J R Clearwater v. Ashland

• Court: Court of Appeals for the Fifth Circuit
• Decided: August 16, 1996
• Docket: 95-10060
• Status: Published

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

___________________

No. 95-10060 ___________________

J.R. CLEARWATER INC., ET AL.,

Plaintiffs, JEFF YOUNG RUSSELL KING., ET AL., Intervenor-Appellees,

and

FRANK FALGIANI and MARIUS GRIFFO, Plaintiffs-Appellees

versus

ASHLAND CHEMICAL CO., ET AL., Defendants-Appellants.

________________________________________________

Appeal from the United States District Court for the for the Northern District of Texas ________________________________________________ August 15, 1996

Before WISDOM, GARWOOD and JONES, Circuit Judges.

GARWOOD, Circuit Judge:

This appeal presents the question whether a federal district

court, having denied class certification in a previous proceeding,

may enjoin certification of a similar class in state court under

the Anti-Injunction Act, 28 U.S.C. § 2283. Because we conclude

that the instant denial of class certification does not come within

one of the exceptions to the Anti-Injunction Act, we affirm the

order of the district court denying the requested relief. Facts and Proceedings Below

In May 1991, a class action was brought in Texas state court

on behalf of named plaintiff Joseph Lawshe and a class of similarly

situated individuals (Lawshe class) against Ashland Chemical

Company, Inc. (Ashland). The gravamen of the complaint was that

the class members had sustained damage to their swimming pools as

the result of Ashland’s mistaken delivery of sodium citrate rather

than sodium sesquicarbonate to J.R. Clearwater, Inc. (Clearwater),

which then mistakenly used the sodium citrate to service the pools.

The complaint alleged that the use of the sodium citrate had

created an imbalance in the alkalinity of the swimming pools that

caused algae growth, staining and corrosion of the pools, pipes,

and pool equipment. The Lawshe class asserted Texas law claims for

breach of contract, negligence, and deceptive trade practices

against Ashland seeking compensatory damages of between $500 and

$5,000 per class member as well as punitive damages. The Lawshe

class asserted no claims against Clearwater.

Ashland removed the suit to the United States District Court

for the Northern District of Texas, Dallas Division, on the basis

of diversity jurisdiction. The Lawshe class action was then

transferred to the Fort Worth Division and consolidated with a

suit, also asserting Texas law claims, filed against Ashland by

Clearwater that was pending in that court. In addition, two new

named plaintiffs, Marius Griffo and Frank Fagliani (class

plaintiffs), were substituted for Lawshe.

After extensive discovery over a two-year period, a class

2 certification hearing was held in September 1993. The district

court denied class certification on the grounds that the individual

class plaintiffs were subject to unique defenses not typical of the

class, and that common issues of fact and law did not predominate

due to individualized circumstances pertaining to each pool.

Following the denial of class certification, the class plaintiffs

sought a voluntary dismissal without prejudice pursuant to Federal

Rule of Civil Procedure 41(a)(2). The district court ruled that

dismissal without prejudice should not be allowed at such a late

stage in the litigation, yet the court declined to dismiss the two

class plaintiffs’ individual claims sua sponte in the event that

they elected to take their claims to trial or allow other proposed

class members to intervene individually.

The attorney for the class plaintiffs then filed a second

class action, likewise asserting Texas law claims, in the Texas

state courts naming Jack E. Sims as the class representative. The

class was defined in the same terms as the class in the initial

action, and the complaint was almost identical except that it

included a negligence claim against Clearwater, asserted no

deceptive trade practices claims against Ashland and sought no

punitive damages, and sought compensatory damages of $15,000 per

class member.

Ashland moved the district court to enjoin class certification

in the state court proceeding in order to protect or effectuate its

own earlier denial of class certification under the relitigation

exception to the Anti-Injunction Act. The district court denied

3 the motion on the grounds that its denial of class certification

was not a final appealable order entitled to collateral estoppel

effect “notwithstanding the Court’s previous statement that its

denial of class certification was final.”1

Discussion

Through the Anti-Injunction Act, 22 U.S.C. § 2283, the

Congress imposed a general prohibition on the federal courts from

interfering in state judicial proceedings. As the Supreme Court

explained in Chick Kam Choo v. Exxon Corp., 108 S.Ct. 1684 (1988):

