An inter-family squabble in the Virgin Islands has produced U.S. Supreme Court precedent that affects jurisdictional deadlines in thousands of cases across the country. In Hall v. Hall, No. 16-1150, 2018 (Mar. 27), the court ruled that a final judgment entered in a case that was consolidated with a related case under Federal Rule of Civil Procedure 42 is immediately appealable, even though the other case (or cases) remains pending in the district court. Hall changes the case-specific approach the U.S. Court of Appeals for the Third Circuit took, and flatly reverses the approach taken by several other circuits. This change in the determination of what constitutes an appealable final judgment in a consolidated case is crucial because a failure to take a timely appeal from such a judgment is fatal to the party's appellate rights.

In-house lawyers need to ensure their outside counsel are aware of this development. When many firms represent different clients in a consolidated action, it can be all too easy to assume that the case will be “over” only when it is over for everybody. Indeed, as discussed below, this was in fact the law of three circuits. But Hall says otherwise, and in-house counsel should confirm that their specific interests are protected and that outside counsel is paying close attention to jurisdictional deadlines in their individual case.

Why and How Are Cases Consolidated?

There are several ways in which cases involving different claims and different litigants can be consolidated in the federal court system. One way is by invoking 28 U.S.C. Section 1407, which establishes the procedure for coordinating or consolidating similar actions pending in different districts through the judicial panel on multidistrict litigation (MDL). Use of the MDL procedure is common in large, complex class action litigation, such as products liability, toxic torts and securities fraud suits.

Rule 42 provides another basis for consolidating cases that involve “a common question of law or fact” but that may not satisfy the requirements for MDL treatment. A district court has substantial flexibility in implementing this rule: it can consolidate matters for hearing or trial, it can fully consolidate actions, and it can issue “any other orders to avoid unnecessary cost or delay.” The Third Circuit has long recognized that consolidation under Rule 42 can be a useful tool for managing litigation: it “streamlines and economizes pretrial proceedings so as to avoid duplication of effort, and … prevents conflicting outcomes in cases involving similar legal and factual issues,” as in In re TMI Litigation, 193 F.3d 613, 723-24 (3d Cir. 1999).

Supreme Court Steps Up, Twice

Three years ago, in Gelboim v. Bank of America, 135 S. Ct. 897 (2015), the Supreme Court examined what constitutes a final, appealable order in cases consolidated through the MDL device. The court held, unanimously, that a district court order disposing of the sole claim in one MDL case that had been consolidated with other cases for pre-trial purposes was a final and appealable order. At the time, the court declined to consider whether its answer would be different if the order had been issued in a case consolidated under Rule 42.

Hall v. Hall presented that question. Hall began with a unique fact pattern. An elderly woman lived with her son, Samuel, in the U.S. Virgin Islands. Her son, a lawyer, acted as her caretaker and oversaw much of her finances. Then, under circumstances disputed by the parties, the woman moved to Florida to live with her daughter, Elsa; transferred all of her assets into a trust; and named Elsa the successor trustee. These changes fueled family tensions, and the dispute ultimately ended up in federal court. Acting in both her individual capacity and in her representative capacity as trustee of the trust, the mother sued Samuel for purportedly mismanaging her affairs. Samuel struck back, filing counterclaims against his mother in both her individual and representative capacities.

When the mother died, Elsa was substituted in the lawsuit as the plaintiff—but only in her representative capacity as successor trustee. In order to allege claims against Elsa in her individual capacity, Samuel filed a separate action against her in federal court. Because the two cases involved common questions of law and fact, the court consolidated them for trial under Rule 42.

A jury reached a verdict in favor of Samuel in both cases. In the first case (brought by the mother), the jury determined that Elsa (in her capacity as trustee) should “recover nothing.” In the second case (brought by Samuel), the jury awarded him $500,000 in compensatory damages and $1.5 million in punitive damages. Ultimately, however, the district court ordered a new trial in the second case. The first case thus produced a final judgment, but the second case did not.

When Elsa appealed the adverse ruling in the first case, the Third Circuit held that the appeal was premature, and dismissed the appeal for lack of jurisdiction. The court used a case-specific approach to determine appealability, considering “the overlap among the claims, the relationship of the various parties, and the likelihood of the claims being tried together,” along with whether justice would be served and judicial economy not compromised if a separate appeal were allowed. Based on this analysis, the court concluded that separate appeals were not proper because the claims in the consolidated cases had been tried before one jury and involved overlapping issues and evidence.

