CURTISS-WRIGHT CORP. v. GENERAL ELECTRIC CO.
Legal provision: Federal Rules of Civil Procedure, including Appellate Procedure (or relevant rules of a circuit court)
Argument of Ralph N. Del Deo
Chief Justice Warren E. Burger: We'll hear arguments next in Curtiss-Wright Corporation against General Electric Corporation.
Mr. Del Deo, I think you may proceed when you are ready.
Mr. Ralph N. Del Deo: Mr. Chief Justice and may it please the Court.
The question before the Court is whether the Third Circuit was in error when it vacated the entry of final judgment by the District Court pursuant to Rule 54 (b) after it had entered summary judgment in favor of Curtiss-Wright in the amount of $19 million.
The -- this -- the Third Circuit based its opinion in the main on the existence of counterclaims which it said, presented a possibility of setoff and barred the entry of the final judgments.
This is a classic example of complex multi-claim litigation.
There are 21 contracts involved.
There are 16 counts in the Curtiss-Wright's complaint ranging from fraud and misrepresentation on down the line.
The General Electric counterclaims allege extraordinary assistance and an unjust enrichment claim which they base on a fact that they helped Curtiss-Wright which prevented Curtiss-Wright from going into default and, therefore, General Electric is somehow entitled to the money that Curtiss-Wright would have lost had it been in default.
Justice William H. Rehnquist: Could those counterclaims be fairly characterized as unliquidated?
Mr. Ralph N. Del Deo: Yes, Your Honor.
They are -- they are unliquidated and, you know, obviously, the proofs are difficult.
The amended complaint is the one on which summary judgment has been granted in this case, and that dealt with the balances due on the contracts for the nuclear components that were delivered and accepted by General Electric and its customer, and are now in use by them.
The basis for summary judgment is really not at issue here.
There were no factual issues in the summary judgment case and the sole legal issue was the existence of a release clause which is referred to in the briefs as 5 (c).
That clause was that -- the interpretation of it was determined in favor of Curtiss-Wright and the summary judgment was granted to them.
In the balance of the case, that release clause has no part.
There is, therefore, no interrelation, factually or legally, between the claims on which summary judgment has been granted and the claims in the unadjudicated claims in the balance of the complaint or in the counterclaims.
Now, the appellate court really doesn't question the qualification for finality here.
They'd have not contested the District Court's finding that there was no -- no separate -- that there was a separate and distinct claim here, that it could be decided separately, that there was no question of mootness or delay or duplicate of appeal or any of those things.
They didn't deal with that at all.
They -- they said that the presence of a counterclaim posing a possibility is -- of a setoff was a bar to the entry of the judgment, absent harsh and unusual circumstances.
And they applied the standard of harsh unusual circumstances which is really akin to -- an irreparable harm standard because they talked about insolvency and economic duress.
They -- they admit that the result is harsh insofar as Curtiss-Wright is concerned, but they -- they somehow dismiss that injustice and say that it has to be almost an irreparable harm, you have to have insolvency.
Justice William H. Rehnquist: Mr. Del Deo, you -- I take it, you don't question either this -- of the statements in Sears, Roebuck versus Mackey that the district -- the primary discretion to certify under Rule 54 is vested in the District Court or that the Court of Appeals may review that certification for abuse of discretion.
Mr. Ralph N. Del Deo: I -- I certainly agree, Your Honor that the Sears case -- I -- I emphasize that the primary discretion was in the District Court.
And any matter in which a -- a court has discretion is obviously always subject to review by a -- by a higher court.
I think that in the Sears case, though, Your Honor, what we had was this, the Court enunciated three things that were important for a -- a Rule 54 (b) entry of judgment.
One was, they said that it had to be a -- a single claim for relief.
Then, they said that claim had to be adjudicated finally.
And then they directed the discretion of the District Court to the fact that the District Court should then see that it was independent, factually and legally, from the balance of the claims in the suit.
And that brings into it the attendant questions of -- of mootness, duplicate of appeals, and so forth.
And on page 436 and 351 of the Sears case, and I'll paraphrase to some extent and quote to some.
They said it cannot well be argued that the claims stated in -- well, they talk about the claims here, it cannot well be argued that the District Court has abused its discretion in certifying that there exist no just reason for delay.
And then, referring to the claims in that case, they said, “They certainly can be decided independently of each other.”
So, what we have here, Your Honor, is -- is a final judgment and the District Court, exercising its discretion under Rule 54 (b) to enter that judgment to where there's no just reason for delay.
And the Sears case emphasizes the broad discretion that the District Court has.
And it was at that point that it focused on the discretion.
This is entirely different than manners involving appeals from interlocutory orders because this is not an interlocutory order.
Justice William H. Rehnquist: But on 437, let me quote you this language from Sears, Roebuck.
The -- the Court says, “The District Court cannot, in the exercise of its discretion, treat as final that which is not final within the meaning of Section 1210 -- 1291.
But the District Court may, by the exercise of its discretion in the interest of sound judicial administration, release for appeal final decisions upon one or more, but less than all, claims in multiple claims actions.”
Mr. Ralph N. Del Deo: That's correct.
Justice William H. Rehnquist: And that -- and then it goes on to say “primary -- primary discretion in the District Court -- the abuse of discretion review in the Court of Appeals.”
Now, how do you articulate the standard by which you feel should have been applied by the Court of Appeals but wasn't here?
Mr. Ralph N. Del Deo: You mean in -- in the present case?
Justice William H. Rehnquist: Yes.
Mr. Ralph N. Del Deo: Well, I -- I think that insofar as the standards are concerned, we did, pursuant to Sears, have a separate claim for relief and that claim was finally disposed of.
And in -- within the framework of the Sears decision, we have a final decision under -- under Section 1291 of 28 U.S.C.
Now, where the Court of -- where the Third Circuit has gotten impaled here, I think is on this question of a counterclaim because they have not applied -- excuse me, they have not applied universally this standard of harsh unusual circumstances to cases where there is no counterclaim.
But, where they become impaled is where the counterclaim.Of course, the Cold Metal case disposes of the matter of the counterclaim being a barrier because that was decided right after Sears and said, “You could have a counterclaim, even a compulsory counterclaim.”