“The Act . . . is a necessary concomitant of the Framers’ decision to authorize, and Congress’ decision to implement, a dual system of federal and state courts. It represents Congress’ considered judgment as to how to balance the tensions inherent in such a system. Prevention of frequent federal court intervention is important to make the dual system work effectively. By generally barring such intervention, the Act forestalls ‘the inevitable friction between the state and federal courts that ensues from the injunction of state judicial proceedings by a federal court.’ Vendo Co. v. Lektro- Vend Corp., 433 U.S. 623, 630-31, 97 S.Ct. 2881, 2887, 53 L.Ed.2d 1009 (1977)(plurality opinion). Due in no small part to the fundamental constitutional independence of the States, Congress adopted a general policy under which state proceedings ‘should normally be allowed to continue unimpaired by intervention of the lower federal courts, with relief from error, if any, through the state appellate courts and ultimately this Court.’ Atlantic Coast R. Co. v. Locomotive Engineers, 398 U.S. 281, 287, 90 S.Ct. 1739, 1743, 26 L.Ed.2d 234 (1970).” Id. at 1689.

The Act does permit the federal courts to enjoin state judicial

proceedings in three limited instances: when expressly authorized

by statute, when necessary in aid of the court’s jurisdiction, or

1 However, Ashland did later secure an order enjoining relitigation of the class certification issue in state court pending this appeal.

4 when necessary to protect or effectuate the court’s judgment. 28

U.S.C. § 2283. The third of these exceptions, commonly referred to

as the “relitigation exception,” is at issue in the present case.

“The relitigation exception was designed to permit a federal court to prevent state litigation of an issue that previously was presented to and decided by the federal court. It is founded in the well-recognized concepts of res judicata and collateral estoppel.” Chick Kam Choo, 108 S.Ct. at 1690.

See also Deus v. Allstate Ins. Co., 15 F.3d 506, 524 (5th

Cir.)(quoting Chick Kam Choo), cert. denied, 115 S.Ct. 573 (1994).

However, these “exceptions are narrow and are ‘not [to] be

enlarged by loose statutory construction.’” Chick Kam Choo, 108

S.Ct. at 1689 (quoting Atlantic Coast Line, 90 S.Ct. at 1743);

Total Plan Serv., Inc. v. Texas Retailers Assn., Inc., 925 F.2d

142, 144 (5th Cir. 1991). Any doubts as to the propriety of an

injunction must be resolved in favor of allowing the state court

action to go forward. Texas Employers Ins. Ass’n. v. Jackson, 862

F.2d 491, 499 (5th Cir. 1988)(en banc), cert. denied, 109 S.Ct.

1932 (1989).

Ashland urges that the district court erred in denying its

motion to enjoin relitigation of the class certification issue in

state court because this issue was fully litigated during the

course of the federal proceedings. While we are sympathetic to

Ashland’s desire to avoid another protracted and costly round of

litigation over class certification in the Texas state courts, the

Anti-Injunction Act requires a different result.

Finality is an essential component of the concepts of both res

5 judicata and collateral estoppel. Avondale Shipyards v. Insured

Lloyd’s, 786 F.2d 1265, 1269 (5th Cir. 1986). An order denying

class certification is not a final judgment, and therefore is not

appealable as a matter of right until conclusion of the litigation

in the district court. Coopers & Lybrand v. Livesay, 98 S.Ct.

