Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-07-03169/USCOURTS-ca8-07-03169-0/pdf.json

Parties Involved:
Absolute Return Europe Fund
Appellant
Lynn Bradley
Not Party
David Colwell
Not Party
Europe Catalyst Fund
Appellant
Florian Homm
Appellant
JBM
Appellant
Joseph McAdams
Appellant
William McCord
Appellee
Moore Stephens Frost
Appellee
Daniel Moudy
Appellee
Richard Smyth
Appellant
The Loyr Foundations
Appellant

Document Text:

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The Honorable Bobby R. Baldock, United States Circuit Judge for the Tenth

Circuit, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 07-3169

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Joseph McAdams; JBM, LLC;

Florian Homm; Absolute Return

Europe Fund, LTD; The Loyr

Foundations; Europe Catalyst Fund;

Richard Smyth,

Appellants,

v.

William McCord; Daniel Moudy,

Appellees, 

Lynn Bradley; David Colwell, 

Defendants,

Moore Stephens Frost, PLC,

Defendant - Appellee

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Appeal from the United States

District Court for the 

Western District of Arkansas.

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 Submitted: April 14, 2008 

 Filed: July 17, 2008 

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Before GRUENDER, BALDOCK1

 and BENTON, Circuit Judges. 

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GRUENDER, Circuit Judge. 

This is an appeal from an order of the district court granting the appellees’

motions to dismiss after the district court entered final judgment under Federal Rule

of Civil Procedure 54(b). For the reasons discussed below, we find that district court

abused its discretion by entering final judgment under Rule 54(b) and dismiss the

appeal for lack of jurisdiction.

I. BACKGROUND

UCAP, Inc. (“UCAP”) was a multi-state provider of mortgage lending and

brokerage services. In November 2004, UCAP’s subsidiaries filed for Chapter 11

bankruptcy, although UCAP apparently did not. UCAP eventually ceased operations,

and its stock was delisted in 2005.

In 2006, Joseph McAdams; JBM Company, LLC; Florian Homm; Absolute

Return Europe Fund, LTD; the Loyr Foundation; Europe Catalyst Fund; and Richard

Smyth (collectively “investors”), various investors in UCAP, filed a complaint in state

court against multiple defendants, including William McCord, a director of UCAP

from November 2001 to February 2002, and Daniel Moudy, a former President and

CEO of UCAP, as well as Moore Stephens Frost, PLC (“MSF”), which served as

UCAP’s auditor from November 2001 to July 2003. The investors filed an amended

complaint a short time later. In their amended complaint, the investors alleged claims

of fraud, state and federal securities violations, breach of fiduciary duty, and breach

of contract. The investors claimed that McCord, Moudy and MSF defrauded them by

inducing them to invest in UCAP through misrepresentations and false statements

regarding UCAP’s financial condition. The defendants removed the case to federal

court. McCord then filed counterclaims against two of the investors who were also

members of UCAP’s board of directors, McAdams and Homm, for breach of contract,

breach of promises and representations, and breach of fiduciary duty. McCord,

Moudy and MSF filed motions to dismiss the investors’ complaint.

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On March 27, 2007, the district court granted the motions to dismiss, finding

that the investors had failed to plead their claims properly under the heightened

standards of pleading required by the Private Securities Litigation Reform Act of 1995

(“PSLRA”), Pub. L. No. 104-67, 109 Stat. 737, and Federal Rule of Civil Procedure

9. The investors then filed a second amended complaint. McCord, Moudy and MSF

again filed motions to dismiss, most of which the district court granted on August 28,

2007. The district court, however, found that the breach of fiduciary duty claim

against Moudy was sufficient to withstand the motion to dismiss and, therefore, it

remains pending. The district court concluded its order by stating that “Defendant

Moudy is directed to Answer the remaining claim in the Second Amended Complaint

within twenty (20) days of the date of this Order.” McCord’s counterclaims against

McAdams and Homm also remain pending.

