Court Opinion

ID: 4290674
Source: CourtListenerOpinion
Date Created: 2018-07-02 16:00:32.531282+00
Date Added: 2024-06-11T14:38:15.806794
License: Public Domain

FILED
                                                                      United States Court of Appeals
                      UNITED STATES COURT OF APPEALS                          Tenth Circuit

                             FOR THE TENTH CIRCUIT                            July 2, 2018
                         _________________________________
                                                                          Elisabeth A. Shumaker
                                                                              Clerk of Court
CONTINENTAL MATERIALS
CORPORATION,

      Plaintiff - Appellant,

v.                                                          No. 17-1108
                                                  (D.C. No. 1:14-CV-02510-RPM)
VALCO, INC.,                                                 (D. Colo.)

      Defendant - Appellee.
                      _________________________________

                             ORDER AND JUDGMENT*
                         _________________________________

Before LUCERO, PHILLIPS, and MORITZ, Circuit Judges.
                  _________________________________

      Continental Materials Corporation (Continental) and Valco, Inc. (Valco)

entered into a lease concerning sand and gravel excavation. Years later, Continental

ran into an unexpected problem: an unfavorable sand-to-gravel ratio on a large

portion of the leased property made mining there unprofitable. Continental sued

Valco, seeking rescission or reformation of the lease. Valco counterclaimed to

enforce the lease and recover unpaid royalties. Then Valco sought summary

judgment on all of Continental’s claims. Ultimately, the district court granted

summary judgment against Continental on all but one of its claims. Later, after first

      *
         This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
refusing to do so, the district court certified its order as final under Federal Rule of

Civil Procedure 54(b).

       Then Continental appealed the district court’s partial-summary-judgment

rulings, arguing that the district court had erred by resolving disputed facts against it.

Because Rule 54(b)’s requirements are unmet, we lack appellate jurisdiction to

consider the merits. So we dismiss the appeal.

                                   BACKGROUND1

       Continental is a Delaware corporation in the business of mining sand and

gravel. Valco is a Colorado corporation that before entering this acquisition

agreement and lease had operated a ready-mix concrete, mining, and aggregate

business in Pueblo, Colorado.

       In October 1996, Continental and Valco entered an acquisition agreement

under which Continental bought Valco’s business in Pueblo. The acquisition

agreement incorporates a lease that granted Continental the right to mine sand and

gravel on Valco’s property for one hundred years. In exchange, Continental agreed to

make royalty payments until it had “paid royalties . . . on the total agreed sand and

gravel reserves on the Property (the ‘Agreed Sand and Gravel Reserves’) of fifty (50)

million tons.” Appellant’s App. vol. 4 at 873 ¶ 6(a).

       The leased property consists of multiple parcels grouped into two chunks: one

bordering the Arkansas River on the west side of Pueblo (Pueblo-West) and another

       1
        When reviewing a decision to grant summary judgment, we view facts in the
light most favorable to the nonmoving party, Continental, and draw all reasonable
inferences in its favor. Tabor v. Hilti, Inc., 703 F.3d 1206, 1215 (10th Cir. 2013).
                                            2
about ten miles downstream on the east side of Pueblo (Pueblo-East). Continental

mined Pueblo-West profitably for years before it began mining Pueblo-East. When

Continental started mining Pueblo-East, it encountered less favorable sand-to-gravel

ratios. The deposits on Pueblo-East contained too much sand and not enough gravel.

Continental continued mining Pueblo-East but, despite its efforts, was unable to mine

profitably. In fall 2014, Continental stopped mining the leased property.

      That fall, Continental sued Valco in the United States District Court for the

District of Colorado. Continental alleged that its payment of royalties under the lease

was premised on the existence of fifty million tons of sand and gravel reserves. But

Continental further alleged that it had understood the term “reserves” to mean

“resources that can be mined in an economically viable fashion.” Appellant’s App.

vol. 2 at 337 ¶ 7. Continental further alleged that it had exhausted the reserves after

extracting a total of eleven million tons of sand and gravel.

