Sometimes when a case on appeal settles, the settlement will involve stipulating to reversal of the judgment. That much was no surprise in the stipulated reversal of a citizens group’s challenge to the City of Palo Alto’s utility rate structure in **************************Green v. City of Palo Alto (D6 Mar. 27, 2023 no. H049436) 2023 WL 2644025 (nonpub. opn.).
The surprising part was that the Court also went along with the parties and issued their agreed list of instructions to the trial court on remand. And all this over a class-action settlement clocking in at less than $18,000.
The settlement would allow the city to avoid issue preclusion (about whether the city may continue charging rents for the use of general-fund assets). And, of course, the settlement would allow the plaintiffs’ attorneys to seek their attorneys’ fees.
The Court agreed that the parties successfully established the factors under Code of Civil Procedure section 128(a)(8) for a stipulated reversal:
The surprising thing about the opinion is that it directs the trial court “to consider and implement the parties' settlement in a manner consistent with the parties' settlement agreement.” This includes allowing the parties to amend the complaint (to add new claims consistent with the settlement); direct notice to the settlement class, hold a fairness hearing, and consider approving the settlement and attorneys’ fees; and finally, to enter judgment on the settlement and direct the City to comply with it.
The parties proposed even more instructions—about retrying an issue concerning the city’s practice of charging rent to its utilities—but the Court did not go along with those. Ordering a retrial “would require examination of the merits of the case and exceed the scope of the stipulated reversal.”
Code of Civil Procedure section 128(a)(8) imposes a presumption against stipulated reversals, and ordinarily that presumption is very difficult to overcome. (Hardisty v. Hinton & Alfert (2004) 124 Cal.App.4th 999.) Green is surprising because the court seems to give light treatment to the presumption, and even goes beyond the stipulated reversal by issuing further directions to the trial court.
The reason stipulated reversals are difficult is that judgments are the exercise of judicial power. A judgment, particularly the judgment of an appellate court, is the expression of a general statement of law, forged into judicial act and backed by the full force of law. We do not want people to get the idea that judgments may be manipulated by private, interested litigants.
As relevant to this class action, it is possible that, as the court noted, the reasons for the settlement are valid given that nearly all the ratepayers in the city are parties, and thus will all share in the proceeds of a little more than $17,000. It is possible that that is the reason for the settlement.
But is it probable? Or it is similarly possible—even probable—that observers may wonder if many of those ratepayers wouldn’t rather let their pennies ride and try to vindicate their position that the city may not continue charging rents to its utilities. And observers may further wonder if the driving force behind plaintiffs’ stipulation was less the $17,000 and change, and more the forthcoming motion for PAGA attorneys’ fees.
In any event, if you are exploring settlement on appeal, do not expect to receive such light treatment as was illustrated here. Try to avoid structuring a settlement that depends on a stipulated reversal.
(See my previous post on in Mid-Wilshire Property, L.P. v. Dr. Leevil, LLC here.)
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes summaries of cases and appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at firstname.lastname@example.org or (714) 641-1232.
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