Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_10-cv-01055/USCOURTS-caed-1_10-cv-01055-17/pdf.json

Parties Involved:
Bedrock Financial, Inc.
Counter Defendant
First American Title Company
ThirdParty Defendant
First American Title Insurance Company
ThirdParty Defendant
Internal Revenue Service
Defendant
United States of America
Counter Claimant

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

BEDROCK FINANCIAL, INC.,

Plaintiff,

v.

UNITED STATES OF AMERICA,

Defendant,

v.

FIRST AMERICAN TITLE COMPANY, 

et al.,

Third-Party-Defendant,

1:10-cv-01055 MJS HC

ORDER GRANTING MOTION TO VACATE 

ORDERS AND JUDGMENTS PURSUANT 

TO FED. R. CIV. P. 60.

(Doc. 151.) 

I. INTRODUCTION

This action was filed by Bedrock Financial, Inc. ("Bedrock"), against the United 

States Internal Revenue Service ("IRS") in Merced County California Superior Court. 

Bedrock, holder of a deed of trust to real property sought to be subrogated to an earlier 

mortgage so as to establish priority over a federal tax lien attached to the property. The 

United States ("Government") removed the suit to this Court. The Court granted 

Bedrock's motion for summary judgment, awarding it equitable subrogation and an 

equitable lien in the amount of $171,106.85. The Court also granted the Government

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judgment against First American Title Company and First American Title Insurance 

Company (collectively, "First American") on its conversion and waste claims in the 

amount of $24,648.76 plus interest.

First American appealed and the Government cross-appealed. Through the Ninth 

Circuit Mediation Program, the parties agreed to terms of settlement which included 

vacation of the summary judgments issued by this Court. The parties have so moved. 

Having carefully considered the papers submitted, the Court grants the motion to vacate.

II. BACKGROUND

This case originated with an action filed May 3, 2010, by Bedrock Financial, Inc., 

a California corporation ("Bedrock"), against the United States Internal Revenue Service 

("IRS") in Merced County California Superior Court (Case No. CV001026). Bedrock, 

holder of a deed of trust to real property in Atwater, Merced County, California (APN 

004-110-005) (the "property"), sought to be subrogated to an earlier mortgage so as to 

establish priority over a federal tax lien (Merced County Doc. No. 2007-057520) which 

attached to the property after the earlier mortgage but before Bedrock's deed of trust. 

The United States ("Government") removed the suit to this Court. The IRS was later 

dismissed, leaving the Government as the only Defendant. The Government answered 

Bedrock's suit, and filed a counterclaim against Bedrock and a third-party complaint 

against First American. The parties consented to the jurisdiction of a United States 

Magistrate Judge for all purposes, pursuant to 28 U.S.C. § 636 (c)(1).

On November 12, 2012, the Court granted Bedrock's motion for summary 

judgment, awarding it equitable subrogation and an equitable lien in the amount of 

$171,106.85. Next, on April 17, 2014, the Court granted the Government's motion for 

judgement against First American on conversion and waste claims. The Court found that 

First American wrongfully diverted $42,458.12 in loan proceeds that were subject to the 

tax lien, but that the Government had subsequently recovered a portion of the 

outstanding debt, leaving an approximate unrecovered balance of $24,354.75.

On June 6, 2014, the Court entered judgment in favor of the third-party plaintiff, 

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the Government, and against the third-party defendants, First American, in the amount of 

$24,648.76 plus interest, and closed the case.

First American appealed the judgment on June 27, 2014, and on July 31, 2014, 

the United States cross-appealed the judgment in favor of Bedrock. The parties engaged 

in informal settlement negotiations, with assistance from a mediator from the Ninth 

Circuit Court of Appeals, and reached a settlement. The terms of the settlement required 

judgments ordered by this Court to be vacated. On March 25, 2015, Bedrock and First 

American filed a motion to vacate orders pursuant to Federal Rule of Civil Procedure 60. 

(ECF No. 151.) The Government filed a statement of non-opposition on April 3, 2015. 

(ECF No. 153.) On April 22, 2015 the Court issued a minute order deeming the matter 

suitable for decision without oral argument. (ECF No. 154.) The matter stands ready for 

adjudication. 