      Continental asserted seven claims: (1) Valco’s nondisclosure or concealment

of information about the sand and gravel reserves before the parties signed the lease;

(2) breach of contract related to Valco’s failure to provide Continental with

information about the sand and gravel reserves; (3) mistake of fact about the amount

of sand and gravel reserves; (4) lack of meeting of the minds about the meaning of

the lease term “Agreed Sand and Gravel Reserves,” Appellant’s App. vol. 2 at 345;

(5) impracticability of performance or frustration of purpose because the leased

property didn’t have fifty million tons of economically minable sand and gravel

reserves; (6) breach of contract related to Continental’s overpayment of royalties

                                            3
arising from its own miscalculation of the inflation factor; and (7) breach of contract

related to Continental’s prepayment of royalties in excess of the royalties due for the

amount of sand and gravel it had mined. Continental sought, among other things,

prospective rescission or reformation of the lease and a declaration that Continental

was excused from further performance.

      In January 2015, Continental stopped paying royalties. In October 2015, Valco

counterclaimed, asserting breach of contract for nonpayment of royalties, and seeking

a declaratory judgment to determine Valco’s rights and Continental’s obligations

under the lease.

      Next, Valco filed five separate motions collectively seeking summary

judgment on all Continental’s claims. The district court granted summary judgment

for Valco on all but one of Continental’s claims—its sixth claim concerning the

overpayment of royalties caused by Continental’s own miscalculations.

      Continental moved to certify the district court’s partial-summary-judgment

order as a final judgment under Rule 54(b) of the Federal Rules of Civil Procedure.

Valco opposed certification. The district court denied Continental’s motion to certify,

concluding that the claims dismissed in the partial-summary-judgment order weren’t

“distinct and separable” from either Continental’s remaining claim or Valco’s

counterclaims. Appellant’s App. vol. 10 at 2730. In particular, the district court

concluded that the “terms of the Lease and Continental’s royalty obligation [we]re

central to all the asserted claims, defenses, and counterclaims.” Id.

                                           4
      Valco moved for entry of judgment on its counterclaims, arguing that the

district court’s partial-summary-judgment order had effectively granted its

counterclaims. The next day, the district court denied Valco’s motion without any

explanation.

      At a pretrial conference concerning Continental’s remaining claim and Valco’s

counterclaims, the district court suggested that the parties conditionally stipulate to

“the outcome of the case if the rulings on summary judgment are correct” to allow for

an immediate appeal of the partial-summary-judgment order. Appellant’s App. vol.

11 at 2897. In line with this suggestion, Continental and Valco jointly moved for “the

entry of a final judgment.” Appellant’s App. vol. 10 at 2750. And they agreed,

subject to Continental’s right to appeal the partial-summary-judgment order, that the

lease is enforceable and governs Continental’s royalty obligations.

      At a later status conference, the district court retreated from its earlier

suggestion, concluding that the parties’ stipulation couldn’t confer appellate

jurisdiction to review the partial-summary-judgment order. And the court agreed

instead to certify an appeal of the partial-summary-judgment order under Rule 54(b).

So Valco withdrew its objection to certification. Later that day, the court certified its

partial-summary-judgment order for appeal. The way now clear, Continental

appealed the district court’s order granting Valco partial summary judgment on six of

Continental’s seven claims.

      After reviewing the certification, we questioned whether we had appellate

jurisdiction to review the district court’s partial-summary-judgment order. We

                                            5
ordered the parties to address that question in their merits briefs and suggested they

seek a more detailed certification order from the district court. The parties returned to

the district court to ask for clarification of the certification order.

       In response, the district court entered an order expanding on its reasoning for

certification. The district court (reversing its earlier conclusion) concluded that the

six claims dismissed in the partial-summary-judgment order were separate and

distinct from Continental’s remaining claim and Valco’s counterclaims. The district

court further explained that Continental’s remaining sixth claim—a claim seeking

reimbursement for overpaid royalties—was “completely separate” from the claims

resolved in the partial-summary-judgment order because the resolved claims didn’t

interact “with the calculation of royalties actually paid.” Appellant’s App. vol. 10 at

2802–03. Though the district court recognized that Valco’s counterclaims might be

affected by the rulings made in the partial-summary-judgment order, it concluded

that Valco’s counterclaims were separable because they still would need to survive

Continental’s affirmative defense—partial failure of consideration—which wasn’t

addressed by the partial-summary-judgment order.

