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).
III SECTION 1292(b) CERTIFICATION
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
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
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
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
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
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
[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
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
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 appeals takes "a practical view of
both the wording of the judgment and the surrounding
Many of the institutional values underlying our federal court
system are promoted by the final judgment rule. See generally
Edward H. Cooper, Timing as Jurisdiction: Federal Civil Appeals
in Context, 47 Law & Contemp.Probs. 157 (1984). These include
efficiency, deference, and justice. Aluminum Company of America
v. Beazer East, Inc., 124 F.3d 551, 561 (3d Cir. 1997) (final
judgment rule "minimiz[es] the possibility of piecemeal appeals,
accord[s] due deference to trial court judges, and promot[es] the
conservation of judicial resources"); see generally 15A Charles
A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice
and Procedure, supra, § 3907, at 268-284; 19 James Wm. Moore et
al., Moore's Federal Practice § 202.03, at 202-13 to 15 (3d ed.
The rule ensures the efficient use of judicial resources. See
Eisen, 417 U.S. at 170, 94 S.Ct. 2140; Sambo's Restaurants,
Inc. v. Wheeler (In re Sambo's Restaurants, Inc.), 754 F.2d 811,
815 (9th Cir. 1985) ("[O]ne of the most compelling reasons for
the finality rule is the avoidance of unnecessary appeals and
interruptions of trial, thereby saving judicial time and
expense."). "From the very foundation of our judicial system the
object and policy of the acts of Congress in relation to appeals
and writs of error . . . have been to save the expense and delays
of repeated appeals in the same suit, and to have the whole case
and every matter in controversy in it decided in a single
appeal." McLish v. Roff, 141 U.S. 661, 665-66, 12 S.Ct. 118, 35
L.Ed. 893 (1891). Delaying appellate review until trial court
proceedings are complete prevents multiple appeals that may
ultimately prove unnecessary. Many issues that a party may seek
to appeal before a final decision may become moot upon the
disposition of the case on the merits. See J.B. Stringfellow v.
Concerned Neighbors in Action, 480 U.S. 370, 380, 107 S.Ct.
1177, 94 L.Ed.2d 389 (1987) (pretrial appeals "burden appellate
courts by requiring immediate consideration of issues that may
become moot or irrelevant by the end of trial"). Either the party
may win on all or part of the substantive issues, thus obviating
the need for any appeal, or the party may lose on the merits but
on grounds unrelated to the earlier claims of error that would
have served as the basis for an interlocutory appeal.
Repeated interlocutory appeals in the same case would also
stretch the already
limited resources of the courts of appeals. See Coopers &
Lybrand v. Livesay, 437 U.S. 463, 471, 98 S.Ct. 2454, 57 L.Ed.2d
351 (1978). ("The finality requirement in § 1291 evinces a
legislative judgment that `[r]estricting appellate review to
"final decisions" prevents the debilitating effect on judicial
administration caused by piecemeal appeal disposition of what is,
in practical consequence, but a single controversy.'" (quoting
Eisen, 417 U.S. at 170, 94 S.Ct. 2140)).
Unlike the trial judge, appellate judges do not have the
benefit of watching and controlling the action as it unfolds
before them. As a result, appellate judges would be forced to
make repeated expenditures of significant time and energy in
understanding the factual and legal issues involved in the case.
The burden on the appellate judges is increased when different
panels of the court of appeals hear the successive appeals. As
federal courts encounter increasing numbers of suits involving
more complex questions of law and fact, the expenditure of
appellate court time and resources necessary to address multiple
appeals from a single case would be excessive. This is a matter
of particular concern given the limited number of appellate court
judges in relation to the continually growing case load of the
federal courts. See Flanagan, 465 U.S. at 264, 104 S.Ct. 1051
(final judgment rule "is crucial to the efficient administration
of justice"); Firestone Tire, 449 U.S. at 374, 101 S.Ct. 669
(final judgment rule "serves the important purpose of promoting
efficient judicial administration").
A second goal of the final judgment rule is preservation of the
distinct and vital role of the trial judge in the federal system.
As the Supreme Court has noted, the final judgment rule
emphasizes the deference that appellate courts owe to
the trial judge as the individual initially called
upon to decide the many questions of law and fact
that occur in the course of a trial. Permitting
piecemeal appeals would undermine the independence of
the district judge, as well as the special role that
individual plays in our judicial system.
Firestone Tire, 449 U.S. at 374, 101 S.Ct. 669; see
Richardson-Merrell, Inc. v. Koller,