Court Opinion

ID: 4667669
Source: CourtListenerOpinion
Date Created: 2021-03-15 16:00:35.556457+00
Date Added: 2024-06-11T08:02:58.421089
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                                File Name: 21a0135n.06

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT
                                                                                       FILED
                                                        )                       Mar 15, 2021
MINDY CARPENTER and SHAWN
                                                        )                   DEBORAH S. HUNT, Clerk
CARPENTER,
                                                        )
                                                        )    ON APPEAL FROM THE UNITED
       Plaintiffs-Appellants,
                                                        )    STATES DISTRICT COURT FOR
                                                        )    THE SOUTHERN DISTRICT OF
v.
                                                        )    OHIO
                                                        )
LIBERTY INSURANCE CORPORATION,
                                                        )
                                                        )
       Defendant-Appellee.
                                                        )

BEFORE: SILER, WHITE, and STRANCH, Circuit Judges.

       SILER, Circuit Judge. After a series of rulings that left one of Plaintiffs’ claims pending

for trial, the district court granted Plaintiffs’ request for an immediate appeal pursuant to Fed. R.

Civ. P. 54(b). Because we find that the district court improvidently granted Fed. R. Civ. P. 54(b)

certification, we DISMISS this appeal WITHOUT PREJUDICE.

                         FACTUAL AND PROCEDURAL HISTORY

       In 2016, fire damaged the home of Plaintiffs Mindy and Shawn Carpenter. Defendant

Liberty Insurance Corporation (Liberty) insured the Carpenters’ home for fire damage. After

Liberty denied the Carpenters’ insurance claim, stating that it had reason to believe the Carpenters

started the fire, the Carpenters brought this action. The Carpenters assert two claims—breach of

insurance contract and bad faith insurance claim denial—and additionally seek “severe emotional

distress/inconvenience/punitive damages[.]”
Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

       Liberty moved for partial summary judgment, seeking to limit the Carpenters’ potential

recovery on their breach of contract claim to the insurance policy amount and to prohibit the

Carpenters from recovering emotional distress damages arising from that claim. The district court

granted the motion, but noted that damages for emotional distress, attorney fees, and punitive

damages could be recoverable under the bad faith claim. Later, Liberty moved for summary

judgment on the Carpenters’ bad faith insurance denial claim. The district court granted this

motion as well, eliminating all damages other than those set forth in the policy. After granting the

second motion, the district court certified its damages and bad faith insurance denial claim rulings

for immediate appeal under Fed. R. Civ. P. 54(b).

                                           DISCUSSION

       “The courts of appeals . . . shall have jurisdiction of appeals from all final decisions of the

district courts of the United States . . . .” 28 U.S.C. § 1291 (emphasis added). “[A] ‘final decision’

is one that ends the litigation on the merits and leaves nothing for the court to do but execute the

judgment.” Ray Haluch Gravel Co. v. Cent. Pension Fund of Intern. Union of Operating Eng’rs

and Participating Emps., 571 U.S. 177, 183 (2014) (citing Catlin v. United States, 324 U.S. 229,

233 (1945)).

       Both parties agree that this case is properly before this court. That being said, “[t]hough

not raised by the parties, [when] a substantial question exists about the propriety of using Rule

54(b) to present [an] issue to the Court[,] ‘[b]ecause it involves the scope of our appellate

jurisdiction, we are compelled to raise sua sponte the issue of whether the district court’s entry of

final judgment was warranted.’” Justice v. Pendleton Place Apartments, 40 F.3d 139, 141 (6th

Cir. 1994) (quoting Braswell Shipyards, Inc. v. Beazer E., Inc., 2 F.3d 1331, 1336 (4th Cir. 1993));

see also Daleure v. Commonwealth of Ky., 269 F.3d 540, 543 (6th Cir. 2001) (“While all parties

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Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

seek to confer appellate jurisdiction, we must dismiss the appeal . . . because we lack appellate

jurisdiction. . . . The district court has not entered final judgment on most claims, and could not,

because it had not ruled on the injunctive aspects of [certain] claims. In addition, its certification

of appealability under Rule 54(b) did not contain the findings required under Sixth Circuit

precedent.”).