       After the district court entered its order clarifying its reasoning for

certification, this appeal proceeded.

                                      DISCUSSION

       On appeal, Continental argues that the district court erred in dismissing six of

its seven claims on summary judgment. Continental and Valco both contend that we

have appellate jurisdiction under 28 U.S.C. § 1291 because the district court properly

                                              6
certified its partial-summary-judgment order as final under Rule 54(b). But we have

an independent duty to inquire about our own jurisdiction. Okla. Tpk. Auth. v.

Bruner, 259 F.3d 1236, 1241 (10th Cir. 2001). Because we conclude that Rule

54(b)’s requirements are unmet, we don’t reach the merits of Continental’s

arguments. Instead, we dismiss the appeal for lack of jurisdiction.

      Courts of appeals have jurisdiction to review “all final decisions of the district

courts.” 28 U.S.C. § 1291. A “final decision is ‘one which ends the litigation on the

merits and leaves nothing for the court to do but execute the judgment.’” Gelboim v.

Bank of Am. Corp., 135 S. Ct. 897, 902 (2015) (quoting Catlin v. United States, 324
U.S. 229, 233 (1945)). An order disposing of fewer than all pending claims is

generally not final for purposes of § 1291. New Mexico v. Trujillo, 813 F.3d 1308,

1316 (10th Cir. 2016). But Rule 54(b) provides one exception: “When an action

presents more than one claim for relief . . . the court may direct entry of a final

judgment as to one or more, but fewer than all, claims or parties only if the court

expressly determines that there is no just reason for delay.” Fed. R. Civ. P. 54(b).

I. Requirements for Certification under Rule 54(b)

      To properly certify an order as final under Rule 54(b), the district court must

make two express determinations in its certification order: first, that its judgment is

final, and second, that no just reason exists to delay entry of its judgment. Trujillo,
813 F.3d at 1316. “In making these determinations, the district court should act as a

‘dispatcher’ weighing Rule 54(b)’s policy of preventing piecemeal appeals against

the inequities that could result from delaying an appeal.” Stockman’s Water Co., LLC

                                            7
v. Vaca Partners, L.P., 425 F.3d 1263, 1265 (10th Cir. 2005) (quoting Curtiss-Wright

Corp. v. Gen. Elec. Co., 446 U.S. 1, 8 (1980)). District courts should be reluctant to

certify orders under Rule 54(b) because “the purpose of this rule is a limited one: to

provide a recourse for litigants when dismissal of less than all their claims will create

undue hardships.” Okla. Tpk. Auth., 259 F.3d at 1242 (quoting Gas–A–Car, Inc. v.

Am. Petrofina, Inc., 484 F.2d 1102, 1105 (10th Cir. 1973)).

      We use a two-tiered standard to review a district court’s Rule 54(b)

certification. Trujillo, 813 F.3d at 1317. First, we review de novo the district court’s

determination of the certified order’s finality, a question of law. Id. Next, we review

for an abuse of discretion the district court’s determination that no just reason exists

for delay. Id. We conclude that we lack appellate jurisdiction because the partial-

summary-judgment order isn’t final. So our inquiry ends at the first tier.

      “To be final for purposes of Rule 54(b), an order must be ‘final’ in the sense

that it is ‘an ultimate disposition of an individual claim entered in the course of a

multiple claims action.’” Jordan v. Pugh, 425 F.3d 820, 826 (10th Cir. 2005)

(quoting Curtiss-Wright Corp., 446 U.S. at 7). “[A] judgment is not final for the

purposes of Rule 54(b) unless the claims resolved are distinct and separable from the

claims left unresolved.” Okla. Tpk. Auth., 259 F.3d at 1243. So the “controlling

jurisdictional question” is whether Continental’s claims dismissed in the partial-

summary-judgment order are “distinct and separable” from its sole remaining claim

still pending in the district court—and from Valco’s counterclaims. See Jordan, 425
8
F.3d at 826 (quoting Old Republic Ins. Co. v. Durango Air Serv., 283 F.3d 1222,

1225 (10th Cir. 2002)).

