Settlement Contingent on Vacating Order Presented Exceptional Circumstances Meriting Relief: Eleventh Circuit | Practical Law

Settlement Contingent on Vacating Order Presented Exceptional Circumstances Meriting Relief: Eleventh Circuit | Practical Law

In Hartford Casualty Insurance Co. v. Crum & Forster Specialty Insurance Co., the US Court of Appeals for the Eleventh Circuit held that, to determine whether exceptional circumstances warrant vacatur of a judgment to conclude a settlement, courts must weigh the benefits of settlement to the parties and to the judicial system against the harm to the public caused by lost precedent. Applying this test, the Eleventh Circuit found vacatur warranted where court-ordered mediation produced a settlement conditioned on vacatur.

Settlement Contingent on Vacating Order Presented Exceptional Circumstances Meriting Relief: Eleventh Circuit

by Practical Law Litigation
Published on 15 Jul 2016 • USA (National/Federal)
In Hartford Casualty Insurance Co. v. Crum & Forster Specialty Insurance Co., the US Court of Appeals for the Eleventh Circuit held that, to determine whether exceptional circumstances warrant vacatur of a judgment to conclude a settlement, courts must weigh the benefits of settlement to the parties and to the judicial system against the harm to the public caused by lost precedent. Applying this test, the Eleventh Circuit found vacatur warranted where court-ordered mediation produced a settlement conditioned on vacatur.
On July 12, 2016, in Hartford Casualty Insurance Co. v. Crum & Forster Specialty Insurance Co., the US Court of Appeals for the Eleventh Circuit held that, to determine whether exceptional circumstances warrant vacatur of a judgment to conclude a settlement, courts must weigh the benefits of settlement to the parties and to the judicial system against the harm to the public caused by lost precedent. Applying this test, the Eleventh Circuit found vacatur warranted where court-ordered mediation produced a settlement conditioned on vacatur. ( (11th Cir. July 12, 2016).)
Hartford Accident and Indemnity Company sued Crum & Forster Specialty Insurance Company in the US District Court for the Southern District of Florida. The district court granted Crum & Forster's summary judgment motion and awarded it fees and costs.
Hartford appealed. The Eleventh Circuit ordered the parties to mediate their dispute. The parties could not reach an agreement and the appeal continued. After oral argument, the Eleventh Circuit ordered the parties to mediate again. At the second mediation, the parties settled. However, they conditioned their settlement on vacatur of the summary judgment order and fee award to Crum & Forster.
The parties jointly moved the district court to vacate its summary judgment and fee award orders under Federal Rule of Civil Procedure (FRCP) 60(b)(6). The district court denied the parties' motion, ruling that there were no exceptional circumstances warranting vacatur. The court reasoned that:
  • The parties' decision to settle was voluntary, and vacatur was not appropriate where the parties voluntarily forfeited review of their case.
  • Vacatur did not serve the public interest.
The parties jointly appealed the denial of their FRCP 60(b) motion. The Eleventh Circuit reversed. The court emphasized that vacatur is an equitable remedy requiring balancing competing interests. In determining whether exceptional circumstances exist to warrant vacatur, a court must weigh the benefits of settlement to the parties and to the judicial system (and therefore the public) against the harm to the public in the form of lost precedent.
The Eleventh Circuit held that exceptional circumstances existed to warrant vacatur here. The court ruled that:
  • The parties did not forfeit review. The parties did not voluntarily begin settlement negotiations. Rather, the Eleventh Circuit twice ordered them to mediate. The resulting settlement would be impossible without vacatur. The court stated that if courts deem a settlement conditioned on vacatur a voluntary forfeiture of review, no settlement would ever warrant vacatur.
  • There was only slight public interest in preserving the district court precedent, which largely concerned state contract law. This interest was outweighed by the substantial benefit of settling the case to the parties and to the judicial system (and therefore the public).
Accordingly, the Eleventh Circuit reversed the district court's denial of the FRCP 60(b) motion and vacated its orders for summary judgment, fees, and costs.
In light of this opinion, attorneys who want to vacate a judgment or order as part of a settlement should consider waiting for a court order to negotiate and expressly condition any resulting agreement on vacatur.