Redeemer Committee of Highland Credit Strategies Funds v. Highland Capital Management, L.P.

Filing 64

OPINION AND ORDER re: 62 JOINT MOTION for Indicative Ruling Pursuant to Fed.R.Civ.P. 62.1 filed by Highland Capital Management, L.P., 60 JOINT MOTION for Relief from the Court's Memorandum Order (D.I. 46), Final Judgm ent (D.I. 47), and Amended Final Judgment (D.I. 48) filed by Highland Capital Management, L.P. Currently before the Court are (i) the parties' joint motion, pursuant to Fed. R. Civ. P. 60 (b)(5), to vacate the decisions now on appeal and to dismiss the complaint with prejudice, and (ii) the parties' joint motion for an "indicative ruling" stating that the parties' Rule 60(b) motion "raises a substantial issue." Fed. R. Civ. P. 62.1(a)(3) ; as further set forth herein. Accordingly, the Court hereby denies the parties' Rule 60(b) and Rule 62.1 motions. See ATSI Comm'cns, 547 F.3d at 111-12. The Clerk of Court is directed to close docket entries 60 and 62. (Signed by Judge Jed S. Rakoff on 5/28/2017) (mro)

-·UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------x
REDEEMER COMMITT~~ OF HIGHLAND
CREDIT STRATEGIES FUNDS,
16 Civ. 2668

(JSR)

Petitioner,
OPINION AND ORDER
-vHIGHLAND CAPITAL MANAGEMENT, L.P.,
Respondent.
-------------------------------------x
JED S. RAKOFF, U.S.D.J.
Currently before the Court are
motion, pursuant to Fed. R. Civ. P.

(i)

the parties'

joint

60 (b) (5), to vacate the

decisions now on appeal and to dismiss the complaint with
prejudice, and (ii)

the parties'

joint motion for an "indicative

ruling" stating that the parties' Rule 60(b) motion "raises a
substantial issue." Fed. R. Civ. P.

62.l(a) (3).

For the reasons

stated below, the Court hereby denies both motions.
On July 12, 2016, the Court issued a Memorandum Order
confirming an arbitration award rendered by the American
Arbitration Association in favor of petitioner Redeemer
Committee of Highland Credit Strategies Funds

("the Committee")

See Memorandum Order dated July 12, 2016, ECF No.

46. On July

28, 2016, the Court entered final judgment. See Final Judgment,
ECF No.

47. On August 2, 2016, upon the joint application of the

parties, the Court amended the final judgment. See Amended Final
1

Judgment, ECF No.

48. Respondent Highland Capital Management

("Highland") promptly filed a notice of appeal challenging those
three decisions. See ECF No.
argued or briefed. Instead,

50. That appeal has yet to be
for the past six months, the

Committee and Highland, pursuant to Second Circuit Local Rule
42.1, have repeatedly withdrawn and reinstated the appeal in
order to facilitate settlement discussions. Those discussions
eventually bore fruit.

On May 18, 2017,

the parties advised the

Court that they had resolved this case and had signed a
confidential settlement agreement.
Having settled, the parties now wish to rewrite the history
of this litigation. In particular, Highland and the Committee
seek vacatur of this Court's previous three decisions
appeal)

(now on

and dismissal with prejudice of the complaint. See Fed.

R. Civ. P.

60 (b) (5)

("On motion and just terms, the court may

relieve a party or its legal representative from a final
judgment, order, or proceeding .

[if] the judgment has been

satisfied, released or discharged .

. ") . This relief is, in

principle, available directly from the Second Circuit, see ATSI
Comm'cns,

Inc. v. Shaar Fund, Ltd.,

547 F.3d 109, 111-12

(2d

Cir. 2008), but the parties have chosen instead to proceed in
this Court. And because the case is on appeal, the parties have
taken the preliminary step of seeking an "indicative ruling"
2

stating that their Rule 60 motion "raises a substantial issue."
See Fed. R. Civ. P.
v. Atmel Corp.,
at *2

62.l(a) (3); see also LFoundry Rousset,

F. App'x

(2d Cir. May 19, 2017)

pursuant to Fed. R. Civ. P.

SAS

, No. 16-2566-cv, 2017 WL 2210895,
(summary order)

("A motion brought

62.l is procedural device that

allows a district court to inform the parties and this court how
it would rule on the merits of certain motions after an appeal
has been filed and the district court has been divested of
jurisdiction."). If the Court were to grant the indicative
relief, the parties would then petition the Second Circuit to
remand the case for the Court to consider the Rule 60(b) motion
itself. See Fed. R. Civ. P.

