The Arkansas Court of Appeals Holds that Sanctions and Contempt Are Not the Same

February 28, 2017 ~ Andy Taylor

The Arkansas Rules of Appellate Procedure–Civil provide that “[a]n appeal may be taken from a circuit court to the Arkansas Supreme Court from . . . [a] civil or criminal contempt order, which imposes a sanction and constitutes the final disposition of the contempt matter.” Ark. R. App. P.–Civ. 2(a)(13). But what about an order that imposes sanctions, but doesn’t hold anyone in civil or criminal contempt?

In Hancook Tire Co., LTD v. Philpot, 2016 Ark. App. 386, the parties were involved in an ongoing discovery dispute. Eventually, the plaintiff (Philpot) filed a “Motion for Sanctions for Spoliation and Concealment of Evidence.” A hearing was held on the motion, and the trial court eventually issued a letter opinion in which it stated that, because of “the multiple hearings that have been necessitated because of the Defendants obtuse and unnecessary abuse of the discovery process,” the trial court would impose Rule 37 sanctions (in the form of attorney’s fees) “to deter any future similar conduct.”

The trial court then entered an order awarding a total of $43,025 in attorney’s fees because Hankook’s “conduct in obstructing discovery has been egregious . . . . [and] to deter further such obstruction of discovery in this matter.” In the order, the trial court stated that “[t]his Order is a final Order for purposes of appeal.” A purported Rule 54(b) certificate appeared at the end of the order. (The Rule 54(b) certificate was rejected by the Court of Appeals in this case because it merely tracked the language of the rule, rather than making specific factual findings; we have previously blogged on this topic, and so therefore will not go into detail on that issue in this blog post.)

The question in the Hancock case is whether an order that imposes sanctions rises to the level of an order of contempt that would make that order a final order for purposes of appeal. In Hancook, the Court of Appeals held that such an order was not an appealable order. Specifically, the Court of Appeals held as follows:

Hankook’s notice of appeal cited to the contempt-with-sanctions provision as the basis to invoke appellate jurisdiction, but the trial court here did not hold Hankook “in contempt,” although it could have so determined as an appropriate sanction under Rule 37(b)(2)(D). Rather, the trial court here entered an order for attorney fees for discovery obstruction. This is not a final, appealable order.

This distinction is a fine line, so counsel must be careful when making the decision whether or not to file a notice of appeal from an order imposing sanctions. It would appear that had the order simply added a few words (stating that one of the parties or counsel was being held “in contempt”), this order would have been considered a final, and, therefore, appealable order. This is yet another reason that it is vital for counsel to closely and carefully read every order before deciding whether or not to file a notice of appeal from that order.

A cautionary note is in order, however. As we have mentioned before, in light of the opinion in Massinelli v. Massinelli, 2016 Ark. App. 90 (and the cases upon which it relied), counsel should always be cautious about deciding not to file a notice of appeal from an order that is arguably final, even if it appears to be nonfinal.

Child Visitation Order Not Final Where Contempt and Child Support Issues Were Left Undecided

October 26, 2016November 17, 2016 ~ Andy Taylor

If you’ve followed this blog for very long, one of the topics that arises quite frequently is the issue of whether or not an order is a final, appealable order. This question often arises in family law cases, because there are so many moving parts in those cases. The decision of the Arkansas Court of Appeals in John v. Bolinder, 2016 Ark. App. 357, provides an example of such a case.

In John, an unmarried couple had one child together in 2010. In 2012, the trial court awarded primary custody to mom, with dad to have visitation (one week per month plus extended summer visitation) and also to pay child support. In 2014, the trial court modified the order to decrease dad’s nonsummer visitation to one weekend per month.

In late 2014, dad filed a motion for release of mom’s medical and psychological records. A few months later, dad filed a motion to modify child support, confirm the length of summer visitation, or modify the summer visitation. Dad also requested that his summer visitation be expanded, and that child support be reduced during the summer visitation.

At some point during this timeline, mom filed a motion for contempt against dad. A hearing was held on these matter in May of 2015, at which hearing the parties mentioned that this contempt motion was unresolved.

In June 2015, the trial court entered an order denying dad’s motion seeking the medical/psychological records and denying the motion to modify summer visitation (although the trial court did slightly modify the summer visitation schedule). The order did not address mom’s contempt motion, and it specifically reserved the issue of child support.