       As noted, we have jurisdiction under 28 U.S.C. § 1291 to review final orders of the district

court. Usually, “when a district court grants summary judgment on some but not all claims” in a

lawsuit, “the decision is not a final order for appellate purposes.” Planned Parenthood Sw. Ohio

Region v. DeWine, 696 F.3d 490, 500 (6th Cir. 2012). But under Federal Rule of Civil Procedure

54(b), the district court may certify a partial grant of summary judgment for immediate appeal if

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

54(b) recognizes the “‘reality that the benefits of immediate appeals on occasion exceed the

costs,’” In re Fifth Third Early Access Cash Advance Litig., 925 F.3d 265, 273 (6th Cir. 2019)

(quoting Adler v. Elk Glenn, LLC, 758 F.3d 737, 739 (6th Cir. 2014) (Sutton, J., concurring)),

justifying occasional departures from the general federal policy disfavoring piecemeal appeals.

       Corrosioneering, Inc. v. Thyssen Env’t Sys., Inc., 807 F.2d 1279 (6th Cir. 1986), outlines

the purpose and function of Fed. R. Civ. P. 54(b):

       Rule 54(b) was a response to the need created by the liberal joinder provisions of
       the Federal Rules of Civil Procedure to revise “what should be treated as a judicial
       unit for purposes of appellate jurisdiction.” The rule was “designed to facilitate the
       entry of judgment on one or more claims, or as to one or more parties, in a multi-
       claim/multi-party action,” “where the parties demonstrated a need for making
       review available on some of the claims or parties before entry of final judgment as
       to all.” It “attempts to strike a balance between the undesirability of piecemeal
       appeals and the need for making review available at a time that best serves the needs
       of the parties.” By utilizing Rule 54(b), a district court “may, by the exercise of its

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Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

        discretion in the interest of sound judicial administration, release for appeal final
        decisions upon one or more, but less than all, claims . . . .”

Id. at 1282 (citations omitted) (emphasis in original).

        “Proper certification under Rule 54(b) is a two-step process.” Planned Parenthood,

696 F.3d at 500. First, the district court must “‘expressly direct the entry of final judgment as to

one or more but fewer than all the claims or parties in a case.’” Id. (quoting Gen. Acquisition, Inc.

v. GenCorp, Inc., 23 F.3d 1022, 1026 (6th Cir. 1994)). A certification order fails this first step if

it does not involve a “final” order or does not feature multiple, separate “claims.” See id.

(discussing “multiple claim” requirement); Williams v. Kentucky, 24 F.3d 1526, 1542 (6th Cir.

1994) (describing final-judgment requirement). At the second step, “‘the district court must

expressly determine that there is no just reason to delay appellate review.’” Planned Parenthood,

696 F.3d at 500 (quoting Gen. Acquisition, 23 F.3d at 1026). The court “must clearly explain” its

conclusion, Gen. Acquisition, 23 F.3d at 1026, and we instruct courts to consider a non-exhaustive

list of five factors for this inquiry, see Corrosioneering, Inc., 807 F.2d at 1283.

        “We apply de novo review to the district court’s conclusion on the first inquiry and review

for abuse of discretion the district court’s determination of no just reason for delay.” Planned

Parenthood, 696 F.3d at 500. However, on the second question, we have “recognized that ‘the

district court’s discretion is not unbounded.’” Gen. Acquisition, 23 F.3d at 1030 (quoting

Corrosioneering, 707 F.2d at 1282). The court’s finding on this second step is “subject to reversal

if the district court fails to adequately explain its reasoning, or if the district court fails to ‘weigh

and examine the competing factors’” involved in the certification decision. Id. (quoting Solomon

v. Aetna Life Ins. Co., 782 F.2d 58, 61–62 (6th Cir. 1986)). As explained below, the district

court’s damages ruling was not final and thus was not properly certifiable, and the district court

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Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

abused its discretion in certifying for immediate appeal its dismissal of the Carpenters’ bad faith

insurance denial claim.

      I.      Damages Ruling

           Rule 54(b) “provides a means in . . . multiple-claim actions . . . by which appeals may be

taken from final decisions on individual claims without waiting for final decisions on the rest of

the claims.” Williams, 24 F.3d at 1542 (emphasis added). A district court’s order that forecloses

recovery for some types of damages stemming from a claim on which it did not decide liability is

not a final decision within the meaning of Rule 54(b). Gen. Acquisition, Inc. 23 F.3d at 1025.

