Ashmore v. CGI Group, Inc. , 860 F.3d 80 ( 2017 )

16-1758-cv
Ashmore v. CGI Group, Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2016
(Argued: March 2, 2017 Decided: June 21, 2017)
Docket No. 16-1758-cv
BENJAMIN J. ASHMORE, SR.,
Plaintiff-Appellant,
— v. —
CGI GROUP, INC., CGI FEDERAL, INC.
Defendants-Appellees.
Before:
KATZMANN, Chief Judge, POOLER and LYNCH, Circuit Judges.
Benjamin Ashmore appeals from the order of the district court (Analisa
Torres, J.) dismissing him as the plaintiff in this Sarbanes-Oxley whistleblower
action and allowing Barbara A. Edwards, the Trustee of his bankruptcy estate
(“Trustee”), to be substituted as the plaintiff. Ashmore argues that he has
standing to prosecute the whistleblower action because, contrary to the district
court’s ruling, the Trustee abandoned the lawsuit to Ashmore. See 11 U.S.C.
§ 554(c). Because the district court’s dismissal of the case as to Ashmore and the
substitution of the Trustee as the plaintiff are interlocutory orders that are not
immediately appealable, we DISMISS the appeal for lack of jurisdiction.
Accordingly, we VACATE the temporary stay of the district court proceedings
entered on July 6, 2016, and we DENY Ashmore’s pending motion to stay as
moot.
ROBERT HERBST, Herbst Law PLLC, New York, NY, for
plaintiff-appellant Benjamin J. Ashmore.
ZACHARY D. FASMAN (Andrew M. Schnitzel, on the brief),
Proskauer Rose LLP, New York, NY, for defendants-
appellees CGI Group, Inc. and CGI Federal, Inc.
GERARD E. LYNCH, Circuit Judge:
Benjamin Ashmore appeals from the order of the district court (Analisa
Torres, J.) dismissing him as the plaintiff in this Sarbanes-Oxley whistleblower
action and allowing Barbara A. Edwards, the Trustee of his bankruptcy estate
(“Trustee”), to be substituted as the plaintiff. Ashmore argues that he has
standing to prosecute the whistleblower action because, contrary to the district
court’s ruling, the Trustee abandoned the lawsuit to Ashmore. See 11 U.S.C.
§ 554(c). Because the district court’s dismissal of the case as to Ashmore and the
substitution of the Trustee as the plaintiff are interlocutory orders that are not
immediately appealable, we DISMISS the appeal for lack of jurisdiction.
Accordingly, we VACATE the temporary stay of the district court proceedings
2
entered on July 6, 2016, and we DENY Ashmore’s pending motion to stay as
moot.
BACKGROUND
This case has a long and somewhat complex procedural history. We
recount only those facts necessary to resolve the limited issue before us: whether
we have jurisdiction over Ashmore’s appeal. In November 2011, Ashmore filed a
whistleblower action against the defendants CGI Group, Inc. and CGI Federal,
Inc. (collectively, “CGI”) under the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. In that
complaint, he alleged that CGI fired him for objecting to its purported scheme to
defraud the United States Department of Housing and Urban Development. CGI
maintains that it fired Ashmore for deficient job performance and that the
scheme that his complaint describes is nonexistent.
In April 2013, while his whistleblower action was pending, Ashmore filed
a pro se bankruptcy petition in the United States Bankruptcy Court for the District
of New Jersey. He listed the whistleblower lawsuit on the portion of his petition
called the Statement of Financial Affairs (“SOFA”), identifying the action as a
pending lawsuit “to which the debtor is or was a party within one year
immediately preceding the filing” of the bankruptcy petition. Joint Appendix
3
(“J.A.”) 108 (emphasis omitted). He failed, however, to list the lawsuit as an asset
on the petition’s Schedule B, which requires debtors to “list all personal property
of the debtor of whatever kind.” J.A. 80. Although Ashmore did not disclose the
lawsuit as an asset on Schedule B, he later informed the bankruptcy Trustee of
the action and the potential for a financial award. In July 2013, counsel for the
bankruptcy Trustee wrote that, in the Trustee’s view, the “best course of action
would be for the Trustee to retain counsel representing the debtor in the
whistleblower action, with any settlement or judgment to be administered
through” the bankruptcy court. J.A. 164.
