Amicus Curiae Brief — Izumi Seimitsu Kogyo Kabushiki Kaisha v. US Philips Corp.

No. 92-112:

Jn the Supreme Court of the United S

OCTOBER TERM, 1992

IZUMI SEIMITSU KoGyYO KABUSHIKI KAISHA, PETITIONER

’.

U.S. PHILIPS CORPORATION. ET AL

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING RESPONDENTS

WILLIAM C. BRYSON

Acting Solicitor General

STUART FE. SCHIFFER

Acting Assistant Allorney General

EDWIN S. KNEEDLEK

Acting Deputy Solicitor General

THOMAS G. HUNGAR

Assistant to the Solicitor General

LEONARD SCHAITMAN

JOUN P. SCHNITKER

Altorneys

Department of Justice

Washington, D.C. 20540

(202) 515-2217

RRR see Beco

QUESTION PRESENTED

Whether the court of appeals erred in granting

respondents’ joint motion to vacate the judgment of the

district court after the case, while pending on appeal,

became movt as a result of the parties’ settlement.

(I)

re

TABLE OF CONTENTS

Page

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IIIT tienen dcenennenncnssqnenesecaqqnecnacseoqsneoqsneceseee 2

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Argument:

1. This Court's precedents mandate a general

rule of vacatur when a case that is pending on

appeal becomes moot as a result of a settlement

agreement that contemplates vacatur .................. 9

Il. Considerations of fairness and public policy also

support a general rule of vacatur in cases that

become moot as a result of settlement while

TENET nccnnsstenensnssennensesneevecacsnecsereseceeee 14

ITD ncn ecmtnsnncnnncnnqnnnenqnccqqcacoueceecees 29

TABLE OF AUTHORITIES

Cases:

Alliance To End Repression v. Chicago, 820 F.2d 873

ST iit dicriennnitnienennauecenensenenenecnscneceeneqeceecece 27

AL. Mechling Barge Lines, Inc. v. United States, 368

IEE GEEEEED cnsnscncesececseccecesecencees papenpeananensnceeneeneeneeees 12, 26

Bates v. Union Oil Co., 944 F.2d 647 (9th Cir. 1991),

cert. denied, 112 S. Ct. 1761 (1992) ..........ccccccccccccees 16

| Barter Healthcare Corp. v. Healthdyne, Inc., 956

| nT, TID rccrinssnenetensenccunnennsecennensevecnsece .

Bento v. 1.7.0. Corp., 599 F. Supp. 731 (D.R.1. 1984) ... 26

Bethune Plaza, Inc. v. Lumpkin, 863 F.2d 525 (7th Cir.

TTT iaeceenenntnnsnenaunnncesensenseeeseanaceseqeetece 27

Black v. Amen, 355 U.S. 600 (1958) .............0... 9

Blonder-Tongue Laboratories, Inc. v. University of

illinois Foundation, 402 U.S. 313 (1971) ..........066. 19

Board of Regents v. New Left Education Project, 414

ITT lisceiancearcinienatignmaeienennnnenneenesensenseececceceecest 13

(111)

lV

Cases—Continued:

Bowen v. Kizer, 485 U.S. 386 (1988) ....... soinuneiaiadamiiteatnidl

Buck's Stove & Range Co. v. AFL, 219 U.S. 58]

EEE ae: See ee ee en a a NE

Cardinal Chemical Co. v. Rosten Int'l, inc., No. 92-114

Ee Ra En anees

Chemetron Corp. v. Business Funds, Inc., 682 F 2d

1149 (Sth Cir. 1982), vacated in part, 460 U.S. 1007,

cert. denied, 460 U.S. 1013 (1983) ...............ccccccccceeeeeeees

Church of Scientology v. United States, 113 5. Ct. 447

GEEEEIED cavecermcnnsoneniasenessntisnisesenineiemnemempemenenen

City Gas Co. v. Consolidated Gas Co., 111 S. Ct. 1300

Ee ae Le ee mee

Clarendon Lid. v. Nu-West Industries, Inc., 936 F.2d

8 4 ee ane

Clarke v. United States, 915 F.2d 699 (D.C. Cir.

| ARE Nene em eT Te cA OE

Commercial Cable Co. v. Burleson, 250 U.S. 360

STITT cioitteisceeiadetetnleiith ene eieseaiietettehcieeniatenieaidemmiasammaeeaeinmaitieabibieidial

Continental Casualty Co. v. Fibreboard Corp., 113

Oa

Coopers & Lybrand v. Livesay, 437 US. 463

es sainaeennaiemmeuninesesieasndenemeanpemnmaeiinmniaiaiiientite

County of Los Angeles v. Davis, 440 U.S. 625

Ee ee ne Tene En |

Dakota County v. Glidden, 113 U.S. 222 (1885) ........ |

Deakins v. Monaghan, 484 U.S. 193 (1988).............

DHL Corp. v. Cwil Aeronautics Bd., 659 F.2d 941

a ee

Dodrill v. Ludt, 764 F.2d 442 (6th Cir. 1985) .............

Duke Power Co. vy. Greenwood County, 299 U.S. 259

(1936) oe ee RRR eS SEER RRR RRR RRR RRR RRR RRR RRR RRR eee eee eee ‘* ‘*

14

16, 17

10

7, 12,15

° Vv

( ases— Continued:

FDIC v. Cherry, Bekaert & Holland, 129 F.R.D. 188

Ge DU GREED cnctnccenscsnsenscrscmemnticeniennesememens

Federal Data Corp. v. SMS Data Prods. Group, Inc.,

SED FBS SIT COS. Cap. BBG .cccrcccscccsecesscscssscecsesceseees

Firefighters Local No. 93 v. City of Cleveland, 478 U.S.

I renee SLL ko ea ees

Fox v. Acadia State Bank, 937 F.2d 1566 (1th Cir.

BODES cocececesnseesesevevesssnmsensceuseuqeeqenapussseceunssunsanenvecsvessenesses

Frank v. Minnesota Newepaper Ass'n, 490 U.S. 225

STITT ceciessninsniiiniteseeresieinienneanetenesimmendieueiepeiesiacmeumimmatiaataianieaaapaataamatiain

Fricker v. Foster, 596 F. Supp. 1353 (D.R.1. 1984) .....

Gray v. Board of Trustees, 342 U.S. 517 (1952) .........

Great Western Sugar Co. v. Nelson, 442 U.S. 92

cecil een a ew

Hammond Clock Co. v. Schyff, 293 U.S. 529

nil aaa aa

Hendrickson v. Secretary of Health & Human Services,

Be! 8 Oe

Hewitt v. Helms, 482 U.S. 755 (1987) .................

Hull v. Western Electric Co., 672 F 2d 381 (4th Ci ir. )

cert. denied, 459 U.S. 981 (1982) ............cccee |

Honig v. Doe, 484 U.S. 305 (1988) ..............66e |

Hionig v. Students of Cal. School for the Blind, 471

Sh BG GERD ceccseccneccceccssesscsnssesesessscassssssseasscssccccceess

Hutchinson v. Coz, 784 F. Supp. 1339 (S.D. Ohio

FETIP cceencenncspenesmnsmnnennnnsieasnnsnspessenseemmmmmnemeneutnemeenencen

lron Arrow Honor Soc'y v. Heckler, 464 US. 67

—

J. Aron & Co. v. Mississippi Shipping Co., 361 U.S. 115

ee

Karcher v. May, 484 U.S. 72 (1987) ........cc66606

Kasper v. Board of Education Comm'rs, 814 F.2d 332

Cae GRR, GED crncccneenecsnennsssnsesesenesnnssnnmmsnensssensegeesesseen

Kennedy v. Block, 784 F.2d 1220 (4th Cir. 1986) ........

vi

Cases—Continued: Page

lake Coal Co. v. Roberts & Schaefer Co., 474 US. 120

SERENE setbeietnnconssienenecneninssees sapsienaepesediemnennatnniatientsenensinens 8, 9

Lewis v. Continental Bank Corp., 494 U.S. 472 (1990) .. 7

Long Island Lighting Co. v. Cuomo, 888 F.2d 230 (2d

ne SIND cnucnsnsscncsaseneinesensnenseieunsinnpsenienssniadbansssgsenmnnnenes 12, 16

Marek v. Chesny, 473 U.S. 1 (1985) cocccccccccccccccccccecees 15

Marshall v. Whittaker Corp., Berwick Forge & Fabrica-

ting Co., 610 F.2d 1141 (3d Cir. 1979) occ 16

Martinez v. Winner, 800 F.2d 230 (10th Cir. 1986) ....... 16

Memorial Hospital, In re, 862 F.2d 1299 (7th Cir.

SITTIEID ncednepnecensanininessieninguastineensenenensnsiiseteintamtemsanans 8, 11, 18, 25, 27

Mills v. Green, 159 U.S. 651 (1895) .....ccccccccccccceeeees ba

Montana v. United States, 440 U.S. 147 (1979) .... 19, 21, 27

National Union Fire Ins. Co. v. Seafirst Corp., 891 F.2d

aT 8, 11

Nestle Co. v. Chester's Market, Inc., 756 F.2d 280 (2d

SEs TUITE teiserisecltbirteiatenrenmtriceintanntatienactsincinctiaatce 8, 16, 20, 23

No East-West Highway Comm., Inc. v. Chandler, 767

ne 16

Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) ...... 19, 24

Pioneer Invest. Servs. Co. v. Brunswick Assocs. Ltd.

