Sometimes a “judgment” is not really a judgment, like when the district court has not yet issued a declaration of the parties’ rights.
September 27, 2020
The Federal Rules of Civil Procedure define a “judgment” as any decree or order from which an appeal lies. But just because a district court calls something a “judgment” does not mean that the court has entered a final, appealable decision. (And the rule that anything appealable is a “judgment” is not really followed.) The First Circuit explained as much this week in WM Capital Partners 53, LLC v. Barreras. In a declaratory-judgment action, the district court granted summary judgment for the plaintiff and asked the plaintiff to propose language for a declaration. But before the plaintiff could do so, the district court entered a judgment in favor of the plaintiff. The defendant then appealed. But, the First Circuit explained, there was no appealable judgment—despite a document purporting to be a judgment—because the district court had not declared the parties’ rights.
This sort of thing has to be maddening for litigants. Few lawyers could resist filing a notice of appeal once the district court enters something called a judgment. Failure to do so risks losing your right to appeal. But if the judgment is not actually a judgment, this attempt at appealing can needlessly delay resolution of the action. We need to be thinking of how to better define and identify the point at which the time to appeal begins running.
The Litigation in WM Capital
WM Capital involved a somewhat complicated set of real-estate transactions. Simplifying a fair bit, the defendant was a landlord that leased two office towers to a tenant. The tenant agreed to renovate those structures and, in return for doing so, obtained property rights in the renovated towers for the term of the lease. The tenant then took out a mortgage on the renovated towers, which was secured by the tenant’s property rights in those towers.
The relationships between the landlord, the tenant, and the bank that issued the mortgage eventually broke down. The bank tried to foreclose on the mortgage and substitute itself as the leaseholder. The bank also filed a declaratory-judgment action in federal court, seeking a declaration of its rights to the leasehold.
While the federal action was pending, the landlord brought an eviction action against the tenant for the tenant’s breach of the lease. An arbitrator eventually determined that the landlord had full ownership in the office towers.
Then, back before the district court, the bank and landlord filed cross-motions for summary judgment. The district court sided with the bank. The district court determined that the arbitration did not extinguish the bank’s rights to substitute itself as the leaseholder. And under the terms of the mortgage, the bank could take over the lease.
The district court directed the bank to submit a proposed declaration. But before the bank could do so, the district court entered a judgment in favor of the bank. The document—titled “JUDGMENT”—stated that “pursuant to the Court’s Opinion and Order, . . . [j]udgment is HEREBY ENTERED as to all defendants in favor of plaintiff.” The landlord immediately filed a notice of appeal. About a month later, the bank filed its proposed declaration. The district declined to take any further action pending resolution of the appeal.
The Non-Judgment Judgment
The First Circuit dismissed the appeal for lack of appellate jurisdiction. The court explained that an action under the Declaratory Judgment Act is not final until the district court specifies the parties’ rights. The district court in WM Capital never did that. So the appeal was premature. The court also explained that WM Capital illustrates why a specific declaration of rights is so important. Despite the district court’s opinion, the parties did not fully understand their rights in the office towers. “[A] precise delineation of the parties’ rights [was] essential.”
The First Circuit also explained that the district court’s purporting to enter a “judgment” did not change matters. A district court cannot create a final, appealable decision by calling something a judgment. The decision has to actually be final for purposes of 28 U.S.C. § 1291.
Better Defining the End of District Court Proceedings
This latter aspect of WM Capital—the rule that something the district court calls a judgment is not necessarily a final, appealable decision—is frustrating. After all, what reasonably diligent attorney would not be tempted to file a notice of appeal once the district court has seemingly entered a judgment? Failure to do so risks forfeiting the right to appeal.
But in cases like WM Capital, where the purported judgment is not a final decision, the premature notice of appeal can add expense and delay to the proceedings. The district court in WM Capital stayed all proceedings once the notice of appeal was filed. Those proceedings will now have to restart. And once the district court is done, another appeal will almost certainly follow.
Perhaps it’s time to consider redefining the point in district court proceedings when parties have a right—and a limited amount of time—to take a traditional, end-of-proceedings appeal. Uncertainty over when that point occurs benefits no one. At best, that uncertainty merely delays district court proceedings. But that uncertainty can also deprive litigants of their right to appeal. A new baseline—that is clear, easily identifiable, and unchanging—is worth considering.
Thanks to Howard Bashman for sending this case my way.
WM Capital Partners 53, LLC v. Barreras, 2020 WL 5640265 (1st Cir. Sep. 22, 2020), available at the First Circuit and Westlaw.