Court Opinion

ID: 4015122
Source: CourtListenerOpinion
Date Created: 2016-07-12 21:01:05.302872+00
Date Added: 2024-06-11T07:44:53.100272
License: Public Domain

Case: 15-12781    Date Filed: 07/12/2016   Page: 1 of 14

                                                                        [PUBLISH]

               IN THE UNITED STATES COURT OF APPEALS

                        FOR THE ELEVENTH CIRCUIT
                          ________________________

                            No. 15-12781; 12-13728
                          ________________________

                      D.C. Docket No. 1:10-cv-24590-JLK

HARTFORD CASUALTY INSURANCE COMPANY,
a foreign corporation,

                                                  Plaintiff -
                                                  Counter Defendant,

HARTFORD ACCIDENT AND INDEMNITY COMPANY,
a foreign corporation, as equitable subrogee and real party in
interest on behalf of Miller & Solomon General Contractors, Inc.,

                                                 Plaintiff -
                                                 Counter Defendant -
                                                 Appellant,

versus

CRUM & FORSTER SPECIALTY INSURANCE COMPANY,
a foreign corporation, as equitable subrogee and real party in
interest on behalf of Miller & Solomon General Contractors, Inc.,

                                                 Defendant -
                                                 Counter Claimant -
                                                 Counter Defendant -
                                                 Appellant,
               Case: 15-12781       Date Filed: 07/12/2016      Page: 2 of 14

WESTCHESTER SURPLUS LINES INSURANCE COMPANY,
a foreign corporation,

                                                         Defendant - Appellant.

                              ________________________

                     Appeals from the United States District Court
                         for the Southern District of Florida
                            ________________________

                                       (July 12, 2016)

Before TJOFLAT and WILSON, Circuit Judges, and COOGLER, ∗ District Judge.

TJOFLAT, Circuit Judge:

       This appeal concerns a settlement agreement made contingent on vacating

certain orders of the District Court. After being moved to do so under Rule 60(b)

of the Federal Rules of Civil Procedure, the District Court declined to vacate those

orders. We conclude that the District Court thereby abused its discretion because it

misapplied the Supreme Court’s seminal decision in this area of the law, U.S.

Bancorp Mortgage Company v. Bonner Mall Partnership, 513 U.S. 18, 115 S. Ct.
386, 130 L. Ed. 2d 233 (1994), which sets out an equitable approach that generally

counsels against granting requests for vacatur made after the parties settle. The

       ∗
       Honorable L. Scott Coogler, United States District Judge for the Northern District of
Alabama, sitting by designation.

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Bancorp Court, however, provided an exception to this general rule for

“exceptional circumstances.” Here, there are such exceptional circumstances.

                                          I.

      Between June 15, 2012, and November 15, 2012, the District Court entered

a series of orders granting summary judgment and assessing attorneys’ fees and

costs in favor of Crum & Forster Specialty Insurance Company and Westchester

Surplus Lines Insurance Company (collectively, “Crum & Forster”) in a suit about

the scope of an insurance policy under Florida law brought by Hartford Accident

and Indemnity Company (“Hartford”). Hartford appealed the District Court’s

grant of summary judgment to Crum & Forster on July 11, 2012. On August 31,

2012, we ordered the parties to take part in a mediation conference. That

mediation failed to resolve Hartford’s appeal.

      After hearing oral argument, we ordered the parties to take part in a second

mediation. This second mediation resulted in a conditional settlement agreement,

which was executed by the parties on January 26, 2015. Crum & Forster and

Hartford agreed to settle the case, but the agreement provided that the settlement

“is expressly contingent upon the issuance of a valid, final, written order by a court

of competent jurisdiction vacating the Summary Judgments and related Cost

Orders and Crum & Forster Fee Judgment . . . in their entirety.” If the District

Court’s orders were not vacated, the conditional settlement agreement provided
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that “the Parties’ controversy, as it existed before this Conditional Agreement was

executed, shall remain live, and the remainder of this Conditional Agreement shall

become null and void and otherwise unenforceable by any Party.” We granted the

parties’ joint motion to stay Hartford’s initial appeal on February 26, 2015, so the

parties could file their motion to vacate those orders in the District Court pursuant

to Rule 60(b). See Fed. R. Civ. P. 60(b)(6) (“On motion and just terms, the court

may relieve a party or its legal representative from a final judgment, order, or

proceeding for . . . any other reason that justifies relief.”).

