FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

NASD DISPUTE RESOLUTION, INC.; 

NEW YORK STOCK EXCHANGE, INC.,

Plaintiffs-Appellants,

v.

JUDICIAL COUNCIL OF THE STATE OF

CALIFORNIA; RONALD M. GEORGE,

in his official capacity as Chair of

the Judicial Council; MARVIN R

BAXTER; RICHARD D. ALDRICH;

NORMAN L. EPSTEIN; RICHARD D.

HUFFMAN; GAIL ANDREA ANDLER; No. 02-17413

AVIVA K. BOBB; ROBERT A. DUKES;

D.C. No. LEONARD P. EDWARDS, WILLIAM C.  CV-02-03486-SC HARRISON; BRAD R. HILL; DONNA J.

HITCHENS; RONALD M. SABRAW; OPINION

BARBAR ANN ZUNIGA; MARTHA

ESCUTIA; ELLEN M. CORBETT; JOHN

J. COLLINS; PAULINE W. GEE; REX

A. HEESEMAN; THOMAS J.

WARWICK, JR., in their official

capacities as members of the

Judicial Council; WILLIAM C.

VICKERY, in his capacity as

Administrative Director of the

Courts,

Defendants-Appellees. 

Appeal from the United States District Court

for the Northern District of California

Samuel Conti, District Judge, Presiding

6475
Argued and Submitted

January 10, 2007—San Francisco, California

Filed May 30, 2007

Before: John T. Noonan and Richard R. Clifton,

Circuit Judges, and George P. Schiavelli,* District Judge.

Opinion by Judge Clifton

*The Honorable George P. Schiavelli, United States District Judge for

the Central District of California, sitting by designation. 

6476 NASD DISPUTE RESOLUTION v. JUDICIAL COUNCIL
COUNSEL

Douglas W. Henkin, Milbank, Tweed, Hadley & McCloy

LLP, New York, New York; Mark A. Perry (argued), William

M. Jay, Gibson, Dunn & Crutcher LLP, Washington, D.C.,

for the appellants. 

NASD DISPUTE RESOLUTION v. JUDICIAL COUNCIL 6477
Mitchell C. Tilner, David S. Ettinger (argued), Horvitz &

Levy LLP, Encino, California; Mary Maloney Roberts, Judicial Council of California, San Francisco, California, for the

appellees. 

OPINION

CLIFTON, Circuit Judge: 

The parties agree that this appeal is moot. The underlying

dispute has been resolved in other litigation. The parties disagree on what should happen now, however. Appellants

NASD Dispute Resolution, Inc. (“NASD”), and New York

Stock Exchange, Inc. (“NYSE”), the plaintiffs, say we should

vacate the district court’s judgment dismissing their lawsuit.

The defendant, the Judicial Council of the State of California

(“the Council”), asks us to dismiss this appeal without vacating the district court’s judgment. We agree with appellants

and vacate the district court judgment. 

I. Background 

In 2001, the California legislature passed a law ordering the

Judicial Council of California, the rule-making arm of the

California court system, to create ethical standards for commercial arbitrators. Cal. Code Civ. Proc. § 1281.85. The

Council responded by enacting comprehensive standards

including requirements for conflict-of-interest checks, disclosures to arbitrating parties, and penalties for unrevealed conflicts. 

NASD and NYSE objected to the California standards.

Those organizations have operated their own securities arbitration services for decades under federal auspices. They have

their own standards and procedures, which are not entirely

consistent with the California standards. They feared the Cali6478 NASD DISPUTE RESOLUTION v. JUDICIAL COUNCIL
fornia standards would make NASD or NYSE arbitration in

California more expensive, because of the added requirements, and less reliable, because an arbitrator’s decision could

be vacated if the arbitrator failed to comply with the California standards. Thus, they sued the Council and its individual

members in federal court, seeking a declaratory judgment that

(1) federal securities law preempted the California standards,

(2) the California standards could not constitutionally be

applied to the stock exchanges’ arbitration programs, and (3)

under state law the California standards did not cover NASD

or NYSE arbitrations. 

