The Proper Action When an Appeal is Mooted

Offering a concise lesson on when a moot federal appeal should be dismissed and when it shouldn’t is the Ninth Circuit’s decision in NASD Dispute Resolution, Inc. v. Judicial Council of the State of California, case no. 02-17413 (May 30, 2007)

Fearing that new standards for California arbitrators imposed by the Judicial Council would make its arbitrations in California more difficult, NASD and the New York Stock Exchange sought a declaratory judgment that the California standards were preempted by federal securities laws, could not constitutionally be applied to the plaintiffs’ arbitration programs, and were not applicable to those programs as a matter of state law.  The district court dismissed the suit on the ground that the defendants were state entities with Eleventh Amendment immunity from suit in federal court.

The plaintiffs appealed. In an intervening decision in another case the Ninth Circuit held that the California standards were preempted by federal securities law, and the California Supreme Court reached a similar holding in yet another case involving different parties.  These intervening cases rendered the present appeal moot.

The issue before the court was whether, in light of the appeal’s mootness, the court should vacate the trial court’s dismissal of the case or instead let the trial court judgment stand and dismiss the appeal.  The state defendants did not want the trial court ruling disturbed, since it held that the Judicial Council and its members were immune from suit in federal court. 

The usual action in the event of a moot appeal is to vacate the decision below with a direction to dismiss, which is what the court does here.  Generally, only when mootness is the result of conduct by the party seeking appellate relief — such as by settling on appeal — should the court dismiss and leave the judgment below intact.  This sufficiently serves the public interest by protecting the district court decision against “a refined form of collateral attack” — an appellant settling on appeal so as to have the judgment below vacated.

The Judicial Council urged that equity and public policy weighed against vacatur because NASD and NYSE were unlikely to sue the Council or its members again, and the public has an interest in preserving judicial precedent.  The court spends a short time on the value of district court opinions as “precedent” and the effect of a “vacated on other grounds” history for a district court case. Since the district court decision will remain in the Federal Supplement and is useful only as persuasive authority anyway, the public interest in preservation of precedent does not require that the ruling remain intact.

This last point is especially sensible and relevant to the discussion in this earlier post regarding the utility of citing district court decisions.