Advanced Bionics Corp. v. Medtronic, Inc. , 128 Cal. Rptr. 2d 172 ( 2003 )

MORENO, J., Concurring.

I agree with the majority that the trial court improperly enjoined Medtronic, Inc., from pursuing its action in Minnesota. The majority concludes that the trial court’s temporary restraining order (TRO) was improper under notions of judicial restraint and comity. I write separately to explain why I believe these notions of judicial restraint and comity should apply in this case and also to discuss, more generally, what I consider to be the appropriate criteria for issuing antisuit injunctions.

The majority recognizes California’s interest in protecting employees from noncompetition agreements, yet it concludes that “this policy interest does not, under these facts, justify issuance of a TRO against the parties in the Minnesota court proceedings.” (Maj. opn., ante, at p. 707.) The majority explains that “[a] parallel action in a different state presents sovereignty concerns that compel California courts to use judicial restraint when determining whether they may properly issue a TRO against parties pursuing an action in a foreign jurisdiction.” (Ibid.) Since there will always be sovereignty concerns when parallel actions are proceeding in two different states, I write separately to explain why I believe that an antisuit injunction is inappropriate in this case notwithstanding California’s public policy interest against noncompetition agreements.

Comity has been described as a “complex and elusive concept.” (Laker Airways v. Sabena, Belgian World Airlines (D.C. Cir. 1984) 731 F.2d 909, 937 (Laker Airways); see Philips Medical Systems Intern. B. V. v. Bruetman (7th Cir. 1994) 8 F.3d 600, 604 [describing comity as “a traditional, although in the nature of things a rather vague, consideration in the exercise of equitable discretion”].) In the issues presented for review in this case, Medtronic asserts that “[t]his court has not examined the criteria for issuing antisuit injunctions since 1897.” (Citing Spreckels v. Hawaiian Com. etc. Co. (1897) 117 Cal. 377 [49 P. 353] (Spreckels)) Since this issue is now squarely before us, I believe it is necessary for us to explain what criteria should be used in determining when a court of this state should issue an antisuit injunction.

I.

State courts have the power to issue antisuit injunctions; they can restrain litigants from proceeding in suits brought in a sister state or in a foreign nation. (Spreckels, supra, 117 Cal. at p. 378; Pfaff v. Chrysler Corp. (1993) 155 Ill.2d 35, 43 [182 Ill.Dec. 627, 610 N.E.2d 51, 54] (Pfaff); Gannon v. Payne (Tex. 1986) 706 S.W.2d 304, 306.)

State courts typically issue antisuit injunctions only in exceptional circumstances, but the state courts employ various different tests to determine whether an antisuit injunction is appropriate. Texas, for example, enjoins foreign suits “sparingly, and only in very special circumstances.” (Christensen v. Integrity Ins. Co. (Tex. 1986) 719 S.W.2d 161, 163.) Texas courts apply a four-part test to determine whether an antisuit injunction is appropriate: “1) to address a threat to the court’s jurisdiction; 2) to prevent the evasion of important public policy; 3) to prevent a multiplicity of suits; or 4) to protect a party from vexatious or harassing litigation.” (Golden Rule Ins. Co. v. Harper (Tex. 1996) 925 S.W.2d 649, 651, citing Gannon v. Payne, supra, 706 S.W.2d at p. 307.)

In Illinois, a foreign action can be restrained if it “will result in fraud or gross wrong or oppression; a clear equity must be presented requiring the inteiposition of the court to prevent manifest wrong and injustice.” (Pfaff, supra, 610 N.E.2d at p. 61.) Am antisuit injunction is not issued “merely because of inconvenience or simultaneous, duplicative litigation, or where a litigant simply wishes to avail himself of more favorable law.” (Id. at p. 62.) Further, the mere fact that a party filing in another state might benefit from a more favorable law does not mean that the party has “avoided or defeated the laws of Illinois so as to require equitable interposition.” (Id. at p. 65.) Illinois courts inquire whether the jurisdiction of the Illinois trial court is threatened, and whether the litigant has “avoided or defeated the laws of Illinois” by filing suit in a sister state. (Ibid.)