Partnership, 113 S. Ct. 1489 (1998) ooccccccccccccseecseeoseoee 24

Pontarelli Limousine, Inc. v. City of Chicago, 929 F.2d

SEED TEED TIED cincsnseninaieesiniieaniiniadteemanainanemmasatimmencn 16

Preiser v. Newkirk, 422 U.S. 395 (1975) ....cccccccccccccce. 13

Quarles v. Sager, 687 F.2d 344 (11th Cir. 1982) ............ 16

Radiofone, Inc. v. FCC, 759 F.2d 936 (D.C. Cir. 1985) .. 26

Ringsby Truck Lines, Inc. v. Western Conference of

Teamsters, 686 F.2d 720 (9th Cir. 1982) 0000000000000... 8, 11

Rufo v. Inmates of Suffolk County Jail, 112 S. Ct. 748

ST initiates anne 28

Savidge v. Fincannon, 836 F.2d 898 (5th Cir. 1988)... 16

Solorio v. United States, 483 U.S. 435 (1987) ............... 24

Sosna v. lowa, 419 U.S. 393 (1975) ooccccccccccccccccccccceeees 7

Vil

Cases— Continued: Page

St. Luke's Fed'n of Nurses & Health Professionals v.

Presbyterian/St. Luke's Medical Center, 459 U.S. 1025

(9DBR) .cccccccccccccccccrseccccesccccssccesonssscccesescoecsssoosapeconsssooees 10

Standefer vy. United States, 447 U.S. 10 21

Steffel v. Thompson, 415 U.S. 452 (1974) .....ccceceeeeneren 7

Stewart v. Southern Ry., 315 U.S. 283 (1942)... 9

Studio 1712, Inc. v. Etna Products Co., 968 F.2d 10

(10th Cir. I9BB) ........cccccccccrsssesssssccserorsoesesssesersssesnsesesees |

United Airlines, Inc. v. McDonald, 432 U.S. 385

CRDTED ccccccccccccccccccccccccescscccccccssccccccssossoscnsssocossssossoonscesess 9

United States v. Alaska S.S. Co., 253 US. 118

CADBO) ..ccccccccccccccrscccsccccccccecsccssscccsscscssosesscssossosssossssseeess s

United States v. Articles of Drug, 818 F.2d 569 (7th

Cir. 1987) ......ccrcccccceccersscerccresssscevereseeerenensensessssssneseeessens 16, 25

United States v. Anaya, 509 F. Supp. 289 (S.D. Fla.

1980), aff'd, 685 F.2d 1272 (11th Cir. 1982)............. 26

United States v. Mendoza, 464 U.S. 154 (1984) ......... l, ~¢

United States v. Miami, 664 F.2d 435 (5th Cir. -

:) ) ee eerrrrrrrrrrrrrrrrrrrrrrrrrrrrrr oe

United States v. Munsingwear, Inc., 340 US. 36

GOIN... -cusniststacinmssanmetenemmmammniaunnts 4, 5, 9, 11, 16, 22

United States v. W.T. Grant Co., 345 U.S. 629 (1953) .. 15

United States, In re, 927 F.2d 626 (D.C. Cir. 1991)......... 8, 11, 26

U.S. Philips Corp. v. Windmere Corp., 861 F.2d 695

(Fed. Cir. 1988), cert. denied, 490 U.S, 1068

CRETIID ..coceccccccceseccnceccsnnssccovcosacsseossooosonscencosoooooss soennnnnnan 2-3

Velsicol Chem. Corp. v. United States, 435 U.S. 932

(a sevenennecenssenssee connee 18

Webster v. Reproductive Health Services., 492 U.S.

GBD CIDBDD .occcccceccccccccccccsscccccccescccccccccsesscsossscossscscossssceses l2

Weinstein v. Bradford, 423 U.S. 147 (1975) «0.000008 13

Williams v. First National Bank, 216 U.S. 582

15

C1DIO) ......ccccceccccceccecsccecsccscsccecsensescesesessscsesssscescesseesesees

Vill

Constitution and statute: Page

I I aie ees 26

Sie SUES UIE usdhnateindieensacinipenabeinsisetediiiinateaeniceaneeneniiniins h

Miscellaneous:

Fisch, Rewriting History: The Propriety of Fradicating

Pror Decisional Law Through Settlement And

Vacatur, 76 Cornell L. Rev. 589 (1991) 000000... 17

Greenbaum, Mootness on Appeal in Federal Courts: A

Reeramination of the Consequences of Appellate

Inisposition, 17 U.C. Davis L. Rev. 7 (1983) ............ 10, 16, 17,

18, 22, 23-24, 26

1B J. Moore, J. Lucas & T. Currier, Moore's Federal

PI, GEE. CII SII ceria ciceiicaicenitepnerissinesiiaidiiasidipemmestenen 2s

Note, Avoiding Issue Preclusion By Settlement

Conditioned Upon The Vacatur Of Entered Judgments,

Be Re Gatsa. SETI SEITE ettsensiciinniesiiniitaieteaiatindinianiainaeminttneien

Note, Collateral Estoppel and Supreme Court Lisposition

of Moot Cases, 78 Mich. L. Rev. 946 (1980) ................. 18, 22

Note, Collateral Estoppel Effects of Judgments

Vacated Pursuant to Settlement, 1987 U. Ill. L.

BETA, ‘THE | ccnnsccdnentenensnntsbonmseminscnnmeicnneasecensinmianteesesens

Note, Settlement Pending Appeal: An Argument For

10, 20, 24

Vacatur, 58 Fordham L. Rev. 233 (1989) ......... 15, 16, 23

Priest & Klein, The Selection of Disputes for Litigation,

FR SS ere eeen 17

Restatement (Second) of Judgments (1982) ................. 21, 23

Schuck, The Role of Judges in Settling Complex Cases:

The Agent Orange Example, 53 U. Chi. L. Rev. 337

IEE wrisiedeicuininddninneniendsidinieianetipmboeunsnnnenenesenacnentenenpenednenetess 17

R. Stern, E. Gressman, & E. Shapiro, Supreme Court

3 . & ere Hw)

Will, Meerhige & Rubin, The Kole of the Judge in the

Settlement Process, 75 F.R.D. 203 (1976) ............00000. 16

13A C. Wright, A. Miller & E. Cooper, Federal Practice

and Procedure (2d ed. 1984 & Supp. 1993)........... 18, 20, 21

In the Supreme Court of the Chuted States

OCTOBER TERM, 1992

No. 92-1123

ZUMI SEIMI\.U KOGYO KABUSHIKI KAISHA, PETITIONER

v.

U.S. PHItips CORPORATION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

70 THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING RESPONDENTS

INTEREST OF THE UNITED STATES

The federal government “is a party to a far greater number

of cases on a nationwide basis than even the most litigious

private entity.” United States v. Mendoza, 464 U.S. 154, 159

(1984). As a party to numerous cases in the federal system

that involve recurring issues of public importance (id. at 159-

163), the federal government is vitally interested in the

question of whether vacatur is available when parties settle

cases on appeal.

“1)

STAVCEMENT

l. Petitioner ‘s a menniacterer of electric razors. Pet. 2.

Petitioner sells its cazors to distributors in the United

States, including Windmere Corporation (Windmere) and

Sears, Roebuck & Co. (Sears), Pet. 2-3. In February, 1984,

petitioner agreed to indemnify Windmere for claims arising

from the sale of petitioner’s razors, including any expenses

associated with litigation. Yet. App. Al1-A12.'

In October 1984, U.S. Philips Corporation and North Amer-

ican Philips Corporation (Philips) filed suit in the United

States District Court for the Southern District of Florida

against petitioner and Windmere. The suit alleged that peti-

tioner and Windmere had infringed Philips’ rotary electric

shaver patent and that Windmere had engaged in unfair com-

petition by infringing the trade dress rights Philips claimed

for the configuration of its shaver. J.A. 12a-20a. Windmere

filed an antitrust counterclaim against Philips and its related

Dutch corporation, N.V. Philips Gloeilampenfabrieken (also

referred to as Philips).

A jury found for Philips on its patent infringement claim

and awarded it $6,500 in damages. J.A. 21a. Final judgment on

that claim was entered in 1986, and neither petitioner nor

Windmere appealed that judgment. Pet. App. A2; Pet. Br. 3.

The jury returned a verdict in favor of Windmere on Philips’

unfair competition claim, apparently finding that Philips’

alleged trade dress was functional and therefore not pro

tectable. The district court, however, ordered a new trial on

Philips’ un*uir competition claim and directed a verdict for

Philips on Windmere’s antitrust counterclaim, Pet. App. A2s-

A2o, JA. 21a, 250-40.

Windmere took an interlocutory appeal to the United States

Court of Appeals for the Federal Circuit from the directed

verdict in faver of Philips on Windmere’s antitrust counter

claim. That court reversed the directed verdict and remanded

for a new trial on the counterclaim, See U.S. Philips Corp. v.

' Petitioner apparently has a similar agreement with Sears. Pet. Br. 7

Windmere Corp., 861 F.2d 695 (1988), cert. denied, 490 U.S.

1068 (1989); J.A. 45a-78a.