The Third Circuit, in my view, is, number one, treating it as an interlocutory order.
And in their Allis-Chalmers case inn which they rely, they use the specific words “interlocutory order.”
They say since final certification of an interlocutory order should occur only in the infrequent harsh case.
The dissent in that case picked that up and said the majority has blurred the distinction between appeals from final decisions, disposing of separate claims and those from interlocutory orders on appeals of ninth --
Justice William H. Rehnquist: 129 could be a --
Mr. Ralph N. Del Deo: But now, I want to get-- pardon?
Justice William H. Rehnquist: 1292 (b), where the District Court certifies them, the Court of Appeals can accept or reject.
Mr. Ralph N. Del Deo: Well, that's -- that's interlocut -- interlocutory, yes.
They confused that, they thought that 54 (b) was some type of interlocutory and the District Court can't make final that which is not final.
So, he can't certify under 54 (b) in the first place, unless -- he can't enter that judgment unless it's -- unless it's a final judgment.
Now, as far as the counterclaims are concerned, the -- the Third Circuit is -- is worried about enforcement, and that is not a question of finality.
They're worried about who shall hold the money.
In their -- in their decision, they -- they said the practical effect here, the practical thing that we're being asked to decide is who shall hold the money until the case is finally decided.
And -- and that really is not a Rule 54 (b) -- primarily a Rule 54 (b) consideration.
As early as Reeves versus Beardall which was prior to the change in the rule from single transaction over to its present state, this -- this Court held that the stay provisions of Rule 54 (b) governed who should hold the money.
Now, what's happened now is that the 54 (b) stay provisions have been split off into 62 (h) which is now where you stay a 54 (b) judgment.
So that, if you apply Reeves versus Beardall, you say, after the judgment has been entered, if you want to stay because you want us to determine who shall hold the money, then you go under Rule 62 (h).
I think the fact that they -- they split that into a separate rule may well have been to avoid having the confusion of the processes under the stay provisions being confused in the processes under finality.
Justice William H. Rehnquist: Your position is that this appeal could have proceeded in the Court of Appeals on the merits and then the judgment nonetheless, be -- have been stayed pending the outcome of the Third Circuit ruling.
Mr. Ralph N. Del Deo: It could have -- if -- if the District Court had so determined, and there are a number of cases that we've cited in our brief to this effect, 54 (b) certification can be entered at -- judgments can be entered and -- and a motion made to stay them under 62 (h) and because of a counterclaim or whatever reason and they can either be stayed or not, not only pending appeal but pending a final determination of all the issues.
The District Court certainly has that power, but I don't -- I don't think that that goes to -- that goes to finality.
That -- that goes to the enforcement of the -- of the judgment.
Chief Justice Warren E. Burger: I haven't heard you describe the harsh and extraordinary circumstances that are postulated as the basis.
Mr. Ralph N. Del Deo: Well, for one thing, Mr. Chief Justice, I -- I think that harsh unusual circumstances has never been articulated by this Court in describing Rule 54 (b).
Chief Justice Warren E. Burger: What -- what did the District Courts consider was the circumstances that justified his certification?
Mr. Ralph N. Del Deo: The -- the District Court considered the fact that Curtiss-Wright was being deprived of its property, its monetary property and would be so deprived for a long time and would suffer financial loss because of it while the unadjudicated claims of both parties went through a long process and while the defendants in this case had the full use of the property.
But I-- the rule does not say unusual harsh circumstances to the extent of having to prove some type of irreparable harm.
The rule speaks in terms of, in my view, what justice and fairness dictate and the provision in the rule is no just reason for delay.
And, there's no showing in this case of a just reason for delay other than -- other than the fact that there exist a counterclaim.
And they -- you cannot really accuse a District Court Judge of having abused his discretion by not incorporating Rule 62 (h) considerations in the 54 (b) determinative process with respect to finality.
The -- I think that to sustain the decision of the Third Circuit is not in harmony with the policy of judicial economy and justice to the litigants, and it's not -- it usurps the discretion of the District Court.
And I think also, it -- it will put a chill on attorneys using the joinder provisions of the rule enjoining all their claims were possible in one case.
I think it would rather encourage them to start a -- a number of lawsuits rather than do what is judicially economical and -- and put them in the one case.
Also, I think that if -- if you --
Justice John Paul Stevens: Mr. Del Deo, that really wouldn't be up to you in this case, would it?
Because your opponent always has at least a permissive counterclaim and if he wants the benefit of delay as a result of a counterclaim, he can always file it.
Mr. Ralph N. Del Deo: Well, I -- Your Honor, I think that one of the dangers of the Third Circuit's position in this case is with respect to counterclaims that it will encourage imaginative counterclaims certainly, and it will also encourage litigants to prolong litigation because we're --
Justice John Paul Stevens: I'm not suggesting, I just want to make --
Mr. Ralph N. Del Deo: Yes.
Justice John Paul Stevens: -- my point more narrow.
You were suggesting -- you have a -- a group of claims on -- for -- for -- on the contract and you also have some claims for additional moneys because of alleged fraud and the like.
Mr. Ralph N. Del Deo: Yes.
Justice John Paul Stevens: And you were suggesting that you would be discouraged from joining those in the same action by this -- by a contrary rule, but it seems to me, even if you had separate actions for your two groups of claims, General Electric could still counterclaim in which ever one they chose.
Mr. Ralph N. Del Deo: I -- Your Honor, I -- I -- that may well be.
I haven't addressed myself to that thought, frankly, but I'd -- I know of very few cases where imaginative counsel, and I'm not accusing my opponent of being imaginative, certainly, but I know a very --
Justice Potter Stewart: It's not insult necessarily.
Mr. Ralph N. Del Deo: What?
Justice Potter Stewart: It's not necessarily an insult.
Mr. Ralph N. Del Deo: Well, I -- I -- excuse me.
Anyway, I -- I know of very few cases where somebody can't think up a counterclaim if they're pressed to it and one good enough to get by a motion to dismiss for failure to state a cause of action.