The question, then, is whether an order deciding visitation is final in a situation where a contempt motion and a motion to modify child support are outstanding. Dad argued that these issues (contempt and child support) were merely collateral matters not affecting the finality of the order. The Court of Appeals rejected this argument, relying on two cases: Burton v. Templeman, 2015 Ark. App. 101 (holding that an order denying a motion to modify visitation was not final where it specifically reserved a ruling on a motion for contempt) and Mitchell v. Mitchell, 98 Ark. App. 47, 249 S.W.3d 847 (2007) (holding that an order on “various post-divorce disputes” was not final where it specifically reserved a ruling on child support).

In light of this decision, there are two things to keep in mind when deciding whether to file a notice of appeal from a decision involving child custody and visitation. First, keep in mind that had the facts been slightly different, this order likely would have been a final order pursuant to Rule 2(d) of the Arkansas Rules of Appellate Procedure-Civil, which provides that “[a]ll final orders awarding custody are final appealable orders.” Second, in light of the opinion in Massinelli v. Massinelli, 2016 Ark. App. 90 (and the cases upon which it relied), counsel should always be cautious about deciding not to file a notice of appeal from an order that is arguably final, even if it appears to be nonfinal. The best option in this situation would probably be to try to obtain a Rule 54(b) certification to any order that leaves unfinished business.

Proceedings Under Trust Code (Rather than Probate Code) Not Appealable Unless Final

October 29, 2014December 29, 2014 ~ Andy Taylor

In Bank of the Ozarks v. Cossey, 2014 Ark. App. 581, the Arkansas Court of Appeals addressed the question of whether an order that appears to be a non-final order is still appealable under Ark. R. App. P. (2)(a)(12), which permits an appeal from almost all orders entered in probate cases.

Only a brief summary of the facts of this case is necessary. In sum, there was a dispute about who was the trustee of the Hamilton Family Trust. One of the beneficiaries of the trust, Ms. Cossey, filed a petition claiming that Bank of the Ozarks was the trustee and demanding an accounting from Bank of the Ozarks. Bank of the Ozarks claimed it was not the trustee of the trust. The circuit court held that Bank of the Ozarks had acted as trustee, and ordered Bank of the Ozarks to perform an accounting within 30 days. Bank of the Ozarks appealed from this order, along with a separate order awarding attorney’s fees and costs to Ms. Cossey.

On appeal, the Court of Appeals first addressed the question of whether the order requiring an accounting was a final order. The court held that “[a]n order that contemplates further action by a party or the court is not a final, appealable order.” Because this order required Bank of the Ozarks to perform an accounting, and because there would likely be additional oversight and rulings by the circuit court, the Court of Appeals held that this was not a final order.

The Court of Appeals then turned its attention to Ark. R. App. P. (2)(a)(12) and Ark. Code Ann. § 28-1-116, which together permit appeals from almost all orders in probate cases. In fact, the Court of Appeals held that “[w]e have interpreted section 28-1-116(a) to allow an immediate appeal from almost any probate order.” However, the issue in this case related to who should be the trustee of the Hamilton Family Trust, a question governed by Ark. Code Ann. § 28-73-701. The question, then, is whether this statute is part of the probate code. Based on the notes to Ark. Code Ann. § 28-1-101, which lists the statutes that make up the probate code, the Arkansas Court of Appeals held that the statute applicable to this case (which was not included in the list) was not part of the Arkansas Probate Code. The Court of Appeals also examined Ark. Code Ann. § 28-1-104, which lists the types of cases that are considered to be probate cases. Although this statute was originally designed to set the jurisdictional guidelines when there were separate circuit, chancery, and probate courts, the Court of Appeals held that the statute is still applicable when determining appellate jurisdiction. Because trust matters are not included in the list of matters considered to be probate matters, the Court of Appeals held that the issues in Bank of the Ozarks were not probate matters.

