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Suppose you gave Bill Gates $1,000 to help him start a small company in his garage.  When that company turned out to be Microsoft, you would prefer that the money be treated as an equity investment, so that you could share in the increased value of the company, instead of a loan, in which case you would only be entitled to repayment of the $1,000 principal.  On the other hand, imagine that you are a part owner of a company that is having cash flow problems.  You provide money to help pay its debts but it later declares bankruptcy.  In that case, you would prefer that your contribution be deemed a loan, because such loans are paid off in full before shareholders of a bankrupt company receive anything.  The proper characterization of funds provided to corporations, as debt or equity, is a recurrent subject of litigation.

A. Hypothetical.

Greensleeves, Inc. is an environmentally aware business specializing in the production of formal wear made entirely of plant foliage.   Abe and Alice are short on money to start Greensleeves.  Having failed to obtain loans from two banks, they approach Jackson Banana Plantations for help in funding the new company.  Jackson agrees to do so, anticipating that Greensleeves would purchase a great number of its, until then, useless banana leaves.  Without the money provided by Jackson, Greensleeves would not have been able to cover its operating expenses.

It is agreed that Jackson would own 40% of the Greensleeves stock.  However, because Jackson wants to conceal its involvement with Greensleeves, it is further agreed that the funding will be provided in the form of personal loans to Abe and Alice, evidenced by demand promissory notes.  All stock will be held by Abe and Alice, but they agree, on demand, to transfer 40% of the stock to Jackson.

Correspondence between the parties sometimes refers to the Jackson funding as loans, but at other times makes clear that the stock in Greensleeves being held by Abe and Alice is actually owned by Jackson.  Jackson never demands payment of any of the notes and no payments are ever made.

After a dispute between the parties, Greensleeves attempts to terminate its relationship with Jackson.  Jackson demands transfer of the stock, but Greensleeves refuses to make the transfer.  Letters from attorneys ensue.

Jackson files suit demanding full repayment of all of the “loans” it had made to Greensleeves by the demand notes.  Greensleeves responds that the so-called loans are, in fact, equity investments; and are nearly worthless as Greensleeves is close to insolvent, its banana leaf undergarments having failed to generate much consumer interest.  The Court must decide whether the Jackson funding was debt or equity.

B.   Massachusetts law.

Massachusetts cases identify a number of factors which a court should consider when determining whether a purported loan is, in reality, a capital contribution (equity investment).  In Yankee Microwave, Inc. v. Petricca Communications Systems, Inc., 53 Mass. App. Ct. 497 (2002), the Massachusetts Appeals Court recharacterized as capital contributions alleged loans made by shareholders to their corporation, holding that repayment of those “loans” prior to payment of the company’s other creditors was, therefore, fraudulent.  Emphasizing the corporation’s initial undercapitalization, the Yankee Court stated:

“Whether an advance should be treated as a capital contribution to, rather than creating a debt of, the bankrupt depends to some extent on the objective intention of the contributor, and in part on whether, in particular circumstances, equitable considerations require treatment of the advance as a capital contribution.” Where a corporation is formed with initial capital that is grossly inadequate to the purposes of the corporation’s business, requiring immediate shareholder loans in order to operate, shareholders’ so-called debt should be treated as equity capital, and given no preference over creditors in the distribution of assets…. We think that where the loans are indeed a substitute for capital to the extent necessary to the operation of the business, they must be treated as capital and be subordinate to claims of creditors….  Here, … careful scrutiny … leaves no doubt that these loans from Basil and Robert were in effect capital contributions.

Id. at 522-23.  (Emphasis added, citation omitted, footnote references omitted).  See also, Buchanan v. Warner, 2006 WL 4119791, *9 (Mass. Super. 11/8/06); TLP Leasing Programs, Inc. v. Northern Light Tech. LLC, 2005 WL 3605414, *1 (Mass. Super.  11/1/05); Garvey v. Lemle, 2005 WL 2009552, *8 (Mass. Super. 7/29/05); Milliken & Co. v. Duro Textiles, LLC, 2005 WL 1791562, *13 (Mass. Super. 6/10/05); American Twine Limited Partnership v. Whitten, 392 F.Supp.2d 13, 21-22 (D. Mass. 2005).

