Chartis Specialty Insurance Company v. Queen Anne HS, LLC
Filing
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ORDER denying Chartis's 99 Motion to Vacate the 4/4/12 Order; case is terminated by Judge Richard A Jones.(RS)
HONORABLE RICHARD A. JONES
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
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CHARTIS SPECIALTY INSURANCE
COMPANY,
Plaintiff,
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v.
ORDER
QUEEN ANNE HS, LLC,
Defendant.
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NO. C11-335RAJ
I. INTRODUCTION
This matter comes before the court on the motion (Dkt. # 99) of Plaintiff Chartis
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Specialty Insurance Company (“Chartis”) to vacate the court’s April 4, 2012 order on the
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parties’ summary judgment motions. For the reasons stated below, the court DENIES the
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motion and directs the clerk to TERMINATE this case in light of the parties’ settlement.
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II. BACKGROUND
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The April 4 order was the court’s last substantive ruling in this sharply contested
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dispute between Chartis and Queen Anne HS, LLC (“Queen Anne”), the construction
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company who converted the apartment complex that was once Seattle’s Queen Anne
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High School into condominiums. The condominium homeowners’ association sued
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Queen Anne for a host of construct defects. Chartis and Queen Anne became embroiled
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in a dispute over whether Chartis, Queen Anne’s excess insurer, was obligated to defend
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ORDER – 1
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or indemnify Queen Anne. In July 2011, the court ruled that the Chartis’s obligations
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would arise, if at all, only after Queen Anne paid $1 million in a judgment or settlement,
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not after Queen Anne paid $1 million in defense costs. Queen Anne and the association
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then entered a $1 million partial settlement of the construction litigation. Queen Anne
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gave the association a $1 million promissory note, securing the note with Queen Anne’s
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interest in a lawsuit against its insurance broker. Chartis denied that the partial settlement
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could trigger its duty to defend or indemnify. That denial ripened into the cross-motions
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for summary judgment that the court resolved in the April 4 order.
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The April 4 order interpreted Chartis’s insurance policy and concluded that Queen
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Anne’s partial settlement triggered Chartis’s duty to defend. The court also ruled that
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Chartis acted in bad faith as a matter of law by not appointing defense counsel beginning
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on August 24, 2011, the execution date of the partial settlement. The court noted that
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Chartis had appointed “associate” counsel in the construction lawsuit, but had never
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agreed that associate counsel would assume Queen Anne’s defense. At the same time,
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the court observed that there were “many factual disputes over whether [associate
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counsel] actually intended to defend [Queen Anne] at trial, whether he acted on Queen
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Anne’s behalf or Chartis’s, and whether Queen Anne could rely on him to provide a
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vigorous defense through trial.” April 4 ord. at 4. The court also explained that there
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were “factual disputes over whether the associate counsel that Chartis provided
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ameliorated the impact of its wrongful refusal to defend,” as well as “disputes over
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associate counsel’s role in the settlement process.” April 4 ord. at 17-18.
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Chartis moved to reconsider the April 4 order, but the parties settled this case
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before Queen Anne responded to the motion. The parties notified the court orally of their
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settlement on May 24. By June 11, they filed a joint status report confirming the
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settlement and informing the court that they had “stipulate[d] to the Court’s vacating the
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[April 4] Order.” Dkt. # 97. On June 15, the court explained that it would not vacate the
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ORDER – 2
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April 4 order based on the parties’ “bare request,” but that it would entertain a motion to
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vacate the order. Dkt. # 98. Chartis’s motion to vacate followed. Queen Anne did not
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join the motion, but filed a two-sentence stipulation to vacate the order, noting that it had
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agreed in the settlement to do so. In their most recent joint status report, the parties
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confirmed that they had “fully executed” their settlement. Dkt. # 102.
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III. ANALYSIS
The court has discretion to vacate the April 4 order. Michelman v. Lincoln Nat’l
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Life Ins. Co., 685 F.3d 887, 892 (9th Cir. 2012) (reviewing “district court’s refusal to
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reconsider or vacate summary judgment” for abuse of discretion); see also Wagoner v.
