Cynthia E. Canady v. Allstate Ins. Co. ( 2002 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 99-3064
___________
Cynthia E. Canady, Marva Jean *
Saunders, both parties individually and *
representing a class of similarly situated *
persons; Mischelle A. Greer; Jimmy D. *
Hunt; Tamara A. Hunt; Kim Y. *
Nickerson; Esther E. Moten; Kerry L. *
Butler; Nadine Farris; Charles *
Lockridge, *
*
Plaintiffs-Appellants. *
*
Coleman McClain; Evalin McClain; *
John Hammonds; Alma Hammonds; *
Sara Kenner; Clarence Kenner, *
* Appeals from the United States
Intervenor Plaintiffs-Appellants. * District Court for the
* Western District of Missouri
v. *
*
Allstate Insurance Company; American *
Economy Insurance Company; American*
Family Mutual Insurance Company; *
American States Insurance Company; *
American States Preferred Insurance *
Company; Farm Bureau Town and *
Country Insurance Company; Farmers &*
Merchants Insurance Company; Farmers*
Insurance Exchange; Federal Insurance *
Company; Fire Insurance Company; *
Liberty Mutual Insurance Company; *
Mid-Century Insurance Company; *
Pacific Indemnity Insurance Company, *
*
Defendants-Appellees. *
*
Prudential Property and Casualty *
Insurance Company, *
*
Defendant. *
*
Safeco Insurance Company; Shelter *
General Insurance Company; Shelter *
Mutual Insurance Company; State *
Farm Fire & Casualty Company, *
State Farm General Insurance Company,*
Vigilant Insurance Company; Old *
Reliable Insurance Company; Sea *
Insurance Company of America; Sun *
Insurance Office of America, Inc., *
*
Defendants-Appellees. *
*
____________
No. 99-3193
____________
Marva Jean Saunders; Cynthia E. *
Canady; Mischelle A. Greer; *
Coleman Douglas McClain; *
Evalin Elaine McClain; Kerry L. *
Butler; Kim Yvette Nickerson; *
Tamara A. Hunt; John Henry *
Hammonds; Esther Elaine Moten, *
*
Plaintiffs-Appellants, *
*
v. *
*
Farm Bureau Town and Country *
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Insurance Company, *
*
Defendants-Appellees. *
*
Prudential Property and Casualty *
Insurance Company, *
*
Defendant. *
*
Liberty Mutual Insurance Company; *
Safeco Insurance Company of *
America; American Economy *
Insurance Company; American *
States Preferred Insurance Company; *
Federal Insurance Company; Pacific *
Indemnity Insurance Company; *
Vigilant Insurance Company; *
American Family Mutual Insurance *
Company, *
*
Defendants-Appellees. *
*
____________
No. 99-3197
____________
Marva Jean Saunders; Cynthia E. *
Canady; Mischelle A. Greer; *
Coleman Douglas McClain; *
Evalin Elaine McClain; Kerry L. *
Butler; Kim Yvette Nickerson; *
Tamara A. Hunt; John Henry *
Hammonds; Esther Elaine Moten, *
*
v. *
*
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Allstate Insurance Company; *
American Family Mutual Insurance *
Company, Farmers Insurance *
Exchange; Fire Insurance *
Exchange; Mid-Century Insurance *
Company; Shelter General Insurance *
Company; Shelter Mutual Insurance *
Company; State Farm Fire & Casualty *
Insurance Company; State Farm *
General Insurance Company, *
*
Defendants-Appellees. *
____________
Submitted: March 13, 2000
Filed: March 8, 2002
____________
Before McMILLIAN and HEANEY, Circuit Judges, and BOGUE,1 District Judge.
____________
McMILLIAN, Circuit Judge.
This matter began in 1996 with a class action complaint filed in the United
States District Court for the Western District of Missouri by a group of homeowners
in minority neighborhoods seeking federal class action certification pursuant to
Federal Rule of Civil Procedure 23. The original plaintiffs alleged that several
insurance companies had violated the Civil Rights Acts of 1866, 1870, and 1871, 42
U.S.C. §§ 1981, 1982 and 1985(3), and the Fair Housing Act, 42 U.S.C. § 3601 et
1
The Honorable Andrew W. Bogue, United States District Judge for the District
of South Dakota, sitting by designation.
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seq., by engaging in discriminatory redlining practices.2 See Canady v. Allstate Ins.
Co., No. 96-0174 (W.D. Mo. June 19, 1997) (Canady I) (Gaitan, J.), aff’d, 162 F.3d
1163 (1998) (per curiam), cert. denied, 119 S. Ct. 871 (1999). The district court
denied class certification, and the Eighth Circuit affirmed. See Canady v. Allstate
Ins. Co., 162 F.3d 1163 (1998) (per curiam) [hereinafter “Canady I Appeal”].
Essentially the same group of homeowners [hereinafter “appellants”], in various
combinations, subsequently filed related litigation in both federal and Missouri state
court.
