United States Court of Appeals
For the First Circuit
No. 08-1709
UNITED STATES FIDELITY AND GUARANTY COMPANY,
Plaintiff-Appellant,
v.
ARCH INSURANCE COMPANY,
Defendant-Appellee.
v.
EASTERN CONTRACTORS, INC.,
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Boudin and Lipez, Circuit Judges,
and Singal,* District Judge.
Bradford R. Carver, with whom Marissa I. Delinks, Bernard D.
Posner, and Hinshaw & Culbertson LLP were on brief, for appellant.
Todd R. Regan, with whom Dennis C. Cavanaugh, Gordon G.
Patterson, and Robinson & Cole LLP were on brief, for appellee.
August 25, 2009
*
Of the District of Maine, sitting by designation.
LIPEZ, Circuit Judge. This appeal requires us to
determine whether we have jurisdiction pursuant to the collateral
order doctrine to review a district court order summarily
dissolving a pretrial attachment, where the appellant chose not to
seek an articulation of the basis for the court's ruling and the
record does not make the basis apparent. The context is a dispute
between two sureties, both claiming rights to the same property.
Appellant United States Fidelity & Guaranty Company (USF&G) and
intervenor-appellee Arch Insurance Company (Arch) are issuers of
surety bonds. Each entered into surety and indemnification
agreements with the defendant in this case, Eastern Contractors,
Inc. (Eastern), a construction company, which ultimately defaulted
on the bonds issued by both sureties pursuant to their respective
agreements. Shortly after USF&G brought this action against
Eastern in federal court, USF&G and Arch commenced ill-fated
negotiations concerning a potential cooperation agreement for the
sharing of Eastern's assets. At the time, Arch was not yet a party
to this litigation.
In August 2006, the district court granted USF&G's
request for an ex parte attachment on four parcels of real property
owned by Eastern in Massachusetts. Arch, seeking to protect its
own rights and recoup its losses, sued Eastern in Massachusetts
state court, successfully attaching two of the same parcels of land
-2-
in January 2007,1 and eventually obtaining a judgment against
Eastern. In June 2007, Arch moved to intervene in this action and
dissolve USF&G's attachment. That attachment was preventing Arch
from immediately executing its judgment against Eastern, which had
become insolvent and whose assets were almost certainly
insufficient to cover the competing claims of its creditors. The
district court allowed Arch to intervene and partially dissolved
USF&G's attachment. Arch moved for reconsideration, seeking total
dissolution, and, in a margin order with no articulated reasoning,
the district court dissolved the attachment in toto, though it
stayed execution of the dissolution order pending this appeal.
The confused course of proceedings below and USF&G's
failure to seek an elaboration of the reasoning underlying the
dissolution prevent us from confidently identifying the precise
legal issue on which the district court ruled. Because it is the
appellant's burden to demonstrate the propriety of appellate
jurisdiction under the stringent conditions of the collateral order
doctrine, we refuse to engage in inappropriate speculation about
the basis or bases for the district court's decision and whether
those uncertain bases would meet the requirements of the doctrine.
We therefore dismiss the appeal.
1
Arch had also sought to attach all four properties, but two
of them had been foreclosed on November 14, 2006 (i.e., after USF&G
had already attached them) and the resulting proceeds paid into
court.
-3-
I.
A. Factual Background and the Master Surety Agreement
On May 18, 1994, USF&G and Eastern executed a Master
Surety Agreement (MSA). Of particular relevance to this action,
the MSA contained both an indemnity clause (Paragraph III(A)) and
a collateral security clause (Paragraph III(B)). The indemnity
clause provided that Eastern agreed to:
exonerate, hold harmless, indemnify and keep
indemnified [USF&G] from and against any and
all demands, claims, liabilities, losses and
expenses of whatsoever kind or nature
(including but not limited to, interest, court
costs and counsel fees) imposed upon,
sustained, or incurred by [USF&G] by reason
of: (1) [USF&G] having executed, provided or
procured BOND(S) in behalf of [Eastern] or (2)
[Eastern’s] failure to perform or comply with
any of the provisions of this AGREEMENT.
The MSA’s collateral security clause further provided:
In order to exonerate, hold harmless, and
indemnify [USF&G], [Eastern] shall, upon
demand of [USF&G] place [USF&G] in funds
before [USF&G] makes any payment; such funds
shall be, at [USF&G’s] option, money or
property, or liens or security interests in
property. (The amount of such money or
property or the value of the property to
become subject to liens or security interests,
shall be determined by surety.)
In reliance on the Agreement and in its capacity as a
surety, USF&G issued a number of payment and performance bonds2 for
2
Under a performance bond, "the surety is liable for a
default in performance by the principal of its contract obligations
. . . [The performance bond] provides available funds to complete
the principal's contract should the latter be in default of the
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the benefit of several obligees, including the Algonquin Regional
School District, to secure Eastern's performance on various school
construction projects in Northborough, Massachusetts. The
Algonquin Regional School District terminated Eastern's involvement
in the project on December 15, 2005, and subsequently made demand
under the performance bond issued by USF&G. As a result of
Eastern's default, the surety also received claims on the payment
bonds issued in connection with the Algonquin project and several
other projects.
B. Procedural History
Because our disposition of this case rests on our
inability to discern the basis for the dissolution order and our
unwillingness to engage in a detailed analysis of each possible
basis to determine whether it provides jurisdiction under the
collateral order doctrine, we describe the tangled procedural
history in some detail.
performance it owes the obligee." Daniel E. Toomey & Tamara
McNulty, Surety Bonds: A Basic User's Guide for Payment Bond
Claimants and Obligees, 22 Construction Lawyer 5, 5 (Winter 2002)
(quotation marks and citation omitted). In contrast, a payment
bond is intended to "protect[] subcontractors, suppliers, and those
providing labor to a principal under a contract of construction"
and "assures that a financially responsible party, the surety, is
committed to paying these . . . claimants should the principal fail
to do so." Id. (quotation marks and citation omitted).
