U.S. Fire Ins. Co. v. Smith Barney, Harris Upham & Co., Inc., 83-1386

• Decision Date: 30 December 1983
• Docket Number: No. 83-1386,83-1386
• Citation: 724 F.2d 650
• Parties: UNITED STATES FIRE INSURANCE COMPANY, The North River Insurance Company, Westchester Fire Insurance Company, Industrial Indemnity Company, First National Bank of Minneapolis, Marquette National Bank of Minneapolis, Marquette National Bank at University, Marquette Lake State Bank, Marquette State Bank of Columbia Heights, Marquette Bank & Trust Co. of Rochester, Golden Valley State Bank, First Brookdale State Bank, Security State Bank of Cannon Falls, Mid America State Bank of Highland Park, Mid America National Bank of Eagan, Hillcrest Mid America State Bank of Maplewood, State Bank of Worthington, and Citizens State Bank of Ontonagon, Michigan, v. SMITH BARNEY, HARRIS UPHAM & CO., INCORPORATED, Dorsey, Windhorst, Hannaford, Whitney & Halladay and Thomas S. Hay, and Smith Barney, Harris Upham & Co., Incorporated, Appellant, v. MINNESOTA STATE ZOOLOGICAL BOARD, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 650

724 F.2d 650

UNITED STATES FIRE INSURANCE COMPANY, The North River

Insurance Company, Westchester Fire Insurance Company,

Industrial Indemnity Company, First National Bank of

Minneapolis, Marquette National Bank of Minneapolis,

Marquette National Bank at University, Marquette Lake State

Bank, Marquette State Bank of Columbia Heights, Marquette

Bank & Trust Co. of Rochester, Golden Valley State Bank,

First Brookdale State Bank, Security State Bank of Cannon

Falls, Mid America State Bank of Highland Park, Mid America

National Bank of Eagan, Hillcrest Mid America State Bank of

Maplewood, State Bank of Worthington, and Citizens State

Bank of Ontonagon, Michigan, v. SMITH BARNEY, HARRIS UPHAM & CO., INCORPORATED, Dorsey,

Windhorst, Hannaford, Whitney & Halladay and

Thomas S. Hay, and Smith Barney, Harris

Upham & Co., Incorporated, Appellant, v. MINNESOTA STATE ZOOLOGICAL BOARD, Appellee.

No. 83-1386.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 14, 1983.

Decided Dec. 30, 1983.

Hubert H. Humphrey, III, Atty. Gen. of Minn., Richard S. Slowes, Asst. Atty. Gen., St. Paul, Minn., for appellee.

Oppenheimer, Wolff, Foster, Shepard & Donnelly, Elmer B. Trousdale, Edward M. Laine, David B. Potter, St. Paul, Minn., for appellant.

Before LAY, Chief Judge, FAGG, Circuit Judge, and NICHOL, Senior District Judge. ^*

LAY, Chief Judge.

This matter comes to us on appeal of an interlocutory order under a Rule 54(b) certification issued by the district court. ¹ We find the district court erred in issuing the certificate and we therefore dismiss the appeal for lack of jurisdiction.

In August 1977, the Minnesota State Zoological Board contracted with a non-profit corporation--Zoo Ride, Inc.--to construct a monorail system. The Board and the corporation entered into an Installment Purchase Agreement by which the Board agreed to buy the monorail system from Zoo Ride over a twelve year period. Zoo Ride assigned its rights in the Purchase Agreement to an underwriter, Smith Barney, who in turn sold its rights in the Agreement as tax-exempt Certificates of Participation.

At the 1979-80 session, the Minnesota Legislature refused to appropriate sufficient funds for the Board to make the installment payments due the coming years. In April of 1980, the Board defaulted on the Purchase Agreement and was sued by the investors in state court.

The Minnesota State Supreme Court held that under state law, the Board and the State could not incur any financial obligation without a prior appropriation of funds by the legislature. United States Fire Insurance Co. v. Minnesota State Zoological Board, 307 N.W.2d 490 (Minn.1981). It therefore held that the State could not be judicially required to pay unless and until the legislature chose to appropriate the necessary funds.

In September 1980, Smith Barney and the "bond counsel," Dorsey and Whitney, were sued by a group of banks and insurance companies in federal court under state and federal securities laws. Smith Barney filed a third party complaint to join the Zoo Board alleging that the Board had superior knowledge which it should have disclosed. The district court dismissed the third party complaint holding that the Zoo Board is an alter-ego of the state and did not explicitly or implicitly waive its immunity. The district court entered a final judgment on this issue under Fed.R.Civ.P. 54(b) and Smith Barney brought this appeal on that issue.

The standard for review of a Rule 54(b) order issued by the district court is extremely limited. In Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 10, 100 S.Ct. 1460, 1466, 64 L.Ed.2d 1 (1980), the Court stated:

There are thus two aspects to the proper function of a reviewing court in Rule 54(b) cases. The court of appeals must, of course, scrutinize the district court's evaluation of such factors as the interrelationship of the claims so as to prevent piecemeal appeals in cases which should be reviewed only as single units. But once such juridical concerns have been met, the discretionary judgment of the district court should be given substantial deference, for that court is "the one most likely to be familiar with the case and with any justifiable reasons for delay." [Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 437, 76 S.Ct. 895, 900, 100 L.Ed. 1297 (1956).] The reviewing court should disturb the trial court's assessment of the equities only if it can say that the judge's conclusion was clearly unreasonable.

In the instant case, although the district court observed that Smith Barney's claim against the Zoo Board could be rendered moot if Smith Barney is not found liable for monetary damages, the court held that the "exigencies" of the case outweighed this factor and favored an immediate appeal. The district court listed the critical factors to be: (1) the dismissal of the third party action against the Zoo Board is not based upon a determination of the merits involving the same factual determinations as the principal claim; (2) a discrete legal issue is involved which would not have to be reviewed again on appeal; (3) the Zoo Board was substantially involved in the financing of the monorail, which is the subject matter of the principal action; (4) the trial of the principal issue will be lengthy, and if this court were to reverse the dismissal of the third party complaint following a full trial on the merits, there exists a potential of a further lengthy trial of the third party claim; and (5) the district court's docket is crowded and it is unlikely any substantial delay of trial will issue from an appeal at this time.

As observed by the Supreme Court in Curtiss-Wright, we must...