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No Jurisdiction Means No Jurisdiction (Except When It Doesn’t)

There are few concepts that are as important to our nation’s jurisprudence as that of jurisdiction. As stated by the Supreme Court of the United States, “Jurisdiction is the power to hear and determine the subject matter in controversy between parties to a suit, to adjudicate or exercise any judicial power over them . . . .” Rhode Island v. Massachusetts, 37 U.S. 657, 718 (1838).  “The statutory and (especially) constitutional elements of jurisdiction are an essential ingredient of separation and equilibration of powers, restraining the courts from acting at certain times, and even restraining them from acting permanently regarding certain subjects.” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101 (1998).  It is precisely because jurisdiction is such a fundamental and important prerequisite to a court taking action in a case that objections to subject matter jurisdiction can be raised at any time, even after a case is over and even if the party contesting jurisdiction already had acknowledged a court’s jurisdiction.  And the North Carolina Court of Appeals previously has addressed the seemingly black and white nature of trial court jurisdiction in another case that we have blogged about. See here.

This issue of jurisdiction was also front and center in an opinion released by the North Carolina Court of Appeals a week ago in SED Holdings, LLC v. 3 Star Properties, LLC (“SED II”) .  In SED II, the Court reviewed several contempt orders that were entered by the trial court pertaining to the defendants’ compliance with a preliminary injunction that the trial court had entered enjoining defendants from disposition of certain property that was at issue in the case.  Significantly, these contempt orders were entered by the trial court after the defendants had noticed an appeal from the trial court’s entry of the preliminary injunction and while that appeal was pending before the Court of Appeals (“SED I ”).

Defendants’ sole issue on appeal in SED II was that the trial court lacked jurisdiction to enter the contempt orders based on N.C. Gen. Stat. § 1-294.  Section 1-294 mandates that the filing of a notice of appeal “stays all further proceedings in the court below upon the judgment appealed from, or upon the matter embraced therein[.]” As the SED II Court stated, this statute codified “[t]he longstanding, general rule in North Carolina [] that when a party gives notice of appeal, the trial court is divested of jurisdiction until the appellate court returns a mandate in the case.” Thus, “[p]ending the appeal, the trial judge is generally functus officio, Latin for ‘having performed his or her office,’ which is defined as being ‘without further authority or legal competence because the duties and functions of the original commission have been fully accomplished.’”

In light of the above, it may at first blush seem like the defendants’ appeal should have been a slam dunk—no jurisdiction means no jurisdiction, right? However, as those familiar with North Carolina appellate practice and a case known (affectionately?) as RPR are aware, it is not always that straightforward.  Judge Zachary, writing for the Court in SED II, comprehensively explained the complexities as follows:

[T]he rule codified at section 1-294 and, by extension, the functus officio doctrine, are not without exceptions. For instance, even when a party has noted an appeal, the trial court “retains jurisdiction to take action which aids the appeal, . . . and to hear motions and grant orders,” when those matters are “ ‘not affected by the judgment appealed from.’ ” Faulkenbury v. Teachers’ & State Employees’ Ret. Sys. of N. Carolina, 108 N.C. App. 357, 364, 424 S.E.2d 420, 422 (quoting N.C. Gen. Stat. § 1-294), aff’d per curiam, 335 N.C. 158, 436 S.E.2d 821 (1993). Section 1-294’s automatic stay is easily applied in the context of a final judgment, “one which disposes of the cause as to all the parties, leaving nothing to be judicially determined between them in the trial court.” Veazey v. City of Durham, 231 N.C. 357, 361-62, 57 S.E.2d 377, 381 (1950). A final judgment “is always appealable,” for the trial court has completed its duties. Embler v. Embler, 143 N.C. App. 162, 164, 545 S.E.2d 259, 261 (2001). Yet an interlocutory order, one that “does not dispose of the case, but leaves it for further action by the trial court in order to settle and determine the entire controversy[,]” is generally not appealable. Veazey, 231 N.C. at 362, 57 S.E.2d at 381.North Carolina law therefore recognizes that merely giving notice of appeal from aninterlocutory order does not automatically deprive the trial court of jurisdiction.Instead, the scope of a trial court’s continuing jurisdiction—if jurisdiction continuesat all—largely depends upon whether the interlocutory order being challenged iseligible for immediate review.

If a party appeals from an interlocutory order that is immediately appealable, the trial court’s jurisdiction is removed and it may not proceed on any matters embraced by the order. Patrick v. Hurdle, 7 N.C. App. 44, 45, 171 S.E.2d 58, 59 (1969); see also N.C. Gen. Stat. § 1-294. “Where a party appeals from a nonappealable interlocutory order, however, such appeal does not deprive the trial court of jurisdiction and thus the court may properly proceed with the case.” RPR & Assocs., 153 N.C. App. at 347, 570 S.E.2d at 514 (citation omitted). The latter rule serves to prevent litigants from delaying “the administration of justice [by] bringing cases to an appellate court piecemeal through the medium of successive appeals from intermediate orders.” Veazey, 231 N.C. at 363, 57 S.E.2d at 382.