           Here, the district court ruled on the recoverability of only some of the types of damages

that could be sought in conjunction with the Carpenters’ breach of insurance contract claim and

did not decide liability on that claim. As such, the district court’s damages ruling was not “final”

and therefore was not certifiable under Rule 54(b). Gen. Acquisition, Inc., 23 F.3d at 1025 (“The

ruling on damages—with no ruling on liability—was obviously not a ‘final’ order conferring

appellate jurisdiction on this court . . . .”).

     II.      Bad Faith Insurance Denial Claim

           The district court’s grant of summary judgment in favor of Liberty on the Carpenters’ bad

faith insurance denial claim was “final” because it resolved both liability and damages. However,

the district court abused its discretion in certifying that ruling. See Corrosioneering, 807 F.2d at

1282 (“The district court acts as a ‘dispatcher’ and is permitted to determine, in the first instance,

the appropriate time when each final decision is ready for appeal. The district court’s discretion

is not unbounded, however, and a Rule 54(b) certification can be reversed by an appellate court

for abuse of that discretion.” (citations omitted)). Because we conclude that the district court

abused its discretion under the “second step” of the Rule 54(b) analysis, we need not determine

                                                  -5-
Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

whether the contract and bad-faith causes of action amounted to “separate claims” under the first

step of the Rule 54(b) analysis.

        To start, a district court must articulate its rationale for certifying an appeal under Rule

54(b). Here, the district court simply recited the legal rules governing Rule 54(b) certification,

followed by these statements: “The Court has weighed the 54(b) factors and finds they balance in

favor of certification. . . . The Court finds that there is no just reason for delay.” The district court

failed to explain its basis for certification. When a district court fails to explain its basis for Rule

54(b) certification, that alone often warrants reversal. See, e.g., Knafel v. Pepsi Cola Bottlers of

Akron, Inc., 850 F.2d 1155, 1159–60 (6th Cir. 1988); Daleure, 269 F.3d at 543 (6th Cir. 2001);

Adler v. Elk Glenn, LLC, 758 F.3d 737, 738–39 (6th Cir. 2014). However, “[w]e have on rare

occasions excused a district court’s failure to set forth a statement of reasons if the reasons are

apparent from the record.” (citations omitted)). EJS Properties, LLC v. City of Toledo, 689 F.3d

535, 537 (6th Cir. 2012); see, e.g., Akers v. Alvey, 338 F.3d 491, 495–96 (6th Cir. 2003).

        And upon engaging in that analysis, it becomes clear that the district court should not have

granted Rule 54(b) certification here:

        Rule 54(b) is not to be used routinely, or as a courtesy or accommodation to
        counsel. “The power which this Rule confers upon the trial judge should be used
        only ‘in the infrequent harsh case’ as an instrument for the improved administration
        of justice . . . .”

        ...

        Generally a finding that an issue being considered for Rule 54(b) certification is
        “separate and distinct” from remaining issues in a case will begin, rather than end,
        the district court’s certification analysis.

              Not all final judgments on individual claims should be immediately
              appealable, even if they are in some sense separable from the remaining
              unresolved claims.

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Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

           . . . [A] district court must take into account judicial administrative interests
           as well as the equities involved. Consideration of the former is necessary
           to assure that application of the Rule effectively “preserves the historic
           federal policy against piecemeal appeals.”

       A nonexhaustive list of factors which a district court should consider when making
       a Rule 54(b) determination includes:

           (1) the relationship between the adjudicated and unadjudicated claims;
           (2) the possibility that the need for review might or might not be mooted by
           future developments in the district court; (3) the possibility that the
           reviewing court might be obliged to consider the same issue a second time;
           (4) the presence or absence of a claim or counterclaim which could result in
           set-off against the judgment sought to be made final; (5) miscellaneous
           factors such as delay, economic and solvency considerations, shortening the
           time of trial, frivolity of competing claims, expense, and the like.
           Depending upon the facts of the particular case, all or some of the above
           factors may bear upon the propriety of the trial court’s discretion in
           certifying a judgment as final under Rule 54(b).

Corrosioneering, 807 F.2d at 1282–83 (citations omitted).

