Kaepa, Inc. v. Achilles Corporation

76 F.3d 624, 34 Fed. R. Serv. 3d 660, 1996 U.S. App. LEXIS 2306, 1996 WL 65671

• Court: Court of Appeals for the Fifth Circuit
• Decided: February 14, 1996
• Docket: 95-50278
• Status: Published

Opinions

WIENER, Circuit Judge:

The primary issue presented by this appeal is whether the district court erred by enjoining Defendant-Appellant Achilles Corporation from prosecuting an action that it filed in Japan as plaintiff, which essentially mirrored a lawsuit previously filed by Plaintiff-Appellee Kaepa, Inc. in state court and then being prosecuted in federal district court by Kaepa. Given the private nature of the dispute, the clear indications by both parties that claims arising from their contract should be adjudicated in this country, and the duplicative and vexatious nature of the Japanese action, we conclude that the district court did not abuse its discretion by barring the prosecution of the foreign litigation. Accordingly, we affirm the grant of the antisuit injunction.

I.

FACTS AND PROCEEDINGS

This case arises out of a contractual dispute between two sophisticated, private corporations: Kaepa, an American company which manufactures athletic shoes; and Achilles, a Japanese business enterprise with annual sales that approximate one billion dollars. In April 1993, the two companies entered into a distributorship agreement whereby Achilles obtained exclusive rights to market Kaepa’s footwear in Japan. The distributorship agreement expressly provided that Texas law and the English language would govern its interpretation, that it would be enforceable in San Antonio, Texas, and that Achilles consented to the jurisdiction of the Texas courts.¹

Kaepa grew increasingly dissatisfied with Achilles’s performance under the contract. Accordingly, in. July of 1994, Kaepa filed suit in Texas state court, alleging (1) fraud and negligent misrepresentation by Achilles to induce Kaepa to enter into the distributorship agreement, and (2) breach of contract by Achilles. Thereafter, Achilles removed the action to federal district court, and the parties began a laborious discovery process which to date has resulted in the production of tens of thousands of documents. In February 1995, after appearing in the Texas action, removing the case to federal court, and engaging in comprehensive discovery, Achilles brought its own action in Japan, alleging mirror-image claims: (1) fraud by Kaepa to induce Achilles to enter into the distributorship agreement, and (2) breach of contract by Kaepa.

Back in Texas, Kaepa promptly filed a motion asking the district court to enjoin Achilles from prosecuting its suit in Japan (motion for an antisuit injunction). Achilles in turn moved to dismiss the federal court action on the ground of forum non conve-niens. The district court denied Achilles’s motion to dismiss and granted Kaepa’s motion to enjoin, ordering Achilles to refrain from litigating the Japanese action and to file all of its counterclaims with the district court. Achilles timely appealed the grant of the antisuit injunction.²

II.

ANALYSIS

A. PROPRIETY OF THE ANTISUIT INJUNCTION

Achilles’s primary argument is that the district court failed to give proper deference to principles of international comity when it granted Kaepa’s motion for an anti-suit injunction. We review the decision to grant injunctive relief for abuse of discretion.³ Under this deferential standard, findings of fact are upheld unless clearly erroneous, whereas legal conclusions “ ‘are subject to broad review and will be reversed if incorrect.’ ”⁴

It is well settled among the circuit courts — including this one — which have reviewed the grant of an antisuit injunction that the federal courts have the power to enjoin persons subject to their jurisdiction from prosecuting foreign suits.⁵ The circuits differ, however, on the proper legal standard to employ when determining whether that injunctive power should be exercised.⁶ We have addressed the propriety of an antisuit injunction on two prior occasions, in In re Unterweser Reederei Gmbh⁷ and Bethell v. Peace.8 Emphasizing in both cases the need to prevent vexatious or oppressive litigation, we concluded that a district court does not abuse its discretion by issuing an antisuit injunction when it has determined “that allowing simultaneous prosecution of the same action in a foreign forum thousands of miles away would result in ‘inequitable hardship’ and ‘tend to frustrate and delay the speedy and efficient determination of the cause.’”⁹ The Seventh and the Ninth Circuits have either adopted¹⁰ or “incline[d] toward”¹¹ this approach, but other circuits have employed a standard that elevates principles of international comity to the virtual exclusion of essentially all other considerations.¹²

Achilles urges us to give greater deference to comity and apply the latter, more restrictive standard. We note preliminarily that, even though the standard espoused in Unter-weser and Bethell focuses on the potentially vexatious nature of foreign litigation, it by no means excludes the consideration of principles of comity. We decline, however, to require a district court to genuflect before a vague and omnipotent notion of comity every time that it must decide whether to enjoin a foreign action.

