Opinion
A088985.
7-31-2003
PACIFIC BELL, Plaintiff and Appellant, v. COVAD COMMUNICATIONS COMPANY, Defendant and Respondent.
We recall the remittitur issued in January 2001, on the ground that the parties joint motion to vacate the judgment of the trial court and the underlying arbitration award was improvidently granted, because they failed to provide required relevant information under Code of Civil Procedure 128, subdivision (a)(8). (See People v. Hickok (1949) 92 Cal. App. 2d 539, 541, 207 P.2d 620.) We also vacate our previous dispositional orders in this matter, deny the vacatur motion, and dismiss the appeal as moot.
All further statutory references are to the Code of Civil Procedure.
FACTUAL AND PROCEDURAL BACKGROUND
In March 1998, Covad Communications Company (Covad) filed an arbitration demand against Pacific Bell, asserting, inter alia, claims of breach of contract, unfair competition, monopolization and attempted monopolization under the Sherman Act, and violation of the Telecommunications Act. The essence of the complaint involved allegations that Pacific Bell had attempted to stifle competition in the market for DSL services by breaching its inter-connection agreements with Covad. The parties agreed to arbitrate the contract claims, and Covad filed suit on the remainder of its claims in federal court.
In November 1998, a three-judge panel of the American Arbitration Association found Pacific Bell had breached its inter-connection agreements with Covad pertaining to the provision of DSL service, as well as the covenant of good faith and fair dealing. The panel subsequently issued an injunction and awarded damages to Covad.
In September 1999, the superior court denied Pacific Bells petition to vacate the arbitration award, and confirmed the award in favor of Covad. In October 1999, Pacific Bell filed a notice of appeal in this court. While that appeal was pending, Albert O. Stein filed a class action in federal court against Pacific Bell and its affiliates, on behalf of subscribers to DSL service, charging violations of antitrust laws and the Telecommunications Act, and citing the Pacific Bell/Covad arbitration decision and its underlying findings. Before argument was heard on the appeal in this court, Pacific Bell and Covad agreed to "a comprehensive settlement that resolved all of their disputes." In September 2000, Pacific Bell and Covad filed a "Joint Motion to Vacate Judgment and Arbitration Award." In October 2000, this court granted the relief mutually sought, remanding with directions to the trial court to vacate the arbitration award. The remittitur was issued in January 2001.
The parties joint motion stated: "As part of [their comprehensive] settlement, [the parties] have agreed that the AAA Award should have no further force or effect and that the AAA award and the Judgment confirming it should be vacated."
The motion was not served on Stein, who claims to have learned of it only after this court had already ruled. [* 4]
In a separate arbitration in November 1999, Pacific Bell had also been found in violation of the Telecommunications Act. The parties reached a stipulation before the hearing on Covads motion to confirm that arbitration decision, and the federal district court vacated the arbitration award pursuant to that stipulation.
In March 2001, Stein moved to intervene in the superior court for the limited purpose of challenging the stipulated vacatur on the ground that it had been premised on misrepresentations to this court. The trial court denied Steins motion to intervene, finding that he lacked the requisite direct and immediate interest in the action. Steins appeal from that ruling is dismissed as moot in our separate opinion filed today in A097030, in light of our recall of the remittitur and denial of the vacatur motion in A088985.
At that time, the superior court had not yet acted pursuant to the remittitur. Steins December 2000 motion to intervene in the federal district court had been denied in February 2001, with the federal court ruling that Stein had not shown that its order was obtained by fraud, since the alleged affirmative misrepresentations by Pacific Bell were made to the state court of appeal.
We also take judicial notice of the record in A097030.
DISCUSSION
In 1999, the Legislature superseded the judicial presumption in favor of stipulated reversals previously set forth in Neary v. Regents of University of California (1992) 3 Cal.4th 273, 284, 834 P.2d 119. (Muccianti v. Willow Creek Care Center (2003) 108 Cal.App.4th 13, 19 (Muccianti).) Section 128, subdivision (a)(8), as amended effective January 1, 2000, provides, in relevant part: "An appellate court shall not reverse or vacate a duly entered judgment upon an agreement or stipulation of the parties unless the court finds both of the following: [P] (A) There is no reasonable possibility that the interests of nonparties or the public will be adversely affected by the reversal. [P] (B) The reasons of the parties for requesting reversal outweigh the erosion of public trust that may result from the nullification of a judgment and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement." Vacatur is denied when the requirements PAGE CONTAINED FOOTNOTES PAGE CONTAINED FOOTNOTES of section 128 are not met, because vacation of the judgment may affect the rights of nonparties and erode the public trust. (Muccianti, supra, at p. 15.) In ruling on a vacatur motion brought pursuant to section 128, we are largely dependent, as a practical matter, on the parties representations made in their motion. (See Morrow v. Hood Communications, Inc. (1997) 59 Cal.App.4th 924, 925.)