And it was a motion to dismiss for failure to state a cause of action that was made here on the counterclaims, it's referred to in our opponent's brief.
It was by no ways any decision on the merits.
Chief Justice Warren E. Burger: But you haven't pinpointed what I thought I read in your brief that the -- one of the harsh circumstances here is that they're going to be deprived specifically of about $1 million a year.
Mr. Ralph N. Del Deo: Well, that is a financial injustice.
If you just calculate that, if you just calculate by figuring the prejudgment interest rate and apply it against the present rates, it's not $1 million anymore.
I think the last time I figured it out, Your Honor, it was $1,000,008 a year.
And of course, that doesn't -- that doesn't even get into what -- the use of them, the value or the use of that money in the market place might be.
Chief Justice Warren E. Burger: Would it have served your purposes, your client's purposes if the judge had ordered that the judgment be paid into the registry of the courts and invested in high yield government obligations pending the outcome of the suits, so that there might be 11% or 12% return, instead of 6% return?
Mr. Ralph N. Del Deo: Well, of course, Your Honor.
That's -- that really a 62 (h) consideration.
It doesn't go to the finality of the judgment.
Even -- in this case, even --
Chief Justice Warren E. Burger: Well, I know you -- you'd -- you'd gotten into the subject, or at least --
Mr. Ralph N. Del Deo: Right.
Chief Justice Warren E. Burger: -- on the edge of the subject of imaginative or innovative remedies.
And that's why I -- I raised this question, wondering whether that would solve the problem -- would have solved the problem.
Mr. Ralph N. Del Deo: Well, that I don't think is a 54-- with due respect to, Your Honor.
I think that would come under 62 (h) with a stay on terms and that, I suppose, could be one of the terms.
Even normal --
Chief Justice Warren E. Burger: You're saying that that would be within the equity powers of -- of the judge?
Mr. Ralph N. Del Deo: Your Honor, what I am saying really is that it is not a consideration under 54 (b).
I feel that the district --
Chief Justice Warren E. Burger: Were on the finality issue.
Mr. Ralph N. Del Deo: On the finality issue and it's not a -- a consideration on his -- on the question of bu-- of abuse of discretion because he -- he has the discretion under this rule and he has not abused it.
And the -- there is no standard of harsh unusual circumstances that goes to irreparable harm here.
Chief Justice Warren E. Burger: I -- I submit to you only that if you agreed that this would be a reasonable solution, the hypothetical solution I suggested, then would that not have some bearing on the arguments you're making about the correctness of the District Judge's ruling?
Mr. Ralph N. Del Deo: Well, I --
Chief Justice Warren E. Burger: That he have to -- he had alternative remedies, this hypothetical one being possibly one and the one he adopted based on finality being another one.
Mr. Ralph N. Del Deo: Well, I -- the motion that I made was under 54 (b) and I -- I think the decision he made was a correct one.
The question here is a -- a deprivation of property, Your Honor, and I think the -- as far as injustice is concerned, to exercise discretion.
I don't know what more injustice you could have if what you're suggesting is -- is almost a settlement type of thing where the Court might say, well, the money be placed in -- put up and placed in high yield securities.
But, I think there, without -- I -- I don't know, the defendant might object to that without a final judgment.
I think, really, that -- that 62 (h) is the place to consider whether the money should be paid and who should hold the money.
Justice William H. Rehnquist: Well, the Third Circuit here conceded that these decisions are final under 1291, didn't it?
Unknown Speaker: That's right.
Mr. Ralph N. Del Deo: They -- they did not quarrel with that.
Their -- their dispute with the decisions was really on the question of harsh of --
Justice William H. Rehnquist: No just --
Mr. Ralph N. Del Deo: -- of the existence of the counterclaim and who should hold the money.
It didn't bother them, apparently, that -- that we're not holding our equipment anymore and that the General Electric counterclaims are unadjudicated, and that the balance of our claims which are substantial are also unadjudicated.
And that this claim that we have here is adjudicated.
It's a --
Justice William H. Rehnquist: But, it --
Mr. Ralph N. Del Deo: It's final judgment.
Justice William H. Rehnquist: It's in the -- it's -- it's my understanding that the Third -- Third Circuit, and I think analytically, would have to make its reversal of the District Court turn on the no just reason for delay standard in Rule 54.
Mr. Ralph N. Del Deo: Well, to the extent then that they are saying that the existence of a counterclaim is a just reason for delay, they are in clear conflict with the Supreme Court decision in the Cold Metal case which held exactly to the contrary.
And with the terminology of the rule which envisions that any -- any claim for relief, whether it's in a counterclaim or in the main action, can be subject to entry of final judgment here.
Now, by the fact that you -- for instance, you can get a judgment on a counterclaim, chances are, there's going to be in existence a complaint.
And the mere existence of a competing claim is not a barrier to 54 (b) certification and entry of judgment.
And, that's exactly what the Third Circuit is holding in the -- in the Allis-Chalmers case by dicta and in this case straight out, and it's --
Justice William H. Rehnquist: But they didn't -- did -- did you feel they laid -- laid down a flat rule that any time there's a counterclaim, the -- the District Court is not entitled to certify under Rule 54?
Mr. Ralph N. Del Deo: The Third Circuit, to the extent they laid down any standard at all, said that you were -- had to deal with situations like insolvency and economic duress.
They dealt with almost irreparable harm type situations, but they have this rule confused with interlocutory orders.
And that's why they're getting into that type of consideration.
They're -- they're not treating it as a final order, as a final judgment.
Justice John Paul Stevens: Mr. Del Deo, I don't -- I'm not sure I -- did you answer Justice Rehnquist's question?
Is it your position that whenever there's a counterclaim, you are -- you -- the -- the prevailing party on the original complaint is always entitled to a 54 (b) finding?
Unknown Speaker: No.
Mr. Ralph N. Del Deo: No.
Justice John Paul Stevens: You don't take that position?
Mr. Ralph N. Del Deo: No.
Justice John Paul Stevens: But, do you take this -- do you take the position that the no just reason for delay language only goes to the question, whether the case is appropriate for appeal and that the questions of financial solvency and collectability nor other questions that are appropriately raised under 62 (h)?
