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Bar Journal - September 1, 2001

Putting a Pricetag on Precedent: The Doctrine of Vacatur upon Consent and its Implication on Policy and Principles in NH Courts

By:

INTRODUCTION

Many courts throughout the United States have recently begun the practice of vacating judgments following post-judgment settlement of litigation. New Hampshire courts have rejected vacatur in most situations. Instead, the courts have used protective orders to limit public access to information that is deemed confidential. Today, more than sixty percent of cases settle out of court, while only three percent of civil cases make it into the courtroom for trial.1 The power of courts to vacate prior judgments is not a recent innovation. In certain circuits, settlements conditioned on vacatur have become a standard practice in both state and federal courts.2

In this article we will define vacatur and offer alternative theories to the practice. We will weigh the benefits of the doctrine of vacatur with the detrimental effects that this doctrine has on the principles of stare decisis. Further, this article will explore whether New Hampshire's courts should adopt this doctrine and vacate lower court judgments pending appeal in an effort to promote settlements. In addition, we will examine possible outcomes, both positive and negative, if New Hampshire courts enforce such a doctrine.

ERASING THE PAST

Vacatur conditioned upon settlement is a procedure by which a court invalidates its own decsion or, in appellate courts, the decision of a trial court or a lower appellate court in order to allow the litigants to settle.3 Vacatur creates a judgment that has little to no legal force or effect. It essentially eliminates a decision as though it had never been promulgated.4 As used in this article, vacatur is not simply invalidating a wrong decision by a higher court, rather, it requires the litigants to join in requesting the judge to vacate the court's decision. The judge's order to vacate the decision is a condition upon which the parties will settle.

THE AUTHORITY TO VACATE

The Supreme Court or any other court of appellate jurisdiction may affirm, modify, vacate, set aside or reverse any judgment, decree, or order of a court lawfully brought before it for review.5 It may also remand the cause and direct the entry of such appropriate judgment, decree or order, or require such further proceedings to be had as may be just under the circumstances.

Under Federal Rule of Civil Procedure 60(b), parties may move to dismiss and vacate before the original district court that issued the judgment.6 This allows a court to relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: (1)mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.7

Under Rule 60(b) he motion shall be made within a reasonable time, and for (1), (2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken.8 A motion under this 60(b) does not affect the finality of a judgment or suspend its operation. This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to grant relief to a defendant not actually personally notified as provided in Title 28 U.S.C. 1655, or to set aside a judgment for fraud upon the court.9 Writs of coram nobis, coram vobis, audita querela, and bills of review and bills in the nature of a bill of review, are abolished, and the procedure for obtaining any relief from a judgment shall be by motion as prescribed in these rules or by an independent action. 10

While the requirements for vacating a judgment are detailed in Rule 60 (b),11 there is a separate set of rules for vacating a judgment once it reaches the appellate level. In moving to dismiss a judgment at the circuit court of appeals level while an appeal is pending, Federal Rule of Appellate Procedure 42 (b) applies. This rule reads:

(a)Dismissal in the District Court. Before an appeal has been docketed by the circuit clerk, the district court may dismiss the appeal on the filing of a stipulation signed by all parties or on the appellant's motion with notice to all parties (b) Dismissal in the Court of Appeals. The circuit clerk may dismiss a docketed appeal if the parties file a signed dismissal agreement specifying how costs are to be paid and pay any fees that are due. But no mandate or other process may issue without a court order. An appeal may be dismissed on the appellant's motion on terms agreed to by the parties or fixed by the court.12

SETTLEMENT CONDITIONED ON VACATUR: FRIEND OR FOE

In the 1984 trademark infringement case, Nestle Co. v. Chester's Market, Inc., the court weighed the public's interest in the finality of judgments with the parties' interests.13 In Nestle, a motion was brought by the defendants to vacate a partial summary judgment of the district court, which held that the term "Toll House" to describe cookies was a generic name.14 The fundamental issues surrounding settlement conditioned upon vacatur are set forth in this case. The court presented a compelling decision based on balancing both public and private interests.15

