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Affinity Living Grp., LLC v. Starstone Specialty Ins. Co.: The Fourth Circuit Demarcates When Voluntary Dismissal of Some Claims Allows Appellate Jurisdiction

Affinity brought a declaratory judgment claim, a breach of contract claim, a breach of the duty of good faith and fair dealing claim, and an unfair and deceptive trade practices claim against its insurer Starstone. The district court granted summary judgment on the pleadings as to the declaratory judgment and breach of contract claims but not as to the extracontractual claims. Affinity then entered into a stipulated dismissal without prejudice of the extracontractual claims saying the claims could not be revived through amendment based on the court’s summary judgment ruling so the entire action had been finally resolved on the merits. Affinity then appealed the district court’s summary judgment order. 

Under 28 U.S.C. § 1291, the statute under which the parties asserted appellate jurisdiction, federal courts of appeals have jurisdiction over appeals from “final orders” of federal district courts. Exactly what constitutes a “final order” has persistently bedeviled courts. In this case, there was final resolution of the contractual claims, but it was much less clear whether the extracontractual claims were also finally resolved. 

The governing Supreme Court decision is Microsoft Corp. v. Baker. 137 S.Ct. 1702, 1710 (2017). In Baker, a group of consumers brought a design-defect claim on behalf of a putative class. The district court struck the plaintiffs’ class allegations, effectively denying class certification, but did not rule on plaintiffs’ individual allegations. In an attempt to appeal the order striking the class allegations, the plaintiffs voluntarily dismissed all claims against Microsoft while reserving the right to revive their claims should the class allegations be reinstated on appeal. The Supreme Court found no appellate jurisdiction, construing finality in a practical rather than technical manner. Id. at 1712–13. The Supreme Court’s holding required plaintiffs to fully litigate their individual claims before their class allegations would be ripe for appellate review. 

The Fourth Circuit applied Baker in Keena v. Groupon, Inc., 886 F.3d 360 (4th Cir. 2018), to reject a plaintiff’s attempt to appeal an order from the district court staying the litigation and compelling arbitration. Id. at 362–63. After the district court entered an order staying the litigation and compelling arbitration, plaintiff voluntarily dismissed her complaint in its entirety with prejudice. The Fourth Circuit found jurisdiction lacking and held it would only assume jurisdiction after arbitration resolved the merits of plaintiff’s claims. Cf. Lamps Plus, Inc. v. Varela, 139 S.Ct. 1407, 1414, 1414 n. 1–2 (2019) (finding that an order compelling arbitration but also dismissing the claims qualifies as a “final” decision). 

Here, the Fourth Circuit distinguished Baker and Keena in order to reach the merits. The court drew the distinction that, in those other cases, “the issues that the parties sought to appeal did not turn on the merits of the legal claims that they asserted.” Class allegations do not reach the merits, and neither does a decision as to forum between arbitration and litigation. Here, the extracontractual claims which the district court did not resolve were doctrinally foreclosed by the district court’s summary judgment order that there was no contractual duty to provide coverage. As all of Affinity’s claims had been legally resolved, voluntary dismissal of the extracontractual claims created a final order over which the court could exercise appellate jurisdiction. 

The dissent found the majority’s distinction to be too fine to countenance. For the dissent, voluntary dismissal was an attempt to manufacture appellate jurisdiction and this was foreclosed by Baker and Keena. Affinity could have gone to the district court and asked it to modify its summary judgment ruling accordingly or sought leave to amend its complaint to withdraw the extracontractual claims. Affinity could also have sought entry of final judgment on the contractual claims under Rule 54(b) or pursued an interlocutory appeal of the contractual claims under 28 U.S.C. § 1292(b). Given these alternate routes to appellate jurisdiction, the dissent would have preferred not to further muddy the doctrinal waters around 28 U.S.C. § 1291. 

All of this wrangling over jurisdiction could have been avoided, as pointed out by the dissent, and this is the advisable course of action. If there is a question whether an order is final, get clarification from the trial court or seek certification under Rule 54(b). Recourse to 28 U.S.C. § 1292(b) for appellate jurisdiction does not always work, but should still be considered. Here, the parties were successful in having their stipulated dismissal confer jurisdiction under 28 U.S.C. § 1291, but it is not clear that the court’s doctrinal distinction will be easy to apply in future cases and could result in seemingly contradictory decisions from different panels of the Fourth Circuit.  

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