Mr. Ralph N. Del Deo: That's correct.
Your Honor, I think that what the -- the discretion that the -- that the Court is to look to is to see whether, as in Cold Metal, the claims are separate.
Whether there's an interrelation between those claims, it poses problems of mootness, duplicate of appeal and so forth, that would --
Justice John Paul Stevens: The whole piecemeal appeal problem.
Mr. Ralph N. Del Deo: Yes.
To admit it, that was --
Justice John Paul Stevens: Was there a stay under 62 (h) in this case?
Mr. Ralph N. Del Deo: None was applied for, Your Honor.
Justice John Paul Stevens: Has the judgment been collected?
Mr. Ralph N. Del Deo: No, we -- the Third Circuit revert -- vacated the District Court's --
Justice John Paul Stevens: But -- but there was a period before it was argued in the Third Circuit?
Mr. Ralph N. Del Deo: The -- the judge in the District Court granted a stay pending appeal.
Justice John Paul Stevens: I see.
There was a -- but now, if you win here, is it correct that the case would go back to the Third Circuit for them to pass on this contract defense, is that right?
Mr. Ralph N. Del Deo: Well, it -- it then -- then, they would go to the merits of the original appeal which is the 5 (c) release --
Justice John Paul Stevens: Right.
Mr. Ralph N. Del Deo: -- clause in the contract.
Justice Potter Stewart: The -- the District Court, as I read its latter opinion on page -- the last paragraph of it on page 13 (a) of the appendix to your petition for writ of certiorari, did say and presumably consider the presence of the counterclaim as a factor weighing against certification, but he thought that factor was overbalanced by the other factors weighing in favor of certification under 54 (b).
And, you would -- you would -- would you -- you would concede, as I understand it, that he was correct in weighing that as one of the factors.
Mr. Ralph N. Del Deo: Well, I think -- I think he's correct certainly in weighing it insofar as the interrelationship of the claims and the counterclaim and the main case, applying the Cold Metal standard and the Sears standard as to the fact that you look to the interrelationship of those claims.
Insofar as the balance of it, I -- whether he -- whether or not he weighed it on any other basis, I -- I, you know, I -- I can't tell you what all of his mental processes were but --
Justice Potter Stewart: But in any event, he decided it in your favor and you're not going to quarrel with him very much.
Mr. Ralph N. Del Deo: That's correct, Your Honor.
I'd like to reserve the rest of my time for rebuttal if I may.
Chief Justice Warren E. Burger: Very well, Mr. Del Deo.
Argument of Isaac N. Groner
Mr. Isaac N. Groner: Mr. Jus -- Mr. Chief Justice and may it please the Court.
The principal ground upon which respondent relies is that Rule 54 (b) was a rule in the service of, and not contrary to, the fundamental policy against piecemeal appeals and that the Third Circuit was correct when it vacated the District Court's entry of the judgment as final which made it appealable under Section 1291 for the reason that there -- the -- the grounds upon which the District Court relied did not comport with the tests which were established at the beginning in the adoption of Rule 54 (b) and were consistent with the policy against piecemeal appeals.
Justice William H. Rehnquist: Of course, an even more effective way to prevent piecemeal appeals would have been avoid -- to avoid adopting Rule 54 (b) at all, wouldn't it?
Mr. Isaac N. Groner: Yes, indeed, Your Honor.
That that is correct and it was a very serious question to the -- to the Advisory Committee on the rules and to the Court presumably in adopting them, as to precisely what scope should be allowed.
Deviation from the previous rules that there could no -- could be no piecemeal appeals and there is no question that what was intended and what was provided was only a very, very narrow exception and that the burden was to be upon someone who was claiming that exception.
Let me read to you, if I may, the concluding sentences of the Advisory Committee report and then refer to the initial sentence.
Chief Justice Warren E. Burger: Do you suggest -- before you go into that, Mr. Groner, that the District Court wasn't aware of all these factors when he did this weighing process?
Mr. Isaac N. Groner: I -- I could not say that he was not aware of it.
There is no reference, Your Honor, to the advisor's notes.
There is reference to the Court of Appeals decision in Allis-Chalmers which -- and to other cases of the Third -- Third Circuit which show recognition of the revisers' notes and the very narrow standard.
The judge certainly sought to apply that standard in good faith.
In our view, as in the view of the Third Circuit, he abused the discretion by exceeding the narrow bounds and, indeed, relying upon grounds which are improper to be relied upon.
First, to show how narrow the exception to the rule against piecemeal appeals was intended --
Justice John Paul Stevens: Mr. Groner, may I just clarify one thing.
You do agree, do you not, that the judgment was final?
Mr. Isaac N. Groner: No, Your Honor.
I take it that that is the issue in this case.
The -- the issue in this case --
Justice John Paul Stevens: But do you -- do you then question his power to enter 54 (b) finding?
Mr. Isaac N. Groner: I'm sorry, Your Honor?
Justice John Paul Stevens: Then you question his power to enter --
Mr. Isaac N. Groner: Oh, no, no.
No, no, Your Honor.
As I -- as I understand it, the judgment is not to be considered final in a case in which there are a multitude of -- of claims, unless and until the District Judge validly enters a certification.
Justice John Paul Stevens: If there were no just reason for delay, then it would be a -- the kind of order which could be made final by him.
Mr. Isaac N. Groner: Oh, yes, indeed.
Justice John Paul Stevens: I see.
Mr. Isaac N. Groner: There's no question about it, Your Honor.
Justice John Paul Stevens: Oh, yes.
Mr. Isaac N. Groner: Yes.
That in that sense, we don't -- we don't question his jurisdiction at all.
To turn to the revisers' notes which this Court, in other context, has held do indeed give guidance as to what the intention of the revisers' were and what the intention embodied in the amendments to the Federal Rules of Civil Procedure are.
After extended consideration, the Advisory Committee said “it,” meaning itself, “concluded that a retention of the older federal rule was desirable and that older federal rule,” as I shall make clear beyond doubt, “was the rule against piecemeal appeals.”
Returning to the revisers', “and that this --
Chief Justice Warren E. Burger: At -- at what -- at what --
Mr. Isaac N. Groner: Yes?
