Jones v. The St. Paul Companies, Inc.

• Decision Date: 06 August 2007
• Docket Number: No. 06-3656.,06-3656.
• Citation: 495 F.3d 888
• Parties: Jarvis C. JONES, Appellee, v. THE ST. PAUL COMPANIES, INC., a Minnesota Corporation; and its wholly owned subsidiary, St. Paul Fire and Marine Insurance Company, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

495 F.3d 888

Jarvis C. JONES, Appellee, v. THE ST. PAUL COMPANIES, INC., a Minnesota Corporation; and its wholly owned subsidiary, St. Paul Fire and Marine Insurance Company, Appellants.

No. 06-3656.

United States Court of Appeals, Eighth Circuit.

Submitted: April 3, 2007.

Filed: August 6, 2007.

Counsel who presented argument on behalf of the appellant was Donald M. Lewis of Minneapolis, MN. Matthew E. Johnson of Minneapolis appeared on the brief.

Counsel who presented argument on behalf of the appellee was Karen Brown Kepler of Minneapolis, MN. Corey L. Gordon and Jerry W. Blackwell of Minneapolis, MN appeared on the brief.

Before BYE, BRIGHT, and RILEY, Circuit Judges.

BYE, Circuit Judge.

The St. Paul Companies, Inc. (St.Paul), successful in defending claims brought against it in federal court by Jarvis Jones, challenges the district court's¹ declination to enjoin a Georgia state court action Jones later filed against five current or former employees of St. Paul alleging tort claims which, although different from the claims brought in federal court, arose out of the same set of facts and circumstances. The district court concluded the relitigation exception to the Anti-Injunction Act, 28 U.S.C. § 2283, did not permit enjoining claims that could have been but were not brought in the federal court action. Jones v. St. Paul Cos., Inc., 450 F.Supp.2d 1003, 1005 (D.Minn.2006). We affirm.

I

After St. Paul terminated Jones from his position as Regional Vice President of the Small Commercial business unit of St. Paul's U.S. Insurance Operations Division, he sued St. Paul in Minnesota federal district court² alleging race discrimination under state and federal law, and defamation. The defamation claim arose from statements his supervisor, Marc E. Schmittlein, made regarding the termination. The federal case went to trial. After hearing from numerous witnesses over nine days, a jury found in favor of St. Paul.

Nine months after the adverse jury verdict, Jones brought an action in Georgia state court³ against Frank Agan, Bruce Berthelsen, Julia Musial, Louis Snage, and Schmittlein (the Georgia defendants). All five were current or former employees of St. Paul who testified in the federal court action. The Georgia state court action alleged claims of tortious interference with contractual relations against each of the five defendants, as well as one count of tortious interference with prospective business relations against Schmittlein. The five contract interference claims arose out of the events leading to Jones's termination. The prospective business interference claim was based on statements Schmittlein made concerning the reasons for the termination, the same statements which formed the basis for the defamation claim in federal court.

The Georgia defendants answered the Georgia state court action asserting, inter alia, the action was barred by the doctrine of res judicata. St. Paul brought a motion in the federal court proceeding also arguing res judicata applied, and seeking to enjoin the state court action under the relitigation exception to the Anti-Injunction Act. The Georgia defendants successfully obtained a stay of the Georgia state court action pending resolution of the issues raised by St. Paul in federal court in the District of Minnesota.

The district court denied St. Paul's motion, concluding the relitigation exception did not encompass the full scope of the doctrine of res judicata, that is, while res judicata bars claims actually litigated as well as claims that could have been litigated, the relitigation exception is limited to claims actually litigated. Jones, 450 F.Supp.2d at 1005 (interpreting Chick Kam Choo v. Exxon Corp., 486 U.S. 140 108 S.Ct. 1684, 100 L.Ed.2d 127 (1988)). Because the tortious interference claims brought in the Georgia state court action were not actually litigated in federal court, the district court declined to issue an injunction determining "the proper forum for defendants' res judicata argument is the state court, which is `presumed competent to resolve' such matters." Id. (quoting Chick Kam Choo, 486 U.S. at 150, 108 S.Ct. 1684).

St. Paul filed a timely appeal. On appeal, St. Paul contends the district court erred in concluding it did not have statutory authority to enjoin the state court action, and assuming it had authority to do so, abused its discretion in declining to issue an injunction. Jones counters that the district court correctly limited the scope of the relitigation exception, and further argues the doctrine of res judicata does not bar the Georgia state court action in any event because the Georgia defendants are not in privity with St. Paul.

II

We review de novo the issue whether the Anti-Injunction Act's relitigation exception applies. Canady v. Allstate Ins. Co., 282 F.3d 1005, 1014 (8th Cir. 2002).