In a September 2013 letter agreement, which was not disclosed to the
district court or the bankruptcy court, the Trustee agreed to allow Ashmore to
continue as the plaintiff in the whistleblower action as long as he met certain
conditions. Specifically, the Trustee wrote that she was “willing to close the
bankruptcy case and not administer the asset at this time” if Ashmore would
“agree[] to the reopening of the bankruptcy case . . . should the trustee determine
that the collection on the litigation is sufficient to provide a distribution to
unsecured creditors and further agree[] not to assert that the litigation ha[d] been
abandoned by the trustee.” J.A. 177. In other words, the Trustee agreed that
4
Ashmore could remain the plaintiff in the action in exchange for allowing the
proceeds from the litigation to go to his bankruptcy estate and promising not to
argue that the Trustee had abandoned the whistleblower lawsuit, which would
otherwise be an asset of the bankruptcy estate, to Ashmore. The bankruptcy
Trustee filed a “Report of No Distribution” in the bankruptcy court on September
17, 2013. Two months later, Ashmore was granted a discharge and his
bankruptcy case was closed. The whistleblower action proceeded, with Ashmore
as the plaintiff.
After extensive motion practice, the district court denied summary
judgment in part1 and the Sarbanes-Oxley whistleblower claim was scheduled to
go to trial in January 2016. Ashmore’s counsel has represented that defendants at
one point made a settlement offer of $800,000, which Ashmore rejected. At that
point, CGI retained new counsel and moved to dismiss the case for lack of
jurisdiction, arguing that the lawsuit was property of the bankruptcy estate, that
the Trustee was the proper plaintiff, and that Ashmore did not have standing to
litigate the action. In opposing the motion to dismiss, Ashmore argued that the
1
Ashmore’s complaint also included a breach of contract claim on which
summary judgment was granted to the defendants.
5
Trustee had abandoned the action as a potential asset of the estate and that the
lawsuit therefore belonged to Ashmore.2 The district court granted the motion to
dismiss, concluding that the Trustee had not abandoned the asset because
Ashmore failed to “schedule” it within the meaning of 11 U.S.C. § 554(c). In so
holding, the court relied in part on our summary order in Ayazi v. New York City
Bd. of Educ., 315 F. App’x 313 (2d Cir. 2009), a case with similar relevant facts,
where we reached the same conclusion. The district court did not, however,
dismiss the suit altogether: it dismissed the case but delayed entering a judgment
closing the case “to afford the Trustee the opportunity to move to be substituted
as plaintiff.” J.A. 509.
Ashmore appealed immediately, before the bankruptcy Trustee moved to
be substituted as the plaintiff. Ashmore then moved before the district court to
stay the case pending appeal, and when that motion was denied, he requested a
stay from this Court on July 1, 2016. On July 6, an applications judge entered a
2
The Trustee moved to reopen the bankruptcy case after learning that Ashmore
had argued to the district court that she abandoned the whistleblower lawsuit.
The bankruptcy case was reopened, and the Trustee wrote to the district court
that she intended to move to be substituted in the whistleblower action if the
bankruptcy court determined that the Trustee had not abandoned the asset. The
district court then issued an order notifying the parties of its intent to decide the
motion to dismiss.
6
temporary stay of the district court’s proceedings until a motions panel could
resolve Ashmore’s motion for a stay. One month later, the motions panel issued
an order keeping the temporary stay in place with one exception: the district
court was permitted to substitute the Trustee as the plaintiff. The Trustee
promptly moved to be substituted as the plaintiff and the district court granted
that motion. The district court proceedings otherwise remain paused.
On appeal, Ashmore contends that the district court erred in concluding
that his action was not properly “scheduled” and that, therefore, the Trustee
could not abandon the action by operation of law under 11 U.S.C. § 554(c). In
response, CGI defends the district court’s decision on the merits and argues that
we do not have appellate jurisdiction.3 We agree with CGI that we do not have
jurisdiction over Ashmore’s appeal. Thus, we may not address the underlying
merits of the dispute.
3
In the motions panel’s August 3, 2016 order extending the temporary stay of the
district court proceedings, we directed the parties to address our jurisdiction over
Ashmore’s appeal in the merits briefing. In response, CGI moved to dismiss the
appeal for lack of jurisdiction, and that motion was referred to us.
7
DISCUSSION
Ashmore argues that we have appellate jurisdiction because the order
dismissing the whistleblower action as to him is either final under 28 U.S.C.
