Hartford Accident and Indemnity Company v. Crum & Forster Specialty Insurance Company , 828 F.3d 1331 ( 2016 )


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  •              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.
    8
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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
    14