Take the case of U.S. Philips v. Windmere. In 1984, U.S. Philips, a manufacturer of rotary electric shavers, sued Windmere, a U.S. distributor for the Japanese Izumi, also a manufacturer of rotary shavers. Philips charged Windmere with patent infringement and unfair competition. Windmere then counter-sued Philips for antitrust violations. Izumi, which had an indemnity agreement with its distributor, covered all of Windmere's legal costs. Philips won the patent suit, but was awarded only $6,500 in damages. In 1990, a jury found in Windmere's favor and awarded Windmere $89 million on the antitrust claim.
What happened next raises serious issues about the power of wealthy corporations to shape the law. Before Philips' appeal of the verdicts could be heard, the company struck a deal with Windmere. A May 1992 settlement between the two corporations gave Windmere an additional $57 million - on one condition. The settlement required Windmere to join with Philips in requesting a federal appeals court to vacate the lower court jury's verdict. Philips' motivations for entering into this agreement are made clear in the settlement: "It is the intention of all parties to this settlement agreement that the judgment, the opinion and the jury interrogatories on [Philips'] unfair competition claim and Windmere's anti-trust claim will be of no force and effect and shall have no precedential or other value."
The case is not unique. Many U.S. corporations have taken advantage of the vacatur process. A party that loses a significant court decision has the standard option of appealing the decision to a higher court. But parties that fear an appeals court upholding of the lower-court decision - and future litigation based on that decision - have another option: get the appeals court to simply wipe out the original ruling and its precedential value. This is accomplished most often by paying a settlement to the winning party with the requirement that the winning party join in a motion to vacate the lower- court decision. A decision to vacate erases the unfavorable ruling from the court record.
While no court is required to grant motions to vacate, it is becoming routine for many appeals courts to do just that. And while any losing party can encourage the winner to join in a motion to vacate a decision, it is wealthy corporations that have the resources to pay the large settlements that may convince winners to join in a vacatur motion.
In February, the Supreme Court agreed to hear a challenge to the Philips- Windmere vacatur. Izumi, which wanted the antitrust decision kept on the record, has brought a case targeting the Federal Circuit's blanket policy of granting vacatur motions without considering other interests at stake. In October, the Supreme Court will hear oral arguments in Izumi v. U.S. Philips Corp., et al,. and Windmere Corp. on whether large corporations will be permitted to routinely erase the precedential value of adverse court rulings by paying off the winning party in a case.
An amicus curiae brief filed in the suit by the Washington, D.C.-based Trial Lawyers for Public Justice (TLPJ) outlines the case against habitually granting vacatur motions. "Routine vacatur works a harmful distortion on the litigation process. It reduces respect for the judiciary by permitting a judicial decision, the public act of a public official, to be bought and sold." The brief notes that the process favors wealthy corporate interests, particularly those that often land in court. "Certain types of litigation, including products liability, toxic court cases, and employment discrimination claims, frequently pit an individual plaintiff with limited litigation experience ... against an institutional defendant with repeated exposure to the litigation process. The defendants in these cases have both the reason and the resources to �roll the dice' and then, if the gamble fails to pay off, to buy out unfavorable decisions. The plaintiffs do not."
The routine granting of vacatur undermines the public value of court decisions and rulings. As the TLPJ brief notes, "A judgment's value extends beyond the fact that it resolves a particular dispute: it may have preclusive effect in subsequent litigation; it serves as a precedent, developing the law; and it imposes public accountability on litigants whose actions result in a finding of liability."
The Supreme Court should reject the notion that parties that settle a case are entitled to vacatur. It should direct lower courts to review motions to vacate with the presumption that the motion will not be granted simply at the request of the parties. In fact, unless the lower court judgement can be proven unsound, courts should be directed to deny vacatur motions requested by parties that have reached a settlement. Selling justice is too costly at any price