California v. Randtron
| Citation | 284 F.3d 969 |
| Decision Date | 02 October 2001 |
| Docket Number | No. 00-16236.,No. 99-17572.,99-17572.,00-16236. |
| Parties | People of the State of CALIFORNIA; City of Lodi, Plaintiffs-Appellees, v. RANDTRON, a dissolved California Corporation, Defendant-Appellant. People of the State of California; City of Lodi, Plaintiffs-Appellees, and American Stores Properties, Inc.; Lucky Stores, Inc.; Holz Rubber Company, Inc., Intervenors-Appellees, v. Randtron, a dissolved California Corporation, Defendant-Appellant, and Oldco Holz, a suspended bankrupt and defunct California Corporation, Defendant. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Kimberly S. McGovern and Jonathan K. Tycko, Gibson, Dunn & Crutcher LLP, Washington, DC, for the defendant-appellant.
Randall A. Hays, City Attorney, Michael C. Donovan and Susan J. King, Attorney General, San Francisco, CA, for the plaintiffs-appellees.
Appeal from the United States District Court for the Eastern District of California; David F. Levi, District Judge, Presiding. D.C. No. CV-98-00620-DFL/DAD.
Before: SCHROEDER, Chief Judge, D.W. NELSON and RAWLINSON, Circuit Judges.
The opinion filed October 2, 2001, appearing at 268 F.3d 891, is amended as follows:
1. Slip Opinion, p. 14086 , second full paragraph — change to read: "Because the district court properly applied the Anti-Injunction Act, and Randtron had no ..."
2. Slip Opinion, p. 14089 n. 7 —change to read: "Randtron does not raise an Anti-Injunction Act challenge to the May 25, 2000 order, recognizing that it falls..."
With this amendment, the panel, as constituted above, has unanimously voted to deny the petition for panel rehearing. Chief Judge Schroeder and Judge Rawlinson voted to reject the suggestion for rehearing en banc, and Judge Nelson so recommended.
The full court has been advised of the suggestion for rehearing en banc, and no active judge of the court has requested a vote on the suggestion for rehearing en banc. Fed. R.App. P. 35(b).
Appellant's petition for panel rehearing and suggestion for rehearing en banc, filed October 16, 2001, is DENIED.
Two issues are presented in this appeal: 1) Whether the Anti-Injunction Act barred the district court from issuing a declaratory judgment precluding the California Superior Court from considering Randtron's res judicata defense; and 2) whether the district court erred in ruling that the Consent Decree barred Randtron from asserting a counterclaim for contribution against Lodi in a separate state court lawsuit in which Lodi attempted to impose liability on Randtron above and beyond the liability asserted and settled in the federal court lawsuit.
In April 1998, the State of California and Lodi, a California municipality (collectively referred to as "Lodi"), brought a federal environmental cause of action against Randtron, a dissolved California corporation,1 for soil and groundwater contamination. The complaint alleged causes of action under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act and the Lodi Comprehensive Municipal Environmental Response and Liability Ordinance ("MERLO"). When Randtron was an operating business, it had insurance policies with at least two companies — Employers Insurance of Wausau ("Wausau") and Granite State Insurance Company ("Granite State"). Randtron (represented by counsel hired by Wausau) and Lodi negotiated a proposed settlement agreement and consent decree.
On April 10, 1998, the court signed an order allowing notice of the proposed settlement and consent decree. Numerous interested parties commented, and Lucky Stores and Holz Rubber Company were permitted to intervene. The court held hearings on the proposed consent decree on July 27, 1998 and September 28, 1998. Additionally, the court considered briefs from the parties and intervenors after the hearings. On December 4, 1998, the court issued an order addressing the objections and specifying the required amendments to the decree. On April 1, 1999, the settlement agreement was memorialized by the federal district court in a final Consent Decree.
The settlement agreement released all claims against Randtron's officers and shareholders not covered by other insurance policies and from any claims against Randtron covered by the two Wausau insurance policies. Specifically, the agreement stated:
As to the Corporate Defendants, this settlement is intended to effectuate settlement of only those Matters Covered for which the Corporate Defendants were protected from liability by the limits of liability coverage provided by the general liability provisions of the combined single limits endorsements of policy numbers 0624-03-033933 and 0626-00-037304 issued by Employers Insurance of Wausau A Mutual Company. As to the Individual Defendants, this settlement is intended to release them from all liability from which they are not actually protected by insurance (which release specifically includes all liability to respond with other than insurance assets or proceeds) for the Matters Covered by this Settlement.