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1. The USF&G lawsuit
On June 21, 2006, USF&G sued Eastern in the United States
District Court for the District of Massachusetts.3 The complaint
cited various provisions of the MSA, including the indemnification
and collateral security clauses and a clause stating that the
surety's "rights to indemnification, exoneration, and subrogation"
could be "enforced as provided by applicable law or, at option of
[USF&G] . . . in any other manner provided at law or in equity."
The complaint alleged that, as a result of Eastern's default, USF&G
had already received approximately $4,329,919.92 in claims under
several payment bonds, and that, based on its investigation, its
exposure under the Algonquin performance bond "could exceed" $3.6
million. Taking these figures together, USF&G stated that "[a]s a
direct and proximate result of Eastern’s defaults, USF&G has
sustained, and anticipates further sustaining, losses in the form
of costs to complete the Algonquin Project, and to resolve other
bond claims, attorneys’ fees, expenses, and interest, in an amount
in excess of $7,929,919.92."
USF&G's complaint asserted both contractual and common
law rights. The former included a count for indemnity pursuant to
the MSA, counts for specific performance of the MSA's indemnity and
3
Because USF&G is a Maryland corporation with its principal
place of business in Connecticut and Eastern is a Massachusetts
corporation with its principal place of business in Framingham, the
basis for federal jurisdiction is diversity of citizenship.
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collateral security clauses, and a count for breach of contract.
The latter were counts for common law indemnity and the equitable
remedy of quia timet/exoneration.4
2. USF&G's motion for an attachment
On August 10, 2006, USF&G filed an ex parte motion to
attach four parcels of real property that Eastern owned in
Massachusetts. Pursuant to Rule 4.1(c) of the Massachusetts Rules
of Civil Procedure, property may be attached for a specified amount
"upon a finding by the court that there is a reasonable likelihood
that the plaintiff will recover judgment, including interest and
costs, in an amount equal to or greater than the amount of the
attachment over and above any liability insurance" possessed by
defendants.
4
Quia timet and exoneration are time-honored and closely
related equitable remedies commonly invoked in the surety industry.
See, e.g., 4 Bruner & O'Connor on Construction Law § 12:97 (2009).
"Quia Timet (Latin 'because he fears') is a '[l]egal doctrine that
allows a person to seek equitable relief from future probable harm
to a specific right or interest.'" U.S. Fidelity & Guaran. Co. v.
Diaz-Matos, Civ. No. 05-1851 (PG), 2007 WL 878571, at *5 (D.P.R.
Mar. 21, 2007) (modification in original) (quoting Black's Law
Dictionary, 1283 (8th ed. 2004)). More specifically, the equitable
remedy of quia timet:
is the right of a surety to demand that the principal
place the surety "in funds" when there are reasonable
grounds to believe that the surety will suffer a loss in
the future because the principal is likely to default on
its primary obligation to the creditor. Exoneration,
though closely related, is distinct. It is the surety's
right, after the principal's debt has matured, to compel
the principal to honor its obligation to the creditor.
Id. (quotation marks and citations omitted).
-7-
USF&G did not specifically cite either Paragraph III(A)
(the indemnification clause) or III(B) (the collateral security
clause) in the memorandum of law submitted in support of its motion
for an attachment. However, the memorandum did state that "in its
Complaint, USF&G seeks indemnification from Eastern," and further
asserted that USF&G was "entitled to be indemnified pursuant to the
terms of the Agreement by the Indemnitor [Eastern], which
indemnification includes reimbursement of all losses, costs, and
attorneys' fees associated with the pending action" (emphasis
added). The affidavit accompanying the motion also stated that
USF&G sought "indemnification" under the terms of the agreement,
and referred to Eastern as the "Indemnitor." It repeated that
USF&G was entitled "to be indemnified pursuant to the terms of the
agreement" by the Indemnitor. Thus, to the extent the motion for
an attachment was based on a specific provision in the MSA, it
seems to have been the indemnification clause. On August 11, 2006,
the district court granted the attachment in the amount of
$7,929,919.92. Eastern never objected to the attachment or sought
to dissolve it.5
5
USF&G had information that Arch and Eastern were negotiating
a potential financing agreement as part of an agreement to take
care of Eastern's debt to Arch whereby Arch would provide financing
to Eastern with the properties serving as collateral.
-8-
3. Arch's state court action
Several months after USF&G obtained its attachment, Arch
commenced its own action against Eastern in Massachusetts Superior
Court, seeking indemnification for $4,714,818.29 of losses incurred
as a result of Eastern's default on bonds Arch had issued pursuant
to its General Agreement of Indemnity with Eastern. Arch obtained
writs of attachment on two of the four properties that were also
subject to USF&G's attachment. In April 2007, Arch and Eastern
entered into an Agreement for Judgment in favor of Arch in the
amount of $8,342,233.27.
4. Arch's motion to dissolve the attachment
On June 5, 2007, Arch moved to intervene in this federal
action and to dissolve USF&G's attachment. Under Massachusetts
law, any person who claims an interest in an attached property --
including a subsequent attachment -- may "dispute the validity and
effect of [the] attachment on the ground that the amount demanded
. . . was not justly due or was not payable when [the action] was
commenced." Mass Gen. Laws ch. 223, § 106. Arch argued that
USF&G's attachment was improper, since the money was not justly due
or payable to USF&G when its action was commenced. In support of
its position, Arch marshaled a Massachusetts case, New Eng. Merch.