On the present appeal, one of the original defendants moved to enjoin
appellants from relitigating in Missouri state court certain issues previously decided
by this court. The United States District Court3 for the Western District of Missouri
issued a final order in favor of the insurance companies, permanently enjoining
appellants from prosecuting any action against multiple, unrelated defendants in any
court based upon the same allegations as those raised in the prior district court ruling
on the matter. See Canady v. Allstate Ins. Co., No. 96-0174 (W.D. Mo. June 24,
1999) (Canady II). As a consequence of the injunction, the district court dismissed
two state court cases with prejudice and denied all pending federal motions as moot.
See Saunders v. Allstate Ins. Co., No. 99-0137 (W.D. Mo. June 28, 1999); Saunders
v. Farm Bureau Town & Country Ins. Co., No. 99-0139 (W.D. Mo. June 28, 1999).
2
Appellants define insurance redlining as an industry-wide practice in which
insurance companies refuse to provide standard or comprehensive homeowners’
insurance for homes located in “high risk” minority neighborhoods, or only provide
homeowners’ insurance in minority neighborhoods at much higher premiums or with
far worse terms and conditions than insurance available for homes located in “low
risk” predominantly white neighborhoods.
3
The Honorable Fernando J. Gaitan, Jr., United States District Judge for the
Western District of Missouri.
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For reversal, appellants argue that the district court (1) violated the Anti-
Injunction Act by enjoining prosecution of state law claims in state court arising from
the same issues as a case dismissed without prejudice in federal court, (2) violated the
All Writs Act by enjoining prosecution of state law claims in state court when the risk
of harm to appellants outweighed the risk of harm to appellees, and (3) erred in
exercising federal subject matter jurisdiction over a class action complaint based
strictly on state law claims, with non-diverse parties, and seeking damages below the
jurisdictional minimum of $75,000. For the reasons discussed below, we affirm the
order of the district court.
Background
On February 14, 1996, sixteen individual plaintiffs brought a class action
against twenty-three insurance companies in the United States District Court for the
Western District of Missouri, seeking class action certification for their claims
pursuant to the Civil Rights Acts of 1866, 1870, and 1871, 42 U.S.C. §§ 1981, 1982
and 1985(3), and the Fair Housing Act, 42 U.S.C. § 3601 et seq. These plaintiffs
alleged that the insurance companies discriminated against a class of homeowners in
minority neighborhoods by their redlining practices, which damaged the homeowners
indirectly by making homeowners’ insurance either unavailable, prohibitively
expensive, or qualitatively worse for houses located in “high risk” minority
neighborhoods, which resulted in lower property values for homes located in those
neighborhoods.
On June 19, 1997, after three months of discovery, the district court denied the
motion for class certification on the grounds that (1) the proposed class definition of
“neighborhood” as measured by postal zip code was overbroad, because no evidence
indicated that every person living in a predominantly minority zip code suffered
injury in fact; (2) the claims failed to fulfill the commonality and typicality
requirements of Fed. R. Civ. P. 23(a), because there was no single defendant or
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several defendants acting in concert; and (3) plaintiffs did not have standing to bring
suit against multiple, unrelated insurance companies in the absence of an alleged
conspiracy. See Canady I. The district court dismissed the complaint without
prejudice, leaving each individual plaintiff in the proposed class free to refile against
each defendant or defendants with whom he or she could assert direct injuries.
The Canady I plaintiffs appealed, and this court affirmed the district court’s
dismissal of their complaint on July 6, 1998. See Canady I Appeal, 162 F.3d at 1163.
In August 1997, several of the original plaintiffs, in various combinations, filed ten
new similar class action complaints in federal court against individual insurance
companies or groups of related insurance companies. These complaints asserted
essentially the same claims as in Canady I4 and were stayed pending the outcome of
this appeal.5
On January 19, 1999, ten of the original plaintiffs from Canady I filed two new
class actions in Missouri state court, see Saunders v. Allstate Ins. Co., et al.,
4
The August 1997 class action complaints, as well as the corresponding
amended complaints filed on March 1, 1999, proposed the same class definition
sought in Canady I and alleged the same indirect injuries. None of the original
Canady I plaintiffs filed an individual complaint alleging individual and direct
grievances against an individual insurance company.
5
See Saunders v. Farmers Ins. Exch., No. 97-1104 (W.D. Mo. Sept. 14, 1999)
(order granting stay pending the outcome of the current case); Saunders v. State Farm
Fire & Cas. Co., No. 97-1140 (W.D. Mo. Sept. 14, 1999) (same); Kenner v. Safeco
Ins. Co., No. 97-1021 (W.D. Mo. Sept. 14, 1999) (same); Greer v. Allstate Ins. Co.,
No. 97-1138 (W.D. Mo. Sept. 14, 1999) (same); McClain v. Shelter General Ins. Co.,
No. 97-1139 (W.D. Mo. Sept. 14, 1999) (same); McClain v. American Economy Ins.
