Opinion
Civil No. 2001-169.
August 9, 2007
Richard H. Dollison, Esq., St. Thomas, U.S.V.I., For the plaintiff and third-party plaintiff Pramco II, LLC,.
Marshal A. Bell, Esq., St. Thomas, U.S.V.I., For the defendants and third-party plaintiffs Carolyn S. Smith and James D. Smith,.
Eric S. Kolar, Esq., Jacksonville, FL, For the third-party defendant, Steven Lemmon,.
George M. Ethridge III, Esq., St. Thomas, U.S.V.I., For the third-party defendant, Steven Lemmon.
MEMORANDUM OPINION
Steven Lemmon ("Lemmon") has moved to strike or to dismiss the third-party complaint of Pramco II, LLC ("Pramco"). For the reasons stated below, the Court will grant the motion to strike Pramco's third-party complaint. The Court will also deny the motion to dismiss as moot.
I. FACTS
In March, 1990, Unlimited Laundries, Inc. ("Unlimited") executed a promissary note ("Note") in favor of the Small Business Administration ("SBA"), in consideration for a $117,000 loan it received from the SBA. Pursuant to the Note, Unlimited promised to repay the $117,000 principal at an interest rate of 4% per annum. The owners of Unlimited, Carolyn S. Smith and James D. Smith (collectively "the Smiths"), executed personal guarantees to secure the repayment of the loan.On December 16, 1991, Lemmon entered into an agreement with the Smiths (the "Purchase Agreement"), in which he agreed to purchase the business assets of Unlimited. Under the Purchase Agreement, Lemmon agreed to indemnify the Smiths for any liability incurred after the closing date (the "Indemnification Clause"). On December 31, 1991, Lemmon entered into an agreement with the SBA (the "Assumption Agreement"), wherein he assumed the debt of Unlimited.
On January 18, 2001, Pramco purchased the Smiths' loan from the SBA. The Smiths and Lemmon failed to make timely payments of principal and interest, as required by the terms of the Note. Pramco demanded payment from the Smiths and Lemmon, but no payment was made. Pramco declared the entire unpaid principal due and payable.
On September 12, 2001, Pramco filed this action against Lemmon and the Smiths, to recover the debt owed under the Note and Assumption Agreement. Pursuant to a stipulation signed by Pramco and Lemmon, which was also signed by the Magistrate Judge, Pramco voluntarily dismissed its complaint against Lemmon with prejudice on June 28, 2002.
On March 30, 2004, the Smiths sought leave to file a claim against Lemmon for indemnification. On April 7, 2004, the Magistrate Judge granted the Smiths leave, and ordered them to file their claims within ten days from the date of the order. However, the Smiths failed to file any claims against Lemmon in accordance with the explicit terms of the Magistrate Judge's order.
A proposed claim for indemnification against Lemmon was attached to the motion for leave that the Smiths filed on March 30, 2004. The Magistrate Judge appropriately did not regard that proposed document attached to the motion as a legally sufficient filing of a complaint. Instead, the Magistrate Judge unambiguously ordered the Smiths to file their claims against Lemmon within the ten-day deadline.
In an agreement executed on April 23, 2004, the Smiths assigned to Pramco their rights and claims against Lemmon under the Indemnity Clause. On October 7, 2004, Pramco, as successor in interest to the Smiths, sought leave to file a third-party complaint against Lemmon.
On February 15, 2005, during the pendency of Pramco's motion for leave, the Court entered a consent judgment (the "Consent Judgment") in this matter. The Consent Judgment stated that the Smiths were jointly and severally liable to Pramco for the amount of $84,239.26, as of June 28, 2002. The Smiths were liable to Pramco for interest from June 29, 2002, until February 15, 2005, in the amount of $9.36 per diem, to accrue thereafter at the legal rate. The Consent Judgement also awarded Pramco reasonable costs and attorneys' fees.
On August 9, 2005, the Magistrate Judge granted Pramco's motion to file a third-party complaint against Lemmon and deemed the complaint filed as of October 7, 2004, when Pramco filed its motion for leave. Lemmon now moves to strike or to dismiss Pramco's third-party complaint.
II. DISCUSSION
A. Final Judgments
Pursuant to Federal Rule of Civil Procedure 54(a), the term "`judgment' . . . includes a decree and any order from which an appeal lies." Fed.R.Civ.P. 54(a) (1993). A judgment is final "when it terminates the litigation between the parties on the merits and leaves nothing to be done but to enforce by execution what has been determined." Gov't of the V.I. v. Harmon, 289 F. Supp. 2d 685, 687 n. 5 (D.V.I. 2003) (quoting Berman v. United States, 302 U.S. 211 (1937)).
A consent judgment is a final judgment unless the termination of the litigation was contingent upon the Court of Appeals' reaching a particular result. See Fed. Home Loan Mortgage Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 438 (3d Cir. 2003). Indeed, "the purpose of a consent judgment is to settle the case without further litigation." Keefe v. Prudential Property and Cas. Ins. Co., 203 F.3d 218, 223 (3d Cir. 2000).
While a consent judgment is deemed final unless it is subject to contingencies or leaves claims pending before the court, it is only appealable under limited circumstances. Verzilli v. Flexon, Inc., 295 F.3d 421, 424 (3d Cir. 2002). A party may appeal a consent judgment only for lack of assent or subject matter jurisdiction, or by explicit reservation of the right to appeal by the parties. Id.
"Final judgment necessarily denies pending motions, and so starts the time for appeal." Dunn v. Truck World, Inc., 929 F.2d 311, 313 (7th Cir. 1991); see also Goodman v. New Horizons Community Service Bd., 2006 WL 940646 at *3 (11th Cir. April 12, 2006) ("[T]he entry of a final judgment implicitly denies any pending motions."); Addington v. Farmer's Elevator Mut. Ins. Co., 650 F.2d 663, 666 (5th Cir. 1981) ("The denial of a motion by the district court, although not formally expressed, may be implied by the entry of final judgment. . . ."); Cohen v. Curtis Pub. Co., 333 F.2d 974, 977 (8th Cir. 1964) ("[T]he entry of final judgment in a cause is in effect an overruling of all motions pending prior thereto in the case." (internal citation and quotation omitted)); Elliott v. Folino, 2007 WL 1545558 at *1 (W.D. Pa. 2007) (explaining that an order granting the defendant's motion to dismiss without addressing the plaintiff's pending motions operated to deny such pending motions sub silentio). Without such a limitation, "[n]o one would know whether the question was live, when the time for appeal started, or even which court had jurisdiction." Dunn, 929 F.2d at 313.
"[T]he time for appeal . . . shall run from the entry of the order denying a new trial or granting or denying any other such motion." Fed.R.App.P. 4(a)(4) (1998).
B. Third Party Practice
In considering the appropriateness of third-party claims, courts aim "to avoid circularity and multiplicity of actions." Noland Co. v. Graver Tank Mfg. Co., 301 F.2d 43, 50 (4th Cir. 1962). In an effort to "establish third party litigants as opposing parties," Federal Rule of Civil Procedure 14 ("Rule 14") limits the circumstances under which parties may engage in third party practice. T. Schwab v. Erie Lackawanna R.R. Co., 438 F.2d 62, 66 (3d Cir. 1971).
Prior to 1948, Rule 14 permitted the impleader of a party on allegations that he was directly liable to the plaintiff in the underlying action. See Fed.R.Civ.P. 14(b) (1946).
Under this earlier version of [Rule 14], it is arguable that a third-party defendant impleaded on the ground of direct liability to the original plaintiff would occupy the same status as the original defendant. Under such circumstances, the third-party litigants would be assuming the same stance vis a vis the plaintiff and would conceivably qualify as coparties.T. Schwab, 438 F.2d at 66. Therefore, third-party practice under the pre-1948 version of Rule 14 could lead to circularity and confusion, thereby frustrating the principal goals of third-party practice.
