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 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 law 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.
The reason stipulated reversals are difficult that 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 might further wonder if the driving force behind plaintiffs’ stipulation was less about the $17,000, 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.