Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
3-11-1998
Michelson v. Citicorp Natl Ser
Precedential or Non-Precedential:
Docket 97-5157
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Filed March 11, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 97-5157
WILLIAM H. MICHELSON, on behalf of himself and all
others similarly situated,
Appellant
v.
CITICORP NATIONAL SERVICES, INC.,
f/k/a/ CITICORP ACCEPTANCE COMPANY, INC.
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 96-cv-00032)
Argued: October 28, 1997
Before: SLOVITER, NYGAARD and
KRAVITCH,* Circuit Judges
(Opinion Filed March 11, 1998)
Daniel A. Edelman
Cathleen M. Combs (Argued)
James O. Latturner
Jennifer R. Shapiro
Edelman & Combs
Chicago, IL 60603
Attorneys for Appellant
_________________________________________________________________
* Hon. Phyllis A. Kravitch, Senior United States Circuit Judge for the
Eleventh Circuit, sitting by designation.
Terri A. Mazur (Argued)
Victoria R. Collado
Mayer, Brown & Platt
Chicago, IL 60603
Attorneys for Appellee
OPINION OF THE COURT
SLOVITER, Circuit Judge,
Appellant William H. Michelson filed a class action
complaint in the district court of New Jersey against
Citicorp National Services, Inc. [CNS], a corporation
headquartered in the State of Missouri, alleging that CNS
imposed unreasonable early termination fees in connection
with its consumer automobile leases and that it failed
adequately to disclose the nature of those fees, in violation
of the Consumer Leasing Act [CLA], 15 U.S.C. S 1667b,1
and its implementing regulation.2 Before the court ruled on
class certification, Michelson sought leave to amend the
complaint to add 39 additional plaintiffs as additional class
representatives and filed a new motion for class certification
based on the proposed amended complaint. The district
court, relying on the authority of Colorado River Water
Conservation Distr. v. United States, 424 U.S. 800 (1976),
denied Michelson's motion, denied certification of a plaintiff
class, and sua sponte stayed Michelson's individual claim
pending the resolution of a related state court action in
Missouri. Michelson appeals from that order.
_________________________________________________________________
1. The relevant statutory section, generally termed the "reasonableness"
provision, states:
Penalties or other charges for delinquency, default, or early
termination may be specified in the lease but only at an amount
which is reasonable in the light of the anticipated or actual harm
caused by the delinquency, default, or early termination, the
difficulties of proof of loss, and the inconvenience or
nonfeasibility of
otherwise obtaining an adequate remedy.
15 U.S.C. S 1667b(b).
2. The disclosure requirements are contained in 12 C.F.R. S 213.
2
The thrust of Michelson's argument on appeal is that the
district court misapplied the Colorado River doctrine
because the federal and state actions involve different
parties and are not truly "parallel." Appellee CNS concedes
that the Colorado River doctrine would not be applicable to
certain elements of Michelson's case but argues that the
district court's order was entered only in part pursuant to
Colorado River and is not a final order. Accordingly, CNS
contends that this court lacks jurisdiction over Michelson's
appeal, which is the threshold question before us.)
I.
The convoluted procedural history of this case began on
May 6, 1991 when Merrilou Kedziora3 filed a class action
against CNS in Illinois state court. The complaint alleged,
inter alia, that the manner in which CNS calculated early
automobile lease termination fees and charges, known as
the Rule of 78s or the Sum-of-the-Digits method, invariably
favored the lessor and was unreasonable. In addition, the
complaint alleged that CNS inadequately disclosed the
effect of its use of the Rule of 78s in its lease agreements.
That suit, premised on the CLA, the Missouri
Merchandising Practices Act, Mo. Rev. Stat. SS 407.010, et
seq., [MMPA] and Illinois state law, was removed to the
United States District Court for the Northern District of
Illinois on June 4, 1991.
On November 21, 1991, before a plaintiff class was
certified, the district court in Illinois granted CNS's motion
to dismiss the disclosure claims under the CLA for failure
to state a claim upon which relief could be granted. See
Kedziora v. Citicorp Nat'l. Servs., Inc., 780 F. Supp. 516,
529-31 (N.D. Ill. 1991), aff 'd in relevant part, Channell v.