Similarly, in New York, the use of injunctive power to restrain litigation in a foreign court is “rarely and sparingly employed, for its exercise represents a challenge, albeit an indirect one, to the dignity and authority of that tribunal. Accordingly, an injunction will be granted only if there is danger of fraud or gross wrong being perpetrated on the foreign court.” (Arpels v. Arpels (1960) 8 N.Y.2d 339, 341 [207 N.Y.S.2d 663, 170 N.E.2d 670, 671].)¹

II.

“The state law standards for interstate injunctions are often similar to those for international injunctions, and the authoritative cases tend to be used interchangeably.” (George, Parallel Litigation (1999) 51 Baylor L.Rev. 769, 840.) Since state courts consider the same criteria for deciding whether to issue both intrastate and international injunctions, it is understandable that some state courts have looked to, and incorporated, the standards established by federal courts to determine when a federal court may enjoin a proceeding in a foreign nation. (See, e.g., Gannon v. Payne, supra, 706 S.W. at p. 307, citing Laker Airways, supra, 731 F.2d 909; and Seattle Totems Hockey, etc. v. National Hockey League (9th Cir. 1981) 652 F.2d 852 (Seattle Totems Hockey Club), cert. denied sub nom. Northwest Sports Enterprises, Ltd. v. Seattle Totems Hockey Club, Inc. (1982) 457 U.S. 1105 [102 S.Ct. 2902, 73 L.Ed.2d 1313].)

Another reason that state courts have looked to federal law is that federal law is fairly well developed in the area of foreign antisuit injunctions. Two competing views have emerged: one view, deemed the “liberal approach,” looks to whether the foreign suit involves similar parties and issues; the other view, described as the “restrictive approach,” considers whether issuing an antisuit injunction would offend notions of international comity. (Compare Kaepa, Inc. v. Achilles Corp. (5th Cir. 1996) 76 F.3d 624 with China Trade and Development v. M.V. Choong Yong (2d Cir. 1987) 837 F.2d 33 (China Trade).)

The Fifth, Seventh, and Ninth Circuit Courts of Appeals have adopted, or “incline [d] toward” the liberal approach. (Philips Medical Systems Intern. B.V. v. Bruetman, supra, 8 F.3d at p. 605 [7th Cir.]; see Kaepa, Inc. v. Achilles Corp., supra, 76 F.3d 624 [5th Cir.]; Allendale Mut. Ins. v. Bull Data Systems (7th Cir. 1993) 10 F.3d 425; Seattle Totems Hockey Club, supra, 652 F.2d 852 [9th Cir.]; In re Unterweser Reederei, Gmbh (5th Cir. 1970) 428 F.2d 888, revd. on other grounds sub nom. The Bremen v. Zapata Off-Shore Co. (1972) 407 U.S. 1 [92 S.Ct. 1907, 32 L.Ed.2d 513].)

Under the liberal approach, a duplication of the parties and issues, alone, is generally sufficient to justify the issuance of an antisuit injunction. (See, e.g., Seattle Totems Hockey Club, supra, 652 F.2d at p. 856.) Courts following this approach consider vexatiousness or oppressiveness in a race to judgment in the foreign forum as sufficient grounds to issue an antisuit injunction. As the Fifth Circuit stated, “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.” ’ ” (Kaepa, Inc. v. Achilles Corp., supra, 76 F.3d at p. 627, fn. omitted.)

In contrast, the District of Columbia, Second, Third, Sixth, and possibly the Eleventh Circuit Courts of Appeals have adopted the restrictive approach, which places a greater emphasis on international comity. (Stonington Partners v. Lernout & Hauspie Speech (3d Cir. 2002) 310 F.3d 118 (Stonington Partners); General Elec. Co. v. Deutz Ag (3d Cir. 2001) 270 F.3d 144; Gau Shan Co., Ltd. v. Bankers Trust Co. (6th Cir. 1992) 956 F.2d 1349 (Gau Shan); Sea Containers Ltd. v. Stena AB (D.C. Cir. 1989) 890 F.2d 1205; China Trade, supra, 837 F.2d 33 [2d Cir.]; Laker Airways, supra, 731 F.2d 909 [D.C. Cir.]; Mutual Service Cas. Ins. Co. v. Frit Industries (M.D.Ala. 1992) 805 F.Supp. 919, 921, affd. (11th Cir. 1993) 3 F.3d 442.)

