Beckwith Machinery Co. v. Travelers Indem. Co., 86-3481

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Citation815 F.2d 286
Docket NumberNo. 86-3481,86-3481
Parties, 7 Fed.R.Serv.3d 1335 BECKWITH MACHINERY COMPANY, Appellee, v. TRAVELERS INDEMNITY COMPANY, Appellant.
Decision Date01 April 1987

William K. Herrington (argued), Herrington and Grater, Pittsburgh, Pa., for appellant.

Deborah P. Powell, Charles Weiss (argued), Thorp, Reed and Armstrong, Pittsburgh, Pa., for appellee.

Before GIBBONS, Chief Judge and SEITZ and GARTH, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge:

The procedural posture in which this case arises forces us to confront a heretofore undecided question of appellate jurisdiction for this circuit, namely, whether a district court's order awarding, but not yet quantifying, attorney's fees is a final order 1 from which an appeal may be taken when the fee award arises not as a collateral matter under a separate statutory provision, but instead results from the underlying cause of action (here a contract) which forms the basis of the dispute between the parties. Because we conclude that the attorney's fees in this case are an integral part of the contractual relief sought by Beckwith and such fees have yet to be determined, there is no final order. Thus, we will dismiss the appeal without reaching the merits of the dispute. 2

I.

The plaintiff-appellee, Beckwith Machinery Company (Beckwith) filed this diversity action against defendant-appellant Travelers Indemnity Company (Travelers) alleging a breach of an insurance contract when Travelers, the insurer, withdrew its defense of Beckwith in an underlying action. 3 The district court entered an order on July 11, 1986 granting Beckwith's motion for summary judgment and denying Travelers' motion for summary judgment. The district court entered a judgment on behalf of Beckwith in the amount of $100,000 plus interest from November 12, 1982 in order to reimburse Beckwith for its settlement payment made to Trumbull Corporation in the underlying action. Additionally, the district court awarded Beckwith the attorney's fees and costs incurred in its defense of the underlying action. Finally, the district court ordered that Beckwith was entitled to attorney's fees and costs for the trial of the instant breach of contract action. The district court has not yet quantified either of these attorney's fee awards. 638 F.Supp. 1179.

II.

The question of the finality of a district court's order disposing of the merits and ordering, but not quantifying, attorney's fees is one with which this court has wrestled for some time. 4 The question has been definitively settled with regard to cases involving unquantified attorney's fees when the award of fees is authorized by a separate statute as a collateral matter. For such cases, this court, resting on White v. New Hampshire Department of Employment Security, 455 U.S. 445, 102 S.Ct. 1162, 71 L.Ed.2d 325 (1982), has adopted the rule that an order deciding the merits of a case is final and therefore appealable separate and apart from, as well as prior to, an order quantifying the attorney's fees awarded under the authority of a separate statute. Halderman v. Pennhurst State School & Hospital, 673 F.2d 628, 643-44 (3d Cir.1982) (in banc) (sur petition for rehearing).

In White v. New Hampshire, the Supreme Court determined that a claim for attorney's fees under 42 U.S.C. Sec. 1988 "raised legal issues collateral to the main cause of action," White, 445 U.S. at 451, 102 S.Ct. at 1166, and such a request was not a motion to alter or amend the judgment under Rule 59(e) of the Federal Rules of Civil Procedure. The Court maintained that "[u]nlike other judicial relief, the attorney's fees allowed under Sec. 1988 are not compensation for the injury giving rise to an action." Id. at 452, 102 S.Ct. at 1166. Moreover the Court asserted that the awarding of attorney's fees under 42 U.S.C. Sec. 1988 "is uniquely separable from the cause of action to be proved at trial." Id.

This court has never addressed the question of whether the White holding was intended to apply not only to cases in which the attorney's fee question arises as a collateral matter under a separate statutory provision, but also to cases in which the fee award arises as an integral part of the merits of the dispute. We note at the outset that there is a split among the circuits on this question.

III.

The Second Circuit has recognized the collateral/integral distinction and held that "where attorney's fees are a contractually stipulated element of damages, a judgment is not final until the fees have been determined." F.H. Krear & Co. v. Nineteen Named Trustees, 776 F.2d 1563, 1564 (2d Cir.1985). White v. New Hampshire, supra, was considered "inapposite" because it concerned awards of attorney's fees pursuant to a separate statute rather than a contract. Id. ("White ... does not lead us to abandon our clear rule that contractually stipulated awards must be determined before a judgment is final."); see also Lewis v. S.L. & E., Inc., 746 F.2d 141, 143 (2d Cir.1984) (White distinguished; attorney's fees in shareholder derivative suit were "integral to a final judgment, not merely collateral to it"); Johnson v. University of Bridgeport, 629 F.2d 828 (2d Cir.1980); Union Tank Car Co. v. Isbrandtsen, 416 F.2d 96 (2d Cir.1969); Aetna Casualty & Surety Co. v. Giesow, 412 F.2d 468 (2d Cir.1969).

The Fifth Circuit has likewise recognized a distinction, and it has fashioned an approach that turns upon "the nature of the plaintiff's cause of action and the source of his entitlement to attorney's fees." Rodriguez v. Handy, 802 F.2d 817, 819 (5th Cir.1986). A fuller articulation of the Fifth Circuit test for finality appears in Holmes v. J. Ray McDermott & Co., 682 F.2d 1143 (5th Cir.1982), cert. denied, 459 U.S. 1107, 103 S.Ct. 732, 74 L.Ed.2d 956 (1983):

When attorney's fees are similar to costs ... or collateral to an action ... a lack of determination as to the amount does not preclude the issuance of a final, appealable judgment on the merits. When, however, the attorney's fees are an integral part of the merits of the case and the scope of relief, they cannot be characterized as costs or as collateral and their determination is a part of any final, appealable judgment.