Citicorp Nat'l. Servs. Inc., 89 F.3d 379, 383 (7th Cir. 1996).
This left pending the plaintiffs' claims under state law and
their claim that CNS's use of the Rule of 78s was
unreasonable under the CLA. Several months later, in
March of 1992, the Illinois plaintiffs voluntarily dismissed
their state law claims, and refiled their MMPA claim in
_________________________________________________________________
3. Originally, Thomas Kedziora was also named as a plaintiff but he
dropped out of the suit during the pendency.
3
Missouri state court. The latter claim alleged that the use
of the Rule of 78s to determine early termination
deficiencies was unreasonable under Missouri law. The
corresponding federal claim under the CLA was not
asserted in the Missouri action, however, because that
claim was still pending in federal court in Illinois. The
Missouri state court complaint pleaded only an opt-in class
action. Michelson, the plaintiff here, did not opt in.
On October 15, 1992, a plaintiff class was certified in the
action pending in federal court in Illinois consisting of all
those with private automobile leases assigned to CNS as
defined in the complaint and who were assessed early
termination or default deficiencies. See Kedziora, No. 91 C
3428, 1992 WL 300982 (N.D. Ill., Oct. 15, 1992). Michelson
was a member of that class. Supp. App. at 101. Several
years later, the district court in Illinois narrowed the scope
of the plaintiff class. See Kedziora, 883 F. Supp. 1155 (N.D.
Ill. 1995). It found that Kedziora's lease was terminated
involuntarily and that CNS did not employ the Rule of 78s
in cases of involuntary termination. Thus, the court
concluded that Kedziora, the named plaintiff in that case,
did not have standing to pursue the claims of the members
who had terminated their leases voluntarily and were
challenging the reasonableness of the Rule of 78s. Id. at
1159-60. This had the effect of excluding many former class
members, including Michelson. Consequently, as of the
date of that ruling, Michelson was not a party to any
relevant litigation pending in any court.
On January 5, 1996, Michelson, a New Jersey resident,
filed the class action complaint in the case at bar in the
United States District Court for the District of New Jersey.
He alleged that in April of 1988 he had leased a new Eagle
Premier LX for 48-months. Under the lease, Michelson's
payments totaled $14,472, including a finance charge or
"lease charge" of $4,263.84. In September of 1991, he
terminated the lease because, according to him, the car was
a "lemon." CNS then determined that Michelson still owed
$1,814.49 in remaining payments (calculated pursuant to
the Rule of 78s) and $5,221.29 for the residual value of the
car. Michelson claims he paid the $1,814.49 in remaining
payments upon termination. CNS then sold the car at
4
auction for $4,040, applied the proceeds toward
Michelson's ultimate liability and sought only $1,171.29
from him. Michelson contested that amount but forwarded
to CNS "under protest" a check for $500 "to settle this
account. . . for [the] residual value on the resale."
Michelson's complaint, as amended, alleged in Count One
that CNS violated the CLA's disclosure provisions for failing
to explain the Rule of 78s and in Count Two that CNS's
practice of calculating early termination charges using the
Rule of 78s was unreasonable under the CLA. Michelson
asserted no claim under the MMPA or any other state
statute.
In May of 1996, Michelson moved to certify a plaintiff
class of those lessees who were assessed charges for early
termination, delinquency or default. Before ruling on that
motion, the district court turned its attention to CNS's
pending motion to dismiss, and granted the motion with
respect to Count One of the second amended complaint (the
disclosure count) but denied the motion with respect to
Count Two (the "reasonableness" claim).
Thereafter, at a pretrial conference with the magistrate
judge on October 23, 1996, CNS argued that Michelson's
$500 payment operated as a settlement of his claim, which
jeopardized his standing to lead the proposed class of
approximately 3,000 plaintiffs. Although Michelson
disputed the issue and the issue was not resolved, the
magistrate judge entered an order on October 29, 1996
giving Michelson leave to join an additional proposed class
representative. Consequently, Michelson's third amended
complaint proposed the addition of 39 new plaintiffs. CNS
opposed the amendment, arguing that because all 39
proposed plaintiffs were class members in the Missouri
state court litigation, denial of the amendment was
appropriate under the doctrine enunciated by the Supreme
Court in Colorado River Water Conservation Dist. v. United
States, 424 U.S. 800 (1976). CNS did not challenge the
maintenance of Michelson's individual claim.