       On May 27, 2015, the District Court, invoking the Supreme Court’s Bancorp

decision, concluded that there are not “exceptional circumstances” warranting

vacatur of the contested orders. Specifically, the District Court rejected the

grounds advanced by Crum & Forster and Hartford (1) that the conditional

settlement agreement was reached only after we had ordered the parties to

mediation, and (2) that the orders in question turned on a federal district court’s

interpretation of state law and are thus of limited precedential value. The Court

reasoned that, even though we had ordered the parties to mediation, the resulting

settlement evinced a “voluntary forfeiture of review,” which counsels against

vacatur, because the decision to settle was “entirely [the parties’] own

prerogative.” The Court further reasoned that whether or not its orders were of

limited precedential value was beside the point; “vacatur should be granted only
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where the public interest would affirmatively ‘be served’” by doing so. In

reaching these conclusions, the District Court rejected the contrary reasoning of

two of our sister circuits, whose understanding of the Supreme Court’s Bancorp

decision the District Court described as “flaw[ed].” See Major League Baseball

Props., Inc. v. Pac. Trading Cards, Inc., 150 F.3d 149 (2d Cir. 1998); Motta v.

Dist. Dir. of INS, 61 F.3d 117 (1st Cir. 1995) (per curiam). This appeal timely

followed.

                                           II.

      Both Crum & Forster and Hartford jointly challenge the District Court’s

denial of their Rule 60(b) motion to vacate. We review the District Court’s denial

of a Rule 60(b) motion for abuse of discretion. Stansell v. Revolutionary Armed

Forces of Colombia, 771 F.3d 713, 734 (11th Cir. 2014). “‘A district court abuses

its discretion if it applies an incorrect legal standard, applies the law in an

unreasonable or incorrect manner, follows improper procedures in making a

determination, or makes findings of fact that are clearly erroneous.’” United States

v. Toll, 804 F.3d 1344, 1353–54 (11th Cir. 2015) (quoting Citizens for Police

Accountability Political Comm. v. Browning, 572 F.3d 1213, 1216–17 (11th Cir.

2009)).

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                                          III.

      Although the District Court identified the correct legal standard for assessing

whether vacatur is appropriate after a case settles—the Supreme Court’s decision

in U.S. Bancorp Mortgage Company v. Bonner Mall Partnership, 513 U.S. 18, 115
S. Ct. 386, 130 L. Ed. 2d 233 (1994)—it applied that standard incorrectly. At issue

in Bancorp was a settlement entered into by a debtor and creditor after the

Supreme Court had granted certiorari to decide whether there was a “new value

exception” to the absolute-priority rule of Chapter 11, a substantive issue of

bankruptcy law. See 513 U.S. at 19–20, 115 S. Ct. at 389. Although the settlement

mooted the question over which certiorari had originally been granted, the Court

decided to hear the debtor’s request that the Court vacate the Ninth Circuit’s

decision below, which the creditor opposed. Id.; see also 28 U.S.C. § 2106 (“The

Supreme Court or any other court of appellate jurisdiction may . . . vacate . . . any

judgment, decree, or order of a court lawfully brought before it for review . . . .”).

The Court thus had to determine the effect of a settlement on the normal practice of

vacating lower courts’ decisions once an appeal has become moot. See Bancorp,
513 U.S. at 22–23, 115 S. Ct. at 390 (confirming this “‘established practice’” and

explaining “that vacatur ‘clears the path for future relitigation of the issues

between the parties and eliminates a judgment, review of which was prevented

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through happenstance.’” (quoting United States v. Musingwear, Inc., 340 U.S. 36,

39–40, 71 S. Ct. 104, 106–07, 95 L. Ed. 36 (1950))).

      Concluding that the Ninth Circuit’s decision should stand, the Court laid out

a balancing approach in the “equitable tradition of vacatur.” Id. at 24–25, 115 S.

