Appellate Decisions

Further Finality Follies From the Fifth Circuit

The Fifth Circuit again demanded that parties obtain a Rule 54(b) certification when a claim has been dismissed without prejudice.

July 9, 2020

By Bryan Lammon

The Fifth Circuit’s finality trap has another victim. In Firefighters’ Retirement System v. Citco Group Ltd., the court held that the district court had not issued a final, appealable decision when claims against one defendant had been dismissed without prejudice. To appeal, the plaintiffs needed to obtain a certification under Federal Rule of Civil Procedure 54(b) (and will presumably be allowed to do so).

Firefighters’ Retirement is thus another illustration of the Fifth Circuit’s foolish finality trap. Unlike other recent finality trap cases, the dismissal without prejudice in Firefighters’ Retirement came between with-prejudice dismissals. But the plaintiffs were trying to appeal a district court decision that came before the dismissal without prejudice. And that was enough to preclude finality. The Fifth Circuit declined to address what would happen if claims were dismissed without prejudice before the decision that a party sought to appeal.

The Fifth Circuit’s Finality Trap

For background on the finality trap and the Fifth Circuit’s failed attempt to disarm it, see these posts:

Briefly, the finality trap stems from courts’ efforts to prevent litigants from manufacturing interlocutory appeals in actions that involve multiple claims or parties. After the district court has resolved some (but not all) of the claims, parties have tried to skirt the normal limit on interlocutory appeals by voluntarily dismissing all remaining claims without prejudice. The plan is to dismiss those claims (thereby ending district court proceedings), appeal, and—regardless of the appeal’s outcome—later refile the voluntarily dismissed claims. Granted, there might be issues in pursing the refiled claims like preclusion or statutes-of-limitations. The point is that nothing the district court did prevents the plaintiff from refiling.

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. Courts of appeals also let would-be appellants fix the finality problem by disclaiming any right to refile the voluntarily dismissed claims.

This is a good rule. 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.

That’s precisely what the Fifth Circuit used to do. Then, in Williams v. Taylor-Seidenbach, Inc., the en banc Fifth Circuit had the chance to disarm its finality trap. It didn’t do so. Instead, it appeared to hold that claims resolved piecemeal—that is, when claims are resolved across multiple district court decisions—are never final. If parties want to appeal any one of the district court’s decisions, they must obtain a Rule 54(b) certification. So when a plaintiff loses on some claims and voluntarily dismisses any remaining claims without prejudice, the plaintiff must obtain a Rule 54(b) certification to appeal the claims on which it lost.

The Fifth Circuit’s Decision in Firefighters’ Retirement

The most recent victim of the finality trap is a group of Louisiana pension funds. They sued various defendants for the defendants’ alleged involvement in a Ponzi scheme. The district court granted summary judgment for one group of defendants. We’ll call them the “involuntarily dismissed defendants.” The funds then voluntarily dismissed their claims against another defendant without prejudice. That’ll be the “voluntarily dismissed defendant.” After that, the funds settled or obtained default judgments against the remaining defendants (and “remaining defendants” is a good term for them). The funds then tried to appeal their loss on the claims against the involuntarily dismissed defendants.

The Fifth Circuit held that the district court’s dismissal was not final. Under the en banc decision in Williams, there was no final decision due to the voluntarily dismissed defendant. And absent a Rule 54(b) certification, there would be no final, appealable decision. Presumably, the plaintiffs can now return to the district court to obtain that certification.

Something in Firefighters’ Retirement that we didn’t see in Williams or any subsequent decisions was the sandwiching of the voluntary dismissal between the resolution of claims against the involuntarily dismissed defendants and the remaining defendants. The Fifth Circuit thought this was a distinction without a difference; the funds still tried to appeal an interlocutory decision by voluntarily dismissing at least one defendant without prejudice. That is, the dismissal without prejudice came after the order that the funds wanted to appeal. In a footnote, the court suggested that things might be different if the dismissal without prejudice came before the district court decision that the appellant was trying to appeal.

Thanks to Howard Bashman and Rory Ryan for each sending this case my way.

Firefighters’ Retirement System v. Citco Group Ltd., 2020 WL 3729322 (5th Cir. July 7, 2020), available at the Fifth Circuit and Westlaw.

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Voluntary dismissals after adverse interlocutory orders don’t create a jurisdictional problem. They instead implicate waiver.
More on Rule 41 Dismissals of Actions and Claims
The Eleventh Circuit held that plaintiffs can voluntarily dismiss only entire actions, regardless of whether they use Rule 41(a)(1) or (2).
Finality After Rule 41 Dismissals of Claims & Actions
The Eleventh Circuit held that a Rule 41(a)(1)(A) dismissal—which purported to dismiss all unresolved claims—was ineffective and thus did not produce a final, appealable decision.
New Essay on the Finality Trap
The courts of appeals have created an asinine finality trap that they need to get rid of. The trap also makes me wonder whether we need to rethink finality.
The Finality of Without-Prejudice Dismissals That Are Silent on Leave to Amend
The en banc Fourth Circuit held that if the district court says nothing about leave to amend, a without-prejudice dismissal is a final, appealable decision.