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Article: June 2018: United States Supreme Court Holds That Litigant May Appeal Final Judgment in Individual Action That Is Part of Ongoing Consolidated Proceeding

Business Litigation Reports

In Gelboim v. Bank of America Corp., 135 S. Ct. 897 (2015), the Supreme Court held that one of multiple cases consolidated for multidistrict litigation under 28 U.S.C. § 1407 is immediately appealable upon an order disposing of that case, regardless of whether any of the other cases remain pending. But the Court declined to answer whether the same rule applies to cases consolidated under Rule 42(a) of the Federal Rules of Civil Procedure. Hall v. Hall answers that question. 138 S. Ct. 1118 (2018). In a unanimous decision authored by Chief Justice Roberts, the Supreme Court held that civil cases consolidated under Federal Rule of Civil Procedure 42(a) retain their separate identities, so that a final decision in one case is immediately appealable by the losing party, even if other cases in the consolidated proceeding remain pending. The holding resolves a four-way split among the courts of appeals and provides clear guidance to civil litigants about when they must appeal.

Background
The case arises from a long-running family dispute. Samuel Hall, a lawyer in the Virgin Islands, served as the caretaker for his mother Ethlyn Hall and provided her with legal assistance. The two had a falling out over Samuel’s handling of Ethlyn’s real estate holdings. During a visit from her daughter Elsa, Ethlyn established an inter vivos trust, transferred all of her property into the trust, and designated Elsa as her successor trustee.

Ethlyn then sued Samuel and his law firm in the district court of the Virgin Islands both in her individual capacity and as trustee of the trust (the “trust case”). While the case was pending, Ethlyn died and Elsa became the successor trustee and accordingly the plaintiff in the trust case. In response, Samuel filed various counterclaims against Elsa—in both her individual and representative capacities—alleging that Elsa had interfered in Ethlyn’s relationship with Samuel. Elsa, however, was not a party to the trust case in her individual capacity. As a result, Samuel
filed a new complaint against Elsa in her individual capacity in the same district court (the “individual case”), raising the same claims that he had asserted as counterclaims in the trust case. On Samuel’s motion, the district court consolidated the actions under Rule 42(a)(2), which allows courts to consolidate actions involving “common questions of law or fact.”

In both cases, the jury found against Elsa, and in both cases, the clerk entered judgment. But in the individual case, the district court granted Elsa a new trial, which had the effect of reopening the judgment. Elsa then filed a notice of appeal from the district court’s judgment in the trust case. Samuel moved to dismiss the appeal on jurisdictional grounds, arguing that the judgment was not final and appealable because the individual case was pending. The Court of Appeals for
the Third Circuit agreed with Samuel and dismissed the appeal for lack of jurisdiction, concluding that because the actions had been consolidated for all purposes, a judgment on one set of claims was not final while another set of claims remained in the district court.

The Decision
The Supreme Court reversed. The Court started its analysis by explaining that had the district court not consolidated the trust and individual cases, there would be no question that Elsa could immediately
appeal from the judgment in the trust case because 28 U.S.C. § 1291 vests the courts of appeals with jurisdiction over “appeals from all final decisions of the district courts,” except those directly appealable
to the Supreme Court. Thus, the Court viewed the question confronting it as whether the consolidation had merged the cases into one, so that judgment in the trust case was interlocutory because work remained to
be done in the individual case.

After reviewing various dictionary definitions of “consolidate,” the Court concluded that the case “was not a plain meaning case.” It thus turned to the legal lineage of the word, which it explained stretches back
at least to the first federal consolidation statute, enacted by Congress in 1813. The Court canvassed Supreme Court and courts of appeals decisions interpreting that statute and in which consolidation was held not to affect the amount in controversy of cases, the number of peremptory challenges available to parties, and the issues that parties could raise or appeal. The Court explained that these cases demonstrate that, from the outset, courts understood “consolidation not as completely merging the constituent cases into one, but instead as enabling more efficient case management while preserving the distinct identities of the cases and the rights of the separate parties in them.”

The Court noted that it was against this backdrop that Rule 42(a) was enacted in 1938. Because Rule 42(a) was modeled on the 1813 statute and did not define “consolidate,” the Court concluded that “the
term presumably carried forward the same meaning we had ascribed to it under the consolidation statute for 125 years.” The Court explained that Samuel’s argument that there was a significant distinction between the original consolidation statute and Rule 42(a)(2) was based on a strained reading of the Rule. And the Court added that if Rule 42(a) were meant to transform consolidation into something different than
what it had been, the Court “would have heard about it” from Congress or the Rules Advisory Committee. The Court observed that nothing in the drafting or committee proceedings leading to Rule 42 revealed such an expectation or intent.

The Court concluded by explaining that its opinion did not mean that district courts cannot consolidate cases for “all purposes” in appropriate it circumstances. Rather, its holding should be read to mean that constituent cases retain their distinct identities at least to the extent that a losing party in one action is able to immediately appeal a final judgment.