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Gerald L. WALLACE, d/b/a See All Tele-Tector of Southern Alabama, Inc., Plaintiff-Appellee, v. NORMAN INDUSTRIES, INC., et al., Defendants-Appellants

United States Court of Appeals for the Fifth Circuit1972-09-28No. No. 72-2028
467 F.2d 824

Summary

Holding. The appeal is dismissed for want of jurisdiction because the district court's order denying the motion to stay does not qualify as an appealable interlocutory order under 28 U.S.C. § 1292(a)(1), as the stay was not sought to permit prior determination of an equitable defense or counterclaim.

Gerald Wallace, a franchise distributor, filed suit against Norman Industries and related parties in Alabama federal court seeking damages for alleged misrepresentations, antitrust violations, breach of warranty, and other claims. Before Wallace filed his action, Norman had initiated a declaratory judgment action in Illinois federal court seeking a determination that it bore no liability to Wallace. After the Illinois court dismissed Norman's declaratory judgment action, Norman moved the Alabama court to dismiss, transfer, or stay Wallace's pending action. The Alabama district court denied this motion, and Norman appealed to the Fifth Circuit.

The Fifth Circuit dismissed the appeal for lack of jurisdiction. The court held that orders denying motions to stay are generally not appealable as final judgments. While such orders may occasionally be appealable as interlocutory orders under certain circumstances, the court found those circumstances absent here. Specifically, the court determined that even though Wallace's underlying action involved legal claims, the requested stay was not intended to permit resolution of an equitable defense or counterclaim—it was merely to allow the separate Illinois declaratory judgment action to proceed. Because the stay did not satisfy the requirements for interlocutory appeal, the court lacked jurisdiction to hear the appeal.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Appealability of orders denying motions to dismiss, transfer, or stay proceedings
  • Requirements for interlocutory appeal of stay orders under § 1292(a)(1)
  • Distinction between legal and equitable claims in determining appealability

Procedural posture

The Fifth Circuit reviewed an appeal of the district court's denial of Norman Industries' motion to dismiss, transfer, or stay Wallace's damages and injunctive relief action pending in the Southern District of Alabama.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

WISDOM, Circuit Judge:

This is an appeal from the district court’s decision denying appellants’ motion to dismiss, stay, or transfer the pending action filed against them in that Court. We dismiss the appeal for want of jurisdiction.

In August 1968, the parties to the present case entered into an agreement under which the appellee, Gerald Wallace, d/b/a See All Tele-Tector of Southern Alabama, Inc., purchased a franchise to sell and distribute theft deterrent equipment manufactured by Norman Industries, Inc., an Illinois corporation. A dispute subsequently arose concerning certain representations allegedly made by the agents and employees of Norman during the course of the negotiations for the franchise agreement. The parties engaged in prolonged settlement discussions in the later months of 1971. In August 1971, Wallace sent Norman a copy of a proposed complaint which he intended to file against Norman unless a settlement was reached. No progress was made, however, and soon thereafter Norman commenced an action for declaratory relief against Wallace in the District Court for the Northern District of Illinois. In its complaint, Norman requested a determination that it was not liable to Wallace for damages resulting from alleged violations of the antitrust laws, breach of warranty and fraudulent misrepresentation, breach of fiduciary duty, and violations of the Securities Act of 1934.

On November 22, 1971, Wallace responded by filing the complaint in the present case against Norman in the District Court for the Southern District of Alabama for damages and injunctive relief. Named as defendants in addition to Norman were Norman Kiven, Allan Stone, I. Peitchel, and Security Leasing Corporation, all of whom were alleged to have participated in the misrepresentations made to Wallace. The complaint included all the causes of action listed in the declaratory action filed in Illinois, but also sought relief for alleged violations of the Lanham Act, breach of contract, and injunctive relief against various other unfair practices.

Wallace next filed a motion in the district court in Illinois to dismiss the declaratory judgment action, and the district court granted that motion on March 17, 1972. Norman and the other appellants herein then filed a motion in the district court in Alabama to dismiss, transfer, or stay Wallace’s action for damages and injunctive relief which was pending in that court. Specifically, the appellants moved to dismiss on the basis of defects in jurisdiction and venue, and alternatively, to transfer or stay the Alabama action pending the outcome of the appeal which Norman intended to file in the Illinois action. On March 27, 1972, the district court denied the motion, and the appellants then appealed that ruling to this Court.

