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IBM CREDIT CORP. v. UNITED HOME FOR AGED HEBREWS

April 5, 1994

IBM CREDIT CORPORATION, Plaintiff,
v.
UNITED HOME FOR AGED HEBREWS, Defendant. UNITED HOME FOR AGED HEBREWS, Third Party Plaintiff, v. IBM and ADL DATA SYSTEMS, Third Party Defendants.



The opinion of the court was delivered by: VINCENT L. BRODERICK

 VINCENT L. BRODERICK, U.S.D.J.

 I

 This case brought pursuant to the diversity of citizenship jurisdiction of the federal courts involves an attempt by plaintiff IBM Credit Corporation (the "Credit Corporation"), a financing subsidiary of the computer equipment company, to compel payment in full by the defendant United Home For Aged Hebrews (the "Home") for leased computer equipment and software, notwithstanding alleged breaches of contract and failure of the application software to perform.

 The plaintiff Credit Corporation sought summary judgment to compel payment and IBM as third party defendant moved for dismissal of the Home's third-party complaint on the grounds that the Home has no recourse against it under the terms of the agreements. The motions were denied in IBM Credit Corp v. United Home, 1994 WL 86597, 1994 U.S. Dist. LEXIS 2886 (SDNY March 3, 1994) (the "March 3 order").

 The parties have reached a tentative settlement conditional on vacatur of the March 3 order. For the reasons which follow, the motion is granted and the March 3 order is vacated effective upon the filing of the stipulation of settlement and dismissal of the litigation signed by attorneys for all parties and by the parties.

 II

 Vacatur of a decision is appropriate where it benefits the parties but does not run counter to any public interest. See Manufacturers Hanover v. Yanakas, 7 F.3d 310 (2d Cir 1993); Nestle Co v. Chester's Mkt, 756 F.2d 280 (2d Cir 1985).

 A significant benefit to the parties is that a vacated order is not binding on the parties in future litigation; this benefit to the losing party can become a bargaining chip in settlement discussions, which are always more likely to be fruitful where more options are on the table. See Harris Trust & Savings Bank v. John Hancock Mutual Life Insurance Co, 970 F.2d 1138, 1146 (2d Cir 1992).

 The interests of the parties may also be served if vacatur results in preventing a ruling from having binding precedential impact which may affect them in situations capable of repetition; the party favored by the ruling may give up its precedential benefit in return for other aspects of the settlement. Reich v. Contractors Welding of Western New York, 996 F.2d 1409, 1413 (2d Cir 1993) (administrative agency ruling).

 III

 The public interest is served by denying vacatur where the decision involved might create collateral estoppel in favor of nonparties whose rights are based on statutory enactments adopted for their protection. See Cardinal Chemical Co v. Morton International, 113 S. Ct. 1967, 124 L. Ed. 2d 1 (1993) (public interest in ruling of invalidity of patent thus opening the way for otherwise inhibited competition in the marketplace). The Cardinal principle is inapplicable where, as in Kaisha v. US Philips Corp, 114 S. Ct. 425, 126 L. Ed. 2d 396 (1993), no nonparties appear to be directly impacted by the decision under consideration.

 The public interest is also served by availability of information about "what the courts do in fact," Holmes, "The Path of the Law," 10 Harv L Rev 457 (1897), also in O.W. Holmes, Collected Legal Papers 173 (1921), and the balance of treatment of problems capable of repetition. It would create a non-level playing field if rulings in favor of one ...


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