Sunday, January 26, 2014

Collateral for Finality: U.S. Supreme Court Clarifies Law in the 4th Circuit for Time to Appeal

On January 15, 2014 in Ray Haluch Gravel Co. v. Central Pension Fund, the U.S. Supreme Court ruled that a pending claim for attorney's fees based upon a statute, contract, or both, does not prevent a final judgment on the merits for purposes of appeal.  Haluch overrules the 4th Circuit opinion Carolina Power and Light v. Dynegy Marketing.

Background


28 U.S.C. § 1291 gives federal courts of appeal jurisdiction from "final decisions" of district courts.  Typically, a decision on the merits is a "final decision" even if the attorney's fees remain to be determined.  Budinich v. Becton Dickinson & Co. 

In the 4th Circuit prior to Haluch, the rule in Carolina Power and Light distinguished Budinich by providing that "a district court decision that leaves unresolved a claim for attorneys fees that are sought as an element of damages under the substantive law is not a final decision within the meaning of 28 U.S.C. § 1291."  Broad brush, if the question of attorney's fees is part of the underlying litigation and has not been resolved ("part of the merits"), then the time for appeal has not yet begun to run.

Likewise, the 1st Circuit Court of Appeals issued a similar ruling (from which the Supreme Court granted certiorari), and the 11th, 3rd and 8th Circuit Courts of Appeal were also in the "not a final decision" camp.  On the other hand, the 2nd, 5th, 7th, and 9th Circuit Courts of Appeal had ruled on the other side of the split. 

The Decision

 

Justice Kennedy, writing for a unanimous Court, concluded that Budinich simply did not allow any distinction between attorney's fees that are "part of the merits" and those that are not.  On the contrary, "the issue of attorney's fees was still collateral for finality purposes under Section 1291"
even if those fees were considered part of the merits judgment.

The necessity to determine whether an unresolved issue of attorney's fees is considered a part of the merits affecting the time for appeal (and the jurisdiction of the court of appeals) undercuts the "operational consistency and predictability" of the Budinich rule.

Finally, to the extent a request for attorney's fees proceeding separately from a judgment on the merits may create "piecemeal litigation," the Federal Rules of Civil Procedure addresses that concern.  Under Rule 58(e), if a timely motion for attorney's fees is made under Rule 54(d)(2), then the court may rule (before a notice of appeal is filed) that the motion operates like a Rule 59 motion and delays the running of the time to appeal.

The Takeaway

 

A final judgment starts the clock for filing a notice of appeal unless a timely motion for attorney's fees is filed and the court issues an order extending the time for appeal accordingly.