Argument preview: Finality, consolidation, and multi-district litigation
on Dec 5, 2014 at 10:28 am
Gelboim v. Bank of America presents a routine question in a highly complex procedural context: When a district court dismisses all claims in one civil action that has been consolidated with other cases for pre-trial purposes through Multi-District Litigation, is that decision a final and immediately appealable order? Given the pervasiveness of complex litigation, and the increasing import of MDL procedures in light of recent retrenchment on class actions, the question may well prove significant.
The case arises out of numerous individual and class actions filed across several federal districts, alleging that banks and financial institutions manipulated the London Interbank Offered Rate (“LIBOR”), an important benchmark for setting short-term interest rates in the United States. These actions were consolidated for pretrial purposes in the United States District Court for the Southern District of New York, pursuant to the MDL statute. That statute provides that when “civil actions” involving “one or more common questions of fact” are pending in different federal districts, they may be transferred to a single district for “coordinated or consolidated pretrial proceedings” – typically discovery, pre-trial dispositive motions, and settlement. At the close of pretrial proceedings, each remaining action is remanded to its original district for trial, unless the action has been resolved in the transferee district.
Among the civil actions included in the LIBOR MDL was a class action by petitioners Ellen Gelboim and Linda Zacher (collectively, “Gelboim’) on behalf of purchasers of bonds with LIBOR-linked interest rates, against Bank of America and other institutions (collectively, “the bank”). The bank moved to dismiss antitrust claims for every complaint in the MDL; in granting those motions, the district court determined that none of the plaintiffs (including Gelboim) could show a cognizable antitrust injury. Because Gelboim only asserted federal antitrust claims, the order dismissed everything in her action; by contrast, other actions in the consolidated proceedings included federal or state claims other than antitrust, which remained alive. Gelboim sought leave to amend her complaint, but it was denied.
Gelboim appealed the dismissal order, pursuant to 28 U.S.C. § 1291, as a final decision of the district court. But the Second Circuit sua sponte dismissed the appeal for lack of jurisdiction, concluding that there was no final decision from the district court, since the order did not dispose of all the claims in the entire consolidated MDL proceeding. The court applied circuit precedent that when a judgment does not dispose of all claims in a consolidated action, there is a strong presumption that the judgment is not final and appealable, overcome only in “highly unusual circumstances.” The path around that precedent is district court certification under Federal Rule of Civil Procedure 54(b), which provides that a decision is final when it disposes of fewer than all claims or parties but there is “no just reason for delay” in appealing the resolved claims. Gelboim did not believe she needed certification, based in part on comments by the district court that, because the only claims in her action had been dismissed, she was in position to appeal as of right. The district court also granted, then withdrew, Rule 54(b) certification as to the actions in the MDL that had non-antitrust claims remaining.
Gelboim and the bank agree on the case’s starting point–the importance of Section 1291 and the final judgment rule. But they highlight different aspects in reaching opposite conclusions. Gelboim emphasizes the mandatory language of Section 1291 – courts of appeals “shall have jurisdiction” – granting an appeal as of right and imposing on the court a strict duty to exercise the jurisdiction conferred. The bank emphasizes “finality,” urging a “rigorous” and narrow understanding of the word that reflects the “congressional imperative” of forbidding piecemeal appeals. The bank also insists that finality must be defined by focusing not on the individual judgment, but on how the definition affects the system of appellate review as a whole.
The point of departure is how each side conceptualizes MDL consolidation and how it affects finality. Both sides argue for an absolute rule, just entirely different ones. Gelboim argues that decisions such as this one should always be final and immediately appealable as of right, while the bank argues that they are never final and never appealable as of right.
Gelboim begins with the undisputable point that, absent the MDL, the dismissal order in her case would be final and appealable, as it disposed of all the claims on the merits in that action; it thus terminated the action, ended that litigation, and “disassociated” the district court from the case. Given the nature of MDL consolidation, the analysis should not change merely because Gelboim’s case was consolidated with other actions. They were consolidated only for pretrial purposes; each suit in the MDL retained its separate status and did not merge with the others into a new, unified action. The text and process of Section 1407 supports this view, speaking of individual actions brought together for limited purposes where there are overlapping facts, but otherwise remaining as individual units and eventually returning, each as an individual civil action, to its district of origin.