      No bright-line rule establishes whether claims are separable such that

certification is proper. See id. at 827. The inquiry focuses on practical concerns,

“particularly the question whether a subsequent appeal of the claims before the

district court will require the court of appeals to revisit the same issues decided in the

first appeal.” Id. “To determine whether separate appeals will be redundant, courts

consider whether the allegedly separate claims turn on the same factual questions,

whether they involve common legal issues, and whether separate recovery is

possible.” Id.

      So to determine whether the district court’s partial-summary-judgment order

was final, we must examine the relationship between the dismissed claims and

Continental’s remaining claim and Valco’s counterclaims.

II. Application

      In its partial-summary-judgment order, the district court dismissed

Continental’s first (nondisclosure), second (breach of contract related to withholding

information about the reserves), third (mistake of fact), fourth (lack of meeting of the

minds), fifth (impracticability of performance), and seventh (breach of contract

related to prepayment of royalties) claims. The district court left unresolved, for the

time being, Continental’s sixth claim, related to overpayment of royalties arising

from Continental’s own miscalculations, and Valco’s counterclaims.

                                            9
       Continental argues that because the dismissed claims are separate and distinct

from the remaining claim and counterclaims, the district court properly certified its

partial-summary-judgment order under Rule 54(b). Valco agrees. But we conclude

that the dismissed claims are too intertwined with the remaining claim and

counterclaims to qualify as separable and distinct. We first address the overlap

between the dismissed claims and the remaining claim and counterclaims. Then we

turn to whether certification of the district court’s partial-summary-judgment order

would result in piecemeal appeals. And finally we examine whether the district court

independently determined, apart from the parties’ joint position, that its order was

final before certifying it under Rule 54(b).

       A. Overlap between the Resolved and the Unresolved Claims

       Because Continental’s sixth claim arises from its own royalty miscalculations

and is unrelated to its theories for reformation or rescission of the lease, Continental

argues that this claim is distinct and separable from its six dismissed claims. We

agree that unlike Continental’s other claims, its sixth claim doesn’t seek to rescind or

reform the lease. Instead, that claim seeks the return of Continental’s royalty

overpayments caused by its miscalculating the inflation factor. But even though

Continental’s sixth claim doesn’t challenge the enforceability of the lease, it is still

related to Continental’s other claims and Valco’s counterclaims—they all stem from

Continental’s royalty obligations.

       In addition, Continental’s six dismissed claims are inextricably intertwined

with Valco’s counterclaims. Continental’s six dismissed claims seek to rescind or

                                            10
reform the lease and excuse Continental from further performance while Valco’s

counterclaims seek to enforce the lease and recover unpaid royalties. Despite this

interconnectedness, Continental argues that Valco’s counterclaims are separable and

distinct from the resolved claims because the counterclaims are subject to an

affirmative defense, partial failure of consideration, that is distinct from the resolved

claims. But Continental’s affirmative defense also overlaps with the dismissed

claims. Continental’s affirmative defense is connected to its third, fifth, and seventh

claims because they all address how the amount of sand and gravel reserves affects

Continental’s royalty obligations. And Continental’s first, second, and fourth claims

are connected to its affirmative defense because those claims address the parties’

understanding of the reserves when they executed the lease.

      Continental’s third, fifth, and seventh claims are strikingly similar to its

affirmative defense of partial failure of consideration. Those claims seek to excuse or

alter Continental’s obligations under the lease based on the amount of economically

minable sand and gravel reserves. Continental’s third claim alleges that the parties

believed that there were fifty million tons of economically minable sand and gravel

reserves when they executed the lease. Because it turned out that the leased property

lacked that amount, Continental alleges a mistake of fact, justifying rescission of the

lease. In Continental’s fifth claim, it alleges that performance under the lease is

impracticable because the leased property doesn’t have fifty million tons of

economically mineable sand and gravel reserves. And Continental’s seventh claim,

breach of contract, alleges that “[t]he amount of Minimum Royalty payments was

                                           11
based on the mutual agreement that there were 50 million tons of reserves. . . .