Having concluded that the trust dispute in Bank of the Ozarks was not a probate matter, a final order was required. Because there was no final order, the Court of Appeals dismissed the appeal. The Court did, however, give some guidance to the parties as to how to proceed. The Court suggested in its opinion that a Rule 54(b) certificate (pursuant to which the parties may appeal from a non-final order) might allow the order to become appealable, although the Court of Appeals was very careful not to “comment[] on the propriety of a Rule 54(b) certificate . . .” Nevertheless, it’s probably a safe bet that this case will soon be before the Court of Appeals again—this time with a Rule 54(b) certificate.

Arkansas Supreme Court’s Procedural Ruling Has Practical Effect of Temporarily Stopping Same-Sex Marriages in Arkansas

May 14, 2014May 14, 2014 ~ Tasha C. Taylor

Lack of Final Order Prevents Arkansas Supreme Court from Issuing a Stay of Pulaski County Circuit Court’s Ruling in Same-Sex Marriage Case

The Arkansas Supreme Court handed down a decision late this afternoon dismissing without prejudice the appeal taken by the State from the Pulaski County Circuit Court’s recent decision declaring Arkansas’s ban on same-sex marriage unconstitutional.

According to the per curiam decision, the circuit court’s order was not final because it failed to adjudicate all the claims or to otherwise include a Rule 54(b) certificate, which would allow an interlocutory appeal from an otherwise non-final order.

Arkansas Supreme Court Essentially Holds That a Stay is Unnecessary Because There is No Order Striking Down Licensing Statute

The Arkansas Supreme Court also denied the State’s plea for the Court to help alleviate confusion among circuit clerks by granting a stay pursuant to the Supreme Court’s superintending authority. The Court noted that because the circuit court had not issued a ruling with respect to Arkansas Code Annotated Section 9-11-208(b) (Repl. 2009), “License not issued to persons of the same sex,” the circuit court’s order had no effect on that statute and its prohibition against circuit and county clerks issuing same-sex marriage licenses.

Although the Pulaski County Circuit Court’s decision struck down as unconstitutional two state statutes that ban marriages by people of the same sex (Arkansas Code Annotated Sections 9-11-107, “Validity of foreign marriages” and 9-11-109, “Same sex marriage void”), it failed to rule on Arkansas Code Annotated Section 9-11-208(a)(1)(B), which provides, “A license shall not be issued to a person to marry another person of the same sex, and no same-sex marriage shall be recognized as entitled to the benefits of marriage.” It appears that this means that that statute is still in effect, so the practical effect of this ruling appears to be that circuit clerks are prohibited from issuing licenses to same-sex couples until the circuit court clarifies its ruling.

The Court’s full decision is available here: Arkansas Supreme Court Same-Sex Marriage Decision.

–Tasha Taylor

The Rule 54(b) Certificate Requirement of “Specific Factual Findings”: Billingsley v. Benton NWA Properties, LLC

March 12, 2014May 14, 2014 ~ Andy Taylor

As we have discussed previously, Rule 54(b) of the Arkansas Rules of Civil Procedure allows a court to issue a final judgment as to certain claims or parties (when multiple claims or parties are involved). By doing so, the trial court makes it possible for the court’s rulings as to the specific claims or parties to be appealed before the other claims are heard. This option is available “only upon an express determination, supported by specific factual findings, that there is no just reason for delay.” Ark. R. Civ. P. 54(b).

Billingsley v. Benton NWA Properties, LLC

In the recent case of Billingsley v. Benton NWA Properties, LLC, 2014 Ark. 65, the Arkansas Supreme Court examined a Rule 54(b) certificate and held that it was not sufficient. In that case, the plaintiffs owned a piece of property that flooded, which the plaintiffs alleged caused approximately $3,500,000 in damages (including loss of value to the property). The plaintiffs sued “many defendants” for the damage caused by the flood, and ultimately reached a settlement agreement with Benton NWA Properties, LLC. Prior to trial on the remaining claims against the remaining parties, a dispute arose between the plaintiffs and Benton NWA Properties, LLC regarding the terms of the settlement agreement. Therefore, the plaintiffs and Benton NWA filed competing motions to enforce the settlement agreement, and the trial court granted Benton NWA’s motion to enforce. The plaintiffs sought to appeal, and the trial court agreed to enter a judgment along with a Rule 54(b) certificate.

