Curtiss-Wright Corporation v. General Electric Company ( 1979 )

OPINION OF THE COURT

PER CURIAM.

In a diversity action by Curtiss-Wright Corp. (Curtiss) against General Electric Company (GE),' the district court granted summary judgment to Curtiss on its claims for outstanding balances due on contracts with GE; additional claims arising out of the contractual relationship have not yet been adjudicated. The district court certified that the judgments were final under Rule 54(b) of the Federal Rules of Civil Procedure.

GE appealed the 54(b) judgments. It first contends that the entry of the 54(b) certifications was not consistent with a sound exercise of discretion, and thus requests this court to dismiss the appeals without consideration of the merits.

Curtiss, as subcontractor, entered into 21 subcontracts with GE, prime contractor for the Navy, to build component parts for propulsion systems on nuclear vessels for about $215 million. Most of the claims asserted by Curtiss were based on alleged fraud and misrepresentation by GE which caused cost overruns and prevented Curtiss from making a profit. Three of Curtiss’s claims sought payment from GE on the outstanding balances due on the 21 subcontracts. GE counterclaimed for $60 million in costs incurred by it due to Curtiss’s alleged failure to perform its contractual obligations competently.

The district court granted summary judgment on the claims for the amount of the outstanding balances and directed GE t.o pay Curtiss $19 million along with prejudgment interest. It further directed that such judgments were final under Rule 54(b) and stated its reasons for such action.

GE asserts that the entry of the 54(b) certifications under the circumstances of this case was in direct conflict with the rules announced by this court in Allis-Chalmers Corp. v. Philadelphia Electric Co., 521 F.2d 360 (3d Cir. 1975). We address that contention.

In Allis-Chalmers this court stressed that certification should be the exception rather than the rule, and delineated illustrative factors governing the trial court’s discretion in certifying a judgment as final under 54(b). 521 F.2d at 364. We went on to state:

In the absence of unusual or harsh circumstances,14 we believe that the presence of a counterclaim, which could result in a set-off against any amounts due and owing to the plaintiff, weighs heavily against the grant of 54(b) certification.

Id. 366. Footnote 14 to the quoted sentence defined unusual or harsh circumstances as those factors “involving considerations of solvency, economic duress, etc.”

The district court addressed the general requirements of Allis-Chalmers as they applied to this case, stating that the certification would not result in duplicative appellate review because the claims for final payment were totally distinct from the other issues in the case. It felt for the same reasons that the proceedings in the district court could continue pending the appeal and would not moot any determination of the merits of this appeal. The district court also felt that justice in this litigation would be served by certification because Curtiss would suffer daily financial losses from its inability to achieve a greater return on the $19 million judgment than the 6% interest authorized by New York law. The court also concluded that GE could afford to pay and that Curtiss would be able to repay the funds if GE succeeded on its counterclaims. The practical consideration here is that the court is being asked to say who should have the benefit of the money until the litigation is finally resolved. We think that Allis-Chalmers dictates that the matter remain in status quo when non-frivolous counterclaims are pending, and in the absence of unusual or harsh circumstances.

Finally, and of decisive significance, it is tacitly conceded that the only harsh circumstance presented here is Curtiss’s inability to use the money from the judgment. The result is indeed harsh from Curtiss’s viewpoint, but what if GE prevails on its compulsory counterclaim? How is its loss resulting from the deprivation of the money to be restored? In any event this factor was rejected as controlling in Allis-Chalmers. Indeed, this was the primary basis for the dissent in Allis-Chalmers. See 521 F.2d at 367 (Gibbons, J., dissenting). As a three judge panel, we are bound to apply Allis-Chalmers here. See Third Circuit Internal Operating Procedures, Chapt. VIII, C.

The appeal will be dismissed for want of an appealable order with a direction to the district court to vacate so much of its judgment as purported to render a final judgment pursuant to. Rule 54(b). Each party shall bear its own costs.