The Rule 54(b) Trap: Dealing with Non-final Orders in Cases with Multiple Claims or Multiple Parties

Recurring Rule 54(b) Issues

Over the past several years, “APPEAL DISMISSED WITHOUT PREJUDICE” has been a recurring disposition in opinions handed down by the Arkansas Supreme Court and the Arkansas Court of Appeals in cases where the order being appealed from was not final and failed to contain a Rule 54(b) certificate. See, e.g., Grand Valley Ridge, LLC v. Metropolitan National Bank, 2010 Ark. 402.

Arkansas Rule of Civil Procedure 54(b) deals with the finality of orders when there are judgments relating to multiple claims or involving multiple parties.  Where there has not been a final judgment with respect to all claims and all parties involved in a particular case, then an appeal from an otherwise non-appealable interlocutory order is improper unless it contains a proper Rule 54(b) certificate.

The relevant portion of Rule 54(b) provides:

(1)  Certification of Final Judgment. When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination, supported by specific factual findings, that there is no just reason for delay and upon an express direction for the entry of judgment.

Ark. R. Civ. P. 54(b) (2010).

The Rule 54(b) Certificate

Rule 54(b) also provides that when the circuit court finds that an otherwise non-final order should be immediately appealable, the circuit court is required to include the following certificate within the order, immediately after the court’s signature on the judgment.  That certificate is required to set forth the factual findings upon which the determination to enter the judgment as final is based.  Rule 54(b) sets out the language to be included in the certificate as follows:

Rule 54(b) Certificate

With respect to the issues determined by the above judgment, the court finds:

[Set forth specific factual findings.]

Upon the basis of the foregoing factual findings, the court hereby certifies, in accordance with Rule 54(b)(1), Ark. R. Civ. P., that it has determined that there is no just reason for delay of the entry of a final judgment and that the court has and does hereby direct that the judgment shall be a final judgment for all purposes.

Certified this ________ day of ________, ________.

_________________________________________
Judge

Ark. R. Civ. P. 54(b) (2010).

As shown above, Rule 54(b) includes the language that is to be included to transform what would normally be an uappealable interlocutory order into an order from which a party can properly appeal prior to a ruling by the circuit court that pertains to all claims and/or all parties.  However, it is worth noting that “merely tracking the language of Rule 54(b) will not suffice; the record must show facts to support the conclusion that there is likelihood of hardship or injustice that would be alleviated by an immediate appeal rather than at the conclusion of the case.” Bank of Arkansas v. First Union National Bank, Ark. (00-1113) (Nov. 16, 2000).

Appeals are also frequently dismissed without prejudice due to the circuit court’s failure to include within the Rule 54(b) certificate the specific specific factual findings upon which a decision to enter a final judgment was based. See, e.g., Kowalski v. Rose Drugs, 2009 Ark. 524.

Failure to Include 54(b) Certificate in an Otherwise Non-Final Order

When the Rule 54(b) certificate is not attached to an order that is otherwise non-final, that order is not appealable.  Appellate courts simply do not have subject-matter jurisdiction to consider the merits of an appeal where the order being appealed from is not final.  See Zolliecoffer v. Mike Beebe, 2010 Ark. 329; see also Ark. R. App. P. – Civil 2(a)(1). Because the lack of finality creates a jurisdictional problem, that issue is frequently raised by the appellate courts sua sponte. See Grand Valley, supra.  Such appeals are dismissed without prejudice.  Once the issue of the non-final order has been dealt with below (by dismissing claims and/or parties or by obtaining an order with a proper Rule 54(b) certificate), then a valid Notice of Appeal can be filed and the appeal can properly be brought before the appropriate appellate court (assuming no other procedural impediments affecting jurisdiction exist).

In Grand Valley, which was handed down by the Arkansas Supreme Court last month, there was no Rule 54(b) certificate within the otherwise non-final order.  The order in that case was not final because it did not resolve all the claims that had originally been raised by Grand Valley and Terminella.  Those parties had filed a motion to voluntary nonsuit without prejudice claims for negligence and interference-with-business-expectancies.  The circuit court granted that motion, rendering the order that was subsequently entered in that case non-final and, therefore, not appealable.

