Defense Judgment + Contingent Side Payment ≠ Moot

Hensley v. San Diego Elec. Co., No. D070259 (D4d1 Jan. 31, 2017)

Plaintiffs in this case lost an in limine motion on whether they could recover emotional distress-related damages on their claims, which made it not worth it to try the case. The parties tried to enter some kind of a stipulated arrangement that permitted an appeal. But the first time it went up, the Court of Appeal found that the arrangement was too ambiguous to count as a final judgment so no appeal would lie.

On remand, the parties agreed privately that Defendant would pay Plaintiffs a dollar amount on their non-emotional distress claims. Defendant also agreed to make an additional liquidated payment, but only if the Court of Appeal were to reverse the in limine ruling and remand for trial. They then stipulated to enter a final judgment in favor of Defendants that Plaintiffs “take nothing” on all claims, but which specifically stated that it was without prejudice to Plaintiffs’ right to appeal the damages.

The Court of Appeal finds that this time around, the parties did enough to create an appealable final judgment.There's no doubt that, on its face, the judgment finally disposed of all of the claims in the litigation. Nothing ambiguous or contingent about it. The fact that it was taken for the purposes of facilitating an appeal didn’t change that fact.

But what about the side deal? Under the parties’ agreement, there won’t ever be a trial even after a remand, because they agreed to resolve that contingency with a payment. That creates a tricky situation. On one hand, there’s no question that the parties could have struck the same deal ten minutes after the reversal. The judgment is still a judgment and the appeal has meaningful consequences for the parties. So, according to the court, the side deal doesn’t make the case moot.

That said, the court is clearly concerned with the potential that these kind of side bets could be used to manipulate appellate jurisdiction and avoid mootness. Clever parties could use these kinds of agreements to trick courts into issuing advisory opinions. The court finds that these concerns don’t control here, however, because the amount of the side-payment “essentially represents a liquidation of [Plainiffs’] emotional distress damages for their causes of action for trespass and nuisance, and is a matter still at stake between them.” But the court makes clear that if the payment were more arbitrary or manipulative, it could well be sufficiently divorced from the true merits as to render a case moot. 

The court goes on to reverse on the damages question. So Plaintiffs get their emotional distress covered without going to trial.


Reversed.