Horwitz v. Alloy Automotive Co.

• Decision Date: 19 March 1992
• Docket Number: Nos. 90-3729,91-2276,s. 90-3729
• Citation: 957 F.2d 1431
• Parties: Donald A. HORWITZ and Wesco Products Company, Plaintiffs-Appellants, v. ALLOY AUTOMOTIVE COMPANY, Sheldon Gray and Avrum Gray, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1431

957 F.2d 1431

22 Fed.R.Serv.3d 339

Donald A. HORWITZ and Wesco Products Company, Plaintiffs-Appellants, v. ALLOY AUTOMOTIVE COMPANY, Sheldon Gray and Avrum Gray Defendants-Appellees.

Nos. 90-3729, 91-2276.

United States Court of Appeals Seventh Circuit.

Argued Sept. 11, 1991.

Decided March 19, 1992.

Forrest L. Ingram (argued), John B. Kalish, Cindy M. Johnson, and Anthony V. Ponzio, Kalish & Colleagues, Chicago, Ill., for plaintiffs-appellants.

Peter Flynn (argued), Myron M. Cherry, and Jeffrey M. Wagner, Cherry & Flynn, Chicago, Ill., for defendants-appellees.

Before WOOD, Jr., ^* FLAUM and RIPPLE, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

Unfortunately this controversy has grown old in the system and not aged well. It began back in 1980 when Plaintiff Wesco filed for reorganization under Chapter 11 of the Bankruptcy Code. Wesco then filed an adversary complaint which ultimately went to the district court and then came here. Wesco Products Co. v. Alloy Automotive Co., 880 F.2d 981 (7th Cir.1989). In 1984 plaintiffs filed this suit generally based on the same operative facts as the prior adversary proceeding. Later this complaint was amended and the defendants filed a counterclaim. The second amended 118-page complaint in 7 counts sought damages under the Racketeer Influenced and Corrupt Organizations statute, 18 U.S.C. §§ 1961-1968 (Count I), damages for breach of contract (Count II), for imposition of a constructive trust (Count III), for imposition of a resulting trust (Count IV), damages for trademark infringement, 15 U.S.C. §§ 1051-1127 (Count V), for damages for unfair competition under the statutes of the State of Illinois, Ill.Rev.Stat. ch. 140, para. 22 (Count VI); and for unfair and deceptive practices under the statutes of the State of Illinois, Ill.Rev.Stat. ch. 121 1/2, paras. 262-272 and 311-317 (Count VII). In these latter stages there were fifteen depositions with "thousands" of documents. The defendants filed summary judgment motions supported by four substantial volumes of evidence. This only sketches out the background as a prologue to what happened in the district court to bring this case again.

I. The Background of this Appeal

The district court, adopting the recommendations of the magistrate judge, partially allowed the defendants' summary judgment motions and dismissed Counts I-IV as being barred by res judicata leaving only Counts V-VII and defendants' counterclaim pending for trial. That ruling, partially favorable and partially unfavorable, complicated the situation for plaintiffs. Plaintiffs wanted to take an interlocutory appeal to have this court review the dismissals of Counts I-IV before proceeding further with the trial of the remaining counts.

The issue of what to do arose at a status hearing. The transcript of the conversations between counsel and Judge Bua ¹ about the possibilities of an interlocutory appeal under Fed.R.Civ.P. 54(b) ² or 28 U.S.C. § 1292(b) ³ reads not so much as an ordinary colloquy between court and counsel, but more like the transcript of a meeting of a committee to reform the Civil Rules. ⁴ That committee came up with a practical solution agreeable to all, and now we have the case. We need to examine this attempted de facto revision of the Civil Rules.

The solution developed after the trial judge voiced his dissatisfaction with the inhospitable attitude of this circuit to interlocutory appeals demonstrated "many, many times." He mentioned in particular one well known, first-impression case of his which he viewed as one of considerable consequence and public interest but which this court declined to accept on interlocutory appeal. He concluded that if we would not take a case of obvious significance we certainly would not accept an interlocutory appeal in this present case. In Judge Bua's opinion he and the parties would "be spinning our wheels" to try an interlocutory appeal. The only solution the judge saw at that moment was to devise and enter a "final order" which this court would have to take. It did not take judge and counsel for both parties long to develop a foolproof way to accomplish that and force a decision out of this court. It was agreed by all that they would go ahead and enter judgment dismissing Counts I through IV as the judge had already ruled after considering the merits of those counts. The only apparent obstacle, therefore, to the immediate appeal of those dismissed counts which the plaintiff desired to try to save, was the remaining counts the district judge had not dismissed because he had found no reason to dismiss them. It was mutually decided to eliminate that obstacle and achieve the needed finality by allowing plaintiffs to voluntarily dismiss the remaining Counts V through VII, even though they had been held sufficient to state a cause of action. Judge Bua at first wondered why he should dismiss the remaining good counts explaining he "can't dismiss a count just because economically it doesn't make sense for the plaintiff to try the balance of the case." To dismiss those remaining good counts without more, however, was viewed as too final and might jeopardize their subsequent resuscitation. That contemplated voluntary dismissal, it was agreed, would therefore need to be "without prejudice to refiling." Later it was remembered that defendant had a counterclaim pending which was another obstruction to finality. Agreeably, as part of the plan, the defendants graciously agreed to voluntarily dismiss that, but also without prejudice to refiling later. It was clearly not the intention of the defendants to abandon their counterclaim which was not otherwise in jeopardy.

