The Fourth Circuit helpfully explained when consented judgments are—and are not—appealable.
September 13, 2019
In Sprint Nextel Corp. v. Wireless Buybacks Holdings, LLC, the Fourth Circuit addressed one of Sprint’s suits against cell-phone arbitrageurs. But before reaching the merits, the court had to assure itself of its jurisdiction. After the district court had granted partial summary judgment to Sprint on liability, the parties stipulated to the amount of damages and the defendant appealed. But consented judgments like this can create problems with appellate jurisdiction. And Wireless Buybacks provides a helpful explanation of the issue.
The consented judgment in Wireless Buybacks
Sprint has apparently sued several companies that purchased upgraded phones from Sprint’s customers to resell them at a higher price. (Sprint discounted the phones it sold to its customers so much that reselling them on the second-hand market can be profitable.) In Sprint’s suit against Wireless Buybacks, the district court held at summary judgment that Wireless Buybacks was liable for tortious interference with the contract between Sprint and its customers; the customer contracts prohibited the resale of Sprint phones, and Wireless Buybacks had induced customers to resell their phones despite knowing about this prohibition.
Rather than proceed to trial on the amount of damages, the parties stipulated that Wireless Buybacks had caused $26.9 million in damages. Wireless Buybacks then appealed the summary-judgment ruling on liability.
The jurisdictional problems with consented judgments
But the stipulated judgment raised concerns about appellate jurisdiction. Parties have tried to use stipulated judgments to circumvent the normal limits on interlocutory appeals; they conditionally agree to the resolution of all outstanding claims but purport to reserve the right to revive them should the court of appeals reverse. Courts don’t always take kindly to these attempts to get around the final-judgment rule. Courts have instead held that these stipulations can deprive them of appellate jurisdiction.
The example of Microsoft Corp. v. Baker
In Microsoft Corp. v. Baker, for example, the Supreme Court held that a conditional dismissal with prejudice was not final or appealable. The district court in Baker had denied class certification on claims involving the Xbox 360. Rather than pursue their individual claims, the plaintiffs in Baker voluntarily dismissed them and sought to appeal the certification decision. But the plaintiffs also purported to reserve the right to reinstate their claims if the class-certification decision was reversed.
This was a classic case of parties trying to manufacture an appeal that the final-judgment rule would normally bar. The Supreme Court accordingly held that the voluntary dismissals were not appealable. The Court’s reasoning was a bit odd—it held that the voluntary dismissals were not “final” under 28 U.S.C. § 1291, despite the case being over—but its decision was undoubtedly correct.
But not all consented judgments preclude an appeal
But not all consented judgments are the same. The Wireless Buybacks opinion discussed two Sixth Circuit decisions that illustrate the difference.
Humbert
In Board of Trustees v. Humbert, the Sixth Circuit held that a stipulated judgment on damages was not final or appealable when it allowed the parties to litigate the amount of damages were the appellate court to reverse. Like the district court in Wireless Buybacks, the district court in Humbert had granted summary judgment on liability but did not decide the amount of damages. The parties then stipulated to the amount of damages to facilitate an appeal. But they also also purported to reserve the right to litigate “any issues” on a remand, including the amount of damages.
Were the Sixth Circuit to hear the appeal, there was a risk of piecemeal review. The parties had essentially paused the litigation and sought an appeal, all with the expectation that litigation would resume were the court of appeals to reverse. The parties’ stipulation also sought to circumvent the normal limits on interlocutory appeals and the limited avenues for those appeals. The Sixth Circuit accordingly determined that the stipulation did not conclusively resolve the matters it purported to resolve. This was merely an attempt to circumvent the limits on interlocutory appeals. The appeal was thus improper.
Innovation Ventures
But in Innovation Ventures, LLC v. Nutrition Science Laboratories, LLC, the Sixth Circuit held that a stipulation definitively resolving all outstanding issues is final and appealable. Simplifying a fair bit, the district court in Innovation Ventures had determined that a potential affirmative defense precluded summary judgment on the plaintiff’s claims but also rejected the plaintiff’s proposed method for proving damages. The parties then stipulated to several issues: the plaintiff had no alternative means of proving actual damages, the particular affirmative defense at issue did not bar nominal damages, and that nominal damages of $1 were thus all that the plaintiff could recover after the district court’s decision. Both parties then appealed the district court’s pre-stipulation decisions.
The Sixth Circuit noted that parties normally may not appeal a judgment that they consented to. But an exception exists when the consented judgment is made to secure review of an interlocutory decision that effectively resolved the claims. The parties had agreed that given the district court’s interlocutory decisions only one outcome was possible: a $1 award of nominal damages. And the parties were bound by all of the points to which they had stipulated. The plaintiff agreed not to pursue any damages theories other than the one that the district court had rejected. And the plaintiff could not go back on that agreement if the appellate court reversed.
Back to Wireless Buybacks
Wireless Buybacks read these decisions to mean “that parties may not gin up appellate jurisdiction by entering into a stipulation that is directly conditioned on the outcome of an appeal”:
For example, the parties may not “stipulate” to the amount of damages but provide that their agreement is void on remand if the court of appeals does anything but affirm. Such an agreement is not really a stipulation at all. A true stipulation is a conclusive resolution of a factual issue that is binding for the rest of the litigation; it does not evaporate after appeal.
And that’s how it should be. True stipulations are a good thing. They remove issues or theories from dispute, streamlining litigation as parties resolve issues on their own.
The stipulation in Wireless Buybacks was a good one. True, the stipulation was in some ways conditional—a reversal on liability would mean that Wireless Buybacks would not have to pay the stipulated damages. But the parties did not purport to reserve the right to litigate the amount of damages. They had instead conditioned the payment of damages (not their amount) on the scope of liability. And that’s a perfectly sensible stipulation. Damages often depend on the scope of liability, and the stipulation can avoid long and expensive proceedings on the amount of damages. All that mattered was that the stipulation was a binding one—it would not disappear if the court of appeals reversed.
Sprint Nextel Corp. v. Wireless Buybacks Holdings, LLC, 2019 WL 4197239 (4th Cir. 2019), available at the Fourth Circuit and Westlaw.