Northwest Airlines, Inc. v. American Airlines, Inc.

• Decision Date: 06 April 1993
• Docket Number: No. 92-2858,92-2858
• Citation: 989 F.2d 1002
• Parties: NORTHWEST AIRLINES, INC., Appellee, v. AMERICAN AIRLINES, INC., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1002

989 F.2d 1002

NORTHWEST AIRLINES, INC., Appellee, v. AMERICAN AIRLINES, INC., Appellant.

No. 92-2858.

United States Court of Appeals,

Eighth Circuit.

Submitted Oct. 13, 1992.

Decided April 6, 1993.

Janie S. Mayeron, Minneapolis, MN, argued (Julie M. Friedman and Elaine J. Erickson, on the brief), for appellant.

Thomas W. Tinkham, Minneapolis, MN, argued (Christopher J. Riley and Edward B. Magarian, on the brief), for appellee.

Before BOWMAN, WOLLMAN, and BEAM, Circuit Judges.

BOWMAN, Circuit Judge.

American Airlines appeals the District Court's ¹ order granting Northwest Airlines' motion to enjoin American from proceeding with a lawsuit American filed against Northwest in a federal district court in Texas. We affirm.

The actions of the parties relevant to this case begin in May 1991 with the dispatch of a letter from the general counsel of American Airlines to her counterpart at Northwest Airlines, the entire text of which follows:

You may not have seen the Texas Supreme Court decision of Sterner vs. Marathon Oil Company, so I have enclosed a copy. As we read that case, we have a decent chance of prevailing against Northwest should we elect to sue for tortious interference with respect to the nine employees you have hired in the past four months, particularly considering the skills they possess.

I have never much fancied being a plaintiff, but you folks may drive us to it. Although we are flattered by all the attention, we hope you'll look elsewhere for your staffing needs.

Letter from Anne H. McNamara, General Counsel, American Airlines, Inc., to Richard B. Hirst, General Counsel, Northwest Airlines, Inc. (May 15, 1991) (emphasis added).

In the months before this letter was written, Northwest had been recruiting employees--with some success--from the ranks of American's department responsible for financial analysis, forecasting, and strategic planning; and from among American's employees in the department that determined the most profitable fare mix for American flights.

On June 6, 1991, Northwest's general counsel responded that he believed the Sterner case cited in the May 15 letter did not change Texas law regarding the hiring of at-will employees from other companies. The letter concluded, "We are, however, reviewing this conclusion with Texas counsel. I appreciate your informing us of your position and your concerns on this point." Letter from Richard B. Hirst, General Counsel, Northwest Airlines, Inc., to Anne H. McNamara, General Counsel, American Airlines, Inc. (June 6, 1991).

Six weeks later, on July 17, 1991, Northwest filed suit in the United States District Court for the District of Minnesota (hereinafter "the District Court") seeking a declaratory judgment that Northwest had lawfully hired at-will employees of American in the past, and could lawfully continue to hire such employees from American and other competitors in the future. On August 30, after another six weeks had passed, American filed suit against Northwest in the United States District Court for the Northern District of Texas. American's complaint seeks permanent injunctive relief and damages for unfair competition and tortious interference with contractual relationships.

On September 6, 1991, American filed a motion in the District Court to dismiss the Minnesota action, or to transfer it to Texas. The court denied the motion on October 30, 1991. Two days before the court's decision, Northwest filed its answer in the Texas suit ², and the next day, October 29, Northwest filed a motion in Texas to stay the Texas case or transfer venue to Minnesota. It was not until January 28, 1992, that the Texas court denied Northwest's motion in an order that does not mention the October 30, 1991, order of the District Court in the Minnesota action. The denial of Northwest's motion became final when Northwest's February 24, 1992, motion to reconsider was denied May 12, 1992.

While waiting for a final decision on its motion to stay or transfer the Texas case, Northwest filed a motion in the Minnesota action on April 21, 1992, to enjoin American from proceeding with the parallel action in Texas. The District Court granted the motion on June 24, 1992. 792 F.Supp. 655.

In enjoining American from proceeding with its suit in Texas, the District Court found that "American ha[d] not shown that Northwest proceeded in bad faith or 'raced to the courthouse.' " 792 F.Supp. at 659. The court also found there were no compelling circumstances to make inapplicable the general rule that "the district court first obtaining jurisdiction over the parties should proceed to adjudicate the controversy and should restrain the parties from proceeding in a later filed action." Id. at 658.

