Flanagan v. Arnaiz
| Decision Date | 06 May 1998 |
| Docket Number | No. 96-16694,96-16694 |
| Citation | 143 F.3d 540 |
| Parties | 98 Cal. Daily Op. Serv. 3400, 98 Daily Journal D.A.R. 4711 Bruce FLANAGAN; Joan Flanagan, Plaintiffs-Appellants, v. Howard ARNAIZ; Helen Rae Byrnes; Patricia A. Carson; Clyde C. Cournale; Roy M. Guinnane; Sidney Lewin; Smith Ketchum, III; Joseph Moore; Shirley Talbot, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Bruce Flanagan, Tracy, California, for plaintiff-appellant Joan Flanagan.
Philip W. Coyle, Truckee, California, for plaintiff-appellant Bruce Flanagan.
William M. Goodman, Topel & Goodman, San Francisco, California, for defendants-appellees Howard Arnaiz, Clyde Cournale, and Roy Guinnane.
Bruce M. Lubarsky, Jackson & Lubarsky, San Mateo, California, for defendants-appellees Sidney M. Lewin, Joseph Moore, and Shirley Talbot.
Joel K. Belway (briefed), San Rafael, California, for defendant-appellee Smith A. Ketchum, III.
Appeal from the United States District Court for the Northern District of California; William H. Orrick, Jr., District Judge, Presiding. D.C. No. CV-88-01708-WHO.
Before: PREGERSON, NOONAN and KLEINFELD, Circuit Judges.
The issue in this case is whether a federal district judge could properly enjoin state proceedings, where settlement of a lawsuit in federal court had included express retention of jurisdiction to resolve disputes arising under the settlement agreement.
The facts in this case are exceedingly complicated. But the law is clear, and application of the law to the facts is equally clear. The district judge was rightfully exasperated by the Flanagans' use of the factual complexity as an excuse to dance back and forth between federal and state courts.
The Flanagans were founders and substantial shareholders in Pacific Coast Savings and Loan Association. The regulatory agency directed the bank to get Mr. Flanagan out of its affairs. Mr. Flanagan challenged the regulatory action, and the actions by the bank's board of directors to oust him. The bank and several of its directors counterclaimed. This lawsuit was settled. The parties entered into a complex settlement agreement (43 pages plus signature pages) of the claims and counterclaims, subject to court approval.
Complexity could not be avoided, because disentangling the Flanagans from the bank would necessarily take time and involve complex accounting judgments. All the Flanagans' stock in the bank would have to be repurchased. That could not be done simply, by purchasing the stock with a note, because the stock was worth too much. Had it been bought all at once, the bank's capital would fall too low to satisfy regulatory requirements. The settlement agreement therefore provided that repurchase would be subject to such delays as might be necessary to keep the bank's capital sufficiently unimpaired as to satisfy regulatory agencies.
Various other details also were prospective and might require future court supervision. For example, the Flanagans were to repurchase stock they had sold to other individuals, and then the bank was to repurchase it from the Flanagans. The bank was to try to get the Flanagans an extension on a delinquent loan.
The parties provided for the possibility of future disputes regarding the settlement agreement and the need for judicial resolution. They agreed that the United States District Court for the Northern District of California should retain jurisdiction for purposes of resolving future disputes. The district judge signed a "Stipulated Order" approving the settlement agreement. The order included an express provision retaining jurisdiction to resolve disputes and enforce the settlement agreement:
7. The Court shall retain jurisdiction of this action for purposes of resolving any disputes that may arise in the future regarding the settlement agreement, its terms or the enforcement thereof.
A materially identical provision was included in the judgment.
A little less than a year later, the Flanagans sued several of these federal defendants they had settled with in state court, for breaching the settlement agreement. They claimed in the Superior Court for the State of California that defendants had "juggled the books" and mismanaged the business "so as to provide a disingenuous excuse" for the bank not to repurchase their stock, and caused the bank to fail so that the stock became worthless. The Flanagans attached a copy of the federal settlement agreement to their state court complaint, as the contract which defendants had allegedly breached.
The state court stayed the lawsuit so that the federal district court could determine whether to resolve the matters. The state court determined that the acts alleged in the state lawsuit "are matters that fall within the reservation of that [the federal] settlement agreement." The Court of Appeal for the State of California affirmed, noting the express reservation of jurisdiction in the federal judgment, and stating the decision was an appropriate exercise of discretion in view of "the strong policy of comity."
