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* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel.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