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Entry of Stipulated Final Judgment Does Not Waive Right to Appeal

December 09, 2010

Decision icon Decision

Last Month at the Federal Circuit - January 2011

Judges: Linn, Dyk (author), Prost

[Appealed from: E.D. Tenn., Magistrate Judge Inman]

In Taylor Brands, LLC v. GB II Corp., Nos. 10-1151, -1294 (Fed. Cir. Dec. 9, 2010), the Federal Circuit denied GB II Corporation’s (“GB II”) motion to dismiss an appeal challenging the grant of SJ of noninfringement following the entry of a Stipulated Final Judgment.  The Court granted GB II’s motion to dismiss an appeal by Taylor Brands, LLC (“Taylor”) stemming from a denial of attorneys’ fees due to lack of standing.

Taylor owns U.S. Patent No. 6,651,334 (“the ’344 patent”), which relates to assisted opening knives.  Taylor sued GB II (d/b/a Columbia River Knife and Tool Company (“CRKT”)), alleging infringement of the ’344 patent.  CRKT counterclaimed, seeking DJs of noninfringement and invalidity.  Before discovery, the district court granted CRKT’s motion for partial SJ of noninfringement by a portion of the accused products.   

Following the grant of partial SJ, CRKT dismissed without prejudice its counterclaim for a DJ of invalidity.  The district court also later entered a Stipulated Final Judgment, jointly proposed by the parties.  This Stipulated Final Judgment granted CRKT’s motion for partial SJ and stipulated that CRKT had not infringed the ’344 patent; Taylor’s first amended complaint for infringement of the ’344 patent was dismissed with prejudice; Taylor’s motion for leave to amend its complaint to add certain additional counts was withdrawn; CRKT’s counterclaim seeking a DJ of invalidity was dismissed without prejudice; and CRKT’s motion for leave to amend its counterclaims to add certain additional counts was withdrawn.

Later, Taylor filed a notice of appeal from the Stipulated Final Judgment (“first notice of appeal”) in the Court challenging the district court’s grant of SJ of noninfringement of the ’344 patent.  CRKT moved to dismiss this notice of appeal on the ground that Taylor waived any right to appeal by consenting to the entry of a judgment against it without expressly reserving the right to appeal.  Taylor filed a second notice of appeal challenging the district court’s order denying CRKT’s motion for attorneys’ fees.  CRKT moved to dismiss Taylor’s second notice of appeal for lack of standing.

Under the Federal Rules of Civil Procedure, most judgments, including Rule 56 SJ orders, are not effective until “set out in a separate document” and entered by the clerk of the court.  Fed. R. Civ. P. 58.  When this procedure is required, courts commonly ask parties to stipulate to the form of the final judgment.  In Thomsen v. Cayser, 243 U.S. 66 (1917), the Supreme Court recognized that such stipulated judgments do not bar an appeal of the underlying judgment.  In Thomsen, the defendant-appellee moved to dismiss the appeal on grounds that “the judgment of the circuit court was entered in the form finally adopted at the request of the plaintiffs and by their consent, and the errors assigned by plaintiffs were waived by such request and consent.”  Slip op. at 5-6 (quoting Thomsen, 243 U.S. at 82).  The Supreme Court denied the motion, holding that “[t]he plaintiffs did not consent to a judgment against them, but only that, if there was to be such a judgment, it should be final in form instead of interlocutory, so that they may come to this court without further delay.”  Id. at 6 (alteration in original) (quoting Thomsen, 243 U.S. at 83).

After Thomsen, both the Supreme Court and the courts of appeal have repeatedly held that the entry of a stipulated final judgment after a dispositive ruling does not bar an appeal.  For example, in United States v. Safeco Insurance Co., 65 F. App’x 637, 638-39 (9th Cir. 2003) (unpublished), the Ninth Circuit found that the defendant “consent[ed] merely to the form of judgment,” because the “evidence, including the lack of a rational reason for abandoning its right to appeal, indicate[d] that [the defendant’s] signature was not intended to represent [its] consent to the court’s summary judgment rulings.”  Slip op. at 6-7 (alterations in original).

In the present case, the Court noted, “We are aware of no case in which a party was found to have waived its right to appeal due to the mere ministerial act of stipulating to the form of a final judgment.” Id. at 7.  The Court stressed the importance of distinguishing between consenting to the substance of the judgment (i.e., agreeing to what the substantive outcome of the judgment will be) and merely consenting to the form of judgment (including agreeing that the judgment will be final instead of interlocutory).  A party who consents to the substance of a judgment should be presumed to have waived its right to appeal—absent an express reservation of that right on the record—because voluntarily agreeing to an adverse substantive outcome indicates that the party has abandoned its underlying claims or defenses.  In contrast, no waiver exists—even without a reservation of appellate rights—when a party consents solely to the form of a judgment.  Merely agreeing to the form of a judgment does not in itself imply that the party agrees with the judgment’s substantive outcome or intends to abandon its position on the issues.

The Court found the litany of cases cited by CRKT distinguishable because they involved situations in which a party consented to the substance of an adverse judgment as opposed to merely the form.  Unlike the present case, the cases cited by CRKT all involved either settlement agreements or voluntary dismissals—both necessarily implying a party’s consent to the substantive outcome. 

According to the Court, Taylor’s consent to the entry of a final judgment, following a grant of SJ of noninfringement, applied only to the ministerial act of entering a judgment pursuant to Rule 58 implementing the SJ decision and could not be construed as consent to the substance of the SJ order.  The Court held that Taylor clearly consented only to the form of the judgment insofar as it effectuates the SJ order.  Thus, the Court denied CRKT’s motion to dismiss Taylor’s first notice of appeal.

The Court granted CRKT’s motion to dismiss Taylor’s second notice of appeal, appealing the part of the order denying CRKT’s motion for an award of attorneys’ fees.  The Court found Taylor was not aggrieved by that decision and thus lacked standing to challenge it on appeal.


Summary authored by Rebecca H. Duttry, Esq.