Ct. at 391–92. The “principal condition” that must be determined “is whether the

party seeking relief from the judgment below caused the mootness by voluntary

action.” Id. at 24, 115 S. Ct. at 391. If so, that party should not be entitled to relief

because “the losing party has voluntarily forfeited his legal remedy by the ordinary

processes of appeal or certiorari,” as “the case stands no differently than it would if

jurisdiction were lacking because the losing party failed to appeal at all.” Id. at

25–26, 115 S. Ct. at 392. Even if granting a request for vacatur would be fair to

the party opposing it because “the parties are jointly responsible for settling” and

thus “may in some sense” be thought to be “on even footing,” the required

balancing “must also take account of the public interest,” as is true of any equitable

remedy. Id. at 26, 115 S. Ct. at 392. By “disturb[ing] the orderly operation of the

federal judicial system” and using vacatur “as a refined form of collateral attack

on” unfavorable judgments, the public interest would be disserved because

“[j]udicial precedents are presumptively correct and valuable to the legal

community as a whole.” Id. at 27, 115 S. Ct. at 392 (quotation marks and citation

omitted). The Court concluded its analysis by reiterating the equitable nature of its
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adopted approach and declined to impose a bright-line rule against vacatur in all

cases mooted by settlement because there may be “exceptional circumstances” that

would warrant vacatur. Id. at 29, 115 S. Ct. at 393. The Court cautioned that

“those exceptional circumstances do not include the mere fact that the settlement

agreement provides for vacatur.” Id.

       To date, two of our sister circuits have held that there are such “exceptional

circumstances” justifying vacatur in published opinions.1 In Motta v. District

Director of INS, the First Circuit concluded that vacatur was warranted when the

parties to an immigration suit agreed to enter into a settlement after a panel of that

Court suggested they do so during oral argument. 2 The Immigration and

Nationalization Service (“the INS”) agreed to settle on the condition that the

district court order under review, which the INS viewed as “dangerous and

erroneous precedent,” be vacated. See Motta, 61 F.3d at 118. Distinguishing

Bancorp, the First Circuit observed that “[t]he INS did not by its own initiative

relinquish its right to vacatur” as it had “at all times sought to pursue its appeal,”

with the INS’s consideration of settling coming “only at the suggestion of th[e]
       1
         Other circuits, including this one, have also vacated district courts’ precedential rulings
based on the presence of exceptional circumstances in unpublished opinions. See Blue Cross
and Blue Shield Ass’n v. Cox, 403 F. App’x 417 (11th Cir. 2010); In re Gen. Motors Corp., No.
94-2435, 1995 WL 940063 (4th Cir. Feb. 17, 1995).
       2
         The underlying issue at stake in Motta involved the propriety of a district court order
staying deportation and allowing the Board of Immigration Appeals to decide whether to reopen
proceedings. Motta, 61 F.3d at 117–18.

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Court.” Id. As such, there would be “no appreciable harm to the orderly

functioning of the federal judicial system” because the parties were not granted

“undue control over judicial precedents.” Id. Although the First Circuit

recognized that vacating district court precedent “works a kind of harm,” the Court

reasoned that “such a species of harm” does not outweigh the settling parties’

interests and the efficiency benefits of settlement. Id. Unlike “the usual appeal”

when “vacatur is only one consideration among others in a settlement,” as was the

posture in Bancorp, the Motta Court reasoned that the INS “is primarily concerned

with the precedential effect of the decision below” because the INS is “a repeat

player before the courts.” Id. Weighing the concrete and individualized harm that

would occur to the parties if their settlement efforts went for naught against the

diffuse and slight harm to the public interest in preserving precedent, the First

Circuit concluded that “the equities plainly favor vacatur.” Id.

       The Second Circuit reached a similar conclusion in Major League Baseball

Properties, Inc. v. Pacific Trading Cards, Inc., which involved an appeal of a

district court order denying a preliminary injunction in a trademark dispute. 3

       3
         Specifically at issue in Major League Baseball was the District Court’s decision to deny
the preliminary injunction requested by Major League Baseball Properties, Inc. in its trademark
dispute with Pacific Trading Cards, Inc., which concerned the production of unauthorized trading
cards with images depicting Major League Baseball players wearing allegedly trademark-
protected uniforms. See 150 F.3d at 150.

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Because an injunction pending appeal “would be financially ruinous” to the

defendant-appellee and because it would take several months to make a

determination “even on an expedited basis,” the Court ordered the parties to

mediate their dispute with the help of staff counsel. Major League Baseball, 150
F.3d at 150–51. The parties returned with a settlement agreement contingent on

the district court order being vacated and jointly requested that the Court grant

vacatur. Id. at 151. Relying on the First Circuit’s reading of Bancorp’s

“exceptional circumstances” language, the Second Circuit reasoned that vacating

the district court order was appropriate because doing so “was a necessary

condition of settlement.” Id. at 152. Leaving adverse precedent on the books

could subject the markholder to a defense of acquiescence “in future litigation with

alleged infringers.” See id. Because the settlement benefitted both parties and

“[t]he only damage to the public interest . . . would be that the validity of [the

disputed trademarks] would be left to future litigation,” the Court concluded that

the balance of the equities favored vacatur. Id.