62.l(b); Fed. R. App.

("If the district court states that .

P. 12.l(b)

the motion raises a

substantial issue, the court of appeals may remand for further
."). Only if the Second Circuit granted that

proceedings

relief could the Court vacate the rulings now on appeal.
However, although the parties must follow this convoluted
procedure in order to obtain vacatur and dismissal in this
Court, the Court is "free to 'entertain and deny the rule 60(b)
motion'" without any such ceremony. Koch v.

Pechota,

App'x 24, 25

(quoting Toliver v.

(2d Cir. 2016)

Cty. of Sullivan,

(summary order)

957 F.2d 47,

49

(2d Cir. 1992)). And here such

a denial is more than well warranted.
3

632 F.

The sole basis offered by the parties in support of vacatur
and dismissal is that the parties have now settled this case.
See Memorandum of Law in Support of the Parties'
for Relief from the Court's Memorandum Order
Final Judgment
No.

(Dkt. No.

48), ECF No.

Parties'
Civ. P.

47)

Joint Motion

(Dkt. No.

46),

and Amended Final Judgment

(Dkt.

60; Memorandum of Law in Support of the

Joint Motion for Indicative Ruling Pursuant to Fed R.
62.1, ECF No.

62. However,

it is well-established that a

settlement does not automatically entitle parties to vacatur of
all preceding legal decisions. To the contrary, absent
"exceptional circumstances," parties are not entitled to vacatur
where the dispute has been mooted because of settlement. ATSI
Comm'cns,

547 F.3d at 111-12

Bonner Mall P'ship,

513 U.S.

(citing U.S. Bancorp Mortg. Co. v.
18

(1994)).

This rule derives both from the equitable nature of the
vacatur remedy and from concerns regarding sound judicial
administration. In particular, "when a case is settled, 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." Microsoft Corp.
v. Bristol Tech.,

Inc.,

250 F.3d 152, 154

(2d Cir. 2001)

(internal quotation marks omitted) . Moreover, and importantly,
"denying vacatur after settlement advances the public interest
4

in preserving judicial precedent and the proper course of
appellate procedure." ATSI Comrn'cns,

547 F.3d at 112

(internal

quotations marks omitted).
Although these rationales are set forth in appellate
decisions,

they apply fully to district court decisions as well.

Indeed, district courts are the first courts to address novel
legal issues, and their written opinions are thus important to
the development of the law - a vital function that vacating such
opinions after the fact would tend to undercut. Thus, although
ATSI Communications and similar decisions deal with vacatur
motions addressed directly to the Court of Appeals,

there is no

reason in principle - and the parties do not identify any - why
any other rule would apply to such motions addressed to a
district court. Other courts in this district have, therefore,
held litigants to an

~exceptional

circumstances" standard in

situations similar to those present here.
Facebook,

Inc.

IPO Sec.

See, e.g.,

& Derivative Litig., No.

(RWS), 2015 WL 7587357, at *2-3

(S.D.N.Y. Nov.

No such circumstances here exist.

Indeed,

In re

12-md-2389

24, 2015).
it is hard to

escape the conclusion that the parties here have come to the
district court with their instant motions precisely because they
know they are unlikely to overcome the Second Circuit's
substantial barriers to obtaining vacatur and dismissal directly
5

on appeal and so hope to obtain such relief through the backdoor
Rule 62.1 "indicative ruling" route. But what matters is the
remedy sought, not how the parties seek it. The Second Circuit
has rejected the notion that the parties can avoid the U.S.
Bancorp rule through creative lawyering,
F.3d at 113

see ATSI Comm'cns,

547

("The parties cannot change that result by sleight

of the draftsman's hand - making the settlement contingent upon,
rather than in contemplation of, vacatur."), and the
"exceptional circumstances" standard therefore applies to the
parties'

joint motions.

Here, the parties fail to make any argument that theirs is
the rare, exceptional case in which vacatur in light of
settlement would be appropriate. Because the Rule 60(b) motion
is patently without merit, it follows that it fails to "raise[]
a substantial issue." Accordingly,
parties' Rule 60(b)

the Court hereby denies the

and Rule 62.1 motions. See ATSI Comm'cns,

547 F.3d at 111-12.
The Clerk of Court is directed to close docket entries 60
and 62.

so
Dated:

ORDERED.
New York, NY
May J.$!, 2017

JED S. RAKOFF, U.S.D.J.

6