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Docket Number

No. 79-3784.

Attorney(S)

Anthony N. Del Rosso, Mineola, N.Y., for plaintiffs-appellants. Ronald P. Teevan, Clearwater, Fla., for Forrest B. Strother. James E. Thompson, Tampa, Fla., for Skyway Development Corp. Sam Carbonaro, pro se. D. Dean Barnard, pro se. Antinori Thury, Paul Antinori, Jr., Tampa, Fla., for Danzig, et al., Tiona, Bay Engineering, Inc. and 1st Realty Corp. of Tampa. De la Parte Butler, Richard A. Gilbert, Tampa, Fla., for Byington and Sutton. Theodore Raulerson, pro se.

Judges

James Clinkscales Hill

Acts

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Smart Summary

Pettinelli et al. v. Danzig et al., No. 79-3784 (5th Cir. May 15, 1981)

Factual and Procedural Background

Plaintiffs filed a shareholders' derivative action on February 2, 1977, alleging numerous acts of corporate misconduct by defendants in connection with the management of Skyway Development Corporation ("Skyway"). The amended complaint was grounded on diversity jurisdiction under 28 U.S.C. § 1332(a) and pleaded eight causes of action charging fraud, conspiracy, and violations of fiduciary duties. Plaintiffs sought relief including an accounting, appointment of a receiver, rescission, specific performance, approximately $67 million in actual damages, and punitive damages. Skyway was named as a nominal defendant and filed a counterclaim seeking $100 million, alleging the plaintiffs' suit was a spurious lawsuit intended to destroy the corporation.

On October 4, 1979, the United States District Court for the Middle District of Florida granted summary judgment as to certain issues and parties. The district court's grant relied substantially on a 1974 release agreement between members of Skyway's board and the plaintiffs. The district court granted full summary judgment to five defendants and partial summary judgment to three others. Plaintiffs appealed from that order to the Fifth Circuit without obtaining from the district court an express Rule 54(b) determination (i.e., an express determination and direction that there was no just reason for delay) nor seeking certification for interlocutory appeal under 28 U.S.C. § 1292(b). The Fifth Circuit raised, sua sponte, the question whether a final appealable order existed and requested the parties to brief the jurisdictional question. The court concluded it lacked jurisdiction and dismissed the appeal.

Legal Issues Presented

Whether the Court of Appeals had jurisdiction under 28 U.S.C. § 1291 (the final judgment rule) when the district court's order granted full summary judgment to some defendants and partial summary judgment to others, but did not contain the explicit Rule 54(b) findings and directions.
Whether an express Rule 54(b) determination and direction by the district court is required to make an order disposing of fewer than all claims or parties final and appealable.
Whether 28 U.S.C. § 1292(a)(1), providing appellate jurisdiction over certain interlocutory orders involving injunctions, could be invoked because the district court's grant had the effect of denying rescission of a release agreement (i.e., whether rescission can be treated as an injunction for purposes of § 1292(a)(1)).

Arguments of the Parties

Appellants' (Plaintiffs') Arguments

They asserted appellate jurisdiction under 28 U.S.C. § 1291 in conjunction with Fed.R.Civ.P. 54(b), arguing that an "express determination" by the district court pursuant to Rule 54(b) was unnecessary. They contended that the district court's intent to make its grant final sufficed.
They alternatively asserted jurisdiction under 28 U.S.C. § 1292(a)(1), claiming that because the district court's grant operated to deny rescission of the release agreement, the court had effectively refused to grant an injunction and thus the order fell within § 1292(a)(1)'s interlocutory injunction jurisdiction.

