Hospah Coal Co. v. Chaco Energy Co.

Citation673 F.2d 1161
Decision Date29 March 1982
Docket NumberNo. 82-1149,82-1149
Parties1982-1 Trade Cases 64,635 HOSPAH COAL COMPANY, a Delaware corporation, Santa Fe Industries, Inc., a Delaware corporation, The Atchison, Topeka & Santa Fe Railway Company, a Delaware corporation, and Santa Fe Mining, Inc., a Kansas corporation, Plaintiffs-Appellees, v. CHACO ENERGY COMPANY, a New Mexico corporation, and Texas Utilities Company, a Texas corporation, Defendants-Appellants.
CourtU.S. Court of Appeals — Tenth Circuit

John R. Cooney of Modrall Sperling Roehl Harris & Sisk, Albuquerque, N. M. (Gus Svolos, Chicago, Ill., and Allen C. Dewey, Peter J. Adang, and John S. Thal of Modrall Sperling Roehl Harris & Sisk, Albuquerque, N. M., with him on the brief), for plaintiffs-appellees.

Gordon B. Spivack of Lord, Day & Lord, New York City (M. D. Sampels, Richard L. Adams, and Max E. Freeman II of Worsham, Forsythe & Sampels, Dallas, Tex., John N. McBaine, Jonathan M. Jacobson, Jonathan E. Clune, and Elinor R. Hoffmann of Lord, Day & Lord, New York City, James C. Ritchie and Rex Throckmorton of Rodey, Dickason, Sloan, Akin & Robb, P. A., Albuquerque, N. M., and Walter A. Steele of White & Steele, P. C., Denver, Colo., with him on the briefs), for defendants-appellants.

Before BARRETT, DOYLE and McKAY, Circuit Judges.

BARRETT, Circuit Judge.

This is an appeal from a grant of a preliminary injunction by the United States District Court for the District of New Mexico. The pertinent facts follow:

On December 18, 1981 Chaco Energy Company (Chaco) and Texas Utilities Company (TUC), defendants-appellants herein, filed suit in the United States District Court for the Northern District of Texas naming as defendants, among others with whom we are not now concerned, Santa Fe Industries, Inc. (SFI), the Atchison, Topeka and Santa Fe Railway Co. (SFR) and Santa Fe Mining, Inc. (SFM). The complaint in the Texas action alleged a conspiracy on the part of SFI, SFR, SFM and others amounting to a violation of the federal and New Mexico antitrust laws. The complaint further alleged common law fraud in the inducement and sought declaratory judgment, rescission of contracts, treble damages and injunctive relief.

Three days later, on December 21, 1981, SFI, SFR, SFM and Hospah Coal Company, a non-party defendant, co-conspirator in the Texas action, filed a declaratory judgment action in the United States District Court for the District of New Mexico, naming TUC and Chaco as defendants. The complaint in the New Mexico action requested a declaration that the plaintiffs had not violated the antitrust laws and it sought an injunction against TUC and Chaco to prohibit them from proceeding with the Texas action. The basis for the requested preliminary injunction was a venue selection clause in a certain coal lease placing venue in New Mexico for all suits "arising out of or relating to" the coal lease. 1 The coal lease was signed by Hospah Coal Company and Chaco. A surety agreement between TUC and Hospah purportedly adopted the venue selection clause of the coal lease. It should be noted that Hospah Coal Company, SFM and SFR are all subsidiaries of SFI. Chaco is a subsidiary of TUC.

Service of process was accomplished in the New Mexico action prior to service in the Texas action. In response to the filing of the New Mexico action, TUC and Chaco sought a temporary restraining order against SFM, SFR, SFI and Hospah in the Texas district court. The Texas court declined to issue the TRO.

Thereafter, on January 11, 1982, the New Mexico district court issued a preliminary injunction enjoining TUC and Chaco from proceeding further in the Texas action. On January 14, 1982, Hospah, SFI, SFM and SFR filed a motion to stay or in the alternative to dismiss the Texas action in the Texas court. They did so in light of the New Mexico injunction. The Texas court issued an order requiring TUC and Chaco to respond to the motion to stay. TUC and Chaco then filed in the New Mexico court a motion to suspend the preliminary injunction in order to allow them an opportunity to respond to the stay motion in the Texas action. The New Mexico court denied the motion to suspend the injunction. Thereupon, TUC and Chaco filed this appeal, together with a motion to stay the New Mexico injunction pending appeal and a motion to expedite hearing of the appeal. We granted the motion to stay the injunction pending appeal and we expedited the hearing.

Prior to the denial of the motion to suspend the injunction in the New Mexico court, TUC and Chaco filed another suit in the same New Mexico court raising the same allegations as those in the Texas action. TUC and Chaco also filed an answer and a counterclaim in the original New Mexico action. In all of their New Mexico filings, TUC and Chaco reserved their rights to object to venue.

The ultimate issue to be resolved is which court should exercise venue and hear the case. Thus, the issue before us is which court should make the determination on the ultimate issue of venue.

Both parties recognize the general rule that when two courts have concurrent jurisdiction, the first court in which jurisdiction attaches has priority to consider the case. O'Hare International Bank v. Lambert, 459 F.2d 328 (10th Cir. 1972), and cases cited therein. The parties disagree, however, as to where jurisdiction first attached. TUC and Chaco contend that the Texas court obtained jurisdiction first because the complaint was filed in that court prior to the filing of the complaint in the New Mexico court. Hospah, SFI, SFR and SFM contend that because service of process was accomplished first in the New Mexico action, jurisdiction attached first in the New Mexico court.

This circuit has adopted the rule announced in Barber Greene Company v. Blaw-Knox Company, 239 F.2d 774, 778 (6th Cir. 1957) that, "in both in rem and in personam actions, jurisdiction relates back to the filing of the complaint." Accord, Product Engineering and Manufacturing, Inc. v. Barnes, 424 F.2d 42 (10th Cir. 1970). The rule that jurisdiction relates back to the filing of the complaint gives effect to Fed.Rules Civ.Proc. rule 3, 28 U.S.C.A., which provides that, "(a) civil action is commenced by filing a complaint with the court." Accordingly we must hold that jurisdiction over the parties and issues herein attached first in the Texas district court.

In O'Hare International Bank v. Lambert, supra at 331, we recognized this exception to the first-to-file rule: "(t)he only justification for employment of injunctive power by a court in a case such as this is to prevent a misuse of litigation in the nature of vexatious and oppressive foreign suits." The New Mexico district court ruled that the Texas action was vexatious, and the injunction was issued on that basis. Apparently, the New Mexico court perceived the Texas action as an attempt by TUC and Chaco to circumvent the venue selection clause in the coal lease.

The existence of a venue selection clause does not impose an absolute duty nor does it endow a party with an absolute right to have every dispute between the parties litigated in the named forum. The applicability of the venue selection clause is an issue of fact in and of itself. We do not consider it vexatious for a party to raise this issue in a forum other than the one designated in the venue selection clause. 2

Fed.Rules Civ.Proc. rule 12(b), 28 U.S.C.A., requires a party to assert a defense of improper venue by way of motion or responsive pleading. If we were to permit a party to object to venue by filing suit for injunctive relief in a separate forum, we would, in essence, be rendering rule 12(b) a nullity. The fact that a venue selection clause is involved does not negate the requirements of rule 12(b). Were it otherwise, a party to such a contract would be invading the province of the courts to decide issues of venue. Such an interpretation of the effect of a venue selection clause generated the initial dislike of the courts for such clauses. See The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).

In a similar vein, § 1404(a), 28 U.S.C.A. establishes a procedure whereby a party may request...

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