Martin v. Graybar Electric Company

• Citation: 266 F.2d 202
• Decision Date: 02 April 1959
• Docket Number: No. 12503.,12503.
• Parties: Edward A. MARTIN, Plaintiff-Appellant, v. GRAYBAR ELECTRIC COMPANY, Inc., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

266 F.2d 202 (1959)

Edward A. MARTIN, Plaintiff-Appellant, v. GRAYBAR ELECTRIC COMPANY, Inc., Defendant-Appellee.

No. 12503.

United States Court of Appeals Seventh Circuit.

April 2, 1959.

Harry H. Ruskin, Chicago, Ill., Joseph Rosenbaum, Chicago, Ill., of counsel, for appellant.

James E. S. Baker, Chicago, Ill., Edward J. Ross, Stuart H. Johnson, Jr., New York City, Sidley, Austin, Burgess & Smith, Chicago, Ill., of counsel, for appellee.

Before DUFFY, Chief Judge, and HASTINGS and PARKINSON, Circuit Judges.

PARKINSON, Circuit Judge.

Plaintiff-appellant Edward A. Martin here appeals from an order of the District Court denying his motion to enjoin the defendant-appellee Graybar Electric Company, Inc. from prosecuting its subsequently filed suit in the United States District Court for the Northern District of Iowa, Eastern Division, involving the same parties and issues.

Graybar is a New York Corporation. It was acquired by its employees from Western Electric Company, Inc. in 1928 and has been wholly owned by its active and retired employees and only such can qualify as stockholders. It is licensed to do business in Illinois and Iowa with offices in Chicago and Sioux City, respectively.

Martin was a Graybar employee for many years and acquired stock in Graybar under certain written agreements which are the subject of controversy in the two pending lawsuits. He was working in Graybar's Chicago office in June, 1953, when he left Graybar and returned to Waterloo, Iowa, where he has since resided.

Following Martin's termination of employment with Graybar, he retained his Graybar stock. Graybar, contending Martin had violated his agreement to resell, has proceeded on the basis that Martin is no longer a Graybar stockholder and has deposited the option price of Martin's stock in a Waterloo, Iowa bank as a continuing tender to Martin.

On August 5, 1958 Martin filed this action against Graybar in the United States District Court for the Northern District of Illinois, Eastern Division.

On August 11, 1958, six days after Martin had filed this action and four days after Graybar had been served with process in Chicago, Graybar filed a declaratory judgment action against Martin in the United States District Court for the Northern District of Iowa, Eastern Division.

Thus two facts were self-evident and undisputed when Martin filed his motion for injunction: a) there were two actions between the same parties involving identical issues pending at the same time in two United States District Courts, and b) this action was filed first and was pending when Graybar filed its suit in Iowa.

The core question here is whether the issuance or denial of an injunction in a case such as this is mandatory or within the discretion of the District Court and, if the latter, was there an abuse of that discretion?

The Supreme Court when speaking to the problem created by the Federal Declaratory Judgments Act, 28 U.S.C.A. §§ 2201, 2202, and the initiation of litigation in coordinate courts by different parties has said: "Wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation, does not counsel rigid mechanical solution of such problems." Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 1952, 342 U.S. 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200.

We believe that this statement is applicable to and dispositive of the first portion of the question before us. To hold otherwise, laying down a judicial fiat that the prosecution of the subsequent suit must or must not be enjoined as a matter of law, would solve few problems while at the same time creating many. We can not, nor do we attempt to, foresee the multitude of factors that would dictate the decision of the District Court in any given case.

However, it is obvious that if the decision is to be left to the discretion of the District Court rather than be the result of an unyielding rule of law, that discretion must be utilized in a wise and consistent manner. To abuse that discretion would be just as obnoxious to the most advantageous functioning of our district courts as if it had never been allowed. An abandonment of discretion is, of course, tantamount to an abuse of discretion. Both are error. Charles v. United States, 9 Cir., 1954, 215 F.2d 825, 828.

The District Court when denying the application for an injunction said:

"What I am asked here to do is to restrain the operation of the Court out in Iowa insofar as this litigation is concerned. Of course, under our rules insofar as interfering with an action in the state courts is concerned we are absolutely prohibited from issuing an injunction in those matters. There can be only one recovery here, of course, and there can only be one final judgment, and whether that is going to be entered in this case or the case out in Iowa, the future alone will have to disclose that. But your application for an injunction to restrain the proceedings out in Iowa will be denied." (Our italics.)

Thus we are forced to the inescapable conclusion that the Court below, reasoning from a false premise, abused its discretion.

Here the District Court expressed the belief that it would interfere with the legitimate operation of a court of concurrent jurisdiction were it to grant this injunction. Unwilling to do so it did not make a decision based upon the facts of this particular case but rather left the ultimate answer to the "future alone."

We could perhaps agree with the District Court's reluctance to encroach upon the functions of the District Court in Iowa. However such is not the case here. As Justice Cardozo, speaking for the Supreme Court in Steelman v. All Continent Corp., 1937, 301 U.S. 278, at page 291, 57 S.Ct. 705, at page 710, 81 L.Ed. 1085, said:

"What he seeks is an injunction directed to a suitor, and not to any court, upon the ground that the suitor is misusing a jurisdiction which by hypothesis exists, and converting it by such misuse into an instrument of wrong. * * * We are unable to yield assent to the statement of the court below that `the restraint of a proper party is legally tantamount to the restraint of the court itself.\' The reality of the distinction has illustration in a host of cases."

Thus where the District Court denies a motion to enjoin, and such denial is motivated by an erroneous belief, there is then an abuse of discretion and the order must be vacated. See Chicago, R. I. & P. R. Co. v. Igoe, 7 Cir., 1954, 212 F.2d 378, 382; 7 Cir., 220 F.2d 299.

Two simultaneously pending lawsuits involving identical issues and between the same parties, the parties being transposed and each prosecuting the other independently, is...