Hartford Cas. Ins. Co. v. Crum & Forster Specialty Ins. Co.

828 F.3d 1331

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

v.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

Westchester Surplus Lines Insurance Company, a foreign corporation, Defendant–Appellant.

No. 15-12781

12-13728

United States Court of Appeals, Eleventh Circuit.

July 12, 2016

Timothy S. Taylor, Miguel A. Brizuela, Vanessa Alison Van Cleaf, Daniel Rodrigo Vega, Elaine Witherspoon, Taylor Espino Vega & Touron, PA, Coral Gables, FL, for Plaintiffs–Appellants.

Holly S. Harvey, Michael Charles Gordon, Clyde & Co US LLP, Richard Michael Dunn, Cozen O'Connor, Miami, FL, Joseph A. Ziemianski, Cozen O'Connor, Houston, TX, Anaysa Gallardo Stutzman, Cozen O'Connor, Dallas, TX, Aaron B. Tilley, Bryan P. Vezey, Cozen O'Connor, New York, NY, for Defendants–Appellants.

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 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 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 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 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) ).

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 through happenstance.’ ” (quoting United States v. Mu nsingwear, 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 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...