2. After a second trial, the jury returned a verdict for

Windmere on both Philips’ unfair competition claim and Wind-

mere’s antitrust counterclaim.” The jury awarded Windmere

more than $89 million in trebled damages on its antitrust

counterclaim, plus attorney’s fees, interest, and costs. The

district court entered separate judgments for Windmere on

the claim and counterclaim. Pet. App. A7-A8; Pet. Br. 3.

Philips appealed both judgments to the Federal Circuit.

Before the court of appeals decided the appeals, however,

Philips and Windmere reached a settlement of their dispute.

Philips agreed to pay Windmere $57 million, and the parties

agreed to execute mutual general releases. In addition, the

parties agreed that they would jointly request the court of

appeals to vacate the district court’s judgments on Philips’

unfair competition claim and on Windmere’s antitrust

counterclaim, although Windmere’s right to receive the $57

million was to be unaffected if the court of appeals declined to

do so. Pet. App. Al7-A21. After Philips and Windmere filed

that joint motion, petitioner sought to intervene on appeal for

purposes of opposing vacatur. J.A. 162a-165a.

3. The court of appeals vacated the judgments of the

district court and remanded with instructions to dismiss the

case with prejudice. Pet. App. Al-A6. The court first held

that petitioner lacked standing to oppose vacatur of the

district court’s judgments. /d. at A2-A5. The court explained

that petitioner “is not a party to this appeal or any aspect

thereof, was not a party to the trial of these claims, and did not

file an appearance in the district court trial of these issues.”

Id. at A3." The court also found that petitioner's status as

* Petitioner apparently financed Windmere's expenses in defending

against the unfair competition claim at the second trial, but did not partici

pate as a party. Pet. Br. 2.3; Pet. 4; Jt. Br. in Opp. 2

* The court noted that petitioner did not contradict Philips’ assertion

that petitioner “took affirmative steps [before the district court] to avoid

ee

4

Windmere's indemnitor was insufficient to confer standing,

noting that the certificate of interest filed in the appeal

identified Windmere as the real party in interest and that

petitioner had not sought either intervention or joinder before

the district court. Pet. App. A4.*

The court of appeals then granted the parties’ joint motion

to vacate. Pet. App. A5-A6. Stating that it did “not view

vacatur as automatic under all circumstances,” the court

noted that, under its precedents, “vacatur of the judgment at

trial is appropriate when settlement moots the action on

appeal.” Jd. at AS. The court explained that this Court's

decisions in United States v. Munsingwear, Inc., 340 U.S. 36,

39-40 (1950), and City Gas Co. v. Consolidated Gas Co., 111 5.

Ct. 1300 (1991), provided authority for that approach. Pet. App.

Ad. The court declined to follow the decisions of other courts

of appeals that do not vacate district court judgments upon

settlement, observing that “the settlement [in this case] * * *

includes all parties to the appeal” and that “[alll of the claims

of the judgments were appealed, and have now become entirely

moot.” Jd. at A6.

4. In 1985, before the court of appeals’ decision in this case,

Philips had brought an action in the United States District

Court for the Northern District of Illinois against petitioner

and Sears. In that action, Philips alleged that petitioner and

Sears had infringed its patents and that Sears had engaged in

unfair competition in selling petitioner's razors. Pet. App.

A22-A30, A36-A38; Pet. Br. 4-5. After the Florida district

court in the instant case entered judgment on the unfair

being characterized or involved as a party in the trial of these counts.” Pet.

App. A3.

‘ The court also rejected petitioner's argument that it had standing to

oppose vacatur because the district court's judgment had served as the basis

for a grant of summary judgment on preclusion grounds in another lawsuit

then pending in Illinois involving Philips, petitioner, and Sears. Pet. App.

A4; see id. at A22-A30; pp. 4-5, infra. The court explained that petitioner

was not a party to the claim on which judgment was entered in the Illinois

action. Pet. App. A4.

5

competition claim in favor of Windmere, the Illinois district

court granted summary judgment in favor of Sears on Philips’

unfair competition claim, finding that the Florida judgment

precluded relitigation of that issue. Pet. App. A28-A30.°

Thereafter, as a result of the Federal Circuit’s vacatur of

the Florida district court’s judgment in this case, the Illinois

district court vacated its previous summary judgment order

and reinstated Philips’ unfair competition claim against

Sears. Pet. App. A37-A44. The Federal Circuit has autho-

rized an interlocutory appeal from that decision under 28

U.S.C. 1292(b), and that appeal is presently pending. Pet. App.

A46-A49; Pet. 5 nb.

SUMMARY OF ARGUMENT

I. Under United States v. Munsingwear, Inc., 340 U.S. 36

(1950), federal appellate courts are generally required to grant

a motion to vacate the judgment below when a case becomes

moot while pending on appeal. This Court has consistently

followed the Munsingwear procedure in cases that become

moot by reason of the parties’ settlement when the settlement

includes a request for vacatur. To be sure, Munsingwear

involved mootness resulting from “happenstance”—an

extrinsic event—rather than agreement of the parties, but

this Court’s cases make clear that Munsingwear is not

limited to the context of mootness by happenstance. Rather,

vacatur is appropriate whenever a case pending on appeal

becomes moot as a result of either the parties’ mutual

agreement or the unilateral conduct of the party that

prevailed below.

ll. The Court's practice of vacating the judgment below

when a pending case becomes moot as a result of the parties’

* Petitioner had filed antitrust counterclaims against Philips in the

Illinois action based upon the antitrust judgment for Windmere in the

instant case. Pet. App. A36, A44-A45; Pet. Br. 5. The Illinois district court

dismissed those counterclaims on the ground that they were compulsory

counterclaims to Philips’ patent infringement claims against petitioner in

the Florida action and were therefore barred by petitioner's failure to raise

them in that case. Pet. App. A44-A45

oe E—EE—————————————

6

settlement is consistent with considerations of fairness and

public policy.

A. Voluntary settlement of disputes is strongly favored in

the law, because it fosters judicial economy, economic effici-

ency, and the public and private interests in the just

resolution of disputes. A general rule of vacatur upon set-

tlement furthers those interests by removing disincentives to

settlement in cases that are pending on appeal. Absent

vacatur, settlement will be impossible to achieve in many

cases, because the preclusive or precedential effects of the

judgment below may be regarded as unacceptable by the losing

party. That concern is particularly strong in cases involving

the government and other institutional litigants, for whom

the preclusive and precedential effects of an adverse judgment

may be more significant than the more immediate impact of

the judgment or the cost of settlement.

B. Petitioner asserts that the foregoing interests are

outweighed by countervailing considerations, particularly the

public and private interests supporting the doctrine of

nonmutual collateral estoppel. That doctrine is inapplicable to

the government, of course, and thus petitioner's argument

would have no force in cases in which the government seeks

vacatur of an unfavorable judgment. In any event, petitioner's

argument lacks merit. Petitioner relies in part on the

interests of third parties in taking advantage of the preclusive

effects of judgments, but it would be unfair to place those

interests above the interests of the parties to the litigation.

Moreover, considerations of fairness militate strongly against

giving preclusive effect to judgments that have been com-

promised by the agreement of the parties before being

subjected to appellate review, because the correctness and

justness of such judgments is called into question.

Petitioner also argues that preserving judgments in settled

cases would foster judicial economy by preventing relitigation

of issues. The possible future benefits of preclusion are

speculative in most cases, however, and are outweighed by the

immediate benefits of permitting vacatur in order to facilitate

7

settlements. Petitioner would apparently have the courts

weigh these various factors on a case-by-case basis, but that

approach would create uncertainty, thereby discouraging

settlement and burdening the courts with additional decision-

making obligations.

Finally, petitioner points to the precedential value of

judgments. The precedential force of district court judgments

is open to question, however, and in any event there is no

justification for placing the precedential value of decisions

ahead of the interest of the parties in resolving their dispute.

For these reasons, vacatur is generally appropriate when

the parties request that disposition in a case that is rendered

moot by settlement. Even if the Court were to reject that

general rule in favor of a more flexible approach, we submit

that a proper balancing of the relevant interests would usually

lead to the conclusion that vacatur is called for.

ARGUMENT

“Federal courts lack jurisdiction to decide moot cases

because their constitutional authority extends only to actual

cases or controversies.” Jron Arrow Honor Soc'y v. Heckler,

464 U.S. 67, 70 (1983) (per curiam); see Church of Scientology

v. United States, 113 S. Ct. 447, 449 (1993); Deakins v.

Monaghan, 484 U.S. 193, 199 (1988). A corollary to that basic

principle is that the parties’ dispute must exist at every stage

of the litigation. “It is not enough that a controversy existed

at the time the complaint was filed.” Deakins v. Monaghan,

484 U.S. ac 199; Sosna v. lowa, 419 U.S. 393, 402 (1975); Steffel

v. Thompson, 415 U.S. 452, 459 n.10 (1974); see also Honig v.

Doe, 484 U.S. 305, 329 (1988) (Rehnquist, C.J., concurring).

“[AJn actual controversy must exist at all stages of appellate

review.” Ibid.; see Lewis v. Continental Bank Corp., 494 U.S.

472, 477-478 (1990).