Immediate review is available where an interlocutory order “affects a substantial right that ‘will clearly be lost or irremediably adversely affected if the order is not review[ed] before final judgment.’ ” Edmondson v. Macclesfield L-P Gas Co., 182 N.C. App. 381, 391, 642 S.E.2d 265, 272 (2007) (quoting Blackwelder v. Dept. of Human Res., 60 N.C. App. 331, 335, 299 S.E.2d 777, 780 (1983)); see also N.C. Gen. Stat. § 1-277(a) (2015) (“An appeal may be taken from every judicial order or determination of a [trial] judge . . . which affects a substantial right claimed in any action or proceeding[.]”); N.C. Gen. Stat. § 7A-27(b)(3) (2015) (providing a right of appeal from any interlocutory order that, inter alia, affects a substantial right). As our Supreme Court has acknowledged, this determination must be made on a case by-case basis: “[T]he ‘substantial right’ test for appealability of interlocutory orders is more easily stated than applied. It is usually necessary to resolve the question in each case by considering the particular facts of that case and the procedural context in which the order from which appeal is sought was entered.” Waters v. Qualified Pers., Inc., 294 N.C. 200, 208, 240 S.E.2d 338, 343 (1978). Despite the muddy waters of the substantial right test, it is clear that a trial court need not await the appellate court’s decision as to whether an appeal has been attempted from a nonappealable interlocutory order. Indeed, because “a litigant cannot deprive the trial court of jurisdiction to determine a case on its merits by appealing from a nonappealable interlocutory order[,]” Velez v. Dick Keffer Pontiac-GMC Truck, Inc., 144 N.C App. 589, 591, 551 S.E.2d 873, 875 (2001), “[t]he trial court has the authority . . . to determine whether or not its order affects a substantial right of the parties or is otherwise immediately appealable.” RPR & Assocs., 153 N.C. App. at 348, 570 S.E.2d at 514 (citations omitted).

(emphasis added).

The trial court in SED, after issuing the injunction, determined that the injunction did not affect a substantial right and was therefore not immediately appealable.  The trial court therefore decided that it had jurisdiction during the pendency of the appeal in order to enforce the injunction order and enter the contempt orders.  After these orders were entered, the Court of Appeals in SED I found that the injunction did affect a substantial right of the defendants and was immediately appealable.  The SED I Court further held that the injunction was appropriately issued.

Thereafter, defendants appealed the issuance of the contempt orders, claiming that the trial court’s retention of jurisdiction was in error, as shown by the SED I Court’s determination that the injunction was immediately appealable.  Plaintiffs argued that the procedural history of the case as it related to jurisdiction of the trial court was on all fours with RPR and thus the same result (that the trial court be found to have appropriately retained jurisdiction even in the face of an interlocutory appeal subsequently found to be immediately appealable) should issue.

In setting forth the SED II Court’s analysis of the issue, Judge Zachary provided a succinct summary of RPR’s procedural history and its resultant holdings and principles:

In RPR Assocs., the defendant appealed from an interlocutory order denying its motion to dismiss based on sovereign immunity. Despite the appeal, the plaintiff continued to pursue its claims at the trial level and argued that the interlocutory order was not immediately appealable. In response, the defendant moved the trial court on two occasions to stay proceedings pending the appeal, but both motions were denied. This Court initially granted the defendant’s motion for a temporary stay pending the appeal and then later dissolved it. Our Supreme Court also denied the defendants’ petitions for certain extraordinary writs.

Upon consideration of the defendant’s appeal from the denial of its motion to dismiss, this Court determined that the interlocutory order affected a substantial right, but ultimately held that the motion to dismiss was properly denied because sovereign immunity had been waived. However, after the interlocutory appeal was heard by this Court in RPR I, but before the decision was filed, the trial court proceeded to the case’s merits, heard evidence, and entered a final judgment. Both parties appealed from that judgment, and the defendant argued that the trial court’s jurisdiction over the case was terminated once the defendant’s interlocutory notice of appeal was entered in RPR I.Id. After explaining that the functus officio doctrine does not apply to nonappealable interlocutory orders, this Court rejected the defendant’s argument, reasoning that

[b]ecause the trial court had the authority to determine whether its order affected [the] defendant’s substantial rights or was otherwise immediately appealable, the trial court did not err in continuing to exercise jurisdiction over this case after [the] defendant filed its notice of appeal. The trial court’s determination that the order was nonappealable was reasonable in light of established precedent and the repeated denials by the appellate courts of this State to stay proceedings. Although this Court ultimately held that [the] defendant’s appeal affected a substantial right, it also held that defendant was not immune to suit. [The d]efendant states no grounds, nor has it produced any evidence to demonstrate how it was prejudiced by the trial court’s exercise of jurisdiction over this case.