Co., No. 97-1019 (W.D. Mo. Sept. 14, 1999) (same); Canady v. Federal Ins. Co., No.
97-1141 (W.D. Mo. Sept. 14, 1999) (same); Canady v. Farm Bureau Town & Country
Ins. Co., No. 97-1121 (W.D. Mo. Sept. 14, 1999) (same); Hammonds v. Prudential
Property & Cas. Co., No. 97-1016 (W.D. Mo. Sept. 14, 1999) (same).
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No. 99-CV-0632 (Mo. Cir. Ct. Jackson County filed Jan. 19, 1999) (class action
petition); Saunders v. Farm Bureau Mut. Ins. Co., et al., No. 99-CV-0633 (Mo. Cir.
Ct. Jackson County filed Jan. 19, 1999) (class action petition) (collectively
“Saunders”), based on the same factual allegations as Canady I, but only alleging
violations of the Missouri Human Rights Act, Mo. Rev. Stat. § 213.040 et seq. These
plaintiffs are the appellants in the present appeal. Each action named nine defendants
from the Canady I action, totaling eighteen different defendants, with one non-diverse
defendant in each action. The defendants immediately removed the two state actions
to federal court on the basis of diversity, 28 U.S.C. § 1332, and federal question
jurisdiction, 28 U.S.C. § 1331, pursuant to the All Writs Act, 28 U.S.C. § 1651(a).
Each defendant filed motions to sever appellants’ claims against them from those
against the other defendants and to consolidate the severed claims with their
respective claims in the ten refiled actions of August 1997 currently pending in
federal court. Appellants then filed a motion to remand the removed actions to state
court, and declined to respond to the motions to sever and consolidate on the ground
that the federal court lacked jurisdiction to rule on those motions.
On February 15, 1999, appellee Liberty Mutual Insurance Company filed a
motion in federal court to permanently enjoin appellants from proceeding in a state
court action against it pursuant to the All Writs Act, 28 U.S.C. § 1651, on the ground
that appellants cannot prosecute claims that were already adjudicated and
conclusively rejected in this court’s prior ruling in Canady I. Appellants opposed the
motion, arguing that the proposed injunction was prohibited by the Anti-Injunction
Act, 28 U.S.C. § 2283, and that the injunction was not supported by an equitable
showing of irreparable harm. On June 24, 1999, the district court granted the motion
and enjoined appellants from prosecuting any action against multiple, unrelated
defendants in any court based upon the same allegations as those raised in Canady I.
See Canady II, slip op. at 18. As a result, the district court ordered that the state court
cases be dismissed with prejudice and denied all pending federal motions as moot.
See Saunders v. Allstate Ins. Co., No. 99-0137 (W.D. Mo. June 28, 1999); Saunders
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v. Farm Bureau Town & Country Ins. Co., No. 99-0139 (W.D. Mo. June 28, 1999)
(dismissing state court cases and denying all pending federal motions as moot). This
appeal followed.
Discussion
A. Federal Subject Matter Jurisdiction
As a threshold matter, we must examine whether there is federal subject matter
jurisdiction in the present case. Appellants consistently have contended that the
Saunders cases should not have been removed to federal court under diversity
jurisdiction. Appellants renew their objection to diversity jurisdiction in the present
appeal because their motion to remand was rendered moot by the district court’s
injunction. We review federal subject matter jurisdiction de novo. See V S Ltd.
P’ship v. HUD, 235 F.3d 1109, 1112 (8th Cir. 2000).
The district court based its jurisdiction to issue an injunction on the powers
granted to it by the All Writs Act, finding that “it clearly has jurisdiction to issue an
injunction to protect an issue necessarily decided in a prior case.” Canady II, slip op.
at 4. We agree. The current action on appeal was initiated by appellee Liberty
Mutual, a defendant in Canady I, who sought an injunction against any federal or
state court proceedings in conflict with the ruling in Canady I pursuant to the All
Writs Act. 28 U.S.C. § 1651 (enabling federal courts to “issue all writs necessary or
appropriate in aid of their respective jurisdictions”). The judgment protected by the
injunction is the judgment in Canady I, which was properly issued in federal court,
as it is undisputed that appellants properly filed their original class action complaint
in federal court. As long as the original lawsuit was properly brought in federal court,
the federal court retains subject matter jurisdiction to remove any subsequent state
law action to federal court for purposes of applying the All Writs Act. See Xiong v.
Minnesota, 195 F.3d 424, 426-27 (8th Cir. 1999) (Xiong) (holding that removal to
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federal court was proper for claims asserted under All Writs Act); see also NAACP
v. Metropolitan Council, 144 F.3d 1168, 1171 (8th Cir. 1998) (NAACP II)
(concluding that federal court properly exercised removal jurisdiction over state law
claims pursuant to the All Writs Act).6 Consequently, we hold that the district court
properly asserted jurisdiction under the All Writs Act over the present dispute in
order to protect its prior judgment.