Under the foregoing principles, when the parties to a case

enter into a settlement agreement that fully resolves their

dispute, the case is rendered moot, and the federal courts are

thereby deprived of jurisdiction to decide the case on the

ee

8

merits.” If the settlement occurs while the case is pending on

appeal, however, a further question arises: what effect should

the settlement-induced mootness have on the judgment

already entered by the district court?’ In our view, both this

Court’s precedents and considerations of fairness and public

policy support a general rule of vacatur of district court

judgments when settlement renders a case moot while on

appeal.”

® See Lake Coal Co. v. Roberts & Schaefer Co., 474 U.S. 120, 120 (1985)

(per curiam); Hammond Clock Co. v. Schiff, 293 U.S. 529, 530 (1994) (per

curiam); United States vy. Alaska S.S. Co., 253 U.S. 113, 116 (1920) (“Where

by an act of the parties *** the existing controversy has come to an end,

the case becomes moot and should be treated accordingly.”); Buck's Stowe &

Range Co. v. AFL, 219 U.S. 581, 581 (1911); Mills v. Green, 159 U.S. 651, 654

(1895); see also Honig v. Doe, 484 U.S. 305, 341 (1988) (Sealia, J.,

dissenting).

? The circuits are split on this issue. The Second and Federal Circuits

have adopted general rules in favor of vacating the district court's

judgment when a case is settled on appeal. See, ¢.g., Federal Data Corp. v.

SMS Data Prods. Group, Inc., 819 F.2d 277, 279-280 (Fed. Cir. 1987); Nestle

Co. v. Chester's Market, Inc., 756 F.2d 280, 283-284 (2d Cir. 1985).

Similarly, the Fourth, Eighth, Tenth, and Eleventh Circuits appear to

grant vacatur when settlement renders a case moot while on appeal,

although those courts have not addressed the question at length. See, eg,

Kennedy v. Block, 784 F 2d 1220, 1225 (4th Cir. 1986); Hendrickson v. Secre

tary of Health & Human Services, 774 F.2d 1355 (8th Cir. 1985) Studio

1712, Inc. v. Etna Products Co., 968 F.2d 10 (10th Cir. 1992); Barter

Healthcare Corp. v. Healthdyne, Inc., 956 F.2d 226, 227 (iith Cir. 1992).

The Third, Seventh, and District of Columbia Cireuits, on the other hand,

uniformly decline to grant vacatur upon settlement. See, eg. Clarendon

Lid. v. Nu-West Industries, Inc., 936 F.2d 127, 128-130 (34 Cir. 1991); Jn re

Memorial Hospital, 862 F.2d 1299, 1301-1308 (7th Cir, 1988); In re United

States, 927 F.2d 626, 627-628 (D.C. Cir. 1991). Finally, the Ninth Circuit

employs a balancing approach, under which the propriety of vacatur

depends upon the relative weight of the public and private interests at

stake in a particular case. Natronal- Union Fire Ins. Co. v. Seafirst Corp..

891 F.2d 762, 765-769 (9th Cir, 1989), Ringshy Truck Lines, Inc. v. Western

Conference of Teamsters, 686 F 2d 720, 721-722 (9th Cir. 19R2).

* Respondents assert (Jt. Br. in Opp. 4-5) that petitioner is not in a

position to challenge the court of appeals’ decision because petitioner was

not a party below and lacks standing to oppose vacatur of the district

9

1. THIS COURT'S PRECEDENTS MANDATE A

GENERAL RULE OF VACATUR WHEN A CASE

THAT IS PENDING ON APPEAL BECOMES MOOT

AS A RESULT OF A SETTLEMENT AGREEMENT

THAT CONTEMPLATES VACATUR

In United States v. Munsingwear, Inc., 340 U.S. 36 (1950),

this Court stated that “[t}he established practice of the Court

in dealing with a civil case from a court in the federal system

which has become moot while on its way here or pending our

decision on the merits is to reverse or vacate the judgment

below and remand with a direction to dismiss.” 340 U.S. at 39.

In keeping with that “established practice,” the Court has

repeatedly emphasized that “[wjhere it appears upon appeal

that the controversy has become entirely moot, it is the duty

of the appellate court to set aside the decree below and to

remand the cause with directions to dismiss.” Great Western

Sugar Co. v. Nelson, 442 U.S. 92, 98 (1979) (per curiam); Duke

Power Co. v. Greenwood County, 299 U.S. 259, 267 (1936).

Since Munsingwear was decided in 1950, this Court

appears to have consistently followed the Munsingwear

procedure in cases that became moot as a result of settlement

while pending before the Court. See, eg., Continental

Casualty Co. v. Fibreboard Corp., 113 S. Ct. 399 (1992) (see Jt.

Br. in Opp. App. B1-B3); City Gas Co. v. Consolidated Gas Co.,

111 S. Ct. 1300 (1991) (citing Munsingwear) (see Jt. Br. in

Opp. App. C1-C4); Lake Coal Co. v. Roberts & Schaefer Co.,

474 U.S. 120 (1985) (per curiam); J. Aron & Co. v. Mississippi

Shipping Co., 361 U.S. 115 (1959) (per curiam); Black v.

Amen, 355 U.S. 600 (1958) (per curiam); see also Stewart v.

Southern Ry., 315 U.S. 784 (1942); Hammond Clock Co. v.

court's judgment. We express no opinion on that question. We assume for

the sake of our submission, however, that petitioner's claims are properly

before the Court. See generally R. Stern, E. Gressman, & S. Shapiro,

Supreme Court Practice 46-47, 338.340 (6th ed. 1986), Uneted Arriimes, Inc

v. MeDonald, 482 US. 385 (1977)

OO _ T_T

10

Schiff, 293 U.S. 529, 530 (1934) (per curiam).” Thus, while the

Court has not explained its reasoning in great detail, its past

practice supports the conclusion that Munsingwear is fully

applicable in the settlement context, and that vacatur of the

district court's judgment is generally required when the

parties seek that result after a case is settled while on

appeal.

Munsingwear itself, of course, did not involve mootness

resulting from settlement. In Munsingwear, the government

had previously brought suit to enjoin violations of certain

commodity price control regulations. The district court

* This consistent practice has been noted by commentators. See, ¢.¢..

Greenbaum, Mootness on Appeal in Federal Courts: A Reeramination of

the Consequences of Appellate Disposition, 17 U.C. Davis L. Rev. 7, 39 &

n.144 (1983); Note, Collateral Estoppel Effects of Judgments Vacated

Pursuant to Settlement, 1987 U. Ill. L. Rev. 731, 749 (1987) [hereafter

Collateral Estoppel Effects|. But cf. Buck's Stowe & Range Co. v. AFL, 219

U.S. 581 (1911); Dakota County v. Glidden, 113 U.S. 222 (1885).

Vacatur is not required when the parties’ settlement agreement

merely contemplates dismissal of the case pursuant to this Court's Rule

46.1. In that circumstance, the parties have in effect decided to be bound by

the judgment below, and thus the case is no different from one in which the

losing party simply decides not to seek review in this Court. See, ¢.¢., Sf

Luke's Fed'n of Nurses & Health Professionals v. Presbyternran/St. Luke's

Medical Center, 459 U.S. 1025 (1982) (dismissing case pursuant to parties’

stipulation). For the same reason, vacatur should not be available when the

losing party in the district court simply declines to appeal or unilaterally

withdraws its appeal. In such instances, the case is certainly over, but it is

not “moot”, to the contrary, the judgment is understood by the parties to

have continuing legal effect in the sense that it defines their legal relation

ship and obligations with respect to the subject matter of the lawsuit.

Where the judgment awards the plaintiff damages in a specified amount

and the parties settle for a lesser amount without moving to have the

judgment vacated, the parties have, in effect, accepted the judgment as a

proper resolution of their underlying dispute and settled the plaintiffs

distinct claim based on that judgment. Where the parties move to have the

judgment vacated, on the other hand, they do not accept the judgment as a

proper resolution of their underlying dispute, and the settlement therefore

is of the plaintiffs claim in that dispute, rather than of the plaintiff's claim

on the judgment.

1]

entered judgment against the government. While the

government's appeal was pending, the commodity at issue was

decontrolled. The defendant then moved to dismiss the

government's appeal as moot, and the court of appeals granted

that motion. 340 U.S. at 37. In rejecting the government's

subsequent attempt to avoid the res judicata effects of the

district court's prior judgment, the Court observed that the

government, through “orderly procedure,” could have

“preventied| [the] judgment, unreviewable because of moot -

ness, from spawning any legal consequences” merely by

asking that the district court's judgment be vacated as moot,

rather than acquiescing in the dismissal of its appeal. /d. at

40-41. As the Court explained, “[t}hat procedure clears the

path for future relitigation of the issues between the parties

and eliminates a judgment, review of which was prevented

through happenstance. When that procedure is followed, the

rights of all parties are preserved; none is prejudiced by a

decision which in the statutory scheme was only pre-

liminary.” Jd. at 40.

Because Munsingwear itself involved mootness by

“happenstance,” petitioner contends (Br. 20-23) that the

Munsingwear procedure should be limited to that context and

should no longer be followed when mootness results instead

from the actions of the parties themselves.'' In support of

that contention, petitioner points (Br. 21-22) to Karcher v.