The opinion does not contain a detailed account of any appellees' arguments opposing jurisdiction beyond references to controlling procedural requirements and precedent cited by the court.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Mansfield, Coldwater Lake Michigan Ry. v. Swan, 111 U.S. 379 (1884)	Principle that courts must inquire into their jurisdiction and answer that question for themselves.	Used to support the proposition that jurisdiction is an "open" question at all stages and that the appellate court must determine sua sponte whether it has a final appealable order.
City of Kenosha v. Bruno, 412 U.S. 507 (1973)	Authority supporting the court's duty to determine jurisdiction.	Cited as additional authority for the court's obligation to examine jurisdiction.
Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149 (1908)	General principle of federal jurisdiction (cited among authorities about jurisdictional inquiry).	Listed among cases emphasizing the court's duty to determine jurisdiction.
Cameron v. Hodges, 127 U.S. 322 (1888)	Another historical authority on jurisdictional inquiry.	Cited to reinforce the principle that courts must assure jurisdiction exists.
Capron v. Van Noorden, 6 U.S. (2 Cranch) 126 (1804)	Early authority cited on jurisdictional questions.	Included among classical authorities establishing the duty to determine jurisdiction.
Oswalt v. Scripto, Inc., 616 F.2d 191 (5th Cir. 1980)	Fifth Circuit authority on jurisdictional inquiry.	Cited as a Circuit precedent supporting the court's jurisdictional review.
State of Alabama ex rel. Baxley v. Woody, 473 F.2d 10 (5th Cir. 1973)	Another Fifth Circuit decision on jurisdictional matters.	Invoked to support the proposition that jurisdiction must be established by the party asserting it.
Strozier v. Gen'l Motors Corp., 584 F.2d 755 (5th Cir. 1978)	Fifth Circuit case requiring a Rule 54(b) determination to sustain appellate review of summary judgment grants in multi-claim or multi-party cases.	Used to show that, in this Circuit, an express Rule 54(b) determination is required for appellate review of partial summary judgment.
Jones v. Menard, 559 F.2d 1282 (5th Cir. 1977)	Another Fifth Circuit decision cited on the need for Rule 54(b) determinations.	Cited as further Circuit precedent that supports the requirement of an express Rule 54(b) determination.
Melancon v. Ins. Co. of North America, 476 F.2d 594 (5th Cir. 1973)	Fifth Circuit authority addressing Rule 54(b) requirements in appellate review of summary judgment.	Referenced as part of Circuit authority requiring Rule 54(b) determinations.
Scott v. Board of Supervisors, 336 F.2d 557 (5th Cir. 1964)	Fifth Circuit precedent on the Rule 54(b) issue.	Listed among cases demonstrating Circuit practice requiring Rule 54(b) determinations for partial dispositions.
Sears, Roebuck & Co. v. Mackey, 351 U.S. 427 (1956)	Discusses historical practice and problems that arose when any dispositive action in multi-claim cases would commence the appeal period (leading to burdensome multiple appeals).	Used to explain the historical context and reason Rule 54(b) ameliorates the burden of piecemeal appeals.
Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1 (1980)	Cited regarding the applicability of Sears' logic to present Rule 54(b) situations.	Invoked to support the continued relevance of the reasoning underlying Sears.
Liberty Mutual Ins. Co. v. Wetzel, 424 U.S. 737 (1976)	Cited (n.3) in support of Sears' applicability and Rule 54(b) considerations.	Noted as further Supreme Court authority referenced in discussing finality and piecemeal appeals.
Cobbledick v. United States, 309 U.S. 323 (1940)	Principle that the final judgment rule aims to avoid piece-meal appeals.	Quoted to emphasize the policy against piecemeal appeals underlying 28 U.S.C. § 1291.
Switzerland Cheese Association, Inc. v. E. Horne's Market, Inc., 385 U.S. 23 (1966)	Authority cited by the court in rejecting the plaintiffs' § 1292(a)(1) argument.	Used to show that § 1292(a)(1) does not encompass the plaintiffs' claim that denial of rescission equates to a refusal to grant an injunction.

Court's Reasoning and Analysis

The court began by emphasizing the fundamental importance of determining jurisdiction at all stages and noted its duty to inquire sua sponte into appellate jurisdiction. The Clerk had previously asked counsel to brief the jurisdictional question, and the court considered the parties' responses.

