Appeal Deadline in Consolidated Bankruptcy Cases: Supreme Court Adopts Minority View (Hall v. Hall)

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Consolidated things — Chihuly

By:  Donald L. Swanson

A new, and unanimous, decision from the U.S. Supreme Court is Hall v. Hall, Case No. 16-1150 (Decided March 27, 2018).

A first read of this opinion seems like a, “What’s the big deal here?” The opinion:

Is about a technical issue of appeal procedure;

Reaches back, for historical authority, to the enactment of a statute in 1813 and cites its own opinion from 2015 reaching a similar result; and

Deals with a situation that’s not very common—a final ruling on one, but not all, actions consolidated under Fed.R.Civ.P. 42(a).

What’s the big deal? Here’s the big deal:

(i) the Hall v. Hall decision adopts a minority view, held by only two circuits, requiring immediate appeal; while

(ii) nearly all other circuits hold some variation of the view that immediate appeal is not required.

So . . . if an attorney in one of the majority circuits did not appeal a ruling in reliance on the majority view, is that attorney’s client now out-of-luck on appeal? And if so, is the attorney now subject to a malpractice claim?

The Hall v. Hall Question

The Hall v Hall decision deals with this procedural question under Fed.R.Civ.P. 42(a) [Footnote 1]:

When does the time-for-appeal start running after entry of judgment on one, but not all, actions previously consolidated under Fed.R.Civ.P. 42(a)?

–Applicability to Bankruptcy Actions

The Hall v Hall decision applies to adversary proceedings and contested matters in bankruptcy, because Fed.R.Civ.P. 42(a) is explicitly incorporated into bankruptcy by reference in Fed.R.Bankr.P. 7042 & 9014(b).

Four-Way Circuit Split

The Petition for Writ of Certiorari in Hall v. Hall says that “every single circuit has weighed in” on the question. And it describes a four-way split among the circuit courts of appeals as follows.

1. Minority View—Requiring Immediate Appeal:

–The First and Sixth Circuits “apply a bright line rule—the dismissal of one of several consolidated cases is immediately appealable as of right.”

2. Minority Views—Allowing Deferred Appeal:

a. The Ninth and Tenth Circuits apply “the exact opposite bright line rule—the dismissal of one of several consolidated cases is not immediately appealable as of right”;

b. The Second Circuit applies “a bright-but-fuzzy line rule”—a “near-per se presumption that the judgment is not appealable” that can “only be overcome in highly unusual circumstances”; and

c. The Third, Fourth, Fifth, Seventh, Eight, Eleventh and D.C. Circuits “eschew a bright line in favor of a fuzzy line approach”—if consolidated “for all purposes,” there’s a “presumption against allowing an appeal of right”; otherwise, “courts apply a case-by-case approach that will likely permit an appeal.”

Simplified Hall v. Hall Facts

Mom Hall is aging. Brother Hall has been taking care of her. Mom and Brother have a falling-out, and Mom goes to live with Sister Hall. Mom sues brother, then dies. Sister takes up the cause, both individually and as Mom’s Trustee. Brother sues Sister individually.

Trial Court Developments

Two lawsuits are now pending in the same court:

(i) Sister (as Mom’s Trustee) v. Brother, and
(ii) Brother v. Sister (individually).

The trial court consolidates the two cases under Fed.R.Civ.P. 42(a) and conducts one jury trial on the consolidated cases.

The jury’s verdict goes all-in for Brother, rejecting Sister’s claims entirely and awarding $2.0 million damages to Brother against Sister.

Then, the trial court sets Brother’s $2.0 million judgment aside, requiring a retrial. But the trial court leaves the verdict denying Sister’s claims undisturbed.

The Appeal

Sister appeals the verdict rejecting her claims against Brother, and Brother moves to dismiss the appeal as premature. He argues that the verdict on Sister’s claims is not a final judgment, appealable as of right, because his consolidated claims against Sister must be retried and, therefore, remain unresolved.

The Third Circuit agrees with Brother and dismisses the appeal. Whereupon, Sister files a Petition for Writ of Certiorari with the U.S. Supreme Court.

The U.S. Supreme Court grants the Petition, hears the case, and reverses.

Supreme Court Opinion

The Supreme Court adopts the First and Sixth Circuit approach: the final resolution of one of several consolidated cases is immediately appealable as of right, regardless of the status of the other consolidated cases.

Here is its rationale:

Absent the Rule 42(a) consolidation, Sister would have an absolute right to appeal; and

The word “consolidate,” in Rule 42(a) has a long “legal lineage” demonstrating that a case “retains its independent character” for appeal purposes, upon final resolution, “regardless of any ongoing proceedings” in cases consolidated with it;

Practical Effect

I’d hate to be one of the attorneys representing a party in the Second, Third, Fourth, Fifth, Seventh, Eighth, Ninth, Tenth, Eleventh or D.C. Circuits who, in reliance on prior rulings from those circuit courts, withheld an appeal from a ruling against his/her client in a consolidated case.

Yikes! Such attorneys have probably been discussing, with their partners and risk-management counsel, whether they should be contacting their malpractice carrier.

Here’s guessing they’ll be deciding that they are ok, because the no-appeal decision was based upon controlling legal authority; and

Surely, there will be some grace on allowing appeals in the wake of the Supreme Court’s Hall v. Hall ruling?! But their client might be out-of-luck.

So, the upshot for attorneys in such cases will likely be this:

They are probably safe on the malpractice claims; but

Their clients are probably screwed?!

Conclusion

It’s great that the Supreme Court gets this circuit-split issue resolved! And the result seems to be clean and easily-applied.

The transition, however, from circuit split to the uniform rule could have negative fallout for the parties, and their attorneys, who are caught in the switch.

Hopefully, there will be some type of relief—and grace—for them in the transition to the new rule.

Footnote 1: Fed.R.Civ.P. 42(a) provides:

“a) CONSOLIDATION. If actions before the court involve a common question of law or fact, the court may:
(1) join for hearing or trial any or all matters at issue in the actions;
(2) consolidate the actions; or
(3) issue any other orders to avoid unnecessary cost or delay.”

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