The Week in Federal Appellate Jurisdiction: February 20–26, 2022

Last week saw a few cases of note. The Seventh Circuit held that an order requiring an insurance company to defend its insured was an appealable injunction. The Sixth Circuit limited a sovereign-immunity appeal to sovereign-immunity issues, refusing to address standing or municipal liability. The Sixth Circuit also split on the extent to which defendants raised arguments within the court’s jurisdiction in a qualified-immunity appeal.

• The Seventh Circuit on Duty-to-Defend Orders and Appealable Injunctions
• The Sixth Circuit on the Scope of Sovereign-Immunity Appeals
• The Sixth Circuit Split on a “Mixed” Qualified-Immunity Appeal

The Seventh Circuit on Duty-to-Defend Orders and Appealable Injunctions

In USA Gymnastics v. Liberty Insurance Underwriters, Inc., the Seventh Circuit held that an order directing an insurer to defend its insured was an appealable injunction.

USA Gymnastics stemmed from the hundreds of sexual assaults committed by Larry Nassar. Faced with numerous lawsuits and governmental investigations, USA Gymnastics sought financial help from Liberty Insurance Underwriters, Inc., with which USA Gymnastics had a liability-insurance policy. Liberty Insurance denied coverage, and USA Gymnastics sued. After USA Gymnastics entered bankruptcy, a district court (at the recommendation of the bankruptcy court) determined that Liberty Insurance had a duty to defend USA Gymnastics for most of the claims against it. Liberty Insurance appealed.

The Seventh Circuit held that the duty-to-defend order was an appealable injunction under 28 U.S.C. § 1292(a)(1). The order was not a formal injunction. But it had the practical effect of one. For one thing, the primary relief granted in the order was equitable: requiring Liberty Insurance to defend USA Gymnastics. For another, the relief granted was largely what USA Gymnastics sought on the merits when it sued Liberty Insurance. And the duty-to-defend order could cause irreparable harm:

Liberty is obligated to defend USAG going forward, requiring payment of an uncertain amount of defense costs and fees. If the order is incorrect, Liberty’s chance at recovery may be limited because USAG is bankrupt. For USAG, a nonprofit, the direction to Liberty to defend is injunctive because it prevents or remedies irreparable harm to USAG, the policyholder, which has fronted substantial legal fees and costs. A reversal on appeal would reimpose serious financial stress and uncertainty.

Finally, the order substantially altered the status quo, “directing the prospective duty to defend with undetermined fees and costs, and resulting in serious and perhaps irreparable harm warranting immediate review.”

USA Gymnastics v. Liberty Insurance Underwriters, Inc., 2022 WL 575720 (7th Cir. Feb. 25, 2022), available at the Seventh Circuit and Westlaw.

The Sixth Circuit on the Scope of Sovereign-Immunity Appeals

In Fox v. Saginaw County, the Sixth Circuit refused to address standing or municipal liability as part of a sovereign-immunity appeal.

Fox was a takings class action against several Michigan counties. The district court denied the counties’ request for sovereign immunity, and the counties appealed. In that appeal, the counties challenged the sovereign-immunity decision as well as the plaintiff’s standing to represent the class and whether the complaint stated a § 1983 municipal-liability claim against the counties.

The Sixth Circuit limited the appeal to the sovereign-immunity issues. Standing was not immediately appealable—despite being a prerequisite to federal jurisdiction—because the court of appeals could review standing in an appeal from a final judgment. And the court refused to extend pendent appellate jurisdiction over the municipal-liability claim. For two issues to be sufficiently intertwined and warrant the exercise of pendent appellate jurisdiction, “the resolution of the appealable issue [must] ‘necessarily and unavoidably’ decide[] the nonappealable issue.” And although the sovereign-immunity and municipal-liability issues were similar, the analyses were sufficiently different.

Fox v. Saginaw County, 2022 WL 523023 (6th Cir. Feb. 22, 2022), available at the Sixth Circuit and Westlaw.

The Sixth Circuit Split on a “Mixed” Qualified-Immunity Appeal

Finally, in Anderson v. Holmes, the Sixth Circuit split on whether defendants in a qualified-immunity appeal accepted the district court’s reading of the record for purposes of the appeal.

In qualified-immunity appeals from summary-judgment decisions, the court of appeals normally lacks jurisdiction to review the district court’s determination of what facts a reasonable jury could find. So defendants must take that version of events as given and argue that it does not amount to a violation of clearly established law.

In Anderson, the panel could not agree on what the defendants were arguing. The majority read the defendants’ brief to rest entirely on their own version of events, not those that the district court had determined a reasonable jury could find. The majority accordingly concluded that it lacked jurisdiction over the entirety of the appeal. Concurring, Judge Gilman read the defendants’ brief to alternatively argue that, even under district court’s reading of the record, they did not violate clearly established law. So in this “mixed” qualified-immunity appeal he would have separated the reviewable arguments from those over which the court lacked jurisdiction.

Thanks to Michael Solimine for sending this case to me.

Anderson v. Holmes, 2022 WL 577668 (6th Cir. Feb. 25, 2022), available at the Sixth Circuit and Westlaw.