Stipulated Reversals and Vacatur

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May the parties to an appeal stipulate to the result? The federal practice differs from the state practice. The United States Supreme Court limits the use of "vacatur" in federal practice to extraordinary circumstances justifying the grant of equitable relief. U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994). The California Supreme Court has directed the Courts of Appeal to grant requests for stipulated reversals "absent a showing of extraordinary circumstances that warrant an exception to this general rule." Neary v. Regents of University of California, 3 Cal. 4th 273 (1992).

Litigants in trial courts are accustomed to having almost complete control over the disposition of their cases upon settlement. In a typical settlement entered into before judgment, the defendant pays the plaintiff a sum of money in return for a release of liability and an agreement to dismiss the underlying lawsuit. California and federal procedures both recognize the parties' complete control over the disposition of a lawsuit before entry of judgment. Cal. Civ. Proc. Code § 581; Fed. R. Civ. P. 41.

After judgment is entered, it can only be vacated through judicial action. The prevailing party may deem the judgment satisfied upon payment of less than the amount specified in the judgment. However, the judgment remains of record, and continues to have res judicata effect.

Trial courts may vacate their own judgments upon request of the parties. However, most of the reported decisions in this area involve requests directed to appellate courts. When they rule on such requests, the courts must resolve a conflict between the litigants' private interests in resolving disputes on their own terms, and the public interest in the sanctity of official government acts.

California Approach

In Neary, the California  Supreme Court resolved the conflict by ordering the Courts of Appeal to favor the private interests of the litigants:

"Simple fairness requires that the first and most weighty consideration be given to the parties' interests and that they be accommodated except in the extraordinary case. The parties are the persons (or entities) most affected by a judgment, which is the ultimate product of their sustained effort and expense. [Citation omitted] Homilies about 'judicial integrity' and 'legal truth' will ring hollow in the ears of the parties. The courts exist for litigants. Litigants do not exist for courts."

3 Cal. 4th at 280.

A court may deny such a request only in "extraordinary circumstances." Such circumstances may exist when reversal would adversely affect the public interest. For example, where an adverse judgment might affect a person's good standing with a licensing agency, the public has an interest in preventing the licensee from buying his or her way out of the adverse consequences. Norman I. Krug Real Estate Investments Inc. v. Praszker, 22 Cal. App. 4th 1814 (1994).

Justice J. Anthony Kline of the First District Court of Appeal has criticized the Neary rule in two published opinions. Morrow v. Hood Communications, Inc., 59 Cal. App. 4th 924, 926 (1997) (Kline, P.J., dissenting); Norman I. Krug, supra, 22 Cal. App. 4th at 1825 (Kline, P.J., concurring). (In Morrow, Justice Kline went so far as to say that he would not follow Neary. That has prompted an investigation by the California Commission on Judicial Performance into possible violations of California's Code of Judicial Ethics.)

In addition to criticizing the entire idea, Justice Kline argues that the stipulation requesting reversal will not provide much of a record on which to determine whether extraordinary circumstances exist. To deal with that problem, the First District has adopted Local Rule 8, which requires a joint declaration from counsel setting forth information about the factual and legal issues involved. The First District's local rules are available here. (In Morrow, Justice Kline went so far as to say that he would not follow Neary. That has prompted an investigation by the California Commission on Judicial Performance into possible violations of California's Code of Judicial Ethics.)

The Neary presumption does not extend to requests to vacate appellate judgments. The California Supreme Court explained the distinction in State of California ex rel. State Lands Comm'n v. Superior Court, 11 Cal. 4th 50, 62 (1995):

"There are two critical differences between the stipulated reversal of a trial judgment in Neary and the dismissal motion here. First, in Neary, we stressed the efficiency of effectuating settlements and thereby avoiding further litigation. As the case proceeds further into the appellate process, however, especially after an appellate decision is actually rendered, more is eradicated by a settlement, and less is gained by the avoidance of further litigation. Second, stipulating that the Court of Appeal opinion not be published and that we not render our own decision would effectively eliminate a precedent-setting appellate decision. As Neary itself stressed, '[T]rial courts make no binding precedents.' [Citation omitted] Published appellate decisions do."