§ 1291 or immediately appealable under the collateral order doctrine. Neither
contention is persuasive.
I. The order dismissing Ashmore as plaintiff is not final.
“The courts of appeals . . . have jurisdiction of appeals from all final
decisions of the district courts of the United States.” 28 U.S.C. § 1291. “The
finality requirement in § 1291 evinces a legislative judgment that restricting
appellate review to final decisions prevents the debilitating effect on judicial
administration caused by piecemeal appeal disposition of what is, in practical
consequence, but a single controversy.” Coopers & Lybrand v. Livesay, 437 U.S. 463,
471 (1978) (internal quotation marks and alteration omitted). “[F]ederal appellate
jurisdiction [thus] ordinarily depends on the existence of a decision by the
District Court that ends the litigation on the merits and leaves nothing for the
court to do but execute the judgment.” Wabtec Corp. v. Faiveley Transp. Malmo AB,
525 F.3d 135, 137 (2d Cir. 2008) (internal quotation marks omitted). With only a
limited number of exceptions, orders that “allow[] the litigation to continue” are
8
not final for purposes of § 1291 and therefore are not immediately appealable. Id.
at 138 (internal quotation marks omitted). To state it another way, in general,
orders that dismiss an action “in its entirety, leaving nothing to be adjudicated in
the district court” are final under § 1291. Cox v. United States, 783 F.3d 145, 147 (2d
Cir. 2015).
The district court’s dismissal of the action as to Ashmore, and
corresponding substitution of the bankruptcy Trustee as plaintiff, are plainly not
final appealable orders under that definition. See Bauer v. Commerce Union Bank,
Clarksville, Tenn., 859 F.2d 438, 440 (6th Cir. 1988) (assuming without analysis that
an order substituting a bankruptcy trustee as plaintiff was not final and
proceeding to address the collateral order doctrine). The district court has not
entered a judgment, and upon dismissal of this appeal the whistleblower action
may continue to its conclusion. Although the district court dismissed the action,
it did so only as to Ashmore, and it expressly permitted the bankruptcy Trustee
to move to be substituted as the plaintiff. See Slayton v. Am. Exp. Co., 460 F.3d 215,
224 (2d Cir. 2006) (holding that dismissal with leave to amend is a non-final order
that is not appealable since the litigation may continue via an amendment to the
complaint). Since the Trustee moved to be substituted as the plaintiff, and the
9
district court granted that motion, the case is ongoing and there is no final order
that is within our jurisdiction to review.4
Ashmore’s arguments to the contrary are unpersuasive. Ashmore contends
that the order effectively “put [him] out of court” because the order incorrectly
“dismissed Ashmore, the sole plaintiff with proper standing, and replaced him
with the Trustee, an improper party lacking standing.” Reply Br. 1, 2. In
Ashmore’s view, the order is final because the district court erred in dismissing
the action and substituting the Trustee, thereby depriving itself of subject matter
jurisdiction. We have held, however, that “denial of a motion to dismiss, even
when the motion is based upon jurisdictional grounds, is not immediately
reviewable.” Wabtec Corp., 525 F.3d at 137 (internal quotation marks omitted); see
also Harrison v. Nissan Motor Corp. In U.S.A., 111 F.3d 343, 347 (3d Cir. 1997)
(“[t]he denial of a motion to dismiss for lack of subject matter jurisdiction is not
appealable.”). Thus, immediate appeal is not automatically authorized whenever
a party alleges that a district court order has permitted a suit to move forward in
4
Had the Trustee “disclaim[ed] any intent to” seek substitution, she might have
“render[ed] [the] non-final order ‘final’ and appealable.” Slayton, 460 F.3d at 224.
Given that the Trustee was substituted as the plaintiff and has indicated her
intent to proceed, however, we cannot review the dismissal.
10
the absence of proper subject matter jurisdiction. More broadly, an interlocutory
order does not become immediately appealable if the reviewing Court is
persuaded that the district court committed reversible error.5 Cf. Cox, 783 F.3d at
149 (concluding that an order was final even where it contained “erroneous or
incomplete reasoning” that would not have supported a complete dismissal of a
petition for habeas corpus because the finality of an order does not depend on its
being correct). We therefore reject the claim that the district court’s order is
appealable because the district court, in Ashmore’s view, divested itself of subject
matter jurisdiction by dismissing Ashmore from the suit.
