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Intervenor lacks standing to appeal

“So remote is the prospect that Enrick could have derived a benefit in suit number 2 from vacating the settlement in suit number 1 that we conclude that he has not established standing to pursue this appeal.”

Hon. Richard A. Posner
Seventh Circuit

Even if a person may intervene to prevent a judgment from being vacated, in order to use the judgment as “offensive collateral estoppel,” the denial of the opportunity to intervene may not be a sufficient injury to confer standing to appeal, the Seventh Circuit held on Oct. 5.

After an automobile accident in Illinois, a diversity suit was commenced in federal court. A jury determined that both drivers were negligent, and the court entered judgment against them in accordance with the verdict. However, the parties decided to settle, and pursuant to the terms of the settlement, they requested the court to vacate the judgment.

Tarkwin Enrick was a passenger in one of the vehicles, and was suing the driver of the other vehicle, in a separate suit. Enrick asked the judge in the first suit to let him intervene in order to oppose the settlement. Enrick wanted the judgment to stand, so that he could use it as “offensive collateral estoppel,” precluding the driver from relitigating the issue of his negligence.

The court permitted Enrick to intervene for that limited purpose. Nevertheless, the court vacated the judgment, and dismissed the first suit. The court stated that he had misgivings about the instructions that he had given the jury, and said that, if the case had not settled, he would almost certainly have granted the defendants a new trial.

Enrick appealed, but the Seventh Circuit held, in an opinion by Judge Richard A. Posner, that Enrick lacked standing, and dismissed the appeal.

The court acknowledged that the Ninth Circuit has held that a person who would like to use a judgment for purposes of offensive collateral estoppel has standing to challenge the vacation of that judgment. American Games, Inc. v. Trade Products, Inc., 142 F.3d 1164, 1167 (9th Cir. 1998).

However, that court’s entire reasoning is contained in a single sentence: “American Games stands to benefit directly from the preclusive effect of the district court’s decision on those issues if that court’s vacatur decision is reversed.”

What the court held

Case: Korczak v. Sedeman, No. 05-2698.

Issue: Where a trial court vacates a judgment, does an intervenor have standing to appeal the vacatur, in order to preserve the underlying judgment for collateral estoppel purposes?

Holding: Where the likelihood that the court in the second action would apply collateral estoppel is "close to zero," the intervenor lacks standing.

Taking issue with that holding, the Seventh Circuit wrote, “Considering that the use of a judgment as offensive collateral estoppel in a subsequent suit is discretionary with the court in that suit, it is hard to see why, if the precedential effect of a decision shouldn’t be a sufficiently tangible interest to confer standing, the possibility of using the decision to foreclose relitigation of a particular issue should be (cite omitted).”

The court also expressed concern that recognizing standing would make it even more difficult to settle cases, by making the intervenor in effect another party to the settlement negotiations.

The court then engaged in a lengthy discussion of whether an intervenor must have an interest sufficient under Article III to entitle him to sue, noting the prevailing view that he need not.

The Seventh Circuit previously left the issue undecided in Sokaogon Chippewa Community v. Babbitt, 214 F.3d 941, 946 (7th Cir. 2000). Again, the court made no firm holding on the issue, but did conclude that, “if the intervenor does not have the kind of interest that confers standing, then, even if he is called a ‘party,’ and even if he is a party for other purposes, he cannot force the litigation to judgment or take an appeal (cites omitted).”

Avoiding a holding on the underlying jurisdictional issues, the court rested its decision on its conclusion that the district judge did not merely vacate the judgment because the parties desired the result, but that he thought the judgment unsound.

The court wrote, “the case is peculiar because the judge, while vacating the judgment because the parties to suit number 1 wanted him to, made clear that he thought the judgment unsound and therefore that he would have set it aside quite apart from the settlement. A vacated judgment is not a permissible basis for collateral estoppel.”

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Case Analysis

The cour
t also found that, because application of collateral estoppel rests with the court’s discretion, the judge in Enrick’s suit would be unlikely to apply it, given the first judge’s opinion of the judgment: “Even if the judge would not have set aside the judgment — for it is merely highly likely, and not certain, that he would have done so — his criticisms of the judgment would undoubtedly have dissuaded the court in suit number 2 from giving the judgment collateral estoppel effect; for a judgment must not be given such effect if ‘any special circumstances exist which would render preclusion inappropriate or unfair.’ Crowder v. Lash, 687 F.2d 996, 1010 (7th Cir. 1982).”

The court concluded, “The fact that a loss or other harm on which a suit is based (here, the loss of Enrick’s opportunity to use the judgment in suit number 1 against the defendant in number 2) is probabilistic rather than certain does not defeat standing. But the probability must not be too close to zero. So remote is the prospect that Enrick could have derived a benefit in suit number 2 from vacating the settlement in suit number 1 that we conclude that he has not established standing to pursue this appeal.”

Accordingly, the court dismissed the appeal.

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David Ziemer can be reached by email.

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