2454, 2457 (1978). Accordingly, it seems apparent to us that the

denial of class certification similarly lacks sufficient finality

to be entitled to preclusive effect while the underlying litigation

remains pending. Because finality is central to the concepts of

both res judicata and collateral estoppel, which animate the Anti-

Injunction Act, such a lack of finality is also fatal to a request

for injunction under the Act.2

2 In its brief, Ashland cites both the Second Circuit’s decision in Lummus v. Commonwealth Oil Ref. Co., 297 F.2d 80,89 (2d Cir. 1961), cert. denied, 368 U.S. 96 (1962), and the Restatement (Second) Judgments for the proposition that something less than section 1291 finality is sufficient for purposes of issue preclusion. However, in our decision in Avondale, which we view as directly analogous to the case at hand, we declined to adopt this more flexible notion of finality. In Avondale, we were presented with the question whether a partial summary judgment was entitled to collateral estoppel effect. In holding that it was not, we noted that a partial summary judgment was not a final appealable order and that it further lacked the necessary finality because it was within the district court’s plenary power to revise or set aside at its discretion prior to final judgment. We distinguished Lummus and similar cases on the grounds that appellate review of the matter on which issue preclusion was sought was available in each instance. Indeed, we noted that both Lummus and the Restatement expressly cited the availability of appellate review as a significant factor in determining whether an otherwise nonfinal order should be given preclusive effect. In the case at bar, the denial of class certification is not itself a final appealable order, Coopers & Lybrand, supra, and is also subject to reconsideration by the district court under Federal Rule of Civil Procedure 23(c)(1). Ashland argues that appellate review was available to the class plaintiffs either through the discretionary appeal mechanism of 28 U.S.C. § 1292(b) or by

6 While we are given to understand by correspondence from

counsel that a final judgment was subsequently entered by the

district court one month after this case was argued before this

panel, that does not change our disposition of the present appeal,

given the discretionary nature of the class certification

determination generally.

The denial of class certification is “a procedural ruling,

collateral to the merits of a litigation. . . .,” Deposit Guaranty

Nat. Bank v. Roper, 100 S.Ct. 1166, 1173 (1980), and the decision

as to whether to certify a class lies within the “wide discretion”

of the trial court. Shipes v. Trinity Ind., 987 F.2d 311, 316 (5th

Cir.), cert. denied, 114 S.Ct. 548 (1993); see also, Wright, Miller

and Cooper, § 1785 at 119(court has “broad discretion”).3 While

Texas Rule of Civil Procedure 42 is modeled on Rule 23 of the

Federal Rules, and federal decisions are viewed as persuasive

refusing to strike the class allegations and allowing the district court to dismiss the entire action with prejudice, thereby rendering the class action ruling final and appealable. We are not persuaded. As Ashland concedes, it is not likely that discretionary review would be granted. Nor should the class representatives be faced with the equally unpalatable choices of either having the order denying class certification be afforded preclusive effect without review or risking the forfeit of their claims on the merits in order to secure such review. See Wright, Miller and Cooper, Federal Practice and Procedure: § 1802 at 483 (noting this means of securing appellate review of order denying class certification “tactically risky” due to risk of forfeiting rights to present merits of claim).

3 This is clearly applicable to the “predominate” determination that formed the ultimate basis of the district court’s ruling in the present case. See Salazar-Calderon v. Presidio Valley Farmers Assn., 765 F.2d 1334, 1350 (5th Cir. 1985) (reviewing predominance determination for abuse of discretion), cert. denied, 106 S.Ct. 1245 (1986).

7 authority regarding the construction of the Texas class action

rule, see American Exp. Travel Related Services Co. v. Walton, 883

S.W.2d 703, 708 (Tex.App.--Dallas 1994, no writ); Ventura v.

Banales, 905 S.W.2d 423, 425 (Tex.App.--Corpus Christi 1995, no

writ), a Texas court might well exercise this discretion in a

different manner. It is our considered view that the wide

discretion inherent in the decision as to whether or not to certify

a class dictates that each court——or at least each jurisdiction——be

free to make its own determination in this regard. See Wright,

Miller & Cooper, § 4434 at 327 (“If preclusion is to be denied, it

should be on the ground that many procedural matters may be so far

discretionary that a second court should be free to make its own

determination.”). This reasoning is particularly applicable when

matters of state-federal relations are involved as in the present

case in which an injunction would impinge upon the state court’s

ability to exercise discretion in the administration of its own

docket contrary to the policies underlying the Anti-Injunction Act.

The element of discretion that inheres in this class

certification determination must be emphasized. Indeed, one Texas

court applying the federal collateral estoppel rules concluded that

collateral estoppel did not bar relitigation of the class

certification issue in part because even those aspects of the state

class action rule which are identical to the federal rule have

sometimes been applied differently by the state courts. Morgan v.

Deere Credit, Inc., 889 S.W.2d 360, 368 (Tex.App.--Houston (14th

Dist.) 1994, no writ). Therefore, the Texas court concluded that

8 the identity of issues necessary to collateral estoppel was

lacking.

For the foregoing reasons, we conclude that the district court

did not err in denying Ashland’s motion to enjoin relitigation of

the class certification in state court. The order of the district

court is accordingly

AFFIRMED.