Second, Ashmore analogizes the district court’s dismissal of the
whistleblower action as to him to an order denying a motion for intervention as
of right. See Fed. R. Civ. P. 24(a). Specifically, he argues that “depriving [him] of
standing to prosecute his own case . . . is the functional equivalent of denying
intervention when the right to intervene is absolute.” Reply Br. 7. In general, “an
order prevent[ing] a putative intervenor from becoming a party” is “subject to
immediate review.” Stringfellow v. Concerned Neighbors in Action, 480 U.S. 370, 377
5
We of course express no view on the underlying merits of the district court’s
conclusion that the bankruptcy Trustee did not abandon the asset because it was
not properly scheduled.
11
(1987); see In re Katz, 623 F.2d 122, 124 (2d Cir. 1980). That rule originated in
Brotherhood of Railroad Trainmen v. Baltimore & O. R. Co., 331 U.S. 519, 524 (1947),
in which the Court held that, “where a statute or the practical necessities grant
the applicant an absolute right to intervene, the order denying intervention
becomes appealable.” The Court later explained the reason for that rule: “the
order denying all intervention was by necessity subject to immediate review,
because the applicant could not appeal from any subsequent order or judgment
in the proceeding.” Stringfellow, 480 U.S. at 378 (internal quotation marks and
brackets omitted, emphasis in original). In such circumstances, the putative
intervenor has “no recourse other than pretrial review.” Id. To state it another
way, so far as the “unsuccessful applicant for intervention . . . is concerned, the
lawsuit is all over.” Shore v. Parklane Hosiery Co., 606 F.2d 354, 356 (2d Cir. 1979)
(internal quotation marks and citation omitted).
That is not the case here, where Ashmore can appeal an unsatisfactory
resolution of the case, as well as, at a minimum, the district court’s order
dismissing him from the action, when the litigation concludes. Unlike the failed
movant for intervention, who does not become a party to the litigation, Ashmore
was a party from the beginning of the lawsuit until he was dismissed for lack of
12
standing and the Trustee was substituted as the plaintiff. His position is thus
analogous not to that of the would-be intervenor, but to that of one of multiple
plaintiffs whose claims are dismissed while those of other plaintiffs remain. The
dismissal of a co-plaintiff’s claim does not resolve the litigation, and the
dismissed plaintiff may not immediately appeal from the non-final order of
dismissal. See Robinson v. Parke-Davis & Co., 685 F.2d 912, 913 (4th Cir. 1982)
(dismissing a plaintiff’s appeal for lack of jurisdiction where all of her claims
were dismissed but some of her co-plaintiff’s claims proceeded to discovery).
This is so because “complete disposition of one or more claims among all parties
is not final so long as another claim remains to be decided.” 15A C. Wright & A.
Miller, Federal Practice and Procedure § 3914.7 (2d ed. Apr. 2017 Update)
(“Wright & Miller”). To state it another way, “finality does not attach to an order
that dismisses some plaintiffs but not all.” Id.; see Citizens Accord, Inc. v. Town of
Rochester, N.Y., 235 F.3d 126, 128-29 (2d Cir. 2000).
A dismissed plaintiff may appeal an “interlocutory order of dismissal”
only after a “final judgment has been entered, disposing of all the claims of all the
13
parties.”6 Hogan v. Consol. Rail Corp., 961 F.2d 1021, 1025, 1026 (2d Cir. 1992)
(dismissing appeal after improper entry of Rule 54(b) judgment). That the claims
were dismissed for lack of standing, or that the district court believed that some
other party was the real party in interest, does not defeat the dismissed plaintiff’s
ability to obtain appellate review of the interlocutory dismissal once a final order
is entered. See 7C Wright & Miller § 1962 (“The propriety of the substitution
[under Federal Rule of Civil Procedure 25] can be raised on appeal from a final
6
Of course, a party may appeal an adjudication of “fewer than all of the claims in
an action” if the district court properly enters a partial final judgment
“permitting an aggrieved party to take an immediate appeal” under Federal Rule
of Civil Procedure 54(b). Harriscom Svenska AB v. Harris Corp., 947 F.2d 627, 629
(2d Cir. 1991). We need not concern ourselves with that doctrine here because the
district court did not enter a judgment pursuant to Rule 54(b). We observe,
however, that the discretionary nature of Rule 54(b) supports our analysis. That
is, Rule 54(b) provides that, “when multiple parties are involved [in an action],
the court may direct entry of a final judgment as to one or more, but fewer than
all . . . parties” under certain circumstances. Fed. R. Civ. P. 54(b) (emphasis
added). The rule thus contemplates circumstances in which one party’s claims
are resolved but it is inappropriate to enter a final judgment as to that party due
to prevailing “judicial administrative interests” and to “preserve[] the historic
federal policy against piecemeal appeals.” Novick v. AXA Network, LLC, 642 F.3d
304, 310-11 (2d Cir. 2011) (internal quotation marks and emphasis omitted).
