Dhx, Inc., a California Corporation v. Allianz Agf Mat, Ltd., a Foreign Corporation, Doing Business in the State of California, Dhx, Inc., a California Corporation v. Allianz Agf Mat, Ltd., a Foreign Corporation, Doing Business in the State of California

Citations: 425 F.3d 1169; 2005 U.S. App. LEXIS 20061Docket: 03-55426

Court: Court of Appeals for the Ninth Circuit; September 19, 2005; Federal Appellate Court

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DHX, Inc., a California corporation, filed a lawsuit against Allianz AGF MAT, Ltd., a foreign corporation doing business in California, claiming breach of an insurance contract related to the theft of shipping containers. The dispute revolves around an insurance claim for stolen merchandise, including shoes owned by Foot Locker, Inc. Allianz sought to dismiss the case for improper venue based on a forum selection clause specifying that disputes be governed by English law and submitted to the High Court of Justice in England.

The United States Court of Appeals for the Ninth Circuit addressed two appeals concerning the same parties and identified that both parties had settled the economic issues in dispute. The court noted that they agreed in open court to vacate a prior district court order denying Allianz’s motion to dismiss for improper venue. The case was remanded to the district court to consider vacating the order, the summary judgment, and the judgment entered in February 2003, in light of the settlement.

Judge Beezer, concurring, highlighted that although a complete financial settlement was reached, Allianz's payment of DHX's attorney's fees allowed DHX to continue litigation, creating the appearance of an ongoing dispute. He emphasized the importance of disclosing settlements to the court and the limitations of the appellate court's authority to vacate judgments after a settlement has occurred.

The district court declined to enforce Allianz's forum selection clause, stating it would infringe upon DHX's constitutional and statutory right to a jury trial. Subsequently, the court ruled in favor of Allianz, determining that Allianz was not the insurer and was an improper party in the case. DHX appealed the summary judgment, while Allianz cross-appealed the district court's refusal to enforce the forum selection clause. Shortly after, both parties reported a settlement between DHX and AGF M.A.T. S.A. concerning related English court proceedings, indicating that AGF M.A.T. S.A. was the principal underwriter of the insurance policy at issue but not a party to the appeals. Despite the settlement, both parties requested the court to resolve the dispute between DHX and Allianz concerning the enforceability of the forum selection clause, which the district court had found unenforceable due to the lack of an express waiver of the jury trial right.

During oral arguments, it became clear that DHX had little interest in continuing the dispute, with the primary interest lying with Allianz, which sought a decision on the merits regarding the forum clause. Allianz's attorney highlighted the significance of the clause for their numerous policies requiring claims litigation exclusively in England. The stipulation suggested that only DHX and AGF M.A.T. S.A. were involved in the settlement, raising questions about Allianz's status. The court expressed its constitutional duty to carefully examine jurisdictional matters, ultimately ordering the parties to submit relevant settlement agreements to determine if the case remained viable or was rendered moot.

The settlement agreement between DHX, Allianz, and AGF M.A.T. S.A. reveals a flawed attempt to maintain a live legal controversy after resolving economic issues, leading to the conclusion that the case is moot. The agreement, signed by representatives from all parties and their attorneys, includes a principal monetary settlement where AGF M.A.T. S.A. will pay DHX $219,000, and entails the dismissal of related proceedings in England. DHX releases Allianz and AGF M.A.T. S.A. from all claims related to the theft of shipping containers and agrees to file necessary dismissals with prejudice.

Despite the settlement, both DHX and Allianz intend to continue litigation over a forum clause order, with DHX committed to opposing a venue appeal favorably to pursue a ruling from the Ninth Circuit. Allianz incentivizes this continued litigation by agreeing to cover DHX's attorney fees, set at $300 per hour for substantial work, and will reimburse costs related to the appeal, including travel expenses for oral arguments.

