In Re: Lease Oil Ant

• Court: Court of Appeals for the Fifth Circuit
• Decided: January 11, 2000
• Docket: 98-40840
• Status: Published

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 98-40840

In re: LEASE OIL LITIGATION (NO. II)

“ALL PLAINTIFFS” Plaintiff-Appellee,

versus

“ALL DEFENDANTS” Defendant-Appellant.

Appeal from the United States District Court For the Southern District of Texas

January 11, 2000

Before HIGGINBOTHAM, BENAVIDES, and STEWART, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

In this interlocutory appeal, we consider the preclusive

effect of an Alabama state court judgment approving a settlement of

a nationwide class action on a federal class action pending in a

federal district court in Texas. Defendant Mobil Oil Corporation

filed a motion to dismiss, claiming an Alabama state court

settlement bars the federal suit against it. We affirm the

district court’s denial of Mobil’s motion to dismiss. We also

conclude that the district court did not violate Fed. R. Civ. P. 65

in issuing an injunction against Mobil. I

This federal class action asserts claims against various crude

oil purchasers under § 1 of the Sherman Act for underpayments on

oil production leases. After this suit was filed, other plaintiffs

filed a separate suit on behalf of a national class in a circuit

court of Alabama entitled Lovelace v. Amerada Hess Corporation.

The factual allegations in Lovelace and the federal suit were

identical, but Lovelace asserted only state law claims. The

Lovelace defendants removed the case to federal court, but the

federal district court in Alabama granted the Lovelace plaintiffs’

motion to remand to state court based on their representation that

the case involved only state law claims. Mobil then settled the

Lovelace claims for $15 million and prospective relief, and an

Alabama trial court affirmed the settlement. Part of that

settlement released Mobil from all existing federal claims of the

nationwide class.

After settling the state suit in Alabama, Mobil moved to

dismiss the federal case, now consolidated with five other federal

class actions and retitled. Mobil argued that the Alabama

settlement precluded the federal claims. While Mobil’s motion to

dismiss was pending, the Texas federal district court preliminarily

enjoined the parties from settling federal claims in other cases

without its approval. The injunction would bind Mobil, however,

only if the pending motion to dismiss was denied. The court

subsequently denied the motion, thereby including Mobil in the

2 injunction. Mobil appeals the injunction under 28 U.S.C.

§ 1292(a)(1).

II

Mobil contends that it lacked notice and an opportunity to be

heard before the injunction issued. We review that order for abuse

of discretion. See Affiliated Prof’l Home Health Care Agency v.

Shalala, 164 F.3d 282, 284 (5th Cir. 1999).

Rule 65 of the Federal Rules of Civil Procedure allows the

court to issue a preliminary injunction after actual notice and an

opportunity to be heard. See Kaepa, Inc. v. Achilles Corp., 76

F.3d 624, 628 (5th Cir. 1996). The form of notice is a matter for

the trial court’s discretion. Plaquemines Parish Sch. Bd. v.

United States, 415 F.2d 817, 824 (5th Cir. 1969).

Here, when the district court enjoined the other defendants,

the order advised Mobil that it too would be enjoined if the court

denied its motion to dismiss. This was sufficient notice to Mobil.

Mobil could have challenged the propriety of the injunction during

the two months before the court denied its motion to dismiss. We

find no violation of Rule 65.

III

Mobil also appeals the denial of its motion to dismiss. Mobil

argues that the Full Faith and Credit Act, 28 U.S.C. § 1783,

required the federal district court to give preclusive effect to

3 the judgment of the state court of Alabama approving the

settlement.1

We must first decide whether review of the denial of the

motion to dismiss is before us as part of the appeal of the

preliminary injunction.2 Our jurisdiction under 28 U.S.C.

§ 1292(a)(1) is not limited to the specific order appealed from.

See Magnolia Marine Transp. Co., Inc. v. LaPlace Towing Corp., 964

F.2d 1571, 1580 (5th Cir. 1992). Jurisdiction extends to certain

related issues that have been sufficiently developed so as not to

require further development at the trial court level. WRIGHT, MILLER

& COOPER, FEDERAL PRACTICE & PROCEDURE: JURISDICTION 2D § 3921.1 (1999).