This court also has the inherent power to recall a remittitur inadvertently or improperly issued. (Cal. Rules of Court, rule 26(c)(2); Hickok, supra, 92 Cal. App. 2d at p. 541; accord, Bryan v. Bank of America (2001) 86 Cal.App.4th 185, 190-191.) "One of the grounds for exercising the power is that the court has been induced to decide the case under a misapprehension of the true facts. That rule is applicable here." (Hickok, supra, at p. 541.)
All further references to rules are to the California Rules of Court.
In their joint motion to vacate the judgment and arbitration award under the authority of section 128, the parties made the following representations to this court: "No third parties have any cognizable interest in the Judgment. The Judgment does only one thing: it transforms the [arbitration award], a contract in writing between the parties to the arbitration [citation], into a judgment that may be enforced like any other judgment of the court. [Citation.] No third party or the public has any interest in the Judgment because it relates solely to this particular arbitration award and to the parties to that arbitration." The parties also cited the holding of Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 824, 982 P.2d 229 (Vandenberg) that "a private arbitration award, even if judicially confirmed, may not have nonmutual collateral estoppel effect under California law unless there was an agreement to that effect in the particular case."
The parties neglected to inform this court, however, that Stein had filed a consumer class action in federal court making detailed reference to the judgment and underlying arbitration award the parties now sought to vacate. Instead, they affirmatively represented that no third parties would be affected, and the vacatur they sought would not erode public trust in the judicial system. While Pacific Bell, as the respondent in Steins appeal from the denial of his motion to intervene in the superior court, now advances detailed arguments regarding the potential preclusive effect and/or admissibility of the state court judgment in Steins federal case, it does not explain why these arguments were not presented in the joint motion to vacate, and why the motion failed to disclose the existence of Steins pending federal action at that time. Notably, Pacific Bell does not claim to have been ignorant of the existence of Steins federal suit.
We note that Steins federal case had been filed more than a month before the parties joint motion to vacate the state court judgment. We also note that the federal court had recently ruled that Steins antitrust class action was a "related case" to Covads pending federal suit against Pacific Bell, within the meaning of the local rules.
Under these circumstances, this court finds it appropriate to recall the remittitur on its own motion, and to vacate its previous dispositional orders. The court was induced to grant the parties joint motion for vacatur under a misapprehension of the facts. (Hickok, supra, 92 Cal. App. 2d at p. 541.) When an order has been improperly rendered by reason of the courts lack of knowledge of the relevant circumstances, the remittitur will be recalled. (In re McGee (1951) 37 Cal.2d 6, 9, 229 P.2d 780; see also 9 Witkin, Cal. Procedure (4th Ed. 1997) Appeal, § 739, pp. 768-769.)
We need not address Pacific Bells protestations that Stein failed to timely request recall of the remittitur, because we conclude pursuant to the courts inherent authority that vacatur was not properly granted under section 128, based on a mistake of fact. (See Kohle v. Sinnett (1955) 136 Cal. App. 2d 34, 39, 288 P.2d 139.) We also note that rule 26(c)(2) provides for recall of the remittitur on the motion of a party or of the court, but makes no mention of interested third parties.
Pacific Bell now contends that even if the parties had informed this court of the existence of Steins pending federal suit, the outcome here would have been no different, because the judgment in question would not have collateral estoppel effect in the federal action, and would be barred as inadmissible hearsay. We conclude, however, that these are questions to be decided by the federal court. Moreover, even assuming arguendo that the state judgment were not given preclusive effect in the federal action, it might be found relevant for other purposes. Vandenberg, supra, on which Pacific Bell relies, held only that, under California law, a private arbitration award will not have nonmutual collateral estoppel effect unless the parties so agree. (21 Cal.4th at pp. 836-837.) The Vandenberg court did not purport to address other potential evidentiary uses of such a judgment, and described its own holding at the outset as "narrowly circumscribed." (Id . at p. 824, fn. 2.) It would be premature for this court to decide federal evidentiary questions better left to the district court. (See Alexander v. Gardner-Denver Co. (1974) 415 U.S. 36, 60, 39 L. Ed. 2d 147, 94 S. Ct. 1011 (Gardner-Denver) [although arbitral decision may lack preclusive effect, it "may be admitted as evidence and accorded such weight as the court deems appropriate"]; accord Barrentine v. Arkansas-Best Freight System (1981) 450 U.S. 728, 743, 67 L. Ed. 2d 641, 101 S. Ct. 1437; Brown v. Green (7th Cir. 1984) 738 F.2d 202, 205-206; Priest v. American Smelting & Refining Co. (9th Cir. 1969) 409 F.2d 1229, 1232 n. 7; Lum v. City and County of Honolulu (D.Hawaii 1988) 690 F. Supp. 914, 916.)