Nat. Bank v. Latshaw, 421 N.E.2d 1264 (Mass. App. Ct. 1981),
dissolving a surety's attachment of its indemnitor's property
because the surety had not yet suffered a loss at the time the
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indemnity action was commenced, even though demand had already been
made. This outcome, Arch argued, was consistent with the
"generally accepted princip[le]" that as long as the amount of bond
claims were indefinite, "there is no adequate remedy at law
available to the surety because its future damages are not
ascertainable and it cannot yet institute an action for
indemnification."
Moreover, Arch preemptively asserted that USF&G was
precluded from arguing that its inability to pursue an action for
an indemnity based on only anticipated future losses would have
deprived it of the right to prevent dissipation of Eastern's
collateral, because it was "commonly understood in the surety
industry that a surety must seek the equitable remedy of specific
performance in order to enforce collateral provisions in an
indemnity agreement." (Emphasis removed.) Thus, if USF&G wanted
to prevent the dissipation of assets during the pendency of the
litigation, it should have sought specific performance of the MSA's
collateral security clause, and, in the interim, a preliminary
injunction to protect its rights and prevent Eastern from
transferring the property. Arch accused USF&G of "ignor[ing] the
availability of the remedy sureties typically seek in these
situations" and instead pursuing an ex parte attachment because an
order of specific performance would have required that Eastern have
-10-
an opportunity to be heard, whereas USF&G wanted to secretly attach
Eastern's asserts to frustrate Arch's interests.
In arguing that the attachment was proper, USF&G's
opposition to the petition for dissolution relied only upon the
collateral security provision of the MSA, which required Eastern to
place USF&G "in funds" before USF&G made "any payment," and
provided that such funds could be, at USF&G's option, "money or
property, or liens or security interest in property." It
distinguished Latshaw on the grounds that the agreement there
contained no collateral security provision.
In its reply brief in support of dissolution, Arch argued
that 1) the attachment was founded upon a claim for indemnification
that was premature when the action was commenced because a surety's
right to indemnity does not accrue until it has actually made
payment or otherwise incurred a loss; 2) USF&G essentially conceded
the irrelevance of the indemnification clause of the MSA by
retroactively shifting the basis for its attachment to the
collateral security clause in its opposition; and 3) such a post-
hoc shift was improper. Moreover, Arch argued that 4) even if the
attachment had been based on the collateral security clause, it
would still be invalid because:
the purpose of a real property attachment is
to preserve assets to satisfy an eventual
"judgment for damages" in favor of the
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plaintiff.6 The mechanism through which a
surety may be awarded a judgment for damages
under the MSA and the common law is a cause of
action for indemnity for losses incurred, not
an equitable claim for specific performance of
a collateral security clause or quia timet.
Therefore, successful enforcement of a collateral security clause
would not result in a "judgment for damages" to the surety for
losses; instead, the funds would be placed in a trust out of which
obligations from the bonds would then be paid out. Thus, Arch
essentially argued that the indemnity and collateral security
clauses were two separate and distinct remedies, and that neither
one was a proper basis for the attachment under the circumstances.
Finally, as a procedural matter, Arch noted that the
affidavit that USF&G had submitted in support of its motion for an
attachment, by referring only to "anticipated" losses, did not
"certify a dollar amount of losses actually incurred by USF&G at
the time of the commencement of the action. Nor did the affidavit
mention the collateral security clause at all, making an attachment
on that basis improper under Rule 4.1(h) of the Massachusetts Rules
of Civil Procedure.7
6
Mass. R. Civ. P. 4.1(a) states that real estate may be
attached to satisfy "the judgment for damages and costs which the
plaintiff may recover."
7
Mass. R. Civ. P. 4.1(h) provides that the affidavit
submitted in support of motions for an attachment "shall set forth
specific facts sufficient to warrant the required findings."
-12-
5. The hearing
On June 26, the district court held a hearing on Arch's
motion.8 By then, USF&G had paid claims on the bonds in excess of
$18 million, and the value of the properties USF&G attached was
approximately $3.5 million.
Although the district court spent much of the hearing
urging the two sureties to amicably agree on an equitable way to
divide Eastern's limited assets, the parties also presented legal
arguments similar to those found in their moving papers. Counsel
for Arch emphasized the distinction between indemnity and
collateral security. He repeated that, under both the common law
and the MSA, the surety's right to indemnity was its "right to
receive reimbursement for costs actually incurred," and did not
accrue until a payment had actually been made. On the other hand,
he argued, Paragraph IIIB of the MSA, the collateral security
clause, did indeed give the surety an equitable cause of action
prior to payment of claims, but it should have been enforced by a
claim for specific performance and, potentially, a preliminary
injunction, and not by a motion for a prejudgment attachment.
Later, the court asked counsel for USF&G if it had a
right "under either the agreement or the common or statutory law to
seek attachment even before [it] had paid anything out?" USF&G
8
At the hearing, counsel for Eastern admitted that Eastern
had an obligation to indemnify USF&G, but noted that there was "a
dispute as to the amounts . . . in question."
-13-
responded: "Absolutely. IIIA [the indemnification clause] includes
demands, claims, liabilities, losses, and expenses." The court
inquired how a party could be indemnified for a demand. Counsel
for USF&G, instead of focusing on the language of the
indemnification clause itself, responded by reference to the
collateral security clause. That provision required Eastern, upon
notice of a claim, to provide collateral security to USF&G,
including liens. Counsel for USF&G later distinguished Latshaw not
on the basis of the language of the indemnification clause, but
because the MSA, unlike the agreement in Latshaw, provided that,
upon notice of claims, Eastern was supposed to either give USF&G
money or an attachment to secure them. The seeming disconnect
between the judge's question (reflecting a focus on the
indemnification clause) and USF&G's responses (focusing on the
collateral security clause) further underscores the confusion
underlying USF&G's approach to the attachment and its dissolution.