III. LEGAL STANDARD

Pursuant to Fed. R. Civ. P. 60(b), a district court may "relieve a party or a party's 

legal representative from a final judgment, order, or proceeding" for a number of 

reasons. 

In U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18, 29, 115 

S. Ct. 386, 130 L. Ed. 2d 233 (1994) ("Bonner Mall"), the Supreme Court held that 

appellate court vacatur of district court judgments in the context of settlement 

agreements should be granted only in "exceptional circumstances." Those exceptional 

circumstances "do not include the mere fact that the settlement agreement provides for 

vacatur." Id. The Court emphasized the importance of considering the public interest 

when contemplating the equitable remedy of vacatur: "Judicial precedents are 

presumptively correct and valuable to the legal community as a whole. They are not 

merely the property of private litigants and should stand unless a court concludes that 

the public interest would be served by a vacatur." Id. at 26 (quoting Izumi Seimitsu 

Kogyo Kabushiki Kaisha v. U.S. Philips Corp., 510 U.S. 27, 40, 114 S. Ct. 425, 126 L. 

Ed. 2d 396 (1993) (Stevens, J., dissenting)). Thus, "quite apart from any considerations 

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of fairness to the parties," vacatur disturbs the "orderly operation of the federal judicial 

system" by deviating from the primary route Congress has prescribed for parties who 

seek relief from the legal consequences of judicial judgments: appeal as of right and 

certiorari. Id. at 27.

However, in American Games, Inc. v. Trade Products, Inc., the Ninth Circuit 

distinguished Bonner Mall by holding that district courts, due to the "fact-intensive nature 

of the inquiry required," enjoy "greater equitable discretion when reviewing [their] own 

judgments than do appellate courts operating at a distance." 142 F.3d 1164, 1170 (9th 

Cir. 1998). Therefore, a district court in this circuit may vacate one of its own judgments 

absent exceptional circumstances. See id. at 1168-69.

In determining whether to vacate a judgment, district courts must take into 

account "the consequences and attendant hardships of dismissal or refusal to dismiss" 

and "the competing values of finality of judgment and right to relitigation of unreviewed 

disputes." American Games, 142 F.3d at 1168 (quoting Dilley v. Gunn, 64 F.3d 1365, 

1370-71 (9th Cir. 1995)). This analysis is appropriate where, as here, the parties seek to 

vacate a judgment following settlement. See Am. Games, 142 F.3d at 1169 ("[T]he 

district court below could have vacated its own judgment using [the] equitable balancing 

test even if [the parties] had mooted their case by settlement."). "The purpose of this 

balancing process is to enable a district court to consider fully the consequences of 

vacatur." Bates, 944 F.2d at 650; see Allard v. De Lorean, 884 F.2d 464, 467 (9th Cir. 

1989) ("[T]he district court should balance the competing interests of the parties in order 

to determine whether the judgment below should be vacated."); see also Dilley, 64 F.3d 

at 1370 ("[T]he touchstone of vacatur is equity.").

Courts are not obliged to vacate a prior order at the behest of the parties in order 

to facilitate settlement. See Bates v. Union Oil Co., 944 F.2d 647, 650 (9th Cir. 1991). 

The Ninth Circuit has recognized that if courts were required to vacate prior rulings after 

settlement "any litigant dissatisfied with a trial court's findings would be able to have 

them wiped from the books." Ringsby Truck Lines, Inc. v. Western Conference of 

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Teamsters, 686 F.2d 720, 721 (9th Cir. 1982).

IV. ANALYSIS

The parties argue that vacatur will promote mediation and settlement. The Ninth 

Circuit and judicial policy have long-favored mediation and settlements. See Pilkington v. 

Cardinal Health, Inc. (In re Syncor ERISA Litig.), 516 F.3d 1095, 1101 (9th Cir. Cal. 

2008); citing Officers for Justice v. Civil Serv. Comm'n of City & County of San 

Francisco, 688 F.2d 615, 625 (9th Cir. 1982) (finding that "voluntary conciliation and 

settlement are the preferred means of dispute resolution"). The Ninth Circuit has 

developed a special mediation program that the parties utilized to resolve their 

differences in a global settlement.