In Overnight Transportation Co. v. Commissioner of Revenue, 54 Mass. App. Ct. 180 (2002), the Appeals Court noted additional factors indicating that a loan is really a capital contribution, holding that, for tax purposes, a promissory note in favor of the corporate taxpayer’s parent company was not a true debt such that interest on the note would qualify as a deductible expense.  According to the Court, the fact that the company lacked the resources to pay back the alleged loan, and that repayment was, therefore, dependent “upon the success of the recipient corporation, … suggests that the amounts were in fact an equity investment.”  The Overnight Court explained that a “person ordinarily would not advance funds likely to be repaid only if the venture is successful without demanding the potential enhanced return associated with an equity investment.”

The Court also found significant the lack of security for the loan. The “absence of security for the advances is a strong indication that the advances were capitalcontributions rather than loans.”  According to the Court, “[a]lthough some loans are made ‘on signature,’ … the absence of provision for security in a loan of this scale is telltale that a ‘loan’ is not real, … and so, also, for the absence of meaningful enforcement mechanisms.”  See also Kimberly-Clark Corp. v. Commissioner of Revenue, 83 Mass. App. Ct. 65 (2013) (the absence of default provisions and the failure of the “debtor” to make any payments on the “loan” supported the conclusion that funds advanced were capital contributions, not debt).

Also relevant, according to the Court in Overnight, is whether a third party lender would have made the alleged loan.

What is assumed here is a hypothetical independent lender willing to make a ten-year advance of $600 million in cash to Overnight without exacting security in specific assets of the company (at best the approximately $300 million). …  Agreeing with the board, we think the hypothetical willing lender could not be found in the flesh. The point can also be made by asking whether anyone could be found to buy the existing note from Holding (or Union Pacific) and at what point in time and at what discount.

54 Mass. App. Ct. 189-90.

Federal law.

Federal cases, usually decided in the bankruptcy context and usually involving purported “loans” made by corporate insiders to their companies, identify additional factors to be used in determining whether a loan is really a capital contribution.  Relevant factors include:

(1) the adequacy of capital contributions;

(2) the ratio of shareholder loans to capital;

(3) the amount or degree of shareholder control;

(4) the availability of similar loans from outside lenders;

(5) certain relevant questions, such as,

(a) whether the ultimate financial failure was caused by undercapitalization;

(b) whether the note included payment provisions and a fixed maturity date;

(c) whether a note or other debt document was executed;

(d) whether advances were used to acquire capital assets; and

(e) how the debt was treated in the business records.

In re: Shamus LLC, 2008 WL 3191315, *12 (D. Mass. 8/6/08), quoting In re: Atlantic Rancher, Inc., 279 B.R. 411 (Bankr. D. Mass. 2002).  See also American Twine, 392 F. Supp.2d at 22-23; In re: Felt Mfg. Co., Inc., 371 B.R. 589, 629-32 (D.N.H. 2007).  These are the factors applied by federal courts in the First Circuit.

Federal courts elsewhere examine additional factors:

These are: “(1) the names given to the certificates evidencing the indebtedness; (2) the presence or absence of a fixed maturity date; (3) the source of payments; (4) the right to enforce payment of principal and interest; (5) participation in management flowing as a result; (6) the status of the contribution in relation to regular corporate creditors; (7) the intent of the parties; (8) ‘thin’ or adequate capitalization; (9) identity of interest between creditor and stockholder; (10) source of interest payments; (11) the ability of the corporation to obtain loans from outside lending institutions; (12) the extent to which the advance was used to acquire capital assets; and (13) the failure of the debtor to repay on the due date or to seek a postponement.

In re: Blevins Concession Supply Co., 213 B.R. 185, 187-88 (Bktcy. S.D. Fla. 1997).

Analysis.

In our hypothetical, many relevant factors support a finding that the funds transferred from Jackson to Greensleeves were capital contributions or equity investments rather than loans.  First, the funds were needed to initially capitalize Greensleeves, which would have been severely undercapitalized without the Jackson funds.  As the Yankee Court said: “We think that where the loans are indeed a substitute for capital to the extent necessary to the operation of the business, they must be treated as capital.”  53 Mass. App. Ct. at 523.

Second, Jackson took no security for the “debt”.  This, in itself, is indicative of an equity investment as opposed to a loan.  Overnight, 54 Mass. App. Ct. at 189.

