Harris County, Tex. v. CarMax Auto Superstores Inc.

• Decision Date: 26 May 1999
• Docket Number: No. 98-20709,98-20709
• Citation: 177 F.3d 306
• Parties: HARRIS COUNTY, TEXAS, Plaintiff-Appellee, v. CARMAX AUTO SUPERSTORES INC, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 306

177 F.3d 306

HARRIS COUNTY, TEXAS, Plaintiff-Appellee, v. CARMAX AUTO SUPERSTORES INC, Defendant-Appellant.

No. 98-20709.

United States Court of Appeals Fifth Circuit.

May 26, 1999.

Frank Edward Sanders, Houston, TX, for Plaintiff-Appellee.

Richard M. Knoth, Jayne L. Jakubaitis, Arter & Hadden, Cleveland, OH, for Defendant-Appellant.

Linda B. Secord, Attorney General of Texas, Douglas Burt Fraser, Austin, TX, for Texas Motor Vehicle Board, Amicus Curiae.

Appeal from the United States District Court for the Southern District of Texas.

Before KING, Chief Judge, and JOLLY and JONES, Circuit Judges.

KING, Chief Judge:

Defendant-appellant CarMax Auto Superstores, Inc. appeals the district court's grant of a preliminary injunction prohibiting it from selling or offering for sale motor vehicles on consecutive days of Saturday and Sunday on the premises of its stores in plaintiff-appellee Harris County, Texas in violation of Texas Transportation Code § 728.002. We find that Harris County is not bound by a prior state court injunction purporting to enjoin all enforcement of the statute and that, therefore, the district court's injunction does not implicate the Anti-Injunction Act, 28 U.S.C. § 2283. In addition, we conclude that the district court properly exercised jurisdiction over this action, that Harris County demonstrated a substantial likelihood of success on the merits, and that the issuance of the injunction did not violate Federal Rule of Civil Procedure 65(a)(1). Accordingly, we affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

This procedurally tangled case concerns Chapter 728 of the Texas Transportation Code (the Blue Law) and the voluminous state and federal litigation brought both to enforce and challenge it. Section 728.002(a) provides: "A person may not, on consecutive days of Saturday and Sunday: (1) sell or offer for sale a motor vehicle; or (2) compel an employee to sell or offer for sale a motor vehicle." TEX. TRANSP. CODE ANN. § 728.002(a). Section 728.004 provides that the operation of a business in a manner contrary to this statute is a public nuisance and that the attorney general or a district, county, or municipal attorney may obtain an injunction restraining such a violation. See id. § 728.004(a)-(b).

In 1997, the El Paso Independent Automobile Dealers Association, Inc. (EPIADA), an organization of small car dealers, brought an action in state district court in El Paso, Texas to challenge the constitutionality of the Blue Law, naming the district and county attorneys of El Paso County and the city attorney of El Paso as defendants. In accordance with state law, a copy of EPIADA's petition was also served upon the attorney general of Texas, see TEX. CIV. PRAC. & REM.CODE ANN. § 37.006(b), ¹ who expressly declined to participate in the suit.

After an evidentiary hearing, the El Paso district court determined that the classifications drawn in the Blue Law were not rationally related to the state legislature's stated purpose and operated in an arbitrary and unjust manner by regulating only weekend sales of motor vehicles without any restrictions whatsoever on sales of such items as liquor, cigarettes, table dances, and lottery tickets. See El Paso Indep. Auto. Dealers Ass'n, Inc. v. Esparza, No. 97-3425, slip op. at 6 (383rd Dist. Ct., El Paso County, Tex. Dec. 23, 1997) (findings of fact and conclusions of law). Specifically, the court held:

1. TEX. TRANS. CODE §§ 728.001 through 728.004 are hereby declared unconstitutional;

2. All officials authorized by TEX. TRANS. CODE § 728.004 to enforce TEX. TRANS. CODE §§ 728.001 through 728.004 are hereby permanently enjoined from enforcing the provisions of TEX. TRANS. CODE §§ 728.001 through 728.004 unless the Texas Supreme Court shall subsequently rule that the statutes are constitutional.

El Paso Indep. Auto. Dealers Ass'n, Inc. v. Esparza, No. 97-3425, slip op. at 1-2 (383rd Dist. Ct., El Paso County, Tex. Dec. 23, 1997) (judgment). In response, the attorney general and the Motor Vehicle Division of the Texas Department of Transportation filed a petition for a writ of mandamus with the state court of appeals in El Paso to set aside the district court's order; the court denied the petition. See In re Attorney Gen., No. 08-98-00021-CV (Tex.App.--El Paso Jan. 28, 1998, orig. proceeding). The attorney general and the Motor Vehicle Division then sought to appeal the district court decision. EPIADA filed a motion to dismiss, alleging that since they were not parties of record in the underlying lawsuit, they had no right of appeal. The state court of appeals held that while the attorney general and the Motor Vehicle Division were entitled to appeal because they were virtually represented by the El Paso officials, they had waived that right by specifically declining to participate in the case. See Attorney Gen. v. El Paso Indep. Auto. Dealers Ass'n, Inc., 966 S.W.2d 783, 785-86 (Tex.App.--El Paso 1998, no writ). All appeals from the El Paso district court judgment and injunction have since been dismissed.

