jurisdiction over its appeal for two reasons. First, Tradesmen argued that the court had jurisdiction under 28 U.S.C. § 1291 (jurisdiction over final decisions) because the parties consented in writing to the entry of a final judgment by the magistrate judge. Second, Tradesmen argued that the court had jurisdiction under 28 U.S.C. § 1292(a)(1) (jurisdiction over interlocutory orders) because the district court denied its request for permanent injunctive relief.

The Seventh Circuit rejected Tradesmen’s first argument outright, finding that it ignored the holding of an earlier case, Kimbrell v. Brown, 651 F.3d 752 (7th Cir. 2011), in which the court held that there is no appellate jurisdiction where a claim remains open against a defendant who had filed for bankruptcy. In Tradesmen, as in Kimbrell, the district court’s summary judgment order did not apply to the defendant who had filed for bankruptcy. Tradesmen, 2013 WL 3949020, at *4 (citing Kimbrell, 651 F.3d at 758). Thus, because that defendant’s “case remains ‘open,’ ‘unfinished,’ and ‘inconclusive’ in the district court, . . . there was no final judgment.” Id. That the parties consented in writing to the magistrate judge’s entry of a final judgment did not change this result. The court of appeals found that the magistrate judge’s order was not a final judgment, and as a result, there was no jurisdiction to hear Tradesmen’s appeal under 28 U.S.C. § 1291.

Tradesmen’s second jurisdictional argument had a better shot. Because the district court denied Tradesmen’s request for permanent injunctive relief, the Seventh Circuit concluded that it had appellate jurisdiction under 28 U.S.C. § 1292(a)(1) to review this part of the district court’s order. Although the Seventh Circuit agreed that it had jurisdiction to review the denial of injunctive relief, it rejected Tradesmen’s further argument that the denial was “inextricably bound” to the district court’s grant of summary judgment such that it could exercise supplemental jurisdiction over the other nine counts.

Having found jurisdiction over one of Tradesmen’s claims on appeal, the court of appeals then considered whether it had jurisdiction over the cross-appeal on attorney fees. Normally, “an appeal concerning attorneys’ fees alone does not meet the requirements of 28 U.S.C. § 1292(a)(1)”; therefore, the court of appeals lacks jurisdiction to hear it. Tradesmen, 2013 WL 3949020, at *5. And there is no pendent appellate jurisdiction over an appeal from an unquantified award of attorney fees. Yet, where an award of attorney fees “is independently final—which means, after the district judge ha[s] decided how much must be paid,” the court has pendent appellate jurisdiction to entertain an appeal of that award. Id. at *6. In Tradesmen, the court found that the district court’s denial of fees made the award independently final—$0. Therefore, it had jurisdiction to hear that issue. Id.

Multiparty litigation often leads to multiple rulings on multiple claims against multiple defendants. To find the four legs on which appellate jurisdiction may stand, the first crucial step is to find the final judgment.

Keywords: litigation, trial practice, final judgment, pendent appellate jurisdiction, Federal Rule of Civil Procedure 54(b)

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