Split Fifth Circuit Panel Holds That Damages Order Should Not Have Been Certified for Interlocutory Appeal Under § 1292(b), Dismissing Case for Lack of Jurisdiction

In Silverthorne v. Sterling Seismic Services, Ltd., No. 24-20006 (5th Cir. Jan. 3, 2025), a Fifth Circuit panel divides over whether the court should have accepted a 28 U.S.C. § 1292(b) interlocutory appeal from a certified order about a jury instruction addressing damages.

Section § 1292(b) allows a district court to certify an order for interlocutory appeal where (1) the “order involves a controlling question of law,” (2) “there is substantial ground for difference of opinion” on that question, and (3) an immediate appeal “may materially advance the ultimate termination of the litigation.”

Five days before a jury trial for trade-secret misappropriation, the district court entered an order about how it would instruct the jury about proof of damages under the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836. “Relevant to this appeal, Silverthorne seeks a remedy of a ‘reasonable royalty’ under § 1836(b)(3)(B)(ii).” The plaintiff moved to take an interlocutory appeal under § 1292(b) on the reasonable-royalty issue. The district court certified the order and an administrative panel granted leave to appeal.

The 2-1 panel reverses the initial panel order and dismisses the appeal. “After the district court certifies an order under § 1292(b), we may, but need not, grant leave to appeal the order . . . . And if we later conclude that we have improvidently accepted an appeal under § 1292(b), we ‘must vacate the earlier order granting leave to appeal and must remand the case to the district court.’”

The panel majority initially notes that the grant of interlocutory appeal here, meant to speed court proceedings along, unnecessarily cost the district court and parties a year of their time. “The district court certified its order for interlocutory appeal five days before trial, then froze the trial proceedings pending this appeal. That was over a year ago. Trial would long have been finished. At that point, Silverthorne could have appealed, and, if necessary, this court could have remanded for a short postlude in the district court.”

The panel majority also observes that § 1292(b) concerns only “controlling question[s] of law,” such as those normally presented on summary judgment or motions to dismiss. “[A] question is not controlling just because its answer would complicate a litigant’s ability to make its case. Nor is a question controlling because our answer could save the parties from a post-judgment appeal.”

“With those principles in mind, damages issues generally do not control a case until the plaintiff establishes liability. Only then would a plaintiff be entitled to damages. If this court reversed an incorrect damages order before then, its impact on the litigation would not be ‘immediate’ but, instead, would be contingent on the rest of the plaintiff’s case.”

Fundamentally, without a trial on liability, the panel majority holds that there is no telling what impact the damages instruction might have on the case. “Any effect of this court’s reversal would be speculative and dependent on Silverthorne’s evidence. If we adopted Silverthorne’s standard, Silverthorne may nonetheless fail to establish a reasonable royalty, and if we affirmed the district court’s interpretation, Silverthorne could nonetheless find a way to prove damages.”

“We unwisely accepted this interlocutory appeal under § 1292(b). Because the certified question is not controlling, and the appeal would not materially advance the ultimate termination of the litigation, Silverthorne has not shown ‘that exceptional circumstances justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment.’ Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978) (cleaned up).”

Dissenting, Judge Higginson would have affirmed jurisdiction and reached the merits of the reasonable-royalty question. On the record, resolution of the issue had (according to the dissent) a major, practical impact on the course of the case. “It is undisputed that the district court’s standard for reasonable royalty damages forecloses the principal theory upon which Silverthorne’s witness has foundation to opine.”

The dissent also decries the belated decision to reverse the administrative panel’s initial grant of leave to appeal. “[W]hen a motions panel has already granted the appeal, when the parties and this court have already expended time and resources on briefing and argument, all while the case is abated in the district court, ‘the discretionary decision now becomes much different.’” The issue will very likely return on direct appeal “of the same issue with the same arguments,” and the better course is to decide them.