6
Appellants contend that the All Writs Act does not provide an independent
basis for removal to federal court, relying primarily on precedent from other circuits
to support their argument. See, e.g., Pacheco de Perez v. AT&T Co., 139 F.3d 1368,
1379 (11th Cir. 1998) (holding that the All Writs Act does not provide an independent
basis for supplemental federal jurisdiction in situations where “federal jurisdiction is
otherwise wholly lacking”). However, those cases do not deal with the relitigation
exception to the Anti-Injunction Act. The relitigation exception requires that the
claim or issue protected from future litigation by the All Writs Act relate back to a
prior federal court decision. For jurisdictional purposes, the Eighth Circuit requires
that the injunction at issue must seek to protect a judgment properly obtained in
federal court, but does not require an independent basis for federal subject matter
jurisdiction when the All Writs Act is so invoked. See Xiong, 195 F.3d 424; NAACP
II, 144 F.3d 1168.
We further distinguish the present case, in which Liberty Mutual’s federal
claim was presented under the All Writs Act, from Rivet v. Regions Bank of La., 522
U.S. 470, 475 (1998), which prohibits removal of a state court action to federal court
when res judicata or collateral estoppel acts as an affirmative defense to that action,
on the reasoning that “federal jurisdiction exists only when a federal question is
presented on the face of the plaintiff’s properly-pleaded complaint.” While we
recognize that the All Writs Act is utilized as a tool to effectuate the relitigation
exception to the Anti-Injunction Act, which deals with the underlying principles of
res judicata and collateral estoppel, we note that those principles are not asserted as
a defense, but rather as the federal claim presented in Liberty Mutual’s petition for
injunctive relief under the All Writs Act.
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B. Applicability of the Relitigation Exception to the Anti-Injunction Act
The Anti-Injunction Act provides that a “court of the United States may not
grant an injunction to stay proceedings in a state court except as expressly authorized
by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or
effectuate its judgment.” 28 U.S.C. § 2283. The Supreme Court has interpreted the
Act as “an absolute prohibition against enjoining state court proceedings, unless the
injunction falls within one of three specifically defined exceptions” included in the
language of the statute. Atlantic Coast Line R.R. v. Locomotive Eng’rs, 398 U.S.
281, 286-87 (1970) (Atlantic Coast Line); see also In re Federal Skywalk Cases, 680
F.2d 1175, 1181 (8th Cir. 1982). The purpose of these exceptions is “to ensure the
effectiveness and supremacy of federal law.” Chick Kam Choo v. Exxon Corp., 486
U.S. 140, 146 (1988) (Chick Kam Choo); see also Daewoo Elecs. Corp. of Am., Inc.
v. Western Auto Supply Co., 975 F.2d 474, 477 (8th Cir. 1992) (Daewoo).
Appellees rely upon the statute’s third “expressly authorized” exception,
commonly known as the relitigation exception, which applies when an injunction is
“necessary to protect or effectuate the federal court’s judgments.” NBA v. Minnesota
Prof. Basketball, Ltd. P’ship, 56 F.3d 866, 871 (8th Cir. 1995) (NBA); see 28 U.S.C.
§ 2283. The relitigation exception rests upon the “well-recognized concepts of res
judicata and collateral estoppel,” Chick Kam Choo, 486 U.S. at 147, and therefore
permits federal courts to “enjoin a state court from litigating claims and issues that
the district court has already decided.” NBA, 56 F.3d at 872. “We review the
applicability of the relitigation exception de novo.” Id. at 871. In reviewing the
application of an exception to the Anti-Injunction Act, we resolve any doubts in favor
of allowing state courts to proceed without interference from the federal courts. See
In re Federal Skywalk Cases, 680 F.2d at 1181 (citing Atlantic Coast Line, 398 U.S.
at 297).
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Appellants argue that application of the Anti-Injunction Act’s relitigation
exception was not warranted, asserting several arguments to undermine the res
judicata or collateral estoppel effect of the Canady I litigation. Specifically,
appellants claim that (1) because Canady I was dismissed without prejudice for lack
of standing, there was no final judgment on the merits and therefore no res judicata
effect, and (2) because the issues in Canady I and Canady II are not identical, there
is no collateral estoppel effect.
1. Res Judicata Effect of Canady I Litigation
To begin, we reject appellants’ argument that Missouri law, not the federal law
of res judicata, should apply in this case because the Saunders cases were originally
filed in Missouri state court. We have determined already that the relevant prior
judgment was issued in federal court in Canady I, and therefore we apply federal res
judicata law because “‘it is fundamental that the res judicata effect of the first forum’s
judgment is governed by the first forum’s law, not by the law of the second forum.’”
Hillary v. Trans World Airlines, Inc., 123 F.3d 1041, 1043 (8th Cir. 1997) (Hillary)
(citing Semler v. Psychiatric Inst. of Wash., D.C., Inc., 575 F.2d 922, 930 (D.C. Cir.
1978)); see also NAACP v. Metropolitan Council, 125 F.3d 1171, 1174 (8th Cir.