Shortly after the district court’s August 28 order, the investors filed a “Motion

for Entry of Partial Final Judgment Pursuant to Rule 54(b) of the Federal Rules of

Civil Procedure,” requesting that the district court enter a final judgment based on its

August 28 order, making the order final and appealable. McCord, Moudy and MSF

responded that entry of final judgment was inappropriate because there was no danger

of hardship or injustice through delay that would be alleviated by immediate appeal

and because judicial economy dictated delaying appeal until all issues could be

confronted on appeal in a unified package. On September 6, 2007, the district court

entered an order granting the investors’ Rule 54(b) motion. The next day, September

7, 2007, the district court entered an amended order again granting the investors’

motion but this time explicitly finding “that there [was] no just reason for delay in

entering final judgment in connection with the Court’s Order of August 28, 2007.”

The district court also found that “this action should be and hereby is administratively

terminated pending investors’ appeal. Upon conclusion of the appeal, Plaintiffs[] may

file a motion to reopen the case.” Pursuant to the September 7 order, the district court

entered a final judgment in favor of McCord, Moudy and MSF on all claims except

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the breach of fiduciary duty claim against Moudy and stated that “[t]he parties [had]

thirty days from entry of [the] judgment on the docket in which to appeal.” The

district court, however, did not address McCord’s counterclaims. The investors

appealed, arguing that the district court erred in granting the motion to dismiss.

We decline to reach the merits of the appeal because we find that the district

court abused its discretion in certifying the appeal under Rule 54(b) and conclude that

we lack jurisdiction to consider this appeal.

II. DISCUSSION

“[F]ederal courts are courts of limited, not general, jurisdiction.” Thomas v.

Basham, 931 F.2d 521, 522 (8th Cir. 1991). “Thus, every federal appellate court has

a special obligation to consider its own jurisdiction.” Id. at 522-23. We will raise

jurisdictional issues sua sponte when we believe we lack jurisdiction, even if the

parties do not address the issue. Id. at 523. “The jurisdiction of the federal appellate

courts is limited to appeals from final decisions of the district courts, 28 U.S.C. §

1291, subject to the well-established exception[] set forth in . . . Fed. R. Civ. P. 54(b)

. . . .” Hope v. Klabal, 457 F.3d 784, 788 (8th Cir. 2006). “Generally, a district court

decision is final when the district court has rendered a decision that ends the litigation

on the merits and leaves nothing for the court to do but execute the judgment.”

Thomas, 931 F.2d at 523 (internal quotations omitted).

Rule 54(b) allows a district court to enter a final judgment on some but not all

of the claims in a lawsuit “only if the court expressly determines that there is no just

reason for delay.” Fed. R. Civ. P. 54(b). “In determining that there is no just reason

for delay, the district court must consider both the equities of the situation and judicial

administrative interests, particularly the interest in preventing piecemeal appeals.”

Interstate Power Co. v. Kan. City Power & Light Co., 992 F.2d 804, 807 (8th Cir.

1993) (internal quotations omitted). “Certification should be granted only if there

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exists some danger of hardship or injustice through delay which would be alleviated

by immediate appeal.” Hayden v. McDonald, 719 F.2d 266, 268 (8th Cir. 1983) (per

curiam) (internal quotation omitted). We review a district court’s decision to grant

certification of a final judgment under Rule 54(b) for abuse of discretion. Interstate

Power Co., 992 F.2d at 807.

Our role in “reviewing the decision of a district court to enter judgment under

Rule 54(b) is ‘not to reweigh the equities or reassess the facts but to make sure that

the conclusions derived from those weighings and assessments are judicially sound

and supported by the record.’” Little Earth of United Tribes, Inc. v. United States

Dep’t of Hous. & Urban Dev., 738 F.2d 310, 314 (8th Cir. 1984) (quoting CurtissWright v. General Electric Co., 446 U.S. 1, 10 (1980)). “Ordinarily, a district court’s

decision to certify a claim for immediate appeal under Rule 54(b) merits substantial

deference. That deference, however, rests on the assumption that the district court

undertook to weigh and examine the competing interests involved in a certification

decision.” Hayden, 719 F.2d at 268 (internal quotation omitted). 