The circuits that follow the restrictive approach “hold that the only proper grounds to grant a foreign antisuit injunction are: 1) to protect the forum’s jurisdiction, or 2) to prevent evasion of the forum’s important public policies.” (Gau Shan, supra, 956 F.2d at p. 1354; see Laker Airways, supra, 731 F.2d at p. 927.) These circuits maintain that the mere duplication of parties and issues is not a sufficient basis for the issuance of an antisuit injunction. They reason that “[f]actors such as ‘vexatiousness’ or ‘oppressiveness’ and a ‘race to judgment’ are ‘likely to be present whenever parallel actions are proceeding concurrently’ ” and therefore are not sufficient grounds for issuance of an antisuit injunction. (Gau Shan, supra, 956 F.2d at p. 1355.)

Courts applying the restrictive approach stress comity, rather than concerns about duplication and a race to judgment, in deciding whether to issue an antisuit injunction. As the Sixth Circuit stated, “[a]ntisuit injunctions . . . deny foreign courts the right to exercise their proper jurisdiction. Such action conveys the message, intended or not, that the issuing court has so little confidence in the foreign court’s ability to adjudicate a given dispute fairly and efficiently that it is unwilling even to allow the possibility.” (Gau Shan, supra, 956 F.2d at p. 1355.) As a result, “[c]omity dictates that foreign antisuit injunctions be issued sparingly and only in the rarest of cases.” (Id. at p. 1354.)

III.

In determining which criteria courts of this state should apply when deciding whether to issue an antisuit injunction, I agree with the majority that considerations of comity and judicial restraint should be paramount. Therefore, I would adopt a test that emphasizes these considerations. While the state courts have employed various standards for determining when an antisuit injunction is appropriate, it is in the federal context where these standards have been most fully explored.

The liberal approach favored by some federal circuit courts does not give sufficient attention to concerns of comity; under this approach, it is simply enough to show that there is parallel litigation in a foreign forum causing “ ‘an absurd duplication of effort’ [which] would result in unwarranted inconvenience, expense, and vexation.” (Kaepa, Inc. v. Achilles Corp., supra, 76 F.3d at p. 627, fn. omitted.) Unlike the liberal approach, the restrictive approach followed by other circuit courts finds that “the possibility of an ‘embarrassing race to judgment’ or potentially inconsistent adjudications does not outweigh the respect and deference owed to independent foreign proceedings.” (Laker Airways, supra, 731 F.2d at pp. 928-929, in. omitted.) The restrictive approach is clearly more protective of the principles of comity and judicial restraint. In deciding what criteria courts of this state should use for issuing antisuit injunctions, I would therefore adopt the restrictive approach.

Under this approach, courts should only issue antisuit injunctions in two situations: if “necessary to protect the jurisdiction of the enjoining court, or to prevent the litigant’s evasion of the important public policies of the forum.” (Laker Airways, supra, 731 F.2d at p. 927.) The circuits that follow the restrictive approach “have interpreted these exceptions narrowly.” (Stonington Partners, supra, 310 F.3d at p. 127.) As I explain below, neither of these exceptions apply in this case.

A. Protecting Jurisdiction

In Laker Airways, the Court of Appeals for the District of Columbia Circuit approved an antisuit injunction where the foreign defendants had initiated the foreign proceeding for the “sole purpose of terminating the United States claim” and where the foreign court had enjoined the parties from pursuing the United States action. (Laker Airways, supra, 731 F.2d at p. 915.) The foreign court was “not following a parallel track but attempting] to carve out exclusive jurisdiction over concurrent actions.” (Id. at p. 930.) In such a case, in which the foreign proceedings were “solely designed to rob the court of its jurisdiction,” an antisuit injunction was necessary to protect the forum’s jurisdiction. (Id. at p. 931.)

While Laker Airways presented a situation in which the jurisdiction of the forum state was in fact threatened, “[s]uch threats to a court’s jurisdiction ... are quite unusual.” (Gau Shan, supra, 956 F.2d at p. 1356.) Typically, only two scenarios threaten a court’s jurisdiction. The first is when the concurrent proceedings are in rem or quasi in rem. (China Trade, supra, 837 F.2d at p. 36.) In such a case, jurisdiction is based on the presence of property within the court’s jurisdictional boundaries. A concurrent proceeding in another jurisdiction presents the danger that the foreign court will order the property transferred out of the jurisdictional boundaries of the first court, thereby depriving it of jurisdiction over the matter. The second scenario was presented in Laker Airways. In that case, a foreign court in an in personam action was attempting to carve out exclusive jurisdiction over the matter. In such a case, “an injunction may . . . also be necessary to protect the enjoining court’s jurisdiction.” (China Trade, supra, 837 F.2d at p. 36.)