6. The district court opinion
Nearly seven months later, and after attempts by USF&G
and Arch to amicably resolve the dispute had failed, the district
court issued an order on January 15, 2008, allowing Arch to
intervene and granting in part Arch’s motion for dissolution of the
attachment. The court noted that, under Massachusetts law, "the
central question on the motion for approval of attachment is
whether plaintiffs are likely to prevail on the merits and obtain
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damages in the necessary amount" (quoting Digital Equip. Corp. v.
Currie Enters., 142 F.R.D. 16, 20 (D. Mass. 1992)). It then
considered Arch's argument that "USF&G's attachment, which was
granted based upon the indemnification provisions in the [MSA], was
invalid because at the time USF&G sought and received the
attachment it had not yet paid any claims." The court found that
the indemnification clause, which covered "any and all demands,
claims, liabilities, losses, and expenses of whatsoever kind or
nature . . . imposed upon, sustained, or incurred" by USF&G, was
broader than, for example, an agreement that indemnified the surety
only for "any loss or expense,"9 and that USF&G could therefore be
indemnified against claims before it had actually paid them. Thus,
the court explained, pursuant to the terms of the MSA, the
attachment was proper to the extent it was based on the
$4,329,919.92 in claims USF&G had already received when it filed
its motion for an attachment. However, the court also held that
partial dissolution of the attachment was appropriate insofar as it
had been based on USF&G's anticipated $3.6 million future exposure
under a separate performance bond. The record did "not reflect
that the $3.6 million represented claims already received by
USF&G," and those funds were not yet "justly due" within the
meaning of the Massachusetts prejudgment attachment statute. The
9
This was the language in Latshaw, upon which Arch had relied
in its petition for dissolution.
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order mentioned neither the collateral security clause itself nor
both parties' respective arguments about the collateral security
provision.
The court also addressed the sufficiency of the affidavit
USF&G had submitted in support of its motion for an attachment.
First, in setting out the legal standards, the court noted MRCP
4.1(h)'s requirement that a motion for an attachment be supported
by an affidavit setting forth "specific facts sufficient to warrant
the required findings." Then, in a footnote, the court
acknowledged that USF&G's affidavit only generally asserted that it
"ha[d] received claims and may sustain losses in excess of
$7,929,919,92 in performing its obligations." The affidavit did
not differentiate between claims already received and potential
exposure, as did the complaint. However, the court did not "view
this defect as providing sufficient grounds to vacate the
attachment," since USF&G's complaint, to which the motion for
attachment referred, specifically alleged that USF&G had already
received claims in the amount of $4,329,919.92.
7. The motion for reconsideration
On January 30, 2008, Arch filed a motion for
reconsideration, or, in the alternative, certification for
immediate appeal pursuant to 28 U.S.C. § 1292(b).10 Arch's
10
28 U.S.C. § 1292(b) provides for discretionary appellate
review of an interlocutory order that would not otherwise be
appealable if the district court states that the order "involves a
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memorandum faulted the order for failing to consider Arch's
arguments about the distinction between a surety's right to
indemnification and its right to collateral security. Arch
repeated its arguments that neither the indemnification clause nor
the collateral security provision supported any prejudgment
attachment by USF&G. Arch also argued that the district court had
"effectively abrogate[d]" MRCP 4.1's requirements by erroneously
accepting an allegation in USF&G's unverified complaint as
sufficient, in the absence of an accompanying affidavit, to justify
an attachment in the amount of $4,329,919.92.
In opposing reconsideration, USF&G argued that either the
indemnification clause or the collateral security provision would
justify its prejudgment attachment, and that its previous filings
had properly supported the attachment under either possibility.
USF&G also asserted that its references to its complaint in its
motion for an attachment satisfied the requirements of Rule 4.1(h)
of the Massachusetts Rules of Civil Procedure, and that the court's
reliance on those references did not constitute an error of law.
On May 5, 2008, the district court, in a margin decision,
summarily granted Arch’s motion, thereby fully dissolving USF&G’s
attachment.
controlling question of law as to which there is substantial ground
for difference of opinion and that an immediate appeal from the
order may materially advance the ultimate termination of the
litigation."
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8. Subsequent proceedings
The following month, the court allowed USF&G’s motion to
stay the dissolution of the attachment pending this appeal.11 In
that order, the district court quoted boilerplate language from
Swift & Co. Packers v. Compania Colombiana Del Caribe, S.A., 339
U.S. 684, 688-89 (1950), to support its summary assertion that the
May 5, 2008 order dissolving the attachment was reviewable under
the collateral order doctrine. It again cited Swift for the
proposition that the "order dissolving the attachment [was]
appealable as a collateral order." Finally, the court noted that
because the appeal would "present[] legal issues separable from the
merits of the underlying dispute between USF&G and Eastern," it was
distinguishable from a First Circuit case holding that the
collateral order doctrine did not provide jurisdiction over a
decision based on the plaintiff's likelihood of success on the
merits.
USF&G's appeal is limited to the district court's May 5
order completely dissolving the attachment. That is, USF&G does
not contest the court's initial partial dissolution of the
11
The court also required USF&G to post a supersedeas bond of
$100,000, explaining that this amount would be sufficient to cover
Arch's costs and any injury Arch might suffer as a result of the
delay in dissolving the attachment.
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attachment from approximately $7.9 million to approximately $4.3
million.12
II.