Though this circuit does not require that a detailed statement of reasons

accompany a Rule 54(b) entry of judgment, where the district court gave

no specific reasons, our review of that court’s decision is necessarily

more speculative and less circumscribed than would be the case had the

court explained its actions more fully. 

Little Earth of United Tribes, 738 F.2d at 313; see also Hayden, 719 F.2d at 269.

Here, the district court provided no reasons or analysis to explain its decision

to enter a final judgment under Rule 54(b) beyond its mere recitation in its September

7 amended order that there was “no just reason for delay.” “Rather than reflecting an

evaluation of such factors as the interrelationship of the claims so as to prevent

piecemeal appeals, or even a familiarity with the case and with any justifiable reasons

for delay, the order recites only the bare requisites of Rule 54(b) certification.”

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Hayden, 719 F.2d at 268-69 (internal quotations and alteration omitted); see also Little

Earth of United Tribes, 738 F.2d at 313 (“In the case before us the district court gave

no explanation for the decision to enter judgment under Rule 54(b), beyond the

recitation that there was no just reason for delay.”).

“Judicial economy will be best preserved by delaying appeal until all issues can

be confronted by this court in a unified package. Such a course is particularly

desirable where . . . the adjudicated and pending claims are closely related and stem

from essentially the same factual allegations.” Hayden, 719 F.2d at 270 (quoting

Cullen v. Margiotta, 618 F.2d 226, 228 (2d Cir. 1980)). The investors’ pending

breach of fiduciary duty claim against Moudy and the dismissed claims arose out of

essentially the same factual allegations involving alleged misrepresentations of

UCAP’s financial condition. Likewise, the litigation of McCord’s counterclaims will

also involve alleged misrepresentations of UCAP’s financial condition. McCord’s

counterclaims allege that, as a member of the audit committee of the board of

directors, McAdams had greater access to UCAP’s financial information and records

and thus had a duty to provide such financial information to McCord and to the other

investors. McCord’s counterclaims also allege that, as a member of the board of

directors, Homm had fiduciary duties to the other shareholders, which he breached by

diluting the value of UCAP and its share price by issuing additional shares of stock

to himself and entities he controlled. McCord alleges that Homm’s breach of his

fiduciary duties directly and proximately caused UCAP’s financial failure and that

Homm knew or should have known this would occur in light of his access to UCAP’s

financial information and records as a member of the board of directors. Therefore,

even if we were to decide this appeal on its merits, piecemeal appeals arising out of

the same factual allegations would almost certainly result, which would require a

future court to refamiliarize itself with this same complex set of facts on subsequent

appeals. See id. Moreover, we are unable to discern any “danger of hardship or

injustice through delay which would be alleviated by immediate appeal.” See id.

(quotation omitted).

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“We acknowledge that the district court has a full calendar and wishes to avoid

duplicative litigation; however, courts of appeals are busy courts too.” United States

Fire Ins. Co. v. Smith Barney, Harris Upham & Co., 724 F.2d 650, 652 (8th Cir.

1983). Judicial economy and the need to avoid piecemeal appeals compel us to

conclude that the district court abused its discretion in finding that entry of final

judgment under Rule 54(b) was appropriate here. Therefore, we cannot resolve the

merits of this appeal because we lack jurisdiction at this time. See Interstate Power

Co., 992 F.2d at 805; United States Fire Ins. Co., 724 F.2d at 651; Hayden, 719 F.2d

at 267. 

III. CONCLUSION

Accordingly, we conclude that the district court abused its discretion by

entering final judgment under Rule 54(b), and we dismiss this appeal for lack of

jurisdiction.

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