Accordingly, we have repeatedly stated that a district court’s authority to enter a
Rule 54(b) judgment should be “exercised sparingly.” Id. at 310 (internal
quotation marks omitted). In the majority of cases, therefore, the resolution of all
of one party’s claims will not justify the entry of a Rule 54(b) judgment. In such
instances, the order disposing of that party “remain[s] interlocutory” until a final
judgment as to all claims and parties. Id. at 314.
14
judgment.”). Such is the case here, where Ashmore may appeal the district
court’s order dismissing him from the case after the litigation concludes.
If, as Ashmore fears, the Trustee agrees to an inadequate settlement with CGI, he
can appeal when there is a final judgment.7
II. The order is not appealable under the collateral order doctrine.
Ashmore next contends that, even if the dismissal of the action as to him is
not a final order, it is immediately appealable under the collateral order doctrine.
That doctrine allows us to review non-final orders when they: “[1] conclusively
determine the disputed question, [2] resolve an important issue completely
separate from the merits of the action, and [3] [are] effectively unreviewable on
appeal from a final judgment.” Fischer v. N.Y. State Dep’t of Law, 812 F.3d 268, 273
7
We note also that the action cannot be dismissed without a court order unless
Ashmore consents. A plaintiff can only voluntarily dismiss an action without a
court order by filing “(i) a notice of dismissal before the opposing party serves
either an answer or a motion for summary judgment; or (ii) a stipulation of
dismissal signed by all parties who have appeared.” Fed. R. Civ. P. 41(a)(1)(A). If
neither of those conditions is met, “an action may be dismissed at the plaintiff’s
request only by court order, on terms that the court considers proper.” Fed. R.
Civ. P. 41(a)(2). CGI answered the complaint in 2012, and Ashmore is a party
who has appeared in the action. Thus, at a minimum, in addition to any
procedural requirements that the Trustee must satisfy in the bankruptcy court to
approve the settlement, the Trustee will need Ashmore’s agreement or a court
order in order to end the litigation.
15
(2d Cir. 2016) (internal quotation marks omitted).8 Those conditions are
“stringent” and must be kept so; otherwise, “the underlying doctrine will
overpower the substantial finality interests [that] § 1291 is meant to further.” Id.
(internal quotation marks omitted).
The general rule thus remains that “a party is entitled to a single appeal, to
be deferred until final judgment has been entered, in which claims of district
court error at any stage of the litigation may be ventilated.” Digital Equip. Corp. v.
Desktop Direct, Inc., 511 U.S. 863, 868 (1994). Further, “the issue of appealability
. . . is to be determined for the entire category to which a claim belongs, without
8
The requirements of the collateral order doctrine originated in Cohen v. Beneficial
Indus. Loan Corp., 337 U.S. 541, 546 (1949). There, the district court issued an order
declining to apply a newly-enacted state law related to putting up security to
cover litigation costs. Id. at 544-45. The Supreme Court held that the district
court’s decision was an immediately appealable collateral order because it “finally
determine[d] claims of right separable from, and collateral to, rights asserted in
the action,” and “because it is a final disposition of a claimed right which is not an
ingredient of the cause of action and does not require consideration with it.” Id. at
546-47 (emphasis added). By allowing appeals “from orders characterized as final
under this doctrine even though it may be clear that they do not terminate the
action or any part of it,” 15A Wright & Miller § 3911, the collateral order doctrine
is another way of describing a final order: that is, an order that is final with
respect to a collateral issue and that is unreviewable on appeal from a final
judgment. Although the Cohen doctrine could be considered an aspect of the final
judgment rule, it is also an exception to that rule, and so, in the interest of clarity,
we discuss it separately.
