Gelboim v. Bank of America Corp.

Issues 

In what circumstances may a party, under 28 U.S.C. § 1291, immediately appeal an order dismissing a claim arising from a case that has been consolidated with other suits for pretrial purposes?

Oral argument: 
December 9, 2014

Under 28 U.S.C § 1291, a federal court of appeals has jurisdiction over a district court’s final decision. This case will determine when a party, involved in a pretrial consolidation, can appeal its individual dismissal. In this case, the district court consolidated Gelboim’s claim with other claims for pretrial purposes, but subsequently dismissed Gelboim’s individual claim. Gelboim argues that because the district court dismissed her individual claim, the district court’s decision on her claim is a final decision that is immediately appealable regardless of whether there are still claims from the consolidated action pending district court review. Gelboim also argues that if dismissed claims are not immediately appealable, claims will be in stasis for an indefinite period of time, which will lead to the waste of judicial time and resources. Bank of America counters by claiming that consolidated claims should be reviewed as a unit regardless of whether consolidation occurs only for pretrial purposes or for all purposes. Bank of America believes that this practice is consistent with Congress’s intent to reduce “needless duplication of effort.” The outcome of this case will affect which court decides when a case is ready for appeal, and how much discretion district courts will have in dealing with multidistrict litigation.

Questions as Framed for the Court by the Parties 

Whether and in what circumstances is the dismissal of an action that has been consolidated with other suits immediately appealable?

Facts 

The London Interbank Offered Rate (“LIBOR”) is an international method of calculating interest rates. LIBOR is important because it is the rate that banks charge to other banks for short-term loans. This case arises out of the class action lawsuit In re LIBOR-based Financial Instruments Antitrust Litigation concerning an antitrust claim alleging LIBOR fixing.

Petitioner Ellen Gelboim is the sole beneficiary of an individual retirement account that contained LIBOR-based debt security. She is also one of the lead bondholder plaintiffs in the class action litigation regarding LIBOR.

Respondents Bank of America Corporation and associated parties (“Bank of America”) are members of the banking trade association responsible for calculating the “daily interest rate benchmark.” These banks submit rates that are designed to reflect the expected cost of borrowing U.S. dollars from other banks; the rates are submitted on a daily basis and the average is used as a benchmark for financial instruments throughout the world.

Gelboim alleged that Bank of America conspired to report rates that did not reflect good faith estimates of borrowing costs and instead submitted purportedly artificial rates over the course of thirty-four months (August 2007-May 2010), which resulted in negative effects to Gelboim’s financial instruments. Gelboim brought suit in the U.S. District Court for the Southern District of New York (“district court”) and is one of a number of private litigants who have brought legal actions for harm resulting from Bank of America’s alleged rate fixing. The district court found that Gelboim failed to allege a sufficient antitrust injury and granted Bank of America’s motion to dismiss. Gelboim appealed to the U.S. Court of Appeals for the Second Circuit (“Second Circuit”) where Second Circuit determined that it lacked jurisdiction over the case because “a final order ha[d] not been issued by the district court as contemplated by 28 U.S.C. § 1291, and the orders appealed from did not dispose of all claims in the consolidated action.”

Analysis 

This case will resolve a four-way circuit split by determining if a dismissed action that is originally part of a consolidated group of actions for pretrial purposes is immediately appealable. The major issue the Supreme Court will resolve is whether cases consolidated for pretrial purposes should be treated as separate actions or one single action for litigation purposes. Gelboim argues that her claim was a single action consolidated with other actions for pretrial purposes only and that these consolidated actions retain their individuality throughout the litigation. Gelboim believes that because an action maintains its individuality during a consolidation, an action is immediately appealable if the district court dismisses it. On the other hand, Bank of America argues that consolidated cases should be treated as one unit for the purposes of litigation and that finality occurs only when all of the claims in the consolidation are dismissed. Bank of America further contends that it should be up to the district court to determine when an action is final and appealable and to hold otherwise would undermine the role of the district court.