       The first and second Corrosioneering factors cut against certification. Regarding the first

factor, there is a close relationship between the adjudicated bad-faith claim and the unadjudicated

contract claim, as both the Carpenters and Liberty concede. See Liberty Supp. Br. at 7–8 (noting

that the two claims “inherently involve a large overlap of evidence, because the facts . . . at the

heart of the breach of contract claim are also intricately related to the operative facts regarding

why the insurer denied the claim”); Carpenter Supp. Br. at 2 (joining Liberty’s Rule 54(b)

arguments in full). Indeed, in this case, the two claims turn on an almost identical question: the

contract claim turns on whether Liberty can prove each element of the arson defense, while the

bad-faith claim turns on whether Liberty had sufficient evidence of arson at the time it denied the

Carpenters’ claim for coverage. For that reason, there is also a possibility that the need for review

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Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

of the bad-faith claim may be mooted in the future. If Liberty defeats the contract claim at trial by

proving the arson defense, that may functionally render moot any appellate consideration of the

district court’s dismissal of the bad-faith claim, because that claim fails if Liberty had sufficient

evidence of arson.

       The third factor also disfavors certification, because there is “the possibility that the

reviewing court might be obliged to consider the same issue a second time . . . .” Corrosioneering,

807 F.2d at 1283 (citation omitted) (quotation marks omitted). Should this court reverse the district

court’s grant of summary judgment in favor of Liberty on the Carpenters’ bad faith insurance

denial claim and the Carpenters prevail on that claim at trial, Liberty could then appeal that result

and this court would have to, once again, determine whether the Carpenters sufficiently

supported that claim with evidence. The fourth factor—which asks about the presence of claims

or counter-claims that could create set-offs against the judgment sought to be made final—is not

relevant here, because we have no such claims or counter-claims.

       The fifth factor asks whether miscellaneous considerations “such as delay, economic and

solvency considerations,” or other practical considerations (including shortening the time of trial,

frivolity of claims, “expense, and the like”) favor or disfavor certification. Id. The Carpenters

argue that reversing the Rule 54(b) certification will create delay, and that this delay will cause

them significant financial hardship. They point out that they have been under serious financial

strain since the fire destroyed their home. We are not indifferent to their plight. But on balance,

the other Rule 54(b) factors cut against certification. And as it stands now, the Carpenters’ breach

of insurance contract claim will proceed to trial. If they succeed on that claim, they may recover

damages up to the policy limits, at least partially alleviating their current financial burden. Our

decision to exercise or decline Rule 54(b) jurisdiction over the bad-faith claim will not affect the

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Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

timeline for resolving the Carpenters’ contract claim, one way or the other. More fundamentally,

neither Liberty nor the Carpenters have demonstrated that this is the type of “uncommon” case

that warrants Rule 54(b) certification. Cf. id. at 1282 (“Rule 54(b) is not to be used routinely . . . .

‘The power which this Rule confers upon the trial judge should be used only “in the infrequent

harsh case” as an instrument for the improved administration of justice . . . .’” (citations omitted)).

        Indeed, the only apparent justification for the certification of the dismissal of the bad faith

insurance denial claim for immediate appeal is convenience. An immediate decision on the

propriety of the district court’s dismissal of the bad faith insurance denial claim would afford the

parties and counsel a clearer picture of what exactly is potentially recoverable in this matter.

Strategic decisions could then be made as to how to proceed. Such convenience, however, is

insufficient to warrant Rule 54(b) certification. See id. (“Rule 54(b) is not to be used . . . as a

courtesy or accommodation to counsel . . . .” (citations omitted)).

        As a final consideration, a ruling here allowing a party to seek Rule 54(b) certification on

the dismissal of its bad faith insurance denial claim when that party’s breach of insurance contract

claim remains pending has a legitimate potential for opening the floodgates. “[T]he tort of bad

faith . . . [and] breach of contract . . . are often, perhaps even generally, asserted together and the

basis for both claims is the refusal to pay insurance.” Bullet Trucking, Inc. v. Glen Falls Ins. Co.,

616 N.E.2d 1123, 1127 (Ohio Ct. App. 1992). Under Ohio law, an insurer does not face a heavy

burden in obtaining a dismissal of an insured’s bad faith insurance denial claim: “[T]o grant a

motion for summary judgment brought by an insurer on the issue of whether it lacked good faith

in the satisfaction of an insured’s claim, a court must find after viewing the evidence in a light

most favorable to the insured, that the claim was fairly debatable and the refusal was premised

on either the status of the law at the time of the denial or the facts that gave rise to the claim.”