In the instant case, for example, it simply cannot be said that the grant of the antisuit injunction actually threatens relations between the United States and Japan. First, no public international issue is implicated by the case: Achilles is a private party engaged in a contractual dispute with another private party. Second, the dispute has been long and firmly ensconced within the confines of the United States judicial system: Achilles consented to jurisdiction in Texas; stipulated that Texas law and the English language would govern any dispute; appeared in an action brought in Texas; removed that action to a federal court in Texas; engaged in extensive discovery pursuant to the directives of the federal court; and only then, with the federal action moving steadily toward trial, brought identical claims in Japan. Under these circumstances, we cannot conclude that the district court’s grant of an antisuit injunction in any way trampled on notions of comity.

On the contrary, the facts detailed above strongly support the conclusion that the prosecution of the Japanese action would entail “an absurd duplication of effort”¹³ and would result in unwarranted inconvenience, expense, and vexation. Achilles’s belated ploy of filing as putative plaintiff in Japan the very same claims against Kaepa that Kaepa had filed as plaintiff against Achilles smacks of cynicism, harassment, and delay. Accordingly, we hold that the district court did not abuse its discretion by granting Kaepa’s motion for an antisuit injunction.¹⁴

B. Rule 65 REQUIREMENTS

Achilles also argues that the district court erred by failing to meet several requirements of Federal Rule of Civil Procedure 65 before issuing the antisuit injunction. Rule 65(a)(1) provides that “[n]o preliminary injunction shall be issued without notice to the adverse party.” We have interpreted the notice requirement of Rule 65(a)(1) to mean that “where factual disputes are presented, the parties must be given a fair opportunity and a meaningful hearing to present then-differing versions of those facts before a preliminary injunction may be granted.”¹⁵ If no factual dispute is involved, however, no oral hearing is required; under such circumstances the parties need only be given “am-pie opportunity to present their respective views of the legal issues involved.”¹⁶ In the instant case, the district court did not rely on any disputed facts in determining whether it could properly grant an antisuit injunction. Moreover, both parties presented comprehensive memoranda in support of their positions on the issue. Accordingly, the district court did not violate Rule 65(a)(1) by failing to conduct an oral hearing before granting the antisuit injunction.

Achilles also argues that the district court violated Rule 65(c) by not requiring Kaepa to post a bond. Rule 65(c) provides that “[n]o ... preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper....”¹⁷ In holding that the amount of security required pursuant to Rule 65(c) “is a matter for the discretion of the trial court,”¹⁸ we have ruled that the court “may elect to require no security at all.”¹⁹ Thus, the district court did not violate Rule 65(e) by failing to compel Kaepa to post a bond.²⁰

III.

CONCLUSION

For the foregoing reasons, the district court’s grant of Kaepa’s motion to enjoin the litigation of Achilles’s action in Japan is

AFFIRMED.

1 . The applicable language of the agreement reads:

This Agreement shall be governed by the laws of the State of Texas, U.S.A., and shall be enforceable in San Antonio, Texas. The English version of this Agreement and the English language shall govern the interpretation and meaning of all words and phrases used herein. Distributor [Achilles] consents to jurisdiction in the State of Texas, U.S.A.

The district court held that this clause (1) permits jurisdiction in Texas, and (2) requires that the agreement be interpreted under United States law and the English language. Neither party challenges this ruling.

2 . Achilles does not challenge the denial of its motion to dismiss.

3 . See Western Directories, Inc. v. Southwestern Bell, 63 F.3d 1378, 1390 (5th Cir.1995); Apple Barrel Productions, Inc. v. Beard, 730 F.2d 384, 386 (5th Cir.1984).

4 . Apple Barrel Productions, Inc. v. Beard, 730 F.2d 384 (5th Cir.1984) (quoting Commonwealth Life Insurance Co. v. Neal, 669 F.2d 300, 304 (5th Cir.1982)).

5 . See, e.g., Gau Shan Co., Ltd. v. Bankers Trust Co., 956 F.2d 1349, 1352 (6th Cir.1992); China Trade & Dev. Corp. v. M.V. Choong Yong, 837 F.2d 33, 35 (2d Cir.1987); Laker Airways v. Sabena, 731 F.2d 909, 926 (D.C.Cir.1984); Seattle Totems Hockey Club, Inc. v. National Hockey League, 652 F.2d 852, 855 (9th Cir.1981), cert. denied, 457 U.S. 1105, 102 S.Ct. 2902, 73 L.Ed.2d 1313 (1982); In re Unterweser Reederei Gmbh, 428 F.2d 888, 890 (5th Cir.1970), aff'd on rehearing en banc, 446 F.2d 907 (1971), rev'd on other grounds sub nom. M/S Bremen v Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972); Bethell v. Peace, 441 F.2d 495, 498 (5th Cir.1971).

6 . Compare, e.g., Seattle Totems, 652 F.2d at 855-56 and Unterweser, 428 F.2d 888 with Gau Shan, 956 F.2d at 1355 and China Trade, 837 F.2d at 36.

7 . Unterweser, 428 F.2d 888.

8 . Bethell, 441 F.2d 495.