The district court held a hearing on the proposed
amendment on March 10, 1997. At that time, the court
expressed concern that although the New Jersey action was
5
based on the federal statute and the pending Missouri state
court action was based on Missouri state law, it appeared
that the question of the reasonableness of the Rule of 78s
was the primary issue in both actions and the damages
sought in both actions were essentially the same. Michelson
sought to distinguish the actions on the grounds that
statutory damages were available in the federal action
whereas only compensatory and punitive damages were
available in the Missouri action. He also contended that the
ruling in Missouri would not be dispositive of his action.
Without deciding the res judicata issue raised by CNS as
one of the bases for its contention that the 39 proposed
plaintiffs were inappropriate class representatives, the court
commented that Michelson's individual action would
remain even if the 39 proposed plaintiffs were eventually
barred after completion of the Missouri action. Likewise,
the court recognized that other potential members of the
New Jersey class who were not parties to the Missouri
action would not be barred by a Missouri judgment.
The court denied the motion to amend the complaint to
add the 39 proposed plaintiffs and the motion for class
certification, and stayed proceedings on Michelson's
individual claim pending resolution of the Missouri action.
It delivered an oral opinion, stating at the outset: "I find
that the basic thrust of the determination I am about to
make is controlled by Colorado River Water Conservation
Dis. v. United States, 424 U.S. 800, 817 (1976)." Supp. App.
at 124. After discussing Colorado River, the court
concluded:
So it seems as though most, if not all, of the
applicable Colorado River factors would cause me to
dismiss or stay this matter, and I do this by way of a
qualitative rather than quantitative analysis. It is not a
mechanical checklist, but we do it weighing these
factors qualitatively. I find this matter should be
dismissed under the Colorado River Doctrine, and
therefore, the motion to amend the complaint is
denied, and the motion for class certification is denied.
With regard to what is left, we will stay Mr.
Michaelson's [sic] matter pending resolution in
Missouri and see what happens out there. He has the
6
option, if he wishes, to jump ship there, to board that
other steamship in Missouri, I suppose, but I am not
making findings as to that.
Supp. App. at 129.
On appeal, Michelson argues that the Colorado River
doctrine is inapplicable on the facts of this case, and that
therefore the order entering the stay should be reversed. In
addition, he argues that the denial of class certification
should be reversed because it had "the effect" of
erroneously staying the claims of the potential class
members under Colorado River and was an abuse of
discretion. We note that Michelson has not specifically
listed as an issue presented on appeal the question whether
the court erred in denying the motion to amend the
complaint. Nevertheless, Michelson argues in his reply brief
that he is also appealing the denial of his motion to amend
the complaint and that that issue was preserved in his
notice of appeal.
II.
A.
We turn to consider whether we have jurisdiction over
any portion of the order Michelson has appealed. It is well-
settled that orders granting or denying motions to add
parties are not "final" within the meaning of 28 U.S.C.
S 1291. In McClune v. Shamah, 593 F.2d 482 (3d Cir.
1979), this court, after noting that plaintiffs had not
appealed from the district court's denial of their motion to
amend the complaint to add a party, commented "nor could
they [have appealed] since it is not a final order appealable
under 28 U.S.C. S 1291." Id. at 486. More recently we
quoted the statement from a decision of the Tenth Circuit
that " `although an order refusing or permitting the filing of
an amended complaint joining an additional party is a
discretionary action by the trial court and subject to
appellate review as part of an ultimate final judgment, the
order itself is not appealable in isolation.' " Fowler v. Merry,
468 F.2d 242, 243 (10th Cir. 1972) (per curiam) (quoted in
Powers v. Southland Corp., 4 F.3d 223, 232 (3d Cir. 1993)).