                                                 -9-
Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

Tokles & Son, Inc. v. Midwestern Indemn. Co., 605 N.E.2d 936, 943 (Ohio 1992). Were this court

to find that the district court correctly certified the bad faith insurance denial claim for appeal, it

might be inundated with partial appeals of bad faith insurance denial claims from all of its districts,

which is exactly the opposite way Rule 54(b) should be utilized. See Solomon, 782 F.2d at 60

(“[T]he draftsmen of [Rule 54(b)] have made explicit their thought that it would serve only to

authorize ‘the exercise of a discretionary power to afford a remedy in the infrequent harsh case.’”

(quoting Panichella v. Pennsylvania Railroad Co., 252 F.2d 452, 455 (3d Cir. 1958) (quotation

marks omitted)). We see no difference between this insurance dispute and the usual case in which

a court grants summary judgment in favor of the insurer on the insured’s bad faith insurance denial

claim but reserves the breach of insurance contract claim for trial.1

         The parties rely on two cases to support their belief that Rule 54(b) certification was proper

here, Smith v. Allstate Ins. Co., 403 F.3d 401 (6th Cir. 2005), and Pure Tech Sys., Inc. v. Mt.

Hawley Ins. Co., 95 F. App’x 132 (6th Cir. 2004). But neither case discussed Rule 54(b) at all;

both simply noted that the district court entered a Rule 54(b) certification and then proceeded to

address the merits of the appeals. Accordingly, they do little to help the parties’ position here.

Cf. United States v. Bowers, 615 F.3d 715, 721 (6th Cir. 2010) (noting that we are not bound

“‘when questions of jurisdiction have been passed on in prior decisions sub silentio’”); United

States v. Lucido, 612 F.3d 871, 876–77 (6th Cir. 2010) (one panel is not bound by prior panel’s

“unexamined” statement that jurisdiction exists).

         1
           Of course, not every insurance case involving bad-faith and breach-of-contract claims is the same, and the
Rule 54(b) inquiry is context and case-specific. Cf. Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 10–11 (1980)
(“Because [Rule 54(b)] discretion ‘is, with good reason, vested by the rule primarily’ in the district courts, and because
the number of possible situations is large, we are reluctant either to fix or sanction narrow guidelines for the district
courts to follow.” (citation omitted)). Our discussion here should not be taken to suggest that Rule 54(b) is always
improper in insurance cases with bad-faith and breach-of-contract claims. In every such case, the district court must
carefully apply both steps of the Rule 54(b) analysis.

                                                         - 10 -
Case No. 20-3465, Carpenter, et al. v. Liberty Ins. Co.

         Smith and Pure Tech are also distinguishable for a critical reason—the district courts in

these cases adjudicated both the bad faith insurance denial and breach of insurance contract claims,

which additionally effectively resolved all remaining counterclaims and crossclaims in Pure Tech

and left one tangential counterclaim pending for trial in Smith. See Smith, 403 F.3d at 404; Pure

Tech, 95 F. App’x at 134–35 (“[T]he grant of summary judgment in favor of the Insurers resolves

all of the cross-claims and third-party claims[.]”). In other words, the judgment of the district court

in Pure Tech essentially was a final judgment, and the judgment of the district court in Smith

resolved all of the claims of the insured. Here, however, the district court rendered a decision on

only one of the Carpenters’ two factually related claims and set the other for trial, meaning this

court may hear another appeal in this case on essentially the same set of facts. See Wright &

Miller, 10 Fed. Prac. & Proc. Civ. § 2659 (4th ed. Oct. 2020 update) (“It is uneconomical for an

appellate court to review facts on an appeal following a Rule 54(b) certification that it is likely to

be required to consider again when another appeal is brought after the district court renders its

decision on the remaining claims . . . .”).

         In sum, the district court abused its discretion when it granted Rule 54(b) certification of

the dismissal of the Carpenters’ bad faith insurance denial claim.

                                                CONCLUSION

         Because the district court should not have granted Rule 54(b) certification, we DISMISS

this appeal WITHOUT PREJUDICE.2

         2
           To be clear, the dismissal of this appeal does not foreclose a future appeal by the Carpenters on the same
issues presented in this dismissed appeal.

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