As explained above, the Court is guided by equitable considerations in resolving 

whether vacatur is proper. In this case, several equitable principles favor vacatur. These 

include the general judicial policy favoring settlement, the Ninth Circuit's specific efforts 

to assist the parties to obtain settlement in this case, the parties' desire to conserve 

resources in continuing to litigate the matter on appeal, the judicial resources that further 

litigation would consume, and the fact-specific nature of the orders under consideration.

As Bedrock and First American explain, the tax lien in dispute in this case will be 

released with the execution of the settlement, and there is no danger that a third party 

could challenge the validity of the lien, or otherwise re-litigate the issues presented in the 

case. (Mot. to Vacate at 4.) It is clear that the current dispute involves specific real 

property and a tax lien which would not be subject to other litigation. 

Although under Bonner Mall "exceptional circumstances do not include the mere 

fact that the settlement agreement provides for vacatur," 513 U.S. at 29, in making its

equitable determination, this Court should give some weight to the fact that the 

settlement is conditioned upon vacatur. Major League Baseball Props., Inc. v. Pac. 

Trading Cards, Inc., 150 F.3d 149, 152 (2d Cir. 1998) (relying in part on the fact that "the 

victor in the district court wanted a settlement as much as, or more than, the loser did"); 

De La O v. Arnold-Williams, Nos. CV-04-0192 EFS, CV-05-0280 EFS, 2008 U.S. Dist. 

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LEXIS 68334, 2008 WL 4192033, at *1 (E.D. Wash. Aug. 27, 2008).

Balanced against these considerations in favor of vacatur is the impact of 

vacating the orders on the orderly progress of litigation. Although a district court's order 

is not precedential, "there is a 'systemic' interest in preserving district court judgments 

because 'they play a significant role in the development of decisional law by providing 

guidance to private parties with respect to the availability of remedies and to litigation 

strategy,' and they 'can also be useful to the courts of appeals in rendering decisions." 

Philip Servs. Corp. v. City of Seattle, Civil Action No. H-06-2518, 2007 U.S. Dist. LEXIS 

84237, 2007 WL 3396436 (S.D. Tex. Nov. 14, 2007) (quoting Cater v. Rosenberg & 

Estis, No. 95 CIV. 10439(DLC), 1999 U.S. Dist. LEXIS 131, 1999 WL 13036, at *3 

(S.D.N.Y. 1999)). While the Court is not fully persuaded that the request is not a 

disguised attack by First American on the resolution of issues contrary to its position, the 

request is tempered by the fact that vacatur will not cause the orders to disappear: they 

will remain in electronic research databases, albeit flagged, but otherwise available for 

whatever guidance they may give to parties and other courts. NASD Dispute Resolution, 

Inc. v. Judicial Council, 488 F.3d 1065, 1069 (9th Cir. 2007) (citing United States v. 

Joelson, 7 F.3d 174, 178 n. 1 (9th Cir. 1993)).

The Court must also consider the public interest. Courts generally characterize 

this interest as "protecting district court precedents from 'a refined form of collateral 

attack . . . .'" NASD Dispute Resolution, Inc., 488 F.3d at 1068-69 (quoting Bonner Mall, 

513 U.S. at 26). As this dispute is germane to the parties involved and facts and legal 

decisions relate to the specific real property in question and encumbrances thereupon, 

the Court is unaware of other public interests or third parties that would be negatively 

impacted by vacatur. 

Considering all of the relevant factors, the Court finds the parties' desire to 

conserve their resources, the potential to conserve judicial resources, and the lack of 

harm to any public interests favor granting the vacatur.

///

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VI. ORDER

It is therefore ORDERED:

1. First American's Motion to Vacate Orders and Judgments (ECF No. 151) is 

GRANTED;

2. The Court vacates the following orders and judgments:

a. The November 13, 2012 order granting Bedrock Financial Inc.'s 

motion for summary judgment (ECF No. 99);

b. The December 3, 2012 judgment in favor of Bedrock Financial Inc. 

(ECF No. 104);

c. The April 17, 2014 order granting the United States' motion for 

summary judgment (ECF No. 135);

d. The June 6, 2014 order awarding damages and entering judgment 

(ECF No. 140); and 

e. The June 6, 2014 judgment in favor of the United States (ECF No. 

141).

IT IS SO ORDERED.

Dated: April 29, 2015 /s/Michael J. Seng 

UNITED STATES MAGISTRATE JUDGE

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