The following are examples of cases where orders were held to be non-final and, therefore, non-appealable absent a Rule 54(b) certificate:

• Voluntary nonsuit of claims–An order that is final with respect to some claims but where other claims were previously dismissed without prujudice (via a voluntary nonsuit) is not final for purposes of Rule 54(b).  See, Grand Valley Ridge, supra.
• Claims dismissed as to some parties and transferred  as to others—An order where the claims against one defendant were dismissed and the claims against another defendant were transferred to another court. See Zolliecoffer, supra; see also Downen v. Redd, 367 Ark. 551 (2006) (holding that an order dismissing claims as to two defendants and transferring the claim as to a third defendant to another circuit court was not final for purposes of Rule 54(b)).
• Conditional orders—As a general rule, a conditional order, becoming final upon contingencies, which may or may not occur, is not a final appealable order. See Coleman v. Regions Bank (Case No. 04-750) (Ark. Nov. 3, 2005).
• Unresolved claims against multiple parties—An order granting summary judgment in favor of only on defendant in a case where there are multiple defendants is not a final and appealable order unless it contains a proper Rule 54(b) certificate. See Chapman v. Wal-Mart, 351 Ark. 1 (2002).

Rule Change: Appellants Now Required to Abandon Stray Claims in Notice of Appeal

Effective July 1, 2010 Arkansas Rule of Appellate Procedure-Civil 3(e)(vi) requires a notice of appeal to state, among other things, that “the appealing party abandons any pending but unresolved claim.”  The new rule causes the abandonment of any unresolved claims in the notice of appeal to operate as a dismissal with prejudice of any stray claims in a case where the order being appealed from would otherwise be final.

The comments to the rule change further explain its purpose:

This amendment will cure a recurring finality problem. Too often—after the parties have paid for the record, filed it, and filed all their briefs on appeal—the appellate court will discover that what appears to be a final order or judgment is not final because a pleaded claim, counterclaim, or cross-claim remains unadjudicated. This kind of stray claim destroys finality and renders an otherwise final order or judgment unappealable. E.g., Ramsey v. Beverly Enters., Inc., 375 Ark. 424, 291 S.W.3d 185 (2009); Rigsby v. Rigsby, 340 Ark. 544, 11 S.W.3d 551 (2000); Brasfield v. Murray, 96 Ark. App. 207, 239 S.W.3d 551 (2006). These stray claims often appear to have been forgotten by the parties or abandoned even though no order resolved them. It wastes parties’ and courts’ scarce resources to have two appeals in these situations.

A party taking an interlocutory appeal or cross-appeal authorized by the Arkansas Rules of Appellate Procedure, the Rules of the Supreme Court and Court of Appeals, or precedent, should not make this statement in the parties’ notice. Nor is this statement required in a notice of appeal or cross-appeal from a judgment certified by the circuit court as final under Rule of Civil Procedure 54(b). In all these situations, which are in essence interlocutory appeals, some claims remain pending and viable in the circuit court during the appeal.

Ark. R. App. P. – Civil 3 (Addition to Reporter’s Notes, 2010 Amendment).

These comments don’t address what happens where the party who did not bring the lingering claims (usually the defendant) is the party appealing from the non-final order.  Presumably a defendant who chooses to appeal from a non-final order could not abandon claims that were originally brought by the plaintiff.  It seems that in those situations, the defendant should obtain a Rule 54(b) certificate in order to appeal from an otherwise non-final order.

It is also worth noting that this statement doesn’t help cure finality problems deriving from the failure to obtain a final order with respect to all parties.  A prior change to Rule 54 alleviates that problem with respect to John Doe defendants who were named in the lawsuit but who were never known and, thus, never served during the litigation.  Effective January 1, 2009, the Arkansas Supreme Court amended Rule 54 to provide that “[a]ny claim against a named but unserved defendant, including a ‘John Doe’ defendant, is dismissed by the circuit court’s final judgment or decree.” Ark. R. Civ. P. 54(b)(5); see Jackson v. Sparks Regional Medical Center, 375 Ark. 533 (2009) (holding that Rule 54(b)(5) could be applied retroactively).

–Tasha Taylor