The dispositive procedural facts, as the court viewed them, were that the district court had granted full summary judgment to five defendants and partial summary judgment to three others, thereby adjudicating fewer than all claims or parties. Such an order, the court explained, "had the effect of disposing of 'one or more but fewer than all of the claims or parties,' Fed.R.Civ.P. 54(b)," and therefore fell squarely within Rule 54(b)'s framework.

The court analyzed plaintiffs' first basis for jurisdiction — 28 U.S.C. § 1291 together with Fed.R.Civ.P. 54(b) — and rejected plaintiffs' contention that an "express determination" by the district court under Rule 54(b) was unnecessary. The court relied on the plain words of Rule 54(b), which require an express determination that there is no just reason for delay and an express direction for entry of judgment. The panel emphasized the mandatory nature of these requirements and quoted Rule 54(b)'s directive that, absent such an express determination and direction, an order adjudicating fewer than all claims or parties "shall not terminate the action" and is subject to revision until final judgment adjudicating all claims is entered. The court also invoked Fifth Circuit precedent requiring Rule 54(b) determinations to sustain appellate review of summary judgment grants (Strozier, Jones, Melancon, Scott).

The court further explained the policy rationale: historically permitting appeals from any dispositive action in multi-claim cases led to burdensome piecemeal appeals and prejudiced litigants; Rule 54(b) was promulgated, in part, to alleviate those harms. The court observed that accepting the plaintiffs' position would require later appellants to file multiple notices to preserve rights, counter to the remedial purpose of Rule 54(b).

Turning to plaintiffs' alternative jurisdictional claim under 28 U.S.C. § 1292(a)(1), the court rejected it as without merit. Plaintiffs argued that the district court's grant had the effect of denying rescission of the release agreement and therefore amounted to a refusal to grant an injunction. The court held that "injunction" and "rescission" are not synonymous and that plaintiffs could not convert a prayer for rescission into one for injunction to invoke § 1292(a)(1). The court cited Switzerland Cheese Association as authority in support of this rejection.

Given the absence of an express Rule 54(b) determination and the inapplicability of § 1292(a)(1), the court concluded it lacked jurisdiction to consider the merits of the appeal. The court therefore dismissed the appeal.

Holding and Implications

APPEAL DISMISSED FOR WANT OF JURISDICTION.

Implications and direct effects:

The Fifth Circuit concluded it did not have jurisdiction to review the district court's October 4, 1979 order because plaintiffs failed to obtain the explicit Rule 54(b) determination required to make a partial disposition final and appealable under 28 U.S.C. § 1291.
The court rejected plaintiffs' alternative contention that the order could be reviewed under 28 U.S.C. § 1292(a)(1) by treating denial of rescission as a denial of an injunction.
The direct effect on the parties is that the appeal by plaintiffs-appellants was dismissed for lack of jurisdiction; the panel did not address the merits of the summary judgment rulings.
The opinion does not announce or purport to establish any new substantive legal precedent beyond the application and reaffirmation of existing rules regarding appellate jurisdiction, Rule 54(b) requirements, and the limited scope of § 1292(a)(1).

Sources: Summary and quotations are drawn exclusively from the text of the provided Fifth Circuit opinion (May 15, 1981) in Pettinelli et al. v. Danzig et al., No. 79-3784.

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FRANK J. PETTINELLI ET AL., PLAINTIFFS-APPELLANTS, v. EDMUND R. DANZIG ET AL., DEFENDANTS-APPELLEES.

JAMES C. HILL, Circuit Judge:

Plaintiffs commenced this shareholders' derivative action on February 2, 1977, alleging numerous acts of corporate misconduct by defendants in connection with the management of Skyway Development Corporation [hereinafter Skyway]. Plaintiffs have appealed from an order of the district court granting full summary judgment to certain defendants and partial summary judgment to others. Because we determine that we are without jurisdiction to consider the merits of this appeal, we dismiss.

