U.S. Bancrop Mortgage Co. v. Bonner Mall Partnership

• Citation: 513 U.S. 18,115 S.Ct. 386,130 L.Ed.2d 233
• Decision Date: 08 November 1994
• Docket Number: 93714
• Parties: U.S. BANCORP MORTGAGE COMPANY, Petitioner, v. BONNER MALL PARTNERSHIP
• Court: United States Supreme Court

513 U.S. 18

115 S.Ct. 386

130 L.Ed.2d 233

U.S. BANCORP MORTGAGE COMPANY, Petitioner,

v BONNER MALL PARTNERSHIP.

No. 93-714.

Supreme Court of the United States

Argued Oct. 4, 1994.

Decided Nov. 8, 1994.

Syllabus ^*

After this Court granted the petition for a writ of certiorari and received briefing on the merits, the parties entered into a settlement and agreed that the case was thereby mooted. Petitioner, however, also requested that the Court exercise its power under 28 U.S.C. § 2106 to vacate the judgment of the Court of Appeals. Respondent opposed the motion.

Held:

1. This Court does not lack the power to entertain petitioner's motion to vacate. Section 2106 supplies the vacatur power, and respondent's suggestion is rejected that Article III's case or controversy requirement prohibits the exercise of that power when no live dispute exists due to a settlement that has mooted the case. Although Article III prevents the Court from considering the merits of a judgment that has become moot while awaiting review, the Court may nevertheless make such disposition of the whole case as justice may require. Walling v. Reuter Co., 321 U.S. 671, 677, 64 S.Ct. 826, 829, 88 L.Ed. 1001. Pp. __.

2. Mootness by reason of settlement does not justify vacatur of a federal civil judgment under review. United States v. Munsingwear, 340 U.S. 36, 39-40, 71 S.Ct. 104, 106-107, 95 L.Ed. 36, and subsequent cases distinguished. Equitable principles have always been implicit in this Court's exercise of the vacatur power, and the principal equitable factor to which the Court has looked is whether the party seeking vacatur caused the mootness by voluntary action. Where mootness results from settlement, the losing party has voluntarily forfeited his legal remedy by the ordinary processes of appeal or certiorari, thereby surrendering his claim to the extraordinary equitable remedy of vacatur. It is irrelevant that the party who won below also agreed to the settlement, since it is the losing party who has the burden of demonstrating equitable entitlement to vacatur. This result is supported by the public interest in the orderly operation of the federal judicial system; petitioner's countervailing policy arguments are not persuasive. Although exceptional circumstances may conceivably justify vacatur when mootness results from settlement, such circumstances do not include the mere fact that the settlement agreement provides for vacatur. Pp. __.

Motion to vacate denied and case dismissed as moot. Reported below: 2 F.3d 899 (CA 9 1993).

SCALIA, J., delivered the opinion for a unanimous Court.

Bradford Anderson, Seattle, WA, for petitioner.

Edwin S. Kneedler, Washington, DC, for U.S. as amicus curiae by special leave of the Court.

John Ford Elsaesser, Jr., Sandpoint, ID, for respondent.

Justice SCALIA delivered the opinion of the Court.

The question in this case is whether appellate courts in the federal system should vacate civil judgments of subordinate courts in cases that are settled after appeal is filed or certiorari sought.

I

In 1984 and 1985, Northtown Investments built the Bonner Mall in Bonner County, Idaho, with financing from a bank in that State. In 1986, respondent Bonner Mall Partnership (Bonner) acquired the mall, while petitioner U.S. Bancorp Mortgage Co. (Bancorp) acquired the loan and mortgage from the Idaho bank. In 1990, Bonner defaulted on its real-estate taxes and Bancorp scheduled a foreclosure sale.

The day before the sale, Bonner filed a petition under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq., in the United States Bankruptcy Court for the District of Idaho. It filed a reorganization plan that depended on the "new value exception" to the absolute priority rule.¹ Bancorp moved to suspend the automatic stay of its foreclosure imposed by 11 U.S.C. § 362(a), arguing that Bonner's plan was unconfirmable as a matter of law for a number of reasons, including unavailability of the new value exception. The Bankruptcy Court eventually granted the motion, concluding that the new value exception had not survived enactment of the Bankruptcy Code. The court stayed its order pending an appeal by Bonner. The United States District Court for the District of Idaho reversed, In re Bonner Mall Partnership, 142 B.R. 911 (1992); Bancorp took an appeal in turn, but the Court of Appeals for the Ninth Circuit affirmed, In re Bonner Mall Partnership, 2 F.3d 899 (1993).

