Thursday, October 10, 2013

Supreme Court Puts the Kybosh on Phony-Baloney Appeals

Kurwa v. Kislinger, No. S201619 (SC Oct. 3, 2013)

Resolving a recent split of authority, the Supreme Court holds that parties cannot manufacture jurisdiction for an interlocutory appeal by dismissing pending causes of action without prejudice and agreeing to toll the statute of limitations on them until after the appeal is resolved. 

In a fight between two doctors about a medical practice, Kurwa sued Kislinger for breach of fiduciary duty and defamation, and Kislinger cross-claimed for defamation. The trial court granted Kislinger’s demurrer on the fiduciary duty claim on a purely legal question. Recognizing that their dueling defamation claims were a side-show, the parties agreed to dismiss those claims without prejudice and to toll the statute of limitations on them, pending Kurwa’s appeal.

Generally, California law applies a strong version of the “one final judgment” rule. Interlocutory and partial appeals are disallowed, although certain extraordinary issues can be resolved via writ review. Most recently, in Morehart v. County of Santa Barbara, 7 Cal. 4th 725, 740 (1994) the Supreme Court expressed the state’s strong policy against piecemeal appeals. Following Morehart, a line of court of appeal cases have dismissed appeals when the parties attempted to what they did here: manufacture jurisdiction for partial appeals though the dismissal of claims without prejudice and agreements to toll the limitations period on these claims pending appeal. These cases reason that the one final judgment rule does not allow such contingent causes of action to exist in “a kind of appellate netherworld” where they await resolution of a partial appeal. See Don Jose’s Rest., Inc. v. Truck Ins. Exch., 53 Cal. App. 4th 115 (1997); Jackson v. Wells Fargo Bank, 54 Cal. App. 4th 240 (1997); Four Point Entm’t, Inc. v. New World Entm’t, Ltd., 60 Cal. App. 4th 79 (1997); Hill v. City of Clovis, 63 Cal. App. 4th 434 (1998); Hoveida v. Scripps Health, 125 Cal. App. 4th 1466 (2005); accord Abatti v. Imperial Irrigation Dist., 205 Cal. App. 4th 650 (2012). But the court of appeal in this case disagreed, reasoning that if the causes of action below were dismissed, nothing actually remained “pending” to preclude an appealable final judgment under Code of Civil Procedure § 904.1(a).
The Supreme Court granted review to resolve the split, and reversed, with Justice Werdegar writing for a unanimous court. The Court noted that unlike in federal law and the law of many other states, California does not have a general procedural mechanism permitting a trial court to approve interlocutory appeals of some, but not all, causes of action against a party. Cf. Fed. R. Civ. P 54(b) (permitting entry of partial judgments); 28 U.S.C. § 1291(b) (permitting district courts to certify issues for interlocutory appeal). To the contrary, California’s strong one final judgment rule precludes any such appeals, with the availability of the writ of mandate serving as a safety valve to permit immediate review of certain important issues. Following the Don Jose’s line of cases, the Court held that causes of action that are dismissed without prejudice and subject to tolling remain “legally alive” in substance, and that it would not permit the manufacture of appellate jurisdiction though the artifice of the parties. The Court further rejected various policy and efficiency-based arguments in favor of interlocutory appeals, fining them inconsistent with the one final judgment rule, enacted by statute in Code of Civil Procedure § 904.1(a).

Reversed. Appeal dismissed. 

Whats interesting is that Kurwa and Kislinger explained what they planned to do to manufacture an appeal on the record in the superior court. But Abatti, which holds that in the absence of a tolling agreement, a dismissal of other claims without prejudice does not in itself preclude finality, remains good law.  (Indeed, it is difficult to see how it could be otherwise, and the Court here affirms Abattis rationale.) But if thats the case, what happens if the parties dont tell the court about the tolling agreement? I suppose we might see an increase of jurisdictional orders to show cause in cases where ancillary claims are dismissed on the eve of appeal. 

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