May, 484 U.S. 72, 82-83 (1987), in which former state legis-

lative officials, purporting to act on behalf of the legislature,

attempted to take an appeal to this Court from a lower court's

judgment invalidating a state statute. While the case was

pending in this Court, the appellants’ successors in office

withdrew the appeal. The Court rejected the appellants’

'' Some courts of appeals have adopted that approach, reasoning that

Munsingwear apples only when a case has become moot for reasons wholly

beyond the control of the appellant. See, ¢.g., Jn re United States, 927 F 2d

at 627-628; National Union Fire Ins. Co. v. Seafirst Corp., 891 F 2d at 766;

In re Memoral Hosmtal, 862 F 2d at 1301; Ringshy Truck Lines, Inc. +

Western Conference of Teamsters, 686 F 2d at 721

—o ee aaa...

12

request to vacate the judgment below under Munsingwear,

explaining (484 U.S. at 83):

This controversy did not become moot due to cir-

cumstances unattributable to any of the parties. The

controversy ended when the losing party—the [state]

Legislature—declined to pursue its appeal. Accordingly,

the Munsingwear procedure is inapplicable to this case.

Contrary to petitioner’s contention, Karcher does not

render Munsingwear inapplicable when mootness results

from the mutual agreement of the parties. The dispute in

Karcher did not become moot by reason of the withdrawal of

the appeal, any more than any case becomes moot when the

losing party decides to forgo further review of the judgment;

rather, the case simply ended when the judgment of the lower

court was rendered final and unreviewable. See Long Island

Lighting Co. vy. Cuomo, 888 F.2d 230, 233 & 234 n.4 (2d Cir.

1989). Karcher thus was not a case of mootness at all, and

Munsingwear was therefore inapplicable on its own terms.

This reading of Karcher is confirmed by a series of deci-

sions, both before and after Karcher, in which this Court has

applied Munsingwear to cases that became moot as a result of

the parties’ conduct. Thus, in Deakins v. Monaghan, 434 U.S.

193, 199-200 (1988), the respondents (the plaintiffs in the

district court) chose to withdraw their claims while the case

was pending before this Court. Applying Munsingwear, the

it vacated the judgment below and remanded with

lismiss. 484 U.S. at 200. Similarly, in Frank v.

Newspaper Ass'n, 490 U.S. 225 (1989) (per

ilefendants-appellants changed their posyion, and

‘appellee accordingly “state[d] its willingness to

er claim tothe * * * relief sought in its com

| 227. Concluding that the case was moot, the

und remanded with directions to dismiss. /hid.

sgwear). See also Webster v. Reproductive

72 US. 490, 512-513 (1989), A.L. Mechling

l'nited States, 368 U.S. 324, 329 (1961); ef.

' Trustees, 342 U.S. 517, 518 (1952) (per

13

curiam); Commercial Cable Co. v. Burleson, 250 U.S. 360, 362

(1919).

As these decisions demonstrate, petitioner errs in contend-

ing that Munsingwear is inapplicable outside the context of

mootness resulting from happenstance. On numerous

occasions, the Court has made clear that vacatur is the ap

propriate response when mootness results from the

agreement of the parties or from the unilateral conduct of the

party that prevailed below. That result is eminently sound

within the broader framework of the mootness doctrine. In a

case such as Munsingwear, the fact that the case was

rendered moot by “happenstance”—71.¢., by factors extrinsic to

the case or beyond the control of the parties—explains why

the lower court judgment should be vacated on the motion of

just one of the parties (the losing party below, who has been

prevented from obtaining appellate review), even if the

prevailing party below might oppose vacatur. But where al/

parties to a particular clairt—the only parties immediately

' In each of the cases cited in the text, the party who had prevailed

below engaged in some form of unilateral conduct that had the effect of

rendering the case before the Court moot. In those circumstances, as in the

case of settlement, we agree that the Munsingwear procedure is applicable

On occasion, however, the Court appears to have followed a similar

approach when the party who lost in the court below acted unilaterally to

moot the controversy while the case was pending before the Court. See,

¢.q.. Weinstein v. Bradford, 423 US. 147, 149 (1975) (per curiam); Preiser v

Newkirk, 422 US. 395, 403-404 (1975), Board of Regents v. New Left Educa

tion Project, 414 U.S. 807 (1973). In our view, absent unusual circum

stances—such as when the losing party complies involuntarily with a

preliminary injunction, Hong v. Students of Cal. School for the Blind, 471

U.S. 148 (1985), or when a legislative enactment resolves the immediate

controversy, Board of Regents v. New Left Education Project, supra,

Bowen v. Kizer, 485 U.S. 386 (1988)—the losing party below should not be

able to obtain vacatur of an unfavorable judgment in an injunctive action

through unilateral action, such as by voluntarily ceasing the allegedly

illegal conduct that is the subject of the suit or by otherwise complying with

the judgment. See also note 13, infra. This case, of course, presents no

occasion to address that question, because respondents’ dispute did not

become moot through the unilateral action of Philips

14

affected by the judgment on that claim—move to have the

judgment vacated, there is no reason for the court to look to

matters external to the case to determine whether vacatur is

proper. Moreover, if, as we have shown (see pp. 12-13, supra),

the unilateral action of the prevailing party below may render

a case moot and properly lead to vacatur of the judgment

below, there is no basis in the mootness doctrine for a court to

deny vacatur when the prevailing party joins in the losing

party’s motion for vacatur as part of the settlement of their

dispute. Accordingly, the court of appeals did not err in

yranting respondents’ joint motion to vacate the judgment of

the district court after respondents settled their differences.

Il. CONSIDERATIONS OF FAIRNESS AND PUBLIC

POLICY ALSO SUPPORT A GENERAL RULE OF

VACATUR IN CASES THAT BECOME MOOT AS

A RESULT OF SETTLEMENT WHILE PENDING

ON APPEAL

Petitioner contends (Br. 24-35) that considerations of

judicial economy and finality, and the interests of non-parties,

require reexamination of the Court's practice of vacating the

judgment below and remanding for dismissal when a pending

case is rendered moot by voluntary settlement. In our view,

however, that established practice strikes the proper balance

between the factors identified by petitioner and the strong

considerations of policy and fairness supporting the Court's

consistent approach in this area."*

Our discussion of the propriety of vacatur is limited to those cases in

which the settlement agreement actually renders a particular claim moot

by achieving a complete resolution of that claim between all of the parties

involved. Obviously, if some parties to the claim have not agreed to the

settlement, or if the judgment is intended to have some continuing legal

effect as a statement of the binding disposition of the underlying claim, the

judgment itself is not “moot,” and vacatur is inappropriate. Cf. Coopers &

Lybrand +. Livesay, 437 US. 463, 465 0.3 (1978) (case not rendered moot by

“tentative” settlement agreement); see also notes 26, 27, infra. Similarly,

the case is not moot, and Munsingwear is therefore inapplicable, if the

defendant chooses to comply with the judgment but there is a reasonable

1

A. 1. The voluntary resolution of legal disputes is strongly

favored in the law, because it serves the interests of plaintiffs

and defendants as well as important public interests. Marek

v. Cheany, 473 U.S. 1, 10 (1985); Williams v. First National

Bank, 216 U.S. 582, 595 (1910); Note, Avoiding Issue

Preclusion By Settlement Conditioned Upon The Vacatur Of

Entered Judgments, 96 Yale L.J. 860, 866 n.41 (1987)

|hereafter Avoiding Issue Preclusion|, Note, Settlement

Pending Appeal: An Argument For Vacatur, 58 Fordham L.

Rev. 233, 236 & nn.18 & 21, 242 (1989) (collecting authorities)

|hereafter Settlement Pending Appeal). First, settlement

serves the interests of judicial economy and efficiency by

eliminating the necessity for further judicial consideration of

the merits of the settled case. See, ¢.g., Federal Data Corp v.

SMS Data Prods. Group, Inc., 819 F.2d 277, 280 (Fed. Cir.

1987) (precluding vacatur “is wasteful of the resources of the

judiciary” to the extent it prevents settlement); Avoiding

Issue Preclusion, 96 Yale L.J. at 867. Settlement on appeal

may have little direct impact on the congested dockets of che

federal district courts (although it does eliminate the

potential for time-consuming remands in settled cases); but

the courts of appeals are also overburdened, and voluntary

resolution of cases pending on appeal is of obvious benefit to

those courts—and ultimately to this Court, through the

elimination of additional candidates for its certiorari docket.

Second, settlement promotes economic efficiency by cap-

ping litigation costs and permitting the parties to devote their

resources and attention to more productive conduct. See

Settlement Pending Appeal, 58 Fordham L. Rev. at 239. In

addition, settlement serves both public and private interests

in the just resolution of disputes: “One of the fundamental

principles of judicial administration is that, in most cases, the

absolute result of a trial is not as high a quality of justice as

expectation that the dispute may arise again in the future. See Deakins +

Monaghan, 444 1S. at 200. 201 1.4, United States vo WOT) Grant Co, 345

US. 629, G82 645 (1054)

CN OOOeaEE—O——ee=EeEeEeEeEeEOEOeeeeeeeee_ee_—_ee

16

is the freely negotiated, give a little, take a little settlement.”

Will, Merhige & Rubin, The Role of the Judge in the

Settlement Process, 75 F.R.D. 203, 203 (1976); see Chemetron

Corp. v. Business Funds, Inc., 682 F.2d 1149, 1202 n.5 (5th Cir.

