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(Article from Insurance Law Alert, July/August 2016)

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The Eleventh Circuit ruled that a Florida federal district court erred in refusing to vacate summary judgment orders following the parties’ execution of a settlement agreement conditioned on the vacatur of those orders.  Hartford Cas. Ins. Co. v. Crum & Forster Specialty Ins. Co., 2016 WL 3741972 (11^th Cir. July 12, 2016).

In a coverage dispute between Crum & Forster and Hartford, a Florida district court issued a series of orders granting summary judgment and assessing attorneys’ fees and costs against Hartford.  Hartford appealed, and the matter was thereafter settled in an agreement that was contingent upon the issuance of an order vacating the summary judgment and costs orders in their entirety.  The district court refused to vacate the orders, relying on Bancorp Mortgage Company v. Bonner Mall Partnership, 513 U.S. 18 (1994), which sets out an “equitable approach that generally counsels against granting requests for vacatur made after the parties settle” unless “exceptional circumstances” exist.  The Eleventh Circuit reversed.

The Eleventh Circuit ruled that the district court applied Bancorp incorrectly.  In particular, the Eleventh Circuit found that the district court’s categorical denial that exceptional circumstances exist any time parties reach a settlement contingent on vacatur is inconsistent with Bancorp’s emphasis on equitable considerations.  In addition, the Eleventh Circuit concluded that the district court’s approach to determining the nature of the public interest in vacatur was overly narrow, stating that the district court “fail[ed] to recognize that the public interest is not served only by the preservation of precedent.  Rather the public interest is also served by settlements when previously committed judicial resources are made available to deal with other matters, advancing the efficiency of the federal courts.”

The Eleventh Circuit ruled that the propriety of granting vacatur is determined by “weighing the benefits of settlement to the parties and to the judicial system (and thus to the public as well) against the harm to the public in the form of lost precedent.”  Emphasizing the fact-specific nature of this analysis, the court explained that two unusual features of the settlement agreement mitigated in favor of vacating the district court orders in the present case:  (1) that the settlement was the result of court-ordered mediation and was expressly contingent of vacatur; and (2) both parties to the settlement sought vacatur.