16
regard to the chance that the litigation at hand might be speeded, or a particular
injustice averted.” Id. (internal quotation marks and brackets omitted).
Accordingly, only a limited class of cases has been held to satisfy the collateral
order doctrine. For example, defendants may immediately appeal interlocutory
rulings denying them qualified immunity, at least to the extent that such denials
turn on questions of law, because such “immunity is a shield not only from
liability, but also from the burdens of” litigation; thus, a “denial of immunity is
effectively unreviewable if appeal is delayed until after a final judgment has been
entered.” Locurto v. Safir, 264 F.3d 154, 163 (2d Cir. 2001).
We need not consider whether the district court’s order satisfies the first
two parts of the collateral order test, Lauro Lines s.r.l. v. Chasser, 490 U.S. 495, 498
(1989), because, as is often the case, the district court’s order fails to satisfy the
third prong: that the order is “effectively unreviewable” if an appeal is delayed
until after a final judgment. Fischer, 812 F.3d at 273. This “third prong of the . . .
[collateral order] test is satisfied only where the order at issue involves an
asserted right the legal and practical value of which would be destroyed if it were
not vindicated before trial.” Midland Asphalt Corp. v. United States, 489 U.S. 794,
799 (1989) (internal quotation marks omitted). “That a ruling may burden
17
litigants in ways that are only imperfectly reparable by appellate reversal of a
final district court judgment has never sufficed.” Mohawk Indus., Inc. v. Carpenter,
558 U.S. 100, 107 (2009) (internal quotation marks and ellipses omitted). “Instead,
the decisive consideration is whether delaying review until the entry of final
judgment would imperil a substantial public interest or some particular value of
a high order.” Id. (internal quotation marks omitted). For example, the Supreme
Court has held that a district court’s order requiring a criminal defendant to
receive medication involuntarily was immediately appealable because, “[b]y the
time of trial [the individual] will have undergone forced medication—the very
harm that he seeks to avoid.” Sell v. United States, 539 U.S. 166, 176-77 (2003).
As already explained, Ashmore can appeal from the final judgment in his
whistleblower suit and challenge, at a minimum, the district court’s order
dismissing him from the suit. If he chooses to take an appeal, and a future panel
of this Court accepts Ashmore’s view that he was improperly dismissed from the
lawsuit, he can “undo [the] harm” associated with an inappropriate dismissal.
Sell, 539 U.S. at 177. Cf. Prop-Jets, Inc. v. Chandler, 575 F.2d 1322, 1325 (10th Cir.
1978) (“It has been generally held that an order granting substitution of a party
[under Rule 25] or adding an additional party is interlocutory” and is not
18
immediately appealable under the collateral order doctrine because any harm
could be undone on appeal from a final judgment). In other words, if this Court
determines that the Trustee abandoned the lawsuit to Ashmore, the district
court’s judgment ending litigation between CGI and the Trustee may be vacated
and the case remanded for further proceedings with Ashmore as the plaintiff.9
The attendant inefficiencies would be no more burdensome than they are in any
other case in which the final judgment rule requires parties to await a final
judgment before appealing adverse interim rulings. To be sure, “[i]f it is
eventually decided that the District Court erred, . . . [Ashmore] will have been
put to unnecessary trouble and expense,” but the Supreme Court “has declined
to find the costs associated with unnecessary litigation to be enough to warrant
allowing the immediate appeal of a pretrial order.” Lauro Lines s.r.l., 490 U.S. at
499.
Ashmore contends that the Trustee has interests that diverge from his in
prosecuting the action. In other words, the Trustee’s duty is primarily to
Ashmore’s creditors, and thus she may accept a settlement offer that does little
more than compensate those creditors. The Trustee’s divergent interests might
9
We of course express no view as to the outcome of any such potential appeal.