Third, because Greensleeves had little capital other than what Jackson had provided, and because Jackson took no security, repayment of Jackson’s advances was dependent upon the success of Greensleeves, again indicative of an equity investment.  Overnight, 54 Mass. App. Ct. at 190.  Jackson could not reasonably expect to be paid back regardless of the performance of Greensleeves.

Fourth, the notes did not provide for a fixed maturity date and no payments were ever demanded by Jackson or made by Greensleeves.

Fifth, there is no reason to believe that a third party lender would have made the same loan to Greensleeves.  Two banks declined to extend credit.  Jackson might claim that it was a third party lender, not an insider of Greensleeves, but Jackson funded Greensleeves in return for equity.  It seems highly unlikely that a disinterested third party lender would have given Greensleeves, a penniless start-up company with a questionable product line, significant unsecured loans.

Perhaps most importantly, the parties themselves treated the funds as an equity investment rather than a loan.  Although Jackson at one time referred to the funding as personal loans, other correspondence between the parties shows that they believed Jackson had purchased a 40% equity interest in Greensleeves.  Indeed, when Greensleeves refused to transfer the stock certificates to Jackson, Jackson threatened to sue.

Certain other factors support the view that Jackson’s funding of Greensleeves was a loan transaction: (1) there is no evidence that Jackson exerted any management or control over Greensleeves; (2) the notes were executed; and (3) Jackson was not an insider of Greensleeves.  To the extent that the Jackson funds were used for operating expenses rather than capital purchases (e.g. equipment), that would also support a finding that the funding was debt rather than equity.

On balance, the factors support the conclusion that the alleged “loans” were actually equity investments or capital contributions.  Thus, Greensleeves is likely to succeed in its defense of Jackson’s suit for payment of the notes.

Whether funds provided to a business constitute debt or equity is often a difficult question requiring a detailed factual analysis.  Parties entering into such funding transactions should take steps to make clear whether the source of the funds is making an investment or merely lending money.  They should be aware, however, that the ultimate characterization of the funding depends not just on how the parties refer it, but also on the financial circumstances of the business, the terms of any alleged loan, the parties’ course of conduct, and many other factors.

Updated: August 24, 2020

This article appears substantially as published in the April 7, 2014, issue of the Massachusetts Lawyers Weekly. It has been modified where necessary to reflect changes in the appellate rules. Attorney Manwaring writes the newspaper’s Appellate Issues column, which is devoted to matters arising from the appellate process.

Study the record.

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This article appears substantially as published in the March 3, 2014, issue of the Massachusetts Lawyers Weekly.  Attorney Manwaring writes the newspaper’s Appellate Issues column, which is devoted to matters arising from the appellate process.

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Learn about my appellate brief drafting services here.

Updated:  August 24, 2020

The Massachusetts Appeals Court requires that most appellate briefs and many motions and other papers be filed electronically instead of by a paper filing.

Attorneys must use eFileMA.com to electronically file the following types of documents:

• All filings in criminal panel cases. All documents in public and partially impounded criminal panel cases (on the court’s “P” docket) must be e-filed.
• Briefs and appendices in civil panel cases. All briefs and appendices in public and partially impounded civil panel cases (on the court’s “P” docket) must be e-filed.
• All docketing statements. All docketing statements, in public and partially impounded civil and criminal panel cases, must be e-filed.
• All motions and letters filed after panel assignment. After the Appeals Court assigns a case to a panel of justices for consideration on the merits, either with or without oral argument, all subsequent filings in the case must be e-filed. This requirement applies in all public and partially impounded civil and criminal panel cases.
• All filings on the Single Justice docket. All documents in public and partially impounded single justice cases (on the court’s “J” docket) must be e-filed.

The Appeals Court stresses that, “any document that is not identified as mandatory (e.g., impounded documents) may nonetheless be e-filed voluntarily by the attorney or party. The Appeals Court encourages all attorneys and self-represented litigants in public, partially impounded, and impounded cases, to e-file every document submitted to the court.”

Information about the Appeals Court’s e-filing system is available here.

