United States Court of Appeals
For the First Circuit
No. 02-2710
WAL-MART STORES, INC.; WAL-MART PUERTO RICO, INC.;
SUPERMERCADOS AMIGO, INC.,
Plaintiffs, Appellees,
v.
ANABELLE RODRIGUEZ, in her personal and official capacity as
Secretary of Justice of the Commonwealth of Puerto Rico,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Juan M. Pérez-Giménez, U.S. District Judge]
Before
Lynch, Circuit Judge,
Campbell, Senior Circuit Judge,
and Howard, Circuit Judge.
Roberto J. Sánchez-Ramos, Solicitor General, Vanessa Lugo
Flores, Deputy Solicitor General, Hiram A. Meléndez-Juarbe,
Assistant Solicitor General, and Jaime Mercado-Almodóvar,
Assistant Solicitor General, on the briefs for appellant.
Bernard W. Nussbaum, Michael H. Byowitz, George T. Conway
III, Wachtell, Lipton, Rosen & Katz, Rubén T. Nigaglioni, Raúl M.
Arias, Veronica Ferraiuoli-Hornedo, and McConnell Valdés on the
briefs for appellees.
Thomas F. Reilly, Attorney General, Glenn S. Kaplan,
Assistant Attorney General, Jesse M. Caplan, Assistant Attorney
General, and Timothy E. Moran, Assistant Attorney General, on the
brief for the Commonwealth of Massachusetts and nineteen other
states, amici curiae.
Kevin J. O'Connor, Jennifer L. Peterson, and La Follette
Godfrey & Kahn, on the brief for the American Antitrust
Institute, amicus curiae.
Michael Stumo and Stumo & Milleron, LLC on the brief for the
Organization for Competitive Markets and the Puerto Rico Farm
Bureau, amici curiae.
March 20, 2003
LYNCH, Circuit Judge. The question presented is whether
to require vacatur of a district court order when the parties,
having settled the case on appeal, join in requesting it.
Anabelle Rodriguez, the Secretary of Justice of the
Commonwealth of Puerto Rico, appealed from the federal district
court's grant of a preliminary injunction prohibiting her from
pursuing an antitrust action which she had filed against Wal-Mart
Stores, Inc. in a Puerto Rico court. The action in the Puerto Rico
court claimed, inter alia, that the divestiture of four stores,
approved by the FTC attendant to Wal-Mart's acquisition of a Puerto
Rico supermarket chain, violated the Commonwealth's antitrust
statute. See 10 P.R. Laws Ann. §§ 257-276 (2002).
On December 6, 2002, despite a previously-issued federal
temporary restraining order prohibiting her from doing so,
Rodriguez sought and obtained from the Puerto Rico court an ex
parte preliminary injunction that enjoined Wal-Mart from taking
further steps to consummate the merger. Wal-Mart had filed a
federal court action earlier that day under 42 U.S.C. § 1983
(2000), contending that the Secretary's purported antitrust
concerns were a sham and that the Secretary's court action was
unconstitutionally filed in retaliation for Wal-Mart's refusal to
accede to the Secretary's unlawful protectionist demands. The
district court, on December 17, 2002, denied the Secretary's motion
that it abstain under the doctrine of Younger v. Harris, 401 U.S.
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37 (1971). After a three-day evidentiary hearing, the court
entered the preliminary injunction on December 26.
The Secretary appealed, arguing, inter alia, that the
district court should have abstained and that issuance of
injunctive relief was improper. Wal-Mart argued that Younger
abstention was unwarranted and that the injunction was not an abuse
of discretion. This court denied the Secretary's application for
a stay of the federal preliminary injunction and expedited the
appeal. We received several briefs amicus curiae in support of the
Secretary from the chief enforcement officers of twenty states, the
American Antitrust Institute, and others, expressing concern about
a federal court enjoining enforcement of a state antitrust law.
