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November 1, 1999


The opinion of the court was delivered by: Weinstein, Senior District Judge.



    I FACTS ........................................................ 143
      A. Blues ..................................................... 143
      B. National Asbestos ......................................... 143
      C. H.K. Porter ............................................... 144
   II PROCEDURE .................................................... 144
      A. Blues and National Asbestos ............................... 144
      B. H.K. Porter ............................................... 145
  III SECTION 1292(b) CERTIFICATION ................................ 145
      A. Final Judgment Rule ....................................... 146
         1. History................................................. 146
         2. Policies ............................................... 148
      B. Exceptions ................................................ 152
         1. Collateral Orders ...................................... 152
         2. Final Orders Under Rule 54(b) .......................... 153
         3. Interlocutory Injunctions Under Section 1292(a)(1) ..... 155
         4. Mandamus ............................................... 157
         5. Class Certification Orders Under Rule 23(f) ............ 160
         6. Other Exceptions ....................................... 161
      C. Interlocutory Orders Under Section 1292(b) ................ 161
         1. History ................................................ 161
         2. Discretion of District Court ........................... 162
            a. Legislative History ................................. 162
            b. Statutory Design .................................... 163
            c. Case Law ............................................ 164
            d. Relationship to Rule 54(b) .......................... 165


V CONCLUSION .................................................... 168

The defendants in these three separate, though related, cases are the major tobacco product manufacturers and associated entities ("Tobacco"). Following orders denying motions to dismiss in each case, they sought certifications permitting interlocutory appeals. See 28 U.S.C. § 1292(b). Certifications were denied by orders of October 13, 1999; this memorandum explains the reasons for those orders.

Defendants contend that, as a matter of law, the district court must certify under section 1292(b) of title 28 to permit interlocutory appeals from the orders denying their motions to dismiss. An examination of the history, theory and practice of the final judgment rule and its exceptions demonstrates that this position is untenable.

The final judgment rule provides a stout barrier to interlocutory appeals such as the ones defendants now seek. In any particular case, the exceptions permitting an early appeal encourage a dialogue between the trail and appellate courts on the desirability of a departure from the final judgment rule. It is the opinion of this court that interlocutory appeals from its orders denying the motions to dismiss are not desirable.


A. Blues

In Blue Cross & Blue Shield v. Philip Morris, Inc. ("Blue Cross"), the plaintiffs ("the Blues") are medical provider-insurer Blue Cross plans from across the United States alleging violations of both federal and state law. See Blue Cross and Blue Shield v. Philip Morris, Inc., 36 F. Supp.2d 560 (E.D.N.Y. 1999). Federal causes of action are brought under the Racketeer Influenced and Corrupt Organizations Act ("RICO") and federal antitrust statutes. Supplemental state law claims are asserted under various state statutes and common-law theories.

B. National Asbestos

In National Asbestos Workers Medical Fund v. Philip Morris, Inc. ("National Asbestos"), the plaintiffs are self-insured ERISA trust funds which provide health care insurance to union workers in the building trades. See National Asbestos Workers Med. Fund v. Philip Morris, Inc., 23 F. Supp.2d 321 (E.D.N Y 1998). Plaintiffs seek damages to trust assets allegedly caused by Tobacco. Federal causes of action are brought under RICO, ERISA and federal common-law theories of unjust enrichment, restitution, indemnity, and breach of assumed duty.

C. H.K. Porter Company, Inc.

In H.K. Porter Company, Inc. v. American Tobacco Co. ("H.K.Porter"), plaintiff is an asbestos distributor that had previously been sued in extensive litigation for injuries resulting from its products. It has paid substantial sums in both settlements and judgments after trials. It brings this suit under RICO and a number of state law theories, including fraud, contribution, and restitution. Its claim is that some or all of the damages it paid were in fact caused by Tobacco. Among other theories, plaintiff contends that it would have impleaded the defendants in many cases had the defendants not fraudulently concealed their own liability for damages.


A. Blue and National Asbestos

Defendants sought dismissal of both Blue Cross and National Asbestos. The thrust of defendants' motions to dismiss was that Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F.3d 229 (2d Cir. 1999), superseding 172 F.3d 223 (2d Cir. 1999), rejects the plaintiffs' federal causes of action and requires dismissal of all state law claims for lack of jurisdiction. Laborers Local 17 held that the plaintiffs' injuries in that case were too remote — i.e., were not proximately caused — to support a cause of action under RICO.