Plaintiffs' amended complaint, grounded jurisdictionally upon diversity of citizenship, 28 U.S.C. § 1332(a) (1976), alleges eight causes of action essentially charging defendants with fraud, conspiracy, and violations of fiduciary duties. The relief plaintiffs requested includes, inter alia, an accounting, appointment of a receiver, rescission, specific performance, some $67 million in actual damages, and an unspecified amount of punitive damages. Skyway, a nominal defendant, has counterclaimed to the tune of $100 million alleging, inter alia, that plaintiffs' action is a "spurious lawsuit" filed "for the purpose of destroying [the] corporation."

The United States District Court, Middle District of Florida, on October 4, 1979 granted summary judgment, see Fed.R.Civ.P. 56(d), as to certain issues and parties in the case. The grant of summary judgment focused in large measure upon a release agreement entered into in 1974 between various members of Skyway's board and plaintiffs. The scope of the grant was clear: three defendants were granted partial summary judgment and five others were granted full summary judgment. This action by the district court, then, clearly had the effect of disposing of "one or more but fewer than all of the claims or parties," Fed.R.Civ.P. 54(b), involved. From the order of the district court granting partial and full summary judgments, plaintiffs have attempted to appeal. They neither moved the district court to enter final judgment as to issues or parties they neither moved the district court to enter final judgment as to issues or parties they seek to bring before this Court, see Fed.R.Civ.P. 54(b), nor have they requested district court certification for interlocutory appeal, see 28 U.S.C. § 1292(b) (1976).

II.

A federal court's inquiry into its own jurisdiction to consider the merits of a case before it has been aptly characterized by commentators as "the first principle of federal jurisdiction." P. Bator, P. Mishkin, D. Shapiro H. Wechsler, Hart and Wechsler's The Federal Courts and the Federal System 835 (2d ed. 1973). So critical is this "first principle" to our constitutional government that federal jurisdiction is said to be an "open" question at all stages, trial and appellate, of an action. In fact, "[t]his question the court is bound to ask and answer for itself, even when not otherwise suggested . . .," Mansfield, Coldwater Lake Michigan Ry. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511, 28 L.Ed. 462 (1884), and we have done precisely that. See also City of Kenosha v. Bruno, 412 U.S. 507, 511, 93 S.Ct. 2222, 2225, 37 L.Ed.2d 109 (1973); Louisville Nashville Railroad Company v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed.2d 126 (1908); Cameron v. Hodges, 127 U.S. 322, 325-26, 8 S.Ct. 1154, 1155-1156, 32 L.Ed. 132 (1888); Mansfield, supra, 111 U.S. at 382, 4 S.Ct. at 511; Capron v. Van Noorden, 6 U.S. (2 Cranch) 126, 126, 2 L.Ed. 229 (1804); Oswalt v. Scripto, Inc., 616 F.2d 191, 192 (5th Cir. 1980); State of Alabama ex rel. Baxley v. Woody, 473 F.2d 10, 12-13 (5th Cir. 1973). In advance of oral argument we raised sua sponte the existence of a final appealable order and through the Clerk requested the parties to brief the issue. Our attention is properly directed to the arguments advanced by appellants in light of the irrefragable principle of federal practice placing "the burden . . . on the party claiming jurisdiction to demonstrate [it] exists." C. Wright, Handbook of the Law of the Federal Courts 17 (3d ed. 1976).

Letter from Gilbert F. Ganucheau to All Counsel of Record (March 4, 1981):

An initial review of the briefs in this case suggests some doubt that there is a final appealable judgment upon which jurisdiction of this court may be based. Counsel's attention is invited to 28 U.S.C. § 1291 and Rule 54(b), Federal Rules of Civil Procedure.

Counsel are directed to brief the question of jurisdiction of the appeal within ten (10) days of the receipt of this letter. A letter form of brief addressed to the Clerk will suffice.

Plaintiffs assert two bases of appellate jurisdiction, 28 U.S.C. § 1291 in tandem with Fed.R.Civ.P. 54(b), and 28 U.S.C. § 1292(a). In support of their first assertion, plaintiffs argue that there is no need for an "express determination" by the district court under Rule 54(b). Such a determination, they argue, is clerical in nature especially in light of the district court's "intent" to render his grant final. The very words of Rule 54(b) belie this bizarre assertion:

When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment.

