A Cautionary Tale Against Taking an Appeal Too Early: Kurwa v. Kislinger (Cal. 2007)

What's the worst can happen by taking an appeal too early? I am asked this often (and I've discussed related topics here and here), and the California Supreme Court case of Kurwa v. Kislinger (2017) 4 Cal.5th 109 always comes to mind. The worst that can happen? Five years of litigation, four trips to the Court of Appeal, two trips to the Supreme Court, and easily six figures in fees, just to get back to where you were when you first asked that question.

The nub of the problem in Kurwa was that plaintiff had two obstacles to appealability. Plaintiff used a too-clever-by-half ploy to get around one (stipulating to waiver of his remaining claim without prejudice, and a tolling agreement to boot). After realizing on appeal this could not create jurisdiction, plaintiff dismissed the rest of his claims with prejudice.

But there was a second obstacle: defendant's cross-claim was still pending. And because the trial court refused to dismiss the judgment based on the ill-conceived stipulation, plaintiff was stuck "in a legal cul de sac."

Solution: The Supreme Court clarified nothing prevented the trial court from vacating the defective original judgment based on the ill-conceived stipulation, at which point it should then adjudicate the cross-claims. Then, and only then, could the court enter a final, appealable judgment.

Here is what happened in Kurwa. Opthamologists Kurwa and Kislinger formed a corporation to treat HMO patients. After about a decade of operation, Kurwa had his license suspended and was put on probation. Kurwa's licensing snafu terminated the practice's HMO agreement, so Kislinger formed a new corporation to take over the practice.

Kurwa sued for breach of fiduciary duty and defamation. Kislinger cross-complained for defamation.

The First Appeal: Dismissed for Manufactured Jurisdiction

The trial court dismissed Kurwa's fiduciary duty claim, and Kurwa appealed. Before he could appeal, however, both Kurwa and Kislinger acknowledged the pending defamation claim and cross-claim stood in the way of appealability. So they filed a stipulation dismissing those claims without prejudice, subject to a tolling agreement, so they could "test the issue" on the defamation claim in the Court of Appeal, after which the parties "may reinstitute" their claims.

The trial court entered judgment on that stipulation in August 2010, and Kurwa appealed.

The Court of Appeal did reverse in Kurwa's favor. But the Supreme Court reversed the Court of Appeal, holding the underlying judgment was not appealable, it being the product of manufactured appellate jurisdiction.

Attempts to Undo the Damage:

Back at the trial court, Kurwa moved to rescind the parties' ill-conceived stipulation. But the trial court refused. (Writ relief was denied, and Supreme Court review was denied.)

Kurwa then moved to add a claim to rescind the stipulation. But the trial court rejected this too. (Writ relief denied; Supreme Court review denied.)

Missed It By That Much:

Finally, Kurwa filed a Request for Dismissal, with prejudice, of his remaining defamation claim. Dismissal was entered in June 2015, and Kurwa appealed.

The Court of Appeal dismissed the appeal of the June 2015 dismissal as taken from the August 2010 judgment, and thus dismissed it as untimely. (Which brings to the case, by this point, just a touch of the ridiculous.) The court also noted, correctly, that the same problem as ever still exists: "Kislinger's cause of action in the cross-complaint remains outstanding."

Kislinger had case law to support him, but so did Kurwa. Kurwa relied on his case law for the proposition that, while the general rule is that a judgment based on a dismissal without prejudice is not final, that rule does not apply "where the party dismissing causes of action without prejudice is the respondent on appeal." (Vedanta Society of So. California v. California Quartet, Ltd. (2000) 84 Cal.App.4th 517, 525, fn. 8.) That is, the respondent cannot jam up the appellant's right of appeal simply by the artifice of filing a without-prejudice dismissal. (A sound holding, in this commentator's view.)

But the Court did not weigh in on this point, because there was still not a final judgment. The 2010 judgment obviously was not final, and even ignoring the still-pending cross-complaint, Kurwa's dismissal of his remaining claims could not "retroactively alter[] the character" of the earlier non-final judgment, the time to appeal from which has long since expired. (This all still seems to me a touch ridiculous, and it is not how other Courts of Appeal have approached similar problems in my experience; notwithstanding Kurwa, courts may still deem the appealable order in such a case to be the subsequent dismissal, not the original, non-final judgment. More clarity on this point, then, is still needed.)

The Path Forward:

Instead, here is what the Supreme Court instructed the trial court and the parties to do: The trial court, having never entered a final judgment against any party, was free to vacate its nonfinal judgment. Doing so would hit the reset button before the parties' stumbled into the appellate procedure underworld. At that point, the cross-claim for defamation must be adjudicated or dismissed with prejudice. Then, at last, a final judgment may be entered from which an appeal may be taken.

Partial adjudications and dismissals can create a quagmire of procedural problems. In some instances, a partial adjudication may fully dispose of claims as to some parties, and thus an appellant must appeal. Other adjudications that leave claims or cross-claims pending concerning a party should not be appealed.