National Union Fire Ins. Co. of Pittsburgh, Pa. v. Seafirst Corp.

• Decision Date: 12 December 1989
• Docket Number: 88-4342 and 88-7248,Nos. 88-3970,s. 88-3970
• Citation: 891 F.2d 762
• Parties: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff-Appellant, v. SEAFIRST CORPORATION, Defendant-Appellee. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff-Appellant, v. SEAFIRST CORPORATION, Defendant, and Davis, Wright & Jones, Defendant-Intervenor-Appellee. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Petitioner, v. UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON, Respondent, and Davis, Wright & Jones; Marsh & McLennan; Arthur Andersen & Co., Respondent-Intervenor, and Seafirst Corporation, Real Party in Interest.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 762

891 F.2d 762

58 USLW 2381

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff-Appellant, v. SEAFIRST CORPORATION, Defendant-Appellee.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff-Appellant, v. SEAFIRST CORPORATION, Defendant, and Davis, Wright & Jones, Defendant-Intervenor-Appellee.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Petitioner, v. UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF

WASHINGTON, Respondent,

and

Davis, Wright & Jones; Marsh & McLennan; Arthur Andersen &

Co., Respondent-Intervenor,

and

Seafirst Corporation, Real Party in Interest.

Nos. 88-3970, 88-4342 and 88-7248.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 6, 1989.

Decided Dec. 12, 1989.

Bradley D. Stam, Michael D. Helgren, Timothy K. Thorson and Gregory C. Narver, Culp, Guterson & Grader, Seattle, Wash., for plaintiff-appellant.

Bruce E.H. Johnson and Bruce Lamka, Davis, Wright & Jones, Seattle, Wash., for Davis, Wright & Jones.

Phillip H. Ginsberg, William R. Bishin and Patrick S. Brady, Ginsberg & Stanich, Seattle, Wash., for Marsh & McLennan.

Richard M. Clinton, Ronald T. Schaps and Lucy P. Isaki, Bogle & Gates, Seattle, Wash. and Robert D. McLean, John M. George, Jr., and Frank B. Vanker, Sidley & Austin, Chicago, Ill., for Arthur Andersen & Co.

Appeal from the United States District Court for the Western District of Washington.

Before HUG, FARRIS and REINHARDT, Circuit Judges.

FARRIS, Circuit Judge:

National Union Fire Insurance Company of Pittsburgh, Pa. and Seafirst Corporation reached a comprehensive settlement after judgment was entered against National Union in Part I, of a planned two part trial. As part of the settlement Seafirst supported National Union's motion to vacate the judgment that was entered against National Union in Part I of the trial. The district court denied the motion. National Union seeks a writ of mandamus or alternatively appeals. We deny the writ, take the case on appeal, and affirm the district court.

FACTS

National Union issued $55 million of "directors and officers" liability insurance to Seafirst in October 1982. This policy insured Seafirst directors and officers for certain acts of negligence committed during the course of their employment. It was a secondary, or "excess," policy that would cover claims exceeding existing Seafirst D & O insurance from another carrier.

In March of 1985, National Union instituted the underlying lawsuit against Seafirst for declaratory relief under 28 U.S.C. § 2201, seeking rescission or reformation of the insurance contract. National Union claimed Seafirst had procured the policy through fraud and misrepresentation. Seafirst counterclaimed, alleging that by not paying claims against Seafirst's directors and officers, National Union had breached the insurance contract and had acted in bad faith. The case was bifurcated for trial. Phase I was to determine National Union's fraud claims. If Phase I found no fraud or misrepresentation, then Phase II would determine Seafirst's claims for coverage under the policy and for bad faith.

National Union also brought separate actions against Seafirst's attorney (Davis, Wright), independent accountant (Arthur Andersen), and insurance broker (Marsh & McLennan) for claims arising out of the same transaction. Davis, Wright, Andersen and Marsh & McLennan now intervene After a four week trial, the jury, by special verdict, found against National Union: the D & O policy had not been obtained by fraud or misrepresentation. The district court entered final judgment upon that verdict on March 25, 1988. On April 8, National Union moved to set aside that judgment and for a new trial of Phase I.

                in this Phase I appeal.   National Union, at one point, moved to join Marsh & McLennan in the original suit against Seafirst, but it never moved to join Davis, Wright or Andersen.   Joinder of Marsh & McLennan was refused on the ground that the proposed addition "at this late juncture ... would unduly complicate and confuse the case, introduce new legal issues, raise the possibility of differing burdens of proofs ..., and involve delays in the completion of discovery and the beginning of trial."   District Court Order Regarding Discovery Conference, 25 February, 1987 at 2
                

Shortly thereafter, National Union and Seafirst reached a settlement wherein National Union would withdraw its motion for a retrial of Phase I and would forego its appellate rights. Both parties would forego trying Phase II liability. Seafirst expressly agreed that National Union would be allowed to pursue Seafirst's insurance broker, attorney, and independent accountant for damages arising from their involvement in the procurement of the D & O insurance policy. National Union would also pay money damages of less than Seafirst's claims against National Union. The parties stipulated to, and the court ordered, that each party's claims against the other be dismissed with prejudice and that each would bear its own costs.