Chief Justice Warren E. Burger: Could -- it would help me if you'd indicate it what date the revisers' notes, if you have time.
Mr. Isaac N. Groner: These were, I believe, in 1946, Your Honor.
For the 1946, the amendment adopted in 1946, effective in 1948, which put the pertinent words of the -- of Rule 54 (b) as they are today, although there was a later amendment that had to do with multiple parties and not with any issue that I'm aware of that we're talking about this afternoon.
After extended consideration, it concluded that a retention of the older federal rule was desirable and that this rule needed only the exercise of a discretionary power to afford a remedy in the infrequent harsh case to provide a simple definite workable rule.
This is afforded by amended Rule 54 (b).
It reestablishes an ancient policy with clarity and precision and the initial sentence in the revisers' note is the historic rule in the federal courts has always prohibited piecemeal disposal of litigation and permitted appeals only from final judgments except in those instances -- except in those special instances covered by statute.
Now, this ancient rule, as it existed and was consistently applied by this Court prior to the 1946 Amendment, was that there should be no appeal and that there could be no appeal.
Justice Potter Stewart: But there's no question but -- that 54 (b) is an exception to that rule and the question in this case is the breathe of that exception, isn't that correct?
Mr. Isaac N. Groner: Yes, indeed.
Justice Potter Stewart: You would concede that 54 (b) is -- whatever -- whatever its scope is an exception to that rule, wouldn't you?
Mr. Isaac N. Groner: Yes, indeed.
Yes, indeed, Your Honor.
And -- and the question as we would see before this Court is whether that exception is to be interpreted and applied narrowly as was intended by the revisers, so that there will be fundamental adherence to the rule against piecemeal appeals or whether there shall be deviation from that rule spreading the exception so wide as to embrace virtually every money judgment case.
Chief Justice Warren E. Burger: What you have just tell us -- and what I take it you're telling us and about to enlarge on is that the loss of $1,000,008 a year that it was an abuse of discretion for the District Judge to say, to believe, that the loss of $1,000,008 per year on this interest problem was an -- was simply not founded, that that didn't bring it within the infrequent exception rule.
Mr. Isaac N. Groner: That is precisely our position, Your Honor.
And it is precisely our position that if there is to be an exception based upon the fact that there is a money judgment and that the market rate of interest, that is to say, the rate charged to borrowers of funds, exceeds the statutory interest rate.
Those grounds would apply to every money judgment.
Chief Justice Warren E. Burger: Are you saying in effect that it has to be a situation almost like Chrysler Motor Company that it's on the verge of bankruptcy if it doesn't get some cash right away?
Mr. Isaac N. Groner: That would be the type of case that we would think the framers of -- of the rule intended and would be an infrequent harsh case because that would be a case that would present special circumstances.
To say that the ordinary money judgment presents special circumstances could not -- if --
Chief Justice Warren E. Burger: Well, are -- is the judgment of this size on -- does that fall in the category of an ordinary money -- money judgment?
Mr. Isaac N. Groner: Well, it -- it --
Chief Justice Warren E. Burger: What is this about, $20 million, the judgment?
Mr. Isaac N. Groner: It's almost $20 million, Your Honor.
And I -- I would not say --
Chief Justice Warren E. Burger: It's not very ordinary, is it?
Mr. Isaac N. Groner: Yes.
Chief Justice Warren E. Burger: Not very ordinary.
Mr. Isaac N. Groner: It -- it depends, Your Honor on whether we're adopting an absolute standard or a relative standard.
Chief Justice Warren E. Burger: Right.
Mr. Isaac N. Groner: To me, that is huge.
On the other hand, there may be corporations, Curtiss-Wright may be included, to whom this would be the same kind of relative money judgment as perhaps a few $100 would be to us.
In any event, it was not so large a sum that Curtiss-Wright even tried to present to the District Court any specific grounds for saying that this is an infrequent harsh case.
Justice William H. Rehnquist: When you say us, you're not referring to General Electric, are you?
Mr. Isaac N. Groner: No.
Justice William H. Rehnquist: As -- among -- a $1,000,008 being to cur -- Curtiss-Wright like a few $100 would be to General Electric?
Mr. Isaac N. Groner: No, Your Honor.
I was trying to --
Chief Justice Warren E. Burger: We'll accept that.
Mr. Isaac N. Groner: I was really --
Chief Justice Warren E. Burger: We'll accept that.
Mr. Isaac N. Groner: I was really only trying to apply a relative test that in all candor, I would not know how the relative test would come out for any individual or for any corporation.
Chief Justice Warren E. Burger: Well, speaking of relativity, Mr. Groner, I suppose if the Advisory Committee in the rulemaking process was trying to have some firm rules that would be applicable forever, $20 million in 1946 isn't the same as $20 million in 1980, is it?
Mr. Isaac N. Groner: I would suppose not, Your Honor, but I -- again I repeat that it is a large sum of money.
And as a matter of fact, that is one of the two grounds that we respectfully urge, is not a proper ground for the District Court to take into account.
The District Court said this is a large sum of money and it will earn a large sum of money in interest in terms of the difference between the statutory interest and the market interest rate.
Justice John Paul Stevens: Mr. Groner, can I suggest another approach to the case?
That perhaps one could read 62 (h) as being primarily directed at questions of solvency and collectability and things like that, and that 54 (b) is primarily directed at the -- the problems related to piecemeal appeals and total conclusion of litigation.
And, if in the judge's discretion, he thought it might expedite winding up the whole case to get a part of it settled finally, but then the rest of it might be settled by -- by adjustment between the parties.
Would that be a proper consideration for the judge to take into account?
That there's a better chance of settling this monstrous litigation if we get this $18 million item out of the way?
Mr. Isaac N. Groner: Well, Your Honor, the -- the considerations in Rule 54 (b) are whether there ought to be an appeal at this particular Court.
Justice John Paul Stevens: Correct, thinking in terms of getting the whole case over.
Mr. Isaac N. Groner: Thinking in terms of -- of, perhaps, of getting the whole case over but weighing that in terms of the historic policy against piecemeal appeals, which has well-grounded public policy considerations for it.
