Opinion ID: 1348839
Heading Depth: 2
Heading Rank: 2

Heading: stipulated reversals discourage pretrial settlements

Text: The majority devotes most of its opinion to making the point that public policy encourages settlements, at both the trial and appellate levels, because they conserve judicial resources, relieve parties of the emotional and financial burdens and risks of further litigation, and permit them to reconcile. I agree entirely that settlements are beneficial, that it is never too late to settle, and that the judiciary should actively encourage settlement at every stage of litigation. But I disagree with the conclusions the majority seeks to draw from these noncontroversial propositions. I question whether the rule the majority adopts, which requires appellate courts to grant requests for stipulated reversal in the absence of extraordinary circumstances, will significantly increase the overall rate of settlements on appeal. Moreover, I am persuaded that the majority's decision will reduce the incentive for pretrial settlements. During the pendency of an appeal, the parties can always end the litigation by settlement. When notified of a settlement, an appellate court will ordinarily dismiss an appeal as moot, and the parties may then file a satisfaction of judgment in the trial court, formally bringing the lawsuit to a close. This is the normal manner in which appellate settlements occur. Appellate courts should and will continue to encourage parties to reach this kind of settlement, which leaves the trial court's judgment intact. Another form of settlement is commonly used in cases on appeal when the decision to settle reflects an agreement that the appeal is meritorious. In this situation, the parties may obtain reversal of the judgment by presenting their agreement to the appellate court in the form of a confession of error. (See San Franciscans for Reasonable Growth v. City and County of San Francisco (1989) 209 Cal. App.3d 1502, 1509 [258 Cal. Rptr. 267]; Barton v. Maal (1936) 12 Cal. App.2d 353, 354 [55 P.2d 529]; see generally, 9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 366, pp. 367-369.) A reversal under these circumstances is for legal error and is not a stipulated reversal as that term is used in this case. There is no empirical evidence that these two forms of settlement are inadequate, and that a significant number of cases can be settled on appeal only by granting a stipulated reversal of the judgment. Although the majority asserts that the Courts of Appeal have routinely granted motions for stipulated reversal, this assertion is based on documents submitted to this court by the defendants in support of their petition for review. Those documents, evidently the result of defendants' exhaustive search of appellate court records, reveal just 12 stipulated reversals by the Courts of Appeal in a 4-year period, during which the Courts of Appeal resolved many thousands of appeals by written opinion. Thus, stipulated reversal appears to be a rare occurrence in our appellate courts. Many parties who would prefer a stipulated reversal would settle even without it to avoid the uncertainties of further litigation. Indeed, that may well be true of the parties to this case. We will never know whether these parties would have settled anyway, without stipulated reversal, if this court had upheld the decision of the Court of Appeal. Even if one assumes that liberal exercise of the authority to grant stipulated reversal will appreciably increase the number of cases settled on appeal, there will be a significant cost for that benefit. If an adverse judgment can be deleted by a postjudgment settlement with stipulated reversal, parties concerned about the collateral consequences of an adverse judgment will have less incentive to settle their cases before trial and judgment. Cases that would have settled pretrial, with minimal judicial involvement, will be tried before a court or jury, perhaps for days or even months, only to have the court or jury's considered decision erased by a stipulated reversal. The most thorough treatment of this question appears in a recent law review article by Professor Fisch of Fordham University School of Law. ( Rewriting History, supra, 76 Cornell L.Rev. 589.) Professor Fisch states her conclusion in these terms: [A] rule of law which routinely permits post-settlement vacatur of judgments actually distorts the settlement process. Such a rule may encourage litigants to delay settlement until a later stage in the litigation. This delay results in a waste of judicial resources. ( Id. at pp. 592-593.) Professor Fisch observes that judgments have a variety of collateral costs to the losing party. Perhaps the most significant of these collateral costs is the judgment's preclusive effect in future litigation under the doctrines of res judicata and collateral estoppel. [1] Other important collateral costs are adverse publicity engendered by the decision and damage to reputation. ( Rewriting History, supra, 76 Cornell L.Rev. at pp. 593, 624-629.) In some cases, [t]he collateral costs of a judgment may be substantially greater for the losing party than the immediate costs of complying with the judgment. ( Id. at p. 594.) When the collateral costs are significant, as they often are, the prospect of incurring these costs provides a powerful incentive for settlement. Yet, as Professor Fisch explains, the availability of stipulated reversal essentially eliminates this factor as an incentive for pretrial settlement. As she writes: In effect, if a litigant is certain that the court will subsequently vacate an adverse judgment, the availability of vacatur makes going to trial cost-free, apart from litigation costs. A litigant may roll the dice, gamble on a favorable judgment and, if unsuccessful at trial, settle the case after judgment and move for vacatur. After settlement and vacatur of the trial court decision, the litigant will be no worse off than if he or she had avoided a final judgment by entering into a pretrial settlement. ( Rewriting History, supra, 76 Cornell L.Rev. at p. 596, fns. omitted.) The majority makes much of the incentives for pretrial settlement that remain even under a regime in which stipulated reversals are freely available on appeal. As Professor Fisch acknowledges, failure to settle before trial will still require the parties to incur litigation costs, and it will increase the settlement demands of the party who prevails at trial. Nevertheless, by converting a judgment from a solemn public pronouncement  irrevocable absent demonstrated legal error  into little more than a bargaining chip in ongoing settlement negotiations, a rule favoring stipulated reversals diminishes one very significant incentive for pretrial settlement. The Seventh Circuit, in an influential opinion by Judge Easterbrook, has recognized that its practice of always denying requests for stipulated reversal has the salutary effect of encouraging settlements before trial and judgment. ( Matter of Memorial Hosp. of Iowa County, Inc. (7th Cir.1988) 862 F.2d 1299, 1302.) The District of Columbia Circuit has adopted the same rule and has expressly endorsed Judge Easterbrook's reasoning ( In re U.S. (D.C. Cir.1991) 927 F.2d 626, 628 [288 App.D.C. 354]), as has the Third Circuit ( Clarendon Ltd. v. Nu-West Industries, Inc. (3d Cir.1991) 936 F.2d 127, 129.) Thus, I am not persuaded that the public policy favoring settlements will be well served overall by the rule mandating stipulated reversal absent extraordinary circumstances. The modest immediate gain in increased appellate settlements will, I fear, be more than offset by the long-term cost in terms of fewer pretrial settlements.