After American's motion to reconsider was denied, American filed a notice of appeal, a request for expedited appeal together with its appellant's brief, and a motion to stay the injunction pending appeal, all on August 18, 1992. This Court denied the stay, but expedited the briefing schedule and oral argument for the appeal. At oral argument on October 13, 1992, the parties informed the Court that trial in Texas, originally set for October 1992, has been continued, and that therefore the need for an expedited decision in this appeal was obviated.

The discretionary power of the federal court in which the first-filed action is pending to enjoin the parties from proceeding with a later-filed action in another federal court is firmly established. See Minnesota Mining & Mfg. Co. v. Rynne, 661 F.2d 722 (8th Cir.1981) (per curiam); Martin v. Graybar Elec. Co., 266 F.2d 202, 204 (7th Cir.1959); see also 6 Charles A. Wright, et al., Federal Practice and Procedure § 1418, at 145-46 (2d ed. 1990) ("Indeed, by granting an injunction in this context, the court furthers the general federal policy against multiplicity of litigation embodied in [Federal Rule of Civil Procedure 13(a) ].").

Injunctions of the sort at issue here, i.e., orders enjoining a party from proceeding with a duplicative, second-filed lawsuit in another forum, are not subject to the Dataphase standards for injunctive relief. ³ In a case of this kind, the Dataphase factors are inapposite, since the question has nothing to do with the merits of the underlying controversy and is simply whether, as between two courts both having jurisdiction over the parties and the subject matter of the dispute, the court in which jurisdiction first attached should proceed to adjudicate the controversy and should restrain the parties from proceeding with the later-filed action. In this context, the governing standards are those set forth by this Court in United States Fire Insurance Co. v. Goodyear Tire & Rubber Co., 920 F.2d 487, 488-89 (8th Cir.1990) The well-established rule is that in cases of concurrent jurisdiction, "the first court in which jurisdiction attaches has priority to consider the case." Orthmann v. Apple River Campground Inc., 765 F.2d 119, 121 (8th Cir.1985). This first-filed rule "is not intended to be rigid, mechanical, or inflexible," Orthmann, 765 F.2d at 121, but is to be applied in a manner best serving the interests of justice. The prevailing standard is that "in the absence of compelling circumstances," Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Haydu, 675 F.2d 1169, 1174 (11th Cir.1982), the first-filed rule should apply.

These standards apply here, even though Goodyear came to us in a somewhat different posture. There, the appeal was from the district court's decision on the merits of the first-filed action (a declaratory judgment action), with the defendant in that action arguing that the court had abused its discretion in not staying or dismissing the action in deference to a later-filed action brought by the defendant in federal court in Georgia. Unlike the present case, in Goodyear the district court had not been asked to enjoin the proceedings in Georgia, so an injunction was not in the picture. We believe, however, that this distinction is immaterial, and that the Goodyear standards are fully applicable to the case now before us. Within this legal framework, our review of the order of the District Court is under the abuse of discretion standard. See Minnesota Mining & Mfg. Co., 661 F.2d at 724 (decision by district court in Minnesota to enjoin defendant in Minnesota action from proceeding with later-filed action brought by him in Georgia "will not be disturbed upon appeal unless the lower court has abused its discretion").

American first argues that Northwest's motion to enjoin the Texas action seeks to have review in this circuit of the Texas court's refusal to dismiss, stay, or transfer American's suit, and that Northwest should have sought review in the Fifth Circuit by way of a writ of mandamus or an interlocutory appeal. ⁴

We disagree with American's procedural characterization of Northwest's motion to enjoin the Texas action. Northwest did not seek review of the Texas order in the Minnesota court. The Texas court's order that American's action should not be dismissed or transferred is not challenged by Northwest's motion in the present action. American's suit is still alive in the district court in Texas; it is stayed pending resolution of the Minnesota action and subsequent consideration of any res judicata effect of a decision in that action, but it has not been transferred or dismissed. The Texas action has indeed been stayed, in the sense that American has been enjoined from proceeding with that action, but that is not the result of review of the Texas court's order. Rather, the injunction granted by the District Court is the result of that court's independent application of the first-filed rule to the circumstances of this case.

American relies heavily on Ellicott Machine Corp. v. Modern Welding Co., 502 F.2d 178 (4th Cir.1974). In that case, Ellicott filed an action in federal court in Maryland. Modern countered with a state court action in Kentucky that was...