The effect upon the litigation of the other claims would be a proper consideration.
There's no indication here in any way that the judge thought that the disposition of the litigation would be expedited or facilitated by resolution of this issue.
Justice John Paul Stevens: (Voice Overlap) a District Judge who isn't constantly thinking about ways to get a case of this magnitude settled?
Mr. Isaac N. Groner: Well, Your Honor, there -- there is no indication of that.
Justice John Paul Stevens: Isn't --
Mr. Isaac N. Groner: -- and there's a -- there is -- if that was a consideration, that sort of consideration may well be the kind of consideration that ought to be weighed in terms of its significance as against the historic policy against piecemeal appeals.
And to say that a judge may certify as final under Rule 54 (b) and require the Court of Appeals to pass on the appeal, a piecemeal disposition of a particular claim because he may have an unarticulated opinion that it may expedite settlement, does not fall, we believe, within the purposes or the effects of the rule.
Justice John Paul Stevens: Because on this record, he didn't articulate any such information.
Mr. Isaac N. Groner: No, Your Honor.
Justice William H. Rehnquist: What if -- what if the Third Circuit, Mr. Groner, had said in this case, considering Rule 54 (b) and the -- its relationship to the tradition against piecemeal appeals, that in any case in which there is a pending plausible counterclaim, a district court in this circuit shall not certify for appeal a -- a final decision on person to Rule 54 (b).
Do you think that would be consistent with Sears, Roebuck versus Mackey?
Mr. Isaac N. Groner: We do -- we do not think that that is what the Third Circuit did.
Justice William H. Rehnquist: Well, I -- the -- but I'm -- my mind is a hypothetical question.
Mr. Isaac N. Groner: If they had done so, if they had established a rule which actually barred the District Judge from certifying any case in which you -- there was a counterclaim, we would not think that that would be a proper exercise of discretion.
Certainly, the framers of Rule 54 (b) intended that there be discretion, we are talking about the standards for the exercise of discretion.
And to provide that kind of absolute rule, I don't think that we would regard it as proper and the Court of Appeals did not do so.
And, although petitioner does attempt to frame the question at some point and even at some point this afternoon stated that the question was whether the certification should be barred when there are counterclaims.
That is not what the Third Circuit did and in any event, that is not a proper reading of Rule 54 (b).
Justice William H. Rehnquist: Well, but if it's not a proper ruling -- reading of Rule 54 (b) but is what the Third Circuit did, then it ought to be reversed.
Mr. Isaac N. Groner: It is not what the Third Circuit did, Your Honor.
The Third Circuit said that in the absence of harsh and unusual circumstances, the existence of a counterclaim is a factor that weighs heavily against the certification of a judgment as final.
In other words, what they were saying is -- is two things.
One, that this is a factor which we think should be given importance and, secondly, precisely by wording it as a factor, they were saying, “This is an issue where discretion should be allowed.
We are not barring, we are not putting forth any absolute rules.
What we are saying is that it is a matter of particular facts.”
And under these particular facts on this record, that is a factor to which we, the Court of Appeals, ascribe potent weight.
Chief Justice Warren E. Burger: Mr. Groner, if you know, has there been any great rush of certifications under Rule 54?
Mr. Isaac N. Groner: We do not know, Your Honor, but --
Chief Justice Warren E. Burger: I -- I must say that there's some observation of that in a general way up here and I have never heard that there has been any great use of the rule of exceptions, such as Judge Coolahan made here.
Mr. Isaac N. Groner: We -- we have -- we have not made such a study, Your Honor.
We would submit that the reversal of the judgment below would encourage more Rule 54 (b) certifications and more Rule 54 (b) disputes.
We would not necessarily describe it as a rush because in all candor, we would have no way of predicting it.
Justice Potter Stewart: Well, the fact is that the mine run plain-vanilla case doesn't lend -- lend itself to a 54 (b) disposition, does it?
Mr. Isaac N. Groner: I -- I'm sorry, I --
Justice Potter Stewart: The ordinary case doesn't -- isn't amenable to the 54 (b).
Mr. Isaac N. Groner: Well, the --
Justice Potter Stewart: It doesn't involve separate issues.
Mr. Isaac N. Groner: Well, the ordinary -- the ordinary case may or may not involve separate issues, Your Honor.
Justice Potter Stewart: Well --
Mr. Isaac N. Groner: There are many -- there are many cases in which there are -- there are --
Justice Potter Stewart: Yes, but comparatively few compared to most civil cases in the Federal District Courts, there are not many cases comparatively, where 54 (b) would be applicable.
Mr. Isaac N. Groner: There are a number of cases which apply Rule 54 (b).
The annotations of course do contain --
Justice Potter Stewart: But, you earlier said everything is --
Mr. Isaac N. Groner: Is relative, yes.
Justice Potter Stewart: Is relative, yes.
Mr. Isaac N. Groner: Compared to other issues, compared to Rule 56 issues, for example.
Justice Potter Stewart: Right.
Mr. Isaac N. Groner: Certainly, they -- they are small in number.
Chief Justice Warren E. Burger: Because the District Judge here obviously placed his emphasis on the extraordinary aspect of this case, that is the large amounts involved and on the fact that these issues could be treated separately and on the fact that if he was in error in his exercise of discretion, there could be a judgment, a collectible judgment the other way.
Those three factors were all in his -- his finding, is that not so?
Mr. Isaac N. Groner: Yes, Your Honor.
But the large amount of money was critical, it appears to us, not so much for its own sake but for the difference in the --
Justice Potter Stewart: Interest.
Mr. Isaac N. Groner: -- interest rate which it represented.
We'd like to say, first of all, as to the amount of money, what you have as a district judge who in effect is saying, “I am reaching a different decision because a claim is large in effect because there's a large corporation making that claim, then I would make if the claim were scall -- small.
And, we respectfully submit that that is not an appropriate type of determination for a system which grants equal justice under law.
Perhaps more significantly, for a district judge to be concerned with the difference in interest rate between what state law has provided and this in a diversity case, and what he regards as the market rate of interest is for him to be concerned with something which ought not to concern him.