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Updated:  July 23, 2019

Statistics released by the Massachusetts Appeals Court confirm the conventional wisdom that appeals are difficult to win.  In 2018, the latest year for which statistics are available, Appeals Court panels decided 1154 cases, split roughly evenly between civil and criminal matters.  The Appeals Court affirmed the lower court in 412 of 554 decisions rendered in civil cases, or 74.4% of the time.  It reversed in 83 cases (15%) and reached some other result in the remaining 59 cases (10.6%).

The statistics also showed that the vast majority of civil cases appealed to the Appeals Court originate in the Superior Court Department of the Trial Court, and that more than four of every five appeals decided by the Appeals Court result in unreported, summary dispositions rather than published opinions.

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Despite the general rule that only final judgments are appealable, Massachusetts provides a statutory avenue by which litigants may seek to have a single justice of the Appeals Court review certain interlocutory orders entered in civil cases.  Massachusetts G.L. c. 231, §118, ¶1, provides that a party aggrieved by an interlocutory order of the Superior Court, Housing Court, Land Court, Juvenile Court or Probate Court may file a petition with the “appropriate appellate court for relief from such order.”  Such interlocutory petitions are governed by the statute and by Appeals Court Rule 20.  

An interlocutory petition under G.L. c. 231, §118, ¶1, should be distinguished from an interlocutory appeal under G.L. c. 231, §118, ¶2, of an order granting, denying or modifying an injunction.  An appeal under paragraph two is governed by the Massachusetts Rules of Appellate Procedure, and takes far longer than a paragraph one petition to the single justice.  Notably, a litigant may proceed under both paragraphs concurrently. 

Relief available:

The single justice “enjoys broad discretion to deny the petition, or to ‘modify, annul or suspend the execution of the [trial court’s] interlocutory order,’ … or, finally, to report the request for relief to the appropriate appellate court.” Ashford v. Massachusetts Bay Transp. Auth., 421 Mass. 563, 566 (1995).  However, the single justice may not take action which is determinative of a case, such as granting a motion to dismiss.  Mass. R. App. P. 15(c).  See DeLucia v. Kfoury, 93 Mass. App. Ct. 166, 168 (2018). A petition for interlocutory review which seeks relief beyond the power of the single justice will be denied. 

The 30 day time limit:

The statute requires that a petition for interlocutory review of an order be filed “within thirty days of the entry of such order.” The period begins on the date the clerk actually enters the order on the trial court docket, not the date shown on the order.   Moreover, because the deadline is imposed by statute rather than by court rule, it is jurisdictional, cannot be extended by the court and is not automatically extended by court rules which allow filing on the next business day if the period ends on a Saturday, Sunday or holiday.  See DeLucia, 93 Mass. App. Ct. at 170-71. Accordingly, if the 30-day period ends on a weekend or holiday, the litigant should file the petition on the preceding business day.

It should also be noted that the filing of a motion for reconsideration does not extend the time for filing a petition for interlocutory review and that interlocutory review usually cannot be obtained from the denial of a motion to reconsider.  McGrath v. McGrath, 65 Mass. App. Ct. 670, 671 (2006). It is the date of the original order that determines the time period for filing.

The petition:

A party seeking interlocutory review under G.L. c. 231, §118, ¶1, must file a petition, a supporting memorandum and an appendix of relevant documents.  The petition should contain, in the following order:

(1) a request for review, which shall state briefly the nature of the order or action of the trial court from which review is sought, the entry date of such order or action, and the name of the judge who entered it; (2) a statement of the issues of law raised by the petition; (3) a statement as to whether a party has filed, served or intends to file a motion for reconsideration in the trial court; (4) a statement of the specific relief requested (a draft order for the single justice may be attached); and (5) an addendum containing a copy of the order or action of the trial court (including a typed version of any pertinent handwritten or oral endorsement, notation, findings, or order made by the lower court).

See Appeals Court Rule 20(a).  The petition must not exceed five pages of text in a monospaced font or 1,000 words in a proportional font compliant with Rule 20(a)(4)(A-C).  It must be accompanied by a supporting memorandum of law.    

The memorandum in support of the petition:

The petitioner must file a memorandum of law, “in support of the petitioner’s position, with citations to appropriate authorities and a statement addressing why interlocutory relief is appropriate.”  See Appeals Court Rule 20(b). The memorandum must not exceed 15 pages of text in a monospaced font or 3,500 words in a proportional font compliant with Rule 20(a)(4)(A-C).    