In November 2002, the district court dismissed the lawsuit.

NASD Dispute Resolution, Inc. v. Judicial Council, 232 F.

Supp. 2d 1055 (N.D. Cal. 2002). The dismissal did not reach

the merits of the arguments put forth by NASD and NYSE but

was instead based on the conclusion that the Eleventh

Amendment barred suit in federal court against the Judicial

Council and its individual members. Id. at 1064-66. NASD

and NYSE appealed. 

Before that appeal came to be heard by this court, we held

in a different case that federal securities law did preempt the

California standards, at least in the context of self-regulatory

bodies like NASD and NYSE. Credit Suisse First Boston

Corp. v. Grunwald, 400 F.3d 1119, 1126-36 (9th Cir. 2005).

The California Supreme Court came to a similar conclusion

in Jevne v. Superior Court, 111 P.3d 954 (Cal. 2005). 

NASD and NYSE now argue that Grunwald and Jevne render the present appeal moot, noting that this appeal addresses

no live controversy because those two cases effectively

granted the relief they sought in the present action. They ask

us to vacate the district court’s judgment and remand with

instructions to dismiss. The Council agrees that the appeal is

moot, but does not wish to taint with vacatur a published

opinion that says the Council and its members are immune

from lawsuit in federal court, and thus opposes vacatur. 

NASD DISPUTE RESOLUTION v. JUDICIAL COUNCIL 6479
II. Mootness 

Even though the parties agree that this appeal is moot, we

have “an independent obligation to consider mootness sua

sponte.” In re Burrell, 415 F.3d 994, 997 (9th Cir. 2005). That

obligation is easily satisfied here, as the parties are right. A

case is moot on appeal if no live controversy remains at the

time the court of appeals hears the case. See GTE Cal., Inc.

v. FCC, 39 F.3d 940, 945 (9th Cir. 1994). The test for whether

such a controversy exists is “whether the appellate court can

give the appellant any effective relief in the event that it

decides the matter on the merits in his favor.” In re Burrell,

415 F.3d at 998 (quoting Garcia v. Lawn, 805 F.2d 1400,

1402 (9th Cir. 1986)). We cannot give the appellants any further relief because Grunwald and Jevne have already provided

the relief sought by them in this case. There is no live controversy, and the appeal is moot. 

III. Vacatur 

[1] When a case becomes moot on appeal, the “established

practice” is to reverse or vacate the decision below with a

direction to dismiss. Arizonans for Official English v. Arizona, 520 U.S. 43, 71 (1997) (citing United States v. Munsingwear, Inc., 340 U.S. 36, 39 (1950)). Vacatur in such a

situation “eliminat[es] a judgment the loser was stopped from

opposing on direct review.” Arizonans for Official English,

520 U.S. at 71. Without vacatur, the lower court’s judgment,

“which in the statutory scheme was only preliminary,” would

escape meaningful appellate review thanks to the “happenstance” of mootness. United States v. Munsingwear, Inc., 340

U.S. 36, 39 (1950). Under the “Munsingwear rule,” vacatur is

generally “automatic” in the Ninth Circuit when a case

becomes moot on appeal. Publ. Util. Comm’n v. FERC, 100

F.3d 1451, 1461 (9th Cir. 1996). 

[2] Nonetheless, vacatur is not always appropriate when a

case becomes moot on appeal. The Supreme Court has termed

6480 NASD DISPUTE RESOLUTION v. JUDICIAL COUNCIL
vacatur an “extraordinary remedy,” one only available to

appellants who “demonstrate . . . equitable entitlement” to it.

