On May 7, 2015, the US Court of Appeals for the Third Circuit held that a failure to include a transcript essential to the appellant's claim was a violation of FRAP 10 and a forfeiture of the claim (Lehman Bros. Holdings, Inc. v. Gateway Funding Diversified Mortgage Servs., L.P., No. 14-1119, (3d Cir. May 7, 2015)).

At issue were losses that Lehman incurred on mortgage loans it had purchased from Arlington Capital Mortgage Corporation. After the purchase, Arlington entered into a contact in which it agreed to indemnify Lehman for any losses on the loans. Arlington later sold its assets to Gateway, and Lehman suffered losses on the loans. Lehman commenced an action against Gateway, seeking repayment on the loans, arguing that Gateway was Arlington's successor as a result of a de facto merger and was therefore liable for the amount due on the loans. Both parties moved for summary judgment. The district court denied Gateway's motion and partially granted Lehman's, holding that Arlington was liable to Lehman on three of the loans at issue. After conducting a bench trial, the district court found that a de facto merger had occurred and that Gateway consequently was liable to Lehman for indemnification.

Gateway appealed, arguing that the district court erred in granting summary judgment because an indemnification agreement may have extinguished Arlington's liability and therefore its own liability as Arlington's purported successor. The district court had deemed Gateway to have waived this argument during a hearing conducted telephonically. Gateway did not submit a transcript of the hearing at issue with the record on appeal. Instead, Gateway asserted that there was "no record" to support the district court's conclusion that Gateway had waived the argument. Lehman submitted the transcript with its own appellate brief.

FRAP 10 requires the appellant to order a transcript of the parts of the proceedings as the appellant considers necessary (FRAP 10(b)(1)(A)). If the appellant plans to argue that a finding or conclusion made by the district court is not supported by the evidence, the appellant must include a transcript of all evidence relevant to that finding or conclusion in the record. Under FRAP 3, failure to comply with the appellate rules allows an appellate court to take appropriate action, including dismissing the appeal (FRAP 3(a)(2)). The Third Circuit noted that dismissal should not be imposed where a lesser sanction would bring about compliance and remedy the degree of prejudice suffered by the opposing party as a result of the violation. In this case, the court held that Gateway advanced an erroneous argument by stating that there was no record to support that the argument had been waived. Gateway's justification for failing to include the transcript was that it believed the hearing was conducted off the record. The Third Circuit found this justification weak and stated that it demonstrated either a "remarkable lack of diligence" or an intent to deceive the court. In either case, the Third Circuit held that forfeiture of the claim was an appropriate sanction for the violation. The Third Circuit also found the other arguments made by Gateway on appeal to be unpersuasive and affirmed the district court's judgment.

Counsel should be careful to include transcripts of all relevant proceedings to ensure compliance with FRAP 10.