Claims & Theories in Rule 54(b) Appeals

In Diaz v. FCA US LLC, the Third Circuit split over whether a district court had resolved distinct claims for purposes of Federal Rule of Civil Procedure 54(b). The majority concluded that the district court had resolved only a distinct theory of recovery, not a distinct claim. Dissenting, Judge Phipps argued that claims are defined by their elements, and the resolved and unresolved claims in the case had distinct elements.

The Partial Judgment in Diaz

Simplifying only slightly, the plaintiffs in Diaz alleged that the defendant sold defective muscle cars. The plaintiffs’ complaint included twelve counts. The plaintiffs based each count on one of two theories: breach of warranty and fraud.

The district court dismissed the fraud counts and many of the warranty counts. But two warranty counts remained. At the plaintiffs’ request, the district court also entered a Federal Rule of Civil Procedure 54(b) partial judgment on only the fraud counts. The plaintiffs then appealed.

The Majority: Separate Theories, Not Separate Claims

A divided Third Circuit vacated the Rule 54(b) partial judgment.

Rule 54(b) allows district courts to enter a partial judgment on the resolution of some (but not all) claims in a multi-claim or multi-party action. The Diaz majority concluded that the district court had resolved only a theory of recovery, not a distinct claim. The fraud and warranty counts were based on the same facts—the purchase of allegedly defective muscle cars—and sought relief for the same injury. So they were alternative theories of recovery for the same claim. And resolution of particular issues or theories of relief is not enough for Rule 54(b). The district court must resolve a distinct claim.

The Dissent: Different Elements, Different Claims

Judge Phipps dissented. He argued that the Supreme Court’s decisions in Twombly and Iqbal had redefined the term “claim” as its used throughout the federal rules. Those cases “structured the [pleading] inquiry around the elements needed to prove a claim.” So “a party’s claim is defined by its elements.” Since the fraud and breach-of-warranty counts involved different elements, Judge Phipps thought they were different claims for purposes of Rule 54(b).

Judge Phipps also suggested that it was counterintuitive to treat the fraud and warranty counts as separate claims. They involved different pleading standards (Rule 9(b) applied to the fraud allegations). And treating them as the same claim would open the scope of discovery to theories of recovery that a party did not plead.

Conflating Theories & Claims

The majority has the better of this issue. The dissent makes the all-too-common mistake of conflating claims and theories of relief.

Courts and lawyers frequently use the term “claim” when referring to theories of relief, e.g., referring to a plaintiff’s product-liability and breach-of-warranty claims. But this is imprecise, as the Seventh Circuit explained in St. Augustine School v. Underly:

We begin by recalling the distinction between a legal claim and a theory supporting relief (what the common law used to call a cause of action). A claim is the set of operative facts that produce an assertable right in court and create an entitlement to a remedy. A theory of relief is the vehicle for pursuing the claim; it may be based on any type of legal source, whether a constitution, statute, precedent, or administrative law. The specific theory dictates what the plaintiff needs to prove to prevail on a claim and what relief may be available. One lawsuit may raise multiple claims, and each claim may be supported by multiple theories.

Conflating these two terms is frequently harmless. But sometimes precision matters. Rule 54(b) is one of those times.

Twombly and Iqbal are an example of imprecise usage. Those cases addressed what is necessary to state a claim under Rule 8(a). And, as those cases said, any inquiry into the adequacy of a complaint starts with the elements. After all, we cannot know what must be pleaded until we know what must be proved.

But the distinction between theories and claims was not an issue in those cases. The Supreme Court could therefore be imprecise in referring to the elements of the plaintiffs’ “claims.” But those cases did not change the definition of a claim: it is still the underlying transaction or occurrence that—under one or more legal theories—gives a right to relief.

Diaz v. FCA US LLC, 2025 WL 1109297 (3d Cir. Apr. 15, 2025), available at the Third Circuit and Westlaw