At the very least, RPR & Assocs. stands for two general propositions: (1) a trial court properly retains jurisdiction over a case if it acts reasonably in determining that an interlocutory order is not immediately appealable, and (2) that determination may be considered reasonable even if the appellate court ultimately holds that the challenged order is subject to immediate review.

(internal citations omitted).

Based on these RPR “general propositions,” the Court held that the trial court appropriately retained jurisdiction during the SED I appeal, and therefore properly entered the contempt orders, because the issue of whether an injunction is immediately appealable is not clearly established and often depends on the facts of the case. Compare Barnes v. St. Rose Church of Christ, Disciples of Christ, 160 N.C. App. 590, 592, 586 S.E.2d 548, 550 (2003) (holding that preliminary injunctions enjoining the transfer of assets did not affect a substantial right and therefore were not immediately appealable), with Scottish Re Life Corp. v. Transamerica Occidental Life Ins. Co., 184 N.C. App. 292, 294-95, 647 S.E.2d 102, 104 (2007) (holding that a preliminary injunction preventing the use and control of assets was immediately appealable in order to preserve a substantial right). Thus, the Court held that even though the trial court’s determination was ultimately declared incorrect by SED I, it had acted reasonably in determining that the interlocutory order was not immediately appealable.

The SED II Court then adopted the same “no harm, no foul” approach that was taken by the Court in RPR.  Judge Zachary stated that, as was the case in RPR, because the SED I Court upheld the injunction, the defendants were not prejudiced by the trial court’s continued exercise of jurisdiction.  Thus, while not explicitly stating as much, it appears the SED II Court recognized a third “general principle” from RPR: that inappropriate retention of jurisdiction by the trial court during the pendency of an appeal can be excused so long as no prejudice results.

The opinion in SED II raises several interesting issues:

— While the SED II Court held that the jurisdictional facts of the case were “indistinguishable” from RPR, there is at least one fact that appears to be very relevant to the ultimate decision in RPR that was noticeably lacking in SED II.  In RPR, the defendant repeatedly asked the appellate courts to stay activity in the trial court during the pendency of the appeal and was turned down by both the Court of Appeals and the Supreme Court.  Those decisions added to the reasonableness of the RPR trial court’s decision to retain jurisdiction and can provide some additional justification for the Court of Appeals’ ultimate determination in that case.  Conversely, it does not appear that the defendants in SED II made any effort to seek a stay from the appellate courts during the pendency of the appeal.  If defendants had sought a writ of supersedeas or an extraordinary writ, that action would have at a minimum allowed the appellate courts to make a determination on the trial court’s jurisdiction at a much earlier point and could have avoided the need for the SED II ruling altogether.  Does that matter?  Should it matter?

— RPR has been the subject of much criticism. See, e.g., Thomas L. Fowler, Functus Officio: Authority of the Trial Court After Notice of Appeal, 81 N.C. L. Rev. 2331 (2003) (“The new rule applied in RPR & Associates, Inc. v. University of North Carolina-Chapel Hill, seems both unnecessary and inconsistent with the basic functus officio rule. If jurisdiction is removed from the trial court when a party seeks to appeal an order that North Carolina laws stipulate is immediately appealable, then the appellate system is undermined by allowing the trial proceedings effectively to continue while the appeal is unresolved.”); Katie Greene, Divested of Jurisdiction? The Effect of Filing A Notice of Appeal While A Posttrial Tolling Motion Is Pending Before the Trial Court, 37 Campbell L. Rev. 461 (2015) (noting “the tension between RPR‘s directive that trial courts determine whether orders are interlocutory and the inability of trial courts to dismiss interlocutory appeals” and “the tension between RPR and the language of section 1-294”).  Despite this criticism, the decision in SED II indicates that RPR is alive and well.  It will be interesting to see if the Supreme Court chooses to take up the issue, either upon request of the parties or perhaps even its own motion.  Interestingly, prior to the opinion in SED II, the Supreme Court allowed defendants’ petition for discretionary review on the underlying issue of the injunction in SED.