National Union thereafter moved to vacate the judgment of the district court on the theory that "[i]t is generally recognized that parties are 'free to settle on terms that require vacation of [a] judgment' and that the courts will honor such agreements," citing 13A Wright, Miller & Cooper, Federal Practice & Procedure, § 3533.10, at 432 (2d ed. 1984). National Union also relied upon cases dealing with Fed.R.Civ.P. 60(b), but did not suggest Rule 60(b) as grounds for vacatur.

Although vacation of the judgment was not a condition of the settlement, Seafirst filed a motion in support of vacatur on the grounds that its "settlement agreement with National Union provides in pertinent part that 'Seafirst will support a motion by National Union to vacate the Judgment ...' in this action. Accordingly, Seafirst hereby joins in National Union's Motion to Vacate...."

Upon learning of the motion to vacate, Davis, Wright and Marsh & McLennan moved to intervene as parties-defendant. Arthur Andersen was joined later.

The motion to vacate was denied. The district court's order stated, in pertinent part, that

[w]hile Plaintiff is correct that in most cases the court will respect a settlement agreed to by the parties, this case is an exception. This court finds that it would not serve the interests of justice to vacate either the judgement or the injunction ¹. To do so would not only affect the rights of other litigants, but would nullify two decisions--one by this court [the injunction], another by a jury--reached after careful and judicious consideration of factual patterns that have not changed.

In June of 1988, Davis, Wright petitioned the district court for declaratory relief and summary judgment in the case brought against it by National Union. Summary judgment was granted for Davis, Wright. Davis Wright & Jones v. National Union Fire Insurance Co., 709 F.Supp. 196 (W.D. Wash.1989). Similarly, while awaiting this appeal, National Union had summary judgment entered against it in its action against Marsh & McLennan, National Union Fire Insurance Co. v. Marsh & McLennan, No. 86-2-18564-0 (Super.Ct., King County, Wash., May 4, 1989), (Order Granting Marsh & McLennan's Motion for Summary Judgment), and in its action against Davis Wright, National Union Fire Insurance Co. v. Davis, Wright, Todd, Riese & Jones, Index No. 24810/85 (Sup.Ct., New York

County, N.Y., June 27, 1989) (order granting Davis, Wright motion to dismiss).

STANDARD OF REVIEW

In deciding whether the district court properly applied the Ringsby rule of weighing the hardships and equities that vary the balance "between the competing values of finality of judgment and right to relitigation of unreviewed disputes," Ringsby Truck Lines, Inc. v. Western Conference of Teamsters, 686 F.2d 720, 722 (9th Cir.1982), we review for abuse of discretion.

DISCUSSION

I. The writ of mandamus is denied and the case is decided on appeal

National Union filed its writ of mandamus out of concern over precedent that does not allow an appeal when, as was initially true here, the district court is the only respondent. However, the Intervenor-Appellees satisfied the requirement for adverse parties. Further, under certain circumstances, we permit appeals where the district court is the only respondent. See Diamond v. United States District Court, 661 F.2d 1198 (9th Cir.1981).

The Writ is denied and we hear the case as an appeal.

II. Grounds for vacatur

There are several circumstances in which a final judgment may be vacated. Fed.R.Civ.P. 60(b) is perhaps the most familiar grounds for a party to seek vacatur. The Supreme Court or any other appellate court also has broad discretion to vacate or modify any judgment properly before it, as is "just under the circumstances." See 28 U.S.C. § 2106.

National Union offers neither of these as a basis for its motion. We assume that it relies upon United States v. Munsingwear, 340 U.S. 36, 71 S.Ct. 104, 95 L.Ed. 36 (1950): "[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, 71 S.Ct. at 106. This is the "duty of the appellate court." 340 U.S. at 40, 71 S.Ct. at 107, quoting Duke Power Co. v. Greenwood County, 299 U.S. 259, 57 S.Ct. 202, 81 L.Ed. 178 (1936). It "clears the path for future relitigation of the issues between the parties and eliminates a judgment, review of which was prevented through happenstance." 340 U.S. at 40, 71 S.Ct. at 107.

III. Vacatur of judgments

1. Introduction

The motion to vacate was made to the district court after the parties settled while a motion for retrial of Phase I was before that court. The question of vacatur usually arises on motion to the appellate court, made after a settlement, pending appeal. In such...