Fed.R.Civ.P. 54(b) (emphasis added). Notwithstanding plaintiffs' attempt to ascribe to the district court a given intent, the Rule says nothing of intent and conclusively mandates a different understanding of the posture of such a case:

In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.

Id. (emphasis added). We feel obliged, before going further, to note the manifest irony of this argument. Rule 54(b) was promulgated, in part, to benefit litigants in plaintiffs' position. See Note, Appealability in the Federal Courts, 75 Harv.L.Rev. 351, 358 (1961). At one point in our legal history, any dispositive action by a federal district court in a multiple-party, multiple-claim scenario was thought to commence the appeal notice period as to the disposition ordered. Cf. Sears, Roebuck Company v. Mackey, 351 U.S. 427, 76 S.Ct. 895, 100 L.Ed. 1297 (1956). This burdened the claims of many a litigant beyond repair, for if he failed to notice appeal within the short time period, his appeal on that disposition was forever lost. Were we to permit plaintiffs' appeal today, we would be obliged to require subsequent appellants to file multiple notices in like cases in order to preserve their rights. That all of this difficulty has been avoided by Rule 54(b) is without doubt. See Sears, Roebuck Company v. Mackey, supra; 6 Moore's Federal Practice ¶¶ 54.27[2-2], [2.-3] (3d ed. 1976).

Plaintiffs further attention is directed to cases in this Circuit requiring Rule 54(b) determinations to sustain appellate review of summary judgment grants. Strozier v. Gen'l Motors Corp., 584 F.2d 755, 756 (5th Cir. 1978); Jones v. Menard, 559 F.2d 1282, 1284 n. 1 (5th Cir. 1977); Melancon v. Ins. Co. of North America, 476 F.2d 594, 595 (5th Cir. 1973); Scott v. Bd. of Supervisors, 336 F.2d 557, 558 (5th Cir. 1964).

Although Sears, Roebuck Co. v. Mackey, was decided under the 1946 language (effective 1948) of Rule 54(b), its logic is clearly applicable to the "multiple-claim" facet of present Rule 54(b). See Curtiss-Wright Corp. v. Gen'l Electr. Co., 446 U.S. 1, 100 S.Ct. 1460, 1465-66, 64 L.Ed.2d 1 (1980); Liberty Mutual Ins. Co. v. Wetzel, 424 U.S. 737, 743 n. 3, 96 S.Ct. 1202, 1206 n. 3, 47 L.Ed.2d 435 (1976).

Moreover, "it thus became prudent to take immediate appeals in all cases of doubtful appealability and the volume of appellate proceedings was undesirably increased." Sears, Roebuck Company v. Mackey, 351 U.S. 427, 434, 76 S.Ct. 895, 899, 100 L.Ed. 1297 (1956).

The final judgment rule, 28 U.S.C. § 1291 (1976), seeks to avoid rather than foster "piece-meal" appeals. Cobbledick v. United States, 309 U.S. 323, 325, 60 S.Ct. 540, 541, 84 L.Ed. 783 (1940).

Plaintiffs' second assertion, based upon 28 U.S.C. § 1292(a)(1), is clearly without merit. See Switzerland Cheese Association, Inc. v. E. Horne's Market, Inc., 385 U.S. 23, 87 S.Ct. 193, 17 L.Ed.2d 23 (1966). They claim that because the district court's grant has the effect of denying rescission of the release agreement, that court has refused to grant an injunction. The statute reads:

The courts of appeals shall have jurisdiction of appeals from: Interlocutory orders of the district courts of the United States . . . or of the judges thereof, granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions, except where a directed review may be had in the Supreme Court . . . .

28 U.S.C. § 1292(a)(1) (1976). "Injunction" and "rescission" are not synonymous. Plaintiffs can no more convert a prayer for rescission into one for injunction than they can convert a partial disposition into an appealable final judgment.

APPEAL DISMISSED FOR WANT OF JURISDICTION.

PETTINELLI v. DANZIG