      We follow the approach taken by the First and Second Circuits, which

embraces the equitable nature of the Supreme Court’s Bancorp inquiry. Under this

approach, courts determine the propriety of granting vacatur by weighing the

benefits of settlement to the parties and to the judicial system (and thus to the

public as well) against the harm to the public in the form of lost precedent. The
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precise application of this approach will vary case by case. Here, two unusual

features of the settlement agreement entered into by Crum & Forster and Hartford

tip the scales decisively in favor of vacating the District Court’s orders in dispute.

      First, we observe that Crum & Forster and Hartford did not begin their

negotiations leading to settlement unprompted. It was only after the second time

we referred their dispute to mediation that Crum & Forster and Hartford agreed to

settle. As that agreement is expressly conditioned on the District Court’s orders

being vacated, this is not the case of an appellant “voluntarily forfeit[ing] his legal

remedy by the ordinary processes of appeal or certiorari.” Cf. Bancorp, 513 U.S.

at 25–26, 115 S. Ct. at 392. Second and relatedly, this is an instance where both

parties to the settlement desire vacatur because settlement would otherwise be

impossible. Taken together, these considerations weigh heavily in favor of

vacating the District Court’s orders. The parties’ interests are best served through

the voluntary disposition of this case, and further proceedings are curtailed,

conserving judicial resources. On the other side of the balance is the public

interest in preserving a district court ruling on questions of state contract law that

has been appealed to this Court. The slight value of preserving that precedent to

the public interest generally, however, is outweighed by the direct and substantial

benefit of settling this case to Crum & Forster and Hartford and to the judicial

system (and thus to the public as well).
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      The District Court’s contrary conclusion and reasoning below rest on two

faulty premises that we expressly disavow. First, the District Court concluded that,

although we had ordered the parties to mediation, the resulting settlement

nonetheless evinced a “voluntary forfeiture of [appellate] review” that was

“entirely [the parties’] own prerogative.” As a result, Crum & Forster and Hartford

should not be entitled to avail themselves of the equitable remedy of vacatur. The

District Court’s rationale, however, proves too much. Although any valid

settlement will, of course, be “voluntary” and in some sense put an end to the

dispute at hand, to conclude that a settlement conditioned on vacatur indicates a

voluntary forfeiture of appellate review would eliminate the possibility that any

settlement would ever warrant vacatur. Adopting such a reading of “exceptional

circumstances”—that is, categorically denying that any such “exceptional

circumstances” exist—would be inconsistent with the Supreme Court’s express

language in Bancorp and the equitable nature of that decision.

      Second, the District Court’s approach to determining the nature of the public

interest in vacatur is too narrow. Relying on the following statement in Bancorp—

“‘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,’” Bancorp, 513 U.S. at 26–27, 115 S. Ct. at 392 (quoting Isumi Seimitsu
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Kogyo Kabushiki Kaisha v. U.S. Philips Corp., 510 U.S. 27, 40, 114 S. Ct. 425,

428, 126 L. Ed. 2d 396 (1993) (Stevens, J., dissenting))—the District Court

understood its discretion to grant vacatur to be limited to those circumstances in

which doing so would affirmatively advance the public interest. That is, the

District Court read the quoted language from Bancorp to adopt a bright-line rule

whereby vacatur could not be granted if there were only slight harm likely to befall

the public interest, or even no harm at all, regardless of the magnitude of the

countervailing benefits of settlement. Apart from being plainly contrary to the

equitable nature of the inquiry called for by Bancorp, the District Court’s

erroneous bright-line approach also fails to recognize that the public interest is not

served only by the preservation of precedent. Rather, the public interest is also

served by settlements when previously committed judicial resources are made

available to deal with other matters, advancing the efficiency of the federal courts.

When proper consideration is given to the interests of the parties, the judicial

system, and the public taken together, vacatur may still prove an appropriate

remedy even if the public’s interest in the preservation of precedent is not

affirmatively advanced when considered in isolation.

                                         IV.

      Accordingly, the District Court’s denial of Crum & Forster and Hartford’s

Rule 60(b) motion is REVERSED. The District Court’s orders of June 15, 2012;
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June 21, 2012; October 30, 2012; and November 15, 2012, awarding Crum &

Forster summary judgment, costs, and attorneys’ fees are hereby VACATED.

     REVERSED AND VACATED

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