As the parties recognize, before we can address the
merits of the court's dissolution decision, we must first address
the threshold question of our jurisdiction to consider that issue
because this is an appeal from an interlocutory order. We briefly
sketch the contours of the collateral order doctrine, which is the
only plausible basis for our jurisdiction over this appeal.13
"Generally speaking, appeals are permitted only from
final judgments of the district court." Lee-Barnes v. Puerto Ven
Quarry Corp., 513 F.3d 20, 25 (1st Cir. 2008) (quotation marks and
citation omitted). The final judgment rule "minimizes dilatory,
piecemeal litigation, and promotes judicial efficiency." United
12
We also note that, on December 12, 2008, based on USF&G's
undisputed allegation that it had paid out more than $18 million in
claims on the bonds, the district court granted USF&G's motion for
summary judgment against Eastern on Count I (the indemnification
count) as to liability only. The final amount of damages has yet
to be determined and there has been no final judgment.
13
We reject USF&G's alternative argument that the order is
appealable as an injunction under 28 U.S.C. § 1292(a)(1). USF&G is
correct that, under our case law, it is an order’s substance, and
not its label, that determines whether it should be treated as an
attachment or an injunction for appellate purposes. See, e.g.,
Micro Signal Research, Inc. v. Otus, 417 F.3d 28, 33 (1st Cir.
2005); Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 45-47 (1st Cir.
1986). But here, the attachment is simply that: a classic lien on
property pending the outcome of litigation that does not, by its
terms, compel the defendants to do or refrain from doing anything.
See, e.g., Micro Signal, 417 F.3d at 33. As such, it is not
appealable as an injunction under 28 U.S.C. § 1292(a)(1). See id.
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States v. Kouri-Perez, 187 F.3d 1, 5 (1st Cir. 1999). However,
under the collateral order doctrine,14 a "limited set of district-
court orders are reviewable though short of final judgment."
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1945 (2009) (quotation marks
and citation omitted). Under the doctrine, as enunciated by the
Supreme Court in its seminal Cohen opinion, a district court order,
though not yet final, may be appealed immediately if it "finally
determine[s] claims of right separable from, and collateral to,
rights asserted in the action, too important to be denied review
and too independent of the cause itself to require that appellate
consideration be deferred until the whole case is adjudicated."
Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949).
The Court has recently reiterated that, for the collateral order
doctrine to apply, a district court order must "(1) conclusively
determine the disputed question, (2) resolve an important issue
completely separate from the merits of the action, and (3) be
effectively unreviewable on appeal from a final judgment." Will,
546 U.S. at 349. If an order fails to meet any one of these15
14
Although we have characterized the collateral order doctrine
as an "exception" to the final judgment rule, see, e.g., Kouri-
Perez, 187 F.3d at 5, the Supreme Court prefers to characterize it
as "a practical construction" of that rule. Will v. Hallock, 546
U.S. 345, 349 (2006) (quotation marks and citation omitted).
15
At times, we have characterized the collateral order
doctrine as consisting of four factors rather than three. For
example, in Espinal-Dominguez v. Puerto Rico, we stated that in
order to satisfy the collateral order doctrine, a district court
order must involve:
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"conjunctive" conditions, it is not appealable under the collateral
order doctrine. Lee-Barnes, 513 F.3d at 25-26 (citing Gulfstream
Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 276 (1988)).
Several general principles are particularly relevant to
the application of the collateral order doctrine to this appeal.
First, "[t]he burden of establishing [appellate] jurisdiction rests
with the party who asserts its existence." Campbell v. Gen.
Dynamics Gov't Sys. Corp., 407 F.3d 546, 551 (1st Cir. 2005); see
also Micro Signal Research, 417 F.3d at 34.
Second, as a general matter, the collateral order
doctrine is "applied narrowly and interpreted strictly." Lee-
(1) an issue essentially unrelated to the merits of the
main dispute, capable of review without disrupting the
main trial; (2) a complete resolution of the issue, not
one that is "unfinished" or "inconclusive"; (3) a right
incapable of vindication on appeal from final judgment;
and (4) an important and unsettled question of
controlling law, not merely a question of the proper
exercise of the trial court's discretion.
352 F.3d 490, 496 (1st Cir. 2003) (quotation marks and citation
omitted). We have referred to these four requirements as
"separability, finality, urgency, and importance." Id. (quotation
marks and citation omitted). Nevertheless, in the Supreme Court's
most recent cases, it has formally continued to refer to Cohen's
"three" criteria, in which "importance" and "separability" appear
to be considered together. See, e.g., Osborn v. Haley, 549 U.S.
225, 238 (2007) (including, as one of the three Cohen criteria,
whether "the issue decided is important and separable"); Will, 546
U.S. at 349 (discussing the "three conditions" of the doctrine,
including that the order "resolve an important issue completely
separate from the merits of the action"). In substance, there is
no difference between our characterization of the collateral order
doctrine and the Supreme Court's. That, of course, must be so.
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Barnes, 513 F.3d at 26 (quoting United States v. Quintana-Aguayo,
235 F.3d 682, 684 (1st Cir. 2000)); see also Will, 546 U.S. at 349-
50 ("[W]e have not mentioned applying the collateral order doctrine
recently without emphasizing its modest scope. And we have meant
what we have said; although the Court has been asked many times to
expand the 'small class' of collaterally appealable orders, we have
instead kept it narrow and selective . . . ."). Indeed, in its
most recent application of the doctrine, the Supreme Court
cautioned that, "[a]s a general matter, the collateral-order
doctrine may have expanded beyond the limits dictated by its
internal logic and the strict application of the criteria set out
in Cohen." Iqbal, 129 S. Ct. at 1946.
