Another plaintiff has fallen into the Fifth Circuit’s finality trap, and it makes me wonder whether the en banc court actually made things worse.
May 15, 2020
Last week, in Williams v. Taylor Seidenbach, Inc., the Fifth Circuit failed to disarm its finality trap. This week, in CBX Resources, L.L.C. v. ACE American Insurance Co., a panel of the Fifth Circuit watched as another party fell into that trap. And unlike the plaintiffs in Williams, the plaintiff in CBX Resources had not obtained the post-proceedings Rule 54(b) certification that Williams held would cure any jurisdictional defects. Presumably the CBX Resources plaintiff will go through the rigmarole of doing so and eventually be back before the Fifth Circuit.
CBX Resources has me wondering if the Fifth Circuit’s Rule 54(b) approach is not only unnecessary, but also makes things worse. The approach seems to encourage the very thing that the court wanted to avoid: litigants’ manufacturing interlocutory appeals by voluntarily dismissing all remaining claims and then refiling them.
The finality trap
I’ve written a lot about the finality trap recently, so I’ll be brief here. (See my post The Fifth Circuit & the Finality Trap for an in-depth discussion.) The finality trap stems from courts’ efforts to prevent litigants from manufacturing interlocutory appeals in actions that involve multiple claims or parties. These attempted appeals come when a district court decision resolves some (but not all) of the claims on their merits. That decision is not immediately appealable; any appeal must normally wait until the end of district court proceedings, when all of the claims are resolved.
Parties have attempted to skirt this limit on immediate appeals by voluntarily dismissing their remaining claims without prejudice. The plan is to dismiss those claims, thereby ending district court proceedings, and then appeal. But those voluntarily dismissed claims aren’t really gone. Because they were dismissed without prejudice, the would-be appellant can reinstate them regardless of the appeal’s outcome. (Granted, there might be claim-splitting or statute-of-limitations issues in doing so, but the point is that nothing the district court did prevents the plaintiff from refiling the claims.) Courts normally see this tactic for what it is: an attempted end-run around the final-judgment rule. And they normally rebuff litigants’ attempts to use it, holding that the voluntary dismissal without prejudice precludes the district court’s decision from being final and appealable.
The rule for dismissals without prejudice is a reasonable one. We don’t want parties trying to manufacture interlocutory appeals and thereby avoid the normal limits on those appeals. The problem—indeed, the “trap”—comes when courts don’t let the parties fix the jurisdictional defect.
The en banc decision in Williams
That’s precisely what happened in Williams. The district court had dismissed some of the plaintiffs’ claims at summary judgment. The plaintiffs then voluntarily dismissed their remaining claims—some of which they dismissed without prejudice—and tried to appeal. The Fifth Circuit held that it lacked jurisdiction due to the without-prejudice dismissals. Back in the district court, the plaintiffs obtained a Rule 54(b) certification for the claims that they lost at summary judgment. (Actually, it’s not clear precisely what the district court certified under Rule 54(b), but I digress.) After a panel of the Fifth Circuit again dismissed the case for lack of jurisdiction (the panel held that the district court could not certify its decisions under Rule 54(b) after all of the claims had been resolved), the court granted rehearing en banc.
The en banc court was poised to fix the finality trap. But it declined to do so, instead holding that the belated Rule 54(b) certification had cured any finality problems in Williams. The majority opinion was a rough one. The majority held that Rule 54(b) certifications were proper even after all claims had been dismissed, apparently believing that cases decided piecemeal do not actually end. And the majority used Rule 54(b)—which normally slices off part of a pending action for an immediate appeal—to deem a decision appealable even though no action remained pending. This was an odd, unintuitive, and unnecessary reading of Rule 54(b). But the outcome was the right one. The Williams plaintiffs did not lose their right to appeal due to a minor procedural misstep.
