American States Ins. Co. v. Dastar Corp.

• Decision Date: 22 January 2003
• Docket Number: No. 01-35412.,01-35412.
• Parties: AMERICAN STATES INSURANCE COMPANY, and American Economy Insurance Company, Plaintiffs-Appellees, v. DASTAR CORPORATION, an Oregon corporation, Entertainment Distributing, an Oregon corporation, and Marathon Music & Video, an Oregon corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

318 F.3d 881

AMERICAN STATES INSURANCE COMPANY, and American Economy Insurance Company, Plaintiffs-Appellees, v. DASTAR CORPORATION, an Oregon corporation, Entertainment Distributing, an Oregon corporation, and Marathon Music & Video, an Oregon corporation, Defendants-Appellants.

No. 01-35412.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 8, 2002.

Filed January 22, 2003.

COPYRIGHT MATERIAL OMITTED

David A. Gerber, D. Gerber Law Offices, Oxnard, CA, for defendants-appellants Dastar Corporation, Entertainment Distributing, and Marathon Music & Video.

Lisa E. Lear & Beth R. Skillern, Bullivant, Houser, Baily PC, Portland, OR, for plaintiffs-appellees American States Insurance Company and American Economy Insurance Company.

Appeal from the United States District Court for the District of Oregon; Michael R. Hogan, District Judge, Presiding. D.C. No. CV-00-06058-HO.

Before FERGUSON, W. FLETCHER, Circuit Judges, and KING,^* District Judge.

OPINION

KING, District Judge.

Dastar Corporation, Entertainment Distributing, and Marathon Music & Video (collectively "Dastar") appeal the district court's grant of partial summary judgment in favor of American States Insurance Company and American Economy Insurance Company (collectively "American") on the sole issue of whether American owed Dastar a duty to defend in a separate action. Because the parties have engaged in manipulation to manufacture appellate jurisdiction after the district court's grant of partial summary judgment, we DISMISS the appeal for lack of appellate jurisdiction.

I. BACKGROUND

Dastar was sued by Twentieth Century Fox Film Corp, SFM Entertainment and New Line Home Video, Inc. (collectively "Claimants") for copyright infringement, violation of the Lanham Act, and for violations of California Business and Professions Code section 17200. On May 12, 1999, Dastar tendered the claim to American as "advertising injuries" covered by insurance policies issued by American. On June 30, 1999, American denied Dastar's tender because it concluded that the Claimants' First Amended Complaint did not allege "advertising injuries" covered by the policies.

On March 7, 2000, American filed a complaint in the United States District Court for the District of Oregon, seeking a declaration on the duties to defend and to indemnify. Dastar answered the complaint and filed a counterclaim alleging breach of the duties to defend and to indemnify. On May 24, 2000, Dastar moved for partial summary judgment solely on the duty to defend. On June 6, 2000, American filed a cross-motion on the same issue. Neither summary judgment motion addressed the duty to indemnify. On July 27, 2000, the district court granted partial summary judgment in American's favor.

After the district court's order, the parties lodged a stipulation permitting Dastar to file an amended counterclaim, which the district court approved. On March 2, 2001, Dastar filed its amended answer and counterclaim, eliminating its counterclaims on the duty to indemnify. On March 20, 2001, the parties lodged a stipulation to dismiss without prejudice American's declaratory relief claim on the duty to indemnify. On March 27, 2001, the district court approved the stipulation dismissing American's indemnity claim, and issued a Declaratory Judgment. On April 13, 2001, Dastar filed its Notice of Appeal.

II. ANALYSIS

Parties may only appeal "final decisions of the district courts." 28 U.S.C. § 1291. Final decisions "`end[] the litigation on the merits and leave[] nothing for the court to do but execute the judgment.'" Dannenberg v. Software Toolworks, Inc., 16 F.3d 1073, 1074 (9th Cir. 1994) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978)). The final judgment rule promotes judicial efficiency, avoids multiplicity of litigation and minimizes delay by "`forbid[ding] piecemeal disposition on appeal of what for practical purposes is a single controversy[.]'" Dannenberg, 16 F.3d at 1074 (quoting Cobbledick v. United States, 309 U.S. 323, 325, 60 S.Ct. 540, 84 L.Ed. 783 (1940)).

An order granting partial summary judgment is usually not an appealable final order under 28 U.S.C. § 1291 because it does not dispose of all of the claims. Cheng v. Comm'r, 878 F.2d 306, 310 (9th Cir.1989). However, under a pragmatic approach, we consider events subsequent to non-final orders to determine whether they create sufficient finality. Dannenberg, 16 F.3d at 1075 ("[J]udgments whose finality would normally depend upon a Rule 54(b) certificate may be treated as final and appealable under § 1291 if remaining claims subsequently have been finalized."). As we recently explained,

when a party that has suffered an adverse partial judgment subsequently dismisses remaining claims without prejudice with the approval of the district court, and the record reveals no evidence of intent to manipulate our appellate jurisdiction, the judgment entered after the district court grants the motion to dismiss is final and appealable under 28 U.S.C. § 1291.