As the California Supreme Court itself recognized in Vandenberg, supra, most jurisdictions in the United States have ruled that "unless the arbitral parties agreed otherwise, a judicially confirmed private arbitration award will have collateral estoppel effect, even in favor of nonparties to the arbitration, if the arbitrator actually and necessarily decided the issue sought to be foreclosed and the party against whom estoppel is invoked had full incentive and opportunity to litigate the matter. [Citations.]" (21 Cal.4th at p. 834.) Federal civil procedure, scholarly opinion and the Restatement (Second) of Judgments follow the majority rule. (See Note, Arbitration and Its Collateral Estoppel Effect on Third Parties, 2000 J.Disp. Resol. 425, 433.) In Vandenberg, supra, however, the court held that "a private arbitration award cannot have nonmutual collateral estoppel effect unless the arbitral parties so agree" (21 Cal.4th at pp. 836-837), although it also described its holding as "narrowly circumscribed." (Id. at p. 824, fn. 2.)
As one respected treatise has explained: "The source of the law that governs the preclusion consequences of an arbitration award has not been much developed. As noted earlier, it seems to be agreed that once a state court has confirmed an award, the full faith and credit statute requires other courts to look to the law of that state. . . . Federal law, on the other hand, has been relied upon in many cases that rule that special federal policies drawn from specific statutes defeat attempts to rest preclusion on an award. . . . In the end, it may prove wise to look to the law that governs the claim advanced in court, rather than the law governing the arbitration or the claim advanced in arbitration." (18B Wright et al., Federal Practice and Procedure (2d ed. 2002) Jurisdiction, § 4475.1, pp. 530-531.) The same commentators have also noted that the United States Supreme Court "has made it more difficult to avoid preclusion by agreeing to have the judgment vacated," referring to U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership (1994) 513 U.S. 18, 130 L. Ed. 2d 233, 115 S. Ct. 386 (Bonner Mall). (18A Wright et al., Federal Practice and Procedure, supra, Jurisdiction, § 4465.2 at p. 763.)
Like the court in Camargo v. California Portland Cement Co. (2001) 86 Cal.App.4th 995, 1021, we "express no view on the weight [if any] to which the arbitrators findings in this case may be entitled under the Gardner-Denver test." (Ibid.) That is a question to be decided by the court in the federal action. We do conclude, however, that vacatur of the judgment confirming the arbitrators decision is barred by section 128, because there is a reasonable possibility that the interests of nonparties and the public would be adversely affected, and the only reason given for the parties request, namely that it is in accord with their settlement agreement, does not outweigh the erosion of public trust that may result from nullification of the judgment under the circumstances presented here. (See Muccianti, supra, 108 Cal.App.4th at pp. 22-23; see also Bonner Mall, supra, 513 U.S. at p. 29 ["exceptional circumstances [required to justify vacatur] do not include the mere fact that the settlement provides for vacatur"]; National Union Fire Ins. Co. v. Seafirst Corp. (9th Cir. 1989) 891 F.2d 762, 769 ["to the extent there may be preclusive effect, [appellant insurer] should not be able to avoid those effects through settlement and dismissal of the appeal"].)
According to the parties own representations to this court in their prior vacatur motion, they "have agreed to a comprehensive settlement that resolves all of their disputes." We therefore dismiss as moot the appeal from the judgment confirming the arbitrators award. (See Giles v. Horn (2002) 100 Cal.App.4th 206, 226-227; County of Fresno v. Shelton (1998) 66 Cal.App.4th 996, 1005; Finnie v. Town of Tiburon (1988) 199 Cal. App. 3d 1, 10, 244 Cal. Rptr. 581.)
DISPOSITION
The remittitur is recalled, and this courts previous dispositional orders are vacated. The parties motion to vacate the judgment of the superior court is denied, and the matter is remanded to the trial court with directions to reinstate the judgment on the arbitration award. The appeal is dismissed as moot.
We concur: McGuiness, P.J., Parrilli, J.