CSX Transportation v. The City of Garden City

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
DEC 15, 2000
No. 99-12799 THOMAS K. KAHN
CLERK
D. C. Docket No. 98-00223-CV-4
CSX TRANSPORTATION, INC.,
NATIONAL RAILROAD PASSENGER CORPORATION,
Plaintiffs-Appellants,
versus
THE CITY OF GARDEN CITY,
Defendant-Third-Party,
Plaintiff-Appellee,
ARCO, INC.,
Third-Party Defendant.
Appeal from the United States District Court
for the Southern District of Georgia
( December 15, 2000 )
Before ANDERSON, Chief Judge, DUBINA and HILL, Circuit Judges.
HILL, Circuit Judge:
CSX Transportation, Inc. and the National Railroad Passenger Corporation
filed this action against the City of Garden City, Georgia seeking indemnification
in connection with a train/truck collision on the city’s construction site. The
district court entered summary judgment for the defendant city based upon
municipal immunity. CSX Transportation, Inc. and the National Railroad
Passenger Corporation bring this appeal.
I.
In 1996, the City of Garden City, Georgia (Garden City or the City) decided
to install water and sewer lines along the public rights-of-way that ran across,
under, and parallel to CSX Transportation, Inc.’s (CSX) railroad tracks. The City
contracted with CSX to use CSX’s rights-of-ways and agreed to indemnify CSX
for any damages arising out of the City’s use of the rights-of-way. Under the
contract, the City agreed to maintain insurance to cover the indemnity obligations
it had assumed.
Garden City employed ARCO, Inc. as the general contractor for this project
which employed CARLCO Trucking, Inc.as a sub-contractor. On October 9, 1997,
a CARLCO employee drove a tractor-trailer truck to the City’s work site to remove
equipment. As he crossed CSX’s tracks, his truck stalled on the tracks where it
was hit by a National Railroad Passenger Corporation (Amtrak) passenger train.
2
CSX paid damages to passengers on the train and sued Garden City for
indemnification under their agreement. Garden City filed a third-party claim
against its contractor, ARCO.
Sometime later, the City filed a motion for summary judgment against CSX,
asserting that it was immune to CSX’s claim for damages for a number of reasons.
The district court agreed with the City1 and, on July 12, 1999, granted it summary
judgment. The court noted, however, that Garden City’s third-party complaint
against ARCO for indemnification was still pending and “the Clerk should not
close this case.” Subsequently, Garden City with the consent of ARCO and
approval of the court, voluntarily dismissed without prejudice its third-party claim
against ARCO. CSX and Amtrak filed this appeal.
Concerned about the finality of the summary judgment, this court, on its
own motion, directed the parties to brief and argue the issue of our jurisdiction to
hear this case.
II.
To be appealable, an order must either be final or fall into a specific class of
interlocutory orders that are made appealable by statute or jurisprudential
exception. See 28 U.S.C. §§ 1291, 1292; Atlantic Fed. Sav. & Loan Ass’n v.
1
Although for a different reason, as we discuss later.
3
Blythe Eastman Paine Webber, Inc., 890 F.2d 371, 375-76 (11th Cir. 1989). A
final decision is “‘one which ends the litigation on the merits and leaves nothing
for the court to do but execute the judgment.’” Pitney Bowes, Inc. v. Mestre, 701
F.2d 1365, 1368 (11th Cir. 1983) (quoting Catlin v. United States, 324 U.S. 229,
233 (1945)). A judgment that does not effectively terminate the litigation is not
final or immediately appealable unless the district court certifies the judgment for
immediate appeal under Fed.R.Civ.P. 54(b). See 28 U.S.C. § 1291; Williams v.
Bishop, 732 F.2d 885, 885-86 (11th Cir. 1984); In re Yarn Processing Patent
Validity Litigation, 680 F.2d 1338, 1339-40 (11th Cir. 1982).
We have held many times that a partial adjudication on the merits, followed
by a voluntary dismissal without prejudice of a pending claim, does not effectively
terminate the litigation and, therefore, does not satisfy the finality requirement of
28 U.S.C. § 1291. Ryan v. Occidental Petroleum Corp., 577 F.2d 298, 302-03 (5th
Cir. 1977). See also State Treasurer v. Barry, 168 F.3d 8, 11-13 (11th Cir. 1999);
Construction Aggregates, Ltd. v. Forest Commodities Corp., 147 F.3d 1334, 1336-
37 (11th Cir. 1998); Mesa v. United States, 61 F.3d 20 (11th Cir. 1995). That is
what happened in this case. The district court’s July 12 entry of summary
judgment was a partial adjudication on the merits. It was followed by the
voluntary dismissal without prejudice of the remaining pending claim – Garden
4
City’s third-party claim against ARCO. Therefore, if Ryan applies, this series of
events did not terminate the litigation. 577 F.2d at 302-03 (summary judgment
plus a voluntary dismissal without prejudice of a remaining claim does not
effectively terminate litigation).