The Arkansas Supreme Court raised, sua sponte, the issue of the sufficiency of the Rule 54(b) certificate, noting that the sufficiency of such a certificate is jurisdictional. The Court looked at Holbrook v. Healthport, Inc, 2013 Ark. 87, in which the court had held that a one-sentence explanation in the Rule 54(b) certificate was insufficient. In Billingsley, the trial court had written a substantial certificate (it was over 5 paragraphs long, most with more than one sentence). Nevertheless, the court held that the 54(b) certificate “fail[ed] to even include a one-sentence factual finding” regarding any danger of hardship or injustice that could be alleviated by an immediate appeal. Therefore, the Arkansas Supreme Court dismissed the appeal without prejudice.

The Takeaway

Based on Holbrook and now Billingsley, the key to an effective Rule 54(b) certificate appears to be to explicitly state the hardship or injustice that will result if an immediate appeal is not allowed. Simply laying out the procedural history is not enough, even if the implication from the history is that it would be inefficient to allow the trial to proceed without having the appeal heard first. So, make sure that any Rule 54(b) certificate not only lays out the history of the case, but also the specific problems that will occur in the future if the appeal is not immediately heard.

Related Posts:

— Andy Taylor

Ford Motor Company v. Washington (Ford III): The Third Time Is Not the Charm (and it ain’t over yet)

June 5, 2013March 12, 2014 ~ Andy Taylor ~ 2 Comments

Introduction

We have written two previous blog posts regarding this case: The first blog post discussed Ford Motor Co. v. Washington, 2012 Ark. 325 (“Ford I“), and the second blog post discussed Ford Motor Co. v. Washington, 2012 Ark. 354 (“Ford II“). In these two opinions, the Arkansas Supreme Court held that there was not a final order because a party that was orally dismissed by the Court was never dismissed in any written order. (Ford I was the original opinion, and Ford II was an opinion denying the petitions for rehearing.) In Ford Motor Co. v. Washington, 2013 Ark. 88 (“Ford III“), the Arkansas Supreme Court again held that there was no final order, this time for a completely different reason. A brief review of the factual and procedural history of this case is in order.

**Factual & Procedural History of the Ford Case**

The facts of the case are as follows: Mr. Johnny Ray Washington and his son were travelling in a 1994 Ford Explorer when Ms. Karah Allen Williams ran a stop sign, colliding with Mr. Washington’s Explorer. Ford I, 2012 Ark. 325, at 2. The Explorer flipped twice, killing Mr. Washington (his son survived). Id. Mr. Washington’s wife, Ms. Paulette Washington, sued (individually and as administratrix of Mr. Williams’s estate) the manufacturer of the vehicle, the dealership that sold the vehicle, and the driver who ran the stop sign (Ms. Williams). Id. Ms. Washington eventually settled with the driver, and an order was entered dismissing her. Id. Ms. Washington also nonsuited her claims against the dealership, and her attorneys announced the nonsuit to the trial court, but no written order was ever entered dismissing the dealership. Id.

At the conclusion of the trial, the jury returned verdicts based on special interrogatories. Ford III, 2013 Ark. 88, at 3-4. The jury found that Ford and Ms. Williams were both proximate causes of Mr. Williams’s death, and assigned 50% of the fault to each. Id. (Although Ms. Williams had been dismissed from the lawsuit, she was included on the verdict form for apportionment purposes.) Id. at 2. The jury awarded $4,652,125 in compensatory damages and $2,500,000 in punitive damages. Id. at 3-4. The trial court incorporated the special interrogatories into its judgment, and stated: “Therefore, judgment is awarded to the respective plaintiffs as set out above.” Id.

Ford appealed, asserting that the circuit court had erred by: (1) refusing to admit evidence that the plaintiff was not wearing a seatbelt; (2) refusing to hold that some of Ms. Williams’s claims were preempted by federal law; (3) refusing to grant JNOV with respect to the plaintiff’s punitive damages claim; and (4) refusing to reduce the compensatory damages by half. Ford I, 2012 Ark. 325, at 1.

In Ford I, the Court held that the judgment was not a final order because although the dealership had been orally dismissed from the case, no written order had ever been entered dismissing the dealership. Id. at 2. Both parties filed petitions for rehearing, arguing that language in the notices of appeal and cross-appeal (in which the parties had stated that they abandoned all pending but unresolved claims) made the order a final order. Ford II, 2012 Ark. 354, at 1. In Ford II, the Arkansas Supreme Court rejected this argument, holding that that language in the notice of appeal dismissed only claims and not parties. Id. at 1-2.