1997) (NAACP I) (holding that “federal law governs res judicata effect of an earlier
federal judgment based on federal law”) (citing Poe v. John Deere Co., 695 F.2d
1103, 1105 (8th Cir. 1982)).
In applying the Eighth Circuit test for whether the doctrine of res judicata bars
litigation of a claim, we examine whether (1) a court of competent jurisdiction
rendered the prior judgment, (2) the prior judgment was a final judgment on the
merits, and (3) both cases involved the same cause of action and the same parties.
Hillary, 123 F.3d at 1044 n.2.; NAACP I, 125 F.3d at 1174. Regarding the first
criterion, we have concluded already that the district court properly exercised federal
subject matter jurisdiction to render the Canady I judgment. However, appellants
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primarily dispute the second criterion of the res judicata test, contending that a
dismissal without prejudice for lack of standing does not constitute a final judgment
on the merits and therefore does not trigger the doctrine of res judicata.
The relitigation exception is narrowly construed and allows a district court to
enjoin litigation of only those claims and issues that the district court has already
decided. See Chick Kam Choo, 486 U.S. at 146 (holding that “the exceptions are
narrow and are ‘not [to] be enlarged by loose statutory construction’”) (quoting
Atlantic Coast Line, 398 U.S. at 287). However, the relitigation exception may apply
even if the merits of the case were never reached, provided that a critical issue
concerning the case has been adjudicated properly. See NBA, 56 F.3d at 872 (“The
legislative policy that ‘permits a federal court to enjoin state court action when a
federal court has decided a suit on its substantive merits has equal force when a
critical underlying issue unrelated to the substantive merits of the action has been
litigated to finality.’”) (quoting Baker v. Gotz, 415 F. Supp. 1243, 1250 (D. Del.),
aff’d, 546 F.2d 415 (3d Cir. 1976) (unpublished opinion)). In NBA, we determined
that a preliminary injunction “carries enough significance and finality to invoke the
relitigation exception” because (1) it “confers important rights and finally adjudicates
the issue of preserving the status quo until the district court reaches the case’s merits”
and (2) it is appealable. 56 F.3d at 872. Likewise, in the present case, a dismissal for
lack of standing to bring a class action complaint may invoke the relitigation
exception because (1) it finally adjudicates the issue of standing under these specific
allegations, and therefore preserves the status quo unless standing is otherwise
obtained and it becomes proper to reach the merits of the case, and (2) it is appealable
and in fact has been fully litigated in this court in Canady I. As a result, we hold that
the relitigation exception may be warranted in this case, even though the merits of the
case were never reached in Canady I.
In examining the third criterion of the federal res judicata inquiry, we consider
whether both the Saunders cases and the Canady I litigation involved the same parties
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and the same cause of action. It is undisputed that the eighteen Saunders defendants
also were named as defendants in Canady I . Therefore, the parties are undeniably
the same in both cases. Further, we agree with the district court that the Saunders
cases involved the same cause of action as the Canady I litigation. “The same cause
of action framed in terms of a new legal theory is still the same cause of action.”
NAACP I, 125 F.3d at 1174 (holding that a state law claim mirroring a Fair Housing
Act claim had res judicata effect because it sought to redress the same wrong in both
actions) (citing United States v. Gurley, 43 F.3d 1188, 1195 (8th Cir. 1994)); see also
Engelhardt v. Bell & Howell Co., 327 F.2d 30, 32-33 (8th Cir. 1964) (holding that
when “the basic wrongful acts pleaded in all actions appear to be the same,” state and
federal law claims constitute the same cause of action for res judicata purposes). A
side-by-side review of the class action complaints filed in the Saunders cases and
Canady I reveals that the language formulating the cause of action in the Saunders
cases is identical to the language comprising the counts in the Canady I litigation,
except that the Saunders complaint supplants the provision of the Fair Housing Act,
42 U.S.C. § 3604(b), with the comparable provision of the Missouri Human Rights
Act, Mo. Rev. Stat. § 213.040. The factual allegations underlying the causes of
action are also identical. We find that, although the legal theory advanced in the
Saunders cases is phrased in terms of Missouri state law, the cause of action remains
the same as the original Fair Housing Act claim presented in the Canady I litigation.
Therefore, we hold that the district court did not err in relying on the res judicata
effect of Canady I in applying the Anti-Injunction Act’s relitigation exception to the
Saunders cases.
2. Collateral Estoppel Effect of Canady I Litigation
Appellants additionally contend that, even if res judicata principles do apply,
the principles of collateral estoppel should prevent application of the Anti-Injunction
Act’s relitigation exception. See Chick Kam Choo, 486 U.S. at 14 (requiring
principles of both collateral estoppel and res judicata to be satisfied in applying
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relitigation exception to Anti-Injunction Act). We examine four factors to determine
if collateral estoppel applies:7
Collateral estoppel is appropriate when: (1) the issue sought to be
precluded is identical to the issue previously decided; (2) the prior
action resulted in a final adjudication on the merits; (3) the party sought
to be estopped was either a party or in privity with a party to the prior
action; and (4) the party sought to be estopped was given a full and fair
opportunity to be heard on the issue in the prior action.