As a threshold matter, then, there does not appear to be a final, appealable
order in this case. Inasmuch as neither party had the court certify the July 12
summary judgment for appeal under Rule 54(b), we do not have jurisdiction to
hear this appeal unless there is some other reason why the judgment should be
considered final.
CSX argues that we have jurisdiction under the Jetco exception to the
finality rule. Jetco Electronic Industries, Inc. v. Gardiner, 473 F.2d 1228, 1231
(5th Cir. 1973). Under this exception, a series of court orders, considered together,
may be said to constitute a final judgment if they effectively terminate the
litigation. Id. In this case, the summary judgment plus the entry of the voluntary
dismissal effectively terminated this litigation, leaving nothing else for the district
court to do, which it recognized by closing the case. CSX argues that this series of
court orders may be considered a final judgment.
Furthermore, CSX argues that this series of orders should be considered a
final judgment because if they are not, Garden City and ARCO will receive a
5
windfall. If there is no final judgment, CSX will forever lose its right to appeal in
this case.2
This result, CSX argues, is not required by Ryan and its progeny. The
common theme of these cases is that jurisdiction cannot be manufactured. For
example, when a district court enters an adverse, but otherwise non-appealable,
ruling against a party, that party may seek to appeal the ruling immediately by
dismissing without prejudice his remaining claims – sort of warehousing them for
later revival if needed – attempting to manufacture a final, appealable judgment.
We have consistently rejected such attempts to obtain appellate review of an
otherwise non-final order. See State Treasurer, 168 F.3d at 11-12, 16 (plaintiff and
defendant stipulated to the dismissal without prejudice of remaining counterclaim
and plaintiff sought to appeal); Construction Aggregates, 147 F.3d at 1335-36(defendant dismissed remaining counterclaim without prejudice and then sought to
appeal); Mesa, 61 F.3d at 21 (plaintiff dismissed remaining claims without
prejudice and then sought to appeal); Ryan, 577 F.2d at 300 (plaintiff dismissed
remaining claims without prejudice and sought to appeal).
2
CSX could ask the district court to certify the July 12 order and judgment as final under Fed.R.Civ.P. 54(b), but
there is no guarantee that the court will grant their request. See State Treasurer, 168 F.3d at 20 (Cox, J. specially
concurring) (the entry of judgment under 54(b) is not a matter of right and is committed to the sound discretion of
the district court).
6
CSX points out that it is not guilty here of such an attempt to manufacture
jurisdiction. After the summary judgment, it had no remaining claims. Nor did it
participate in any way in Garden City and ARCO’s agreement to dismiss without
prejudice Garden City’s remaining third-party claim.
This case is the mirror image of Ryan, where the parties attempted to
manufacture appealability. Here, Garden City and ARCO appear to have
undertaken to manufacture non-appealability. If there is no final appealable order
in the case, CSX will be deprived of any appellate review of the dismissal of its
lawsuit and will be left holding the proverbial (and unenviable) “bag.”
We have noted this possibility before. In State Treasurer, we expressed
concern that under the Ryan rule, an appellant not involved in the decision to
dismiss a remaining claim without prejudice and, therefore, not guilty of
conspiring to create jurisdiction, would nonetheless lose his right to appeal. 168
F.3d at 21 (Cox, J., specially concurring). We said then that “[w]hatever the
wisdom of punishing crafty litigants, it is hard to justify punishing their victims.”
Id. CSX urges us to transform this concern into a new rule for this circuit.
There is some authority for this result. In Schoenfeld v. Babbitt, 168 F.3d
1257, 1265-66 (11th Cir. 1999), we held that where the appellant had dismissed its
claims against a defendant without prejudice before the district court entered
7
judgment for the remaining defendant, Ryan did not apply and that order was final
and appealable.
In this case, however, the voluntary dismissal followed the entry of the non-
final order and, therefore, is asserted to come under the rule of Ryan. Even if the
rule is harsh, we are bound to follow it if it applies to this case. The issue is
whether it does apply.3 We conclude that it does not.