Circuits that have followed the restrictive approach have held that the possibility that a foreign court may favor the party filing the foreign suit is not a threat to the jurisdiction of the United States courts. (Gau Shan, supra, 956 F.2d at p. 1356.) Even “the possibility that a ruling of a foreign court might eventually result in the voluntary dismissal of the claim before the United States court” does not threaten the United States court’s jurisdiction. (Ibid.)

In the present case, the parallel proceeding initiated by Medtronic in Minnesota does not threaten the jurisdiction of the California courts. At the time when the California court issued the TRO at issue here, enjoining Medtronic “from taking any action whatsoever, other than in this Court,” the Minnesota court had issued a preliminary injunction restricting Stultz’s activities as an Advanced Bionics Corporation employee but not restraining the parties from pursuing other litigation. After the California court issued the antisuit TRO, the Minnesota court revised its preliminary injunction. Notably, however, the Minnesota court did not enjoin the action from proceeding in a California court; instead, the Minnesota injunction was defensive; it enjoined the parties “from obtaining relief in another court that would effectively stay or limit [the Minnesota] action.” Whereas the foreign proceedings in Laker Airways were “solely designed to rob the court of its jurisdiction” and the foreign court attempted to carve out exclusive jurisdiction, the Minnesota injunction did not seek to terminate the litigation in California, but was instituted merely to protect the jurisdiction of the Minnesota court. (Laker Airways, supra, 731 F.2d at p. 931.) Further, as courts applying the restrictive approach have held, the possibility that Medtronic may receive a more favorable ruling in a Minnesota court does not threaten the jurisdiction of a California court. (Gau Shan, supra, 956 F.2d at p. 1356.)

B. Evading Public Policies

“Few cases have addressed a situation in which an anti-suit injunction has been appropriately entered to protect important public policy, but the courts that take a restrictive approach have referenced this exception as being narrowly drawn.” (Stonington Partners, supra, 310 F.3d at p. 127.) “[O]nly the evasion of the most compelling public policies of the forum will support the issuance of an antisuit injunction.” (Gau Shan, supra, 956 F.2d at p. 1358.)

Here, Stultz and Advanced Bionics, as well as several amici curiae, argue that California has a fundamental interest in protecting its employees from noncompetition agreements under Business and Professions Code section 16600.² They contend that allowing the parallel suit to proceed in Minnesota would undermine California’s strong public policy interest.

Contrary to the arguments of Stultz and Advanced Bionics, however, the public policy exception does not allow for an injunction merely because two states may apply different substantive laws. “If any advantage in law was sufficient to justify application of the public policy exception, antisuit injunctions would become common and . . . comity a consideration of secondary importance. Procedural or substantive advantages offered by the forum law do not, of themselves, provide grounds for an antisuit injunction.” (Gau Shan, supra, 956 F.2d at p. 1357.)

Even the possibility that the party filing in a sister state may benefit favorably from an application of that state’s law does not necessarily constitute an evasion of the forum state’s public policies. The Supreme Court of Illinois, for example, has held that Illinois law was not avoided or defeated in a case where “Chrysler may benefit from a liberal interpretation by a Michigan court of Michigan’s law” and similar claims had already been dismissed without prejudice in Illinois. (Pfaff, supra, 610 N.E.2d at p. 65.) The court held that while a party may gain by filing suit in a sister state, “that gain alone does not mean that [the party filing in the forum state] has suffered a manifest wrong and injustice.” (Ibid.) In addition, the possibility that a sister state may apply and enforce a different law is merely speculative and is present “whenever courts have concurrent jurisdiction.” (China Trade, supra, 837 F.2d at p. 37.)