Wellons, Inc. v. T.E. Ibberson Co., 869 F.2d 1166, 1168 (8th Cir. 1989).
Our prior discussion establishes that the second and third criteria have been
met in this case. The fourth criterion has been satisfied as well, because the original
Canady I plaintiffs were afforded a full and fair opportunity to be heard on the
specific issue of whether they had standing to proceed in a class action against
multiple, unrelated insurance companies in the absence of an alleged conspiracy and
without alleging direct injuries. Only the first factor is in dispute on this appeal.
Appellants assert that the issues of Canady I are not identical to the issues
precluded by the injunction of Canady II because: (1) the Saunders claims were
asserted under Missouri law, which has more liberal joinder rules than federal law
and allows joinder of multiple defendants even in the absence of concerted action,
7
Although we rely upon federal law in analyzing the collateral estoppel issue,
see Jaramillo v. Burkhart, 999 F.2d 1241, 1245 (8th Cir. 1993) (holding that to
determine collateral estoppel effect of a federal civil rights action, “[f]ederal law
governs the preclusive effect of a claim arising under federal law”), it is irrelevant
whether we apply federal Eighth Circuit law or Missouri law, because both
jurisdictions employ identical analyses. See In re Scarborough, 171 F.3d 638, 641-42
(8th Cir. 1999) (outlining Missouri collateral estoppel criteria).
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and (2) the facts are not identical in that the cases covered different time periods and
proposed using different methodology to determine class status. Specifically,
appellants assert that the district court’s discovery limitation orders prevented
appellants from pursuing a more narrowly-focused class definition based on census
tract information rather than zip codes.
At the outset, we note that these arguments rely upon differences in procedural
rules. See Fed. R. Civ. P. 20 (classifying joinder as a federal procedural rule), 26(c)
(authorizing a district court, as a matter of procedure, to create orders limiting
discovery). However, because federal subject matter jurisdiction attaches pursuant
to the All Writs Act, procedural matters in this case, as well as any future case
impacting the prior judgment in Canady I, are governed by the Federal Rules of Civil
Procedure. See Fed. R. Civ. P. 81(c) (authorizing application of the Federal Rules to
state court actions removed to federal court); see also Willy v. Coastal Corp., 503
U.S. 131, 134-35 (1992) (holding that the “expansive language” of Rule 81(c)
“indicates a clear intent to have the [Federal] Rules . . . apply to all district court civil
proceedings”); Hiatt v. Mazda Motor Corp., 75 F.3d 1252, 1255 (8th Cir. 1969) (Hiatt)
(explaining that “[i]t is, of course, well-settled that in a suit based on [federal]
jurisdiction the federal courts apply federal law as to matters of procedure”). As a
result, any differences in procedural rules are irrelevant to the instant case. For this
reason, we decline to consider the procedural discrepancies highlighted by appellants
in our determination of whether the issues in the present appeal are identical to the
issues presented in Canady I.
Appellants additionally argue that there is no identity of issues because the
state law claims covered a different time period than the federal law claims. We find
this argument unpersuasive. The difference in time periods does not affect the
underlying nature of the claims at issue, and therefore the difference in time periods
is irrelevant in determining whether the issues were identical. See Xiong, 195 F.3d
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at 427 (holding that difference in claims alleging the same violations over different
time periods are immaterial in determining identity of issues for purposes of applying
the relitigation exception to the Anti-Injunction Act).
Because appellants do not assert any persuasive arguments to support their
contention that the issues are not identical, and we have determined already that the
claims asserted in both federal and state court are essentially the same, we hold that
the district court did not err in finding that the collateral estoppel effect of the Canady
I litigation justified application of the relitigation exception to the Anti-Injunction Act
in this case.
3. Scope of the Injunction
We must be careful to stay within the parameters of the relitigation exception.
Therefore, we review the record to ensure that the scope of the injunction is narrowly
tailored to sufficiently protect the original federal judgment, without exceeding it.
See Chick Kam Choo, 486 U.S. at 148 (requiring an injunction to be narrowly
tailored to preclude relitigation only of issues already adjudicated by the federal
court). To do so, we assess “the precise state of the record and what the earlier
federal order actually said.” Id.; see also In re SDDS, Inc., 97 F.3d 1030, 1037 (8th
Cir. 1996).