This case was brought by Nestle stemming from the use of the term "Toll House" by the defendant, Saccone's Toll House for the same or similar products. Nestle, which owned five federally registered trademarks for products with the name "Toll House" including trademarks for chocolate, cookies, cookie mix, spice flavored and butterscotch flavored morsels and prepared edible chocolate, claimed trademark infringement and unfair competition against Saccone.16 Saccone used Toll House in its corporate name, as the name of the inn it owned and operated, and for the cookies it baked and sold.17 The cookies were sold by defendant at Chester's Market, Inc., a grocery store in East Windsor, Connecticut. Nestle sued defendants on the use of the name in association with the cookies it sold under the Toll House name.18

This case reflects the court's belief in the importance of balancing public and private interests. The Nestle court held that the public's interest in finality of judgments and in adjudicating trademark validity outweighed the parties' interests.19 The parties were blunt in the request for vacatur when they stated, "the plaintiff will forego its appeal, only if plaintiff, as a condition of the settlement, can obtain the protection that it believes it needs against any subsequent use by defendants and by third parties, for collateral estoppel and other preclusive purposes."20

Despite the parties proposed settlement conditioned upon vacating the partial summary judgment, the court refused to vacate the decision.21 The policy reasoning behind this decision was that while both parties were able to reach an agreement in this case, future litigants would be unfairly prejudiced by being forced to re-litigate the same issue. Instead, the court refused to vacate the partial summary judgment awarded to defendants on the claim that Toll House is a generic term.22 In dicta, the court stated that, "to vacate the judgment would give this litigation 'the aura of the gaming table' by permitting Nestle to wager again and again on the prospect of obtaining in another court a judgment that the trademark is valid."23

The Nestle court stated, "both the judicial system and the public have a strong interest in the finality of judgments. The doctrines supporting judgment finality-including res judicata and collateral estoppel-prevent needless and endless relitigation of issues and claims."24

In Nestle, two fundamental issues surrounding settlements conditioned upon vacatur are presented. The court balanced the interests of the parties and the public in reaching its conclusion. It weighed two factors in deciding the case. The first factor was both parties' interest in terminating the action and avoiding the cost of further litigation and court's interests in foregoing further proceedings in the case. The second factor was the strong policies of res judicata and collateral estoppel underlying the concept of finality of judgments.25 In the end, the court found in favor of the public and the motion to vacate was denied.26

Is Vacatur Really a Problem?

The precedential authority of court decisions is the cornerstone of our judicial system. These decisions are carefully preserved, cataloged and published. They are made available in books and on-line services. These decisions are available not only to judges and lawyers, but also to the public. Our common law legal system is not based solely on the Constitution and statutes passed by the legislatures. It is a system that is based on common law principles developed by the courts throughout the past two centuries.

Deciding judgments with similar facts in the same way settles disputes in an efficient manner. Setting forth the determination of disputed facts gives litigants a firm understanding of the common law. It prevents parties from constantly rearguing the same position and the same issue in case after case. Our common law legal system is based on the premise that previously decided cases have a public value as law for future cases.27

Proponents, however, assert that vacatur is an attempt to settle disputes in a more expedient fashion. This is advantageous to the entire legal process because courts become less backlogged, litigants are not forced to spend money needlessly and the certainty of our system remains in effect. The result is an expedited, economical and more efficient resolution in the cases that have similar or parallel facts or issues.

