WRS Inc v. Plaza Ent Inc , 402 F.3d 424 ( 2005 )

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
4-4-2005
WRS Inc v. Plaza Ent Inc
Precedential or Non-Precedential: Precedential
Docket No. 03-4094
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD
CIRCUIT
No. 03-4094
WRS, INC.,
d/b/a
WRS Motion Picture Laboratories,
a corporation,
Appellant
v.
PLAZA ENTERTAINMENT, INC., a corporation;
ERIC PARKINSON, an individual;
CHARLES VON BERNUTH; JOHN HERKLOTZ, an
individual
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 00-cv-02041)
District Judge: Honorable William L. Standish
Argued October 7, 2004
Before: SLOVITER, VAN ANTWERPEN, and COWEN,
Circuit Judges.
(Filed April 4, 2005)
Thomas E. Reilly (Argued)
Pittsburgh, PA 15220
Attorney for Appellant
John W. Gibson
Pittsburgh, PA 15219
Attorney for Appellees,
Plaza Entertainment, Inc.
Eric Parkinson and Charles von Bernuth
John P. Sieminski
Richard A. O’Halloran (Argued)
Burns, White & Hickton
Pittsburgh, PA 15222
Attorneys for Appellee,
John Herklotz
OPINION OF THE COURT
SLOVITER, Circuit Judge.
WRS, Inc. appeals from an order of the District Court
entered September 15, 2003 denying its Motion to Reopen. The
District Court held that the case had already been dismissed
without prejudice and that WRS must file a new action against
defendants to pursue the claims asserted in its original
complaint. It appears that both parties and the District Court
were proceeding on the assumption that the original case had
been dismissed. That assumption, although not unreasonable,
was erroneous. Therefore, we must dismiss the appeal from the
order of the District Court denying the Motion to Reopen.
I.
WRS, through counsel Thomas E. Reilly, filed a
complaint on October 13, 2000 in the United States District
Court for the Western District of Pennsylvania against Plaza
Entertainment, Inc. (“Plaza”), Eric Parkinson, Charles von
Bernuth, and John Herklotz, invoking federal jurisdiction on the
basis of diversity of citizenship. WRS alleged that Plaza had
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failed to pay WRS for duplicating various film and video titles
and that the individual defendants were liable on their guaranties
of Plaza’s obligations to WRS for the duplication services. The
complaint sought money damages, declaratory relief, and
“foreclosure of its security interest in the property of Plaza,”
including Plaza’s right to exploit the titles at issue. Parkinson,
von Bernuth, and Herklotz filed answers to the complaint; Plaza
answered and filed a counterclaim.
Thereafter, on August 24, 2001, WRS filed a Chapter 11
bankruptcy proceeding in the United States Bankruptcy Court
for the Western District of Pennsylvania. It appears that no
counsel was appointed for WRS in the bankruptcy proceeding
and Reilly filed a motion to withdraw as WRS’ counsel in this
case on December 13, 2001, explaining that he did so because
under 11 U.S.C. § 327(a), a Chapter 11 debtor must have court
approval to hire professionals, including attorneys.
The District Court granted Reilly’s motion to withdraw
on February 14, 2002, and entered the following order:
1. Plaintiff WRS, Inc. d/b/a/ WRS Motion Picture
Laboratories, is in bankruptcy and is not
represented by counsel in the above-captioned
action. It appears that no further action may be
taken by the court at this time. The Clerk shall
accordingly mark the above-captioned case as
closed. Nothing contained in this order shall be
considered a dismissal or disposition of this action,
and should further proceedings therein become
necessary or desirable, any party may initiate the
same in the same manner as if this order had not
been entered.
2. In the event that counsel does not enter an
appearance for plaintiff on or before March 15,
2002, the above-captioned action will be dismissed
without prejudice.
App. at 4-5 (emphasis added).