Finally, for the purpose of analyzing this appeal, we
must examine the development of the law regarding the doctrine's
"importance" element. Some of the Supreme Court's strongest
pronouncements about the importance of "importance" came in Digital
Equipment Corporation v. Desktop Direct, Inc., 511 U.S. 863, 868
(1994), in which the Court held that an order vacating a dismissal
predicated on a settlement agreement was not immediately
appealable. Stating that the issue did not "rise to the level of
importance needed for recognition under § 1291," id. at 864, the
Court explained that the Cohen inquiry could not be performed
without "a judgment about the value of the interests that would be
lost through rigorous application of a final judgment requirement."
-22-
Id. at 878-79. See also Van Cauwenberghe v. Bard, 486 U.S. 517,
524 (1988) ("[T]he substance of the rights entailed, rather than
the advantage to a litigant in winning his claim sooner" is
dispositive. (quotation marks and citation omitted)). Most
recently, in Iqbal, after noting that the collateral order doctrine
may have expanded beyond the limits of "its internal logic" and
reiterating the "strict application" of the Cohen criteria, the
Court emphasized the distinction in its precedent between those
collateral orders that turn on "abstract" rather than "fact-based"
issues of law. 129 S. Ct. at 1947. Only the former were properly
reviewable under the collateral order doctrine. Id. Accordingly,
in order for USF&G to meet its burden to establish appellate
jurisdiction, it must demonstrate that the issue resolved by the
district court was sufficiently important to bring it within the
confines of the collateral order doctrine.
Critically, USF&G cannot avoid this problem by asserting
generally that all orders denying or dissolving attachments are
immediately appealable. To be sure, in Swift, 339 U.S. at 684,
which held that an order vacating a foreign attachment of a vessel
that provided the sole basis for jurisdiction in an admiralty
action was immediately appealable, the Supreme Court distinguished
orders upholding prejudgment attachments, noting that they were not
immediately appealable because the parties' rights would be
adequately protected during the pendency of the litigation. Id. at
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689. This proposition led some courts to conclude that "generally
appeal can be taken from orders that deny security but cannot be
taken from orders that grant security." 15A Charles Alan Wright,
Arthur R. Miller, & Edward R. Cooper, Federal Practice and
Procedure § 3914.2 (2d ed. 1992).
More recently, however, and consistently with the Supreme
Court's increasing emphasis on the importance element and the
narrowness of the collateral order doctrine, courts have taken a
more limited view of the appealability of denials of security.
There has been "significant movement" toward a more flexible
approach under which it is "more difficult to appeal denials of
security that reflect routine determinations of fact and the
exercise of discretion rather than resolution of serious and
difficult questions of law." 15A Wright, Miller, & Cooper, at
§ 3914.2. These cases have emphasized, inter alia, the requirement
that the case present a difficult question of law or a challenge to
a court's authority to act. See id. at § 3914.2 & nn. 29-30
(collecting cases).
Following this trend, we rejected in Sobol v. Heckler
Congressional Committee "the blanket assertion that orders
dissolving attachments are immediately appealable." 709 F.2d 129,
131 (1st Cir. 1983). We found that we lacked jurisdiction to
review an interlocutory appeal of an order dissolving an attachment
of the defendant's bank account. Id. Since we had concluded that
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the dissolution rested on the "particular facts" of the case,16 our
review would not "resolve an important legal issue" and therefore
"would not be of any assistance in future cases." Id. In Lee-
Barnes, we continued along the same path, embracing the Supreme
Court's explanation that to be important in the Cohen sense means
"'being weightier than the societal interests advanced by the
ordinary operation of final judgment principles.'" Lee-Barnes, 513
F.3d at 26 (quoting, inter alia, Digital Equip., 511 U.S. at 879).
Therefore, in Lee-Barnes, we found that "the issue on appeal -
i.e., whether the district court erred in deeming the surety bond
void - simply [did] not 'rise to the level of importance needed for
recognition under [the collateral-order doctrine].'" Id. at 26
(some modifications in original) (quoting Digital Equip., 511 U.S.
at 878). The issue presented was "highly unlikely to affect, or
even be consequential to, anyone aside from the parties." Id.
Accordingly, we dismissed the appeal, making clear that the mere
fact that an order dissolves a prejudgment attachment is not enough
to guarantee jurisdiction; instead, the party must present "a
sufficiently important issue to warrant immediate review." Id. at
27.17
16
We discuss the basis for that conclusion infra.
17
The Second Circuit has also embraced the more flexible
approach, starting with Donlon Indus., Inc. v. Forte, 402 F.2d 935,
937 (2d Cir. 1968) (Friendly, J.), and continuing through the
present day. See, e.g., Banque Nordeurope, S.A. v. Banker, 970
F.2d 1129, 1131 (2d Cir. 1992) (per curiam) (noting trend towards
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III.
We must decide if the district court's dissolution order
was based on an issue sufficiently important to justify our
application of the collateral order doctrine. That question --
the importance of the merits issue raised by the appellant -- is
front and center here because Arch argues as a threshold matter
that, given the tangled procedural history of this case, we cannot
even determine the basis or bases for the district court's
dissolution order. Instead, Arch says, citing the district court's
summary dissolution order, we have nothing "beyond mere
speculation" on which to base our review.
A. Searching for the Important Legal Question
To the extent Arch argues that the mere absence of
articulated reasoning in the order under review forecloses
appellate jurisdiction, it is incorrect. Our case law suggests
that, while it is always preferable for the parties to request
clarification from the district court, where necessary, prior to
seeking appellate review of an interlocutory order, the lack of
more flexibility in dealing with appeals from denials of pretrial
security); Kensington Int'l Ltd. v. Rep. of Congo, 461 F.3d 238 (2d
Cir. 2006), explained that the more "flexible" approach stemmed
from the recognition that, even when an order "vacating,
dissolving, or denying an attachment" met Cohen's requirements,
id. at 241, there is an "additional requirement for appealability
above and beyond the Cohen test: importance." Id. at 242. That
is, "whether the issue on appeal is an important issue of law, the
resolution of which may have relevance for future cases." Id. at
241.