9 . Unterweser, 428 F.2d at 890, 896 (noting as well that antisuit injunctions have been granted when foreign litigation would (1) frustrate a policy of the forum issuing the injunction; (2) be vexatious or oppressive; (3) threaten the issuing court’s in rem or quasi in rem jurisdiction; or (4) prejudice other equitable considerations); see also Bethell, 441 F.2d at 498 ("[T]he court was within its discretion in relieving the plaintiff of expense and vexation of having to litigate in a foreign court.”). Cf. Gau Shan, 956 F.2d at 1353 (concluding that the Fifth Circuit “reifies] primarily upon considerations of vexatiousness or oppressiveness in a race to judgment in the foreign forum as sufficient grounds for an [antisuit] injunction”) (citing Unterweser, 428 F.2d at 896); Seattle Totems, 652 F.2d at 855-56 (discussing Unterweser and Bethell).

10 . See Seattle Totems, 652 F.2d at 855-56 (discussing Unterweser and Bethell) (holding that it is within the district court's discretion to grant an antisuit injunction when the adjudication of an issue "is likely to result in unnecessary delay and substantial inconvenience and expense to the parties and witnesses ... [as well as] inconsistent rulings or even a race to judgment”).

11 . See Philips Medical Sys. Int’l B.V. v. Bruetman, 8 F.3d 600, 605 (7th Cir.1993); see also Allendale Mut. Ins. Co. v. Bull Data Systems, Inc., 10 F.3d 425, 431 (7th Cir.1993). Cf. Sperry Rand Corp. v. Sunbeam Corp., 285 F.2d 542 (7th Cir.1960).

12 . See, e.g., Gau Shan, 956 F.2d at 1355; China Trade, 837 F.2d at 36; Laker Airways, 731 F.2d at 927, 937. The weakness in the foundation of the dissent's opinion is that it relies extensively on these cases while virtually disregarding our holdings in Unterweser and Bethell. The strict stare decisis policy of this court prevents us from joining in the dissent's abrogation of the holdings of two prior panels on this issue through purported distinctions without real differences. See United States v. Parker, 73 F.3d 48, 51 (5th Cir.1996) (" '[0]ne panel may not overrule the decision — right or wrong — of a prior panel, absent en banc reconsideration or a superseding contrary decision of the Supreme Court' ") (quoting In re Dyke, 943 F.2d 1435, 1442 (5th Cir.1991)).

13 . Allendale, 10 F.3d at 430-31.

14 . The parties also debated the applicability of Federal Rule of Civil Procedure 13(a) to claims brought in foreign courts. Rule 13(a) governs compulsory counterclaims and provides in relevant part: "A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim....” Fed.R.Civ.P. 13(a).

Achilles concedes that under Rule 13, the Japanese action constitutes a compulsory counterclaim. Nonetheless, Achilles argues that Rule 13 does not apply to claims brought in foreign courts and thus cannot be relied on as a basis for prohibiting the prosecution of the Japanese action. As we have decided on other grounds that the district court properly exercised its authority in enjoining the Japanese action, we need not address whether Rule 13 governs foreign suits. We note, however, that our holding today is consistent with the purpose of Rule 13, which is to " ‘prevent multiplicity of actions and to achieve resolution in a single suit of all disputes arising out of common matters.' " Seattle Totems, 652 F.2d at 854 (quoting Southern Construction Co. v. Pickard, 371 U.S. 57, 83 S.Ct. 108, 9 L.Ed.2d 31 (1962)).

15 . Commence Park at DFW Freeport v. Mardian Construction Co., 729 F.2d 334, 342 (5th Cir.1984) (discussing Marshall Durbin Farms, Inc. v. National Farmers Organization, Inc., 446 F.2d 353 (5th Cir.1971)).

16 . Commerce Park, 729 F.2d at 341; see also Federal Savings and Loan Insurance Corp. v. Dixon, 835 F.2d 554, 558 (5th Cir.1987). Cf. Jones v. Newton, 775 F.2d 1316, 1318 (noting that an oral hearing on motions is typically not required in this circuit); Security and Exchange Commission v. First Financial Group of Texas, Inc., 659 F.2d 660, 669 (5th Cir.1981).

17 . Fed.R.Civ.P. 65(c).

18 . Corrigan Dispatch Company v. Casa Guzman, 569 F.2d 300, 303 (5th Cir.1978); see also City of Atlanta v. Metropolitan Atlanta Rapid Transit Authority, 636 F.2d 1084, 1094 (5th Cir. Unit B Feb. 1981). But see Continuum Company, Inc. v. Incepts, Inc., 873 F.2d 801, 803 (5th Cir.), reconsidered on other grounds, 883 F.2d 333 (5th Cir.1989).

19 . Corrigan Dispatch, 569 F.2d at 303.

20 . Moreover, under the instant facts — the party enjoined being the party that created any risk of damages for delay or duplication by filing the second, mirror-image suit in Japan after contractually consenting to the jurisdiction and substantive law of Texas — the district court cannot be said to have abused its discretion: The injunction can only work to avoid damages, not cause them.