1982) (Reavley, J., dissenting), vacated in part, 460 U.S. 1007,

cert. denied, 460 U.S. 1013 (1983); Settlement Pending

Appeal, 58 Fordham L. Rev. at 236.

2. A general rule of vacatur upon settlement eliminates

disincentives to settlement on appeal, thus furthering those

important interests.'* Settlement on appeal would often be

difficult or impossible to achieve if the parties were foreclosed

from securing vacatur of the lower court’s judgment in order

to effectuate their settlement. The losing party might have a

strong interest in avoiding the preclusive effect of the

judgment below’ or in lessening the precedential force of the

lower court’s ruling,'® and that party therefore might be

14 See Nestle Co. v. Chester's Market, Inc., 756 F.2d 280, 282 (2d Cir.

1985); Long Island Lighting Co. v. Cuomo, 888 F.2d 230, 234 n.4 (2d Cir.

1989); Settlement Pending Appeal, 58 Fordham L. Rev. at 242-243;

Greenbaum, supra, 17 U.C. Davis L. Rev. at 36-37.

15 The general rule is that a vacated judgment has no collateral estoppel

or res judicata effect. See United States v. Munsingwear, Inc., 340 U.S, at

39-40; Pontareiii Limousine, Inc. v. Chicago, 929 F.2d 339, 340 (7th Cir.

1991); Savidge v. Fincannon, 836 F.2d 898, 906 & n.33 (5th Cir. 1988); No

East-West Highway Comm., Inc. v. Chandler, 767 F 2d 21, 24 (Ist Cir.

1985); Dodrill v. Ludt, 764 F.2d 442, 444 (6th Cir 1985) Quarles vy. Sager,

687 F.2d 344, 346 (11th Cir. 1982); Hill v. Western Electme Co. 672 F.2d 381,

387-389 (4th Cir.), cert. denied, 459 U.S G1 lo Burt see Bates vo Union

Oil Co., 944 F.2d 647 (9th Cir. 1991), cert. ten» 2S Ct. 1761 (1992),

Chemetron Corp. v. Business Funds, ine Oe * -s e7-1192

16 Most courts that have considered ‘he jor na neluded that

vacatur also deprives the lower court's jucgmen’ ¢ (s orecedential effect.

See, e.g., County of Los Angeles v. Davis +4 5. 625, 634 n.6 (1979);

Martinez v. Winner, 800 F.2d 230, 231 (10th Cir 1988) DHL Corp. y. Creal

Aeronautics Bd., 659 F.2d 941, 944 n.4 (9th Cir. 1981) Marshall v. Whittaker

Corp., Berwick Forge & Fabricating Co., 610 F.2d 1141, 1145 (3d Cir, 1979);

see generally Greenbaum, supra, 17 U.C. Davis L. Rey. at 95 1.399

(collecting authorities). But see United States v. Articles of Drug, 818 F.2d

569, 572 (7th Cir. 1987). Of course, vacated decisions may still have persua-

17

unwilling to forgo further appellate review if vacatur is una-

vailable. That concern is particularly strong in cases

involving the government and other institutional litigants,

which are often more interested in the precedential effect of

the lower court decision than in the details of the particular

case. See Greenbaum, supra, 17 U.C. Davis L. Rev. at 35

n.130. Thus, a general rule of vacatur when cases become

moot through settlement encourages voluntary resolution of

disputes. "”

In contrast, denying vacatur when parties settle cases that

are pending on appeal would undoubtedly lead to additional

litigation: some parties, even if they could reach mutually

sive value based on the force of the analysis employed by the court. See

County of Los Angeles v. Davis, 440 U.S. at 646 n.10 (Powell, J., dissent-

ing); Greenbaum, supra, 17 U.C. Davis L. Rev. at 100 & n.417.

7 Petitioner and its amicus Tr’al Lawyers for Public Justice express

concern (Pet. Br. 32; Trial! Lawyers Br. 8) that the practice of granting

vacatur when cases settle on appeal will encourage parties to delay settle-

ment until after trial, secure in the knowledge that vacatur will be

available in the event of an unfavorable judgment. See also Fisch,

Rewriting History: The Propriety Of Eradicating Prior Decisional Law

Through Settlement And Vacatur, 76 Cornell L. Rev. 589, 632-642 (1991).

In our view, that concern is greatly overstated. The cases in which parties

are most likely to view vacatur as potentially valuable are those “in which

the legal or factual issues are sufficiently complex that it is difficult to

predict the outcome of the litigation.” /d. at 637 n.239. It is in precisely

such cases, however, that “[a] pretrial settlement at a value both parties

view as reasonable may be impossible to achieve, given the substantial

differences in the parties’ expectations of the litigation outcome.” Jhid.; see

also Schuck, The Role of Judges in Settling Complex Cases: The Agent

Orange Example, 53 U. Chi. L. Rev. 337, 339-340 (1986); Priest & Klein, The

Selection of Disputes for Litigation, 13 J. Legal Stud. 1, 14-16 (1984).

Moreover, petitioner’s and amicus’s argument ignores the very real costs

imposed on parties who choose to litigate unsuccessfully rather than settle

before judgment is entered by the district court. Litigation is extremely

expensive; unfavorable judgments often result in damaging publicity that

cannot be eliminated by subsequent vacatur; and the entry of an

unfavorable judgment tends to increase dramatically the price of settlement

for the losing party by significantly lessening that party’s chances of

eventual success in the courts.

18

agreeable settlement terms, would be unable to resolve their

dispute voluntarily because of continuing concerns about the

effects of the outstanding district court ruling. Indeed, in

those circuits that refuse to permit vacatur upon settlement,

there is simply “no answer that will satisfy” a litigant who is

unable to consummate an otherwise satisfactory settlement

because of the unavailability of vacatur. See /n re Memorial

Hospital, 862 F.2d at 1303.'* In short, to deny litigants the

ability to settle cases by obtaining vacatur would frustrate

important interests in fairness and judicial economy.'”

'S As one leading treatise observes, “[iJt is particularly daunting to

contemplate that even after the parties have preferred to surrender the

opportunity for appellate review as a matter of right in order to achieve the

certainty and economy of settlement, they can do so [in those courts that

forbid vacatur on settlement] only if they are willing to submit to

nonmutual issue preclusion in litigation with nonparties.” 13A C. Wright,

A. Miller & E. Cooper, Federal Practice and Procedure § 3533.10, at 290

(Supp. 1993). In an attempt to respond to that concern, the Seventh Circuit

has suggested that “(i)f parties want to avoid stare decisis and preclusive

effects, they need only settle before the district court renders a decision, an

outcome our approach encourages.” Jn re Memorial Hospital, 862 F.2d at

1302. As explained above (see note 17, supra), however, that result is often

impracticable, particularly in public or complex litigation, in which the

legal and factual issues may be novel and difficult to evaluate at an early

stage.

1’ This case, of course, involves the question of vacatur as a result of

settlement while the case is pending before the court of appeals, and our

submission is therefore limited to that question. Some commentators argue,

and we agree, that different considerations should apply when a case

becomes moot while a petition for certiorari is pending before this Court but

has not yet been granted, because whether to grant review on any issue

(including mootness) is purely discretionary with the Court. See, e.g., Note,

Coliateral Estoppel and Supreme Court Disposition of Moot Cases, 78 Mich.

L. Rev. 946, 953-958 (1980); see also 77-900 U.S. Br. in Opp. at 5-8, Velsicol

Chemical Corp. v. United States, 435 U.S. 942 (1978) (arguing that Court

should simply deny certiorari in moot cases that would not have warranted

review on the merits); Clarke v. United States, 915 F.2d 699, 713-715 (D.C.

Cir. 1990) (en banc) (Edwards, J., dissenting). But cf. Greenbaum, supra, 17

U.C. Davis L. Rev. at 43-48.

19

B. Despite the foregoing considerations, petitioner and its

amici assert (Pet. Br. 24-35; Trial Lawyers Br. 2-14; Sears

Amicus Br. 4-10) that the court of appeals erred in adopting a

general rule of vacatur in cases that settle while pending on

appeal. They rely principally on the public and private

interests in the finality of judicial decisions, especially as

embodied in the doctrine of nonmutual collateral estoppel. As

this Court has recognized, nonmutual collateral estoppel

serves “the dual purpose of protecting litigants from the

burden of relitigating” issues previously litigated by an

opposing party and of “promoting judicial economy by pre-

venting needless litigation.” Parklane Hosiery Co. v. Shore,

439 U.S. 322, 326 (1979); see Blonder-Tongue Laboratories,

Inc. v. University of Illinois Foundation, 402 U.S. 313, 328-

329 (1971). In petitioner’s view, those interests outweigh the

benefits of a general rule of vacatur.

Before addressing the merits of petitioner’s argument, we

note that the doctrine of nonmutual collateral estoppel is inap-

plicable to the federal government. United States v. Mendoza,

464 U.S. 154 (1984). Thus, even if petitioner’s argument had

some validity in the context of litigation between private

parties, it would have no force in cases in which the federal

government seeks vacatur of an adverse lower court judgment

as part of a settlement agreement. In such cases, third

parties would not be entitled to make preclusive use of the

district court’s judgment even absent vacatur, so the govern -

ment’s interest in obtaining vacatur could never be out-

weighed by finality concerns.