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articulated reasoning in the order under review is not a per se bar
to jurisdiction. Instead, we have been willing to examine the
circumstances surrounding the district court's actions to determine
the court's basis for its decision. See Sobol, 709 F.2d at 130
(examining the parties' arguments to the district court and timing
of the order to infer reason for dissolution where order dissolving
attachment was issued without an opinion or statement of reasons).
Indeed, although we admonished the appellants in Sobol for failing
to seek an articulation of the court's reasoning, we analyzed the
course of proceedings to conclude that the court's order likely
rested on one of two possible grounds. Id. One of the possible
grounds was the district court's determination that the plaintiff
was not likely to succeed on the merits, and the second was a
"difficult state law question of whether trustee process was
available to plaintiff." Id. Because of the timing of the order,
we found that the more likely ground for dissolution was a
determination about the plaintiff's likelihood of success on the
merits, and we based our holding that the collateral order doctrine
was inapplicable on that inference.18 See id. (assuming that the
district court concluded that plaintiff was unlikely to succeed on
the merits, and, under those circumstances, holding that the
18
If the district court had concluded that the plaintiff was
unlikely to succeed on the merits, the basis for the decision would
also obviously not be separable from the merits - a requirement of
the collateral order doctrine.
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dissolution of the attachment was not appealable under the
collateral order doctrine).
The district court in Bridge Construction Corporation v.
City of Berlin, 705 F.2d 582 (1st Cir. 1983), also failed to
explain its reasoning for staying federal proceedings pending the
resolution of a parallel state action. Id. at 583. Noting that
the plaintiff could have sought an elaboration of the court's
reasoning and thereby avoided the uncertainty created by the
cryptic order, we concluded that "[t]he order [did] not resolve 'an
important issue' separate from the merits of the action, because it
may well involve only a fact-specific exercise of discretion rather
than a controlling issue of law." Id. (emphasis added and
citations omitted).19 This language suggests that it was not merely
the lack of articulated reasoning itself, but the ongoing ambiguity
about the basis for the district court's decision, unresolved by
contextual information in the district court record, that defeated
our jurisdiction. See id. at 582-84. The mere possibility that
the court had erred on a potentially important legal question
regarding the proper scope of a federal court's power to resolve
the merits of the case in light of a parallel state proceeding was
19
Our discussion of the district court’s order was apparently
dicta, as we found that appellant had certainly failed to satisfy
the finality criterion. Id. at 584 ("In any event, the order has
not conclusively determine[d] the legal issue.") (quotation marks
and citation omitted) (modification in original).
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insufficient to permit the application of the collateral order
doctrine. Id. at 583-4.
Bridge and Sobol tell us that although we may look beyond
the text of the dissolution order itself in an attempt to discern
the district court's reasoning, there must be limits to this
exercise. Where the exercise does not permit us to discern the
precise legal issue that is implicated by the ruling, it is not our
responsibility to assume jurisdiction simply because one of the
issues that may have been the basis for the district court's order
may be an important one. It is the appellant's job to demonstrate
that appellate jurisdiction is proper. In considering the
application of the narrow collateral order doctrine, where our
resort to context does not allow us to determine the important and
abstract legal issue at the heart of the interlocutory appeal, we
must conclude that the appellant has not justified the application
of that doctrine.
B. Trying to Determine the Basis for the District Court's Order
In arguing that the reason for the dissolution is
ultimately unknowable, Arch first observes that the court may have
determined that, in light of MRCP 4.1(h), the references in USF&G's
unverified complaint to the value of claims received were an
inadequate substitute for similar averments in the affidavit
supporting the motion for an attachment. Interestingly, USF&G
explicitly argues that one of the "legal issues" on which the
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district court ruled was whether it had satisfied the requirements
of Rule 4.1. Indeed, in the jurisdictional statement in its brief,
it characterizes the issues on appeal as whether it "was entitled
to an attachment based on the receipt of claims and demands prior
to their actual payment and whether USF&G satisfied the
requirements of Mass. R. Civ. P. 4.1" (emphasis added).20 USF&G
characterizes both of these as "important and unsettled legal
issues" that would justify invocation of the collateral order
doctrine. In the merits portion of its brief, it includes a
section arguing that the references in its complaint to claims
received satisfied the requirements of Rule 4.1. If indeed the
district court's ruling was based on the insufficiency of USF&G's
affidavit, it is hard to see how that would constitute an important
enough issue to justify the application of the collateral order
doctrine.
Admittedly, we find it less likely that the district
court judge, after explicitly resolving the affidavit issue in
USF&G's favor, would have reversed herself on that pleading issue
and characterized what was at stake in her ruling as a question of
law sufficiently important to permit interlocutory review. On the
other hand, one can imagine characterizing an affidavit's
20
In its reply brief, USF&G again states that "the district
court ruled on two legal issues: whether USF&G was entitled to a
prejudgment attachment based on the receipt of claims and demands,
and whether USF&G satisfied Mass. R. Civ. P. 4.1's requirements."
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sufficiency as a matter of law in the same way that we treat the
sufficiency of a complaint under Rule 12(b)(6) as a legal question
subject to de novo review. Moreover, as we have mentioned, the
language in the district court's stay order, which USF&G relies on
for the proposition that the issues involved here are important
enough to warrant immediate appellate review, is strictly
boilerplate. The court's quotation of Swift, and its further
citation to that case for the proposition that an order dissolving
a prejudgment attachment is immediately appealable, further reflect
the possibility that the court was mistakenly adhering to the now
rejected "general rule" that orders dissolving attachments are
automatically appealable so long as they are separable from the
merits of the underlying dispute, regardless of the basis for the
dissolution (which might have been the Rule 4.1 issue).