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After receiving permission to withdraw, Reilly withdrew
his appearance on behalf of WRS; no other counsel entered an
appearance on behalf of WRS on or before March 15, 2002. No
action was taken in this case until August 20, 2003, when Reilly
filed a Motion to Reopen the case.1 The District Court denied
WRS’ Motion to Reopen by Memorandum Order dated
September 15, 2003. In that order, the District Court stated that
the “case was dismissed without prejudice [and] [t]herefore, if
WRS wishes to pursue the claims asserted in its October 13,
2000 complaint, WRS must file a new action against
defendants.” App. at 3.2 WRS filed a Motion for
Reconsideration, which the District Court denied. WRS then
filed this timely appeal.
II.
At the outset, we must consider whether we have
jurisdiction to hear WRS’ appeal. Ordinarily, we only have
jurisdiction to hear appeals from final decisions of the district
court. 28 U.S.C. § 1291. A decision is considered “final” for
purposes of § 1291 when the district court’s decision “‘ends the
litigation on the merits and leaves nothing for the court to do but
execute the judgment.’” Quackenbush v. Allstate Ins. Co., 517
U.S. 706, 712 (1996) (quoting Catlin v. United States, 324 U.S.
229, 233 (1945)). “Conversely, if the order specifically
contemplates further activity by the District Court, it is not
considered final.” Berke v. Bloch, 242 F.3d 131, 135 (3d Cir.
2001); see also Aluminum Co. of Am. v. Beazer E., Inc., 124
F.3d 551, 557 (3d Cir. 1997) (“Ordinarily, a final decision will
have two effects. First, the decision will fully resolve all claims
presented to the district court. Second, after the decision has
1
In his Motion to Reopen, Thomas Reilly asserted that on
July 25, 2003 he had filed an application in the bankruptcy
proceeding to be appointed as special counsel for WRS in this case.
The Bankruptcy Court granted Reilly’s motion on September 10,
2003.
2
WRS has filed such an action and expects that the
defendants will assert a statute of limitations defense.
4
been issued, there will be nothing further for the district court to
do.”).3
We are faced here with what appears to be, at least with
respect to the first paragraph of the District Court’s February 14,
2002 order, an order administratively closing the case because of
the pendency of the bankruptcy proceeding: “It appears that no
further action may be taken by the court at this time. The Clerk
shall accordingly mark the above-captioned case as closed.”
App. at 4. In Penn West Assocs. Inc. v. Cohen, 371 F.3d 118(3d Cir. 2004), we stated that an order administratively closing a
case is not, in and of itself, a final order, but then held that
because “[t]he practical effect of [the denial to reopen the
administratively closed case] was to dismiss Penn West’s
action,” the order denying the motion to reopen “was a final
decision under 28 U.S.C. §1291.” Penn West, 371 F.3d at 124;
see also Brown Shoe Co. v. United States, 370 U.S. 294, 306
(1962) (noting that the Supreme Court of the United States has
adopted “[a] pragmatic approach to the question of finality”).
The facts in Penn West differ from those before us.
There, the case was administratively closed because the parties
reported that they had reached a “full and final settlement” and
that “there [were] no further matters pending before the Court.”
371 F.3d at 121. It does not appear from the Penn West opinion
that the district court’s order at issue there contained language
comparable to that included in the first paragraph of the
3
Both parties appear to view the denial of WRS’ Motion to
Reopen as if it were an order denying a Fed. R. Civ. P. 60(b)
motion. We have held that such an order is generally a final
appealable order. See Smith v. Evans, 853 F.2d 155, 158 (3d Cir.
1988) (stating that “the grant or denial of a Rule 60(b) motion is an
appealable order”). More recently, we stated that we may review
the denial of a Rule 60(b) motion even when the underlying order
is not final if the denial “‘wrap[s] up all matters pending on the
docket,’ thus making the decision final.” Torres v. Chater, 125
F.3d 166, 168 (3d Cir. 1997) (quoting Kapco Mfg. Co. v. C & O
Enters., 773 F.2d 151, 153 (7th Cir. 1985)).