The question must be raised as to whether or not vacatur is really the most efficient way to expedite cases. Isn't it ultimately more time consuming to hear the same disputed facts or issues repeatedly? A decision that is vacated in an effort to settle may be less time consuming because future costly appeals are avoided. However, if the same issue is continuously brought before the court, the prior vacated decision loses any beneficial effect.28

In order to uphold the value, fairness and certainty of our common law system, each litigant should be able to use all decisions on an issue to prove to a court what the law states about a particular issue.29 When courts allow the losing party to vacate an order in critical judgments, anyone with enough money can seek to undermine the reliability of our laws. William Zeller wrote in Avoiding Issue Preclusion by Settlement Conditioned upon Vacatur of Entered Judgments, "money skews the legal system when a victorious party to one case can buy off the losing party to prevent the loser from appealing and possibly changing the decision."30

UNCLOGGING CONGESTED COURT DOCKETS

While preserving precedent is a persuasive argument against the doctrine vacating decisions, proponents of vacatur are persuaded by the efficiency that settling lawsuits achieves. As Justice Berger stated in, Isn't There a Better Way, "we should provide mechanisms that can produce an acceptable result in the shortest possible time, with the least possible expense, and with a minimum of stress on the participants. That is what justice is all about."31

In deciding whether the practice of vacating judgments is advantageous, one need only look at the crowded civil dockets in numerous courthouses across the country. When viewed as a tool to help alleviate the heavy caseload of courts, proponents believe vacatur is the choice alternative to litigation. In Jill Fisch's article, Rewriting History: The Propriety of Eradicating Prior Decisional Law through Settlement and Vacatur, she wrote, "to the extent that settlement has the effect of reducing docket congestion and resolving cases without further consumption of judicial resources, it obviously serves public as well as private interests."32 She added, "[r]efusal to vacate may force parties to continue an appeal, at cost to themselves, their adversaries, the overburdened appellate courts and, by extension, the public."33

Vacatur is perhaps the most compelling settlement option. In exchange for the agreed-to cost of settlement, it enables the litigant against whom the decision has been entered the opportunity to have that adverse judgment erased from the public record. Additionally, given that third-party issue preclusion has broad applicability, parties in an action may have incentives to settle in order to eliminate an ongoing preclusive effect.34 Vacatur eliminates the possibility of future claims of collateral estoppel or res judicata.35

Vacatur is an attractive option for litigants because it may help them reach a settlement rather than relitigating the case at an appellate level. The cost of appealing a case often prevents litigants from overturning a lower court decision. What if the lower court law is bad? Might we want that decision vacated? As Professor Galanter and Ms. Cahill stated in "Most Cases Settle": Judicial Promotion and Regulation of Settlements,36 the result may be "intrinsically superior to those produced by adjudication."37 Further, in Berner v. British Commonwealth Pacific Airlines, Limited, the court stated, "[c]ompelling and reasonable circumstances may influence the defendant to enter into a settlement even though he still denies liability to the plaintiff."38 Avoiding issue preclusion is not the only reason to seek vacatur.39 Aside from depriving a judgment of preclusive effect, vacatur would diminish the significance of the judgment inside and outside of the litigation context.40 Thus, allowing a party to protect itself from the impact of an adverse judgment.

THE US SUPREME COURT'S STAND ON VACATUR

In a 1994 decision, US Bancorp Mortgage Co. v. Bonner Mall Partnerships,41 the U.S. Supreme Court ruled against vacatur except under "exceptional circumstances." Justice Scalia wrote, "[w]e hold the mootness by reason of settlement does not justify vacatur of a judgment under review. This is not to say that vacatur can never be granted when mootness is produced in that fashion . . . ."42 The Court's decision in Bonner Mall is not applicable to state court practices with respect to vacatur.43 Many decisions that are vacated are a result of state court litigation because practices regarding vacatur differ greatly.44

CAN VACATUR BE JUSTIFIED?