The federal district court subsequently issued an order allowing the Flanagans to file a supplemental complaint alleging violation of the settlement agreement. The district court dismissed on the pleadings, concluding that all the claims were barred by applicable statutes of limitations. The Flanagans appealed, and we affirmed in part and reversed in part in an unpublished disposition. Though we affirmed most of the district court's determinations, we reversed the dismissal of the Flanagan's breach of contract claim, on the ground that the face of the complaint alleged a date for accrual of that cause of action that was within the limitations period. We held that the Flanagans were not entitled to equitable tolling of the limitations period from the time they filed their lawsuit in state court because the federal court's retention of jurisdiction to enforce the settlement agreement made it unreasonable for them to sue in state court:
Filing in state court, however, was unreasonable in light of the federal district court's explicit retention of jurisdiction. The Flanagans cannot prevail on the equitable tolling issue because the record exposes their state court filing as patently unreasonable.
We remanded a portion of the breach of contract claim. All that was left of the statute of limitations issue was whether that portion of the claim accrued within the limitations period. The district court issued an order allowing discovery only on that point, and requiring the parties to meet and confer regarding a settlement plan. A trial date was set.
But the Flanagans tried again to slip into state court. They filed a motion to lift the stay in the state superior court. The defendants moved in federal district court for an order enjoining the Flanagans from proceeding in state court. It is at this point that the case at bar starts.
The federal district judge, noting that Mr. Flanagan had "made it very difficult for the court to maintain its control and management of the case," granted a permanent injunction against pursuing the dispute in state court:
All right, now, Mr. Flanagan, you've made it very difficult for the court to maintain its control and management of the case, inasmuch as the court has stated, as clearly as can be, and is in accord with three other courts, that this court has exclusive jurisdiction, and that being the case, I'm going to enter an injunction, and I'm ordering that the Flanagans are permanently enjoined from pursuing or attempting to pursue in any manner their action filed in the Superior Court of the State of California, case number 923988, and that the Flanagans are permanently enjoined from filing any action in the courts of any state which implicitly or explicitly alleges a breach of the settlement agreement in this case, which was approved by this court by a stipulated order, October 20, 1988;
And third, I'm ordering you to withdraw your motion to vacate the stay of proceedings to amend the complaint and specially set a trial setting conference, which was filed in the Superior Court in the 923988 case, which is currently set for hearing August 22nd at 9:30;
And fourth, I order the Flanagans to file in the San Francisco County Superior Court, and serve on all parties, a notice of withdrawal of that motion.
And finally, within ten days of the filing of this order, the Flanagans shall file in this court and serve upon the parties a declaration, executed by the attorneys for the Flanagans, stating they have filed the aforementioned notice of withdrawal of motion in the Superior Court; and I want a copy of the notice bearing the file stamp.
And I'll have no more of this. This is it. The law [argued by Flanagan] is inexcusably wrong. It's almost subject to a question of competence to appear in the United States District Court, and in addition to that, it flies in the face of not only the original order of this court, which has been affirmed by three other courts, but also the order of this court, and I'm not in the habit of having anybody who's under an order in this court disobeying it.
And if I find this order that I've just read to you--and you get an original copy of it, but it's an order in effect right now--if I find that that order is violated in any way, I shall proceed to see that the matter is handled appropriately by you, and you'll be facing a substantial fine and/or spending some time in Pleasanton.
The federal litigation on the statute of limitations was of course not over. It was at the discovery stage, and defendants claimed that the Flanagans were in violation of a meet and confer order. The Flanagans appealed the injunction against proceeding in state court, and that is the appeal now before us. We have jurisdiction...
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...(9th Cir. 2006) ("We may take judicial notice of court filings and other matters of public record.").14 See, e.g. , Flanagan v. Arnaiz , 143 F.3d 540, 544–45 (9th Cir. 1998) (affirming injunction against "filing any action in the courts of any state" related to settlement agreement because ......
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Sandpiper Village v. Louisiana-Pacific., 03-35058.
...the federal court may "interpret and apply its own judgment to the future conduct contemplated by the judgment." Flanagan v. Arnaiz, 143 F.3d 540, 544-45(9th Cir.1998). The requisite independent basis for jurisdiction may be supplied by a provision in the settlement agreement and order that......
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