U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513

U.S. 18, 26 (1994) (Bonner Mall). An appellate court considering whether to vacate a lower court’s opinion must also

“take account of the public interest.” Id. Specifically, the public has an interest in protecting district court precedents from

“a refined form of collateral attack:” the appellant who settles

while appeal is pending and, having rendered the case moot

by his own actions, demands the adverse lower-court opinion

be vacated. Id. “Both the Supreme Court and this court have

recognized exceptions to this practice if the party seeking

appellate relief fails to protect itself or is the cause of subsequent mootness.” Publ. Util. Comm’n, 100 F.3d at 1461(emphasis in original). Thus, the Supreme Court held that vacatur

is not always appropriate if the case is moot only because the

parties settled while appeal was pending. Bonner Mall, 513

U.S. at 29.1 The appellants in Bonner Mall, by settling, had

forfeited the right to appeal and therefore lost their equitable

entitlement to vacatur. Id. at 26. Similarly, the Supreme Court

has also denied vacatur when a case is moot only because the

losing party failed to pursue appeal. Karcher v. May, 484 U.S.

72, 83 (1987). In such cases, principles of equity and the public interest balance against vacatur. See Dilley v. Gunn, 64

F.3d 1365, 1369-71 (9th Cir. 1995). 

The Council contends that under Bonner Mall and Dilley,

equity and the public interest weigh against vacatur of the district court’s opinion. NASD and NYSE would suffer no harm

if the opinion was allowed to stand, the Council argues,

because that opinion merely bars suits against Council mem1

In the case of such a settlement, vacatur may still be granted; appellate

courts can remand to the district court to decide whether the facts suggest

that vacatur is still appropriate. Bonner Mall, 513 U.S. at 29. See, e.g.,

DHX, Inc. v. Allianz AGF MAT, Ltd., 425 F.3d 1169, 1170 (9th Cir. 2005)

(remanding after parties settled so that district court could decide if vacatur is appropriate). 

NASD DISPUTE RESOLUTION v. JUDICIAL COUNCIL 6481
bers, and neither NASD nor NYSE is ever likely to sue Council members again. Thus, the Council continues, the public

interest in preserving “judicial precedent” requires the district

court’s opinion to stand, because that opinion is valuable to

the public while vacatur is useless to NASD and NYSE. 

[3] In practical terms, the significance of this dispute

largely amounts to the impact of the phrase “vacated on other

grounds.” No matter what we conclude, the opinion of the district court will not be ripped from Federal Supplement 2d. It

will still be available and will still be citable for its persuasive

weight. See United States v. Joelson, 7 F.3d 174, 178 n. 1 (9th

Cir. 1993); Gould v. Bowyer, 11 F.3d 82, 84 (7th Cir. 1993);

see also DHX, Inc. v. Allianz AGF MAT, Ltd., 425 F.3d 1169,

1176 (9th Cir. 2005) (Beezer, J., concurring). That’s all the

weight a district court opinion carries anyway, outside of

future litigation involving the same parties and their privies,

because a district court opinion does not have binding precedential effect. See Hart v. Massanari, 266 F.3d 1155, 1174

(9th Cir. 2001) (noting that “the binding authority principle

applies only to appellate decisions, and not to trial court decisions”). 

[4] The impact of the phrase “vacated on other grounds”

may motivate the parties before us to contest the issue, but it

is not enough to get this case out from under the general rule

of Munsingwear. This rule requires us to vacate the district

court’s judgment. The Supreme Court in Bonner Mall held

that it stood by “Munsingwear’s dictum that mootness by happenstance provides sufficient reason to vacate.” 513 U.S. at

25 n. 3. The present case is one in which “happenstance,” not

the parties’ own actions, rendered the appeal moot. The appellants did not settle the case, nor did they fail to appeal. Rather,

this court and the California Supreme Court resolved the controversy with the decisions in Credit Suisse and Jevne. That

was not appellants’ doing. NASD and NYSE were not even

parties to those actions, though it would not matter if they had

been, because they could not be required to abandon their

6482 NASD DISPUTE RESOLUTION v. JUDICIAL COUNCIL
consistent position in other pending litigation merely to avoid

mooting out another case. We therefore hold that the exception identified in Bonner Mall for settlements should not

apply to judgments mooted by court decisions in other cases.

[5] We vacate the district court’s judgment and remand

with instructions to dismiss the case. 

VACATED AND REMANDED. 

NASD DISPUTE RESOLUTION v. JUDICIAL COUNCIL 6483