James Beck of Reed Smith.

Declaratory judgments present particularly vexing issues of appellate procedure. In part, these problems arise from their peculiar nature—seeking a “declaration” of rights in advance of an actual controversy—which can verge on improper advisory opinions. See Gulnac v. South Butler County School District, 587 A.2d 699, 701 (Pa. 1991) (vacating declaratory judgment as advisory; must not be used “in anticipation of events which may never occur,” “moot cases,” or “purely academic” issues). But when the declaration is the end in itself, it becomes difficult to determine when the action should start, and when it should end. The problem is particularly acute when declaratory judgment actions are decided by preliminary motion.

Declaratory judgment actions are, of course, a statutory creation. The legislature provided that declaratory judgments “shall have the force and effect of a final judgment or decree,” 42 Pa. C.S.A. Section 7532. Section 7532 confers this “force and effect” without regard to the finality, as commonly understood, of any particular declaratory judgment. Thus, until 2016, the appealability of declaratory judgments was governed by Pa. R.A.P. 342(b)(2), which defined “final order” to include “any order that is expressly defined as a final order by statute.” That created what has been described as a “waiver trap,” since declaratory judgments: were procedurally interlocutory but nonetheless designated as appealable as of right. Failure to appeal immediately an interlocutory order deemed final by statute waived the right to challenge the order on appeal from the final judgment.

One converse of a waiver trap was the filing of large numbers of protective appeals by attorneys fearful of a waiver.

The 2016 reworking of the appellate rules moved declaratory judgments to Pa. R.A.P. 311(a)(8): Other cases.—An order that is made final or appealable by statute or general rule, even though the order does not dispose of all claims and of all parties.

The “waiver trap” was dealt with by Rule 311(g), providing that, as to declaratory judgment (and various other) actions, “failure to file an appeal of an interlocutory order does not waive any objections to the interlocutory order.”

While the language of the new rule is functionally similar to the old, the shift from Rule 341 to Rule 311 entailed a significant difference—Rule 311 governs “appeals as of right.” Appellate courts have to hear them, and appellate courts do not like being told that they have to do anything that they have not agreed to do. That was the sentiment conveyed by the Pennsylvania Supreme Court's recent decision in Manufacturers' Association Insurance v. Johnson Matthey, ___ A.3d ___, 2018 WL 3447808 (Pa. July 18, 2018) (MAC). While Rule 311(a)(8) allows appeals of orders that “do not dispose of all claims and all parties,” MAC takes a giant step in that direction.

MAC was decided against the backdrop of Nationwide Mutual Insurance v. Wickett, 763 A.2d 813 (Pa. 2000), a decision rendered under the old rules, which had held that the grant of preliminary objections to an insurer's declaratory judgment action, were immediately appealable orders under Section 7532 and Rule 341, even though the court simultaneously granted the defendant's joinder of a third-party defendant, (grant of POs “constituted final orders …, and the trial court was without jurisdiction to reconsider them”).

In MAC, another insurer sought a declaration of noncoverage. The defendant responded with a counterclaim seeking its own declaratory judgment of coverage. The insurer sought summary judgment, but lost. However, the order denying summary judgment “did not address defendant's counterclaims, including its declaratory judgment claim.” Also of significance, in MAC, the declaratory judgment action was filed in the Commonwealth Court in the first instance. See Pennsylvania Manufacturers' Asociation Insurance v. Johnson Matthey, 160 A.3d 285 (Pa. Cmwlth. 2017). That meant that, under Rule 311(a)(8), the appeal of right was to the Pennsylvania Supreme Court.

MAC addressed only the “threshold issue” of “whether his court has jurisdiction to entertain this appeal.” It answered that question in the negative, agreeing that, notwithstanding Rule 311(a)(8), the summary judgment order remained “interlocutory and unappealable because the order only partially declared the rights of the parties.”

Relying on United States Organizations for Bankruptcy Alternatives v. Department of Banking, 26 A.3d 474 (Pa. 2011) (USOBA), a case that had quashed a declaratory relief appeal where “the Commonwealth Court's order granted only part of the relief requested,” the Supreme Court in MAC articulated a two-pronged test for appealability of declaratory judgments: “what is the effect of the lower court's decision on the scope of the litigation; and what practical effect does the court's decision have on the ultimate outcome of the case.” An order that “merely narrows the scope of the litigation,” but “does not resolve the entirety of the parties' eligibility for declaratory relief,” remains “interlocutory and not immediately appealable” notwithstanding Section 7532 and Rule 311(a)(8).

In MAC the Commonwealth Court had “effectively denied [the plaintiff insurer's] claim for declaratory relief” when it denied summary judgment, because that order had stated that the plaintiff was “not entitled to a declaratory judgment.” That order, however, had not addressed the defendant's “related, but broader, counterclaim for declaratory relief” on the same insurance claims. Since “the court's order does not resolve the parties' competing claims for declaratory relief; rather, it merely narrows the dispute,” which rendered it “not appealable at this time.” Thus the plaintiff insurer's appeal from the Commonwealth Court order was quashed.

After MAC, it is an open question what is left of Rule 311(a)(8)'s “even though the order does not dispose of all claims and of all parties” language. What do MAC and USOBA have in common with each other, but not with Wickett? Two aspects, one substantive and one procedural, stand out. Substantively, Wickett disposed of all of the requests for declaratory that any of the parties had made, leaving only a nondeclaratory third-party action to be adjudicated. MAC and USOBA, on the other hand, did not decide all of the parties' conflicting requests for declaratory relief.

Procedurally, Wickett was an appeal of a decision by a Court of Common Pleas. The Supreme Court took jurisdiction, after an intervening Superior Court decision by way of an allocatur grant.  MAC and USOBA were appeals from decisions by the Commonwealth Court sitting in original jurisdiction. The only further appeal was to the Supreme Court, and after 2016, that meant an appeal of right, not a discretionary appeal.

Thus, appellate practitioners involved with declaratory judgment actions can find two takeaways in MAC. First, if the order from which an appeal is contemplated disposes of all the outstanding requests for declaratory relief, then it is probably appealable, notwithstanding the continued pendency of other claims. Second, an appeal of right taken to the Supreme Court from the Commonwealth Court's original jurisdiction is more likely to receive critical examination as interlocutory, and possible quashal, than a discretionary appeal. The good news, however, is that under Rule 311(g), parties do not waive appellate review by not immediately appealing arguably interlocutory decisions involving declaratory judgments.

James M. Beck, a member of the Reed Smith life sciences health industry group, focuses his practice on complex personal injury and products liability litigation. He has experience in developing legal defenses, master briefs and dispositive motions in numerous mass torts, and has prepared amicus briefs on behalf of a variety of national organizations.