The appendix:

In addition to the petition and memorandum, the petitioner must submit an appendix containing relevant portions of the record.  The memorandum should cite to the documents in the appendix.  The appendix must begin with a table of contents listing the documents it contains, and must include, “a current copy of the trial court docket entries and all relevant documents filed in the trial court, including those filed by the other party or parties….” See Appeals Court Rule 20(b). The Rule cautions that, “[o]nly those pleadings, exhibits, and documents which were before the trial court when the order appealed from was entered, and which are necessary for an adjudication of the issues raised, may be submitted.”  Id. The pages of the appendix must be consecutively numbered, starting with the cover or first page as page one.

The response memorandum:

The opposing party may, but is not required to, file a response memorandum within seven days after the petition is filed (or 10 days if the petition was served by first class mail).  Appeals Court Rule 20(c). The single justice may, and often does, shorten the time for filing a response.  A response memorandum must not exceed 15 pages of text in a monospaced font or 3,500 words in a proportional font compliant with Rule 20(a)(4)(A-C), and should state the reasons why the single justice should not grant the petition.  Id.  A supplemental appendix may be filed if the petitioner’s appendix fails to include documents which the opposing party deems relevant.  Id.

Filing:

The petition, supporting memorandum, appendix, response, any supplemental appendix, and certificates of service must be e-filed using the eFileMA system if the filing party is represented by counsel. Paper copies of all documents must also be filed with the clerk’s office of the trial court from which the matter arose. If the petition, memorandum or response is produced using a proportional font, a certificate of compliance with the applicable length limit must also be filed, identifying the name and size of the font used, the number of non-excluded words and the name and version of the word processing software used. Appeals Court Rule 20(d).

Filing fee:

The filing fee in the Appeals Court was $315 as of August 2020.  G. L. c. 262, §§ 4 & 4C. 

Hearing and oral argument:

The single justice generally decides petitions for interlocutory review on the papers and without a hearing.  

Possible sanctions for interlocutory appeal of discovery orders:

Because discovery orders are uniquely within the trial court’s discretion, and appeals from such orders are therefore disfavored, the statute threatens a litigant and his or her counsel with sanctions if a petition for interlocutory review of a discovery order is not found to “substantially justified.”  It provides,

If the petition is filed with respect to a discovery order and is denied, the single justice may, after such hearing as the single justice in his discretion deems appropriate, require the petitioning party or the attorney advising the petition or both of them to pay to the party who opposed the petition the reasonable expenses incurred in opposing the petition, including attorney’s fees, unless the court finds that the filing of the petition was substantially justified or that other circumstances make an award of expenses unjust.

G.L. c. 231, §118, ¶1.

Impounded or confidential information.

Appeals Court Rule 20 provides that,

In any case in which the trial court entered an order impounding, sealing, or excluding from public access all or any portion of the trial court records, or there is material or information in a party’s petition, addendum, response, or any appendix that is automatically impounded or deemed confidential by statute or court rule, the parties shall comply with Rules16(d), 16(m), and 18(d). The parties shall comply with Supreme Judicial Court Rule 1:24, Protection of Personal Identifying Information in Publicly Accessible Court Documents in all filings to the Appeals Court.

Appeals Court Rule 20(e).

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Updated August 11, 2020.

Although usually only final judgments are appealable, Mass. R. Civ. P. 64 allows a trial court, other than the District Court to, “report the case for determination by the appeals court.”

Such a report is authorized in three circumstances.  First, the trial court may report a case “after verdict or after a finding of facts under Rule 52.”  Mass. R. Civ. P. 64(a).  Second, a report is authorized where the trial court “is of the opinion that an interlocutory finding or order made by it so affects the merits of the controversy that the matter ought to be determined by the appeals court before any further proceedings….”  Id.  Third, where the parties request a report and have “agreed in writing as to all the material facts, [the court] may report the case to the appeals court for determination without making any decision thereon.”  Id.

The Appeals Court may decline to accept a reported case.

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Updated August 11, 2020.