After the Court’s holdings in Ford I and Ford II, the case was remanded to the trial court so that a written order could be entered dismissing the party with whom the plaintiffs had settled (the dealership). Ford III, 2013 Ark. 88, at 4-5. Ford Motor Company appealed again, raising the same four points on appeal. Id. at 1-2.

**The Ford III Decision**

On appeal in Ford III, the Arkansas Supreme Court raised, sua sponte, the issue of finality. Id. at 5. The Court held that in order for a judgment to be final, “the amount of the judgment must be computed, as near as may be, in dollars and cents and . . . the judgment must specify clearly the relief granted or other determination of the action.” Id. (citing Thomas v. McElroy, 243 Ark. 465, 420 S.W.2d 530 (1967); Ark.Code Ann. § 16–65–103). The Court held that the problem with the judgment that had been entered by the circuit court was that it did not set forth a specific dollar amount owed by Ford. Id. at 6. The Court held that “[i]nstead, the circuit court merely reproduced the jury’s answers to the interrogatories and gave no further guidance.” Id. In support of its holding, the Arkansas Supreme Court noted that in Ford’s brief, Ford had requested that the Arkansas Supreme Court clarify the amount of money that it owed. Id. Because the Court held that the judgment did not constitute a final order, the Court dismissed the appeal without prejudice. Id.

The Ford III Dissent

This opinion is notable not just for its holding, but also for a rather vigorous dissent, written by Justice Hart. Id. at 7-8 (Hart, J., dissenting). The dissent seems to be based on two considerations. First, Justice Hart noted that the record in the case was “huge,” consisting of a 2,208-page abstract and a 1,201-page addendum. Id. at 7. She then noted that the Supreme Court had previously reviewed the same judgment, and had remanded the case for lack of a final order (for failure to dismiss a party by written order), but had not raised this particular finality issue until the case had been remanded and was back up on appeal. Id.

Second, the dissent argues that the judgment was, in fact, a final order. Id. at 7-8. The dissent noted that the jury interrogatories (and the judgment) set forth the exact amount of compensatory and punitive damages, and that the interrogatories then apportioned fault, with 50% of the fault attributed to the manufacturer, and 50% of the fault attributed to the driver. Id. at 7. The dissent then argues that “[i]t is simply not defensible to assert that this judgment is not final because this court does not deign to perform a simple arithmetical operation that is routinely taught in the second grade—division by two.” Id. at 7.

Practical Impact of Ford III

The practical impact of this decision is that an order or judgment involving money must state the exact amount owed, in dollars and cents. There can be no ambiguity. Although the judgment in Ford III did not specifically set forth a formula (it was implied that the compensatory damage award would be reduced by half because the jury had determined that Ford was only 50% responsible, but that was not explicitly stated in the judgment), the opinion in Ford III seems to imply that even a formula would not have been sufficient. Therefore, the safest route to obtain a final judgment is to ensure that any money judgment sets forth an exact amount owed, down to the penny.

Related Posts:

Andy Taylor

Abandonment Language in Notice of Appeal is Not Effective as to Stray Parties (Ford II)

November 12, 2012March 12, 2014 ~ Andy Taylor ~ 2 Comments

In Ford Motor Company v. Washington, 2012 Ark. 354 (“Ford II“), the Arkansas Supreme Court addressed whether a party’s statement in its notice of appeal that it abandons all pending but unresolved claims is effective as a dismissal against a stray party. Ford II is the Court’s opinion on a petition for rehearing, so before examining that case, we need to discuss the original case first.

We addressed the case of Ford Motor Company v. Washington, 2012 Ark. 325, (“Ford I“) in a previous blog post. As discussed in that post, the plaintiff in that case sued three parties: the driver of a vehicle, the manufacturer of the vehicle, and the dealership that sold the vehicle. The plaintiff settled with the driver, and an order was entered dismissing the driver with prejudice. The plaintiff moved for a voluntary nonsuit against the dealership, and the motion was granted orally, but no order was ever entered dismissing the dealership.

