Court Opinion

ID: 7016739
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:23:25.479949+00
Date Added: 2024-06-11T16:10:25.015706
License: Public Domain

FERGUSON, Circuit Judge,
dissenting:
I respectfully dissent. In holding that the parties engaged in manipulation of our jurisdiction, the majority fails to recognize the difference in litigating the duty to defend and the duty to indemnify. It also fashions a new rule of law which requires that before a voluntary dismissal of independent claims can be approved, District Courts must certify the appealability of remaining claims pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. In the process, the majority implies that trial judges who approve the dismissal of a claim without prejudice in order to permit the litigants to proceed on an independent claim actually facilitate manipulation. This is simply not true. When lawyers and trial judges agree to dismiss independent, unripe claims, they are faithful to the administration of justice, preserving the resources of the courts as well as clients. By focusing on manipulation as opposed to the intent underlying the final judgment rule, the majority misses the forest for the trees. As a result, they compel an outcome that is neither efficient nor just.
As the majority correctly observes, the purpose of the final judgment rule is to “prevent[ ] the debilitating effect on judicial administration caused by piecemeal appellate disposition of what is, in practical consequence, but a single controversy.” Eisen v. Carlisle, 417 U.S. 156, 170, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). What the majority ignores is that the inquiry into whether a decision is final requires “evaluation of the competing considerations underlying all questions of finality— ‘the inconvenience and costs of piecemeal review on the one hand and the danger of denying justice by delay on the other.’ ” Id. (quoting Dickinson v. Petroleum Conversion Corp., 338 U.S. 507, 511, 70 S.Ct. 322, 94 L.Ed. 299 (1950)). Our own pragmatic approach to the issue of finality recognizes these competing considerations by allowing parties to voluntarily dismiss claims without prejudice prior to appeal, absent a finding of manipulation. James v. Price Stern, 283 F.3d 1064, 1066 (9th Cir.2002). Thus, the purpose of such a dismissal is to support efficiency, not undermine it. In finding that the dismissal in the instant case was manipulative, the majority makes three wrong turns: 1) they misconstrue the standard for manipulation as set out in our previous cases, 2) they fail to recognize the legal and practical significance of the difference between interdependent and independent claims, and 3) they invent a rule of law that fails to accord sufficient discretion to the District Court, the party in the best position to determine if there has been manipulation.
Our prior decisions have found manipulation only when there was explicit evidence of the parties’ intent to evade the finality requirement, such as a waiver of the statute of limitations, James, 283 F.3d at 1066; Dannenberg v. Software Toolworks, Inc., 16 F.3d 1073, 1074 (9th Cir.1994), an express agreement that the dismissed claims would be revived in the *893event of a successful appeal, Dannenberg, 16 F.3d at 1077; Cheng v. Comm’r, 878 F.2d 306, 309-10 (9th Cir.1989), or circumvention of the District Court’s power to approve the voluntary dismissal, Fletcher v. Gagosian, 604 F.2d 637, 638-39 (9th Cir.1979). In the instant case, none of these express indicia are present: the parties did not agree to waive the statute of limitations, made no explicit agreement to revive the indemnification claim, and sought and received approval from the District Court for both their amended counterclaims and the stipulated dismissal.
More importantly, by straining to find manipulation, the majority misses the relevant point: compelling the parties to litigate the duty to defend and duty to indemnify claims together will do nothing to prevent duplicative litigation or piecemeal appeals because the claims do not involve “for practical purposes [ ] a single controversy.” Dannenberg, 16 F.3d at 1074 (quoting Cobbledick v. United States, 309 U.S. 323, 325, 60 S.Ct. 540, 84 L.Ed. 783 (1940)). In each of the cases cited by the majority in support of its manipulation finding the claims at issue were interdependent.1 In Cheng, the parties sought review of a decision relating to some, but not all, of allegedly impermissible tax deductions, Cheng, 878 F.2d at 308, while in Dannenberg, the parties sought review of a series of claims based on the same set of facts as their dismissed federal claim. 16 F.3d at 1073. Similarly, in Local Motion v. Niescher, the dismissed claims were based on the same contract and alleged violations of contract as the appealed claim. 105 F.3d 1278, 1279 (9th Cir.1997).
In contrast, in the two cases in which we did not find manipulation, the claims were independent. In James, the claim on appeal involved a contract governing the ownership of a group of paintings, while the dismissed claim involved a different contract for a separate set of illustrations, with distinct questions of law and distinct defenses. 283 F.3d at 1065. In United Nat’l Ins. Co. v. R & D Latex Corp., the court held that the parties could agree to dismiss a claim for reimbursement of defense costs “to facilitate an appeal” on duty to defend and indemnify issues, without finding any manipulation. 141 F.3d 916, 918 n. 1 (9th Cir.1998).
Under Oregon law, the duty to defend and the duty to indemnify are akin to the claims in James and R & D Latex, requiring distinct legal and factual analyses. While a court’s inquiry into a duty to defend claim looks only at the facts as alleged in the complaint, the duty to indemnify assessment requires a court to consider if facts actually proved in the underlying litigation demonstrate a right to coverage. Northwest Pump v. American States Ins. Co., 144 Or.App. 222, 925 P.2d 1241, 1243 (1996). The breach of one duty does not imply a breach of the other, nor does the establishment of one duty affect a finding regarding the other. Id. Thus, a separate appeal of the duty to indemnify issue would not, as the majority states, necessarily require that the court refamiliarize itself with the facts or law of the case, because it would raise new issues grounded in an independent set of facts.
