U.S. for Use of Valders Stone & Marble, Inc. v. C-Way Const. Co.

• Decision Date: 03 August 1990
• Docket Number: C-WAY,Nos. 89-2747,89-2862,s. 89-2747
• Citation: 909 F.2d 259
• Parties: UNITED STATES of America for the Use of VALDERS STONE & MARBLE, INCORPORATED, a Wisconsin Corporation, Plaintiff-Appellee/Cross-Appellant, v.CONSTRUCTION COMPANY, a Michigan Corporation; American Casualty Company of Reading, Pennsylvania, a Pennsylvania Corporation, Defendants- Appellees/Cross-Appellees, and Selvick Marine Towing Company, a Wisconsin Corporation, Intervening Defendant-Appellant/Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 259

909 F.2d 259

1991 A.M.C. 386

UNITED STATES of America for the Use of VALDERS STONE &

MARBLE, INCORPORATED, a Wisconsin Corporation, Plaintiff-Appellee/Cross-Appellant, v. C-WAY CONSTRUCTION COMPANY, a Michigan Corporation;

American Casualty Company of Reading,

Pennsylvania, a Pennsylvania

Corporation,

Defendants-

Appellees/Cross-Appellees,

and

Selvick Marine Towing Company, a Wisconsin Corporation,

Intervening Defendant-Appellant/Cross-Appellee.

Nos. 89-2747, 89-2862.

United States Court of Appeals, Seventh Circuit.

Argued April 10, 1990.

Decided Aug. 3, 1990.

Paul A. Rake and Sherry L. Clarke, Eichhorn, Eichhorn & Link, Hammond, Ind., for plaintiff-appellee.

Peter L. Gustafson, David Green, and Jeff Birkhold, Warner, Norcross & Judd, Grand Rapids, Mich., for defendants-appellees.

Harold L. Witsaman, Ray, Robinson, Hanninen & Carle, Chicago, Ill., and Anthony DeBonis, Jr., Smith & DeBonis, East Chicago, Ind., for intervenor-appellant.

Before CUDAHY, COFFEY and MANION, Circuit Judges.

CUDAHY, Circuit Judge.

C-Way Construction Company was the contractor for a federal marine construction project in Indiana. American Casualty Company provided C-Way's payment bond pursuant to the requirements of the Miller Act, 40 U.S.C. Sec. 270a et seq. C-Way entered into a purchase order agreement on August 20, 1984, with 4-X Corporation for the provision of stone. Before the stone shipment was completed, Valders Stone & Marble bought out 4-X (which had become insolvent) and assumed certain of its obligations and liabilities by means of a document dated March 14, 1985. One of the obligations allegedly assumed by Valders pursuant to the 4-X assignment was the C-Way purchase order. ¹ C-Way hired a barge from Selvick Marine Towing Company ² to transport the stone. The barge provided by Selvick was insured by St. Paul Fire & Marine Insurance Company. Valders contracted with Rusty Strauss & Son Excavating to load the stone onto the barge. The barge suffered damage allegedly as a result of Strauss's negligent loading. ³

This case originated when C-Way refused to pay Valders for the stone, claiming a setoff due to its obligation to compensate Selvick for the damage done to the barge. ⁴ Valders brought suit on the payment bond against C-Way pursuant to the provisions of 40 U.S.C. section 270b. The parties agreed to try the case before a federal magistrate. On July 3, 1989, the magistrate denied Valders's motion for summary judgment on its dispute with C-Way. That dispute was tried and resolved (adversely to Valders) on August 20, 1989. Valders filed a motion for reconsideration that was still pending at the time we heard oral argument in this case.

Selvick and its insurer, St. Paul, ⁵ intervened in the suit. Selvick claimed that Valders was liable for the damage done to the barge under theories of non-delegable duty in contract and the warranty of workmanlike performance in admiralty. In his July 3, 1989, order, the magistrate awarded Valders summary judgment on Selvick's claim based on the facts that Strauss was an independent contractor and that Selvick lacked privity with Valders.

Selvick appeals on the basis of 28 U.S.C. section 1292(a)(3), which establishes appellate jurisdiction over interlocutory orders finally determining the substantive rights and liabilities of parties to an admiralty case. Valders cross-appeals from the magistrate's denial of its summary judgment motion against C-Way.

1. APPELLATE JURISDICTION OVER THE CROSS-APPEAL

Selvick asserts its claim under the admiralty head of federal jurisdiction. U.S. Const., art. III, cl. 2; 28 U.S.C. Sec. 1333(1). Since the case involves an allegation of property damage to a vessel engaged in a traditional maritime activity (commerce), there is admiralty jurisdiction here. See Foremost Ins. Co. v. Richardson, 457 U.S. 668, 102 S.Ct. 2654, 73 L.Ed.2d 300 (1982); Executive Jet Aviation, Inc. v. City of Cleveland, 409 U.S. 249, 93 S.Ct. 493, 34 L.Ed.2d 454 (1972). Appellate courts generally lack jurisdiction over interlocutory orders rendered by district courts. However, 28 U.S.C. section 1292(a)(3) empowers us to hear "[i]nterlocutory decrees of [ ] district courts or the judges thereof determining the rights and liabilities of the parties to admiralty cases in which appeals from final decrees are allowed." The magistrate's summary judgment in favor of Valders finally determined that Selvick lacked a right to recover compensation from Valders for the damage to its barge. The magistrate's order therefore determined the rights and liabilities of Selvick and Valders with regard to Selvick's claims, and we have jurisdiction over Selvick's appeal.