Alternatively, the court could have based its decision on
one of the provisions of the MSA. Even under that assumption,
given the tangled procedural history that we described above, see
supra Part I.B., the precise legal issue that prompted the court to
dissolve the attachment is far from clear. The record reflects
several possible issues. The district court's dissolution order
could have reflected the judge's determination 1) that her previous
interpretation of the indemnification clause was erroneous and
should be considered by an appellate tribunal; 2) that her original
interpretation of the indemnification clause was erroneous, but
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that the collateral security provision had not been invoked by
USF&G in a timely fashion as the basis for its motion for an
attachment; or 3) that her initial interpretation of the
indemnification clause was erroneous and that USF&G did not have
the right, as a matter of law, to seek a prejudgment attachment
based on the collateral security provision.
IV.
Given the narrow scope of the collateral order doctrine
and our inability to discern with any confidence the basis for the
district court's ruling, we are unwilling to engage in a detailed
analysis of the merits of a legal issue that may not have been the
basis for the district court's decision. Moreover, while we
recognize that some of the grounds for the district court's
decision may be important, they are not all self-evidently so. For
example, if the dissolution order rested on the specific language
of the MSA's indemnification clause, it is possible that the
interpretation of particular contract language between two private
parties is too fact-enmeshed to be an important legal question of
concern to future parties. And if, as USF&G allows, the district
court's decision was based on the sufficiency of its affidavit, we
would be in a situation where the relevant issue of law would be
"fact based" and not "abstract." See Iqbal, 129 S. Ct. at 1947.
As we have seen, our precedent holds that the presence of even one
"unimportant" issue as the possible or likely basis for decision
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precludes our review under the collateral order doctrine. See
Bridge, 705 F.2d at 583. It was USF&G's responsibility to narrow
the issues in a way that would facilitate our evaluation of their
importance as well as our eventual review of the order. It is
apparent from USF&G's briefing -- which addresses all possible
bases for the district court's ruling and tries to label all of
them as important -- that they have not done so.
Moreover, even if we credit our hunch that the
dissolution may not have been based on the affidavit issue, we do
not think it is good enough, as a general matter, to reach a
conclusion that there are several other legal issues, perhaps all
of them important, that might explain the district court's
decision. In that scenario, if we were to address the merits of
each of those issues, there would still be a likelihood that we had
engaged in a hypothetical exercise unrelated to the district
court's actual decision.
The final judgment rule is concerned with judicial
economy. We would undermine that value too much if, despite our
willingness to examine the record of the proceedings below to
determine the basis for an unexplained interlocutory order, we
disregarded the continuing uncertainty about that basis and
expended judicial resources evaluating legal issues that may or may
not have been important to the district court. It is also
troubling that it would have been so easy for USF&G to eliminate
-33-
the uncertainty that bedevils this appeal - a simple, one-page
motion in the district court seeking clarification of the grounds
for dissolution would probably have sufficed. "It is up to
defendants to show that we have jurisdiction over their appeal of
the attachments; whether or not a stronger case for jurisdiction
could have been made, it has not been provided here." Micro Signal
Research, 417 F.3d at 34.
V.
We fully understand the likely implications of our
decision for USF&G. Under the circumstances, it has a substantial
claim that it will be harmed by the dissolution of the attachment,
and therefore this appeal meets Cohen's urgency requirement.
Espinal-Dominguez, 352 F.3d at 497 (noting that we have "equated
urgency with a showing of irreparable harm"). From the record, it
appears that USF&G will be unable to recover the majority of the
funds it has paid pursuant to the MSA due to Eastern's insolvency,
and Arch is poised to execute its state court judgment against
Eastern as soon as USF&G's attachment is dissolved, using its own
attachment on the same properties at issue here. Accordingly, our
statement in Lee-Barnes that, if and when the appellant ultimately
prevailed on the merits and obtained a final judgment, she "would
have ample opportunity to test the propriety" of the district
court's ruling declaring the bond null, may not apply here. 513
F.3d at 26 (quotation marks omitted). However, "the policy against
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piecemeal appeals almost never operates without some cost."
Quintana-Aguayo, 235 F.3d at 685 (quotation marks omitted).
"Immediate review is not justified merely because appellants will
recover less money at judgment, can identify some interest that
will be irretrievably lost or have reasons to prefer immediate
review." Id.
Although urgency is one of the requirements of the
collateral order doctrine, see, e.g., Espinal-Dominguez, 352 F.3d
at 497; Rodriguez v. Banco Central, 790 F.2d 172, 178 (1st Cir.
1986), we have made clear that all of the criteria must be
satisfied in order to find appellate jurisdiction pursuant to that
doctrine. See, e.g., Lee-Barnes, 513 F.3d at 25; United States v.
Carpenter, 494 F.3d 13, 25 (1st Cir. 2007). Accordingly, a showing
of urgency is a necessary, but not sufficient, condition for
jurisdiction.
Here, USF&G's failure to establish the specific basis for
the court's order is ultimately dispositive. While we have, in the
past, been willing to pore over the district court record to deduce
the basis for the court's ruling, we have gone on to evaluate
whether an issue is important enough to meet the requirements of
the collateral order doctrine only when we have been able to
discern the basis for the court's ruling with confidence. See
Sobol, 709 F.2d at 130. We have not been able to do that here.
Accordingly, we dismiss this appeal for lack of jurisdiction.
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So ordered.
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