Rule 54(b) Strikes Twice . . . in the Same Case.

Case:  Beverly Enterprises Inc. v. Keaton (Beverly II)

Appellate Practice Tip:  Before appealing, make certain that all claims against all parties are either properly dismissed (meaning that a court order is entered) or adjudicated.  Otherwise, the order from which you are appealing is a non-final order, and the Supreme Court will refuse to reach the merits of the appeal. See Ark. R. Civ. P. 54(b).

Case Explanation:  The Arkansas Supreme Court’s recent decision in Beverly Enterprises Inc. v. Keaton (Beverly II) represents the second time that the same case has been dismissed without prejudice as a result of a Rule 54(b) problem. 2011 Ark. 7; see also Beverly Enterprises, Inc. v. Keaton, 2009 Ark. 431 (Beverly I).

The Plaintiff in Beverly filed suit both individually and in her capacity as administratrix of the estate. Beverly I, 2009 Ark. 431, at 1.  In the original lawsuit, there were three defendants, all of which were business entities that were affiliated with Beverly Enterprises, Inc. (the “Beverly Defendants”). Beverly I, at 2.  There were five claims alleged in the original complaint:

1. Violation of the duty of care under the Arkansas Medical Malpractice Act;
2. Violation of the general duty to provide adequate and appropriate custodial care and supervision;
3. Violation of the Arkansas Long Term Care Resident’s Rights Statute;
4. Deception in representing that they could provide proper care; and
5. Violation of the Arkansas Deceptive Trade Practices Act.

Id. at 2.

The plaintiff later amended her complaint to add a breach of fiduciary claim against the Beverly Defendants, and also added an additional Beverly entity and nine Beverly executives as defendants on that claim. Id. at 2.  The amended complaint also added a claim for violation of the Uniform Fraudulent Transfer Act against all of the above defendants, as well as one other individual and five other entities. Id. at 2-3.

The claims and parties are somewhat complicated, so they are summarized in the table below.  To add some level of clarity, the parties referred to in this blog post as the “Beverly Defendants” are indicated in orange.

At a pretrial hearing, the plaintiff’s attorney acknowledged that no wrongful death claim had ever been alleged against any defendant, and also announced to the court that an agreement had been reached under which the plaintiff would nonsuit all claims against all defendants, except for the claims against the Beverly Defendants. Beverly I, 2009 Ark. 431, at 3.  On the first day of trial, an order was entered dismissing with prejudice the plaintiff’s wrongful death claim.

After a jury trial, a judgment was entered against the Beverly Defendants on the negligence claims, and a punitive damages award was entered against two of those defendants. Id. at 3.  A separate judgment was entered the same day declaring the Civil Justice Reform Act’s limitation on punitive damages unconstitutional. Id. at 3.  However, no order was entered adjudicating the other claims or the other defendants. Id. at 3.

The Beverly Defendants appealed, but the Arkansas Supreme Court refused to reach the merits of the case. Id.  The Court quoted Arkansas Rule of Civil Procedure 41(a), which provides that a dismissal without prejudice by a plaintiff “is a matter of right, it is effective only upon entry of a court order dismissing the action.” Id. at 4.  Based on this, and based on Rule 54(b), the Court held that “a judgment is not final if it has not adjudicated all the claims against all the parties.” Beverly I, 2009 Ark. 431, at 4.

In Beverly I, only the negligence claims against the Beverly Defendants had been adjudicated. Id. at 5.  The other claims and other parties had been neither properly adjudicated nor dismissed. Id. at 5.  In essence, all of the claims and all of the parties in the chart above remained unadjudicated and not dismissed, except for the negligence claims against the Beverly Defendants.  Therefore, the Supreme Court dismissed the appeal without prejudice.

Beverly II represented the second attempt to appeal the case.  After the dismissal without prejudice in Beverly I, the trial court entered an order dismissing “with prejudice all of the Plaintiff’s claims against the Defendants save and except for the Beverly Defendants.” Beverly II, 2011 Ark. 7, at 1-2.  It appears that this order properly dismissed all of the claims against the defendants who were added in the amended complaint (the defendants listed in the table above in black text).  However, there were still claims remaining against the Beverly Defendants that still had not been adjudicated or dismissed. Id. at 2.  Therefore, the Supreme Court held that the “remaining claims against Beverly must be properly adjudicated or dismissed before this court acquires jurisdiction to hear the appeal.” Id. at 2.

Arkansas appellate attorneys should be very careful about Rule 54(b) problems, as both the Arkansas Supreme Court and Arkansas Court of Appeals are very particular about compliance with the rule.  Even where a plaintiff intends to waive certain claims, and even where it is clear from the transcript that the plaintiff intended to waive the claims, it is important to review the pleadings and orders to make certain that all claims against all parties have been adjudicated or dismissed.

Related Posts:

• Arkansas Court of Appeals Orders Rebriefing in Two Cases; Warns Appellate Attorneys of Pitfalls of Not Strictly Adhering to Rules
• The Rule 54(b) Trap: Dealing with Non-final Orders in Cases with Multiple Claims or Multiple Parties
• Rule 54(b) Certification Requires Showing of Undue Hardship Without Interlocutory Appeal
• Arkansas Court of Appeals Dismisses Case without Prejudice for Lack of Final Order; Court Notes that Only Documents From the Record May be Included in an Appellant’s Addendum

–Andy Taylor