Courts justify vacating a decision because it promotes immediate cessation of litigating disputes. However, in an effort to promote a speedier settlement, a judgment that is vacated disappears. A part of the common law disappears. The law remaining on the books is tainted and does not equally reflect all of the judgments and decisions analyzing all aspects of a case or issue. The result is that courts and litigants are unaware of the full breadth of the law. The immediate loser is not the direct party in the case at bar, rather it becomes future parties that will follow a vacated case with a similar issue.45 As Galanter and Cahill stated:

What makes the processes of vacatur and the stipulated reversals so interesting and disturbing is the willingness of courts to erase or manipulate precedent to promote settlement. This no-holds-barred view of settlement does not just deplete the pool of settlement information by restricting dissemination; it boldly destroys the adjudicative product. Courts have taken a full turn from settlement as accommodation within the structure of public rules to the dismantling of that structure as participants engage in the pursuit of settlement.46

A VIEW FROM THE PROPONENTS

Proponents assert that vacatur is not the same as a reversal or overruling of a judgment. In Harry Klingman's article, Settlement Pending Appeal: An Argument for Vacatur, he wrote that, "a well-reasoned, albeit vacated, district court decision that remains in the reporters will influence future judges and litigants who may look to it when faced with similar facts and issues. Therefore, vacatur does not . . . wholly deprive the dispute of precedential value."47 In a narrow range of circumstances, appellate courts may give vacated decisions precedential value.48

NEW HAMPSHIRE'S CURRENT SYSTEM

While vacating judgments is currently a prevalent practice in the second, third and twelfth circuits, it is not in New Hampshire. New Hampshire rarely allows litigants to settle cases conditioned upon vacatur. Rather, New Hampshire has adopted the use of protective orders to shield issues deemed confidential. A protective order is "any order or decree of a court whose purpose is to protect a person from further harassment or abusive services of process or discovery."49 Much like the doctrine of vacatur, protective orders have become a political battleground in the judicial system. Although New Hampshire is not currently a district that routinely practices vacating court orders, it is a state that actively utilizes protective orders. So why not stop at protective orders?50

Prior to 1989, protective orders were used, when consented to by plaintiffs and approved by courts, to protect certain information from public view or access. Since 1989, there has been a national trend to limit the use of protective orders.51 Proponents of protective orders argue that the process allows plaintiffs to bring suits or actions against a party without fear of private matters becoming public.52 Those that oppose protective orders fear they limit privacy and property interests and intimidate future litigants from seeking justice.53

In New Hampshire, a bill proposing to limit the use of protective orders was introduced in 1991.54 On May 1, 1991 the legislature vetoed the bill.55 At present time, New Hampshire has chosen not to restrict the use of protective orders. Why would it need to begin the practice of vacatur? Protective orders offer litigants the option to conceal confidential or private information while still preserving the doctrine of stare decisis. Vacatur, though offering the same protection for confidential information, erases the common law.56

New Hampshire judges, however, have begun to limit the use of protective orders in cases where the defendant is interested in concealing information that would allow future litigants to bring suit.57 Examples of these cases are found in the areas of product liability and consumer torts. Judges in both the state and federal courts in New Hampshire have become concerned with the public's interest in concealing information through the use of protective orders.58 Many judges are now using protective orders as they were originally intended: to protect trade secrets and personal information in domestic and sexual assault cases.59

WHAT NEW HAMPSHIRE COURTS SHOULD DO IN THE FUTURE

Efficiency is preferred in today's hectic society. The frustrations of waiting are all too common in our fast-paced, bottom-line, stitch-in-time world. For litigants, attorneys and judges, waiting months and sometimes years for a case to go to trial because of overcrowded court dockets makes settlement appealing. But that doesn't necessarily make it right. We need to ask ourselves what price we are willing to pay for heightened efficiency.

Too often, as the saying goes, we are "in a rush for judgment." In considering the doctrine of vacatur upon consent, we must acknowledge that deep pocket litigants and impatient persuaders are able to lure judges into agreeing to burn the books and erase common law. What will the future hold for potential litigants who no longer have a legal backbone to support them? When weighing the benefits of vacatur, we must look at its effect on our common law system. The practice of vacating decisions abandons the principles upon which our common law system was built. It erases decision and dismantles stare decisis. Without precedent to protect the public, the common law principles of law that we have so long depended upon and used to decide pending cases will be devastated. The use of settlements conditioned upon vacatur should be eliminated.