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February 14, 2002 order which clearly states that “[n]othing
contained in this order shall be considered a dismissal. . . .”
App. at 4. In light of such clear language, it is difficult to
construe the February 14 order as a dismissal unless there is
something in the second paragraph of the February 14 order that
does constitute such an order.
III.
The second paragraph of the court’s February 14, 2002
order states that “[i]n the event that counsel does not enter an
appearance for plaintiff on or before March 15, 2002, the above-
captioned action will be dismissed without prejudice.” App. at
4-5 (emphasis added). No appearance was entered by counsel on
behalf of WRS by March 15, 2002. Both parties and the District
Court have proceeded on the assumption that because no counsel
entered an appearance by March 15, there was a subsequent
order entered dismissing WRS’ suit. That was obviously the
predicate of WRS’ Motion to Reopen the proceedings. In
addition, the District Court stated in its September 15, 2003
order (denying the Motion to Reopen) that the case had been
“dismissed without prejudice.” App. at 3. Although we have
scoured the docket for this order of dismissal, no such order was
ever entered.
At oral argument, counsel for the defendants conceded
that there was no March 15, 2002 order of dismissal but argued
that such an order was not necessary because the order of
dismissal could be found within the body of the February 14
order. We disagree. Although we recognize that great deference
is given to a district court’s interpretation of its own order, see In
re Fine Paper Antitrust Litig., 695 F.2d 494, 498 (3d Cir. 1982),
there is a substantial difference between giving deference to a
district court’s interpretation of its order and allowing that court
to assume the existence of such an order post hoc. The District
Court’s original intention to dismiss the case without prejudice
should the plaintiffs fail to make an appearance by March 15,
2002 cannot be translated into the entry of an order dismissing
the case. Similarly, we cannot now find that the February 14
order contained an implied order of dismissal when it obviously
6
did not. As a result, we hold that the case was administratively
closed pursuant to the February 14 order,4 but that it was never
in fact dismissed. Indeed, what date should we assume the order
was entered?
In Penn West, we stated that administrative closings can
become final orders if they contain “a built-in timetable under
which the administrative closing may automatically expire, or,
alternatively, mature into a final decision.” 371 F.3d at 128.
Although orders with a built-in timetable may mature into a final
decision, they are not entirely self executing. Such orders must
still be entered into the docket before they can be considered
final orders of dismissal.
The need for a separate entry of dismissal, distinct from
the administrative order containing the timetable, follows from
the decision in United States v. Indrelunas, 411 U.S. 216 (1973)
(per curiam), called into question on other grounds, Bankers Tr.
Co. v. Mills, 435 U.S. 381 (1978) (per curiam). In that case, the
Supreme Court explained that the separate-document
requirement was needed to remove the “considerable uncertainty
over what actions of the District Court would constitute an entry
of judgment, and [the] occasional grief to litigants as a result of
this uncertainty.” 411 U.S. at 220.
The problem that can arise because of the failure to file a
separate document that completes a self-executing order is
exemplified by the facts in Bogaerts v. Shapiro (In re Litas Int’l,
Inc.), 316 F.3d 113 (2d Cir. 2003). In Bogaerts, the bankruptcy
court entered an order on July 12, 2000 that required one of the
parties to procure certain documents by July 31, 2000, to appear
4
The first sentence of paragraph one of the February 14,
2002 order uses the classic language of administrative closings. See
Mercer v. Allegheny Ludlum Corp., 132 F.R.D. 38, 38 n.1 (W.D.
Pa. 1990) (stating that “It is the practice of this Court to
administratively close those cases where representations are made
that settlement is imminent or some other disposition of the case is
contemplated by the parties other than adjudication.”).