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Wagoner, 938 F.2d 1120, 1122 n.1 (10th Cir. 1991) (noting “district court’s general
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discretionary authority to review and revise interlocutory rulings prior to entry of final
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judgment”). The April 4 order is interlocutory, because it resulted in no judgment for
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either party. Rule 54(b) of the Federal Rules of Civil Procedure gives the court the power
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to “revise[]” such an order “at any time before the entry of a judgment adjudicating all
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the claims and all the parties’ rights and liabilities.” The Ninth Circuit has not squarely
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addressed what constraints, if any, apply to a district court considering whether to vacate
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its own orders. It has, however, explained that a district court considering a Rule 60(b)
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motion to vacate its own judgment can engage in broad equitable balancing. Am. Games,
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Inc. v. Trade Prods., Inc., 142 F.3d 1164, 1169 (9th Cir. 1998); see also Zimores v.
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Veterans Admin., 778 F.2d 264, 267 (5th Cir. 1985) (“The standard for reviewing
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vacation of an interlocutory order is hence not whether the stringent Rule 60(b) standard
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is met, but is rather whether the district court abused its discretion.”); Persistence
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Software, Inc. v. Object People, Inc., 200 F.R.D. 626, 627 (N.D. Cal. 2001) (“The
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standard for granting a motion to vacate under Rule 54(b) is less rigid than that under
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Rule 60(b) governing vacation of final judgments.”). Despite that broad discretion,
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courts may take guidance from the standards governing the court’s decision on a Rule
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60(b) motion to vacate a judgment. See, e.g., TriQuint Semiconductor, Inc. v. Avago
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Techs. Ltd., No. CV 09-1531-PHX-JAT, 2012 U.S. Dist. LEXIS 69055, at *7-8 (D. Ari.
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May 17, 2012) (considering motion to vacate interlocutory order “as an exercise of its
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equitable discretion by considering the concerns articulated by [United States Bancorp
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Mort. Co. v. Bonner Mall P'ship, 513 U.S. 18 (1994)], despite the fact that Bancorp does
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not establish a binding standard in these circumstances”) (citation omitted).
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In balancing the equities, the court begins with Chartis’s argument that the April 4
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order is erroneous in at least one respect. Its motion for reconsideration claimed that the
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court erred by finding bad faith as a matter of law in its refusal to appoint defense counsel
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following Queen Anne’s partial settlement. Chartis’s contention is that the “associate
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counsel” it had already appointed was no different than the defense counsel it was
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obligated to provide Queen Anne. The court disagrees, for the reasons stated in the April
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4 order. But, as the court acknowledged, there were unresolved factual disputes over
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what role associate counsel played, and that the resolution of those factual disputes at
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trial or otherwise might ameliorate the impact of Chartis’s failure to name defense
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counsel. In other words, although Chartis undisputedly (in the court’s view) violated its
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duty to defend by not designating defense counsel following the partial settlement, it is
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possible that Queen Anne suffered little or no damage as a result, depending on the extent
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to which associate counsel filled the role of defense counsel. But by refusing to accept its
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duty to defend and clarify that associate counsel (or someone else) would fill the role of
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defense counsel, Chartis acted in bad faith as a matter of law. Chartis’s decision to settle
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the case meant that the court never addressed its motion for reconsideration, but that
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motion was unlikely to succeed. Even if the order contains an error, it binds no one, not
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even Chartis. It is possible that another litigant might cite it in a future attempt to
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persuade another court to take the same position. But that future court is not bound by
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this court’s decision. Indeed, it is just as likely that this court’s decision would help
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another judge reach a contrary decision. The court finds that the alleged error in the
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April 4 order weighs only slightly, if at all, in favor of vacating that order. This is
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particularly so where the bulk of the order was devoted to interpreting the Chartis
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insurance policy, not to analyzing the role of associate counsel.