WHEN IS A CONSOLIDATED ACTION FINAL?

Under 28 U.S.C § 1291, a consolidated action is immediately appealable if a “dismissal [by the district court] constitutes a final decision.” Gelboim argues that an action can be appealed once it is dismissed, even if the other consolidated claims are still pending. Gelboim contends that if the district court had not consolidated her claim under 28 U.S.C. § 1407 (“§ 1407”)—the statute governing multidistrict litigation (“MDL”)—her claim would have been immediately appealable given that the court dismissed it. Gelboim further argues that the language of § 1407 does not imply or suggest that “the actions merge into a new, unified action during those proceedings.” Gelboim contends that § 1407 allows for consolidation only when there are common questions of fact, not common legal questions, which means that the legal theories of the numerous consolidated actions may be wide-ranging. Gelboim argues that if an action is dismissed on purely legal grounds, it is misguided to believe that the legal issues on appeal will overlap with the legal issues in the consolidated actions still pending before the district court. Gelboim believes that this leaves no reason to question the finality of an action dismissed on legal grounds; therefore, an action can be immediately appealed even though the other consolidated claims are not yet finalized.

According to Bank of America, an action is final when nothing remains “open, unfinished, or inconclusive” and when the district court disassociates itself from the case. Bank of America argues that finality for consolidated multidistrict litigation claims occurs when every claim is disposed of because that is when the district court is done with the litigation as a whole. Bank of America contends that the consolidated claims should be treated as one litigation unit both in the district and appellate court levels.Bank of America also contends that it does not matter whether the actions were consolidated for pretrial purposes only or for all purposes; the claim cannot be appealed until all parts of the action have been disposed of. Bank of America further supports its arguments by comparing multidistrict litigation to multiparty and multiclaim suits; even though claims in these suits may be separable from the other claims, they are not immediately appealable. Bank of America also compares pretrial consolidation under § 1407 to the other consolidation rules such as Rule 4(a)(4), Rule 4(a)(3), and Rule 4(a)(1). In these rules, Bank of America argues, courts treat the multiple claims as a unit. Bank of America further contends that the issue is not one of merging the claims together because even if the cases remain individual in character, the claims are still bound together procedurally for timing purposes.

STATUTORY INTERPRETATION AND CONGRESSIONAL INTENT

Gelboim argues that the language of § 1407—governing MDL—suggests that claims consolidated for pretrial purposes should retain their separate status throughout judicial proceedings because the language of § 1407 and the Federal Rules of Civil Procedure suggest that Congress intended the claims to be viewed as individual units within a consolidated action—individual units that retain their separate character. Gelboim further argues that because § 1407 calls for the individual action to be sent back to its original jurisdiction after being heard by the district court in charge of the MDL, consolidated claims should be treated as transferred, individual claims instead of claims merged into a single unit. Gelboim compares pretrial consolidation to joinder, where the claims of multiple parties are joined based on their similarities concerning questions of fact or law as long as the claims arise out of the same occurrence. Similar to joinder, Gelboim maintains, if the consolidated actions were merged, it would allow parties to circumvent the “same occurrence” condition necessary for permissive joinders under Federal Rule of Civil Procedure 20. Gelboim also contends that Federal Rule of Civil Procedure 54(b) (“FRCP 54(b)”) does not apply to this case because FRCP 54(b) does not apply when a court dismisses an action in its entirety, as the district court did with her claim. Consequently, Gelboim maintains that she can still appeal her claim even though a partial final judgment was not entered against her.

