ON APPEAL FROM AN ORDER OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil Action No. 73-2891).
Aldisert, Gibbons and Garth, Circuit Judges. Gibbons, Circuit Judge, dissenting.
In this diversity case the district court: (1) granted summary judgment on the plaintiff's complaint before adjudicating the defendant's pending counterclaim; and (2) certified that judgment as final under Fed. R. Civ. P. 54(b). This appeal challenges the district court's grant of summary judgment, its 54(b) certification, and its refusal to stay enforcement of the judgment. We dismiss the appeal and hold that the certification of the district court's grant of summary judgment as final under Rule 54(b) of the Federal Rules of Civil Procedure must be vacated because of the failure of the court to articulate reasons for the certification.*fn1
The plaintiff, Allis-Chalmers Corporation (hereinafter "AC"), having sold eight transformers to the defendant, Philadelphia Electric Corporation (hereinafter "PECO"), and having received payment for only five, commenced this action to compel payment for the remaining three transformers and for the cost of certain repairs made by AC to PECO's equipment. PECO's answer admitted the amounts claimed by AC*fn2 but asserted as a set-off and counterclaim unrelated claims which, if established, would exceed in amount the sums claimed by AC.*fn3
After issue had thus been joined, the plaintiff moved ". . . pursuant to Rule 56 and 54(b) of the Federal Rules of Civil Procedure, for summary judgment against defendant. . . ." AC accompanied its motion with affidavits establishing that it was due $497,742.70. As indicated supra note 2, PECO filed no affidavit disputing this claim but rather argued that its set-off and counterclaim barred the entry of summary judgment in favor of AC. The district court held that, since PECO's counterclaim was factually unrelated to the plaintiff's cause of action and since there were no genuinely disputed issues of material fact concerning plaintiff's claim, ". . . the entry of summary judgment on plaintiff's claim is not only proper but is required under Federal Rule 56. . . ." Therefore, on July 19, 1974, the district court entered an order granting summary judgment for plaintiff. The order recites in relevant part:
". . . The Court, finding that no just cause exists for delaying the entry of this judgment, hereby directs that such judgment be entered pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, in the amount of four hundred ninety seven thousand seven hundred forty-two dollars and seventy cents ($497,742.70) plus interest and costs."
This appeal requires us in the first instance to consider the propriety of the district court's 54(b) certification. Although both AC and PECO have focused on the summary judgment disposition as the central issue on this appeal, we cannot reach that issue unless our jurisdiction has been properly invoked by an appealable order. This Court obtains jurisdiction only when an appeal is taken from a final order (28 U.S.C. § 1291) or from an appealable interlocutory order (28 U.S.C. § 1292). As the Supreme Court stated in Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 437-38, 100 L. Ed. 1297, 76 S. Ct. 895 (1956):
Rule 54(b) . . . scrupulously recognizes the statutory requirement of a 'final decision' under § 1291 as a basic requirement for an appeal to the Court of Appeals. . . .
Hence, our jurisdiction depends upon whether the district court properly granted 54(b) certification. If that court abused its discretion in certifying the summary judgment as final, we are without jurisdiction to entertain this appeal. See B. B. Adams General Contractors, Inc. v. Department of Housing and Urban Development, 501 F.2d 176 (5th Cir. 1974). Since we cannot consider the merits of a non-final order, we turn first to the threshold question of the propriety of the 54(b) certification.
Fed. R. Civ. P. 54(b)*fn4 is designed to facilitate the entry of judgment on one or more claims, or as to one or more parties, in a multi-claim/multi-party action. The rationale for its adoption was stated by the Supreme Court in Sears, Roebuck & Co. v. Mackey, supra 351 U.S. at 432, as follows:
With the Federal Rules of Civil Procedure, there came an increased opportunity for the liberal joinder of claims in multiple claims actions. This, in turn, demonstrated a need for relaxing the restrictions upon what should be treated as a judicial unit for purposes of appellate jurisdiction. Sound judicial administration did not require relaxation of the standard of finality in the disposition of the individual adjudicated claims for the purpose of their appealability. It did, however, demonstrate that, at least in multiple claims actions, some final decisions, on less than all of the claims, should be appealable without waiting for a final decision on all of the claims . . . .