James v. Price Stern Sloan, Inc., 283 F.3d 1064, 1070 (9th Cir.2002).

A significant concern in assessing finality is whether the parties have attempted to manipulate our appellate jurisdiction. See James, 283 F.3d at 1066 ("We have always regarded evidence of such manipulation as the necessary condition for disallowing an appeal where a party dismissed its claims without prejudice."); see also Dannenberg, 16 F.3d at 1076. A party may not engage in manipulation either to create appellate jurisdiction or prevent it. Compare Cheng v. Comm'r, 878 F.2d 306 (9th Cir.1989) (rejecting parties' attempt to create appellate jurisdiction by manipulation) with Local Motion v. Niescher, 105 F.3d 1278, 1278 (9th Cir. 1997) (rejecting prevailing party's attempt to avoid appellate jurisdiction by dismissing remaining claims without prejudice to create appearance of non-finality).

Manipulation of jurisdiction has arisen in several different contexts. In Huey v. Teledyne, 608 F.2d 1234 (9th Cir.1979), and Ash v. Cvetkov, 739 F.2d 493 (9th Cir. 1984), the parties attempted to create appellate jurisdiction over interlocutory orders by provoking the district court to dismiss their actions for failure to prosecute. See 608 F.2d at 1239, 739 F.2d at 498. The parties' acts were objectionable because they resulted in piecemeal litigation, rewarded dilatory practices, and undermined the district court's ability to dispose of cases in an orderly and expeditious manner. Id.

Agreements to dismiss claims without prejudice also suggest manipulation. In Cheng, the parties stipulated that the plaintiff, who lost a partial summary judgment motion, would dismiss his remaining claims. The stipulation permitted the plaintiff to present additional evidence and arguments to the district court on the dismissed issues if the decision were reversed on appeal. Cheng, 878 F.2d at 309. We held that the stipulation demonstrated manipulation because: (1) the plaintiff's ability to resurrect the claims if he prevailed on appeal meant that the district court had not truly disposed of all the claims; (2) deciding the appeal in stages could result in unnecessary decisions that might become moot upon further litigation in the district court; and (3) a party with "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 ... the court has not yet considered." Id. at 310-11.

Manipulation is also apparent when the parties agree to waive the statute of limitations for dismissed claims. See Dannenberg v. Software Toolworks, Inc., 16 F.3d 1073, 1074 (9th Cir.1994). An agreement to waive the statute of limitations and remove potential barriers from refiling the claims is manipulative because "litigants should not be able to avoid the final judgment rule without fully relinquishing the ability to further litigate unresolved claims [.]" Id. at 1077.

In this case, both parties have attempted to create appellate jurisdiction through manipulation. First, the record shows that the parties discussed their attempts to create appellate jurisdiction. A joint status report stated that they "agreed to allow judgment to be entered based on the summary judgment rulings by the Court so the duty to defend issue[could] be appealed." Additionally, correspondence between the parties indicates that they attempted to structure their stipulations to create jurisdiction.¹

Second, the fact that the parties dismissed the remaining claims in two steps also reveals intent to manipulate jurisdiction. Some cases before James used language that could be read to suggest that a losing party, but not a winning one, is prohibited from dismissing remaining claims without prejudice to create finality. See, e.g., Local Motion, 105 F.3d at 1279 ("a losing party may not `manufacture finality' by dismissing his or her remaining claims without prejudice.") (emphasis in original); United Nat'l Ins. Co. v. R & D Latex Corp., 141 F.3d 916, 918 n. 1 (9th Cir.1998) ("Here, Aetna, a prevailing party, dismissed its remaining claim in an effort to facilitate an appeal by Mydrin. This is not manipulation of the appellate process.").² But we do not read case law before James to create such a distinction. Those cases focused on whether there was manipulation to manufacture jurisdiction, not whether the prevailing or the losing party dismissed the remaining claims. Indeed, in Local Motion, we specifically declined to permit a winning party to thwart jurisdiction by dismissing the remaining claims without prejudice. See 105 F.3d at 1279.

The language in cases prior to James reveals the parties' attempt to manipulate jurisdiction in light of what they apparently thought was the law before James. Seizing upon the distinction between dismissal by a prevailing versus a losing party, Dastar and American attempted to avoid the appearance that the "losing" party...