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for a deposition by August 21, 2000, to pay a discovery sanction
by July 31, 2000, and to furnish the court with an affidavit by
September 12, 2000 certifying compliance. The order further
stated that if the party failed to comply, its claims “‘shall be
deemed dismissed with prejudice without further order of the
Court.’” 316 F.3d at 115 (quoting order of bankruptcy court).
Instead of dismissal when the mandated steps were not taken, the
bankruptcy court signed a supplemental order setting new
deadlines. The non-complying party filed a notice of appeal to
the district court which held its appeal untimely. The United
States Court of Appeals vacated the judgment of the district
court and remanded, holding that the bankruptcy court’s July 12
order was not final and that even “self-executing orders” require
the court issuing them to enter a final judgment. Id. at 118. It
stated that the uncertainties created by conditional orders could
have been eliminated by the following procedure:
[W]hen docketing the supplemental order, the
clerk of the [bankruptcy] court could have entered
a “tickler” marking as crucial the date on which
the conditions were to have been fulfilled. And if
Appellant did not comply with the conditions on
that date, the clerk could then have entered a
judgment pursuant to [Fed. R. Civ. P. 58] without
any further direction from the court. In addition,
[the Appellant], for whom finality of the decision
was perhaps of greatest importance, could easily
have asked the court . . . to enter a final (Rule 58)
judgment.
Id. at 119.
The potential for uncertainty is significant in cases
involving administrative closings with built-in timetables
without the entry of an order of dismissal. The requirements for
reopening a dismissed case as opposed to an administratively
closed case are different. If the administrative-closing order
became a self-executing final judgment, the district court could
grant a party’s motion to reopen only if there were
“extraordinary circumstances.” See Sawka v. Healtheast, Inc.,
8
989 F.2d at 138, 140 (3d Cir. 1993). Parties need a definitive
way of knowing if and when their case has been dismissed.
Accordingly, we hold that although an administrative closing
may mature into a final order of dismissal, the district court (or
bankruptcy court) must enter an order so providing. Without
such an entry, the case simply remains administratively closed.
Turning to the case before us, we have already concluded
that the District Court’s February 14, 2002 order was an
administrative closing and not a final judgment. In Halderman
by Halderman v. Pennhurst State Sch. and Hosp., 901 F.2d 311,
317 (3rd Cir. 1990), we noted that a court may dismiss a case
conditionally and thereby retain jurisdiction. We believe that is
effectively what was done here. Because the February 14 order
also stated “should further proceedings therein become necessary
or desirable, any party may initiate the same in the same manner
as if this order had not been entered,” App. at 4, counsel would
likely have been successful in seeking to reopen the case. We
therefore hold that there was no final order, and we have no
jurisdiction over the appeal from the order denying the Motion to
Reopen. We must remand to the District Court.5
5
On remand, the Court may wish to consider the equities
argued by WRS here: the statute of limitations has run, the
ambiguity of the February 14 order, the unlikelihood that WRS
would have knowingly forfeited its $1.2 million claim, the policy
underlying 11 U.S.C. § 108, which gives debtors a two-year
extension within which to commence an action on a pre-petition
claim, which courts have construed as designed to provide extra
time “‘to investigate and pursue collection of claims for the benefit
of the estate.’” United States of Am. for the Use of Am. Bank v.
C.I.T. Constr. Inc., 944 F.2d 253, 260 n.10 (5th Cir. 1991) (quoting
Northern Specialty Sales, Inc. v. INTV Corp., 57 B.R. 557, 559 n.1
(Bankr. D. Or. 1986)). On the other hand, Plaza argues that § 108
is inapplicable to claims that were already the subject of suit. We
leave these issues for the District Court in the first instance.
Nothing in the opinion is intended to preclude the District Court
from dismissing the case because counsel failed to comply with the
requirements of the order to enter an appearance on or before
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IV.
For the foregoing reasons, we will remand the case to the
District Court for proceedings consistent with our decision.
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