Several relevant distinctions between Laborers Local 17 and these two cases made dismissal at the pleadings stage imprudent. First, "[t]he legal concept of proximate causation mandates a multi-faceted and highly fact specific inquiry." National Asbestos Workers Med. Fund v. Philip Morris, Inc., Nos. 98 CV 1492, 98 CV 3287, 1999 WL 706113, at *3 (E.D.N.Y. Sept. 7, 1999) ("[T]he infinite variety of claims that may arise make it virtually impossible to announce a black-letter rule that will dictate the result in every case. Instead, previously decided cases identify factors that circumscribe and guide the exercise of judgment in deciding whether the law affords a remedy in specific circumstances." (quoting Associated Gen. Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 536-37, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983))). In that vein, "a number of unique features of the Blue Cross plaintiffs and their injuries which are relevant to the proximate cause analysis" were noted. Id. at *5. Principle among these was that the Blues are not merely traditional passive health insurers; rather, they play a major, active and direct role in the provision of health care benefits in the United States. Id. The Blues are the largest provider of managed health care in the United States; economic injury to the Blues and their tens of millions of clients is arguably a foreseeable — and direct — result of the defendants' alleged racketeering activity. Extensive financial damage to the Blues may place the American health-care system in jeopardy. See Gregory P. Joseph, RICO Causation, Nat'l L.J., Nov. 1, 1999, at B19.

Second, unlike the plaintiffs in Laborers Local 17, which relied only on direct "RICO" claims, the plaintiffs in both Blue Cross and National Asbestos set forth a "valid, alternative basis for recovery," pleading RICO causes of action under a theory of subrogation. Defendants have sought dismissal of the subrogation claims, arguing that the plaintiffs did not have standing because the subrogated injuries were not based on "business or property" losses as required for standing to sue under RICO. See 18 U.S.C. § 1964(c) (RICO confers standing to sue on "[a]ny person injured in his business or property by reason of" racketeering acts defined in the statute.). Defendants' motions for dismissal before trial were rejected because the "[v]ictims of racketeering who have been deprived of their monetary resources as a direct result of racketeers' predicate acts should, under the most natural interpretation of the phrase `business or property,' recover their pecuniary losses." National Asbestos Workers Med. Fund, Nos. 98 CV 1492, 98 CV 3287, 1999 WL 706113, at *8 (emphasis added).

Defendants subsequently moved for certifications permitting interlocutory appeals. See 28 U.S.C. § 1292(b).

B. H.K. Porter

Defendants moved to dismiss H.K. Porter's suit claiming that Laborers Local 17 foreclosed the action. On August 11, 1999, defendants' motion was denied in part relying on the reasons set out in National Asbestos Workers Medical Fund, Nos. 98 CV 1492, 98 CV 3287, 1999 WL 706113, at *16-17, discussed above.

Defendants' motion was also denied because the RICO-related issues raised in the present action are substantially different from those in Laborers Local 17. Plaintiff's claims here are based on an allegation of fraud in actual litigations resulting in excessive damages being paid by plaintiff. This charge, if true, arguably constitutes a direct injury to plaintiff, actionable under RICO. With respect to the non-RICO claims, defendants' argument of federal preemption by the Cigarette Labeling and Advertising Act was rejected because the Act "does not apply to the deliberate acts to deceive alleged by plaintiff." H.K. Porter Co., Inc. v. American Tobacco Co., 71 F. Supp.2d 73, 75 (E.D.N.Y. 1999).

Defendants subsequently moved for certification permitting an interlocutory appeal. See 28 U.S.C. § 1292(b).


Section 1292(b) of title 28 provides a mechanism for permissive appeals of non-final orders that are otherwise not appealable as of right under section 1291. See 28 U.S.C. § 1292(b). It "confer[s] on district courts first line discretion to allow interlocutory appeals." Swint v. Chambers County Comm'n, 514 U.S. 35, 47, 115 S.Ct. 1203, 131 L.Ed.2d 60 (1995).

To take an appeal under section 1292(b) from an interlocutory order the moving party must meet three statutory criteria: (1) a controlling question of law, (2) that involves a substantial ground for difference of opinion, (3) the resolution of which by the court of appeals will materially advance the termination of the dispute. The district court must then certify that, in its opinion, these criteria are satisfied. Finally, the court of appeals must agree to hear the appeal. The provision reads in relevant part:

  When a district judge, when making in a civil action
  an order not otherwise appealable under [section
  1292], shall be of the opinion that such order
  involves a question of law as to which there is
  substantial ground for difference of opinion and that
  an immediate appeal from the order may materially
  advance the ultimate termination of the litigation,
  he shall so state in writing in such order. The
  Court of Appeals which would have jurisdiction of an
  appeal of such action may thereupon, in its
  discretion, permit an appeal to be taken from such
  order, if application is made to it within 10 days
  after the entry of the order. . . .