The State of New York which was a governing law with respect to this issue, the State of New York has said a particular percentage rate of interest on judgments.
The legislature and the Governor and the entire later -- legislative process of the State of New York must have been well aware of the competing considerations, the desire for definiteness for a set rate in all cases as against the factors on the other side, namely that there would be market variances and that there might be the possibility in a commercial sense of obtaining a higher interest rate.
Now, the legislature of the State of New York decided that it would provide a set rate, not a flexible rate depending on a market rate, and it made that applicable to the kinds -- kind of judgment that is involved here.
Justice Harry A. Blackmun: Do you know the date that that was done?
Mr. Isaac N. Groner: I believe 1970 or 1971, Your Honor.
Justice Harry A. Blackmun: Well, the legislature always lags behind the current facts, doesn't it?
Mr. Isaac N. Groner: Well, I am not prepared to say that about the legislature of the State of New York, Your Honor, but, in any event, if they do, they would know that and it is precisely that the legislature would take into account, Mr. Justice Blackmun, what would happen in the future that this is a matter of legislative policy.
Certainly, the legislature understood that in the future, there might be all kinds of economic situations, there might be inflation, there might be elevations in the interest rate.
They had the possibility of making a flexible rate, precisely the kind of thing that is now before the Senate of the United States -- the Congress of the United States.
A Senate bill passed by the Senate is now before the House which would make applicable the judgments in federal cases a variable interest rate.
It would make applicable to judgments the interest rate provided in the Internal Revenue Code which is tied to the market rate.
Now, what is involved here is a judge, in effect saying what the legislature of the State of New York has provided is improper, is unjust.
In my judgment, in this case, if I applied the New York -- the -- the law of the State of New York as the legislature has adopted it and specified it, then Curtiss-Wright will lose more money than I'd like to see a litigant lose.
And in a diversity case, we say to Your Honors that that is an improper judgment for a federal district judge to make.
We say, further, that the matter of interest rates on judgments is clearly a legislative matter.
As I've indicated, there is a Senate bill which seeks to change that.
The Congress of the United States has many different provisions with respect to interest in different statutes.
In some cases, they have provide -- provided for no interest with respect to the United States.
In other cases, they provided different rates, but the Congress has been the one which has regulated that subject matter.
Justice Potter Stewart: It's -- your submission is that, Mr. Groner, that it's impermissible for a district judge to consider, in any way, the difference between the going economic rate of interest and the statutory rate?
Mr. Isaac N. Groner: Yes, Your Honor.
Justice Potter Stewart: Did the Court of Appeals say anything like that?
Mr. Isaac N. Groner: No, Your Honor.
Chief Justice Warren E. Burger: That cuts down the scope of Rule 54 quite a bit, doesn't it?
Mr. Isaac N. Groner: We do not think so, Your Honor, because, in our view --
Chief Justice Warren E. Burger: Yes.
Well, you -- you would take that out of -- you would say that's not a factor the District Judge may consider.
You have just said that.
Mr. Isaac N. Groner: Oh yes, Your Honor.
But it is a factor which he never was enable to consider under Rule 54 (b).
Chief Justice Warren E. Burger: Right.
Mr. Isaac N. Groner: So, we are not reducing the scope.
Chief Justice Warren E. Burger: Well, who -- who tells us -- where do we find out that he never was able to consider that?
Mr. Isaac N. Groner: You find that, Your Honor, from two different sources.
One is the provision or -- or the guidance provided by the advisers.
If they had thought when they specified the infrequent harsh case, we submit that we are talking about factors that are applicable uniquely to particular litigants.
We are not talking about factors that are applicable to groups of cases.
That is one source of our submission that it was improper for the District Judge to take the rate of interest into account.
The second source is the very concept of whether establishing and enforcing a rate of interest for judgment lies within the judicial province at all, whether it does now or whether it did when the rule was adopted or amended.
We -- we submit to Your Honors, it clearly is not within the judicial province that Congress, for federal judgments and state legislatures for state judgments have provided that the -- have provided what the rule should be.
And we cite the Funkhouser case as a holding of this Court which says that the establishment of a rate of interest on judgments is a matter for the legislative province.
So, we say to Your Honor that when a judge takes a factor into account which is within the legislative purview, he is not acting in a way which the Court of Appeals ought to sustain as a proper exercise of judicial discretion.
Justice John Paul Stevens: Mr. Groner, in -- in one sense, I suppose the question is whether he abused his discretion in finding no just reason for delay.
Does anything in the revisers' notes or the history of the rule tell us on whom the burden falls on the just reason for delay issue?
Is it upon the proponent of the finding to say -- had to say at the burden of showing, there is no just reason or is it on the one who says there is a just reason to point out the reason?
Mr. Isaac N. Groner: In our view, it quite clearly falls upon the one who is proposing that the judgment be final.
And this is a reflection, in our view, again of the bedrock consideration that the general rule is that there shall be no piecemeal appeals.
So that it is the supplicant for the exception to the rule who has that burden and we say, in this case, there was no effort to meet that burden.
There was no effort to show that there was anything unique about Curtiss-Wright which distinguished it from any other holder of a money judgment which would justify holding this to be the infrequent harsh case.
The fact that the -- the extent to which the claims and counterclaims may be independent or the prospective mootness of the issues, in our view, set the stage.
They do not deal with the question which is whether or not the time of the Court of Appeals and of the parties should be taken up with an appeal at this particular time.
I note, for example, that the judge found that granting this certification would not prevent the rest of the case from coming to trial.
He did not say that it would eat it and, quite clearly, any time there is an appeal, there is some diversion of the attention in the scope of resources in the litigation from the trial process to the appellate process, and this is part of the public policy which is involved in the rule against piecemeal appeals.
And this is the general rue which is involved, in our view, in this case.
Now, it might be pointed out that the funds that are of concern here are not funds that have been available to the use of the General Electric Company.
They are funds, if you want to look for them, they are in a public fist.
General Electric, under its prime contract, receives the funds only as reimbursement after it pays them out, so that there is -- the actual funds are funds in the treasury, rather than with General Electric and that's where they have been during this time.