In this case, a summary judgment was entered against the plaintiff. Then,
the defendant and the third-party defendant stipulated to the dismissal of the
remaining third-party claim. The plaintiff did not participate in any way in the
voluntary dismissal of the third-party claim. The defendant and third-party
defendant agreed to that disposition. As nothing remained pending in the lawsuit,
the district court ordered the Clerk to close the case. The plaintiff then filed a
notice of appeal of the judgment which had been entered against it prior to the
voluntary dismissal.
Under these circumstances, the rule of Ryan is inapplicable. Because the
appellant did not participate in the voluntary dismissal of the remaining claims,
there was no collusion between it and the parties dismissing the remaining claim.
3
Garden City concedes that whether the rule of Ryan applies to render voluntary dismissals of third-party claims non-
final is an issue of first impression in this circuit.
8
Therefore, there was no attempt to manufacture jurisdiction. On the contrary, the
plaintiff/appellant stands to lose all right to appeal if the rule of Ryan applies under
these circumstances. Additionally, in the future, parties could deliberately
manipulate the proceedings to make the rule of Ryan apply to cut off their
adversary’s right to appeal.4
We conclude that Ryan was not intended to apply to the circumstances of
this case. The voluntary dismissal, with or without prejudice, of a defendant’s
remaining third-party claim in an otherwise terminated lawsuit does not bar the
plaintiff’s right to appeal a judgment against it. Under these circumstances, the
summary judgment plus the voluntary dismissal of the remaining claim in the case
satisfies the finality requirement of Rule 54(b) for the purpose of terminating the
litigation. See Jetco, 473 F.2d at 1231.
CSX was not involved in any way in the voluntary dismissal of Garden
City’s remaining third-party claim against ARCO. Accordingly, Garden City’s
voluntary dismissal of its third-party claim against ARCO effectively terminated
4
In State Treasurer, Judge Cox hypothesized just such a possibility: a plaintiff who seeks to cut off her opponent’s
right to appeal, files a meritless claim along with her valid one. Before the court can rule on her claims, she
voluntarily dismisses the meritless claim. After judgment in her favor, her opponent is left with no right to appeal
because, under Ryan, the voluntary dismissal is not a final order. 168 F.3d at 21. This scenario has, fortunately,
been forestalled by our decision in Babbitt, 168 F.3d at 1266.
9
this case in the district court.5 Accordingly, we conclude that Ryan does not apply
to this case. Nor shall we extend it to apply to this case. We have jurisdiction over
this appeal.
III.
The indemnification contract between CSX and Garden City provided that
the City would assume liability for all claims arising out of its construction in
CSX’s rights-of-way. It, in effect, required the City to waive its sovereign
immunity vis-a-vis CSX in connection with any claims against CSX arising out of
the City’s construction project.
Georgia law, however, forbids a city from waiving its sovereign immunity
unless it has insurance to fund any liability it might thereby incur.6 The relevant
statute provides:
[a] municipal corporation shall not waive its immunity by the
purchase of liability insurance . . . unless the policy of insurance
issued covers an occurrence for which the defense of sovereign
immunity is available, and then only to the extent of the limits of such
insurance policy.
O.C.G.A. § 36-33-1.
5
Garden City argues that because it claimed indemnity including attorneys fees against ARCO, it may revive this
claim at any time since its dismissal was without prejudice. We express no opinion on that issue, but note that if the
City is correct, then it holds the key to the presently locked door to CSX’s appeal even more firmly in its grip since it
can resurrect that right by reviving and prosecuting its claim for fees to judgment.
6
Otherwise, the taxpayers of the city would have to foot the bill.
10
The district court concluded, therefore, that “the indemnification agreement
here is barred by municipal immunity – except to the extent that the City obtained
insurance to cover it.” Because CSX made no showing in the district court that
Garden City procured or had any such insurance,7 the district court held that its
agreement to indemnify CSX was ultra vires and null and void. See Precise v. City
of Rossville, 261 Ga. 210, 403 S.E.2d 47(1991).
While on appeal, CSX moved to supplement the record in this case to show
that Garden City participates in the Georgia Interlocal Risk Management Agency
(GIRMA) fund which provides it coverage up to $1,000,000 against “all sums
which [Garden City] shall be obligated to pay as money damages by reason of
liability imposed upon [Garden City] by law or assumed by [Garden City] under
contract or agreement.” CSX argued in its motion that the grant of summary
judgment was in error because the City does have the requisite insurance to enable
it effectively to waive its sovereign immunity. A panel of this court denied the
motion. CSX renewed this motion on appeal in its brief and at oral argument.