Gelboim supports this argument by analogy to Federal Rule of Civil Procedure 42, which provides for intra-district consolidation when there are questions of law or fact common to the actions. She argues that the pre-Rules understanding of consolidation and Rule 42’s drafting history together establish a “settled rule that consolidation does not mean merger.” The distinction between consolidation and merger is further reflected in the different functions of Rule 42 and Federal Rule of Civil Procedure 20, which permits joinder of parties in a single action when claims share a common question of law or fact and arise out of the same transaction or occurrence. If consolidation under Rule 42 produces a single merged action, it undermines Rule 20’s transactional-relationship requirement for joinder; simple consolidation, based on a common question of law or fact and without transactional-relatedness, would be enough to create a single action.
Finally, Gelboim emphasizes the policy benefits of immediate review and how it reinforces the efficiencies of multi-district litigation. Most notably, it avoids redundant complicated discovery in already-complicated cases. This case illustrates the concern. The actions in the MDL with remaining non-antitrust claims will continue into discovery; this discovery encompasses the conduct of sixteen banks over at least a four-year period, covering all transactions, communications, and economic data. Gelboim, lacking any pending claims, would remain on the sidelines for all of this. But she will eventually be able to appeal. And if she succeeds on that delayed appeal and her antitrust claims are revived, the entire discovery process must be repeated for her. Allowing the appeal now avoids that problem; if the court of appeals reverses on the antitrust claims, Gelboim can immediately join in ongoing discovery.
Relatedly, delaying appeal creates problems within the appellate process. Because non-dismissed actions will ultimately be remanded to their districts of origin, appeals from final judgments will take place in multiple circuits, perhaps simultaneously; there will not be one single appeal, as Section 1291 and the final judgment rule contemplate. Nor is it clear when Gelboim would be able to appeal – at the end of consolidated pretrial proceedings when the remaining actions are remanded to their original districts or when all the actions have been litigated to final judgment in their original districts. At the first point, none of those remanded cases is over, so nothing seems final. At the second point, Gelboim would have to monitor litigation in multiple districts to identify the last case to become final, to ensure that she did not miss the narrow window for filing a timely notice of appeal, a mandatory and jurisdictional timing requirement. This uncertainty can be alleviated by a single rule of immediate appealability.
The bank begins its argument by joining issue on the meaning of consolidation and its effect on finality. The bank points out that cases may be consolidated under Rule 42 either for all purposes or only for limited purposes and duration, such as discovery and pretrial proceedings. The circuits are uniform that when actions are consolidated for all purposes, an order disposing of only some of the consolidated claims or cases is not final and appealable. The same rule should apply when cases are consolidated only for limited purposes, since the result in either case is that the “cases should travel together.” Consolidating for limited purposes only changes the duration of consolidation, not its fundamental nature. And that is as true for MDL consolidations as for Rule 42 consolidations.
In fact, the bank insists, its proposed clear rule of non-appealability is especially appropriate for MDL consolidations, given the efficiencies the procedure is designed to create. MDL ensures “centralized management” of closely related claims, vesting the transferee judge with discretion and flexibility to manage proceedings in a streamlined manner, especially complicated discovery on overlapping issues in a large number of actions. Allowing immediate appeals in cases such as this undermines that efficiency, strips district courts of flexibility and control, and makes it more difficult to manage the pretrial process in an efficient and beneficial way. In an amicus brief in support of the bank, the United States Chamber of Commerce elaborates on these concerns for the district court’s administrative and organizational discretion in complex litigation.
More importantly, the bank and the Chamber insist that their rule does not leave parties in Gelboim’s situation entirely unable to obtain immediate review of the dismissal. Instead, they identify two “tried-and-true mechanisms” offering litigants “ample opportunities” to reach the court of appeals. One is to obtain a certification of finality as to the dismissed claims under Rule 54(b), as several other plaintiffs in the LIBOR MDL attempted. The second mechanism is Section 1292(b), which allows for immediate review of disputed controlling legal questions, when both the trial court and court of appeals agree that immediate review would advance termination of the litigation.
The bank and the Chamber both insist that these tools, particularly Rule 54(b), are uniquely appropriate and regularly and extensively used in MDL cases. Rule 54(b) seems designed for this very situation; if the consolidated proceeding constitutes a single litigation unit, then the dismissal of all claims in one action qualifies under the rule as a judgment on one or more, but fewer than all, claims or parties. Both procedures give the judge discretion and flexibility to determine appealability, just as she exercises discretion and flexibility within the entire MDL process. The court can determine whether immediate appeal is warranted in each particular case and how immediate appeal will affect the MDL proceedings, given the specific needs, issues, problems, and efficiencies that the district judge best understands.
[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, serves as counsel to the petitioner in this case. The author of this post is not affiliated with the law firm]