In the present case, the earlier federal order in Canady I prohibited the
prosecution of any action against multiple, unrelated insurance companies in the
absence of an alleged conspiracy and without alleging direct injuries. The injunction
at issue in this appeal mirrors that language, ordering that “plaintiffs are ENJOINED
from prosecuting any action against multiple, unrelated defendants in any court based
upon the same allegations as those raised in this case.” Canady II, slip op. at 16
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(emphasis in original). The district court chose this wording to preclude further
adjudication of the already-resolved issue of standing to bring a class action against
multiple, unrelated defendants in the absence of an alleged conspiracy or without
alleging direct injury. Specifically, the district court outlined its rationale by stating
that
[i]t is clear that plaintiffs were only granted permission by the dismissal
of the prior case to refile actions in which they allege direct injuries
against properly joined defendants. By suing in state court when they
did, plaintiffs obviously were attempting to circumvent this Court’s
prior ruling that they have no standing to bring suit against unrelated
defendants. They were also attempting to defeat the diverse defendant’s
right to seek removal so as to prevent federal law from deciding the
question of standing. Such duplicative litigation shall not be tolerated,
and an injunction is appropriate under these circumstances to preclude
plaintiffs from playing “judicial hopscotch” and frustrating orders of the
Court.
Id. at 13. Because the district court confined the scope of the Canady II injunction
to whether a class action may be brought against multiple, unrelated insurance
companies in the absence of an alleged conspiracy and without alleging a direct
injury, it stayed within the boundaries of the relitigation exception to the Anti-
Injunction Act, and thus did not err in issuing the injunction prohibiting appellants
from prosecuting any federal or state court proceeding attempting to relitigate the
specific and narrowly-defined issue of standing.
Prior case law in this circuit supports this conclusion. In NBA, we affirmed an
injunction only insofar as it prevented the state court from taking a different approach
on issues previously decided in the district court’s original decision. See 56 F.3d at
872. Similarly, in the present case we hold that the district court acted properly in
issuing an injunction preventing the state court from taking a different approach on
the issue of standing to pursue a class action in the absence of an alleged conspiracy
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or without alleging direct injury. The injunction is not so broad as to foreclose the
pursuit of any federal or state court action including claims and parties common to
the already decided federal action. See id. at 872 (holding that pursuit of “a parallel
state court lawsuit involving claims and parties common to the federal action does not
justify the district court’s intervention in state court proceedings”). On the contrary,
appellants may attain standing under many circumstances, including the filing of
individual suits, the successful allegation of a conspiracy by the named defendants,
or the assertion of actual grievances. What appellants may not do is recycle the same
claims and issues in different courts, hoping to achieve the result they desire.
This appeal is one of those rare cases in which the issues pursued in state court
are essentially identical to the issues presented in the original federal litigation. Upon
careful review of the complaints submitted in the Saunders cases with the original
Canady I complaint, we find no perceivable difference in the issues presented. Each
petition alleges that appellants, as a class, identified by the same definition, were
harmed by the same redlining practices employed by the homeowners’ insurance
industry. Appellants may not file what is essentially the same action, albeit under
different legal theories, in state court merely to obtain a more favorable result than
the one already obtained in their first choice of forum. See Kansas Pub. Employees
Ret. Sys. v. Reimer & Koger Assocs., Inc., 77 F.3d 1063, 1070 (8th Cir.) (reasoning
that a federal injunction against state court proceedings would be warranted when
“the new suit was merely a refiling of the old suit in ‘an attempt to subvert the
purposes of the [federal statute granting jurisdiction]’”), cert. denied, 519 U.S. 948
(1996).8
8
Appellants argue that their injuries are indirect by nature, because the
redlining practices in the insurance industry only have a negative impact when all the
insurance companies engage in them, and that foreclosing the ability to pursue this
action by joining multiple, unrelated defendants in state court, as opposed to federal
court (which has already prevented them from pursuing on a theory of indirect
injury), impermissibly extends the impact of the Canady I decision to state courts as
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We find it dispositive that the district court based its injunctive relief on
appellants’ lack of standing to bring suit, because (1) lack of standing does constitute
a final judgment for res judicata and collateral estoppel purposes,9 and (2) standing
is determined by procedural rules. See Nor-West Cable Comm. Partnership v. City
of St. Paul, 924 F.2d 741, 746-47 (8th Cir. 1991) (classifying standing as an
appealable procedural issue reviewed for clear error); see also Dresser v. Backus, 229
F.3d 1142 (4th Cir. 2000) (per curiam) (holding that because relitigation of issue was
barred by collateral estoppel, res judicata determination of finality of judgment
dismissed for lack of standing was not relevant); Summit Medical Assoc., P.C., v.
Pryor, 180 F.3d 1326, 1334 (11th Cir. 1999) (holding that “although a district court’s
standing determination conclusively resolves a disputed question and settles an
important issue separate from the merits of the case, courts have recognized that the
issue of standing is not effectively unreviewable on appeal from final judgment”).
As stated above, this case was brought properly in federal court pursuant to the All
Writs Act, as will any future suit dealing with the exact same issues. As a result,
well as federal courts. Regardless, appellants chose to litigate their original claims
in federal court, and thus they are bound by the res judicata and collateral estoppel
effects of their original choice of forum. See Hiatt, 75 F.3d at 1260 (noting that a
plaintiff must accept the limitations of choosing a federal forum rather than a state
forum) (citing Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 376 (1978)).