We rarely enlarge the record on appeal to include material not before the
district court which has labored without the benefit of the proffered material. See
7
CSX never produced any evidence to counter the City’s claim that it never “purchased” the necessary insurance,
and the district court held that this fact was established under S.D.Ga. Local Rule 56.1. The City did not, however,
deny that it “had” insurance which might cover this claim. In fact, they identified the “insurance policy” offered
now by CSX in response to an interrogatory asking for any policy which might cover the claim.
11
Hormel v. Helvering, 312 U.S. 552, 556 (1941); Kemlon Products & Dev. Co. v.
United States, 646 F.2d 223, 224 (5th Cir. 1981). We do, however, have the
inherent equitable power to allow supplementation of the appellate record if it is in
the interests of justice. Young v. City of Augusta ex rel DeVaney, 59 F.3d 1160,
1168 (11th Cir. 1995). This is a matter left to our discretion. Dickerson v.
Alabama, 667 F.2d 1364, 1367 (11th Cir. 1982). We decide on a case-by-case
basis whether a particular appellate record should be supplemented. Ross v. Kemp,
785 F.2d 1467, 1474-75 (11th Cir. 1986).
A primary factor which we consider in deciding a motion to supplement the
record is whether acceptance of the proffered material into the record would
establish beyond any doubt the proper resolution of the pending issues. Dickerson,
667 F.2d at 1367. In this case, the district court held that the City’s failure to
procure insurance rendered its agreement to indemnify CSX null and void. The
existence or non-existence of insurance, then, was pivotal to the district court’s
resolution of this case. Under these circumstances, we are persuaded that
supplementation of the record on this issue is in the interests of justice. See
Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1555 (11th Cir. 1989) (a
consideration of all the relevant information is necessary to make an informed and
final decision).
12
Garden City objects to this supplementation on the grounds that CSX knew
of the GIRMA coverage prior to the entry of summary judgment and could have
introduced it into the record in opposition to the City’s motion for summary
judgment. The City, however, never argued to the district court that its contract to
indemnify CSX was void because it had not honored its agreement to procure the
requisite insurance. In its motion for summary judgment, the City cited a host of
reasons why its agreement to indemnify CSX was void, but lack of insurance was
not one of them.8
The district court’s opinion, which found the lack of insurance fatal to the
agreement, was the first time the issue was clearly raised. Relying on an affidavit
by a former mayor who stated that Garden City “did not appropriate any monies to
fund the City’s indemnification obligation,” the trial court concluded that no
insurance existed to cover the City’s potential liability to CSX. Summary
judgment was entered on July 12, 1999. CSX appealed on August 6, 1999, and
filed the motion to supplement the record on September 23, 1999.
8
The City argued that the indemnity agreement was void because it: unlawfully waives the City’s municipal
immunity; creates an unlawfully lengthy obligation of Garden City; creates an unlawful public debt; impermissibly
grants a gratuity; and violates public policy. Since we shall remand this case for reconsideration of the issue of
immunity in view of the existence of the GIRMA policy, we shall not consider the issues of unlawful obligation and
public debt as they may depend on the existence of insurance coverage. We find no merit in the remaining
arguments advanced by the City.
13
While we rarely exercise our authority to enlarge the appellate record, the
Supreme Court has reminded the appellate courts that:
[T]he rules of practice and procedure are devised to promote the ends
of justice, not to defeat them. A rigid and undeviating judicially
declared practice under which courts of review would invariably and
under all circumstances decline to consider all questions which had
not previously been specifically urged would be out of harmony with
this policy. Orderly rules of procedure do not require sacrifice of the
rules of fundamental justice.
Hormel, 312 U.S. at 721.
Under the circumstances of this case, we conclude that the motion to
supplement the record should be granted. Since the district court never had the
opportunity to consider what effect, if any, the City’s participation in the GIRMA
fund has on the City’s indemnification agreement with CSX, we shall remand the
case to the district court so that it may consider this fact before determining
whether Garden City effectively waived its immunity by its agreement to
indemnify CSX. We express no opinion on the outcome of that review.
IV.
We hold that the summary judgment and the voluntary dismissal considered
together effectively terminated this litigation in the district court, and we have
jurisdiction over this appeal. We hold that CSX’s motion to supplement the record
on appeal is due to be granted. Accordingly, the motion to supplement the record
14
is GRANTED, the entry of summary judgment is VACATED and the case is
REMANDED to the district court for proceedings consistent with this opinion.
15