28 U.S.C. § 1292(b) (emphasis added).

Establishing the three criteria is not sufficient to guarantee an interlocutory appeal. The court of appeals may still refuse to hear the case in its full discretion "for any reason." Coopers & Lybrand v. Livesay, 437 U.S. 463, 475, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978) ("The appellate court may deny the [interlocutory] appeal for any reason, including docket congestion.") (footnote omitted).

Defendants' motions for certification raise a serious question, namely, whether the district court, like the court of appeals, has unfettered discretion to deny certification where the statutory criteria are satisfied. It is defendants' assertion — relying on the repeated use of the word "shall" in the provision — that if the statutory criteria are met the district court must certify the order for interlocutory appeal. See Defs.' Suppl.Mem.Supp.Cert. at 1-2. Consideration of the historic policy against piecemeal appeals embodied in the final judgment rule, as well as review of the legislative history and design of section 1292(b), leads to a contrary conclusion.

District courts do have independent and "unreviewable" authority to deny certification even where the three statutory criteria are met. See, e.g., Executive Software N. Am., Inc. v. U.S. Dist. Ct., 24 F.3d 1545, 1550 (9th Cir. 1994) ("Even if the remand order meets the section 1292(b) criteria, the district court must agree to certify the order (a decision that itself is unreviewable), and the court of appeals must exercise its discretion to entertain the action before a section 1292(b) appeal can proceed."; but mandamus was issued to consider the limited power to deny pendent jurisdiction under the then newly adopted 28 U.S.C. § 1367, particularly because district court did not give any reason for denying jurisdiction).

A. Final Judgment Rule

1. History

A cornerstone of the federal judicial system, defining the institutional relationship of the district and appellate courts, is the final judgment rule. This principal has been a part of the federal court system since its inception, having been adopted by the Judiciary Act of 1789. See Cobbledick v. United States, 309 U.S. 323, 324, 60 S.Ct. 540, 84 L.Ed. 783 (1940) ("Finality as a condition of review is an historic characteristic of federal appellate procedure.").

Three sections of the 1789 Act provided for appeal from final judgments, making no exception for interlocutory appeals. See Robert J. Martineau, Defining Finality and Appealibility by Court Rule: Right Problem, Wrong Solution, 54 U.Pitt.L.Rev. 717, 726-27 (1993). The sections providing for appeal from final judgments were:

  [Section 21]:[F]rom final decrees in a district court
  in causes of admiralty and maritime jurisdiction,
  where the matter in dispute exceeds the sum of value
  of three hundred dollars, exclusive of costs, an
  appeal shall be allowed to the next circuit court. .
  [Section 22]:[F]rom final decrees and judgments in
  civil actions in a district court, where the matter
  in dispute exceeds the sum or value of fifty dollars,
  exclusive of costs, may be re-examined, and reversed
  or affirmed in a circuit court . . . upon a writ of
  error . . . [a]nd upon a like process, may final
  judgments and decrees in civil actions, and suits in
  equity in a circuit court . . . where the matter in
  dispute exceeds the sum or value of two thousand
  dollars, exclusive of costs, be re-examined and
  reversed or affirmed in the Supreme Court.
  [Section 25]:[A] final judgment or decree in any
  suit, in the highest court of law or equity of a
  State in which a decision in the suit could be had .
  . . may be re-examined and reversed or affirmed in the
  Supreme Court of the United States upon a writ of
  error. . . .

Judiciary Act of 1789, 1 Stat. 73 (1789).

The final judgment rule had already become a basic feature of Anglo-American jurisprudence by the time the first Congress created the federal judiciary and expressly adopted the rule in 1789. English common-law courts had long required a final disposition of an entire controversy before any form of appellate review would lie. But see Martineau, supra, 54 U.Pitt.L.Rev. at 727; cf. id. ("On the equity side of the English court system, however, the courts of chancery allowed free resort to interlocutory review."). The basis for the English common-law courts adopting the final judgment rule was primarily formalistic. See 15A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3906, at 265 (2d ed. 1992) (citing Carleton M. Crick, The Final Judgment as a Basis for Appeal, 41 Yale L.J. 539, 544 (1932)). At English common law an appellate court was required to consider the entire record. John C. Nagel, Note, Replacing the Crazy Quilt of Interlocutory Appeals Jurisprudence with Discretionary Review, 44 Duke L.J. 200, 202 (1994). This requirement made appeals to the King's Bench physically "problematic because it was difficult for the King's Bench and the trial court to review the [same] record simultaneously." Id.

