Tuesday, May 8, 2007

A second bite under Parsons

Under the Anti-Injunction Act's relitigation exception, a federal court can enjoin a pending state-court proceeding if that proceeding involves an issue that the federal court has previously resolved.  In Parsons Steel, the Supreme Court invoked the Full Faith and Credit Act to sensibly prevent two bites at the preclusion/injunction apple.

For example, suppose A sues B in federal court.  The federal court favorably resolves an issue for B.  A then sues B again in state court.  Under Parsons, B has two options, not three, for giving teeth to the federal court's prior ruling.   Of course B can raise a preclusion defense in state court.  Or, under the relitigation exception, B can ask the rendering federal court to enjoin the state-court proceeding, to the extent A relies upon issues actually resolved by the federal court.  But what B cannot do is raise the preclusion defense in state court, lose, and then ask for the federal court to enjoin the state court proceeding.  This is because the state-court ruling on the preclusion issue is itself an issue-preclusive ruling that binds the federal court.

In the recent Duffy case, two bites were available.  There B successfully moved to dismiss the federal suit based on a forum-selection clause that selected England.  A refiled in  state court, not England.  Generally, then, B would have two options.  First, B can move to dismiss the state-court suit on grounds that the federal dismissal is issue preclusive.  Or second, B can return to federal court and seek an injunction to prevent relitigation of that particular issue.  In effect, the relitigation exception allows B to choose which court will resolve the preclusion issue.  But B did both.  After the state court denied the motion to dismiss, B returned to federal court.  The Fifth Circuit held that, because the denial in state court was not a final judgment under state law, there was no Parsons bar to the return to federal court. 

This result surprises me, as does the rigid analysis. Even if the judgment was not "final" under Texas law, the exceptions to the Anti-Injunction Act are supplemented by the equitable principles that govern injunctive relief and the principles of comity surrounding the Anti-Injunction Act.  Even if an injunction may issue, that's not to say it must.   B can obtain federal review in the first instance by seeking an injunction from the federal court when A files the second suit.  B can obtain federal review by seeking Supreme Court review, the federal issue being the preclusive effect of a federal judgment.  But even where the state-court judgment does not trigger the formal Parsons bar, the appropriate balance of comity and efficiency does not favor allowing B to try twice.  The lesson for litigators, I suppose, is that if you time things right, you can get two bites at the apple.  Raise your preclusion defense in state court, but when you lose be sure to ask the federal court to overrule that ruling before the state ruling becomes technically "final" under state law.  -RR


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