The district court's express retention of jurisdiction over the settlement agreement provided: "The Court shall retain full jurisdiction over the Settling Parties, Wausau, the Trust, and this Consent Decree for purposes of ensuring compliance with its terms and provisions and adjudicating, either directly or by Order of Reference, any and all disputes arising hereunder."
On December 24, 1998, Lodi filed a complaint in state court to enforce an administrative order requiring Randtron to prepare a comprehensive plan for the remediation of the polluted areas pursuant to MERLO and to recover unexhausted insurance assets.2,3 Randtron, now represented by counsel retained by Granite State,4 filed a demurrer in state court based on res judicata. Lodi filed a motion for declaratory relief, and an injunction in federal district court to prevent Randtron from asserting a res judicata defense in the state court action. The state court stayed Randtron's state action pending the federal district court's resolution of Lodi's motion.
In its October 12, 1999 decision, the district court determined that Lodi was not attempting to circumvent the terms of the Consent Decree. Rather, Lodi was attempting to comply with its terms. See California v. Randtron, 69 F.Supp.2d 1264 (E.D.Cal.1999). The court stated, "Lodi's present federal court action reasonably can be viewed, then, as an action to stop Randtron from breaching the terms of the Consent Decree." Id. at 1269. The court held that it had subject matter jurisdiction on the basis of the Consent Decree and under the All Writs Act to issue the injunction. Id. at 1268-69. The court also held that the relitigation exception applied, and described Granite's effort to use res judicata with regard to Randtron as a "fiction." Id. at 1271. The court issued the injunction, holding:
the Consent Decree releases Lodi's claims against Randtron only to the extent those claims were covered by the two Wausau policies specified in the Decree. The Decree does not bar Lodi from asserting the same substantive claims against Randtron to the extent it possesses other insurance assets.
In the interim, Randtron filed a cross-complaint5 in state court against Lodi for contribution, asserting that Lodi was partially responsible for the environmental contamination at issue. In response, on March 30, 2000, Lodi filed an application in federal court for an order to show cause why Randtron should not be held in contempt and sanctioned for violating the Consent Decree by filing its cross-complaint. On April 21, 2000, Lodi moved for a preliminary injunction in federal court requiring Randtron to dismiss its cross-claims. On the same day, Randtron filed a motion in federal court for a temporary stay of proceedings in federal court pending the state court's decision.
The district court held a hearing on the motions on May 19, 2000. Lodi's motion for preliminary injunction was granted. Lodi's motion to show cause and Randtron's motion for a stay were both denied.
Because the district court properly applied the Anti-Injunction Act, and Randtron had no enforceable contribution claim against Lodi, we affirm.
Whether an injunction may issue under the Anti-Injunction Act is a question of law reviewed de novo. Prudential Real Estate Affiliates v. PPR Realty, Inc., 204 F.3d 867, 879 (9th Cir.2000). However, the decision to issue an injunction that comes within an exception to the Act is reviewed for an abuse of discretion. United States v. Alpine Land & Reservoir Co., 174 F.3d 1007, 1011 (9th Cir.1999).
The district court's interpretation of a consent decree is reviewed de novo. Gates v. Gomez, 60 F.3d 525, 530 (9th Cir.1995). "However, we give deference to the district court's interpretation based on the court's extensive oversight of the decree from the commencement of the litigation to the current appeal." Id. (citations and internal quotation marks omitted).
The district court had jurisdiction to enforce the settlement agreement because the district court incorporated the agreement into the Consent Decree. See Flanagan v. Arnaiz, 143 F.3d 540, 544 (9th Cir.1998).
Additionally, the district court had jurisdiction under the All Writs Act, 28 U.S.C. § 1651, which provides that federal courts "may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." 28 U.S.C. § 1651.
We have jurisdiction pursuant to 28 U.S.C. § 1291.
The Anti-Injunction Act, 28 U.S.C. § 2283, prohibits federal courts from enjoining state court actions except in specific and narrow circumstances. Prudential, 204 F.3d at 878; Alpine, 174 F.3d at 1014. Federal courts may enjoin state court actions if one of three...
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