Valders's suit against C-Way, however, is not based on admiralty jurisdiction, but on federal question jurisdiction (derived from the Miller Act) and diversity jurisdiction. Valders rests its claim of appellate jurisdiction over the cross-appeal on 28 U.S.C. section 636(c)(3). That section provides that, in any case conducted by a United States magistrate at the parties' consent, "[u]pon entry of judgment ..., an aggrieved party may appeal directly to the appropriate United States court of appeals from the judgment of the magistrate in the same manner as an appeal from any other judgment of a district court." (Emphasis added.) As we have indicated, appellate jurisdiction over interlocutory orders is the exception rather than the rule. Since a denial of summary judgment is not a final judgment, Pacific Union Conference of Seventh-Day Adventists v. Marshall, 434 U.S. 1305, 1306, 98 S.Ct. 2, 3, 54 L.Ed.2d 17 (Rehnquist, Circuit Justice 1977), and Valders's cross-appeal does not fall within any category of appealable interlocutory orders listed in section 1292, we would ordinarily conclude at this point that there is no appellate jurisdiction over the cross-appeal.

Valders, however, argues that its right to contest certain matters addressed by the magistrate's pending final judgment will be prejudiced by our review at this time of Selvick's appeal in isolation. We read Valders's contention as an assertion that we may hear the cross-appeal under the doctrine of pendent appellate jurisdiction. As our cases, and those of other courts of appeals, have held, pendent appellate jurisdiction may be found only in a limited class of cases. E.g., People of State of Ill. ex rel. Hartigan v. Peters, 861 F.2d 164, 166 (7th Cir.1988); Patterson v. Portch, 853 F.2d 1399, 1403 (7th Cir.1988); see also Akerman v. Oryx Communications, Inc., 810 F.2d 336, 339 (2d Cir.1987) (pendent appellate jurisdiction doctrine should "rarely be used because of the danger of abuse."); Kershner v. Mazurkiewicz, 670 F.2d 440, 449 (3d Cir.1982) (en banc) (noting narrow scope of section 1292(a)).

We recently explained that pendent appellate jurisdiction will be found only "[w]hen an ordinarily unappealable interlocutory order is inextricably entwined with an appealable [interlocutory] order" and only if "there are compelling reasons for not deferring the appeal of the former order to the end of the lawsuit." Peters, 861 F.2d at 166. A close relationship between the unappealable order and the appealable order will not suffice: it must be practically indispensable that we address the merits of the unappealable order in order to resolve the properly-taken appeal.

In the present case, Valders alleges that we cannot resolve Selvick's appeal without passing on the substance of the cross-appeal. The cross-appeal essentially asserts that the magistrate incorrectly found that the Valders/4-X assignment agreement covered and included the 4-X/C-way purchase order. Selvick asserts a number of claims based on the purchase order. We must decide initially, therefore, whether we need determine the scope of the Valders/4-X assignment in order to settle Selvick's appeal.

Selvick raises two points on appeal. First, it challenges the magistrate's conclusion that Valders could not be held liable for a breach of the warranty of workmanlike performance because Selvick was not in privity with Valders in any contract. Second, Selvick argues that the magistrate incorrectly ruled that Valders did not owe Selvick a non-delegable contractual duty to load the stone with due care because it (Selvick) was a third-party beneficiary of Valders's contract with C-Way. Only Selvick's second contention would arguably require us to delve into the question of the scope of the Valders/4-X assignment. After reviewing the purchase order to determine whether Selvick was a third-party beneficiary of Valders and C-Way's contract, we could take one of three courses: (1) affirm the magistrate's grant of summary judgment against Selvick in favor of Valders; (2) reverse the magistrate's order with respect to Selvick's third-party beneficiary claim, but remand for further proceedings to determine the scope of the assignment; or (3) reverse the grant of summary judgment outright. Only the final course of action would prejudice Valders. Clearly, then, we may limit our review of Selvick's appeal to an inquiry whether, reading the purchase order in the light most favorable to Selvick, Valders and C-Way intended to make Selvick a third-party beneficiary of their contract. We may leave to the magistrate (and to the appeal, if any, from the magistrate's final judgment) the question whether Valders assumed the purchase order under the assignment from 4-X.

Because we are able to extricate the issues raised by Selvick's properly-taken interlocutory appeal from the matters raised by the cross-appeal, we have no pendent appellate jurisdiction over Valders's cross-appeal. We will, however, treat Valders's cross-appeal as preserving its right to pursue the matters that it raises in an appeal properly taken from the magistrate's eventual final judgment. The cross-appeal is accordingly dismissed without prejudice.

II. SELVICK'S APPEAL

Selvick charges the magistrate with error in dismissing its claim that Strauss's...