— Despite the criticism of RPR (which criticism will presumably extend to by extension SED II), the facts of SED reveal an interesting conundrum that a trial court and parties face when a preliminary injunction is appealed.  In SED, the trial court enjoined the defendants from disposing of assets, deciding that allowing that such action could cause irreparable harm to the plaintiff.  The defendants appealed from that order and then sought to do exactly what the injunction prohibited them from doing—selling the assets.  If the trial court does not have jurisdiction to enforce its injunction during the pendency of an appeal, then an injunction could be rendered meaningless and a defendant could simply avoid the effect of the injunction by noticing an appeal.  If the trial court had determined that it did not have jurisdiction to enforce the injunction during the pendency of the appeal, what should/could the plaintiff have done to protect itself? 

— Although Section 1-294 is viewed as a “jurisdictional statute,” is that a misnomer?  Jurisdiction is not something that is ordinarily considered to be appropriate so long as it is “reasonable” and no prejudice results.  That is why an entire completed trial can be undone, prejudicing seemingly everyone, upon a determination that the presiding court never had subject matter jurisdiction.

Let us know your thoughts in the comments below.

–Patrick Kane

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4 Responses to "No Jurisdiction Means No Jurisdiction (Except When It Doesn’t)"

  • Matt Leerberg
    November 8, 2016 - 3:08 pm Reply

    In my view, Pat correctly identifies the source of the tension: the purported jurisdictional nature of Section 1-294 and the functus officio doctrine. But what if section 1-294 is instead intended to serve as a “traffic cop,” shuttling some disputes to the appellate division while leaving others for resolution by the trial tribunal? There are certainly structural arguments in support of this view. After all, section 1-294 plainly does seek to draw a line between further proceedings that are independent of the pending appeal and those that are inextricably linked to it. Why would the *subject-matter jurisdiction* of our courts of general jurisdiction be subject to such fine parsing?

    If the statute is non-jurisdictional, then the “no harm, no foul” analysis of RPR / SED makes more sense. Sure, we hope that the statute will properly send the right cars down the right roads the first time. But if that process fails, and no one is prejudiced, then why undo it after the fact?

    To be sure, there is much work to be done on providing better explanations to the trial courts and the bar as to which disputes belong in which courts and when. The further development of case law and, perhaps, the appellate rules can help with that need. After all, the real problem here is not presented in cases where the trial court considers a motion on which it should have stood down. The real problem is presented in cases where neither the trial court nor the appellate courts act, and litigants are left with no way to move their cases forward efficiently. This is an existing structural problem that takes hold after a notice of appeal is filed but before the record is docketed. I venture to guess that other commenters will expound on this issue.

  • Beth Scherer
    November 8, 2016 - 3:12 pm Reply

    Pat has hit the nail on the head regarding why RPR is so troubling from a jurisprudence standpoint. It’s the only case I know of that holds that a trial court’s jurisdiction is subject to a “foul, but no harm” analysis.

    While I understand the pragmatic reasons why RPR was created, RPR creates much mischief. It essentially allows trial courts to ignore 1-294 and the appellate court’s authority to determine when appellate jurisdiction is proper.

    Given the Supreme Court’s new authority to provide rule-based exception to 1-294’s stay jurisprudence, does RPR still represent the best approach to this pragmatic dilemma?

    I’m interested to know our readers thoughts on whether RPR is a problem, and any potential fixes.

  • Lorin Lapidus
    November 8, 2016 - 3:16 pm Reply

    Good Article, Pat. Thanks. RPR always confused me since it appears to contradict Estrada v. Jaques, 70 N.C. App. 627, 640, 321 S.E.2d 240, 249 (1984). (“[R]uling on the interlocutory nature of appeals is properly a matter for the appellate division, not the trial court.”). It is safe to say the COA has doubled down in RPR and its peace out cub scout for Estrada .

  • Jason Edward Cohee
    October 10, 2018 - 11:04 pm Reply

    I am from Illinois so therefore I did not pay that close of attention to the State case law used. My situation is that a Federal Judge dismissed me with prejudice from his court.

    I then filed a Notice of Appeal with an attached Motion for permission to Proceed in Forma Pauperis into Appellate court. The trial judge dismissed my forma pauperis motion because he called my claims frivolous.

    Whether or not my claim is frivolous I stand on Griggs v Provident consumer discount co 459 us 56, 58: “The filing of a Notice of Appeal is an event of jurisdictional significance – it confers jurisdiction on the [appelate court] and divests the [trial court] of its control over those aspects of the case involved in the appeal.”

    The 7th circuit sent me a schedule as to when I was to have my docketting statement in and other pertinent dates. The day the trial judge dismissed my aforementioned motion the appelate court sends me a letter stating the fact that I have 30 days to file the motion with them and the blank motion form is included to reenter that court.

    I am not sure what gives. I am just an untrained pro se attorney that is soliciting to his hearts content.

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