This arrangement indicates that the parties sought to mitigate litigation risks while preserving the opportunity to challenge the district court's ruling on the forum clause, as Allianz is concerned about the implications of the ruling affecting its policies that designate England as the exclusive litigation forum. The strategy reflects an effort to allow the court to address the merits of the forum clause while dismissing the case based on the settlement.

The settlement crafted by DHX and Allianz aimed to maintain a court controversy regarding the validity of Allianz's insurance clause, particularly whether rights to a jury trial could be inadvertently waived in an insurance contract. Despite recognizing the potential mootness of the case, the parties attempted to preserve the forum clause issue while settling their economic dispute. However, this effort revealed the artificiality of their arrangement, as Allianz's primary concern was the forum clause's viability in future cases. DHX, having lost interest in the case's outcome, continued to litigate primarily for attorney's fees, following Allianz's directives.

The court emphasized that a live controversy must exist throughout the judicial process, referencing constitutional limitations on federal court authority to address moot questions or provide advisory opinions. Citing established case law, the court stated that once a settlement resolves all disputes, the case becomes moot, leaving no basis for effective relief and precluding further judicial intervention. Consequently, despite the parties' attempts to frame the settlement as preserving a controversy, the court determined it could not entertain the matter due to the absence of a live issue.

Allianz has acquired DHX, yet both claim an ongoing case or controversy, despite their cooperative relationship characterized by a side agreement. Allianz has paid DHX $219,000 and provides ongoing attorney's fees contingent upon DHX maintaining a litigating position regarding a forum clause. If DHX were to cease litigating, it would breach their settlement agreement, which mandates DHX to oppose the venue appeal favorably for a Ninth Circuit ruling. This arrangement undermines the adversarial nature required for an Article III case, as the parties share a common interest in the settlement.

The court refrains from addressing the merits of the forum selection clause, deeming both appeals moot and any opinion on the matter as an impermissible advisory opinion. Attorneys must promptly inform the court of settlements, as delays are sanctionable; withholding information about changes affecting a case's viability contradicts their duties as officers of the court. The parties' disclosure regarding their settlement was insufficient and misleading, omitting Allianz's involvement and the financial settlement details, thereby obscuring the ongoing artificial litigation. During oral arguments, Allianz's counsel requested that if the court declined to review the merits, it consider vacating the district court's opinion, to which DHX's attorney did not object. However, due to the case's mootness from the settlement, the court cannot vacate the district court's ruling, regardless of the parties' preferences.

In U.S. Bancorp Mortgage Co. v. Bonner Mall P'ship, the Supreme Court ruled that a losing party cannot seek vacatur of an appellate court's opinion after settling the case, as doing so represents a voluntary forfeiture of their legal remedy through appeal. The Court emphasized that judicial precedents serve societal interests, and vacatur cannot be granted simply due to settlement. Parties affected by a precedent cannot erase it by settling and jointly seeking vacatur; moreover, a vacated opinion lacks preclusive effect but retains some informational or persuasive value.

The Supreme Court noted that while exceptional circumstances might justify vacatur, this was not the case when parties merely settled their dispute. Upon settling, parties forfeit their right to appeal and thus to vacatur, as illustrated by Allianz's choice to settle, which resulted in the denial of vacatur. However, a district court may exercise discretion to consider vacatur under Federal Rule of Civil Procedure 60(b). Consequently, remanding the case to the district court for vacatur consideration is permissible.

Additionally, a stipulation from DHX, INC. indicated a settlement with AGF M.A.T. S.A. concerning related proceedings in English courts, which affects the issues in the consolidated appeals. DHX, INC. and ALLIANZ AGF MAT LTD. agreed to withdraw a motion to strike and remand the appeals.