19
indeed make it less likely that Ashmore is satisfied with the outcome of the
whistleblower action. But that fact does not detract from Ashmore’s ability to
appeal after a final judgment.10
Finally, Ashmore contends that the district court’s order satisfies the third
prong of the collateral order test because it may have preclusive effect in the
bankruptcy proceeding, citing Mt. McKinley Ins. Co. v. Corning Inc., 399 F.3d 436(2d Cir. 2005). In Mt. McKinley, we held that an order declining to abstain from
adjudicating certain claims against insurers and staying the New York district
court proceedings pending the resolution of those claims in the Bankruptcy
Court for the Western District of Pennsylvania was immediately appealable
under the collateral order doctrine. Id. at 440. We began by recognizing that,
“under ordinary circumstances, a refusal to abstain would be reviewable on
10
Billino v. Citibank, N.A., 123 F.3d 723 (2d Cir. 1997), upon which Ashmore also
relies, is inapposite. In Billino, the Court dismissed an appeal for lack of
jurisdiction because the notice of appeal was defective. Id. at 726-27. In dicta, the
Court observed that, “even if the action here were not dismissed and remained
pending, albeit in suspense for lack of a party with standing to prosecute it,” the
denial of a motion to substitute a new party for a deceased plaintiff “would be
appealable under the collateral order exception.” Id. at 727. We noted that, on the
facts of that case, the order would satisfy the exception because the order
“result[ed] in a total bar to recovery because there [was] no party to carry on the
action.” Id. That is plainly not true here, where the Trustee stands ready to
prosecute the action to its conclusion.
20
appeal from a final judgment, making the collateral order exception
inapplicable.” Id. at 442 (emphasis in original). We held that Mt. McKinley was
not an ordinary case, however, because the district court stayed its proceedings,
meaning that the outcome of the Pennsylvania litigation would have “preclusive
effect” in New York and “would bar further litigation in the Southern District.”
Id. at 444. Thus, our review would have encompassed “only whether the
Southern District ultimately made the correct judgment on claim preclusion and
not whether it correctly abstained as an initial matter.” Id. That inevitable
limitation to our appellate review satisfied the third prong of the collateral order
test. The concern in Mt. McKinley is not present here because, should Ashmore
decide to appeal when the litigation concludes, we will be able to reach the
merits of the district court’s interlocutory dismissal order.
Ashmore also suggests that the order is unreviewable because the
bankruptcy court in New Jersey may give it preclusive effect in determining that
the Trustee has not abandoned the lawsuit to Ashmore, leading the bankruptcy
court to approve a settlement between CGI and the Trustee. Even if the New
Jersey court determines that the district court’s order has preclusive effect in the
bankruptcy proceeding, Ashmore has not explained how that determination
21
would infringe on our ability to review the dismissal on appeal from a final
judgment. Indeed, courts may avoid issuing final judgments based on issue
preclusion until the order creating the preclusive effect is no longer appealable.
See Restatement (Second) of Judgments § 16 cmt. b (Am. Law Inst. 1982). And
where a final judgment is entered based on the preclusive effect of another
court’s order, but the other court’s order is later overturned on appeal, a party
generally may move for the judgment to be set aside. See Fed. R. Civ. P. 60(b)(5)
(“On motion and just terms, the court may relieve a party or its legal
representative from a final judgment, order, or proceeding . . . [if] the judgment
. . . is based on an earlier judgment that has been reversed or vacated . . . .”); Fed
R. Bankr. P. 9024; Restatement (Second) of Judgments § 16 cmt. c (Am. Law Inst.
1982). In other words, even if the New Jersey bankruptcy court gives the district
court’s dismissal preclusive effect, Ashmore will be able to obtain appellate
review of the merits of the district court’s order in this Court.11
11
Ashmore also suggests that this Court may later be bound by a decision that
the bankruptcy court reaches based on the issue-preclusive effect of the district
court’s ruling. But he cites no case holding as much, and at least one court of
appeals has explicitly rejected such reasoning. See In re Kane, 254 F.3d 325, 329-30
(1st Cir. 2001) (“[T]he town is seeking to block an appeal of an original ‘merits’
judgment by relying on the preclusive effect of later decisions which themselves
relied on the original merits judgment now appealed. . . . Direct review of the
22
In sum, because the Trustee has been substituted as the plaintiff in the
whistleblower action and the district court proceedings have not yet concluded,
the dismissal of the action as to Ashmore is not a final order. Nor is it
immediately appealable under the collateral order doctrine because Ashmore can
obtain, on appeal from a final judgment, review of, at a minimum, the district
court’s order dismissing him from the suit.
CONCLUSION
For the foregoing reasons, we DISMISS the appeal for lack of jurisdiction.
Accordingly, we VACATE the temporary stay of the district court proceedings
entered on July 6, 2016, and we DENY Ashmore’s pending motion to stay as
moot.
erroneous original decision cannot be precluded because, in the meantime, . . .
other courts have adopted it by cross reference.”).
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