ENDNOTES

1. Jill E. Fisch, Rewriting History: The Propriety of Eradicating Prior Decisional Law through Settlement and Vacatur, 76 Cornell L. Rev. 589, 596 (1991).
2. Blanca Fromm , Bringing Settlement out of the Shadows: Information About Settlement in an Age of Confidentiality, 48 UCLA L. Rev. 663, 664 (2001).
3. Fisch, supra note 1, at 597.
4. Id.
5. Id. at 598.
6. Fed. R. Civ. P. 60(b).
7. Id.
8. Id.
9. 28 U.S.C. 1655 (1948).
10. Id.
11. Id.
12. Fed. R. Civ. P. 42(b).
13. Nestle Co. v. Chester's Market, Inc., 571 F.Supp. 763, 765 (D.Conn. 1983).
14. Id. at 766.
15. Id.
16. Id.
17. Nestle Co., 596 F. Supp. at 1446.
18. Id.
19. Id. at 1451.
20. Id.
21. Id.
22. Id at 1455.
23. Id.
24. Id.
25. Id at 1452.
26. Id.
27. Daniel Purcell, The Public Right to Precedent: A Theory and Rejection of Vacatur, 85 Calif. L. Rev. 867, 868 (1991).
28. Id. at 869.
29. Anderson, Kill & Olick, Disappearing Decisions, (last modified July 19, 2001) .
30. William D. Zeller, Avoiding Issue Preclusion by Settlement Conditioned upon Vacatur of Entered Judgments, 96 Yale L.J. 860, 861, (1987).
31. Burger, Isn't There a Better Way?, 68 A.B.A. J. 274, 274 (1982).
32. Fisch, supra note 1, at 642.
33. Note, Settlement Pending Appeal: an Argument for Vacatur, 58 Fordham L.Rev. 233 (1989).
34. Zeller, supra note 30, at 865.
35. Fisch, supra note 1, at 596.
36. Marc Galanter & Mia Cahill, Most Cases Settle" Judicial Promotion and Regulation of Settlements , 46 Stan. L. Rev. 1339, 1371 (1994).
37. Id.
38. Note, The Impact of Collateral Estoppel on Post judgment Settlements, 15 Sw. U. L. Rev. 343, 352 (1985) (citing Berner v. British Commonwealth Pac. Airlines, Ltd., 346 F.2d 532 (2d Cir. 1965), cert. denied, 382 U.S. 983 (1966)).
39. See In re Memorial Hosp., 862 F.2d 1299, 1302-03 (7th Cir. 1988) (suggesting alternative reasons for seeking vacatur). But see note, supra note 37, at 860 ("Indeed, the very purpose of settlement conditioned on vacatur is to avoid future issue preclusion.").
40. Harry E. Klingeman, Settlement Pending Appeal: An Argument for Vacatur, 58 Fordham L. Rev. 233, 243 (1989).
41. U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994).
42. Id. at 29.
43. Jill E. Fisch, Post-settlement vacatur: a case of disappearing decisions, Trial, 1995 WL 15142591 at 5 (February, 1 1995).
44. Id.
45. Fisch, supra note 43, at 594.
46. Galanter & Cahill, supra note 36, at 1387.
47. Klingeman, supra note 40, at 244.
48. Id.
49. Black's Law Dictionary 1223 (6th ed. 1990).
50. Arthur R. Miller, Confidentiality, Protective Orders, and Public Access to the Courts, 105 Harvard L. Rev. 427, 429 (1993).
51. Richard McNamara, Esq.(personal interview).
52. Id.
53. Id at 430.
54. Richard A. Rosen & Karen E. Steinberg. New Developments in State Protective Order Legislation and Procedural Rules, 837 ALI-ABA 301, 315.
55. Id.
56. Id at 316.
57. Id at 317.
58. Id.
59. Miller, supra note 50, at 430.

The Author
Suzanne Klunk, Class of 2002,
Franklin Pierce Law Center,
Concord, New Hampshire.
The Author
Mary Ellen Wenners Morse, Class of 2002,
Franklin Pierce Law Center,
Concord, New Hampshire.

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