Pacific Indemnity Co. v. Acel Delivery Service, Inc., 28323.

• Decision Date: 18 September 1970
• Docket Number: No. 28323.,28323.
• Parties: PACIFIC INDEMNITY COMPANY, Plaintiff-Appellee, v. ACEL DELIVERY SERVICE, INC., et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

432 F.2d 952 (1970)

PACIFIC INDEMNITY COMPANY, Plaintiff-Appellee, v. ACEL DELIVERY SERVICE, INC., et al., Defendants-Appellants.

No. 28323.

United States Court of Appeals, Fifth Circuit.

August 6, 1970.

Rehearing Denied September 18, 1970.

Tom H. Davis, Austin, Tex., for defendants-appellants.

Logan Ford, Spencer C. Relyea, III, Dallas, Tex., for plaintiff-appellee.

William C. Manning, Irving, Tex., Henry W. Simon, Jr., Norman W. Darwin, Fort Worth, Tex., for other interested parties.

Before RIVES, GEWIN and INGRAHAM, Circuit Judges.

INGRAHAM, Circuit Judge:

On May 27, 1967, a Piper Comanche aircraft crashed at Raton, New Mexico, killing the pilot, Wendell Williams, and a passenger, Joe Mack Talley. Another passenger, Walter C. Talley, was seriously injured. The aircraft was owned by the Acel Delivery Service, Inc. and was insured by the Pacific Indemnity Company.

On May 13, 1968, suit was filed by George and Josephine Edmondson against Acel Delivery Service, Inc., and the Estate of Joe Mack Talley, in Cause No. A33,991, in the District Court of Bernalillo County, New Mexico. These plaintiffs were damaged when the aircraft crashed into a barn they were occupying. Pacific took over the defense of Acel after obtaining a nonwaiver agreement reserving its rights to later deny coverage. However, it refused to defend the Talley Estate.

On November 22, 1968, the estate of Joe Mack Talley and Walter C. Talley filed suit against the estate of the pilot, Wendell Williams, in Cause No. 54709-C in the 96th District Court of Tarrant County, Texas. Pacific filed an answer on behalf of the pilot's estate and has taken over the defense without obtaining a nonwaiver agreement.

On March 26, 1969, Pacific filed suit against Acel, the Talleys and others, in the court below seeking a declaratory judgment and an injunction enjoining the further prosecution of all state court suits growing out of the above crash except the suit pending in the New Mexico court.

On July 18, 1969, the court below granted an interlocutory injunction in accordance with Pacific's request. The Talleys have appealed from this injunction restraining them from prosecuting their state court suit against the pilot's estate.

The sole issue presented on appeal is whether a federal court, in a suit for declaratory judgment to determine whether coverage existed under a policy of aviation insurance, was precluded by 28 U.S.C. § 2283 from enjoining state court actions against the purported assureds "in aid of its jurisdiction", when such persons have refused to permit the insurer to defend them under a reservation of rights or nonwaiver agreement.

The federal Anti-Injunction Statute, 28 U.S.C. § 2283, provides:

A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.

At the outset, we note, as this court did in Tampa Phosphate R. R. v. Seaboard Coast Line R. R., 418 F.2d 387, 392 (5th Cir. 1969), cert. denied, 397 U.S. 910, 90 S.Ct. 907, 25 L.Ed.2d 90 (1970), "That § 2283 applies irrespective of whether the federal injunction is directed to the parties as here or to the state courts."

Pacific Indemnity does not argue that there is express congressional authorization for an injunction in this type of action and we are in accord with that conclusion. Neither is it urged that the injunction was required to "protect or effectuate" a judgment of the district court. Rather, Pacific maintains that the injunction entered by the court below was "necessary in aid of its the court's jurisdiction." 28 U.S.C. § 2283.

While the purpose and function of § 2283 has been drawn in question, we do not feel disposed, on the facts of this case, to explicate the history and background of a section which is already the subject matter of a plethora of decisional law in this and other circuits as well as in the Supreme Court.

The language of § 2283 is explicit in defining the circumstances in which a federal court may stay proceedings in a state court; however, certain timeworn judicially declared exceptions do exist. Thus, it is said that where the jurisdiction over the proceedings is in rem or quasi in rem, "The state or federal court having custody of such property has exclusive jurisdiction to proceed." Donovan v. City of Dallas, 377 U.S. 408, 412, 84 S.Ct. 1579, 1582, 12 L.Ed.2d 409 (1964). And more recently, in personam proceedings (criminal), instituted in state tribunals, have been stayed by federal courts — the equitable restraints being predicated on the constitutional imperative of freedom of speech. See, e. g., Sheridan v. Garrison, 415 F.2d 699 (5th Cir. 1969), cert. denied, 396 U.S. 1040, 90 S.Ct. 685, 24 L.Ed.2d 685 (1970). Absent a res to be preserved and protected or the need for immediate vindication of first amendment rights, the federal courts have been hesitant to expand, by judicial improvisation, the exceptions Congress has created to the general prohibition of § 2283.

In the instant case, Pacific has denied coverage under the policy on several grounds, one of which being that the pilot of the aircraft was not properly qualified as required by the policy provisions. Pacific argues that in the absence of a stay of the proceedings now pending in state court, it must either waive its policy defenses or deny coverage and lose control of the litigation. This for the reason that in Texas, as in many other states, an insurance company by assuming and conducting the defense of a claim or action brought against its insured, with knowledge of facts which forfeit the coverage of the policy and without first effectively disclaiming liability, is thereafter precluded from defending an action on the policy and asserting no coverage on the basis of such facts.

In order to avoid this admittedly difficult choice of which course of action to pursue in the state court actions against its insured, Pacific contends that the injunction entered by the district court was "necessary in aid of its jurisdiction" to determine the question of policy coverage. Pacific further asserts that none of the decisions interpreting 28 U. S.C. § 2283 or any of its statutory predecessors have ousted the equitable jurisdiction of a federal court to issue injunctions, including stays of state court proceedings, where necessary to afford a litigant before it complete relief and to prevent irreparable injury to the party seeking a temporary injunction.

We are constrained to reject Pacific's arguments and its interpretation of § 2283. The Supreme Court, in the recent case of Atlantic Coast Line R. R. v. Brotherhood of Locomotive Engineers, 398 U.S. 281, 90 S.Ct. 1739, 26 L.Ed.2d 234 (1970), again had occasion to construe the meaning of § 2283. While the case involved a federal court injunction...