Certification under Mass. R. Civ. P. 54(b) is an exception to the general rule that only final judgments, which dispose of all claims as to all parties, are appealable. Generally, a judgment as to fewer than all parties to an action, or fewer than all claims, is interlocutory and, therefore, not subject to immediate appeal. However, Rule 54(b) provides that,

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 direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer 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 subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.

Due to the policy disfavoring piecemeal appeals, the exception offered by Rule 54(b) is quite narrow. For reasons of public policy and judicial administration, Rule 54(b) certification is granted only in extraordinary cases.

When applying rule 54(b), both the trial court in the first instance and an appellate court on review must ever bear in mind the rule’s underlying purpose of balancing the need for immediate review, based on the likelihood of injustice or hardship to the parties of a delay in entering a final judgment as to part of the case, against the appellate courts’ “traditional abhorrence of piecemeal appellate review….

***

Because of the bedrock policy against premature and piecemeal appeals, the Supreme Judicial Court has declared that “[w]e do expect strict compliance” in dealing with the narrow exception to that policy created by rule 54(b)…. Consequently, certifications under rule 54(b) “should not be granted routinely or as a courtesy or accommodation to counsel.”… “[O]verly generous use of [rule] 54(b) … can create a minefield for litigants and appellate courts alike,” … and does not further “the interests of sound judicial administration.” …. Therefore, the court’s rule 54(b) discretion should be “exercised sparingly,” … and, when the dismissed and the surviving claims are factually and legally overlapping or closely related, such a fragmentation of the case is to be avoided except in “unusual and compelling circumstances.”….

In short, rule 54(b) certification is a “special dispensation,” … which “should be used only ‘in the infrequent harsh case.’”… “Rule 54(b) was not meant to animate essentially fragmentary proceedings or to be employed in the absence of sufficiently compelling circumstances.”

Long v. Wickett, 50 Mass. App. Ct. 380, 387-89 (2000) (internal citations omitted). See also Morrissey v. New England Deaconess Association-Abundant Life Communities, Inc., 458 Mass. 580, 594-95 (2010) (“Rule 54(b) is directed toward efficient use of judicial resources, balancing the need for immediate review, based on the likelihood of injustice or hardship to the parties of a delay in entering a final judgment as to part of the case, against the appellate courts’ traditional abhorrence of piecemeal appellate review, … as a matter of sound judicial administration…. [T]he narrow exception to this policy created by rule 54(b) is exercised sparingly” (internal quotation marks omitted)); Yanis v. Paquin, 96 Mass. App. Ct. 134, 137-38 (2019) (“Rule 54(b) is designed “to avoid the possible injustice of a delay in entering judgment on a distinctly separate claim or as to fewer than all the parties until the final adjudication of the entire case by making an immediate appeal available. The rule tries to balance the long-standing bedrock policy in Massachusetts against premature and piecemeal appeals with the need for prompt appellate review to avoid delay and any resulting injustice or hardship. (Citations and internal quotation marks omitted)).

A court should not grant a Rule 54(b) certification unless all four of the following factors are present:

(1) the action must involve multiple claims or multiple parties; (2) there must be a final adjudication as to at least one, but fewer than all, of the claims or parties; (3) there must be an express finding that there is no just reason for delaying the appeal until the remainder of the case is resolved; and (4) there must be an express direction of the entry of judgment.

Long, 50 Mass. App. Ct. at 385-86 (footnote references omitted). See also Yanis, 96 Mass. App. Ct. at 137; O. Ahlborg & Sons, Inc. v. Massachusetts Heavy Industries, Inc., 65 Mass. App. Ct. 385, 392 (2006).

Whether there are multiple claims in an action, as required for certification, is a question of law, while “the determination of the presence or absence of a just reason for delay … is left to the sound discretion of the … judge ….” Yanis, 96 Mass. App. Ct. at 138. Such discretion must be exercised “sparingly.” Id.

