Appellate Decisions

The Sixth Circuit on Manufactured Appeals and Rule 54(b)

An appeal was improperly manufactured by dismissing claims without prejudice, and the district court failed to explain its Rule 54(b) certification.

January 22, 2020

By Bryan Lammon

The courts of appeals occasionally struggle with appellate jurisdiction when parties dismiss some of their claims without prejudice. The issue comes up when a district court has resolved some of the claims in a multi-claim suit and parties try to transform that non-final decision into a final one by dismissing their remaining claims without prejudice. Courts hold that parties cannot manufacture an appeal this way. Parties instead must obtain a Rule 54(b) certification, which allows district courts to certify for immediate appeal a decision resolving some (but not all) claims in a multi-claim suit.

The Sixth Circuit yesterday rejected one of these manufactured appeals. In Novia Communications, LLC v. Weatherby, the plaintiff had tried to take a belt-and-suspenders approach to appellate jurisdiction, voluntarily dismissing its unresolved claims and securing a Rule 54(b) certification. But the Sixth Circuit held that neither action gave the court jurisdiction. The voluntary dismissal of three unresolved claims did not make the resolution of other claims final and appealable. And the Rule 54(b) certification was improper because it did not explain why an immediate appeal was warranted. Also of interest, the court went on to suggest that a Rule 54(b) certification might not be proper in any event due to the relationship between the resolved and unresolved claims.

The many claims in Novia Communications

The dispute in Novia Communications arose out of a failed asset-purchase agreement for a local television station. (Very local for my purposes, as it was Channel 48 in Toledo, Ohio.) The plaintiff brought several claims, of which only six are relevant to the present discussion: four breach-of-contract claims concerning the failed asset-purchase agreement and two torts claims (tortious interference and fraud). The district court granted summary judgment to the defendants on three of the four breach-of-contract claims. The district court then approved a consent judgment that entered (1) a stipulated dismissal on the fourth breach-of-contract claim and the two tort claims and (2) a Rule 54(b) certification for the three claims that were resolved at summary judgment. The plaintiff then appealed its loss on those three claims.

The Sixth Circuit dismisses the appeal

The Sixth Circuit held that it lacked jurisdiction for two reasons.

The improper manufactured appeal

First, and putting aside the Rule 54(b) certification for a moment, the district court’s decision was not a final one. Dismissals without prejudice preclude finality when a party reserves the option of refiling the dismissed claims in federal court regardless of the appeal’s outcome. We don’t want parties manufacturing what are essentially interlocutory appeals by voluntarily dismissing their outstanding claims without prejudice, appealing, and then refiling the voluntarily dismissed claims. That would be an end-run around the final-judgment rule and frustrate that rule’s purposes. And that is precisely what the plaintiff had done in Novia Communications. In fact, the plaintiff expressly reserved the right to reassert its dismissed claims after the appeal. So the voluntary dismissal did not secure appellate jurisdiction.

The improper Rule 54(b) certification

Second, the Rule 54(b) certification was ineffective. Again, Rule 54(b) allows district courts to certify for immediate appeal the resolution of some (but not all) claims in a multi-claim or multi-party suit. In Novia Communications, the order seemed to do that; the judge had signed the certification and said that there was no just reason for delay (which are normally magic words in the Rule 54(b) context). But the Sixth Circuit requires that district courts state their reasons for certifying an order under Rule 54(b). Granted, nothing in Rule 54(b) requires this reason-giving. The Novia Communications court was nevertheless bound by the Sixth Circuit’s caselaw on this matter. Because the district court gave no reasons for certifying its decision, the certification was improper and did not supply appellate jurisdiction.

The Sixth Circuit nevertheless said that the parties could try and fix this problem by obtaining a proper certification. And if they did, the court would reinstate the fully briefed and argued appeal.

But the Sixth Circuit also questioned the propriety of a Rule 54(b) certification. Certification is proper only when the district court has resolved a distinct claim. This ensures that the issues raised in the certified appeal are sufficiently separate from any that remain pending in the district court. And it was not clear that the certified claims—three breach-of-contract claims concerning the failed asset-purchase agreement—were sufficiently distinct from a claim that had been dismissed without prejudice—the fourth breach-of-contract claim concerning that agreement.

Novia Communications, LLC v. Weatherby, 2020 WL 289199 (6th Cir. Jan. 21, 2020), available at the Sixth Circuit and Westlaw.

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