In any event, the concerns identified by petitioner and its

amici do not justify a departure from the Court’s past ad-

herence to the Munsingwear procedure in cases that become

moot by virtue of settlement. In the first place, the core

purpose of finality is to ensure that the parties themselves

can rely on a judgment that has become final in the district

court or on appeal as a definitive resolution of their dispute.

Montana v. United States, 440 U.S. 147, 153 (1979). Nothing in

that core purpose suggests that the parties themselves should

20

be barred from jointly obtaining vacatur of a judgment before

it has become final, in order to implement a settlement as the

definitive resolution of their dispute. Moreover, as this

Court’s decision in United States v. Mendoza indicates, the

interests favoring application of nonmutual collateral estoppel

are not absolute and must give way to countervailing

considerations in appropriate circumstances. See 464 U.S. at

163. In our view, the voluntary settlement of cases while

pending on appeal is one such circumstance.

1. Petitioner first contends (Br. 27-30) that vacatur is

inappropriate because petitioner’s interest in preserving the

preclusive effect of the district court’s judgment outweighs

Philips’ interest in obtaining vacatur of that judgment. In

effect, petitioner argues that the interests of non-parties to

the litigation should be given greater weight than the

interests of the parties themselves. In many cases, the una-

vailability of vacatur would force parties to expend additional

time, effort, and money in prolonging a dispute they would

prefer to resolve. We can discern no basis in law or policy for

placing the interests of (often free-riding) third parties above

the interests of the litigants themselves. See Nestle, 756 F.2d

at 282-284: Federal Data Corp., 819 F.2d at 279-280; 13A C.

Wright, A. Miller & E. Cooper, Federal Practice and

Procedure § 3533.10, at 432 (2d ed. 1984); Collateral Estoppel

Effects, 1987 U. Ill. L. Rev. at 752.”

2 In this case, petitioner paid Windmere’s litigation expenses, and it

argues (Br. 28-29) that vacatur improperly denies it the benefit of those

expenditures. Petitioner, however, was not a party to Philips’ unfair

competition claim against Windmere, and it chose not to intervene in the

litigation of that claim. Moreover, petitioner paid Windmere’s litigation

expenses because it was obligated to do so as part of the agreement under

which Windmere distributed petitioner’s shavers. Petitioner's payment of

litigation expenses is a contractual matter between it and Windmere; the

mere payment of expenses gives petitioner no special right to have a

district court judgment preserved over the objection of the parties. If it

was important to petitioner to preserve the effect of a judgment in favor of

one of its distributors because of the potential preclusive effect of that

judgment in suits against other distributors, petitioner could have included

21

Moreover, the justification for applying nonmutual colla-

teral estoppel is particularly weak, and the countervailing

concerns of fairness are heightened, when the judgment at

issue was rendered unreviewable on appeal as a result of the

original parties’ settlement. As this Court has observed,

“(t]he estoppel doctrine * * * is premised upon an underlying

confidence that the result achieved in the initial litigation was

substantially correct. In the absence of appellate review

* * * such confidence is often unwarranted.” Standefer v.

United States, 447 U.S. 10, 23 n.18 (1980); see also 13A C.

Wright, A. Miller & E. Cooper, supra, § 3533.10, at 289 n.22

(Supp. 1993) (“Nonmutual preclusion, always a risky matter,

is even riskier when it rests on findings that were not open to

the appellate review that is built into our adversary system

and that has shaped the nature of trial courts and pro-

cedures.”). Indeed, one reason for the approach reflected in

Munsingwear is the Court’s recognition of the need to

prevent “a decision which in the statutory scheme was only

preliminary” from “spawning any legal consequences.” 340

U.S. at 40-41.

a provision in its agreement with Windmere and other distributors that

required petitioner’s consent to any settlement that would result in vacatur.

There is no reason that the established rule of vacatur should be modified to

accord petitioner a benefit that it chose not to (or was unable to) secure by

contract.

What is more, the settlement was not without its advantages for

petitioner. If Philips’ appeal had gone forward, petitioner would have been

required to pay the additional litigation costs incurred by Windmere, and it

is possible that the judgment in Windmere’s favor on the unfair competition

claim would have been set aside and that Windmere ultimately would have

lost on that claim. Petitioner would then have been obligated to indemnify

Windmere for any judgment entered against it. See Pet. App. All-A12. In

addition, that adverse judgment presumably would have had a preclusive

effect on petitioner (and those in privity with it) in other litigation. See

Restatement (Second) of Judgments § 39 (1982); Montana vy. United States,

440 U.S. at 154-155. For these reasons, if vacatur were denied because of

petitioner’s objection, petitioner would stand to gain from the settlement

while giving up nothing.

22

To be sure, despite the additional assurances of correctness

provided by appellate review,”' the failure by the losing party

to seek such review has not generally been deemed a sufficient

justification for denying preclusive effect to a district court

judgment. See Munsingwear, 340 U.S. at 39. That result

makes considerable sense when the parties decline to take an

appeal, because their willingness to be bound by the judgment

provides some assurance that it reflects a just resolution of

their dispute.

The situation is much different, however, when one or more

parties appeal, the case is then settled while pending on

appeal, and the parties seek vacatur of the district court's

judgment. In that circumstance, the parties are not willing to

be bound by the district court’s judgment, but have instead

reached their own, often quite different, resolution of their

dispute—a resolution that, from the combined perspective of

the parties, is more just than the judgment they seek to have

vacated. By their very nature, settlement agreements are

based on compromise: each party typically contributes to the

settlement by retreating from its litigating position to some

extent, often because of perceived weaknesses in its case and

uncertainty about its chances of ultimate success, as well as

the costs of further litigation. The premises underlying the

doctrine of nonmutual collateral estoppel therefore weigh

against a rule that would require the courts to give full

preclusive effect to a judgment that was compromised on

appeal, because the prevailing party’s willingness to forgo the

judgment in its favor and the losing party’s unwillingness to

be bound by that judgment suggest that full confidence in the

correctness and justness of the unreviewed judgment is

unwarranted.”

21 See, e.g., Greenbaum, supra, 17 U.C. Davis L. Rev. at 17; see also

Note, Collateral Estoppel and Supreme Court Disposition of Moot Cases, 78

Mich. L. Rev. 946, 954 (1980).

For essentially the same reason, it is well established that application

of collateral estoppel is inappropriate when the prior judgment appears to

have been the product of a compromise verdict. See Restatement (Second)

25

2. Petitioner also asserts (Br. 31-33) that a general rule of

vacatur undermines the interest in judicial efficiency by

forcing the federal courts to adjudicate issues that were

previously resolved in another case. As noted above (pp. 16-18,

supra), however, denying vacatur to parties who settle on

appeal would discourage settlement, thereby disserving the

very interests in judicial economy that the preclusion

doctrines are designed to foster. See Nestle, 756 F.2d at 282.

For that reason, and because the underlying justification for

applying collateral estoppel is diminished in this context in

any event, vacatur should not be barred on the ground urged

by petitioner. Cf. United States v. Mendoza, 464 U.S. at 163

(declining to apply nonmutual collateral estoppel against the

United States because “a contrary result might disserve the

economy interests in whose name estoppel is advanced” by

causing the government to appeal when it would otherwise not

do so).

Moreover, while in this case it is clear that the district

court’s judgment would have been given actual preclusive

effect in the Illinois litigation absent vacatur, in most cases

the possibility of such future preclusive use is entirely

speculative. As a general rule, then, vacatur furthers the

immediate and concrete interests of the parties and the courts

while potentially undermining only the more remote and

hypothetical interests of future litigants and courts. See

Nestle, 756 F.2d at 284; Settlement Pending Appeal, 58

Fordham L. Rev. at 239-240; Greenbaum, supra, 17 U.C. Davis

of Judgments § 295) (1982). If “the circumstances * * * suggest that the

issue was resolved by compromise|,| * * * taking the prior determination at

face value for purposes of the second action would extend the effects of

imperfections in the adjudicative process beyond the limits of the first

adjudication, within which they are accepted only because of the practical

necessity of achieving finality.” Jd. § 29, comment g, at 295; see also id

illus. 7.

24

L. Rev. at 38; Collateral Estoppel Effects, 1987 U. Ill. L. Rev.

at 753.”

Petitioner nevertheless would apparently have the courts

weigh the relative interests of the parties and others in light

of the particular circumstances of each case in order to

determine whether vacatur is appropriate—although tell-

ingly, petitioner does not propose any concrete standards for

measuring and balancing the respective interests of parties,

non-parties, and the public. Br. 24, 26, 35. That approach

would not promote either judicial economy or fairness,

because its very unpredictability would discourage settlement

and create actual or perceived inequities. Various Members

of this Court have noted the problems created by the

indeterminate nature of balancing tests, including their

unpredictability and inconsistency in result. See, eg.,

Pioneer Invest. Servs. Co. v. Brunswick Assocs. Ltd.

Partnership, 113 S. Ct. 1489, 1503 (1993) (O’Conner, J., joined

by Scalia, Souter, and Thomas, JJ., dissenting) (“Reasonable

minds often differ greatly on what the equities require.”);

Cleveland Board of Education v. Loudermill, 470 U.S. 5382,

562-563 (1985) (Rehnquist, J., dissenting); see also Solorio v.

United States, 483 U.S. 435, 448-451 (1987) (jurisdictional

balancing test overruled as “confusing and difficult” to apply).