In its current manifestation the final judgment rule provides in pertinent part:

  The courts of appeals (other than the United States
  Court of Appeals for the Federal Circuit) shall have
  jurisdiction of appeals from all final decisions of
  the district courts of the United States, the United
  States District Court for the District of the Canal
  Zone, the District Court of Guam, and the District
  Court of the Virgin Islands, except where a direct
  review may be had in the Supreme Court.

28 U.S.C. § 1291. The rule requires "that `a party must ordinarily raise all claims of error in a single appeal following final judgment on the merits.'" Flanagan v. United States, 465 U.S. 259, 263, 104 S.Ct. 1051, 79 L.Ed.2d 288 (1984) (quoting Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374, 101 S.Ct. 669, 66 L.Ed.2d 571 (1981)). The Supreme Court has repeatedly held that the "policy of Congress embodied in [the final judgment rule of section 1291] is inimical to piecemeal appellate review of trial court decisions which do not terminate the litigation[.]" United States v. Hollywood Motor Car Co., 458 U.S. 263, 265, 102 S.Ct. 3081, 73 L.Ed.2d 754 (1982).

Though the final judgment rule has been a part of the federal court system since it was founded, both the Supreme Court and the lower federal courts have long struggled to devise a comprehensive definition of finality. In 1892 the Supreme Court noted that "no question of equity practice has been the subject of more frequent discussion in this Court than the finality of decrees. . . . The cases, it must be concluded, are not all together harmonious." McGourkey v. Toledo & Ohio Central Ry. Co., 146 U.S. 536, 544-45, 13 S.Ct. 170, 36 L.Ed. 1079 (1892). Not until 1945 — over a century and a half after the final judgment rule was first adopted — did the Supreme Court venture a full definition. See Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 89 L.Ed. 911 (1945). In Catlin, the Supreme Court defined a final judgment as "one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Id.; see, e.g., Van Cauwenberghe v. Biard, 486 U.S. 517, 521, 108 S.Ct. 1945, 100 L.Ed.2d 517 (1988) (same); Taylor v. Board of Educ., 288 F.2d 600, 602 (2d Cir. 1961) ("A `final decision' within 28 U.S.C. § 1291, the basic statute authorizing appeals to the courts of appeals, and its predecessors going back to §§ 21 and 22 of the Act of Sept. 24, 1789, `is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" (quoting Catlin, 324 U.S. at 233, 65 S.Ct. 631)).

While this understanding of a final judgment seems straightforward, its application has not always been easy. Justice Black commented that "whether a ruling is `final' within the meaning of § 1291 is frequently so close a question that decision of that issue either way can be supported with equally forceful arguments, and . . . it is impossible to devise a formula to resolve all marginal cases coming within what might well be called the `twilight zone' of finality." Gillespie v. U.S. Steel Corp., 379 U.S. 148, 152, 85 S.Ct. 308, 13 L.Ed.2d 199 (1964); see also F.T.C. v. Minneapolis-Honeywell Regulator Co., 344 U.S. 206, 215, 73 S.Ct. 245, 97 L.Ed. 245 (1952) (Black, J., dissenting) (commenting in reference to judgments that "there is no more ambiguous word [than final] in all the legal lexicon").

Historical disputes over what constitutes a final judgment have to a large extent been resolved by a deep accretion of case law. In "almost all situations it is entirely clear, either from the nature of the order or from a crystallized body of decisions, that a particular order is or is not final." Charles Alan Wright, Law of Federal Courts 741 (5th ed. 1994); see Building Indus. Ass'n v. Babbitt, 161 F.3d 740, 742 (D.C.Cir. 1998) ("The determination of what constitutes a final decision is not normally a difficult one."); see, e.g., Pacific Union Conference of Seventh-Day Adventists v. Marshall, 434 U.S. 1305, 98 S.Ct. 2, 54 L.Ed.2d 17 (1977) (order denying summary judgment not final); Indian Oasis-Baboquivari Unified Sch. Dist. No. 40 v. Kirk, 109 F.3d 634 (9th Cir. 1997) (en banc) (order dismissing some claims without leave to amend and some with leave to amend not final). But see Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 170, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) ("No verbal formula yet devised can explain prior finality decisions with unerring accuracy or provide an utterly reliable guide for the future.").

The understanding of the district court judge is often critical. In order to determine if a final judgment has issued, the court of appeals for the Second Circuit generally looks for some "clear and unequivocal manifestation by the trial court of its belief that the decision made, so far as it is concerned, is the end of the case." Fiataruolo v. United States, 8 F.3d 930, 937 (2d Cir. 1993) (court of ...

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