Because Rule 54(b) certification is allowed only when there are “multiple claims or multiple parties,” a trial court must determine “whether … several separately stated counts are genuinely separate claims, as opposed to merely a portion of a single [litigation] unit.” Id. In doing so, the court should keep in mind the,

determinative, indeed critical, distinction … between separate claim[s] for relief within the meaning of the rule … [and] different theories of recovery arising out of the same cause of action. A [party] presents multiple claims for relief … when the possible recoveries are more than one in number and not mutually exclusive or, stated another way, when the facts give rise to more than one legal right or cause of action. Conversely, when a party asserts only one legal right, even if seeking multiple remedies, there is only a single claim for relief for rule 54(b) purposes. Similarly, [a]lternative [legal] theories of recovery based on the same factual situation are but a single claim, not multiple ones, under rule 54(b). Finally, there is only a single claim for relief, making a separate appeal under rule 54(b) inappropriate, in a case where the facts underlying the adjudicated portion of the case are largely the same as or substantially overlap those forming the basis for the unadjudicated issues.

Yanis, 96 Mass. App. Ct. at 138–39. (Citations and internal quotation marks omitted).

In determining whether there is or is not “just reason for delay,”

the facts of each case [must] be closely examined to ensure that allowing an appeal will not wrongly fragment the case…. A court should also examine whether [certification] will advance the interests of judicial administration and public policy.

Long, 50 Mass. App. Ct. at 395 (internal quotation marks omitted). The factors to be considered when ruling on a motion for entry of separate final judgment under Rule 54(b) include:

whether “any hardship or injustice will result if the plaintiff is required to try its case … before securing appellate review,” whether intermediate review of the judgment certified will or “will not simplify, shorten or expedite the trial of any of the other claims still pending in the [trial] [c]ourt,” and whether the questions sought to be raised by the appeal might “become moot if the [trier of fact ultimately found] … for the [appellee].”

Id. at 396 n.12, quoting J.B.L. Constr. Co. v. Lincoln Homes Corp., 9 Mass. App. Ct. 250, 252-53 (1980). See also Signature Financial Group, Inc. v. Coolidge, 2003 WL 21246174, *2 (Mass. Super. 4/14/03).

Where Rule 54(b) certification has been granted improperly, the Appeals Court can dismiss the appeal and restore the order appealed to its interlocutory status. Long, 50 Mass. App. Ct. at 404.

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Updated August 11, 2020.

The doctrine of present execution is one of the limited exceptions to the general rule that only final judgments are appealable.  “As a general rule, an aggrieved litigant cannot as a matter of right pursue an immediate appeal from an interlocutory order unless a statute or rule authorizes it.” Shapiro v. City of Worcester, 464 Mass. 261, 264 (2013).  The doctrine of present execution, however, provides that “an interlocutory order is immediately appealable if it concerns an issue that is collateral to the basic controversy … and the ruling will interfere with rights in a way that cannot be remedied on appeal from the final judgment.”  Id. (internal citations and quotation marks omitted).  See also Commonwealth v. Delnegro, 91 Mass. App. Ct. 337, 341 (2017); City of Revere v. Massachusetts Gaming Comm’n, 476 Mass. 591, 599 (2017) (“The doctrine of present execution provides a narrow exception to the general rule prohibiting interlocutory appeals, provided two conditions are met: (1) the matter is collateral to the merits of the controversy, and (2) the interlocutory ruling will interfere with rights in a way that cannot be remedied on appeal from the final judgment”).

For example, “[o]rders denying motions to dismiss based on immunity from suit fall into this limited class of cases because (1) such orders are always collateral to the rights asserted in the underlying action, … and (2) the right to immunity from suit would be lost forever if such orders were not appealable until the close of litigation.” Shapiro, 464 Mass. at 264.  See also City of Revere, 476 Mass. at 599.  The doctrine of present execution also provides for interlocutory appeal of orders denying special motions to dismiss under the Massachusetts anti-SLAPP statute, G.L. c. 231, § 59H, Fabre v. Walton, 436 Mass. 517, 521 (2002), orders denying motions to dismiss based on claims of immunity asserted by volunteers for nonprofit organizations under the Federal Volunteer Protection Act and the Massachusetts charitable immunity statute, Lynch v. Crawford, 483 Mass. 631, 640 (2019); Wilbur v. Tunnell, 98 Mass. App. Ct. 19, 2020 WL 3886146, *2 (7/10/20), and orders disqualifying a litigant’s attorney in a civil case. Wilbur, 2020 WL 3886146, *2; Delnegro, 91 Mass. App. Ct. at 340-42 (The doctrine of present execution applies to disqualification orders in civil cases but not in criminal matters); Slade v. Ormsby, 69 Mass. App. Ct. 542 (2007).

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