The Supreme Court then granted Elsa's certiorari petition. Prior to Hall, there was a four-way split in the circuits. In addition to the Third Circuit's case-by-case approach, the First and Sixth circuits held that the dismissal of one of several consolidated cases was immediately appealable as of right, as in FDIC v. Caledonia Investments, 862 F.2d 378, 380-81 (1st Cir. 1998); Beil v. Lakewood Engineering & Manufacturing, 15 F.3d 546, 551 (6th Cir. 1994). The Federal, Ninth and Tenth circuits employed exactly the opposite bright-line rule, as in Spraytex v. DJS&T, 96 F.3d 1377, 1381 (Fed. Cir. 1996); Trinity Broadcasting v. Eller, 827 F.2d 673, 675 (10th Cir. 1987); Huene v. United States, 743 F.2d 703, 705 (9th Cir. 1984). And the Second Circuit used a per se presumption that the judgment in one case is not appealable, but was willing to overcome the presumption in highly unusual circumstances. Hageman v. City Investing, 851 F.2d 69, 71-72 (2d Cir. 1988). As Elsa pointed out in her cert petition, “the circuit split rendered appellate jurisdiction over a final judgment dependent upon the luck of geography.” Elsa noted that 28 U.S.C. Section 1291 uses mandatory language: the court of appeals “shall” have jurisdiction over “all final decisions of the district courts.” She also pointed to prior Supreme Court precedent citing the need for uniformity in the application of Section 1291, e.g., Budinich v. Becton Dickinson, 486 U.S. 196, 202 (1998).

In a scholarly and well-researched opinion, Chief Justice John Roberts reversed the Third Circuit on behalf of a unanimous court. The court held that when cases are consolidated under Rule 42 they remain distinct from each other for purposes of appellate jurisdiction. To reach this conclusion, the chief justice principally considered the lineage of Rule 42, which he traced back to the first federal consolidation statute, enacted in 1813, as well as legal practice going all the way back to England. The court also noted that, as early as 1852, it “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,” Hall, 2018 WL 1472897, at *6, citing Rich v. Lambert, 12 How. 347 (1852). Ultimately, the court held that a final judgment entered in one of several cases consolidated under Rule 42 is immediately appealable.

The Implications of 'Hall'

Despite its idiosyncratic factual and procedural history, Hall produced a uniform rule that applies in all cases that are consolidated under Rule 42. It is especially important to recognize that Hall fundamentally changes the practice in the Federal, Ninth, and Tenth circuits, where a litigant previously could sit back and wait until all of the consolidated cases were resolved before filing a notice of appeal from an adverse ruling. Now, regardless of where your litigation is pending, you need to be more mindful of orders entered in your individual case, and you must work closely with outside counsel to evaluate whether any given order is a final judgment for purposes of Section 1291. If it is, you must appeal immediately in order to preserve your rights.

In that regard, it bears further analysis regarding whether and to what extent Hall will apply retroactively. Obviously, Elsa's appeal to the Third Circuit will be reinstated. But, what about similarly situated litigants who had their appeals dismissed as interlocutory and premature Should they file another appeal? Seek to have the prior appeal reinstated? Seek leave of the court to appeal again nunc pro tunc? Must they take immediate action in order to preserve their appellate rights, or may they rely on the prior dismissal as “the law of the case” and wait to appeal again until the consolidated action is finally over? Similarly, what if you have a case in a jurisdiction where the law was clear (prior to Hall) that you had no right to take an immediate appeal from an adverse judgment, so you didn't? Must you seek to do so now on pain of potentially forfeiting your appellate rights? These questions warrant further study and analysis. The important takeaway is that, if you have any Rule 42 cases on your company's docket, you will want to consult with your trial counsel immediately in order to review the case's history and map out a strategy for addressing Hall.

Donna Doblick is a partner and member of the Reed Smith's appellate group. She has extensive experience with complex, high-stakes commercial litigation, both at the trial and appellate levels. She can be reached at [email protected].

Joshua Newborn is an associate in the firm's appellate group. He can be reached at [email protected].