Lehman Brothers Holdings, Inc. v. Gateway Funding Diversified Mortgage Services, L.P., 785 F.3d 96 (3d Cir. 2015). Federal Rule of Appellate Procedure 10 requires an appellant to “order … a transcript of such parts of the proceedings not already on file as the appellant considers necessary.” That rule goes on to say that “[i]f the appellant intends to urge on appeal that a finding or conclusion is unsupported by the evidence or is contrary to the evidence, the appellant must include in the record a transcript of all evidence relevant to that finding or conclusion.”
Here, the District Court entered summary judgment against defendant (“Gateway”) on an indemnification issue, and stated that defendant had briefed the argument that the indemnification obligation had been extinguished but had abandoned that contention during an April 24, 2013 oral argument. Gateway appealed (on that and other issues), asserting that it had not abandoned the issue at the April 24 argument. But defendant did not supply a transcript of the April 24 hearing. In an opinion by Judge Hardiman, the Third Circuit ruled that, due to that failure, Gateway had forfeited the indemnification issue.
Judge Hardiman concisely summarized the key facts surrounding the transcript issue. “Instead of ordering a transcript of the April 24 oral argument and including it in the record on appeal, Gateway merely asserted that ‘there is no record to support the [District] Court’s position that Gateway “abandoned” this argument[.]’ This statement was untrue; in fact, there is a record of that hearing, and Lehman [the opposing party] filed it with its appellate brief. Gateway responded that it ‘did not include the transcript of oral argument … because it was under the impression that the argument was conducted off the record and that no transcript existed for the oral argument.’ Gateway Reply Br. 1. And because Lehman filed it, Gateway argued, ‘the transcript is now a part of the record’ and it is irrelevant that Gateway neglected to do so. Id. at 2. Gateway’s cavalier argument is wrong.”
Though Rule 10 does not provide for sanctions for failure to comply with that rule, Judge Hardiman observed that Federal Rule of Appellate Procedure 3 permits “the court of appeals to act as it considers appropriate, including dismissing the appeal,” where there is a violation of an appellate rule. Dismissal for failure to comply with procedural rules is not favored, but this was “the unusual situation where forfeiture is appropriate.”
Gateway’s claim that there was no record support for the idea that it had abandoned its argument regarding indemnification was unfounded, and its further assertion that it had been “extremely prejudiced” by the District Court’s finding of abandonment was also wrong. Overall, on the facts here, “Gateway’s Rule 10 violation at best shows a remarkable lack of diligence and at worst indicates an intent to deceive the Court. In either case, forfeiture is appropriate.”
The transcript itself revealed that the District Court gave Gateway “multiple chances to advance” its argument, but Gateway did not do so. Thus, Judge Hardiman noted that, under the abuse of discretion standard of review, it was unlikely that the District Court’s ruling would have been disturbed even if the Third Circuit had reached the merits of this issue. The rejection of Gateway’s appeal on this issue, however, was premised on the violation of Rule 10. The panel then went on to rebuff Gateway’s other points and to affirm the decision below.
Evidently, the panel wanted to send a message, as the first sentence of its opinion indicated (“This appeal presents us with an opportunity to emphasize the importance of following the rules.”). Had Gateway’s counsel at least inquired as to whether there was a transcript of the key hearing, it is extremely unlikely that its appeal on this issue would have been barred. Appellate counsel need to take at least that step in order to comply with Rule 10 and avoid a fate similar to the one that befell Gateway here.