Opinion ID: 1348839
Heading Depth: 3
Heading Rank: 1

Heading: The efficiency of postjudgment settlements

Text: This court recognized a century ago that settlement agreements `are highly favored as productive of peace and good will in the community,' as well as `reducing the expense and persistency of litigation.' ( McClure v. McClure (1893) 100 Cal. 339, 343 [34 P. 822].) The need for settlements is greater than ever before. Without them our system of civil adjudication would quickly break down. (Lynch, California Negotiation and Settlement Handbook (1991), p. vii [foreword by California Supreme Court Chief Justice Malcolm M. Lucas].) Settlement is perhaps most efficient the earlier the settlement comes in the litigation continuum. The benefits of settlement, however, do not evaporate when judgment is entered. A pretrial settlement does, of course, avoid the costs of trial. That much is a truism. It is also an incomplete assessment because it views the litigation process only with hindsight. The matter must also be viewed prospectively. Although a postjudgment settlement is perhaps less efficient than a pretrial one, equally true is that a postjudgment settlement is nonetheless efficient in its own right because it will preclude the need for future expenditures of time and money by the parties and the judiciary. Requiring parties to continue to litigate a matter over which there is no longer a real dispute is wasteful of the resources of the judiciary. ( Federal Data Corp. v. SMS Data Products Group (Fed. Cir.1987) 819 F.2d 277, 280 [directing administrative agency to vacate decision after parties settled].) Our appellate courts' own policies demonstrate this point. In 1985, one-half of the Courts of Appeal had no settlement program, either formal or informal. (Cal. Civil Appellate Practice (2d ed., Cont.Ed.Bar 1985) § 11.1, p. 329.) Four years later, settlement conference procedures were in place in every Court of Appeal with two exceptions. (Eisenberg, Cal. Practice Guide: Civil Appeals & Writs (The Rutter Group) ¶ 6:2, p. 6-1.) At present, every Court of Appeal provides for settlement conferences, reflecting the now uniform recognition that the policy favoring settlement continues after judgment. Even more telling is the fact that Courts of Appeal throughout the state, including the Court of Appeal in this case, have routinely granted the parties' requests for stipulated reversals and similar procedures to effectuate settlement agreements. The principle that even a belated settlement saves resources is also well recognized in the federal courts. ( Federal Data Corp. v. SMS Data Products Group, supra, 819 F.2d 277, 280; Nestle Co., Inc. v. Chester's Market, Inc. (2d Cir.1985) 756 F.2d 280, 282-283.) Indeed, the Supreme Court has summarily vacated judgments in cases settled while pending on appeal after a court of appeals has refused to do so. ( Nestle Co. Inc. v. Chester's Market Inc., supra, 756 F.2d at p. 282, citing New Left Ed. Proj. v. Board of Reg. of the U. of Tex. Sys. (5th Cir.1973) 472 F.2d 218, vacated 414 U.S. 807 [38 L.Ed.2d 43, 94 S.Ct. 118].) The policy in favor of settlement, even when it requires a stipulated reversal, is rooted in practicality. If settlement on appeal is prohibited, the appeal must be heard and decided. If the judgment is reversed and retrial is allowed (not an unusual result), considerable future expense and trial court resources will be consumed. The present case is an excellent example of the merit of postjudgment settlements. The Court of Appeal's refusal to implement the parties' agreement would have the following consequences: (1) The Court of Appeal would expend substantial resources in deciding the merits of the underlying appeal. The trial lasted four months. The record consists of 63 volumes of reporter's transcript containing nearly 13,000 pages and a 19-volume clerk's transcript of 5,366 pages. The action has been the subject of a prior appeal. ( Neary v. Regents of the University of California (1986) 185 Cal. App.3d 1136 [230 Cal. Rptr. 281].) When settlement was reached during the present appeal, the Court of Appeal had already granted three defendants' requests to file a brief twice as long as the normal maximum. The appellate courts have enough to do without deciding cases the parties no longer wish to litigate. (2) The parties would incur substantial costs in litigating this appeal, e.g., filing and responding to a brief twice the normal length. If the judgment were reversed and there were a retrial, the parties and the trial court would expend substantial further resources, as demonstrated by the length of the first trial. The parties also have made clear that, if the merits of the appeal were decided, the loser would surely seek relief in this court and perhaps the United States Supreme Court. In view of the sharpness of the dispute to date, the amount at stake, and the complex issues raised (some of them constitutional), further appeals would be a near certainty. This would burden the courts as well as the parties. We reject the notion, advanced by some of the amici curiae in this case, that the possibility of postjudgment settlements incorporating a stipulated reversal will reduce the frequency of pretrial settlements. This view misses the mark in several respects. First, the law review article on which the amici curiae rely claims that the availability of vacatur [i.e., reversal] makes going to trial cost-free, apart from litigation costs. (Fisch, Rewriting History: The Propriety of Eradicating Prior Decisional Law Through Settlement and Vacatur (1991) 76 Cornell L.Rev. 589, 596, fns. omitted.) This is rather like saying that death is only temporary, apart from its permanency. Litigation costs are an enormous burden and are such an integral part of the process that they cannot be simply severed from the equation. Indeed, the article's author acknowledges in a footnote that these costs can be considerable, but the article fails to consider their significance. Second, trials (indeed, the entire litigation process) have significant non -monetary costs. One of the most significant is negative publicity, which can be especially harmful to an institutional defendant, e.g., a product manufacturer. In amici curiae's view, such a defendant loses nothing if he settles after an unfavorable judgment. Not so. Negative news reports can have a lasting effect. Individuals also suffer considerable emotional distress during litigation. These costs may be unrecoverable. Third, the argument against stipulated reversal too easily surmises that a losing defendant can simply buy its way out from an unfavorable judgment by paying the amount of the judgment. This is dubious because it assumes a case can be settled after trial for the same amount as it could have been settled before trial. As practitioners know, however, the parties' respective pretrial evaluations of a case change markedly after trial. (This is true regardless of whether stipulated reversal is an issue, e.g., in the situation where a settlement comes after trial but before judgment.) Fourth, even if the amici curiae's view had some intuitive appeal, it would not be supported by empirical data. To the contrary, the record in this case (more specifically, the parties' joint request for judicial notice) demonstrates that Courts of Appeal have heretofore routinely granted stipulated reversals and similar procedural methods for effecting settlements. Nothing suggests, however, that the availability of such a procedure has even slightly decreased the number of pretrial settlements. In short, the use of a stipulated reversal to effectuate a postjudgment settlement is an efficient and conservative use of the resources of the courts and the litigants.