7
The Fowler court also stated that denial of an amendment
does not "present[ ] a situation indicating allowable review
under the exceptional doctrine of Cohen . . .," Fowler, 468
F.2d at 243, a view with which we also agreed. Powers, 4
F.3d at 232.
Similarly, it has been firmly established for nearly two
decades that orders granting or denying class certification
are not appealable before a final order is issued. See
Coopers & Lybrand v. Livesay, 437 U.S. 463, 469-71 (1978)
(order denying class certification was not a final order
under the `death knell' doctrine nor was it appealable as a
collateral order); Georgine v. Amchem Products, Inc., 83 F.3d
610, 624 (3d Cir. 1996), aff'd, 117 S. Ct. 2231 (1997);
Favia v. Indiana Univ. of Pennsylvania, 7 F.3d 332, 338 n.9
(3d Cir. 1993).
Accordingly, our jurisdiction at this juncture to review
the district court's denial of Michelson's motion to amend
the complaint and its denial of class certification will
depend on whether the district court's stay of Michelson's
individual claim can be deemed a final order.
B.
We consider then whether that portion of the district
court's order staying Michelson's individual claim pending
the resolution of the Missouri action was "final" within the
meaning of 28 U.S.C. S 1291. In order to determine whether
the stay order is final, we must look to its effect. See
Aluminum Co. of America v. Beazer East, Inc., 124 F.3d 551,
557 (3d Cir. 1997); Marcus v. Township of Abington, 38
F.3d 1367, 1370 (3d Cir. 1994). The effect of afinal order
is typically two-fold. First, it will dispose of all claims
presented to the district court and, second, it will leave
"nothing further for the district court to do." Aluminum Co.
of America, 124 F.3d at 557 (citing Catlin v. United States,
324 U.S. 229, 233 (1945)). See also Quackenbush v. Allstate
Ins. Co., 116 S. Ct. 1712, 1718 (1996) (stating that a
decision is ordinarily considered final and appealable under
S 1291 only if it ends the litigation on the merits and leaves
nothing for the court to do but execute the judgment);
Christy v. Horn, 115 F.3d 201, 203 (3d Cir. 1997). Thus,
8
"there is no final order if claims remain unresolved and
their resolution is to occur in the district court." Aluminum
Co. of America, 124 F.3d at 557.
The issue of whether and under what circumstances a
stay order may be considered final and appealable has
spawned a considerable body of case law. Of course, by
definition an order that stays the proceedings for a finite
period of time, would, without more, merely postpone a
final disposition in the district court, and therefore would
lack the essential elements of finality. Thus, in Moses H.
Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1
(1983), Justice Brennan referred to "the usual rule that a
stay is not ordinarily a final decision for purposes of
S 1291, since most stays do not put the plaintiff effectively
out of court." Id. at 10 n.11 (internal quotations omitted).
This court has had numerous occasions to iterate that
principle. See Marcus, 38 F.3d at 1370 ("Stay orders
normally are not appealable final orders because they
merely delay proceedings in the suit."); Schall v. Joyce, 885
F.2d 101, 104 (3d Cir. 1989) (recognizing that Moses H.
Cone "reaffirm[ed] the usual rule that a stay is not
ordinarily a final decision for purposes of S 1291") (citations
omitted).
Not all stays fall within this general rule. In Moses H.
Cone, the Court reasoned that where a stay order has the
practical effect of a dismissal, a reviewing court may treat
it as final. Moses H. Cone, 460 U.S. at 9-10. The particular
stay in that case was one entered pursuant to Colorado
River, sometimes referred to as the Colorado River
abstention doctrine, under which a federal court may, in
exceptional circumstances, dismiss a federal suit"due to
the presence of a concurrent state proceeding for reasons of
wise judicial administration." Colorado River, 424 U.S. at
818.
The Moses H. Cone case arose when the contractor for a
construction project for a hospital requested arbitration of
its dispute with the hospital, as provided for in the
contract. The hospital sought a declaratory judgment in
state court that there was no right to arbitration. The
contractor filed a diversity action in federal court to compel
arbitration under section 4 of the Arbitration Act. The
9
district court stayed the federal proceedings pursuant to
the Colorado River doctrine, and the contractor appealed.