The remaining issues between DHX, Inc. and Allianz AGF MAT Ltd. pertain to Appeal No. 03-55455, specifically regarding the October 18, 2002 District Court Order that denied Allianz's motion to dismiss. The primary dispute involves the enforceability of a forum selection clause favoring English courts, which the District Court deemed unenforceable due to the absence of an express waiver of the right to a jury trial, leaving collateral estoppel implications at issue. Both parties consent to the Court of Appeal focusing solely on these points in the consolidated appeals.

A settlement agreement has been reached, where AGF-M.A.T. S.A. will pay DHX $219,000 by March 16, 2004, or upon receipt of DHX's faxed signature if after that date. Both parties agree to mutually dismiss the pending English case (AGF M.A.T. S.A. v. Dependable Hawaiian Express, Inc.) and will file a consent order documenting the settlement terms and mutual dismissal, with each party bearing its own costs.

Additionally, DHX and Allianz are involved in California proceedings (DHX, Inc. v. Allianz AGF MAT Ltd.) at the Ninth Circuit Court of Appeals, which may be remanded to the Central District of California. The key issues in dispute are limited to Allianz's appeal regarding the venue ruling. DHX agrees to dismiss the final order appeal (03-55426) with prejudice upon Allianz's written request and will oppose the venue appeal in a manner that favors a merit ruling from the Ninth Circuit. Should the appeal be dismissed or remanded without a merits determination, both parties will jointly request the District Court to vacate the order. Allianz is responsible for preparing necessary papers for these efforts, while DHX will support any motions filed by Allianz and withdraw its motion to strike Allianz's pleadings.

AGF-M.A.T. S.A. will reimburse DHX for reasonable attorneys' fees and costs incurred in substantial work related to appeals and district court proceedings, specifically allowing Mr. Woolley to charge $300/hour for substantial work documented by detailed invoices. This excludes work related to papers drafted by ALLIANZ's counsel. For oral argument preparation and attendance, Mr. Woolley is limited to 10 hours of billable time and reimbursement for economy airfare (up to $300 round trip) and essential parking/taxi costs. Any additional reimbursement requires prior written consent from ALLIANZ under an agreed budget.

DHX releases Allianz AGF-MAT, Ltd., AGF-M.A.T. S.A., and related parties from all claims related to the theft of two containers on September 4, 2001, any insurance claims arising from it, and the lawsuit filed by DHX in California courts, agreeing to file necessary dismissals with prejudice. The settlement resolves disputed claims without admitting liability, aiming to avoid further litigation costs. 

The parties recognize the potential for unknown claims post-release but waive rights to such claims. DHX asserts sole ownership of the released claims and agrees to indemnify the released parties against any related claims from others. Any ambiguities in the agreement will not be interpreted against the drafting party, and the agreement is governed by English law. The prevailing party in enforcement actions is entitled to recover reasonable fees and costs. The agreement represents the entire understanding between the parties and can only be modified by a written agreement signed by all parties. It may be executed in counterparts, with signatories confirming their authority to execute the release.

On March 15, 2004, DHX, Inc. and Allianz AGF M.A.T. S.A., represented by authorized agents, signed agreements without objection to vacating a district court order. During oral arguments, Allianz expressed a desire to vacate the order to avoid future collateral estoppel issues, which the court confirmed was agreeable to DHX. The district court had identified AGF M.A.T. S.A. as the actual insurer, while DHX alleged that Allianz obscured the true identity of the insurer through various corporate maneuvers. Allianz contended that DHX was aware of AGF M.A.T. S.A.'s identity but chose to sue Allianz to leverage a litigation strategy related to California's bond requirements for non-admitted foreign insurers. Related issues were addressed in Appeal No. 03-55426, which has since been settled. The court instructed parties to file settlement agreements relevant to the vacatur. DHX's claims for compensatory damages included amounts of $185,371.37 for stolen shoes and $58,023.70 for other claims, though the appeal primarily focused on the former. Allianz limited reimbursement for travel expenses to economy airfare, while DHX's agreement to vacate was anticipated as part of the settlement terms requiring consent for vacatur.