Tuesday, October 25, 2005

Ninth Circuit Reverses Entry of Injunction against State Court Judgment Based on Anti-Injunction Act

Yesterday in Sandpiper Village Condominium Ass'n., Inc. v. Louisiana-Pacific Corp., --- F.3d ----, 2005 WL 2714525 (9th Cir. Oct. 24, 2005) the Ninth Circuit reversed the district court's order enjoining entry of judgment on a portion of a jury verdict rendered in Minnesota state court on the ground that the injunction violated the Anti-Injunction Act. There was a prior settlement reached in a nationwide class action and the district court with jurisdiction over the settlement enjoined the state court judgment because it felt that the state court award was inconsistent with the prior settlement reached in the class action. The Ninth Circuit reversed the court's order issuing the injunction because it did not find any of the three exceptions to the Anti-Injunction Act to be applicable [the first exception, that the injunction was authorized by Act of Congress did not apply]:

The second exception to the Anti-Injunction Act authorizes injunctive relief "to prevent a state court from so interfering with a federal court's consideration or disposition of a case as to seriously impair the federal court's flexibility and authority to decide that case." Atlantic Coast Line R.R. Co. v. Bhd. of Locomotive Eng'rs, 398 U.S. 281, 295 (1970). . . . Although the second exception has since been expanded to include some in personam actions, it remains that an injunction is justified only where a parallel state action "threatens to 'render the exercise of the federal court's jurisdiction nugatory.' . . . The necessary in aid of jurisdiction exception is inapplicable here because the state court action did not threaten the district court's jurisdiction over the Inner-Seal Siding litigation. By the time that the court issued the injunction, the Inner-Seal Siding class action had long since been resolved. Indeed, the district court had several years earlier approved the settlement and entered final judgment. Because the litigation was over, the state court action could not have interfered with the district court's consideration or disposition of the class claims.

. . .

The third exception to the Anti-Injunction Act, the socalled relitigation exception, permits a federal court to enjoin state proceedings when necessary "to protect or effectuate its judgments." 28 U.S.C. § 2283. This power "allows federal courts to ... protect the res judicata effect of their judgments and prevent the harassment of ... federal litigants through repetitious state litigation." Amwest Mortgage Corp. v. Grady, 925 F.2d 1162, 1164 (9th Cir.1991). . . . The relitigation exception is inapplicable here because the Minnesota lawsuit did not challenge the res judicata effect of the class settlement. Significantly, Lester was not named as a party to the class action and was not a member of the nationwide class. Nor were Lester's interests sufficiently parallel to the class members' interests such that privity could be implied. As a general rule, "one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process." For that reason, "[a] judgment or decree among parties to a lawsuit resolves issues as among them, but it does not conclude the rights of strangers to those proceedings." As a stranger to the class proceedings and settlement and lacking privity with class members, Lester was entitled to sue L-P in state court for its own injuries.

Judge Reinhardt dissented, writing:

At a time when Congress is expanding the jurisdiction of the federal courts over national class-action lawsuits, see 28 U.S.C. § 1332(d), the majority's decision severely limits the authority of district courts to protect that jurisdiction and to preserve the settlement agreements they have authorized. It renders federal court orders and judgments vulnerable to further litigation in state courts on a state-by-state basis, litigation that can reopen what are intended to be final damage awards and undermine the orderly implementation of complex national settlement agreements. Further, it allows parties and third parties alike to circumvent federal class-action orders by relying on state law claims that contravene the specific provisions of such orders.


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