## Facts

- Bonner Mall Partnership owned a shopping mall and filed for Chapter 11 bankruptcy on the eve of a scheduled foreclosure after defaulting on taxes.
- Bonner’s proposed reorganization plan relied on a contested “new value exception” to the Bankruptcy Code’s absolute priority rule.
- The Bankruptcy Court granted the mortgage holder’s request to lift the automatic stay, concluding the new value exception did not survive enactment of the Bankruptcy Code.
- The District Court reversed, and the Ninth Circuit affirmed, allowing the new value exception.
- The mortgage holder petitioned for certiorari; the Supreme Court granted review and the case was briefed.
- After certiorari was granted, the parties reached a consensual reorganization plan approved by the Bankruptcy Court, mooting the dispute.
- The mortgage holder moved for vacatur of the Ninth Circuit’s judgment under 28 U.S.C. § 2106; the debtor opposed vacatur.

## Issues

1. Whether an appellate court should vacate a lower-court judgment under 28 U.S.C. § 2106 when mootness results from the parties’ voluntary settlement while the case is on appellate review.
2. What equitable considerations govern vacatur when the party seeking vacatur contributed to mootness by settling.

## Decision

- The Supreme Court denied vacatur and dismissed the case as moot.
- The Court held that settlement-caused mootness does not, by itself, justify vacatur of a federal civil judgment under review.
- The Court confirmed it retains authority under § 2106 to vacate judgments despite mootness, but vacatur is discretionary and equitable.
- The Court concluded no exceptional circumstances warranted vacatur in this case.

## Legal Principles

- Appellate courts have statutory authority under 28 U.S.C. § 2106 to vacate judgments as justice may require, even when the merits are moot.
- Vacatur is an equitable remedy; the principal factor is whether the party seeking vacatur caused mootness by voluntary action.
- When mootness results from settlement, the losing party ordinarily forfeits appellate review and is not entitled to vacatur absent exceptional circumstances.
- The mere inclusion of a vacatur term in a settlement agreement is not an exceptional circumstance.
- Automatic vacatur practices associated with mootness arising from happenstance (as in Munsingwear-type situations) do not extend to mootness produced by voluntary settlement.
- Courts consider the public interest in preserving judgments that were fully litigated, including their precedential and preclusive effects.

## Conclusion

Because the case became moot through the parties’ voluntary settlement, and no exceptional circumstances justified equitable relief, the Supreme Court refused to vacate the Ninth Circuit’s judgment and dismissed the case as moot, leaving the lower-court decision in place.


U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18 (1994)