United States District Court, D. Hawaii
IN RE CUZCO DEVELOPMENT U.S.A., LLC, Reorganized Debtor.
JCCJO HAWAII, LLC, Defendant. CUZCO DEVELOPMENT U.S.A., LLC, Plaintiff,
ORDER DENYING JOINT MOTION TO VACATE ORDER AND
JUDGMENT (ECF NO. 25)
Michael Seabright Chief United States District Judge
3, 2017, this court reversed an order of the Bankruptcy Court
in an adversary proceeding involving the avoidance of a lease
between Cuzco Development U.S.A., LLC (“Cuzco”)
and JCCHO Hawaii, LLC (the “May 3 Order”). ECF
No. 14; In re Cuzco Dev. U.S.A., LLC, 2017 WL
3000024 (D. Haw. May 3, 2017).
appealed this court's May 3 Order to the Ninth Circuit.
With the assistance of the Ninth Circuit mediator, the
parties settled. And as part of that settlement, the parties
dismissed the appeal and agreed jointly to request this court
to vacate the May 3 Order and subsequent judgment. Joint
Motion to Vacate Order and Judgment (“Joint
Motion”) at 3, ECF No. 25. That Joint Motion is now
before the court.
reasons set forth below, the motion is DENIED.
Joint Motion appears to make two arguments. First, it claims
that the settlement requires the parties to seek vacatur as
part of the negotiated resolution of the case. Joint Motion
at 3. Second, it states that the issue addressed in the May 3
Order - the avoidance of a lease - “will not be
re-litigated by anyone else.” Id. at 6. After
balancing the equities involved, the court finds that the
parties have failed to provide a sufficient basis to vacate
the May 3 Order.
first justification, that the parties seek a vacatur based on
their settlement, was rejected by the Supreme Court's
holding in U.S. Bancorp Mortgage Co. v. Bonner Mall
Partnership, 513 U.S. 18 (1994). The Court first drew a
clear distinction between a party unable to seek appellate
review based on “mootness by happenstance” and
mootness by settlement:
A party who seeks review of the merits of an adverse ruling,
but is frustrated by the vagaries of circumstance, ought not
in fairness be forced to acquiesce in the judgment. The same
is true when mootness results from unilateral action of the
party who prevailed below. Where mootness results from
settlement, however, the losing party has voluntarily
forfeited his legal remedy by the ordinary processes of
appeal or certiorari, thereby surrendering his claim to the
equitable remedy of vacatur. The judgment is not
unreviewable, but simply unreviewed by his own choice.
Id. at 25 (internal footnote and citations omitted).
In reaching its decision, the Court specifically considered
and largely rejected the policy argument that a vacatur
A final policy justification urged by petitioner is the
facilitation of settlement, with the resulting economies for
the federal courts. But while the availability of vacatur may
facilitate settlement after the judgment under review has
been rendered and certiorari granted (or appeal filed), it
may deter settlement at an earlier stage.
Some litigants, at least, may think it worthwhile to
roll the dice rather than settle in the district court, or in
the court of appeals, if, but only if, an unfavorable outcome
can be washed away by a settlement-related vacatur. And the
judicial economies achieved by settlement at the
district-court level are ordinarily much more extensive than
those achieved by settlement on appeal. We find it quite
impossible to assess the effect of our holding, either way,
upon the frequency or systemic value of settlement.
Id. at 27-28 (emphasis in original). In fact, the
Court concluded that the exceptional circumstances that may
call for vacatur at the appellate level “do not include
the mere fact that the settlement agreement provides for
vacatur. . . .” Id. at 29.
court recognizes, however, that in the Ninth Circuit
Bonner Mall applies only to motions to vacate before
appellate courts - that is, a different rule applies to a
Rule 60(b) motion to vacate before a district court.
American Games, Inc. v. Trade Products, Inc., 142
F.3d 1164 (9th Cir. 1998), held that district courts should
continue to employ the pre-Bonner Mall test
articulated in Ringsby Truck Lines, Inc. v. Western
Conference of Teamsters, 686 F.2d 720, 722 (9th Cir.
1992). This test requires a district court to balance
equities, including “the consequences and attendant
hardships of dismissal or refusal to dismiss, ” the
“competing values of finality of judgment and right to
relitigation of unreviewed disputes, ” the
“motives of the party whose voluntary action mooted the
case, ” and the public policy against allowing a losing
party to “buy an eraser for the public record.”
American Games, 142 F.3d at 1168, 1170.
applying this test, “the distinction between mootness
caused by happenstance versus that caused by voluntary legal
action taken by the party seeking vacatur remains as the
pivotal threshold question in determining the propriety of
vacatur by the district court.” Visto Corp. v.
Sproqit Techs., Inc. 2006 WL 3741946, at *5 (N.D. Cal.
Dec. 19, 2006). The Ninth Circuit has recognized this
principle, stating that “a district court is not
required to vacate a judgment pursuant to settlement because,
otherwise, any litigant dissatisfied with a trial court's