The relitigation exception to the Anti-Injunction Act provides a "court of the United States may not grant an injunction to stay proceedings in a State court except ... to protect or effectuate its judgments." 28 U.S.C. § 2283. Congress added the phrase "to protect or effectuate its judgments" to the statute in 1948 in response to the Supreme Court's decision in Toucey v. New York Life Insurance Co., 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100 (1941). Toucey reversed two decisions of the Eighth Circuit which enjoined parties from using state courts to relitigate issues already adjudicated in federal court, holding it was inappropriate for federal courts to issue injunctions in such circumstances because the Anti-Injunction Act did not contain an express exception granting that power. 314 U.S. at 139-41, 62 S.Ct. 139. In a dissenting opinion, Justice Reed indicated the majority's decision was inconsistent with how courts had been interpreting the Anti-Injunction Act. Justice Reed believed it was appropriate, under the doctrine of res judicata, for a court which had already examined a claim to enjoin a subsequent court from reexamining a settled controversy. Id. at 149, 62 S.Ct. 139 (Reed, J., dissenting).

Prior to Toucey, courts had generally recognized a federal court's power to enjoin a state court action if the doctrine of res judicata would apply, irrespective of whether the claims involved in the state court action were actually litigated or merely could have been litigated in the federal court proceeding. See, e.g., Gunter v. Atl. Coast Line R.R., 200 U.S. 273, 291, 293, 26 S.Ct. 252, 50 L.Ed. 477 (1906) (affirming an injunction preventing the relitigation of a railroad's exemption from property taxes even though the subsequent state action concerned taxes for a different period of time and thus "related to a different cause of action" than the earlier federal court action); Wilson v. Alexander, 276 F. 875, 882 (5th Cir.1921) (reversing the denial of a request for injunction to prevent relitigation of a dispute over ownership of bonds even though a new theory of recovery was asserted for the first time in the state court action). In amending the Anti-Injunction Act to specifically include the words "to protect or effectuate its judgments," Congress indicated its intent was "[to] restore[] the basic law as generally understood and interpreted prior to the Toucy (sic) decision." Amalgamated Clothing Workers of Am. v. Richman Bros., 348 U.S. 511, 515 n. 1, 75 S.Ct. 452, 99 L.Ed. 600 (1955) (quoting H.R.Rep. No. 308 at A181 revisor's notes (1947)).

For forty years after the 1948 amendment, the federal courts were nearly unanimous in interpreting the relitigation exception as encompassing the full scope of res judicata, that is, the exception applied both to claims actually litigated and to claims that could have been litigated. See, e.g., First Ala. Bank, N.A. v. Parsons Steel, Inc., 747 F.2d 1367, 1376 (11th Cir. 1984), rev'd on other grounds, 474 U.S. 518, 106 S.Ct. 768, 88 L.Ed.2d 877 (1986) ("It is now settled that the relitigation exception enables a federal court to enjoin state litigation which is precluded by the doctrine of res judicata."); Harper Plastics, Inc. v. Amoco Chem. Corp., 657 F.2d 939, 947 (7th Cir.1981) ("Harper had a full opportunity to join the contract claim with the claim for relief under the Robinson-Patman Act, and by failing to do so it split its cause of action. While § 2283 may be grounded in principles of comity and federalism ... those principles do not supercede the doctrine of res judicata. The relitigation exception to § 2283 recognizes that much."); CCMS Pub. Co. v. Dooley-Maloof, Inc., 645 F.2d 33, 38 (10th Cir. 1981) ("In the federal case defendants had full opportunity to litigate their claim for earned commissions and they lost. They may not relitigate their claim [in state court] by changing its label to quantum meruit.... A federal court may enjoin state proceedings where necessary to protect or effectuate its judgments. 28 U.S.C. § 2283 ... The injunction was proper.").

The sole exception during this period of time was Delta Air Lines, Inc. v. McCoy Restaurants, Inc., 708 F.2d 582 (11th Cir. 1983). The Eleventh Circuit limited the application of the relitigation exception to those claims actually litigated in federal court and did not apply it to claims that could have been litigated, explaining:

Because of the sensitive nature of federal interference with state court litigation, the exceptions to the rule against injunctions, including the third which applies to relitigation of claims that threatens a federal court's judgment, must be narrowly construed. The injury to a litigant from a denial of an injunction often appears minor where the argument is one of relitigation. If the federal court is too cautious, all is not lost. A state court is as well qualified as a federal court to protect a litigant by the doctrines of res adjudicata and collateral estoppel.... A federal court's judgment is presumably far more threatened if the state proceeding involves the same issues than if it involves...