However, appellate courts do have discretion to vacate appellate judgments.

Federal Approach

In U.S. Bancorp, 513 U.S. at 26-27, the United States Supreme Court explained the general federal rule against vacatur based on settlement:

"As always when federal courts contemplate equitable relief, our holding must also take account of the public interest. '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.' Izumi Seimitsu Kogyo Kabushiki Kaisha v. U.S. Phillips Corp., 114 S.Ct. 425, 428 (1993) (STEVENS, J., dissenting). Congress has prescribed a primary route, by appeal as of right and certiorari, through which parties may seek relief from the legal consequences of judicial judgments. To allow a party who steps off the statutory path to employ the secondary remedy of vacatur as a refined form of collateral attack on the judgment would--quite apart from any considerations of fairness to the parties--disturb the orderly operation of the federal judicial system.

The Court expressly rejected the policy of fostering settlements as a basis for favoring vacatur. 513 U.S. at 27-28. For a case that discusses the Ninth Circuit's post-U.S. Bancorp vacatur standards, see Dilley v. Gunn, 64 F.3d 1365 (9th Cir. 1995). For two recent cases where Courts of Appeals granted vacatur under the U.S. Bancorp standards, see Major League Baseball Properties, Inc. v. Pacific Trading Cards Inc., No. 98-7700 (2nd Cir. Jul. 13, 1998); Motta v. District Director of INS, 61 F.3d 117 (1st Cir. 1995).

Additional Sources of Information

The Vacatur Center, maintained by the law firm of Anderson Kill & Olick. Dedicated to preserving vacated decisions and to eliminating vacatur and stipulated reversals.

Barnett, Making Decision Disappear: Depublication and Stipulated Reversal in the California Supreme Court, 26 Loyola L. Rev. 1033 (1993).

Carrizosa, Making the Law Disappear: Appellate Lawyers Are Learning to Exploit the Supreme Court's Willingness to Depublish Opinions, California Lawyer 65 (Sept. 1989).

Cordray, Settlement Agreements and the Supreme Court, 48 Hastings L.J. 9 (1996).

Fisch, Rewriting History: The Propriety of Eradicating Prior Decisional Law Through Settlement and Vacatur, 76 Cornell L. Rev. 589 (1991).

Gordon, Vanishing Precedents, Business Insurance 1 (June 15, 1992).

Harmon, Unsettling Settlements: Should Stipulated Reversals Be Allowed To Trump Judgments' Collateral Estoppel Effects Under Neary?, 85 Cal. L. Rev. 479 (1997).

Horton, Selective Publication and the Authority of Precedent in the United States Courts of Appeals, 42 UCLA L. Rev. 1691 (1995).

Lewis, Recent Decision: U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership: Settlement Conditioned on Vacatur?, 47 Alabama L. Rev. 883 (1996).

Loudenslager, Erasing the Law: The Implication of Settlements Conditioned Upon Vacatur or Reversal of Judgments, 50 Wash. & Lee L. Rev. 1229 (1993).

Parloff, Rigging the Common Law, American Lawyer 74 (Mar. 1992).

Purcell, The Public Right to Precedent: A Theory and Rejection of Vacatur, 85 Cal. L. Rev. 867 (1997).

Resnik, Whose Judgment? Vacating Judgments, Preferences for Settlement, and the Role of Adjudication at the Close of the Twentieth Century, 41 UCLA L. Rev. 1471 (1994).

Shacter, Whose Lawsuit Is It, Anyway?, 26 Beverly Hills B.A.J. 187 (1993).

Zeller, Avoiding Issue Preclusion by Settlement Conditioned Upon the Vacatur of Entered Judgments, 96 Yale L.J. 860 (1987).

Note, Collateral Estoppel Effects of Judgments Vacated Pursuant to Settlement, 1987 U. Ill. L. Rev. 731.

Note, Settlement Pending Appeal: An Argument for Vacatur, 58 Fordham L. Rev. 233 (1989).

Note, The Impact of Collateral Estoppel on Postjudgment Settlements, 15 Sw. U.L. Rev. 343 (1985).

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