The Court of Appeals held it had jurisdiction over the
appeal and reversed. The Supreme Court upheld the
exercise of appellate jurisdiction by the Court of Appeals.
After acknowledging the general rule that stays are not final
orders for purposes of appeal, the Court held that the stay
in that case was final and appealable because"a stay of the
federal suit pending resolution of the state suit meant that
there would be no further litigation in the federal forum;
the state court's judgment on the issue [of arbitrability]
would be res judicata." Id. at 10.
The Court enunciated what has since been recognized as
one of the principal exceptions to the nonappealability of a
stay order: when a stay forces the plaintiff "effectively out of
federal court" by requiring "all or an essential part of the
federal suit to be litigated in a state forum" or"when the
sole purpose and effect of the stay is precisely to surrender
jurisdiction of a federal suit to a state court," the order is
final and appealable. Id. at 10 n.11. Supreme Court
decisions both before and after Moses H. Cone have
sustained the appealability of district court orders declining
to exercise jurisdiction under various abstention doctrines.
See Idlewild Liquor Corp. v. Epsteen, 370 U.S. 713, 715 n.2
(1962) (per curiam) (court of appeals "properly rejected"
argument that district court order effectively staying an
action for the same reasons underlying Pullman abstention
was not final); Quackenbush, 116 S. Ct. at 1719-20 (order
remanding to state court on grounds of Burford abstention
was final).
Following the decision in Moses H. Cone, this court has
consistently applied the finality analysis articulated there in
determining our own jurisdiction to hear appeals from
orders staying federal cases in deference to actions
proceeding simultaneously in state court. See , e.g., Marcus,
38 F.3d at 1370; Trent v. Dial Medical of Florida, Inc., 33
F.3d 217, 222 (3d Cir. 1994); Schall, 885 F.2d at 104-05;
Cheyney State College Faculty v. Hufstedler, 703 F.2d 732,
735-36 (3d Cir. 1983). That analysis usually has entailed
an inquiry into the effect of the district court's stay to
ascertain whether the court has surrendered its jurisdiction
10
to a state court. This necessitates comparing the nature of
the claims presented in the two actions and considering the
extent to which the state court judgment will impact on the
federal action. See generally, Moses H. Cone, 460 U.S. at 9-
13; Marcus, 38 F.3d at 1370-72; Trent, 33 F.3d at 220-22;
Schall, 885 F.2d at 104-05; Cheyney, 703 F.2d at 735-36.
Michelson makes the broader argument that all stays
entered pursuant to the Colorado River doctrine are
appealable final orders. Although at first blush this appears
to be an expansion of finality, further consideration
suggests that Michelson's contention is not without basis,
although he cites no case that has articulated the rule in
precisely that manner. Examination of Moses H. Cone and
the cases thereafter support the view that if the stay
entered by the district court meets the threshold
requirements of the Colorado River doctrine, i.e. the state
proceeding for which the federal case has been stayed is in
fact parallel in parties and claims and will have res judicata
effect on all or an important part of the subsequent federal
case, then the order is appealable. The difficulty in
application arises in considering the appealability of a stay
when the district court has merely invoked the Colorado
River doctrine to justify the stay order entered, but the
circumstances of the case do not correspond with the
parameters of that doctrine. In that situation, there would
be no appellate jurisdiction.
Our decision in Marcus serves as an illustration of the
point. In that case, a plaintiff who sued a township and
local officials under 42 U.S.C. S 1983 appealed from a stay
pending the resolution of a related criminal proceeding,
nominally entered pursuant to the Colorado River doctrine.
Marcus, 38 F.3d at 1370. In dismissing the appeal for want
of jurisdiction, we stated that notwithstanding the district
court's invocation of Colorado River, "[a]ppellate review is
inappropriate here because the stay entered by the district
court merely delays the federal litigation and does not
effectively terminate it." Id. Specifically, we noted that the
state court judgment would have no res judicata effect on
the federal litigation and that "[o]nce the stay is lifted, the
state court's disposition of the criminal proceeding will have
a negligible impact on the subsequent federal adjudication."
