Pennzoil Company v. Texaco, Inc, 85-1798

• Decision Date: 06 April 1987
• Docket Number: No. 85-1798,85-1798
• Citation: 95 L.Ed.2d 1,107 S.Ct. 1519,481 U.S. 1
• Parties: PENNZOIL COMPANY, Appellant v. TEXACO, INC
• Court: U.S. Supreme Court

481 U.S. 1

107 S.Ct. 1519

95 L.Ed.2d 1

PENNZOIL COMPANY, Appellant

v TEXACO, INC.

No. 85-1798.

Argued Jan. 12, 1987.

Decided April 6, 1987.

Syllabus

Under Texas law, a judgment creditor can secure and execute a lien on a judgment debtor's property unless the debtor files a supersedeas bond in at least the amount of the judgment, interest, and costs. Appellant obtained a jury verdict of $10.53 billion in its Texas state-court suit alleging that appellee tortiously had induced a third oil company to breach a contract to sell its shares to appellant. Because it was clear that appellee would not be able to post a bond in the necessary amount, the verdict had substantial adverse effects on appellee's business and financial situation. Accordingly, even before the trial court entered judgment on the verdict, appellee filed suit in Federal District Court alleging that the Texas proceedings violated its rights under the Federal Constitution and various federal statutes. Appellee did not present these claims to the state court. Appellant argued, inter alia, that the Federal District Court should abstain from hearing the case under the doctrine of Younger v. Harris, 401 U.S. 37, 91 S.Ct. 760, 27 L.Ed.2d 669. The District Court rejected this contention, and, concluding that appellee's constitutional claims had "a very clear probability of success," issued a preliminary injunction barring any action to enforce the state court's judgment, which had now been entered. The Court of Appeals affirmed, holding, inter alia, that Younger abstention was unnecessary because the state interests at stake differed in both kind and degree from those present in the cases in which this Court has held that Younger applied, and because Texas had failed to provide adequate procedures for adjudication of appellee's federal claims.

Held: The lower federal courts should have abstained under the principles of federalism enunciated in Younger. Pp. 10-18.

(a) Younger abstention helps to avoid unwarranted determination of federal constitutional questions. Here, because appellee chose not to present its constitutional claims to the Texas courts, it is impossible to determine whether the governing Texas statutes and procedural rules actually involved those claims. Moreover, the Texas Constitution contains an "open courts" provision that appears to address appellee's claims more specifically than does the Federal Constitution. Thus, it is entirely possible that the Texas courts would have resolved this case on state statutory or constitutional grounds, without reaching appellee's federal constitutional questions. Pp. 10-12.

(b) Younger abstention is mandated if the State's interests in the proceedings are so important that exercise of the federal judicial power would disregard the comity extended between the States and the National Government. Here, the argument that the exercise of the District Court's power did not implicate a "vital" or "important" state interest misreads this Court's precedents, which repeatedly have recognized that the States have important interests in administering certain aspects of their judicial systems. These include enforcing the orders and judgments of the States' courts. Federal injunctions in such cases would interfere with the execution of state judgments on grounds that challenge the very process by which those judgments were obtained. So long as such challenges relate to pending state proceedings, proper respect for the ability of state courts to resolve federal questions presented in state court litigation mandates that the federal court stay its hand. Pp. 12-14.

(c) The argument that Younger abstention was inappropriate because no Texas court could have heard appellee's constitutional claims within the limited time available fails because appellee has not satisfied its burden of showing that state procedural law barred presentation of its claims. When, as here, a litigant has made no effort in state court to present his claims, a federal court should assume that state procedures will afford an adequate remedy, in the absence of unambiguous authority to the contrary. Pp. 14-18.

784 F.2d 1133 (CA2 1986), reversed and remanded.

POWELL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, O'CONNOR, and SCALIA, JJ., joined. SCALIA, J., filed a concurring opinion, in which O'CONNOR, J., joined, post, p. ----. BRENNAN, J., filed an opinion concurring in the judgment, in which MARSHALL, J. joined, post, p. ----. MARSHALL, J., filed an opinion concurring in the judgment, post, p. ----. BLACKMUN,J., filed an opinion concurring in the judgment, post, p. ----. STEVENS, J., filed an opinion concurring in the judgment, in which MARSHALL, J., joined, post, p. ----.

Laurence H. Tribe, Cambridge, Mass., for appellant.