In Ford I, the plaintiff prevailed at the trial level against the manufacturer, but when the manufacturer appealed, the Arkansas Supreme Court refused to hear the appeal for lack of a final order. (Although not mentioned in Ford I, the Ford II opinion indicates that both parties filed notices of appeal/cross-appeal.) The Arkansas Supreme Court held that the nonsuit against the dealership was ineffective because there was no written order dismissing the dealership. In response to this decision, the plaintiff and the manufacturer-defendant jointly petitioned the Court for a rehearing, basing their argument on Searcy County Counsel for Ethical Gov’t v. Hinchey, 2011 Ark. 533.

In Hinchey, the plaintiffs alleged that the county judge had sold a piece of equipment to two buyers without following the statutory requirements for such a sale. The lawsuit named both the county judge and the buyers as defendants. The county judge filed a motion for summary judgment, which was granted. The plaintiffs appealed, but the Arkansas Supreme Court refused to hear the appeal because the circuit court’s order granting the county judge’s motion for summary judgment did not dismiss the complaint against the buyers.

In its opinion in Hinchey, the Arkansas Supreme Court observed that the plaintiff had failed to include a statement in its notice of appeal that it abandoned any pending but unresolved claim. Rule 3(e)(vi) of the Arkansas Rules of Appellate Procedure–Civil requires that this statement be included in all notices of appeal. The rule provides that such a statement in the notice of appeal “operate[s] as a dismissal with prejudice effective on the date that the otherwise final order or judgment appealed from was entered.”

The Reporter’s Notes to the amendment to the rule state the purpose as follows:

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.

In Hinchey, the Arkansas Supreme Court stated that if the plaintiff had included this statement in its notice of appeal, the statement “would have operated as a dismissal with prejudice of its claim against [the buyers],” meaning there would have been a final order and the court would have been able to hear the appeal.

With this background in mind, we now move back to a discussion of Ford II. In Ford II, the plaintiff had included the required abandonment language in its notice of cross-appeal. Therefore, both parties argued that the language operated as a dismissal of all of the plaintiff’s claims against the dealership.

The Arkansas Supreme Court disagreed. The Court noted that both the text of the rule itself and the Reporter’s Notes refer to unresolved and/or stray “claims,” but not “parties.” The Court also noted that the cases cited in the Reporter’s Notes addressed unresolved claims, and that none of those cases involved stray parties. Based on this, the Arkansas Supreme Court held that “[t]he Rule does not . . . allow an appealing party to dismiss a party from the action by such a statement in a notice of appeal or notice of cross-appeal.” The Court further held that “Rule 3 requires appellants and cross-appellants to abandon pending and unresolved claims, but it does not permit appellants and cross-appellants to dispose of parties in the same fashion.”

Finally, the Arkansas Supreme Court addressed its prior statement in Hinchey that seemed to indicate that such a statement in the notice of appeal would act as a dismissal of any stray parties. Rather than attempting to distinguish the two cases, the Court simply held that the “statement in Hinchey was merely dicta.”

The result of this decision is that even if an appealing party includes the abandonment language (from Rule 3(e)(vi) of the Arkansas Rules of Appellate Procedure–Civil) in its notice of appeal, stray parties must have been dismissed in writing in order for the order to be final. The abandonment language simply will not operate to dismiss stray parties from a lawsuit.

Related Posts:

–Andy Taylor

Oral Order Dismissing a Party Not Sufficient to Create Final Order (Ford I)

September 18, 2012March 12, 2014 ~ Andy Taylor ~ 3 Comments

The first round of decisions from the Arkansas Supreme Court for its 2012-13 term included a holding on a familiar issue concerning the finality of decisions. In Ford Motor Company v. Washington, 2012 Ark. 325, the Arkansas Supreme Court again reiterated that a written order is required in order for the voluntary nonsuiting of a party to be effective.

The case involved an automobile accident that involved a Ford Explorer and a Nissan Sentra. The driver of the Explorer was killed, and the passenger (the driver’s son) was injured. The plaintiff (the driver’s wife) sued individually, and on behalf of her son and her husband’s estate. The plaintiff filed claims against the manufacturer of the vehicle (Ford Motor Company) and the dealership that sold the vehicle (Freeway Ford Lincoln Mercury, Inc.) for negligence, strict liability, failure to warn, and breach of warranties. The plaintiff also filed a negligence claim against the driver of the Sentra (Karah Allen Williams).

