JERRY RANDALL WATSON V. BEST FINANCIAL SERVICES, INC.
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2006-SC-000393-DG
JERRY RANDALL WATSON
APPELLANT
ON REVIEW FROM COURT OF APPEALS
CASE NUMBER 2006-CA-000203
TAYLOR CIRCUIT COURT NO. 02-CI-00291
V.
BEST FINANCIAL SERVICES, INC .
APPELLEE
OPINION OF THE COURT BY JUSTICE MINTON
AFFIRMING
Kentucky Rules of Civil Procedure (CR) 54.02 allows a trial court dealing with
multiple claims or multiple parties in a single action to grant a final judgment as to fewer
than all of the claims or parties upon a determination that there is no just reason for
delay. In this employment contract case, the trial court used this procedural device in
granting a final judgment in favor of the employer on all of the employee's claims, which
left only the employer's counterclaim in the action . But the employee failed to file his
notice of appeal within thirty days of the entry of the judgment.' When the employee
finally did file his notice of appeal six months after the entry of the judgment, the
employer moved the Court of Appeals to dismiss the appeal . The Court of Appeals
dismissed the appeal as untimely . We affirm because we agree that the trial court had
1
CR 73.02.
the power under CR 54.02 to grant a final judgment on less than all of the claims and to
certify to the appellate court that there was no just cause for delay. And having made
that determination in this case, Watson ignored the trial court's certification to his peril.
I . UNDERLYING FACTS AND PROCEDURAL HISTORY .
The employer, Best Financial Services, Inc., hired the employee, Jerry Randall
Watson, to work as the branch manager in one of Best Financial's company offices.
The parties entered into a written employment agreement, and the branch office opened
for business several weeks later.
Just less than five years after the opening of the branch office, believing that Best
Financial had breached the employment agreement in failing to pay him tenure bonuses
to which he was entitled, Watson unilaterally caused (in a series of four deposits) a total
of $228,782 .96 to be transferred from Best Financial to his attorney's escrow account.
After making the last deposit, Watson sent Best Financial a letter in which he notified
the company of the transfers . Ten days later, Best Financial terminated Watson's
employment .
About a month after his termination, Watson sued Best Financial for (1) breach of
the employment agreement, (2) unpaid compensation (wages and bonuses), and
(3) defamation. Best Financial, in response, filed an answer and counterclaim . The
bases for the counterclaim were (1) breach of the confidentiality clause of the
employment agreement and (2) breach of the agreement's covenant not to compete
following Watson's termination . And Best Financial later amended the counterclaim to
include a count for breach of fiduciary duty .
Over one year after Best Financial filed its answer and counterclaim, it moved the
trial court for summary judgment in its favor on Watson's claims . Based on the trial
court's interpretation of the employment agreement and the effect of the parties'
undisputed conduct, it granted partial summary judgment to Best Financial on July 28,
2004. After the partial summary judgment, the only remaining issue concerning
Watson's claim was his annual bonus for the time period of July 1, 2001, through
March 20, 2002. Based on the trial court's findings and conclusions pertaining to the
proper time period for calculating Watson's annual bonus, Best Financial paid Watson
his annual bonus .
Having resolved all of the issues alleged in Watson's complaint, at the request of
counsel for both parties, the trial court issued the following order, which the court clerk
entered on July 25, 2005 :
The parties appeared before the on [sic] Court [sic] June 9, 2005[,]
and advised the Court that the issue of the annual bonus due to the
Plaintiff by the Defendant for the period of July 1, 2001 [,] to March 20,
2002[,] has been resolved by the parties in accordance with the Court[']s
,Order. By virtue of the resolution of the one outstanding claim, all claims
contained in the Plaintiff's Complaint have been resolved either through
payment or through entry of the Partial Summary Judgment entered on
July 28, 2004. The Court is otherwise sufficiently advised ;
IT IS HEREBY ORDERED AND ADJUDGED that there is no just
cause for delay and the Partial Summary Judgment entered on July 28,
2004[,] and the Order ruling [sic] entered on April 27, 2005[,] [denying
Watson's motion to alter, amend, or vacate the partial summary judgment]
are final and appealable .
The circuit clerk distributed copies of the order to the attorneys of record.
At the time, however, Watson's current counsel had a motion pending to be
substituted as Watson's counsel of record . The trial court heard the motion for
substitution of counsel on August 16, 2005, and granted the motion the same
day.
Following the substitution, neither party filed a notice of appeal within thirty
days of the trial court's final and appealable order. Instead, Watson's current
counsel attempted to amend the complaint to assert additional claims . The trial
court denied the attempt. Following the denial, by agreement of the parties, the
trial court issued an agreed order dismissing Best Financial's counterclaims
without prejudice . The circuit clerk entered this agreed order on December 29,
2005.