This concern is particularly weighty for the federal

government, which must consider a variety of factors in de-

termining whether to settle or continue litigating any

particular lawsuit and which relies heavily on predictability of

outcome in making those decisions. See United States v.

Mendoza, 464 U.S. at 161-162.

An ad hoc balancing test would also impose undue burdens

on the courts. Under petitioner’s proposed approach, the

23 The concern for judicial economy is particularly misplaced when the

judgment at issue (like the antitrust judgment involved in this case) could

give rise to offensive collateral estoppel in a subsequent case. As this Court

noted in Parklane Hosiery Co. v. Shore, 439 U.S. 322, 329 (1979), offensive

collateral estoppel “does not promote judicial economy in the same manner

as defensive use does.”

25

courts would be required to analyze and weigh a variety of

conflicting factors in determining whether vacatur was

appropriate each time it was sought in connection with a set -

tlement. In most cases, moreover, the courts would be

required to make that determination without the assistance of

an adversary presentation to frame the relevant issues. For

that reason as well, the bright-line approach reflected in

Munsingwear should continue to govern in cases of this

type.”

3. Finally, petitioner and one of its amici contend (Pet. Br.

33-34; Trial Lawyers Br. 5-7, 9-11) that vacatur of district

court judgments should be disfavored because vacatur under-

mines the public interest in precedent and the development of

the law and improperly permits judicial decisions to become

mere bargaining chips between the parties. See also

Clarendon Ltd. v. Nu-West Industries, Inc., 936 F.2d at 129;

In re United States, 927 F.2d at 628; In re Memorial Hospital,

862 F.2d at 1302-1303. That contention is unpersuasive.

In the first place, the actual precedential value of district

court decisions is debatable. See, e.g., United States v.

Articles of Drug, 818 F.2d 569, 572 (7th Cir. 1987) (noting that

“a single district court decision * * * has little precedential

effect. It is not binding on the circuit, or even on other

district judges in the same district”); For v. Acadia State

“4 In Cardinal Chemical Co. v. Morton Int'l, Inc., No. 92-114 (May 17,

1993), slip op. 16, this Court recently reemphasized the particularly “strong

public interest in the finality of judgments in patent litigation.” See id. at

17 (discussing “the danger that the opportunity to relitigate [questions of

patent invalidity] might, as a practical matter, grant monopoly privileges

to the holders of invalid patents”). Cardinal Chemical does not shed light

on the resolution of the issue in this case, of course, because it did not

involve the question of the proper disposition of a case that became moot

while pending on appeal. See id. at 11-15 (finding that claim of patent

invalidity was not rendered moot by court of appeals’ finding of no infringe-

ment). In any event, even if the unique public interest implicated in

judgments of patent invalidity were sufficiently strong to justify denial of

vacatur when such cases settle on appeal, a general rule of vacatur would

still be appropriate in cases that did not involve such issues.

26

Bank, 937 F.2d 1566, 1570 (11th Cir. 1991). District judges do

appear to give substantial weight to other district court

rulings, however, especially in cases arising in the same

judicial district.*° Furthermore, the government’s ex-

perience suggests that one district judge’s ruling on a novel

issue, even if erroneous, will frequently be followed by other

district judges, thus necessitating numerous appeals. We

therefore agree with petitioner's argument to the extent that

it ascribes some precedential weight—in practice if not in

theory—to district court decisions.

We do not agree, however, with petitioner’s conclusion that

whatever precedential value unreviewed (and unreviewable)

district court decisions may have militates against a general

rule of vacatur.” In the first place, as noted above (see pp. 21-

22, supra), the validity of an unreviewed district court

% See, e.g., Hutchinson v. Cox, 784 F. Supp. 1339, 1342 (S.D. Ohio 1992);

FDIC vy. Cherry, Bekaert & Holland, 129 F.R.D. 188, 193 n.5 (M.D. Fla.

1989); Bento v. 1.7.0. Corp., 599 F. Supp. 731, 740 n.9 (D.R.1. 1984); Fricker

v. Town of Foster, 596 F. Supp. 1353, 1356 (D.R.1. 1984); United States v.

Anaya, 509 F. Supp. 289, 293 (S.D. Fla. 1980) (en bane), aff'd, 685 F.2d 1272

(11th Cir. 1982).

26 This case, of course, involves only the propriety of vacatur of district

court judgments in cases that are rendered moot by settlement while

pending before the court of appeals. Different considerations are present

with respect to decisions of administrative agencies. Thus, although the

Court has held that Munsingwear applies to agency adjudications that

become moot while judicial review is pending, see A.L. Mechling Barge

Lines v. United States, 368 U.S. 324, 329 (1961), we believe a different

result is called for when the private parties affected by an agency

regulatory ruling settle their differences and seek to have the agency's

ruling vacated. In that setting, the agency itself is generally a party to the

litigation as well, and it in any event has a legitimate regulatory interest

in the preservation of its ruling, particularly to the extent that the ruling

announces law to guide the conduct of third parties not presently before the

court. Moreover, agencies are not constrained by the case-or-controversy

requirement of Article II], so the mootness concerns underlying the

Munsingwear doctrine have less force in that context. See generally

Radiofone, Inc. v. FCC, 759 F.2d 936, 940-941 (D.C. Cir. 1985) (opinion of

Sealia, J.); Greenbaum, supra, 17 U.C. Davis L. Rev. at 54-64.

27

decision that has been compromised on appeal is open to

question. Moreover, petitioner’s argument exalts the broader

precedential value it ascribes to the district court’s decision

over the court’s central role in resolving concrete disputes

hetween parties. “(T]he purpose for which civil courts have

been established” is “the conclusive resolution of disputes

within their jurisdictions,” Montana v. United States, 440

U.S. at 153, and “ijn all civil litigation, the judicial decree is

not the end but the means.” Hewitt v. Helms, 482 U.S. 755, 761

(1987). Thus, “litigation exists to resolve the parties’ genuine

grievances; opinions are byproducts.” Bethune Plaza, Inc. v.

Lumpkin, 863 F.2d 525, 531 (7th Cir. 1988); see Alliance To

End Repression v. Chicago, 820 F.2d 873, 876 (7th Cir. 1987).

We therefore believe that the parties’ interest in obtaining

vacatur outweighs whatever public interest there may be in

the precedent that is the byproduct of the judicial resolution

of disputes between parties.””

4. Ifthe Court rejects the general rule of vacatur in favor

of a more flexible approach, we submit that the standards

apphed by courts in approving consent decrees would provide

an appropriate framework for determining whether to grant

vacatur in a particular case. In the consent-decree context, a

district court does not automatically enter the decree agreed

to by the parties; instead, the court “must satisfy [it ]self that

the decree is consistent with the Constitution and laws, does

not undermine the rightful interests of third parties, and is an

appropriate commitment of the court’s limited resources.”

27 To be sure, there may be unusual circumstances, not present in this

case, that would render vacatur inappropriate. In particular, vacatur upon

settlement may be inappropriate when the judicial system itself has a

distinct and legitimate interest in preserving the judgment below, as when

the judgment at issue involves contempt of court or otherwise implicates

the authority of the courts, rather than the more generalized interest in the

precedential or preclusive value of judicial decisions in cases involving

other parties. See Jn re Memorial Hospital, 862 F.2d at 1302-1303. In the

contempt situation, for example, the court is in a position analogous to that

of a party to a case who has not joined in a settlement entered into by the

other parties.

28

Kasper v. Board of Education, 814 F.2d 332, 338 (7th Cir.

1987); see United States v. Miami, 664 F.2d 435, 440-441 (5th

Cir. 1981) (en banc) (Rubin, J., concurring); 1B J. Moore, J.

Lucas & T. Currier, Moore’s Federal Practice 4 0.4095], at

331 (2d ed. 1993); see also Rufo v. Inmates of Suffolk County

Jail, 112 S.Ct. 748, 764 (1992); Firefighers Local No. 93 v. City

of Cleveland, 478 U.S. 501, 525-526, 529-530 (1986). Given the

public interest in settlement that would be furthered by the

availability of vacatur, and absent any illegality or fraud on

the court in the settlement agreement, this approach would

generally lead to the conclusion that vacatur should be

granted.”

28 In determining whether vacatur would conflict with the “rightful

interests of third parties,” the court would not, in our view, be required to

consider the interests of non-parties whose only interest derived from the

poss.vle preclusive effect of the judgment. Vacatur would merely deprive

those third parties of a windfall; it would not affect their “rightful” interests

in the sense that a consent decree imposing affirmative obligations or

concretely affecting their primary conduct might do. Cf. Firefighters Local

No. 93 v. City of Cleveland, 478 U.S. at 529-530. Courts considering whether

to enter a consent decree do not typically take into account the interests of

non-parties who might prefer to have the case proceed to final judgment in

order to take advantage of nonmutual collateral estoppel, and there is no

reason to follow a different approach in the vacatur context.

29

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted.

WILLIAM C. BRYSON

Acting Solicitor General

STUART E. SCHIFFER

Acting Assistant Attorney General

EDWIN S. KNEEDLER

Acting Deputy Solicitor General

THOMAS G. HUNGAR

Assistant to the Solicitor General

LEONARD SCHAITMAN

JOHN P. SCHNITKER

Attorneys

MAY 1993