In our view, to say that because considerations are appropriate under one Federal Rule of Civil Procedure, they may not be applied under another Federal Rule of Civil Procedure, is plainly inaccurate.
Whether or not any of these considerations are appropriate to an application under Rule 62 (h) is beside the point, in our view, as to whether or not they are proper under Rule 54 (b).
Each of these rules has different functions, and the function of Rule 54 (b) is related to the traffic to the appellate process and the exception to the general rule is a narrow one.
Whether or not there ought to be a stay, pending an appeal or pending some other time, is not the province of Rule 54 (b).
In effect, the disposition by the Court of Appeals here right now has led to the same practical result as a grant of the 62 (h) stay because, in effect, the Court of Appeals has said that there will be no execution of the judgment and there will be no appeal decision until after there has been trial of the other claims.
Thank you, Your Honors.
Chief Justice Warren E. Burger: Mr. Del Deo, you have about four minutes left.
Rebuttal of Ralph N. Del Deo
Mr. Ralph N. Del Deo: Thank you, Your Honor.
In the first place, the difference between prejudgment interest rate and the interest which we would get even if this judgment were final and stayed is considerable because the New York prejudgment interest rate is significantly lower than the interest rate applicable to judgments, so the last statement that was made that the -- this has the same effect as a stay under 62 (h) is inaccurate.
The -- we would still lose half a million dollar -- we would -- there's a half a million dollar differential a year just in the difference of prejudgment postjudgment interest rates.
Besides, prejudgment interest rates are meant to apply before a claim is finalized and adjudicated.
Our -- our claim is final, it has been adjudicated.
Chief Justice Warren E. Burger: Do you equate that to a property?
Mr. Ralph N. Del Deo: Well, I -- I think also, the deprivation of property, in and of itself, it's -- the -- the difference in the interest rate makes -- shows you how much the loss is.
The loss of the use of the property is significant, not being able to have it, to use it in -- in their operations.
And I assure you, if there's any misconception here, I want to resolve it.
$20 million is a lot of money to Curtiss-Wright.
It's -- it's not an insignificant amount if-- I don't think there's any doubt about that.
But I'd like to read from this Advisory Committee note --
Justice Thurgood Marshall: But is the $20 million enough to change the rules?
Mr. Ralph N. Del Deo: I don't think you -- I -- I think this is what the rule was --
Justice Thurgood Marshall: I mean, that's the --
Mr. Ralph N. Del Deo: Yes.
Justice Thurgood Marshall: (Inaudible)
Mr. Ralph N. Del Deo: The -- this is quite within the rule.
This is the purpose of the rule.
I -- we --
Justice Thurgood Marshall: You say the same rule was just $10,001.
Mr. Ralph N. Del Deo: Your Honor, the purpose --
Justice Thurgood Marshall: Am I right?
Mr. Ralph N. Del Deo: Pardon?
Justice Thurgood Marshall: You would say the same thing if the total amount involved was $10,001.
Mr. Ralph N. Del Deo: I think you have to take in all the facts in the -- in the case.
In this case for instance, Judge Coolahan's --
Justice Thurgood Marshall: And your answer would be, you didn't know, yes or no.
Mr. Ralph N. Del Deo: Well, Your Honor, I was going to say, in this case if you permit me to answer your question was that Judge Coolahan also noted that this was going to be a lengthy proceeding.
So it's -- it's not just the loss of that much money.
It's the loss of that much money over a long period of time.
The -- that much -- a smaller amount might be de minimis to one litigant.
I think this is why the -- the -- this is why the discretion is given to the District Court Judge.
The money that we're losing on the interest rates, for instance, can never be recouped.
If at the end of the case, the General Electric --
Justice Thurgood Marshall: But at the end of the case --
Mr. Ralph N. Del Deo: -- counterclaims are dismissed.
Justice Thurgood Marshall: At the end of the case, you might not get anything.
Mr. Ralph N. Del Deo: Well, if at the -- well, Your Honor, we'll always get the -- we'll always get the $20 million, but we'll never recoup the difference in the interest at the end of the case.
Now, I read from this Advisory Committee note that was referred to.
It says, “Rule 54 (b) was originally adopted in view of the wide scope and possible content of the newly created civil action in order to avoid the possible injustice of a delay in judgment on distinctly separate claim to await adjudication of the entire case.”
That's exactly what we have here.
We have injustice resulting from the delay of our claim.
We -- the Third Circuit wishes to equate the kind of injustice we have to show over and above the obvious injustice to something relating to insolvency and economic duress.
But if we were insolvent, my opponent would be here saying that -- that we shouldn't get the money because we would go broke and lose it if we had to pay it back.
So, that's --
Chief Justice Warren E. Burger: Unless you put up a bond.
Mr. Ralph N. Del Deo: Pardon?
Chief Justice Warren E. Burger: Unless you put up a bond --
Mr. Ralph N. Del Deo: Which, if we were --
Chief Justice Warren E. Burger: -- to be (Voice Overlap) --
Mr. Ralph N. Del Deo: -- insolvent we couldn't afford, Your Honor.
Justice Byron R. White: Could I ask you?
Mr. Ralph N. Del Deo: Thank --
Justice Byron R. White: If a counterclaim hadn't been pending, would the -- would you think the Court of Appeals would have said the certification is alright?
Mr. Ralph N. Del Deo: In -- in similar cases, which this Court has had in Liberty Mutual and Tilden, the Court of Appeals in the Third Circuit has permitted such cases to come to be certified.
In fact, they did it erroneously.
Justice Byron R. White: And, even -- even though the reason may be that -- just -- that's just the reason that the District Judge relied on here.
Mr. Ralph N. Del Deo: Yes, they've never used harsh unusual circumstances in cases without counterclaims that -- that I know of.
Justice Byron R. White: So that the counterclaim really is the turning point in the case.
It's the reason that they imposed a different standard.
Mr. Ralph N. Del Deo: It's the only reason that they've articulated and it's the one I see, Your Honors.
Chief Justice Warren E. Burger: Thank you, gentlemen.
The case is submitted.
We'll hear arguments next in Roberts against --