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In balancing the equities, the court considers the public interest, not merely the
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interests of the parties before it. Only Chartis has an interest in vacating the April 4
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order, whereas the public has an interest in it as persuasive authority. Court orders “are
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not merely the property of private litigants and should stand unless a court concludes that
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the public interest would be served by a vacatur.” Bonner Mall, 513 U.S. at 26 (citation
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omitted). Because “[j]udicial precedents are presumptively correct and valuable to the
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legal community as a whole,” id., vacating them in the service of a single litigant is
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inadvisable.
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The court invested considerable resources into interpreting Chartis’s policy.
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Chartis suggests that unlike, for example, a claim construction order in a patent case, this
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case did not strain the court’s resources. The court assures Chartis that it is mistaken.
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Few cases on the court’s docket have demanded more attention than this one. The court’s
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resources are the public’s resources, and vacating an interlocutory order in the wake of a
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settlement deprives the public of whatever benefit inures from that investment. See, e.g.,
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Tumulty v. FedEx Ground Package Sys., Inc., No. C04-1425P, 2007 U.S. Dist. LEXIS
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20429 (W.D. Wash. Mar. 22, 2007) (declining to impliedly undo decision reached after
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intensive litigation by vacating judgment); Zinus, Inc. v. Simmons Bedding Co., No. C
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07-3012 PVT, 2008 U.S. Dist. LEXIS 33359, at *3-6 (N. D. Cal. Apr. 23, 2008)
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(declining to vacate claim construction order). As the Zinus court bluntly put it:
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The public paid for this use of court resources through its tax dollars.
Vacatur would render that expenditure a waste, and the parties cite no
public interest that would be served by vacatur which would justify the
waste of public funds.
Id. at *6.
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Chartis’s motion arises in not-at-all-unusual circumstances: after extensive
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litigation and an adverse decision, a litigant decides to settle a case rather than proceed to
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trial. If anyone stands to gain from the vacatur of the April 4 order, it is Chartis. The
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court notes that whereas Chartis hopes to vacate the April 4 order, it has not mentioned
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the court’s July 27, 2011 order. That order also interpreted Chartis’s insurance policy,
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but in that order, the court’s interpretation favored Chartis. The court does not fault
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Chartis for pursuing its interests, but the court considers the public interest when deciding
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whether to vacate an order. The court doubts that it serves the public interest to
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selectively vacate decisions adverse to one litigant.
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Whether the court vacates the April 4 or not, it remains in the public record, and
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has as much persuasive effect as any court or party wishes to accord it. Vacatur does not
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make an order disappear. See Cisco Sys., Inc. v. Telecordia Techs., Inc., 590 F. Supp. 2d
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828, 831 (E.D. Tex. 2008) (“[The order] is now on the internet, available to anyone with
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a computer.”). The court’s order is already available to all subscribers to the Westlaw
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and Lexis legal research services. See 2012 U.S. Dist. LEXIS 47887; __ F. Supp. 2d __,
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2012 WL 1133186. The Westlaw citation suggests that the decision has been or will
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soon be reported in the Federal Supplement. Vacating an order does not eliminate it from
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the public record. Because it is in the public record, and because it is not binding,
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vacating the order would have no practical effect.
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Finally, the court’s declining to vacate the April 4 order will not discourage
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settlement. It will not discourage settlement in this case because the parties have already
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executed a settlement that does not depend on the fate of the April 4 order. As to other
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litigants (including Chartis in future cases), a liberal policy of vacatur does not favor
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settlement. It instead encourages parties with deep pockets to litigate with impunity,
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knowing that they can eliminate adverse decisions with a settlement and a motion to
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vacate.
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IV. CONCLUSION
For all of these reasons, the court DENIES Chartis’s motion to vacate the April 4
order. Dkt. # 99. The court directs the clerk to TERMINATE this civil action in light of
the parties’ settlement.
DATED this 31st day of August, 2012.
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The Honorable Richard A. Jones
United States District Court Judge
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