The decision in CBX Resources
CBX Resources involved two claims against a single defendant: one alleging that the defendant (an insurance company) had a duty to defend the plaintiff, and one under the Texas Insurance Code. The district court held that the defendant did not have a duty to defend. The plaintiff then voluntarily dismissed its Texas Insurance Code claim without prejudice and tried to appeal. The Fifth Circuit held the appeal in abeyance pending Williams. And after Williams, the court held that it lacked jurisdiction because the plaintiff in CBX Resources had not obtained a Rule 54(b) certification. As the court recognized, its decision in Williams did “not free CBX from the trap.”
The Fifth Circuit went on to reject the plaintiff’s attempts to distinguish Williams. It first held that the finality trap applies in actions involving multiple claims against a single defendant, not just those involving claims against multiple defendants. The plaintiff had argued that the concerns underlying the finality trap—parties’ refiling their voluntarily dismissed claims after an appeal—did not exist when there were multiple, related claims against a single defendant. After all, res judicata would preclude bringing those claims in a later suit. But, as the Fifth Circuit pointed out, that would be true only if the court of appeals affirmed. “When the appellate court reverses, there is no preclusion and the plaintiff on remand can seek to reallege the claims that it had dismissed without prejudice.”
The Fifth Circuit then suggested that the Rule 41(a) voluntary dismissal could not be undone and, even if it could, the court would still lack jurisdiction. Rule 41(a) allows only for the dismissal of actions, and actions are not the same thing as claims. The Fifth Circuit allows parties to use Rule 41(a) voluntarily dismiss claims against only some (but not all) defendants. (The en banc Williams opinions included some discussion of revisiting this rule, but the majority declined to do so.) But it does not allow parties to voluntarily dismiss some (but not all) claims against a single defendant. The CBX Resources plaintiff accordingly argued that its voluntary dismissal might have been improper because it had tried to partially dismiss claims against a single defendant. The court noted, however, that it has not allowed parties to undo Rule 41(a) dismissals in the course of an appeal. And even if parties could do that, that still wouldn’t give the court appellate jurisdiction. It would simply mean that the case was still pending in the district court.
Finally, the Fifth Circuit refused to infer a Rule 54(b) certification. It did “not see any indication—let alone unmistakable intent—that the district court entered a partial final judgment under Rule 54(b) before this appeal was filed.”
What next?
Hopefully the plaintiff in CBX Resources will be able to return to the district court, obtain a Rule 54(b) certification, and appeal again. That will ensure the plaintiff doesn’t lose its right to appeal. But it’s also highly unnecessary. The Rule 54(b) procedure that Williams endorsed requires an odd reading of Rule 54(b) and an odd use of Rule 54(b) certification. This procedure also seems pretty pro forma. The district court has almost no reason not to certify its merits decision under Rule 54(b). So we’ll probably be right back where we were in due course. As I’ve said before, the better option is to allow parties to disclaim their right to refile any voluntarily dismissed claims.
Did Williams make things worse?
CBX Resources has me wondering whether Williams might have made things worse. I didn’t realize it immediately after Williams, but the Fifth Circuit’s Rule 54(b) procedure appears to condone the voluntary-dismissal tactic that underlies the finality trap. Recall that the courts of appeals do not want parties voluntarily dismissing some claims, immediately appealing the resolution of other claims, and then reinstating the voluntarily dismissed claims. Doesn’t the Rule 54(b) approach allow this? All that’s keeping parties from manufacturing these interlocutory appeals is obtaining a Rule 54(b) certification from the district court. Once that’s done, parties can immediately appeal the claims on which they lost and refile the voluntarily dismissed ones. Unlike Rule 54(b) decisions made in the middle of district court proceedings, there will rarely be any reason for the district court not to issue the Rule 54(b) certification once a party dismisses its remaining claims. After all, proceedings are over in the district court; why not facilitate an appeal? The Rule 54(b) approach thus seems to encourage the very situation that the courts of appeals try to avoid.
CBX Resources, L.L.C. v. ACE American Insurance Co., 2020 WL 2374593 (5th Cir. May 12, 2020), available at the Fifth Circuit and Westlaw.