A federal court in Virginia recently confronted a situation that arises with some degree of regularity: a judgment is entered by a court, the loser files a notice of appeal and then offers to settle the case, but imposes as a condition of the settlement that the judgment be vacated.

Earlier this year, a district judge in Virginia issued a judgment against Prudential in a disability claim adjudicated under the Employee Retirement Income Security Act. Neumann v. Prudential Insurance Company of America, 367 F.Supp.2d 969 (E.D. Va. 2005). Prudential's decision-making process was excoriated by the court in its ruling, and Prudential was hoping to vacate the decision in lieu of appeal. The court refused Prudential's request. Neumann v. Prudential Insurance Company of America, 2005 U.S. Dist. LEXIS 28430 (E.D. Va., Nov. 14).

Explaining that Rule 60 of the Federal Rules of Civil Procedure governs relief from final judgments, the court held that the requirements of that rule were not met. The court relied primarily on U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994), where the parties to a bankruptcy appeal settled and then requested the court to vacate its ruling. The Supreme Court determined that a post-judgment settlement did not constitute the type of extraordinary circumstances that would justify relief from a final judgment.

Although U.S. Bancorp involved a settlement prior to seeking vacatur, and this case involved a settlement conditioned on vacatur, the court explained that the ''distinction is not material; it does not affect the basic principle that post-judgment vacatur should issue only in extraordinary circumstances.''

The court added that subsequent rulings have established a ''general presumption against vacatur,'' citing as authority for the proposition that once a case has been fully briefed, argued and decided by written opinion, there is a presumption against vacatur. Valero Terrestrial Corp. v. Paige, 211 F.3d 112, 118 (4th Cir. 2000); Aqua Marine Supply v. AIM Machining Inc., 247 F.3d 1216, 1221 (6th Cir. 2001); Khodara Environmental, Inc. ex rel. Eagle Environmental L.P. v. Beckman, 237 F.3d 186, 195 (3d Cir. 2001); Microsoft Corp. v. Bristol Technology Inc., 250 F.3d 152, 154 (2d Cir. 2001).

The court found the arguments presented by the parties were insufficient to overcome the presumption against vacatur. The fact that settlement was conditioned on vacatur was an argument expressly rejected in U.S. Bancorp. Nor did the court accept the argument that vacatur would conserve judicial resources. The court found the argument ''illusory'' and ''counterproductive.''

Although a settlement could result in economies for the appellate courts in the short term, the court noted: ''Yet, it is far from clear that post-judgment vacatur, if granted with any regularity, would conserve judicial resources overall. To the contrary, were post-judgment vacatur readily available, many litigants might thereby be encouraged to forgo settlement early in the litigation process, hoping either to prevail at trial or, failing that, to bargain away any adverse decision with a settlement conditioned on vacatur. In this way, settlement conditioned on post-judgment vacatur, in sharp contrast to prejudgment settlement, hardly results in conserving judicial resources.''

The court also expressed a policy justification for eschewing vacatur: ''To be sure, settlement by the parties is a desideratum of any dispute resolution system, including federal litigation and the result reached here should not be construed to the contrary. Yet importantly, it is not always the sole or even dominant desideratum. Other goals arguably become more important in the post-judgment phase of litigation.

''This is so because federal courts are institutions whose power and authority derive not from mere private agreement, but from public law. In other words, federal courts exist not just to bring peace between warring parties, but more importantly to give expression and force to the rules and principles (and hence values) embodied in the governing law, including statutes and judicial precedent.

''Put differently, where, as here, the parties have litigated their dispute in the trial court and a decision and judgment have issued elucidating and applying the governing law to resolve the parties' dispute, courts play an important role that goes well beyond merely resolving private disputes. Accordingly, the presumption against vacatur is well founded; it stands as a safeguard against strategic manipulation of the judicial system for private gain at public expense.''

The court concluded by pointing out that if the desire is to eliminate any precedential or persuasive effect of the earlier opinion, the means to do so is to prosecute the appeal. Alternatively, Prudential is free to settle with the plaintiff without vacatur ''and thereby conserve legal fees and judicial resources.''

This is a very significant ruling. Some of the most strongly worded district court opinions we have seen in our area of practice have disappeared through vacatur. See, for example, Loucks v. Liberty Life Assurance Company of Boston, 337 F.Supp.2d 990 (W.D. Mich. 2004). We published an article about that ruling on our firm's Web site. In our article, we pointed out the significance of the court's findings in that case; however, the decision has since been withdrawn.

The reasons given by the court in this ruling should give pause to any court considering allowance of a vacatur motion. Moreover, in view of the clarity in the Supreme Court's ruling in U.S. Bancorp, it is difficult to understand why a court would ever exercise its discretion to grant a vacatur.

Finally, in addition to the sound reasons to deny vacatur advanced both by the Supreme Court and those given in this ruling, if federal courts were to become parties to vacatur, their judgments would become advisory opinions, contrary to the requirements of Article III of the U.S. Constitution.