David Boies, New York City, for appellee.

Justice POWELL delivered the opinion of the Court.

The principal issue in this case is whether a federal district court lawfully may enjoin a plaintiff who has prevailed in a trial in state court from executing the judgment in its favor pending appeal of that judgment to a state appellate court.

I

Getty Oil Co. and appellant Pennzoil Co. negotiated an agreement under which Pennzoil was to purchase about three-sevenths of Getty's outstanding shares for $110 a share. Appellee Texaco Inc. eventually purchased the shares for $128 a share. On February 8, 1984, Pennzoil filed a complaint against Texaco in the Harris County District Court, a state court located in Houston, Texas, the site of Pennzoil's corporate headquarters. The complaint alleged that Texaco tortiously had induced Getty to breach a contract to sell its shares to Pennzoil; Pennzoil sought actual damages of $7.53 billion and punitive damages in the same amount. On November 19, 1985, a jury returned a verdict in favor of Pennzoil, finding actual damages of $7.53 billion and punitive damages of $3 billion. The parties anticipated that the judgment, including prejudgment interest, would exceed $11 billion.

Although the parties disagree about the details, it was clear that the expected judgment would give Pennzoil significant rights under Texas law. By recording an abstract of a judgment in the real property records of any of the 254 counties in Texas, a judgment creditor can secure a lien on all of a judgment debtor's real property located in that county. See Tex.Prop.Code Ann. §§ 52.001-52.006 (1984). If a judgment creditor wishes to have the judgment enforced by state officials so that it can take possession of any of the debtor's assets, it may secure a writ of execution from the clerk of the court that issued the judgment. See Tex.Rule Civ.Proc. 627.¹ Rule 627 provides that such a writ usually can be obtained "after the expiration of thirty days from the time a final judgment is signed." ² But the judgment debtor "may suspend the execution of the judgment by filing a good and sufficient bond to be approved by the clerk." Rule 364(a). See Rule 368.³ For a money judgment, "the amount of the bond . . . shall be at least the amount of the judgment, interest, and costs." Rule 364(b).⁴

Even before the trial court entered judgment, the jury's verdict cast a serious cloud on Texaco's financial situation. The amount of the bond required by Rule 364(b) would have been more than $13 billion. It is clear that Texaco would not have been able to post such a bond. Accordingly, "the business and financial community concluded that Pennzoil would be able, under the lien and bond provisions of Texas law, to commence enforcement of any judgment entered on the verdict before Texaco's appeals had been resolved." App. to Juris. Statement A87 (District Court's Supplemental Finding of Fact 40, Jan. 10, 1986). The effects on Texaco were substantial: the price of its stock dropped markedly; it had difficulty obtaining credit; the rating of its bonds was lowered; and its trade creditors refused to sell it crude oil on customary terms. Id., at A90-A98 (District Court's Supplemental Findings of Fact 49-70).

Texaco did not argue to the trial court that the judgment, or execution of the judgment, conflicted with federal law. Rather, on December 10, 1985—before the Texas court entered judgment ⁵ Texaco filed this action in the United States District Court for the Southern District of New York in White Plains, New York, the site of Texaco's corporate headquarters. Texaco alleged that the Texas proceedings violated rights secured to Texaco by the Constitution and various federal statutes.⁶ It asked the District Court to enjoin Pennzoil from taking any action to enforce the judgment. Pennzoil's response, and basic position, was that the District Court could not hear the case. First, it argued that the Anti-Injunction Act, 28 U.S.C. § 2283, barred issuance of an injunction. It further contended that the court should ab- stain under the doctrine of Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). Third, it argued that the suit was in effect an appeal from the Texas trial court and that the District Court had no jurisdiction under the principles of Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983).

The District Court rejected all of these arguments. 626 F.Supp. 250 (1986). It found the Anti-Injunction Act inapplicable because Texaco's complaint rested on 42 U.S.C. § 1983. See Mitchum v. Foster, 407 U.S. 225, 92 S.Ct. 2151, 32 L.Ed.2d 705 (1972) (holding that § 1983 falls within the exceptions to the Anti-Injunction Act). It found Younger abstention unwarranted because it did not believe issuance of an injunction would "interfere with a state official's pursuit of a fundamental state interest." 626 F.Supp., at 260. As to the Rooker-Feldman doctrine, the court noted only that it was not "attempting to sit as a final or intermediate appellate state court as...