The injunction and the preclusive effect of the Alabama

judgment are so entangled as to arrive here together. Delaying

review of whether Mobil has effectively settled the federal claim

while deciding whether the federal court can enjoin Mobil from

settling without its approval would make no practical sense, and we

have jurisdiction to avoid that oddity. In short, it would waste

1 Mobil also argues that the federal claim is barred under the Rooker-Feldman doctrine. Because this Circuit has interpreted that doctrine as consistent with the Full Faith and Credit Act, see Davis v. Bayless, 70 F.3d 367, 375 (5th Cir. 1995), the two arguments are not distinct. Mobil’s argument would bar the very analysis it relies on in this appeal: the Matsushita court’s examination of whether a state court judgment claiming to release federal claims should be given preclusive effect. 2 Mobil contends that the plaintiffs in one of the class actions have no standing to defend against Mobil’s motion because they opted out of the Lovelace settlement. We agree with the district court that this argument is irrelevant. Other plaintiffs did not opt out, and our decision on the preclusion issue will be law of the case on further proceedings, regardless of whether the class actions ultimately proceed to trial separately.

4 judicial resources without any offsetting benefit in the form of a

more fully developed record. We have jurisdiction, and it is

appropriate to decide the preclusive effect of the Alabama judgment

as part of the § 1292(a)(1) appeal.

The Full Faith and Credit Act requires a federal court to give

state court judgments the same preclusive effect they would have in

another court of the same state. See Parsons Steel, Inc. v. First

Ala. Bank, 474 U.S. 518, 523 (1986). In Matsushita Electric

Industrial Company, the Supreme Court held that a federal court

must give effect to a state court approval of a class action

settlement, even if the settlement releases federal claims within

the exclusive jurisdiction of the federal courts, as long as the

law of the state would give preclusive effect to the judgment.

Matsushita Elec. Indus. Co., Ltd. v. Epstein, 516 U.S. 367, 375,

380 (1996).

The issue in this case is thus whether Alabama courts would

preclude the federal suit following a settlement that claimed to

release federal antitrust claims. Mobil argues that Alabama law

precludes the suit as a matter of contract and as a matter of res

judicata. First, Mobil claims that Alabama would enforce the

settlement as a matter of contract law. A footnote in Matsushita

comments that if a state chooses to approach the preclusive effect

of a judicially-approved settlement “as a question of pure contract

law,” the federal court must follow that approach. Matsushita, 516

U.S. at 379 n.6.

5 We are not persuaded that Alabama treats the preclusive effect

of judicially-approved settlements as a question of pure contract

law. The cases and statute cited by Mobil stand for the ordinary

proposition that a settlement will be enforced according to its

terms, not that Alabama follows a particular approach to preclusion

law. Mobil’s reference to Adams v. Robertson, 676 So.2d 1265 (Ala.

1995), is also not on point. The Adams settlement settled no

federal claims, and the Alabama Supreme Court’s opinion, which

reviewed the settlement for fairness, decided no preclusion issues.

The passage cited by Mobil, stating the power of a court to release

claims over which it does not have jurisdiction, is drawn from

general language found in the trial court’s lengthy findings, which

were appended to the Alabama Supreme Court’s opinion. Adams, 676

So.2d at 1300. This case is not precedent for the proposition that

Alabama embraces a pure contract law approach to preclusion.

Mobil’s second preclusion argument is that res judicata bars

the action. Alabama insists that for a prior judgment to control,

it must have been rendered by a court of competent jurisdiction.

See Carlisle v. Phenix City Bd. of Educ., 543 So.2d 194, 195 (Ala.

1989). The jurisdictional competency requirement extends to

judgments following settlements. See Parmater v. Amcord, Inc., 699

So.2d 1238, 1240-41 (Ala. 1997).

Alabama’s law of res judicata is not unique. It is the test

previously used by Delaware and described in Matsushita, where the

state judgment would not have had preclusive effect on the federal

suit: “[e]arly cases suggested that Delaware courts would not

6 afford claim preclusive effect to a settlement releasing claims

that could not have been presented in the trial court.”

Matsushita, 516 U.S. at 376. The result in Matsushita followed

from the Delaware Supreme Court’s elimination of the jurisdictional

requirement in the context of a settlement releasing federal

claims. Id. at 376-77. We see no indication that Alabama has

abandoned its jurisdictional requirement for judicially-approved

settlements.

Because federal antitrust claims are within the exclusive

jurisdiction of the federal courts, see Marrese v. American Academy

of Orthopaedic Surgeons, 105 S. Ct. 1327, 1331 (1985), those claims

could not have been litigated in the Alabama suit. Given current

Alabama law requiring jurisdictional competency as a condition to

the preclusive bite of res judicata, the Alabama judgment approving

the settlement entered by its state court in Lovelace does not bar

the federal action under that doctrine.

We hold that the district court met the requirements of Rule

65 in enjoining Mobil. We further hold that the Full Faith and

Credit Act did not require the federal district court to give

preclusive effect to the judgment of the state court of Alabama

approving the Lovelace settlement.

AFFIRMED.