The rule attempts to strike a balance between the undesirability of piecemeal appeals and the need for making review available at a time that best serves the needs of the parties. Aetna Insurance Co. v. Newton, 398 F.2d 729, 734 (3d Cir. 1968); Re Pass v. Vreeland, 357 F.2d 801, 804 (3d Cir. 1966); Panichella v. Pennsylvania Railroad Co., 252 F.2d 452, 454 (3d Cir. 1958); see Wright & Miller, Federal Practice and Procedure: Civil § 2654 (1973). ". . . The District Court is used as a 'dispatcher.' It is permitted to determine, in the first instance, the appropriate time when each 'final decision ' upon 'one or more but less than all' of the claims in a multiple claims action is ready for appeal. . . ." Mackey, supra 351 U.S. at 435. In Panichella, supra at 455, we previously addressed the proper exercise of the district court's discretion with respect to 54(b) certification. We said:
". . . ordinarily an application for a 54(b) order requires the trial judge to exercise considered discretion, weighing the overall policy against piecemeal appeals against whatever exigencies the case at hand may present. Indeed, the draftsmen of this Rule have made explicit their thought that it would serve only to authorize 'the exercise of a discretionary power to afford a remedy in the infrequent harsh case * * *.' 28 U.S.C.A., Federal Rules of Civil Procedure, 118-119 note. It follows that 54(b) orders should not be entered routinely or as a courtesy or accommodation to counsel. The power which this Rule confers upon the trial judge should be used only 'in the infrequent harsh case' as an instrument for the improved administration of justice and the more satisfactory disposition of litigation in the light of the public policy indicated by statute and rule. See 6 Moore, Federal Practice, 1953, 264-65."
A proper exercise of discretion under Rule 54(b) requires the district court to do more than just recite the 54(b) formula of "no just reason for delay". The court should clearly articulate the reasons and factors underlying its decision to grant 54(b) certification.*fn5 ". . . It is essential . . . that a reviewing court have some basis for distinguishing between well-reasoned conclusions arrived at after a comprehensive consideration of all relevant factors, and mere boiler-plate approval phrased in appropriate language but unsupported by evaluation of the facts or analysis of the law. . . ." Protective Committee v. Anderson, 390 U.S. 414, 434, 20 L. Ed. 2d 1, 88 S. Ct. 1157 (1968) (compromise of claims in bankruptcy). In the same vein, the Second Circuit in Gumer v. Shearson, Hammill & Co., Inc., 516 F.2d 283 (2d Cir. 1974) said:
We suggest to the district courts that in the future it would be helpful to us in reviewing the exercise of discretion in granting a Rule 54(b) certificate if the court, rather than incorporating in the certificate [footnote omitted] the conclusory language of Rule 54(b), would make a brief reasoned statement in support of its determination that, 'there is no just reason for delay' and its express direction for 'the entry of a final judgment as to one or more but fewer than all of the claims or parties' where the justification for the certificate is not apparent. . . .
Accord, Schwartz v. Compagnie General Transatlantique, 405 F.2d 270, 275 (2d Cir. 1968) (". . . the trial court [should] marshall the competing considerations and state the ones considered to be most important."). See Wright & Miller, Federal Practice and Procedure: Civil § 2659 (1973).
We endorse the suggestion contained in Gumer as a most desirable practice. Because it will convey to litigants the reasons for the court's decision and will afford the appellate court a meaningful basis for review, we incorporate that practice as a requirement for all Rule 54(b) certifications.
In reviewing 54(b) certifications, other courts have considered the following factors,*fn6 inter alia : (1) the relationship between the adjudicated and unadjudicated claims;*fn7 (2) the possibility that the need for review might or might not be mooted by future developments in the district court;*fn8 (3) the possibility that the reviewing court might be obliged to consider the same issue a second time;*fn9 (4) the presence or absence of a claim or counterclaim which could result in set-off against the judgment sought to be made final;*fn10 (5) miscellaneous factors such as delay, economic and solvency considerations, shortening the time of trial, frivolity of competing claims, expense, and the like.*fn11 Depending upon the facts of the particular case, all or some of the above factors may bear upon the propriety of the trial court's discretion in certifying a judgment as final under Rule 54(b).
The variety and number of factors which may be present in any one case highlights the importance of the district court's evaluation and articulation of those factors leading to its grant of 54(b) certification. Since final certification of an interlocutory order should occur only "in the infrequent harsh case " Panichella, supra, it is vital that the reviewing court be completely apprised of the reasons supporting the district court's exercise of discretion and of those factors which have weighed the scales most heavily in favor of certification.
The guiding principles established by Panichella, supra, and succeeding cases, may therefore be summarized: (1) the burden is on the party seeking final certification to convince the district court that the case is the "infrequent harsh case" meriting a favorable exercise of discretion;*fn12 (2) the district court must balance the competing factors present in the case to determine if it is in the interest of sound judicial administration and public policy to certify the judgment as final; (3) the district court must ...