Id. at 1371. We then explained further that:
11
We realize, of course, that most stay orders entered
upon the authority of Colorado River Water
Conservation Dist. v. United States, are subject to
immediate appellate review. As the Supreme Court
pointed out in Moses H. Cone, the Colorado River
doctrine applies only if there is parallel state court
litigation involving the same parties and issues that
will completely and finally resolve the issues between
the parties and, accordingly, a "decision to invoke
Colorado River, necessarily contemplates that the
federal court will have nothing further to do in
resolving any substantive part of the [federal] case,
whether it stays or dismisses." In other words, because
of the requirement of a parallel state court proceeding,
stays entered under the authority of Colorado River will
normally have the effect of putting the plaintiff
"effectively out of federal court" and surrendering
jurisdiction to the state tribunal.
In this case, the district court cited Colorado River in
support of its decision to stay the proceedings before it.
But our jurisdiction does not turn on the authority
cited by the district court. It turns, rather, on the effect
of the order that the district court had entered. If that
order has deprived the federal plaintiff of a federal
adjudication to which he or she may be entitled, it is
a final order under Moses H. Cone and subject to
immediate appellate review. If, as here, the order only
serves to delay the federal adjudication, it is notfinal
and not appealable.
Marcus, 38 F.3d at 1371-72 (internal citations and footnote
omitted). After Marcus then, it is clear that the justification
for the stay articulated by the district court is not
determinative of our appellate jurisdiction, nor could it be.
Id.
The distinction between the appealability of a Colorado
River stay and a stay that merely delays the federal
litigation is borne out by review of other leading cases.
Those which have sustained appellate jurisdiction were all
cases in which the essential elements of the Colorado River
doctrine were present, i.e. parallel parties and parallel
claims as well as a realistic possibility that the federal
12
action would thereafter be precluded. See, e.g., Wilton v.
Seven Falls Co., 115 S. Ct. 2137 (1995) (reviewing Colorado
River stay where district court contemplated that state
court would resolve all issues); Trent, 33 F.3d at 225
(holding that court had jurisdiction over appeal from
Colorado River stay where all or essential part of plaintiff 's
case would proceed in state court); National R.R. Passenger
Corp. v. Providence & W.R.R., 798 F.2d 8, 10 (1st Cir. 1986)
(appellate jurisdiction existed over Colorado River stay
because res judicata effect of state judgment would render
stay "the equivalent of a dismissal"). See generally 15A
Wright, Miller & Cooper, Federal Practice and Procedure
S 3914.13 (2d ed. 1992) (citing cases).
On the other hand, cases where, despite nominal
reference to Colorado River by the district court, the federal
plaintiff would not be precluded from proceeding with the
federal claim in due course have been held unappealable.
See, e.g., Marcus, 38 F.3d at 1371; cf. United States v.
Section 17 Township 23 North, 40 F.3d 320, 322 (10th Cir.
1994) (action stayed in deference to state court proceeding
not final in the usual sense absent threat of res judicata
effect); Boushel v. Toro Co., 985 F.2d 406, 410 (8th Cir.
1993) (stay entered pending foreign litigation notfinal
because the "substance of the order did not effectively end
the federal litigation" and "further proceedings in the
federal court" were ensured if necessary).
It is important to emphasize the limited extent to which
stays are appealable. In Quackenbush, the Court
characterized the result in Moses H. Cone as having been
compelled by precedent that was " `limited to cases where
(under Colorado River, abstention, or a closely similar
doctrine) the object of the stay is to require all or an
essential part of the federal suit to be litigated in a state
forum,' " 116 S. Ct. at 1719 (quoting Moses H. Cone, 460
U.S. at 10 n.11) (emphasis added). Similarly, this court
stated in Trent that "[i]n Moses H. Cone, the Supreme Court
held that a stay grounded in the pendency of similar
litigation in state court is appealable if it `effectively
deprive[s] the plaintiff of its right to a federal forum. . . .' "
33 F.3d at 221 (emphasis added).
13
Thus, the task of the appellate court when presented
with what is ostensibly a Colorado River stay is to make an
initial decision whether the stay may have a determinative
effect on the federal suit. If it is arguable that the stay will
place a plaintiff such as Michelson effectively out of federal
court by forcing him or her to rely on a state court
judgment, then it is appealable under the authority of
Moses H. Cone.