Watson then filed a notice of appeal . On motion of Best Financial under
CR 76.34(6), the Court of Appeals dismissed the appeal because it concluded
that the appeal was untimely . In its order dismissing the appeal, the Court of
Appeals reasoned that the trial court's order of July 25, 2005, which included the
language certifying the full disposition of Watson's complaint as final and
appealable, triggered the running of the thirty-day time period for Watson to file
his notice of appeal. We agree with the Court of Appeals .
II . RESOLUTION OF THE ISSUE .
Under CR 54 .02(1),
(1) When more than one claim for relief is presented in an action, whether
as a claim, counterclaim, cross-claim, or third-party claim, or when
multiple parties are involved, the court may grant a final judgment upon
one or more but less than all of the claims or parties only upon a
determination that there is no just reason for delay . The judgment shall
recite such determination and shall recite that the judgment is final . In the
absence of such recital, any order or other form of decision, however
designated, which adjudicates less than all the claims or the rights and
liabilities of less than all the parties shall not terminate the action as to any
of the claims or parties, and the order or other form of decision is
interlocutory and subject to revision at any time before the entry of
judgment adjudicating all the claims and the rights and liabilities of all the
parties .
CR 54.02 is substantively equivalent to Federal Rules of Civil Procedure
(FRCP) 54(b) . Federal case law is instructive on the purpose of the rule. It was
promulgated in its original form to meet the need-demonstrated in multiple claims
actions in which claims may be joined liberally-"for relaxing the restrictions upon what
should be treated as a judicial unit for purposes of appellate jurisdiction ." 2 Sound
judicial administration following the implementation of rules of civil procedure governing
joinder of claims "did not require relaxation of the standard of finality in the disposition of
the individual adjudicated claims for the purpose of their appealability .' 3 "It did,
however, demonstrate that, at least in multiple claims actions, some final decisions, on
less than all of the claims, should be appealable without waiting for a final decision on
all of the claims." 4. The rule was a departure from "the former general practice that, in
multiple claims actions, all the claims had to be finally decided before an appeal could
be entertained from a final decision upon any of them.
,5
In any case presenting multiple claims or multiple parties, CR 54 .02, like
FRCP 54(b), vests the trial court-as the tribunal most familiar with the case--with
discretion to "release for appeal final decisions upon one or more, but less than all,
Sears, Roebuck & Co. v. Mackey , 351 U.S . 427,432-33, 76 S.Ct . 895, 100 L.Ed. 1297
(1956) ; see Curtiss-Wright Corp . v. General Electric Co. , 446 U .S. 1, 3, 100 S.Ct . 1460,
64 L.Ed.2d 1 (1980) (citing Sears in examining the use of FRCP 54(b)) .
Id. at 432.
Id.
Id. at 434.
claims in multiple claims actions. ,6 In such a case, the trial court functions as a
"dispatcher ."7 If the trial court grants a final judgment upon one or more but less than all
of the claims or parties, that decision remains interlocutory unless the trial court makes
a separate determination that "there is no just reason for delay."8 And the trial court's
judgment shall recite such determination and shall recite that the judgment is final .9
A reviewing court, in turn, examines the trial court's certification on two levels.
First, an appellate court must determine that the trial court rendered a final adjudication .
upon one or more claims in litigation .'° A final adjudication is a judgment that
conclusively determines the rights of the parties in regard to that particular phase of the
proceeding." Second, once an appellate court determines that the trial court rendered
a final adjudication upon one or more claims in litigation, an appellate court then
examines the trial court's certification for abuse of discretion in releasing for appeal a
final decision upon one or more, but less than all the claims . 12
Here, the trial court rendered a partial summary judgment that adjudicated all but
one issue presented in Watson's complaint. The trial court's order of July 25, 2005,
resolved conclusively the remaining issue and fully disposed of Watson's complaint. So
the trial court's order including the requisite recitals satisfies the requirement of a final
adjudication upon one or more claims in litigation .
Id. at 437.
Id. at 435.
CR 54.02.
Id.
Hale v. Deaton, 528 S .W.2d 719, 722 (Ky. 1975).
Id.
Sears , 351 U.S . at 437.