Bank of America argues that Gelboim misinterprets § 1407. Bank of America argues that Congress intended § 1407 as a way to prevent “needless duplication of effort” by the courts. Bank of America also argues that allowing immediate appeals would completely undo the efficiencies that Congress intended with § 1407. Bank of America contends that a district court’s decision to consolidate the claims into a unit should not be undone by allowing one claim to go immediately to appeal. Bank of America also argues that Gelboim interprets the joinder rules incorrectly. According to Bank of America, the rules for permissive joinder apply when a party, not the district court, wants to merge a claim; so, permissive joinder should not be compared to multidistrict litigation. Bank of America also contends that FRCP 54(b) does apply to Gelboim’s claim, allowing appeals under this rule is entirely at the district court’s discretion, and the district court did not grant Gelboim a partial judgment which denies Gelboim the right to appeal. Bank of America further argues that because the district court decides how to consolidate multidistrict litigation cases, it is fitting to have them decide when to dismiss the consolidated MDL claims under FRCP 54(b).

Discussion 

In this case, the Supreme Court has the opportunity to determine whether an individual claim that has been dismissed from a consolidated claim is immediately appealable under 28 U.S.C. § 1291 or whether appealability is a determination the district court makes under Federal Rule of Civil Procedure 54(b) (“F.R.C.P 54(b)”) or 28 U.S.C. § 1292(b). Gelboim argues that the Second Circuit’s decision was a final decision that is subject to immediate appeal under 28 U.S.C. § 1291. On the other hand, Bank of America argues that the content of Gelboim’s appeal is not from an appealable final judgment and is therefore subject to the district court’s discretion under F.R.C.P 54(b) and 28 U.S.C. § 1292(b). The outcome of this case may implicate the resources of the courts and those who litigate within them.

EFFECTS ON THE JUDICIAL SYSTEM

Gelboim argues that the Second Circuit’s rule will result in “confusion and waste” and encourage losing parties to immediately file protective notices of appeal at the conclusion of trial, which would force courts to adjudicate whether or not an appeal is necessary for every case. Gelboim alleges that this will result in the consumption of party and judicial resources and instead argues for a “clear, categorical rule” that she claims would prevent courts from being overburdened with an increased number of appeals.

Alternatively, the U.S. Chamber of Commerce (“Chamber”), in support of Bank of America, argues that multidistrict litigation (“MDL”) and consolidation of related claims minimizes the costs of litigation and alleviates burdens on both litigants and courts. If each MDL litigant could immediately appeal after a dismissal, the Chamber argues, this would frustrate judges’ ability to manage cases and burden judges’ discretion to move cases under F.R.C.P 54(b). Additionally, according to the Chamber, such a decision would intervene with Congress’s intent to promote “fairness, efficiency, and convenience.”

Supporting Gelboim, the Mayor and City Council of Baltimore (“Baltimore”) argue that the Second Circuit’s rule would require parties in Gelboim’s position to wait for the completion of every case in the consolidated claim before pursuing an appeal. Once the decision is successfully appealed, Baltimore states, the parties would need to resubmit facts and expert testimony; Baltimore claims that this could take many years and consume party resources and time.

Supporting Bank of America, a group of retired U.S. District Court judges argue that whether a case merits immediate appeal is a decision district courts should determine on a case-by-base basis. These judges argue that district court judges are in the best position to make such determinations given their intimacy with the facts and circumstances in a case, enabling the judges to determine whether immediate appeal would “help or hinder coordination of MDL.” The judges claim that Rule 54(b) provides district court judges with the flexibility to determine whether immediate appeal is warranted. This, the judges claim, protects “judicial supervision,” guards against “piecemeal” appeals, and prevents the overburdening of appellate courts or the disruption of a district court’s resolution of remaining claims.

Conclusion 

In this case the Supreme Court will determine when a party, involved in a consolidation for pretrial purposes, can appeal an individually dismissal claim. Gelboim argues that if the Supreme Court allows for immediate appeals, the litigation and settlement processes will be accelerated. In contrast, Bank of America contends that if the consolidated claims are not treated as a single litigation unit, judicial resources will be wasted and efforts will be duplicated. The outcome of this case will settle the inconsistencies amongst the federal courts of appeals and will also impact the district courts’ discretion in deciding when to allow an appeal of consolidated claims.

Edited by 

Additional Resources