In May 1998, after the El Paso court of appeals decision stating that the attorney general had waived his right to appeal, defendant-appellant CarMax Auto Superstores, Inc. (CarMax) informed plaintiff-appellee Harris County, Texas (Harris County or the County) that it intended to keep its three Houston-area locations open on both weekend days. On July 1, 1998, Harris County filed a state court application for a temporary restraining order, temporary injunction, and permanent injunction barring CarMax from violating the Blue Law. ² In its answer, CarMax conceded that during two weekends in June 1998, one of its Harris County stores sold or offered for sale motor vehicles on consecutive days of Saturday and Sunday and indicated that it intended to continue doing so. Before the court could rule, however, CarMax removed the case to the United States District Court for the Southern District of Texas on the basis of diversity of citizenship. On July 22, 1998, Harris County filed a first amended complaint and application for temporary restraining order and injunctive relief in federal court. The district court held a two-hour hearing on July 27, 1998 and on July 31, 1998 granted an injunction ordering CarMax to "cease and desist from selling and offering for sale motor vehicles on consecutive days of Saturday and Sunday on the premises of its three automobile dealership outlets located ... in Harris County" from the date of the order until final judgment on the merits. CarMax appealed. ³

II. STANDARD OF REVIEW

Any injunctive relief is considered "an extraordinary and drastic remedy, not to be granted routinely, but only when the movant, by a clear showing, carries the burden of persuasion." White v. Carlucci, 862 F.2d 1209, 1211 (5th Cir.1989) (quoting Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 997 (5th Cir.1985)). A district court may grant a preliminary injunction only if the movant establishes four requirements:

First, the movant must establish a substantial likelihood of success on the merits. Second, there must be a substantial threat of irreparable injury if the injunction is not granted. Third, the threatened injury to the plaintiff must outweigh the threatened injury to the defendant. Fourth, the granting of the preliminary injunction must not disserve the public interest.

Cherokee Pump & Equip., Inc. v. Aurora Pump, 38 F.3d 246, 249 (5th Cir.1994) (citations omitted). Each of these elements is a mixed question of fact and law; we review a district court's findings of fact under a clearly erroneous standard and its conclusions of law de novo. See Hoover v. Morales, 164 F.3d 221, 224 (5th Cir.1998) (quoting Sunbeam Prods., Inc. v. West Bend Co., 123 F.3d 246, 250 (5th Cir.1997), cert. denied, --- U.S. ----, 118 S.Ct. 1795, 140 L.Ed.2d 936 (1998)). The ultimate issue, however, is whether the district court abused its discretion in granting the preliminary injunction. See House the Homeless, Inc. v. Widnall, 94 F.3d 176, 180 (5th Cir.1996).

III. DISCUSSION

On appeal, CarMax contends that the district court's preliminary injunction was an abuse of discretion for four reasons: (1) The El Paso injunction binds not only the named defendants, but all officials authorized to enforce the Blue Law, including the Harris County Attorney, and the federal injunction therefore interferes with the effect of a state court injunction in violation of the Anti-Injunction Act, 28 U.S.C. § 2283; ⁴ (2) the district court erred in exercising jurisdiction over the action because prior, duplicative litigation was pending in the Northern District of Texas; (3) Harris County failed to establish a substantial likelihood of success on the merits; and (4) the district court issued the preliminary injunction in violation of Federal Rule of Civil Procedure 65(a)(1). We address each of these arguments in turn.

A. Does the federal preliminary injunction violate the Anti-Injunction Act?

Our first task is to determine whether the district court's preliminary injunction violates the Anti-Injunction Act, which prohibits federal courts from granting injunctions "to stay proceedings in a State court." 28 U.S.C. § 2283. The Supreme Court has interpreted the Act to forbid federal injunctions "prohibiting utilization of the results of a completed state proceeding." Atlantic Coast Line R.R. Co. v. Brotherhood of Locomotive Eng'rs, 398 U.S. 281, 287, 90 S.Ct. 1739, 26 L.Ed.2d 234 (1970). That is, a federal court may not issue an injunction countermanding a state court injunction. See id. at 283-85, 90 S.Ct. 1739 (vacating a federal injunction that enjoined a railroad from invoking a state court injunction banning union picketing of a switching yard). Thus, in this case, if the El Paso injunction binds Harris County, restraining it from enforcing the Blue Law, then the federal injunction arguably prevents the use of a state court injunction and violates...