Appellate Law

Applying the “One Final Judgment Rule” in Cases of Voluntary Dismissal

Under California law, a dissatisfied litigant may appeal a decision only after the trial court has issued its final judgment. Generally, this means that if the trial court issues an order that disposes of fewer than all of the causes of action framed by the pleadings, there is not yet a final judgment, and therefore it is too early to appeal. This precept has come to be known as the “one final judgment rule.” But what should happen when a party voluntarily dismisses a cause of action without prejudice and the trial court then issues a judgment on the remaining causes of action? Is this judgment “final” enough to permit an appeal? The Second District Court of Appeal recently addressed such a situation in Kurwa v. Kislinger (2012) 204 Cal.App.4th 21, and determined that despite authority to the contrary, such judgments are in fact final and appealable.

In Kurwa, two doctors formed a corporation to jointly solicit monthly fees from HMOs in exchange for providing medical services to the HMOs’ members. When Dr. Kurwa’s license to practice medicine was temporarily suspended, Dr. Kislinger decided to terminate the joint venture and start a new corporation without Kurwa. In doing so, Kislinger appropriated assets from the two doctors’ joint venture and convinced their largest HMO client to transfer its provider agreement to the new corporation. Kurwa in turn sued Kislinger for breach of fiduciary duty and defamation, and sought an accounting. Kislinger countersued for defamation, among other things.

When the trial court granted Kislinger’s motions in limine to exclude certain crucial evidence, Kurwa conceded that he could not proceed on his claims for breach of fiduciary duty and accounting, and the court dismissed those causes of action. Both doctors also agreed to dismiss their causes of action for defamation without prejudice, and to waive the applicable statute of limitations.

When Kurwa appealed, Kislinger argued that the judgment was not yet final, because the voluntary dismissal of the defamation causes of action without prejudice left open the possibility that the parties could still litigate those claims in the future. Thus, argued Kislinger, the “one final judgment rule” prohibited Kurwa’s appeal. The Court of Appeal disagreed.

While acknowledging a line of opinions that had considered similar fact patterns but reached a contrary conclusion, the Court of Appeal held that the judgment was in fact final and therefore appealable. In the Court’s view, the “one final judgment rule” prohibits an appeal only when a cause of action is actually pending (i.e., “filed but not yet adjudicated”). Citing language from contrary precedent, the Court reasoned: “While a cause of action which has been dismissed may be pending ‘in the appellate netherworld,’ it is not pending in the trial court, or in any other court, and thus cannot fairly be described as ‘legally alive.’” Thus, having been voluntarily dismissed, Kurwa’s and Kislinger’s defamation causes of action were no longer “pending,” and the judgment on the remaining causes of action was final and appealable. The Court further found that Kurwa’s complaint did present factual allegations to support a cause of action for breach of fiduciary duty and accordingly reversed the trial court’s dismissal of the lawsuit.

Not all of the justices were convinced by Kurwa’s arguments, however. In a brief dissenting opinion, Justice Kriegler departed from his colleagues’ position. “Multiple authorities conclude that an appeal in the circumstances of this case violates the one judgment rule,” he reasoned. “There is no contrary authority supporting my colleagues' position on the issue of appealability[, and the] appeal should be dismissed.”

Thus the Kurwa decision interprets the “one final judgment rule” in a new way by clarifying that the rule does not prohibit an appeal—at least in Division 5 of the Second District—when a trial court issues a judgment disposing of fewer than all of the causes of action framed by the pleadings, so long as none of the causes of action remain actually pending in the trial court. Such a judgment is now considered “final” and may therefore be appealed.

It should be noted, however, that conflicting court of appeal outcomes such as this one and the ones with which it expressly disagreed present a classic case for California Supreme Court review. In fact, Kislinger has already filed a petition for review (No. S201619), and the Supreme Court has extended its time to grant or deny the petition to July 11, 2012. It remains to be seen whether the top court will endorse this new interpretation.

Update for Our Readers
Our February newsletter reported on the California Supreme Court’s January opinion in Rossa v. D.L. Falk Construction, Inc., that held that Rule 8.278 did not authorize an award of costs for interest expenses and fees incurred in borrowing funds to deposit as security for a letter of credit procured to secure an appeal bond. The Supreme Court noted that the Judicial Council may consider whether to extend the right to recover such costs (53 Cal.4th 398, fn. 8). Well, the Judicial Council now appears to be doing just that: Invitation to Comment (SPR12-06) proposes amending Rule 8.278 to provide that interest expenses and fees incurred will be recoverable costs. So stay tuned, as this law may change. (See www.courts.ca.gov/documents/SPR12-06.pdf.)

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