Watson argues that Kentucky courts have repeatedly held that orders that are
actually interlocutory in nature are not final and appealable, regardless of a trial court's
inclusion of the requisite recitals in the order. And Watson contends that the trial court's
order of July 25, 2005, was interlocutory because at the time of its entry, Best Financial
had a counterclaim pending . By the express provisions of CR 54.02, however, a trial
court may grant a final judgment on less than all the claims when more than one claim
for relief is presented in an action, even when the remaining claim is a counterclaim . It
is not the mere presence of a counterclaim that renders CR 54.02 certification
inappropriate .13 If it did, CR 54.02 "would lose much of its Utility .04 The significance of
a counterclaim for CR 54.02 purposes turns on its "interrelationship with the claims on
which certification is sought, 05 and factors into the issue of whether the trial court
abused its discretion if the certification is appealed timely.
An underlying issue in this case is what is required of the trial court in making a
record concerning its certification . We believe that our predecessor court set out
adequate guidelines for trial courts in a case decided over forty years ago, Jackson v .
Metcalf. 16 In that case, Jackson appealed from an unfavorable judgment in a land
dispute . The trial court determined that Metcalf owned a part of the disputed property
and certified this judgment to be final and appealable without just reason for delay.
Jackson appealed, and Metcalf filed a motion to dismiss the appeal. Although that case
concerned the slightly different issue of whether the lawsuit actually involved multiple
13
14
15
16
Curtiss-Wright , 446 U.S. at 9.
Id.
Id.
404 S.W.2d 793 (Ky. 1966) .
claims, we borrow its logic in affirming the trial court's exercise of discretion. The Court
stated:
The trial judge could have reasonably refused to certify the
appealability of the order in question under CR 54.02. Nevertheless[,] we
believe that where it is reasonably debatable whether a single claim or
multiple claims are involved, the trial judge's exercise of discretion in
certifying under CR 54.02 will be conclusive as to that issue .
In the exercise of that discretion[,] the trial judge must balance this
Court's historic policy against piecemeal appeals and the practical needs
of the particular case before him. The entering of certification under
CR 54.02 is no more automatic than is an extension of time to file a record
on appeal under CR 73.08. The trial judge should always determine in
entering a certification under CR 54.02 that the order being certified is
sufficiently important and severable to entitle a party to an immediate
appellate review. 17
A trial court should not grant CR 54.02 requests routinely or as a courtesy to
counsel. Each case must be evaluated on a case-by-case basis . And for that reason,
we, like the United States Supreme Court, are reluctant to establish fixed guidelines for
the trial courts to follow.' $ In the event, however, that a trial court exercises its
discretion and determines that a party is entitled to immediate appellate review, a party
failing to appeal from a final judgment containing the requisite recitals--as occurred
here--does so to its peril . Given the procedural posture of this case, we conclude that it
would be inappropriate to review the trial court's initial certification for abuse of
discretion, the second level of appellate review. If Watson believed that the trial court
abused its discretion in certifying Watson's claims, he should have filed his notice of
" Id. at 794-95 (internal citations omitted).
Curtiss-Wright , 446 U.S. at 10-11 .
18
appeal within thirty days of the trial court's final judgment under CR 54.02 and raised
that issue on appeal . 19
In the closing paragraphs of his brief, Watson argues that this Court should not
overlook the fact that his current counsel, substituted on August 16, 2005, did not
receive a copy of the July 25, 2005, order. Instead, the circuit clerk sent the order to his
former counsel, who remained at that time Watson's counsel of record . But the July 25,
2005, order was part of the court record and available for review by Watson's current
counsel when the hearing on the substitution occurred . While we sympathize with the
position in which Watson's current counsel was placed when he was substituted in a
case after entry of a final judgment under CR 54.02, at all times, a lawyer shall act with
reasonable diligence and promptness in representing a client .2° Reasonable diligence
and promptness includes reviewing the court record in the case into which the lawyer is
substituted .
In conclusion, the trial court's order of July 25, 2005-that fully disposed of all the
claims in Watson's complaint and included the requisite language certifying the full
disposition of Watson's complaint as final and appealable-triggered the thirty-day time
limit for Watson to file his notice of appeal. Because Watson did not file his notice of
appeal from this order within thirty days, it was untimely . We affirm the Court of
Appeals' dismissal .
All sitting, except Schroder, J .
Lambert, C.J. ; Cunningham, Noble, and Scott, JJ ., concur. Abramson, J.,
concurs in result only.
' 9 Id. at 10.
20
Rules of the Supreme Court (SCR) 3.130(1 .3).
COUNSEL FOR APPELLANT :
Stuart E. Alexander, III
Kathleen M. W. Schoen
Tilford, Dobbins, Alexander, Buckaway & Black, LLP
401 West Main Street, Suite 1400
Louisville, KY 40202
COUNSEL FOR APPELLEE :
John C . Miller
Bertram, Cox & Miller, LLP
321 East Main Street
P. O. Box 1155
Campbellsville, KY 42719
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