Dannenberg v. Software Toolworks Inc., 92-16718

• Decision Date: 18 February 1994
• Docket Number: No. 92-16718,92-16718
• Parties: Fed. Sec. L. Rep. P 98,078, 28 Fed.R.Serv.3d 128 Richard B. DANNENBERG; Mindy Blitz; Kenneth Homer Fleisher; Steven G. Cooperman; Nathaniel Orme; Ervin H. Fishman, et al., Plaintiffs-Appellants, v. The SOFTWARE TOOLWORKS INC.; Leslie Crane; Elizabeth M. Barker; Deloitte & Touche, et al.; PaineWebber Incorporated; Montgomery Securities, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1073

16 F.3d 1073

Fed. Sec. L. Rep. P 98,078, 28 Fed.R.Serv.3d 128

Richard B. DANNENBERG; Mindy Blitz; Kenneth Homer

Fleisher; Steven G. Cooperman; Nathaniel Orme;

Ervin H. Fishman, et al., Plaintiffs-Appellants, v. The SOFTWARE TOOLWORKS INC.; Leslie Crane; Elizabeth M.

Barker; Deloitte & Touche, et al.; PaineWebber

Incorporated; Montgomery Securities,

Defendants-Appellees.

No. 92-16718.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 13, 1993.

Decided Feb. 18, 1994.

Leonard B. Simon and Alan Schulman, Milberg Weiss Bershad Spechthrie & Lerach, San Diego, California; Sherrie R. Savett, Berger & Montague, Philadelphia, Pennsylvania; Ronald Litowitz, Bernstein Litowitz Berger & Gorssmann, New York, New York, for the plaintiffs-appellants.

Leslie G. Landau, McCutchen, Doyle, Brown & Enersen, San Francisco, California, for defendant-appellee Deloitte & Touche.

Boris Feldman, Wilson, Sonsini, Goodrich & Rosati, Palo Alto, California, for defendants-appellees Montgomery Securities and PaineWebber.

William F. Alderman, Orrick, Herrington & Sutcliffe, San Francisco, California, for amicus curiae.

Appeal from the United States District Court for the Northern District of California.

Before: LAY, ^* HALL, and THOMPSON, Circuit Judges.

CYNTHIA HOLCOMB HALL, Circuit Judge:

The class-action plaintiffs in the securities litigation involving Software Toolworks, Inc. appeal the district court's partial summary judgment in favor of defendant auditors Deloitte & Touche ("Auditors") and defendant underwriters Montgomery Securities and PaineWebber, Inc. ("Underwriters"). Because the plaintiffs failed to obtain Rule 54(b) certification to appeal the district court's nonfinal order, we dismiss for lack of jurisdiction.

I.

In October 1990, the plaintiffs filed a class action against the Auditors and Underwriters for alleged violations of federal securities laws. In March 1992, the district court granted summary judgment in favor of the Underwriters on all claims and in favor of the Auditors on every claim other than one cause of action under Sec. 11 of the Securities Act of 1933. See In re Software Toolworks, Inc. Sec. Litigation, 789 F.Supp. 1489 (N.D.Cal.1992). Following this partial summary judgment order, the plaintiffs stipulated with the Auditors to dismiss the remaining Sec. 11 claim on the following terms:

1. Plaintiffs agree to dismiss their remaining claim against Deloitte under Section 11 of the Securities Act of 1933 without prejudice.

2. Upon the dismissal of their Section 11 claim against Deloitte, plaintiffs may appeal the court's [partial summary judgment] Order.... In the event that any portion of the Order which grants Deloitte summary judgment on plaintiffs' [other] claims ... is reversed on appeal, plaintiffs may refile any portion of their Section 11 claim as to which summary adjudication has not been entered in Deloitte's favor, or as to which summary adjudication in Deloitte's favor has been reversed, within 30 days of the date such reversing decision becomes final, without objection from Deloitte. Deloitte waives any statute of limitations or other time-related defense to plaintiffs refiling their Section 11 claim within such 30-day period. In the event that the partial summary judgment on plaintiffs' [other] claims against Deloitte is affirmed in its entirety by the Ninth Circuit or Supreme Court decision, plaintiffs' Section 11 claim against Deloitte shall be deemed dismissed with prejudice as of the date such decision becomes final.

The district court approved the stipulation and the plaintiffs subsequently filed this appeal pursuant to 28 U.S.C. Sec. 1291, which accords appellate jurisdiction over "final decisions." The plaintiffs neither sought nor obtained a judgment under Federal Rule of Civil Procedure 54(b), pursuant to which district courts may issue final judgments as to fewer than all claims or parties "upon an express determination that there is no just reason for delay."

The Underwriters have moved to dismiss the appeal for lack of jurisdiction, arguing that the stipulation could not transform the district court's nonfinal, nonappealable order into a final, appealable order. We agree. ¹

II.