Holmes, 682 F.2d at 1146.

The Fifth Circuit has applied the Holmes test in later cases declaring that an appellate court does not have jurisdiction before attorney's fees have been quantified. Oxford Production Credit Ass'n v. Duckworth, 689 F.2d 587 (5th Cir.1982) (under Mississippi law, attorney's fees provided for by the contract are integral to the merits and not collateral); Alcorn County v. U.S. Interstate Supplies, Inc., 731 F.2d 1160, 1165 (5th Cir.1984) (attorney's fees in a RICO action are integral to the merits because the RICO statute "both creates the plaintiff's cause of action and provides for an award of damages"); Todd Shipyards Corp. v. Auto Transportation, S.A., 763 F.2d 745, 751 (5th Cir.1985) (in an action for breach of implied warranties of workmanlike performance, "an award of attorney's fees cannot be regarded as collateral to the action but forms an integral part of the scope of relief"); Hooper v. FDIC, 785 F.2d 1228, 1232 (5th Cir.1986) (under Texas law, motions for attorney's fees sought under a note or contract are an integral part of the merits; appeal dismissed for want of appellate jurisdiction); Bilmar Drilling, Inc. v. IFG Leasing Co., 795 F.2d 1194 (5th Cir.1986) (under contract theory, attorney's fees and expenses are "not merely collateral to the merits," whereas motion under 28 U.S.C. Sec. 2202 for attorney's fees and expenses is collateral).

The Eleventh Circuit has also adopted the Fifth Circuit approach. McQurter v. City of Atlanta, 724 F.2d 881, 882 (11th Cir.1984); Certain British Underwriters at Lloyds of London, England v. Jet Charter Service, Inc., 739 F.2d 534, 535 (11th Cir.1984); C.I.T. Corporation v. Nelson, 743 F.2d 774, 775 (11th Cir.1984). 5

Although the Second, Fifth, and Eleventh Circuits have chosen this case-by-case approach, other circuits have declined to recognize any distinction between an order awarding Sec. 1988 fees and an order awarding fees in a contractual context. They instead adopt a bright-line approach, holding that all orders awarding attorney's fees whether or not quantified, are orders concerning a collateral issue that does not affect the finality of a merits order.

The Ninth Circuit opted for this bright-line approach in Int'l Ass'n of Bridge, Structural, Ornamental, and Reinforcing Ironworkers' Local v. Madison Industries, 733 F.2d 656 (9th Cir.1984). That court offered three reasons for rejecting a case-by-case approach. First the court noted that such an approach would "spawn a whole new body of law" which would lead to an unnecessary expenditure of judicial resources. Second, the court was concerned that the issue of timeliness of appeal could limit counsel's post-judgment litigation strategy. Third, because the court believed that the bright-line rule provides attorneys with the best device for determining the time for appeal, it reasoned that the rule would reduce the odds of an "unfair" determination that an appeal was untimely.

Similarly, the Seventh Circuit has held that attorney's fees provided by statute are no different from those provided by contract. In Exchange National Bank of Chicago v. Daniels, 763 F.2d 286, 292-293 (7th Cir.1985), the court concluded "that the source of the power to award fees does not matter. The finality of a decision depends on the kinds of issues the court determines, not on the source of authority for the court's decision." Id. at 293.

The Sixth and Eight Circuits have also followed this approach. See Morgan v. Union Metal Manufacturing, 757 F.2d 792, 795 (6th Cir.1985) (refusing to adopt an integral/collateral distinction "even though it may occasionally prove harsh" because such a distinction would not "best...

To continue reading

Request your trial
24 cases
  • Ragan v. Tri-County Excavating, Inc.
    • United States
    • U.S. Court of Appeals — Third Circuit
    • August 7, 1995
    ...contributions the employer "shall pay all costs and reasonable attorney's fees incurred." App. 133. In Beckwith Machinery Co. v. Travelers Indem. Co., 815 F.2d 286 (3d Cir.1987), we held that when an award of attorney fees is based on a contractual provision and is an "integral part of the ......
  • Gallant v. Telebrands Corp.
    • United States
    • U.S. District Court — District of New Jersey
    • December 22, 1998
    ...897 F.2d 120, 122-23 (3d Cir.1990) (citing Curtiss-Wright Corp., 446 U.S. at 10, 100 S.Ct. 1460); Beckwith Machinery Co. v. Travelers Indemnity Co., 815 F.2d 286, 290 (3d Cir.1987); Waldorf v. Borough of Kenilworth, 959 F.Supp. 675, 678-79 (D.N.J.1997); Garrett, 1989 WL 21778, at *2. A dete......
  • Doe v. Terhune
    • United States
    • U.S. District Court — District of New Jersey
    • November 28, 2000
    ...855 F.2d 1080, 1089 (3d Cir.1988); Mary Ann Pensiero, Inc. v. Lingle, 847 F.2d 90, 97 (3d Cir.1988); Beckwith Mach. Co. v. Travelers Indem. Co., 815 F.2d 286, 291 n. 8 (3d Cir.1987); West v. Keve, 721 F.2d 91, 95 n. 5 (3d This court also finds the Advisory Committee Notes for the 1993 amend......
  • Terra Nova Ins. Co. Ltd. v. 900 Bar, Inc.
    • United States
    • U.S. Court of Appeals — Third Circuit
    • October 18, 1989
    ...defended for thirteen months without reservation of rights estopped to assert loss not within policy's coverage), appeal dismissed, 815 F.2d 286 (3d Cir.1987). Accordingly, a declaration that there was no duty to defend will not entitle Terra Nova to recover any costs it has expended. Since......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT