Fourth Circuit tough on appeals of summary judgment denials after trial

In Varghese v. Honeywell Int'l Inc., No. 04-2271 (4th Cir. September 14, 2005) (PDF), the Fourth Circuit reversed a jury verdict in favor of an employee, holding that employer-granted stock options are not "wages" as that term is defined by the Maryland Wage Payment and Collection Law. But that's not the interesting part of the ruling.

The employer also appealed the denial of its motion for summary judgment on the grounds of ERISA preemption. The Fourth Circuit refused to consider that part of the appeal, holding that under Chesapeake Paper Products Co. v. Stone & Webster Engineering Corp., 51 F.3d 1229 (4th Cir. 1995), "this Court will not review, under any standard, the pretrial denial of a motion for summary judgment after a full trial and final judgment on the merits." Id. at 1237. So what should Honeywell have done? "Honeywell had the option to move for judgment as a matter of law (the denial of which we will review), arguing that ERISA preempted Dr. Varghese’s state law separation pay claims. As we noted in Chesapeake, 'a party may appropriately move for judgment as a matter of law on discrete legal issues.' Id. at 1236 (emphasis added)."

So if you are like me, you are asking yourself "What's the difference?" If it is a legal issue, why does it matter whether it is raised under Rule 56 before trial or under Rule 50 during or after trial?

Judge Motz did not like the holding on this issue, either, and she dissented from that part. She felt that the court should distinguish between summary judgment motions that assert purely legal defenses (res judicata, preemption, etc.) and those asserting that insufficient evidence existed to create a triable issue of fact: "I would hold ... that when, as here, a district court denies a motion for summary judgment based entirely on a legal defense, a subsequent trial does not eliminate the movant’s right to assert that defense on appeal." She noted that this is the approach followed by a majority of the other circuits. She called the holding in Varghese an imprudent expansion of the rule in Chesapeake.

I think Judge Motz is right. Quoting liberally from Judge Posner's opinion in Rekhi v. Wildwood Industries, Inc., 61 F.3d 1313 (7th Cir. 1995), Judge Motz wrote:

"[t]he injustice would be" to deny the party moving for summary judgment on the basis of a legal defense the opportunity to reassert that defense on appeal because "most defenses . . . would have no function if all [they] did was bar meritless suits." Id. Accordingly, a defense must "remain[ ] available . . . even when the plaintiff, having survived summary judgment, goes on to win a judgment on the merits." Id. (citing cases). "Defenses are not extinguished merely because" they are "denied at the summary judgment stage." Id. Rather, "[i]f the plaintiff goes on to win [at trial], the defendant can reassert the defense on appeal." Id.

And why not? On summary judgment, the matter is fully briefed and considered by the district judge, and both parties presumably have a full and fair opportunity to argue their positions. Why should they forfeit their right to appellate review following a trial simply because they fail to repeat the same argument in a Rule 50 motion?

I doubt there would be en banc review on this point because Honeywell got its reversal on other grounds. But it's an interesting issue.