We recognize that in one sense, the decision as to
appealability of a stay may be seen as a preview of the
issues that will inform the ultimate decision on the
appropriateness of the stay itself. However, once the
appeals court takes jurisdiction, it will have the opportunity
to examine in detail all of the factors relevant to the
decision that "exceptional circumstances" justified the
district court in abstaining from exercising "its unflagging
obligation" to hear the case. Colorado River, 424 U.S. at
817. See also Moses H. Cone, 460 U.S. at 16. The appeals
court will then be in a position to decide whether the court
abused its discretion in entering the stay.
Significantly, both parties to the instant appeal agree that
the resolution of the Missouri action will have little or no
effect on Michelson's individual claim in federal court. As
Michelson concedes, "a finding in the Missouri state action
here resolves nothing for the [federal] trial court. The
Missouri state court's holding on Missouri State law
certainly does not bind, and may not even aid the trial
court here with its determination of federal law." Reply Br.
at 3.
It follows that we cannot characterize the stay as
equivalent to a dismissal. Because Michelson is not a party
to the Missouri action, once that action is resolved and the
stay is lifted, he will not be precluded from proceeding with
his federal claims by principles of res judicata. Similarly,
because the state court action is premised only on Missouri
law, whereas Michelson's federal suit is based exclusively
on the federal CLA, a determination of the reasonableness
of particular fees and penalties under Missouri law will not
be determinative of the similar issue in Michelson's federal
suit. See Wiskup v. Liberty Buick Co., Inc., 953 F. Supp.
958, 969 (N.D. Ill. 1997) ("Given the wide variation among
14
the states regarding the permissibility of the Rule of 78s,
importing a state standard into the CLA would simply
create confusion."). Thus, regardless of the result in the
Missouri action, the stay order will not have the type of
legal or practical effect as to thrust Michelson's federal CLA
claim "effectively out of court." Moses H. Cone, 460 U.S. at
10.
Indeed, it appears from the argument in the district court
that the court did not expect Michelson's federal claim to be
disposed of by the Missouri action unless Michelson were to
opt into the Missouri class -- something Michelson has
never displayed any inclination to do. The court rejected
CNS's argument that the entire federal action would"fall[ ]
apart" after judgment was rendered in Missouri, and
reminded counsel that "[i]t doesn't fall apart" because,
assuming Michelson is not deemed to have settled with
CNS, Michelson's individual claim would remain. Thus,
although the district court did not make its reasoning
explicit, there is nothing to suggest that the court was
intentionally surrendering its jurisdiction to the state court
rather than merely imposing a finite delay. And certainly,
there is nothing to suggest that Michelson could not return
to the district court to request that the stay be lifted before
the Missouri action is resolved.
Accordingly, regardless of the authority cited when the
district court entered the stay, the court's order will not
and clearly was not intended to foreclose Michelson from
presenting any of his claims in federal court and therefore
is not a final judgment on the merits. See Marcus, 38 F.3d
at 1371 ("The `mere prospect of delay' does not create
appellate jurisdiction where it would not otherwise exist.")
(quoting Hoots v. Pennsylvania, 587 F.2d 1340, 1347 (3d
Cir. 1978)).
This case illustrates the problem that an appellate court
faces when considering whether it has jurisdiction over an
appeal of a stay when the basis for the stay is not clearly
articulated by the district court. CNS emphasizes that it
never asked that Michelson's individual claim be stayed
under Colorado River, and agrees with Michelson that
application of that doctrine would be erroneous. Appellee's
Br. at 10. It argues that the district court did not find that
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Michelson's individual claim should be stayed under
Colorado River and only relied on that doctrine in denying
leave to amend the complaint. Admittedly, neither party
offers a cogent basis for the stay, and the district court's
oral opinion is somewhat ambiguous on this point. In light
of our ultimate decision that we lack jurisdiction, we do not
address that issue, although we share with our colleague
Judge Garth the frustration of being "prohibited from
reviewing . . . those Colorado River abstention rulings
involving state and federal proceedings that are neither
parallel nor identical, and which are thus erroneous."
