Final Does Not Always Mean “Final” When it Comes to Federal Appellate Jurisdiction

On August 21, 2026, the First Circuit Court of Appeals issued a decision in  Air-Con, Inc. v. Daikin Applied Latin America, LLC, Case No. 24-1863, holding that a Final Judgment issued by the District Court for the District of Puerto Rico did not confer federal appellate jurisdiction because it failed to satisfy the applicable requirements for “finality”.

Under 28 U.S.C. § 1291, federal courts of appeals have appellate jurisdiction over “final decisions” of federal district courts, which have been generally defined as “decisions that end the litigation on the merits and leave nothing for the court to do but execute the judgment”. See Catlin v. United States 324 U.S. 229, 233 (1945).

In Air-Con, local air conditioner distributor Air-Con, Inc. (“Air-Con”) filed a complaint against Daikin Applied Latin America, LLC (“Daikin”) and others claiming it had suffered an impairment of its distribution rights under the Puerto Rico Dealer’s Act, commonly known as “Law 75”. After removing the case to the Puerto Rico District Court, defendant Daikin filed a counterclaim against plaintiff Air-Con seeking a declaratory judgement and compensation for damages incurred during the breakdown of their commercial relationship. The district court summarily dismissed Air-Con’s Law 75 claims, as well as Daikin’s counterclaim for declaratory judgment, thereby leaving Daikin’s counterclaim for damages set for trial.

Seeking appellate review of the dismissal of its Law 75 claims, Air-Con pursued entry of a final judgment regarding that issue under Federal Rule of Civil Procedure 58. The district court treated this request as a motion for partial final judgment under Rule 54(b), but ultimately rejected it, citing the “significant factual and legal overlap” between Air-Con’s Law 75 claims and Daikin’s pending counterclaim for damages. Air-Con then attempted to obtain appellate jurisdiction by filing a petition for leave to appeal under Federal Rule of Appellate Procedure 5, which was denied by the First Circuit Court of Appeals, stating that the Law 75 summary judgment ruling was not a final, immediately appealable order because a counterclaim remained pending. Subsequently, shortly before initiating preliminary trial proceedings, defendant Daikin moved to voluntarily dismiss its pending counterclaim, without prejudice, with the stated intent of concluding the case. Despite Air-Con’s opposition, the district court granted the aforementioned voluntary dismissal, without prejudice, and entered a “final judgement” noting that the pending counterclaim was the only bar to entry of final judgment and appellate review of the Law 75 summary judgment order.

Air-Con then appealed. The First Circuit Court of Appeals examined the governing principles of finality under 28 U.S.C. § 1291, analyzed Supreme Court precedents, as well as the different prevailing approaches in other circuits, and considered if the final outcome should hinge on whether the dismissed counterclaim belonged to the appellant or the appellee. The Court concluded that no final appealable judgement existed because Daikin’s counterclaim, dismissed without prejudice, could be revived in the same district court. The finality of the case was found to be “an illusion created by the artifice of dismissal without prejudice” and, as such, the circumstances required for Air-Con to attain appellate jurisdiction were not present.

In practical terms, the ruling made Air-Con’s appellate rights entirely contingent on Daikin’s discretion as to whether to refile the counterclaim previously dismissed without prejudice. The Court, however, identified alternatives for parties placed in such a rare procedural predicament. One option was for the district court to require the party seeking dismissal to choose between dismissal with prejudice or litigating the claim to a proper final judgment. Another avenue was to seek relief under Rule 60(b) which allows a party to obtain relief from a “final judgment, order, or proceeding.” Fed. R. Civ. P. 60(b). The Court clarified that the concept of “finality” under Rule 60(b) was undoubtedly broader than the finality required for appellate jurisdiction under § 1291. Therefore, in cases where a party’s appellate rights were impaired by another party’s voluntary dismissal without prejudice, the district court could use its equitable powers pursuant to Rule 60(b) (6) to ensure the affected party has a meaningful path to appellate review.

The First Circuit’s recent decision illustrates the complex and nuanced considerations involved in federal appellate practice, as well as the potential repercussions and unforeseen consequences that actions taken at the district court level can have on subsequent appellate rights. A complete and thorough understanding of the procedural and jurisdictional issues involved can help parties anticipate potential complications and avoid unnecessary delays and expenses. Accordingly, developing a comprehensive litigation and appellate strategy from the outset, which takes into account the potential ramifications of procedural decisions, is critical to protecting a party’s rights and interests.  For more information on how this recent ruling could impact your case, feel free to contact our Special Briefs and Appeals Practice Team.