Oral argument was scheduled for March 6, 2003. On March
3, the parties filed a "Joint Motion Requesting Remand to the
District Court with Instructions to Dismiss the Underlying Action
with Prejudice and to Vacate the Preliminary Injunction and Opinion
and Order Below." In the motion the parties reported they had
entered into a stipulation of settlement dispositive of the
controversy underlying the appeal. A key element of the
stipulation and motion is the request that this court remand to the
district court with instructions not only to dismiss the complaint
with prejudice but likewise to vacate the December 26 preliminary
injunction and the court's related opinion and order. In the joint
motion, the Secretary represented that moving for vacatur of the
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opinion and order was an "essential component of the appellant's
entry into the stipulation of settlement," as "she is primarily
concerned about the impact of the decision below on her obligations
as the official with principal responsibility to institute
enforcement actions under and otherwise enforce Puerto Rico's
antitrust laws;" and - - citing to Massachusetts' amicus brief on
behalf of 19 states - - she also believes the decision below
adversely implicates issues of federal-state relations of concern
to many states.
Ordinarily, the settlement of a case will lead to
dismissal of an action but not to vacatur of the orders already
issued. In U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership,
513 U.S. 18 (1994), the Supreme Court held unanimously that
vacating a judgment in these circumstances (as part of dismissal of
an appeal pursuant to a settlement agreement) was the exception,
not the rule, and must be justified by equitable circumstances.
Id. at 29. Vacatur may be appropriate where mootness arises
through "happenstance," id. at 25 (quoting United States v.
Munsingwear, Inc., 340 U.S. 36, 40 (1950)), or through the
unilateral action of the party prevailing below, see id., but not
necessarily where the appellant moots the case by settlement or
withdrawal of the appeal, id. at 25-26. See Kerkhof v. MCI
WorldCom, Inc., 282 F.3d 44, 53-54 (1st Cir. 2002). Accordingly,
by order entered March 4, 2003, this court requested the parties to
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brief what equitable circumstances, if any, warranted vacatur. The
parties filed a joint brief in response.
Pursuant to the settlement, the Secretary dismissed her
case in the Puerto Rico court, freeing Wal-Mart from the
preliminary injunction against it. Wal-Mart agreed to divest two
stores in addition to the four stores covered by the FTC agreement,
and made certain promises related to its labor and purchasing
practices in Puerto Rico. The Secretary seeks vacatur because she
fears that the district court decision may impair her in her duties
to enforce the laws of the Commonwealth. Wal-Mart agreed to join
the motion for vacatur solely because Wal-Mart believes that
resolution of this controversy by means of settlement is in the
interest of the parties, of justice, and of the public.
The equitable decision on vacatur rests in the discretion
of this court. Kerkhof, 282 F.3d at 53. We agree with the parties
that the special circumstances of this case warrant vacatur of the
district court's preliminary injunction and the associated opinion
and orders. Our precedent supports vacatur here.
As in Kerkhof, vacating the judgment preserves the
ability of both sides to litigate the issues should they arise
again. Id. at 54. The issues before the district court here were
complicated, involving weighty concerns of both federalism and
antitrust law. This settlement was not motivated by one party or
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the other attempting to obtain a strategic advantage from the
existence of that injunction.
As in Motta v. District Director of INS, 61 F.3d 117, 118
(1st Cir. 1995) (per curiam), the party seeking vacatur is a
government agency, a repeat player in the courts. The government
has an institutional interest in vacating adverse rulings of
potential precedential value. Id. While the strength of that
interest may vary under different circumstances, it is sufficiently
strong here, both abstractly and specifically because of the
Secretary's insistence that the settlement will fail if vacatur is
not granted.1 It would be inequitable here to require the
Secretary to choose between the strong public interest in settling
the case amicably and her interest as chief enforcement officer in
removing adverse precedent. And Wal-Mart, whose attempts to
consummate a merger and acquisition transaction which closed on
December 5, 2002 have been enmired in litigation ever since, has an
interest in ending litigation which has frustrated its need for
business certainty.
Finally, federalism concerns support vacatur here. The
Secretary's actions in proceeding in Puerto Rico's courts in the
face of a federal court restraining order were certainly unusual.
1
The fact that a party conditions a settlement on
achieving vacatur does not by itself provide the needed equitable
circumstances. Such a rule would essentially remove the decision
from the court and hand it to the parties, in violation of the U.S.
Bancorp rule.
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But then a federal action to restrain a local law enforcement
official from bringing a local antitrust action is itself unusual.
The Secretary has dismissed the Commonwealth's enforcement action
and freed Wal-Mart of that constraint. Similarly freeing the
Secretary here is an equitable outcome.
Accordingly, we grant the request and remand to the
district court with instructions to vacate the preliminary
injunction, opinion and order issued on December 26, 2002 and to
dismiss the case with prejudice. Each side shall bear its own
costs.
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