Under the final judgment rule embodied in 28 U.S.C. Sec. 1291, parties may appeal only the "final decisions of the district courts." A final judgment under Sec. 1291 is "a decision by the District Court that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454, 2457, 57 L.Ed.2d 351 (1978) (internal quotation omitted). By requiring parties to "raise all claims of error in a single appeal following final judgment on the merits," Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374, 101 S.Ct. 669, 673, 66 L.Ed.2d 571 (1981), Sec. 1291 "forbid[s] piecemeal disposition on appeal of what for practical purposes is a single controversy," Cobbledick v. United States, 309 U.S. 323, 325, 60 S.Ct. 540, 541, 84 L.Ed. 783 (1940).

"It is axiomatic that orders granting partial summary judgment, because they do not dispose of all claims, are not final appealable orders under section 1291." Cheng v. Commissioner, 878 F.2d 306, 309 (9th Cir.1989). See, e.g., Seattle Audubon Soc'y v Espy, 998 F.2d 699, 705 (9th Cir.1993). As a result, parties ordinarily must obtain Rule 54(b) certification in order to appeal partial summary judgments. E.g., Sierra Club v. DOT, 948 F.2d 568, 571-72 (9th Cir.1991). We do, however, take a pragmatic approach to finality in situations where events subsequent to a nonfinal order fulfill the purposes of the final judgment rule. Specifically, "judgments whose finality would normally depend upon a Rule 54(b) certificate may be treated as final [and appealable under Sec. 1291] if remaining claims subsequently have [ ] been finalized." Baker v. Limber, 647 F.2d 912, 916 (9th Cir.1981). E.g., Unioil, Inc. v. E.F. Hutton & Co., 809 F.2d 548, 554 (9th Cir.1986), cert. denied, 484 U.S. 822, 108 S.Ct. 83, 98 L.Ed.2d 45 (1987); Anderson v. Allstate Ins. Co., 630 F.2d 677, 680-81 (9th Cir.1980).

Here, the plaintiffs never obtained Rule 54(b) certification. We therefore have jurisdiction over their appeal of the district court's partial summary judgment only if the dismissal stipulation "finalized" the district court order. We conclude that it did not.

A.

In Cheng v. Commissioner, 878 F.2d 306 (9th Cir.1989), we dismissed an appeal for lack of jurisdiction on virtually indistinguishable facts. In that case, after the Tax Court granted partial summary judgment for the Commissioner of Internal Revenue on some, but not all, of the disallowed deductions challenged by the petitioner, "the parties entered into a stipulation and order to permit the entry of a appealable final order." Id. at 308. The terms and effect of that stipulation are very similar to the terms and effect of the agreement here:

Petitioner wishes to appeal the Court's order granting Respondent's motion for partial summary judgment. The parties recognize that in the event that the Court's motion for partial summary judgment is reversed on appeal and the case remanded to the Tax Court the remaining issues may have to be tried before the Court. However, in order to permit the entry of a final appealable decision at this time and without in any way impairing the parties ability to litigate the remaining issues, the parties hereby stipulate that:

[A final order] ... may be entered by the Court upon the stipulation that Petitioner is not conceding the remaining issues and should a decision be entered in favor of Petitioner on appeal and the case remanded to the Court, Petitioner will, on remand, be permitted to present [his other claims for deductions].

Id. Pursuant to this stipulation, the Tax Court "enter[ed] a decision in the full amount of the deficiencies asserted by the Commissioner" (i.e., a decision against the petitioner on all the claimed deductions) but allowed the petitioner to maintain "the right to resurrect the issues waived ... should the case be reversed." Id. at 308-09.

We found the stipulation insufficient to convert the partial summary judgment into a final order:

[A]n order must conclusively terminate the litigation in order to be considered final; an order that may terminate the proceeding is insufficient.... [T]he requirement that all claims of error be raised in a single appeal is not satisfied if there is a possibility that more than one appeal will be filed. Treating an order that has the potential of leading to multiple appeals as final would be inconsistent with Congress's policy disfavoring piecemeal appellate review....

The Tax Court's order in this case, as a result of the parties' stipulation, does not conclusively end the litigation on the merits; review of the order will result in piecemeal review were we to reverse. Were we to entertain this appeal and reverse the Tax Court on the issue presently before us, it is not at all unlikely that the party that loses below would file an appeal on the waived issues.

Id. at 310.

To reach this conclusion, we noted that an exercise of jurisdiction over partial summary judgments might require "repeated refamiliarization with the case" in the likely event of a subsequent appeal, result in resolution of "an issue on appeal unnecessarily," and "undermine one of the primary purposes underlying the final judgment rule--the efficient use of judicial resources." Id. (internal quotation omitted). We also disapproved of the parties' manipulation of the appellate process: "A plaintiff who has alleged several separate claims could conceivably appeal as many times as he has claims if he is willing to stipulate to the dismissal of the claims (contingent upon the affirmance of the lower court's judgment) the court has not yet considered." Id. at 311. Noting that the petitioner "could easily have avoided the finality...