At the outset, we are confronted with the contention that the district court’s decision refusing to dismiss, transfer, or stay the action below is not an appealable order. The established rule, of course, is that denials of motions to dismiss, transfer, or stay an action are not final judgments and are not appealable under § 1291. 28 U.S.C. In certain circumstances, however, an order granting or denying a stay may be appealable as an interlocutory order under 28 U.S.C. § 1292(a)(1); Baltimore Contractors v. Bodinger, 1955, 348 U.S. 176, 75 S.Ct. 249, 99 L.Ed. 233. In the present case, the appellants contend that the district court’s denial of a stay is equivalent to a denial of an injunction and thus appealable under § 1292(a)(1). We disagree.

The rule in this Circuit is that “[a]n order staying or refusing to stay proceedings in the District Court is appealable under § 1292(a)(1) only if (A) the action in which the order was made is an action which, before the fusion of law and equity, was by its nature an action at law; and (B) the stay was sought to permit the prior determination of some equitable defense or counterclaim,” Jackson Brewing Co. v. Clarke, 5 Cir. 1962, 303 F.2d 844, cert. denied 371 U.S. 891, 83 S.Ct. 190, 9 L.Ed.2d 124. See Caldwell & Sons, Inc. v. United States for Use and Ben. of John H. Moon & Sons, Inc., 5 Cir. 1969, 407 F.2d 21; Hart v. Orin Insurance Co., 10 Cir. 1970, 427 F.2d 528; American Safety Equipment Corp. v. J. P. Maguire & Co., 2 Cir. 1968, 391 F.2d 821; Carcich v. Redevi A/B Nordie, 2 Cir. 1968, 389 F.2d 692; Standard Chlorine of Delaware, Inc. v. Leonard, 2 Cir. 1967, 384 F.2d 304; Day v. Pennsylvania Railroad Co., 3 Cir. 1957, 243 F.2d 485.

Since the action in which the stay is requested is essentially one at law, it may be argued that the first requirement has been satisfied. It is also apparent, however, that the second requirement has not been satisfied. The purpose of the requested stay is to permit the declaratory judgment action in Illinois, and the appeal to be filed therein, to proceed until completion. A declaratory judgment action cannot be termed as either inherently at law or in equity. When classification has been required, courts have examined the basic nature of the issues involved to determine how they would have arisen had Congress not enacted the Declaratory Judgment Act. 28 U.S.C. §§ 2201, 2202. American Safety Equipment Corp. v. J. P. Maguire & Co., 2 Cir. 1968, 391 F.2d 821, 824. See, e. g., Simler v. Conner, 1963, 372 U.S. 221, 83 S.Ct. 609, 9 L.Ed.2d 691; Beacon Theatres, Inc. v. Westover, 1959, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988.

An examination of the issues in the declaratory judgment action clearly indicates that the causes of action were legal, not equitable. We therefore find that the stay was not sought to permit the prior determination of an equitable defense or counterclaim. For this reason, the district court’s decision was not an interlocutory order appealable under § 1292(a)(1).

As a final matter, we readily concede that it is anomalous that the appealability of the order in this case should turn on an outmoded historical distinction. Thirty years after the supposed merger between the courts of equity and law, these ancient classifications continue to be determinative of important questions of appellate jurisdiction. As the Supreme Court held, however, we are bound by this rule until Congress chooses to adopt another one. Baltimore Contractors v. Bodinger, supra.

The appeal must be dismissed.

. Catlin v. United States, 1945, 324 U.S. 229, 65 S.Ct. 631, 89 L.Ed. 911.

. Chas. Pfizer & Co. v. Olin Mathieson Chemical Corp., 5 Cir. 1955, 225 F.2d 718, 720; Crummer v. Du Pont, 5 Cir. 1952, 196 F.2d 468, cert. denied, 344 U.S. 856, 73 S.Ct. 91, 97 L.Ed. 665. But see Auerbach v. United States, 5 Cir. 1965, 347 F.2d 742 (Brown, J., dissenting).

. Baltimore Contractors v. Bodinger, 1955, 348 U.S. 176, 75 S.Ct. 249, 99 L.Ed. 233.

. United States v. Baker Lockwood Manufacturing Co., Inc., 8 Cir. 1943, 138 F.2d 48, relied on by the appellants, was decided before the Supreme Court’s decision in Baltimore Contractors v. Bodinger, supra, which established the present rule governing appealability of denials of stays. Furthermore, we note that to the extent Baker Lockwood may imj)ly a rule contrary to the present one, it has never been followed or relied on by any court.