Moreover, duty to defend and duty to indemnify claims arise and ripen at different points in the dispute between the parties, thus raising different concerns with regard to efficiency and litigation strategy. The duty to defend arises upon the initial filing of a complaint against the insured, *894creating an immediate case or controversy to determine whether or not the terms of the policy create a duty to indemnify. Ledford v. Gutoski 319 Or. 397, 877 P.2d 80, 82 (1994). In contrast, the duty to indemnify remains speculative until the underlying proceeding against the insured has progressed sufficiently to settle the relevant liability issues. See Travelers Prop. Cas. Corp. v. Winterthur Int'l, No. 02-Civ.-2406, 2002 WL 1391920, at *6, 2002 U.S. Dist. LEXIS 11342, at *18 (S.D.N.Y. June 25, 2002) (reasoning that unlike the duty to defend, a declaratory judgment action on the duty to indemnify is not “a justiciable and ripe controversy” until liability is established and therefore “dismissal of the complaint without prejudice is the correct disposition of the action.”). As competent trial lawyers understand, even assuming facts could be proven establishing a duty to defend, a variety of events could occur after the filing of the complaint which would preclude indemnification, including collusion between the litigant parties or bribery of witnesses. Intelligent lawyering, not manipulation, would induce counsel to refrain from litigating the indemnification issue until after the underlying action is concluded.
Precisely because the claims are being developed in an underlying action against the insured, however, the insured requires an immediate determination of the duty to defend issue. See Lockwood Int’l, B.V. v. Volm Bag Co., 273 F.3d 741, 746 (7th Cir.2001) (“The insured needs a defense before he knows whether the claim that has been made against him is covered by the policy.”). Because the dismissal of the duty to defend claim would force the parties to await the outcome of the underlying litigation, even if it turns out there is no indemnification claim to address, it is fatal to the parties’ legitimate need for prompt review and contrary to the purposes underlying the final judgment rule.2 See Eisen, 417 U.S. at 170, 94 S.Ct. 2140; Dannenberg, 16 F.3d at 1076.
The majority shrugs off the District Court’s participation in the process based on the fact that the District Court was not required to grant its permission for the voluntary dismissal. In doing so, it fails to see that the District Court’s voluntary dismissal of the indemnity issue was a legitimate discretionary decision. Unlike the majority, the District Court of the District of Oregon understood that, under Oregon Law, the duty to defend and the duty to indemnify are separate and distinct causes of action. It understood that the failure to dismiss would burden the court’s docket by allowing the case to linger until a decision in the underlying lawsuit eventually finalized the claims. Understanding these things, the District Court legitimately exercised its discretion to permit a judgment on the merits of the duty to defend claim. The majority’s assertion that the District Court’s decision “cannot be said to involve meaningful consideration or participation by the District Court [because] the parties were entitled to do so without leave of the court” is an insult to district court judges. To claim, without any evidence whatsoev*895er, that a district court judge who issues an order does so without meaningful consideration does not bode well for those who are on the front lines of litigation battles. The district court is in a far better position to determine whether the parties have engaged in manipulation than we are. To suggest otherwise implies a disturbing lack of faith in the district courts to fulfill their gate-keeping role.
The majority’s suggestion that Rule 54(b) certification provides a cure all for the practical problems raised by its decision is also troubling. We have never held that Rule 54(b) certification is required in cases such as the instant one, where the District Court’s order of dismissal disposes of all remaining claims. See R & D Latex Corp., 141 F.3d at 918 n. 1 (rejecting argument that because parties failed to get Rule 54(b) certification, there should be a finding of manipulation). Without reference to either precedent or practice, the majority’s suggestion would create a novel rule of law that removes discretion from the party in the best position to determine if there has been manipulation.
Rule 54(b) recognizes that the approval of the district court creates jurisdiction in the Circuit Courts for an appeal of fewer than all of the original claims. The rule permits a deviation from the historical rule prohibiting piecemeal litigation when there is a danger of hardship because of a delayed appeal. For all practical purposes, the District Court in the instant case accomplished the same thing, simultaneously eliminating dead wood from its docket in the form of issues that may never need to be decided. With the cost of litigation soaring, consideration of the economic burden of litigation upon clients is a major concern. The voluntary dismissal approved by the District Court actually promoted efficiency, as if it turns out there is no judgment to indemnify, neither we, the District Court, nor the parties will have to consider the indemnification issue.
The majority’s approach risks compelling premature and unnecessary litigation of issues that are not yet ripe for full adjudication or, equally troubling, forcing parties to wait for the outcome of underlying litigation before they can seek insurance coverage to defend against it. It is also inordinately disrespectful of the role of the district courts in managing litigation. I dissent.

. Our decisions in Huey and Ash both involved attempted appeals of interlocutory orders and thus are not directly on point.

. The majority suggests that ASI’s initial decision to bring the duty to defend and indemnification claims together precludes their subsequent dismissal of the indemnification claim. The fact that ASI was not required to litigate the indemnification issue initially, however, does not mean it must be compelled to continue litigating it in order to gain appellate review of the duty to defend issue. Again, a combination of factors can arise after the start of litigation that might cause a party to rethink its litigation strategy, none of which indicate a conspiracy to abuse the resources of this court. Unforseen events in the underlying action, for example, could dramatically shift the incentive and need to immediately address an indemnification claim.