Rule 14 permits a defendant to file a third-party complaint at any time during the pendency of the underlying action, though leave of the Court is required if more than ten days have passed since service of the original answer. Fed.R.Civ.P. 14(a) (2000); see also Evans v. Allen-Williams Corp., 36 V.I. 208, 211 (D.V.I. 1997). Under Rule 14, a defendant may implead a third-party who is not a party to the action, but "who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff." Fed.R.Civ.P. 14(a) (2000). Indeed,
[a] claim against a third party defendant must belong to the original defendant and must be based upon the original plaintiff's claim against the original defendant in order to be afforded impleader status. . . . A judgment against the third party must inure to the benefit of the original defendant and not to the original plaintiff (note emphasis).Andrew v. Carvalho, 14 V.I. 513, 516 (Terr. Ct. 1978).
A plaintiff, on the other hand, may only file a third-party complaint if a counterclaim has been asserted against him. Fed.R.Civ.P. 14(b). After a counterclaim has been filed against a plaintiff, that plaintiff may only "cause a third party to be brought in under circumstances which under [Rule 14] would entitle a defendant to do so." Id.
III. ANALYSIS
Lemmon contends that, Pramco's third-party complaint is improper because Pramco is also the original plaintiff and no counterclaim has been filed in this action.Ordinarily, a plaintiff may only file a third-party claim if a counterclaim has been filed against that plaintiff. Fed.R.Civ.P. 14(b) ("Rule 14(b)"). Pramco is the original plaintiff in this matter, and no counterclaim has ever been filed against Pramco. Therefore, Rule 14(b), on its face, does not permit Pramco to file a third-party complaint against Lemmon. Lemmon, however, overlooks the fact that Pramco sought leave to file the third-party complaint not as the original plaintiff in this action, but as the successor in interest to the Smiths. Pramco, therefore, asserts that it may implead Lemmon under Federal Rule of Civil Procedure Rule 14(a) because Lemmon is liable to the Smiths or the Smiths' successor in interest. While that argument presents an interesting set of circumstances, the Court need not determine whether Rule 14(a) would permit Pramco to implead Lemmon given the legal status of this action when Pramco received approval to file its third-party claim.
On February 15, 2005, when the Consent Judgment was entered, the only claim before the Court was Pramco's action against the Smiths to enforce the Note. On that date, there were no cross claims, counterclaims, or third-party claims filed in this matter. The Consent Judgment resolved Pramco's action against Smith on the merits, awarded Pramco damages, as well as costs and attorneys' fees. The entry of the Consent Judgment left nothing more for the Court to do in connection with this action. Furthermore, the Consent Judgment did not preserve other methods to adjudicate the claim, nor was its enforceability contingent on the Court of Appeals reaching a particular result. Therefore, the Consent Judgment was a final judgment. See, e.g., Caver v. City of Trenton, 420 F.3d 243, 260-62 (3d Cir. 2005) (holding that by removing one of the plaintiff's claims from the jury's consideration after the close of evidence and against the objection of the plaintiff, the district court implicitly entered a final judgment disposing of that claim); Scottsdale Ins. Co., 316 F.3d at 438 (holding that a consent judgment previously deemed non-final due to the pendency of two counts in the action became final when the district court dismissed the remaining two counts with prejudice); cf. Keefe, 203 F.3d at 223-24 (holding that a Consent Judgment was not final because the parties' "positions [were] truly adverse with respect to the critical legal issue that they ask[ed] [the Court] to resolve").
Lemmon had been dismissed from the action in 2002.
Accordingly, on February 15, 2005, when the Consent Judgment was entered, it sub silentio denied Pramco's motion for leave to file a third-party complaint. See, e.g., Flannery v. IFA Inc., 974 F.2d 1340, 1341-42 (7th Cir. 1992) (holding that, by entering a final judgment in the action, the district court implicitly denied the defendant's pending motion for reconsideration). As such, the August 9, 2005, order could not provide relief on the motion for leave to file a third-party complaint, since that motion had been terminated approximately six months earlier.
III. CONCLUSION
For the reasons stated above, the Court will grant Lemmon's motion to strike Pramco's third-party complaint. The Court will deny as moot Lemmon's motion to dismiss. An appropriate order follows.