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Article: Gelboim et al. v. Bank of America Corp. et al.: Supreme Court to Address Viability of Partial Appeals in Multi-District Litigations

November 20, 2014
Business Litigation Reports

Timing is everything. As any trial lawyer can tell you, the right to an appeal is important. But often, the right to a speedy appeal can be even more valuable. Under the final judgment rule, however, parties in federal court can appeal a ruling only after the district court has entered a final judgment. 28 U.S.C. § 1291. Courts apply this rule in the vast majority of cases, which involve a single or small group of plaintiffs suing a single or small group of defendants. As cases become more complex, however, the final judgment rule’s bright-line application starts to fade. Parties to a class action, for instance, would have to wait until final judgment to appeal the grant or dismissal of class certification. Recognizing the potential significance of a class certification decision (and the harm that can in some cases flow from a delayed appeal), the Supreme Court carved out a right to request an immediate appeal of a class certification decision. Fed. R. Civ. P. 23(f). The Court has not yet created a similar mechanism for speedy appeal of major decisions in multi-district litigation, such as a grant of a motion to dismiss applicable only to certain plaintiffs. Lower courts have dealt with the issues in different ways, and, as a result, there is now a Circuit split as to whether partial appeals should be permitted in a MDL. The Supreme Court recently granted certiorari on this issue in Gelboim v. Bank of America Corp., Case Nos. 13-3565, 13-3636, 2013 WL 9557843, 2013 U.S. App. LEXIS 26157 (2d Cir. 2013), cert. granted, 134 S. Ct. 2876 (June 30, 2014) (No. 13-1174).

One approach, adopted by the Ninth, Tenth, and Federal Circuits, is to categorically prohibit partial appeals in a MDL until a final judgment as been rendered as to all actions unless the district court certifies an interlocutory appeal under Rule 54(b). See, e.g., Huene v. United States, 743 F.2d 703 (9th Cir. 1984); accord Trinity Broad. Corp. v. Eller, 827 F.2d 673, 675 (10th Cir. 1987) (reasoning that applying a flexible standard “would lead to the same piecemeal review Rule 54(b) seeks to prevent”); Spraytex, Inc. v. DJS&T & Homax Corp., 96 F.3d 1377, 1380 (Fed. Cir. 1996). In the First and Sixth Circuits, by contrast, courts allow a claimant dismissed from a consolidated action to appeal as of right without requiring the claimant to obtain certification under Federal Rule 54(b). See In re Massachusetts Helicopter Airlines, Inc., 469 F.2d 439, 441 (1st Cir. 1972); see also Kraft, Inc. v. Local Union 327, Teamsters, 683 F.2d 131, 133 (6th Cir. 1982). A number of remaining courts—the Third, Fifth, Seventh, Eighth, Eleventh, and D.C. Circuits—apply a more flexible standard, evaluating each case individually. See, e.g., Schippers v. United States, 715 F.3d 879, 884 (11th Cir. 2013);United States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214, 216 (D.C. Cir. 2003); Tri-State Hotels, Inc. v. FDIC, 79 F.3d 707, 711-12 (8th Cir. 1996); Hall v. Wilkerson, 926 F.2d 311, 314 (3d Cir. 1991); Ivanov-McPhee v. Washington Nat’l Ins. Co., 719 F.2d 927 (7th Cir. 1983); Ringwald v. Harris, 675 F.2d 768 (5th Cir. 1982).

The Second Circuit, which rendered the Gelboim decision now before the Supreme Court, has adopted an approach similar to the Ninth and Tenth Circuits, applying a presumption of non-appealability that can be overcome only “in highly unusual circumstances.” Hageman v. City Investing Co., 851 F.2d 69, 71 (2d Cir. 1988). Gelboim involves the LIBOR manipulation scandal that broke in 2011, in which numerous banks have been implicated in manipulating the London Interbank Overnight Rate (“LIBOR”), a financial benchmark that represents the average interest rate banks charge one another for short-term loans. Plaintiffs throughout the country brought suit against numerous large banks that allegedly participated in LIBOR manipulation, including Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, J.P. Morgan Chase, and the Royal Bank of Scotland. Those actions were consolidated into a MDL before the Honorable Judge Naomi Reice Buchwald in federal court in New York. The plaintiffs brought RICO, antitrust, commodities manipulation, and various state law claims. In re LIBOR-Based Fin. Instruments Antitrust Litig., No. 11-md-2262, slip op. at 2 (S.D.N.Y. Mar. 23, 2013). On March 23, 2013, Judge Buchwald dismissed many claims, including- the antitrust, RICO, and (in part) the commodities manipulation claims. In re LIBOR-Based Fin. Instruments Antitrust Litig., No. 11-md-2262, slip op. at 3-4.

Following Judge Buchwald’s ruling, those plaintiffs who had asserted only an antitrust claim were left with no surviving claim, and no ability to appeal since no final judgment had been entered across the cases in the MDL. Gelboim v. Bank of America Corp., Case Nos. 13-3565, 13-3636, 2013 WL 9557843, 2013 U.S. App. LEXIS 26157 (2d Cir. 2013). Those plaintiffs sought Rule 54(b) certification, which Judge Buchwald denied. The Second Circuit denied their appeal. Plaintiffs then petitioned the Supreme Court to resolve the circuit split over partial appeals in consolidated actions, which, if decided in their favor, would allow the plaintiffs to seek review of the motion to dismiss.

In Gelboim, the petitioners argue that the Supreme Court should adopt the First Circuit standard—that plaintiffs ought to have a right, not subject to the district court’s discretion under Rule 54(b), to promptly appeal an order dismissing all their claims. As petitioners have argued, had there been no MDL to begin with, they would have had the right to immediately appeal from the complete dismissal of their case simply as a matter of course. Petitioners maintain that they should not be denied this right merely because other parties have elected to pursue similar claims. Petitioners further argue that many MDLs involve numerous pending actions, and depriving individual parties of the right to promptly appeal the denial of their claims could entail extreme delays, which, as a practical matter, would leave many litigants with no meaningful appellate rights at all.

The Gelboim respondents argue that Rule 54(b) and Section 1292(b) of title 28 of the United States Code, which provides a statutory basis for trial court judges to allow interlocutory appeals, are the proper mechanisms for obtaining review in a partial appeal. They argue that these provisions are preferable because they allow the trial judge to decide whether an appeal would be more efficient given the particular facts and claims in any particular situation. Moreover, respondents argue, allowing already-dismissed claimants to immediately appeal risks prejudice to the remaining litigants. By permitting the party with the weakest case (whose claims were therefore dismissed) to first present a contested issue on appeal, there is an increased potential for creating unfavorable precedent for the remaining litigants. 

This case presents the Court with an opportunity to resolve the circuit split, and clarify the application of the final judgment rule and Rule 54(b) in the MDL context. Oral argument is set for December 9, 2014.