Marcus, 38 F.3d at 1374 (dissenting opinion). That
frustration, however, is the price the judicial system exacts
for its commitment to limiting appeals in the interest of
orderly adjudication.
C.
Michelson suggests that we have appellate jurisdiction to
review the stay order under the collateral order doctrine,
the alternate approach to finality enunciated by the
Supreme Court in Cohen v. Beneficial Industrial Loan Corp.,
337 U.S. 541 (1949). Under that "narrow exception" we may
review an order before final judgment on the merits that
"(1) finally resolves a disputed question; (2) raises an
important issue distinct from the merits of the case; and (3)
is effectively unreviewable on appeal from a final judgment."
Christy, 115 F.3d at 203-04. See also Quackenbush, 116 S.
Ct. at 1718; In re Ford Motor Co., 110 F.3d 954, 958 (3d
Cir. 1997). All three elements must be satisfied. Christy,
115 F.3d at 204.
We need not address the first and third elements because
it is clear that the district court's stay order does not satisfy
the second element. On one hand, a stay order "that
amounts to a refusal to adjudicate the merits plainly
presents an important issue separate from the merits."
Moses H. Cone, 460 U.S. at 12. Thus, where a plaintiff
cannot return to federal court following the resolution of
the state court action, the stay amounts to a refusal by the
district court to address the merits of the federal action,
and the importance and separability prong of the collateral
order doctrine is satisfied. Id.; cf. Quackenbush, 116 S. Ct.
16
at 1719-20 (holding that remand order based on Burford
abstention doctrine was an appealable collateral order, by
analogy to treatment of Colorado River stay in Moses H.
Cone ); Terra Nova, 887 F.2d at 1220 (stay entered in favor
of state court proceeding satisfied "importance" element
where stay had the practical effect of foreclosing litigation
in federal court).
On the other hand, if the stay reflects merely the district
court's imposition of a finite period of delay before the court
completes its adjudication, the importance prong of the
Cohen test is not satisfied. In our decision in Rolo v.
General Development Corp., 949 F.2d 695 (3d Cir. 1991), a
case not directly implicating the Colorado River doctrine, we
analogized to the Colorado River cases and distinguished
between stay orders that effectively terminate the litigation,
as in Moses H. Cone, and those that merely impose delay.
Id. at 701. With respect to the latter, we reasoned that "[i]t
does not follow [from Moses H. Cone] that an order which
does no more than establish the timetable for litigating the
merits of a controversy resolves an important issue
completely separate from the merits." Rolo, 949 F.2d at 701
(internal quotations omitted). Subsequently in Marcus, 38
F.3d at 1371 n.4, we held that our reasoning in Rolo was
also applicable to stays entered pursuant to Colorado River.
As we detailed above, regardless of the outcome in the
state litigation Michelson's individual claim in federal court
will remain substantially, perhaps entirely, unaffected.
Thus, because "there will be further proceedings of
substance in the district court," Rolo, 949 F.2d at 701, after
the Missouri action is concluded, the district court's stay
order fails to satisfy the "importance" prong of the collateral
order doctrine, and we may not review it as a collateral
order.
III.
For the reasons set forth, we conclude that we have no
jurisdiction over the order of the district court denying
Michelson's motion to certify a class, denying leave to
amend the complaint to add additional plaintiffs, and
staying the proceedings. The fact that we find the order
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unappealable does not mean that an indefinite stay entered
for no supportable reason, in this or any other case, is
insulated from appellate review. Mandamus remains an
available remedy in appropriate cases. See Cheyney State
College Faculty, 703 F.2d at 736; Crotty v. City of Chicago
Heights, 857 F.2d 1170, 1174 n.10 (7th Cir. 1988). We
express no opinion as to whether this is an appropriate
case for mandamus.
For the foregoing reasons, we will dismiss the appeal.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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