Parties’ Stipulation Waived Right to Appeal

In re Odyssey Contracting Corp., ___ F.3d ___ (3d Cir. 2019). Odyssey Contracting Corp. and L&L Painting Co., Inc., were (respectively) a subcontractor and the prime contractor on a project to repaint a bridge. They got into a payment dispute and sued each other for breach of contract. Odyssey filed for bankruptcy protection, and the legal dispute between these parties became and adversary proceeding in Bankruptcy Court.

At the final pre-trial conference, the parties entered into a stipulation. That stipulation provided that if the Bankruptcy Court found that Odyssey was the breaching party, “then L&L’s damages claim for the said breach(es) will be deemed to exceed Odyssey’s damages claims for all of its claims . . . ; and, thereupon, all of the Parties’ pending claims will be withdrawn and disposed of in their entirety with prejudice by L&L and Odyssey, respectively….. and this proceedings shall be deemed to be finally concluded in all respects.”

After a bench trial, the Bankruptcy Court found that Odyssey was the breaching party. That court directed the parties to “resolve the … adversary proceeding … in compliance with the [s]tipulation.” But instead of doing that, Odyssey appealed to the District Court. L&L moved to dismiss the appeal, and the District Court granted that motion. Odyssey then appealed to the Third Circuit, which affirmed that result in an opinion by Judge Ambro.

The first question was whether the Third Circuit had jurisdiction, that is, whether the decision below was final. Judge Ambro held that it was. The issue arose because the Bankruptcy Court’s order had also included language requiring the parties to “file a joint status report indicating whether all actions in compliance with the [s]tipulation and [o]rder ha[d] been taken to resolve [the adversary proceeding] or, if . . .not, why [not,]. . . and what steps remain to be taken.” That opened up an argument, not made by either party, that since there were still things to be done before the ruling was truly final, it could not be appealed as of right.

Judge Ambro concluded that, at most, there were only ministerial steps left to be taken to achieve finality, if it had not already been achieved. And because “in the bankruptcy context we construe finality in a more pragmatic, functional sense,” the Bankruptcy Court’s decision was indeed final. The District Court thus had jurisdiction to consider Odyssey’s appeal, and the Third Circuit thus had jurisdiction as well.

The decision on the merits, which employed de novo review of the legal issue of interpretation of the meaning of the stipulation, was much more direct than that on jurisdiction. The plain language of the stipulation confirmed that Odyssey had waived any right to appeal. The stipulation said that if the Bankruptcy Court found Odyssey to be the breaching party, Odyssey would “thereupon” fold its tent. “Thereupon,” Judge Ambro said, meant “immediately; without delay; promptly.” That was inconsistent with the idea that Odyssey could appeal.

The stipulation’s further statements that the case would be withdrawn “with prejudice” and be concluded “in all respects” buttressed the conclusion that Odyssey had waived any right to appeal. Finally, the panel reiterated the position of Keefe v. Prudential Prop. & Cas. Ins. Co., 203 F.3d 218 (3d Cir. 2000), that “a party that seeks to appeal must make its intent to do so clear at the time of the stipulation setting the manner for resolution.” The court declined to follow cases from other Circuits that had said that, absent language barring an appeal, a party to a stipulation could appeal. Those were all class action cases, in which different considerations obtain.

This is a lesson for parties who enter into stipulations. The language of stipulations needs to be plain, and to leave no doubt as to whether and under what, if any, circumstances an appeal will be permitted.