Bancorp then petitioned for a writ of certiorari. After we granted the petition, 510 U.S. ----, 114 S.Ct. 681, 126 L.Ed.2d 648 (1994), and received briefing on the merits, Bancorp and Bonner stipulated to a consensual plan of reorganization, which received the approval of the Bankruptcy Court. The parties agreed that confirmation of the plan constituted a settlement that mooted the case. Bancorp, however, also requested that we exercise our power under 28 U.S.C. § 2106 to vacate the judgment of the Court of Appeals. Bonner opposed the motion. We set the vacatur question for briefing and argument. 511 U.S. ----, 114 S.Ct. 1367, 128 L.Ed.2d 44 (1994).

II

Respondent questions our power to entertain petitioner's motion to vacate, suggesting that the limitations on the judicial power conferred by Article III, see U.S. Const., Art. III, § 1, "may, at least in some cases, prohibit an act of vacatur when no live dispute exists due to a settlement that has rendered a case moot." Brief for Respondent 21 (emphasis in original).

The statute that supplies the power of vacatur provides:

"The Supreme Court or any other court of appellate jurisdiction may affirm, modify, vacate, set aside or reverse any judgment, decree, or order of a court lawfully brought before it for review, and may remand the cause and direct the entry of such appropriate judgment, decree, or order, or require such further proceedings to be had as may be just under the circumstances." 28 U.S.C. § 2106.

Of course no statute could authorize a federal court to decide the merits of a legal question not posed in an Article III case or controversy. For that purpose, a case must exist at all the stages of appellate review. Preiser v. Newkirk, 422 U.S. 395, 401, 95 S.Ct. 2330, 2334, 45 L.Ed.2d 272 (1975); Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 133, 40 L.Ed. 293 (1895). But reason and authority refute the quite different notion that a federal appellate court may not take any action with regard to a piece of litigation once it has been determined that the requirements of Article III no longer are (or indeed never were) met. That proposition is contradicted whenever an appellate court holds that a district court lacked Article III jurisdiction in the first instance, vacates the decision, and remands with directions to dismiss. In cases that become moot while awaiting review, respondent's logic would hold the Court powerless to award costs, e.g., Heitmuller v. Stokes, 256 U.S. 359, 362-363, 41 S.Ct. 522, 523-524, 65 L.Ed. 990 (1921), or even to enter an order of dismissal.

Article III does not prescribe such paralysis. "If a judgment has become moot [while awaiting review], this Court may not consider its merits, but may make such disposition of the whole case as justice may require." Walling v. Reuter Co., 321 U.S. 671, 677, 64 S.Ct. 826, 829, 88 L.Ed. 1001 (1944). As with other matters of judicial administration and practice "reasonably ancillary to the primary, dispute-deciding function" of the federal courts, Chandler v. Judicial Council of Tenth Circuit, 398 U.S. 74, 111, 90 S.Ct. 1648, 1667, 26 L.Ed.2d 100 (1970) (Harlan, J., concurring in denial of writ), Congress may authorize us to enter orders necessary and appropriate to the final disposition of a suit that is before us for review. See Mistretta v. United States, 488 U.S. 361, 389-390, 109 S.Ct. 647, 663-664, 102 L.Ed.2d 714 (1989); see also id., at 417, 109 S.Ct., at 678 (SCALIA, J., dissenting).

III

The leading case on vacatur is United States v. Munsingwear, Inc., 340 U.S. 36, 71 S.Ct. 104, 95 L.Ed. 36 (1950), in which the United States sought injunctive and monetary relief for violation of a price control regulation. The damages claim was held in abeyance pending a decision on the injunction. The District Court held that the respondent's prices complied with the regulations and dismissed the complaint. While the United States' appeal was pending, the commodity at issue was decontrolled; at the respondent's request, the case was dismissed as moot, a disposition in which the United States acquiesced. The respondent then obtained dismissal of the damages action on the ground of res judicata, and we took the case to review that ruling. The United States protested the unfairness of according preclusive effect to a decision that it had tried to appeal but could not. We saw no such unfairness, reasoning that the United States should have asked the Court of Appeals to vacate the District Court's decision before the appeal was dismissed. We 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." Id., at 39, 71 S.Ct., at 106. We explained 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." Id., at 40, 71 S.Ct., at 107. Finding that the United States had "slept on its rights," id., at 41, 71 S.Ct., at 107, we affirmed.

The parties in the present case agree that vacatur must be decreed for those judgments whose review is, in the words of Munsingwear, " 'prevented through happenstance' "—that is to say, where a controversy presented for review has "become moot due to circumstances unattributable to any of the parties." Karcher v. May, 484 U.S. 72, 82, 83, 108 S.Ct. 388, 391, 98 L.Ed.2d 327 (19...