The plaintiff eventually settled the claim against Ms. Williams. Then, at trial, the plaintiff moved to nonsuit her claims against Freeway. The trial court granted the motion orally, but the dismissal was never reduced to a written order.

At trial, the plaintiff prevailed on her claims against Ford and was awarded compensatory and punitive damages. Ford appealed, arguing that certain evidence had been improperly excluded, that certain claims were preempted by federal law, that the punitive damages award should be reversed, and that the compensatory damages should be reduced.

The Arkansas Supreme Court held that the order in the case was not a final order. Quoting from Arkansas Rule of Civil Procedure 41(a), the Court held that “[a] voluntary nonsuit is ‘effective only upon entry of a court order dismissing the action.'” Ford Motor Co., 2012 Ark. 325, at 2. Because there was no written order dismissing Freeway, the order in the case did not adjudicate all claims against all parties. Therefore, the order was not a final order, and the Arkansas Supreme Court dismissed the appeal without prejudice.

Related Posts:

–Andy Taylor

Rule 54(b)(5) and the Rule of Unintended Consequences: Yet Another Rule 54(b) Trap

June 15, 2011March 12, 2014 ~ Andy Taylor ~ 4 Comments

In 2008, Rule 54(b) of the Arkansas Rules of Civil Procedure was amended in an effort to resolve a finality problem that kept reoccurring. See Ark. R. Civ. P. 54(b), Addition to Reporter’s Notes, 2008 Amendments. The problem was that defendants (often “John Doe” defendants) would be added to a complaint, but then those defendants would never be served. See id. An order would be entered that would be considered by everyone to be final, and one party would then appeal. See id. However, because there were unserved defendants, the order would not be binding on those parties, and the Supreme Court or Court of Appeals would be forced to dismiss the appeal for lack of a final order. The purpose of Rule 54(b)(5) was to deal with this situation by providing that once a final order is entered, any claims against named but unserved defendants (including John Doe defendants) are dismissed. See Ark. R. Civ. P. 54(b)(5).

In Global Economic Resources, Inc. v. Swaminathan, 2011 Ark. App. 249, the Arkansas Court of Appeals introduced an interesting twist to the new rule. The case has a rather lengthy history, as is outlined below.

Trial Court

The case began as a breach of contract action by Global against Susindran Swaminathan and Venkataraman Melpakkam (referred to in the remainder of this blog post as the “Individuals”), doing business as Sabare SCM Solution, Inc. Id. at 1-2. After the answer was filed, Global filed an amended complaint dismissing the Individuals without prejudice, and adding Sabare SCM Solution, Inc., a Georgia corporation, as a separate defendant. Id. at 2. The trial court dismissed Sabare SCM with prejudice, holding that the court did not have personal jurisdiction. Id. Global appealed this order. Id.

First Appeal

Although the trial court had entered an order dismissing Sabara SCM, it had not entered an order in response to Global’s motion to dismiss the Individuals. Id. Therefore, the Court of Appeals dismissed the appeal for lack of a final order. Id.

Back to the Trial Court

After the dismissal of the first appeal, Global filed another amended complaint. Id. at 2-3. This complaint included as defendants the Individuals and Sabare SCM, and also added Ganesh Kumar and Sabare USA, Inc., as defendants. Id. On the same day, Global filed a motion to withdraw its earlier motion to dismiss the Individuals. Id. at 3. Sabare SCM and the Individuals again raised personal jurisdiction as a defense. Id. On March 11, 2010, the trial court entered an order dismissing Sabare SCM and Sabare USA for lack of personal jurisdiction. Id. In the same order, the trial court stated that it was granting Global’s earlier motion to dismiss the Individuals. Id.

After this order was entered, Global claimed to have served Sabare USA. Id. at 4. Sabare USA moved to quash, arguing that the court did not have personal jurisdiction. Id. In its response, Global asked that the motion to quash be denied, and also argued that the order dismissing the Individuals was improper because there was no motion to dismiss pending at the time (because Global had withdrawn its motion to dismiss). Id.

On September 30, 2010, the trial court entered an amended order reaffirming the conclusions in its March 11, 2010 order. Id. at 4-5. Six days later, on October 6, 2010, the trial court entered an “amended amended order,” correcting an error not relevant to the subject matter of this blog post. Id. at 5. On October 25, 2010, Global filed a notice of appeal.