9
We recognize that denial of class certification alone does not constitute a final
judgment on the merits sufficient to satisfy the res judicata principles underlying the
relitigation exception to the Anti-Injunction Act. See Coopers & Lybrand v. Livesay,
437 U.S. 463, 467 (1978); White v. Cessna Aircraft Co., 518 F.2d 213, 215-16 (8th
Cir. 1975); see also In re General Motors Corp. Pick-Up Truck Fuel Tank Prod. Liab.
Litig., 134 F.3d 133, 146 (3d Cir. 1998) (holding that “denial of class certification is
not a ‘judgment’ for purposes of the Anti-Injunction Act while the underlying
litigation remains pending”); J.R Clearwater Inc. v. Ashland Chem. Co., 93 F.3d 176
(5th Cir. 1996) (holding that denial of class certification in still-pending federal action
lacked sufficient finality to invoke relitigation exception to Anti-Injunction Act).
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federal standing will always be determined by Article III and federal case law
interpreting it. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)
(outlining the elements required to attain standing in federal court). Because standing
is a procedural issue, and because all procedural issues regarding class action
standing in the present case will be decided in federal court according to the Federal
Rules of Civil Procedure, any discrepancies between state and federal procedural
rules are irrelevant. As a result, we hold that the district court did not err in narrowly
tailoring its injunction of state court proceedings concerning the issue of appellants’
standing to bring a class action against multiple, unrelated insurance companies in the
absence of a conspiracy or without alleging direct injuries.
C. Applicability of the All Writs Act
While the relitigation exception to the Anti-Injunction Act provides a
justification for disregarding the Anti-Injunction Act, a federal court must also
possess positive authority to issue an injunction against state court proceedings. The
All Writs Act provides this authority, and empowers a federal court to protect the res
judicata and collateral estoppel effects of its prior judgments by enabling it to “issue
all writs necessary or appropriate in aid of their respective jurisdictions.” 28 U.S.C.
§ 1651. See In re General Motors Corp. Pick-Up Truck Fuel Tank Prod. Liab. Litig.,
134 F.3d 133, 143 (3d Cir. 1998) (“If an injunction falls within one of [the exceptions
to the Anti-Injunction Act], the All-Writs Act provides the positive authority for
federal courts to issue injunctions of state court proceedings.”).
In addition to being permissible, an injunction must also be equitable in order
for a federal court to issue it. See Chick Kam Choo, 486 U.S. at 151 (“the fact that
an injunction may issue under the Anti-Injunction Act does not mean that it must
issue”); Daewoo, 975 F.2d at 478 (an injunction must be equitable as well as
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allowable under an exception to the Anti-Injunction Act). Appellants argue that, even
if the relitigation exception to the Anti-Injunction Act does apply, appellees did not
establish the four elements necessary for an equitable injunction under the All Writs
Act, because (1) appellees’ only injury of additional litigation expenses does not
constitute irreparable injury; (2) the harm to appellees of additional litigation
expenses does not outweigh the harm to appellants of the loss of their right to pursue
claims in state court; (3) appellee Liberty Mutual failed to show that it would succeed
on the merits of the case; and (4) the public has an interest in seeing the matter
litigated.
We review the district court’s grant of injunctive relief for an abuse of
discretion. In re SDDS, 97 F.3d at 1040. We will reverse the district court’s decision
only if its conclusion derives from clearly erroneous factual or legal conclusions. See
id. In determining whether injunctive relief is appropriate, we consider the
Dataphase factors: (1) the threat of irreparable harm to the movant; (2) the balance
between this harm and the injury caused by granting the injunction, (3) the probability
of succeeding on the merits, and (4) the public interest. See id. (authorizing
application of the Dataphase factors to questions regarding federal injunctive relief
under the relitigation exception to the Anti-Injunction Act); see also Dataphase Sys.
v. C L Sys., 640 F.2d 109, 113 (8th Cir. 1981) (establishing the factors necessary to
permit injunctive relief) (en banc).
In re SDDS explicitly holds that (1) a party suffers irreparable harm when it is
required to relitigate in state court issues previously decided in federal court, and
(2) the deprivation of an opportunity to pursue the same issues in a state forum does
not constitute a legitimate harm requiring a balancing of equities. 97 F.3d at 1040.
Because the defendants in Canady I already successfully litigated the issues
prohibited by the Canady II injunction, we may infer that the appellees in this action
will likewise be successful. Moreover, “the public policy concerns of finality and
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repose informing our res judicata jurisprudence strongly supports the protection of
our previous judgment.” Id. at 1041. Our discussion affirming the district court’s
application of the relitigation exception to the Anti-Injunction Act thoroughly
explored the rationale for applying res judicata and collateral estoppel principles to
the circumstances of this case, and we are motivated by that reasoning to support the
injunction on public policy grounds. Thus, appellants’ circumstances fail to satisfy
the Dataphase criteria. As a result, we hold that the district court did not abuse its
discretion in granting injunctive relief.
Conclusion
For the reasons stated above, we affirm the order of the district court.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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