Because there were and are not 50 million tons of reserves Valco has no right to

retain these prepayments.” Appellant’s App. vol. 2 at 347 ¶¶ 61–62. Similarly, as an

affirmative defense, Continental alleges that it “promised to pay Minimum Royalties

in consideration for the promise that there would exist 50 million tons of Agreed

Sand and Gravel Reserves that could be extracted and marketed.” Appellant’s App.

vol. 10 at 2748. Because Continental could economically extract only a total of

eleven million tons of sand and gravel, it argues that its royalty obligations should be

reduced in proportion to the shortfall in the reserves.

      Like Continental’s affirmative defense, its first, second, and fourth claims also

relate to its royalty obligations and the parties’ understanding of the sand and gravel

reserves. Continental’s first and second claims allege that Valco failed to disclose

information about the sand and gravel reserves, “which created a false impression

that there were 50 million tons of reserves.” Appellant’s App. vol. 2 at 343 ¶ 32. And

in its fourth claim, Continental alleges that there is no enforceable agreement because

there was no meeting of the minds about the term “Agreed Sand and Gravel

Reserves.” Id. at 345–46 ¶ 49. Continental alleges that it understood “Agreed Sand

and Gravel Reserves” to mean “economically min[e]able reserves” and Valco

understood the term to mean a volumetric measurement of the resource. Id.

      The questions of Continental’s royalty obligations and the sand and gravel

reserves are fundamental to the dismissed claims, Valco’s counterclaims, and

Continental’s affirmative defense. Any later appeal of the remaining claim six and

                                           12
Valco’s counterclaims would likely require us to reexamine Continental’s royalty

obligations and how the sand and gravel reserves and the parties’ understanding

about the reserves impacted those obligations.

      B. Policy against Piecemeal Appeals

      The district court also partially justified its certification based on the overlap

between the dismissed and remaining claim and counterclaims. In its order clarifying

its reasoning for certification, the district court explained that “it would be more

efficient to resolve any issue with the Summary Judgment Order before proceeding to

a trial of the counterclaims[,]” because the counterclaims’ fate might be decided by

whether the appeals court reversed the partial-summary-judgment rulings.

Appellant’s App. vol. 10 at 2803–04. Because the claims are so interrelated, the

district court reasoned, it could apply our resolution of the issues on appeal to the

unresolved claims still pending in the district court.

      But a court applying Rule 54(b) must consider the policy against piecemeal

appeals, which is intended to promote efficiency at the appellate-court level. Jordan,
425 F.3d at 829. And placing an additional burden on the appellate court to assist the

district court with later rulings doesn’t serve that policy. Appellate courts may

decline to take jurisdiction even after the parties have briefed and argued their

positions on appeal. And “in the long run it will be less wasteful and more efficient

for district and appellate courts to adhere to the rule that only separate and distinct

claims can be isolated for appeal under Rule 54(b).” Id. Interrelated claims should be

litigated and appealed together. Id.

                                            13
       C. The District Court’s Role

       Finally, we note that the district court must independently determine that the

order it’s certifying is final. The parties’ consent to certification doesn’t relieve the

district court of that duty. Here, the district court reversed its ruling on certification

after Valco withdrew its objection. But we don’t see where the district court

explained what circumstances had changed—other than Valco’s withdrawing its

objection—to render its partial-summary-judgment order final. And the parties’

agreement to certify doesn’t permit the district court to treat as final an order that

isn’t final under 28 U.S.C. § 1291. See In re Integra Realty Res., Inc., 262 F.3d 1089,

1108 (10th Cir. 2001) (“Finality is judged by the standards applicable to determining

jurisdiction under 28 U.S.C. § 1291. . . . ‘The District Court cannot, in the exercise of

its discretion, treat as “final” that which is not “final” within the meaning of . . .

§ 1291.’”) (quoting Wheeler Mach. Co. v. Mountain States Mineral Enters., Inc., 696
F.2d 787, 789 (10th Cir. 1983)).

                                     CONCLUSION

       For the foregoing reasons, this appeal is dismissed for lack of jurisdiction.

                                              Entered for the Court

                                              Gregory A. Phillips
                                              Circuit Judge

                                            14