II. Rule 54(b) Appeals

This court's reception of Rule 54(b) ⁵ and Section 1292(b) interlocutory appeals may not be quite as bad, however, as pictured by Judge Bua. An entry of judgment under Rule 54(b) requires a final judgment "in the sense that it completely disposes of a separate claim for relief or finally resolves all claims against a particular party." United States v. Ettrick Wood Products, Inc., 916 F.2d 1211, 1217 (7th Cir.1990). If there has been such a final judgment, then the district court has the discretion to decide whether to enter judgment on a portion of the case under Rule 54(b). Id. at 1218. The district court's decision is then reviewed by this court for abuse of discretion. See id. There is language in several of our cases that emphasizes the potential breadth of the district court's discretion. For example, this court has stated that district court "[d]iscretion carefully exercised is rarely upset." Id. (citing Horn v. Transcon Lines, Inc., 898 F.2d 589, 592 (7th Cir.1990)).

This court has, of course, placed some limits on the district court's discretion to grant a final judgment under Rule 54(b). For example, this court has denied review when it felt that the district court was rubber stamping the attorney's request rather than carefully considering the need for a Rule 54(b) order. Buckley v. Fitzsimmons, 919 F.2d 1230, 1238 (7th Cir.1990), amended, clarified, Nos. 89-2441, 89-2899, 89-2900, 1990 WL 192085, 1991 U.S.App. LEXIS 487 (7th Cir.), and vacated on other grounds, --- U.S. ----, 112 S.Ct. 40, 116 L.Ed.2d 19 (1991), and modified, 952 F.2d 965 (7th Cir.1992) ⁶ (citing Horn, 898 F.2d at 592). Moreover, we have denied review when there was too much factual or legal overlap between the claims retained by the district court and those appealed under a Rule 54(b) judgment. Buckley, 919 F.2d at 1238. Review was denied in that situation because Rule 54(b) only allows for the bifurcating of separate claims. If there is a great deal of factual or legal overlap between counts, then they are considered the same claim for Rule 54(b) purposes. However, even in this area, if it is a close call this court gives deference to the district court's determination of what constitutes a separate claim under Rule 54(b). Olympia Hotels Corp. v. Johnson Wax Dev. Corp., 908 F.2d 1363, 1367 (7th Cir.1990); but see Buckley, 919 F.2d at 1237 (cautioning that there are limits to the district court's discretion to define a separate claim because jurisdiction is a question of power). ⁷

It should also be noted in this court's defense that several of the denials of appellate review resulted from the lower court's failure to properly invoke Rule 54(b), and therefore had nothing to do with the Seventh Circuit's alleged reluctance to accept Rule 54(b) appeals. For example, in order to properly invoke Rule 54(b) the district court must expressly find that "there is no just reason for delay," and the court must expressly enter a final judgment. Ettrick, 916 F.2d at 1217. Review has been denied where the trial judge failed to follow these steps. ⁸

Considering that no attempt was made to enter a Rule 54(b) judgment, we cannot create our own jurisdiction by endeavoring to conform the counts at issue on appeal into a Rule 54(b) interlocutory appeal in order to aid the parties.

III. Section 1292(b) Appeals

Judge Bua also mentioned his pessimism about a Section 1292(b) interlocutory appeal effort so that attempt also was not made. Three primary factors are necessary for jurisdiction under 1292(b): (1) the issue certified for appeal must involve a "controlling question of law"; (2) there must be "substantial ground for a difference of opinion" as to the application of this question of law; and (3) the claim must be one in which the immediate appeal of this controlling question of law "may materially advance the ultimate termination of the litigation...." 28 U.S.C. § 1292(b).

What the court and parties did not do for themselves we cannot do for them, but we do not want it to be understood that we are hostile to appropriate interlocutory appeals under the applicable rules. ⁹

IV. Section 1291 Appeal

The parties rely on 28 U.S.C. § 1291 ¹⁰ to confer jurisdiction by this court. Their efforts to produce an appealable order under Section 1291...