The Second Appeal

On appeal, the Court of Appeals dismissed the appeal, holding that the notice of appeal was not timely filed. Id. at 5-7. The problem was that after the trial court dismissed the Individuals and Sabare SCM on March 11, 2010, only Sabare USA and Gamesh Kumar remained as parties. Id. Even though Sabare USA was served approximately two weeks after the March 11 order was entered, it had not been served prior to entry of that order (presumably Gamesh Kumar was never served). Id. at 4, 6. Therefore, these two parties were “named but unserved defendant[s]” pursuant to Rule 54(b)(5), meaning that any claims against them were dismissed at the time the claims against the served parties were dismissed. Id. at 6. As a result, the March 11, 2010 order was considered the final order for purposes of the notice of appeal, meaning that the October 25, 2010 notice of appeal was not timely filed. Id.

Conclusion

As mentioned above, the intent of Rule 54(b)(5) was to correct previous outcomes that “waste[d] litigants’ time and money and scarce judicial resources.” Ark. R. Civ. P. 54 Addition to Reporter’s Notes, 2008 Amendments. The rule was meant to resolve the problem created when “a forgotten defendant[s] . . . presence destroys the finality of the judgment being appealed.” Id. In this case, however, the unserved defendant actually created finality when none was intended, and the result was that the appeal was dismissed with the merits of the case never being addressed by the appellate court.

–Andy Taylor

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

February 10, 2011March 12, 2014 ~ Andy Taylor ~ 5 Comments

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:

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

Source Document	Claim	Defendants
Original Complaint	Violation of Arkansas Medical Malpractice Act	Beverly Enterprises, Inc. Beverly Health and Rehabilitation Services, Inc. Beverly Enterprises – Arkansas, Inc., d/b/a Beverly Healthcare – Camden)
Original Complaint	Violation of General Duty To Provide Adequate and Appropriate Custodial Care	Beverly Enterprises, Inc. Beverly Health and Rehabilitation Services, Inc. Beverly Enterprises – Arkansas, Inc., d/b/a Beverly Healthcare – Camden)
Original Complaint	Violation of Arkansas Long Term Care Resident’s Rights Statute	Beverly Enterprises, Inc. Beverly Health and Rehabilitation Services, Inc. Beverly Enterprises – Arkansas, Inc., d/b/a Beverly Healthcare – Camden)
Original Complaint	Deception by Representing Ability To Provide Proper Care	Beverly Enterprises, Inc. Beverly Health and Rehabilitation Services, Inc. Beverly Enterprises – Arkansas, Inc., d/b/a Beverly Healthcare – Camden)
Original Complaint	Violation of Arkansas Deceptive Trade Practices Act	Beverly Enterprises, Inc. Beverly Health and Rehabilitation Services, Inc. Beverly Enterprises – Arkansas, Inc., d/b/a Beverly Healthcare – Camden)
Amended Complaint	Breach-of-Fiduciary Claim	Beverly Enterprises, Inc. Beverly Health and Rehabilitation Services, Inc. Beverly Enterprises – Arkansas, Inc., d/b/a Beverly Healthcare – Camden) Beverly Indemnity, Ltd. William R. Floyd Douglas J. Babb David R. Devereaux Jeffrey P. Freimark Cindy H. Susienka Patrice K. Acosta James M. Griffith Patricia C. Killing Richard Skelly, Jr.
Amended Complaint	Violation of Uniform Fraudulent Transfer Act	Beverly Enterprises, Inc. Beverly Health and Rehabilitation Services, Inc. Beverly Enterprises – Arkansas, Inc., d/b/a Beverly Healthcare – Camden) Beverly Indemnity, Ltd. William R. Floyd Douglas J. Babb David R. Devereaux Jeffrey P. Freimark Cindy H. Susienka Patrice K. Acosta James M. Griffith Patricia C. Killing Richard Skelly, Jr. Rubin Schron Fillmore Capital Partners, LLC Fillmore Strategic Investors, LLC Pearl Senior Care, Inc. PSC Sub, Inc. Geary Property Holdings, LLC

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.

–Andy Taylor