The crucial determination is whether the suit was filed in another state for the purpose of evading the important policies of the forum state. Such a purpose may be inferred, for example, if neither party has ties to the sister state in which a parallel suit has been initiated. Courts have found that a party’s connection to the foreign jurisdiction minimizes the possibility that such a suit was filed for purposes of evading the forum state’s law. For example, the Sixth Circuit found that the purpose of filing suit in Hong Kong was not to evade the policies of Tennessee, since one of the parties was a Hong Kong corporation and its assets were located there. (Gau Shan, supra, 956 F.2d at p. 1358.) Also, in Arpels v. Arpels, the New York Court of Appeal found that the filing of parallel divorce proceedings in France was appropriate based on the fact that the parties were married in France, lived there for several years, maintained a home there after moving to New York, and possibly were still citizens of France. (Arpels v. Arpels, supra, 207 N.Y.S.2d at p. 342.)

Similarly, courts have held that the identity of the so-called evading party is relevant in determining whether the purpose of the parallel litigation was to evade the laws of the forum state. (Laker Airways, supra, 731 F.2d at pp. 931-932.) Courts have granted an antisuit injunction in cases in which the litigants are both residents of the state in which the injunction is sought, and one resident is seeking to evade the law of the common domicile in order to gain an inequitable advantage over the other. In Cole v. Cunningham (1890) 133 U.S. 107, 119 [10 S.Ct. 269, 278, 33 L.Ed. 538], the United States Supreme Court affirmed a Massachusetts decree enjoining prosecution of a New York action, in which Massachusetts creditors prosecuted attachment suits against a Massachusetts debtor in New York to avoid Massachusetts insolvency laws. The court stated that the rule allowing courts to enjoin those over which they have jurisdiction “has been often applied by the courts of the domicile against the attempts of some of its citizens to defeat the operation of its laws, to the wrong and injury of others.” (Ibid.)

Further, an evasive purpose might also be inferred if the foreign suit is initiated contrary to the dictates of a forum selection clause. If the foreign suit is filed in adherence to the forum selection clause, however, an evasive purpose is less likely. For example, in Kirby v. Norfolk Southern Railway Com. (N.D.Ga. 1999) 71 F.Supp.2d 1363, 1371, the court found that there was no evidence from which to infer that the party filing suit in Australia was evading the public policies of the forum, based in large part on the forum selection clauses in the applicable contracts, selecting Australia as the forum of choice.

In the present case, the issue is not simply whether California has a strong public policy against noncompetition agreements. Instead, the question is whether Medtronic initiated its action in Minnesota for the purpose of evading California’s public policy. Based on the facts of this case, I conclude that Medtronic did not institute its suit in Minnesota to evade California law. Medtronic is a Minnesota corporation. Medtronic entered into an employment contract with Stultz, a Minnesota resident, in Minnesota. The contract contained a choice-of-law provision that stated: “The validity, enforceability, construction and interpretation of this Agreement shall be governed by the laws of the state in which the Employee was last employed by Medtronic.” Stultz worked for Medtronic’s Minnesota office for the duration of his employment. Based on these significant ties to a Minnesota forum, as well as the choice-of-law clause designating Minnesota as the chosen forum, I cannot conclude that Medtronic filed suit in Minnesota for the purpose of evading California public policy.

I therefore do not agree with the argument of Stultz and Advanced Bionics, as well some of the amici curiae, that the issuance of the antisuit TRO by the California trial court was appropriate because California law should apply to the action. The Court of Appeal below reached this same conclusion, finding that California law should apply and therefore that the restraining order was appropriate to ensure that this dispute be litigated in California. The antisuit injunction case law does not involve a choice-of-law type of inquiry. A choice-of-law analysis “is simply not a good ‘fit’ with the injunction context.” (Stonington Partners, supra, 310 F.3d at p. 130.) Here, the question is not whether California law should apply, but simply whether Medtronic initiated the suit in Minnesota for the purpose of evading California’s public policy. Even though Medtronic may benefit by initiating a proceeding in Minnesota, I do not find that the purpose of Medtronic’s action was to evade the public policy of California.

IV.

Following the restrictive approach of the federal courts, I therefore conclude that this case does not fall within the exceptional circumstances in which the issuance of an antisuit injunction is appropriate. Medtronic has a legal right to proceed in Minnesota and it is entitled to avail itself of that forum. In this case, an injunction is not necessary to protect the jurisdiction of the California courts, nor is it needed to prevent Medtronic from evading the public policy of California. Accordingly, I agree with the majority that the issuance of the antisuit injunction was inappropriate under principles of comity and judicial restraint.

The petition of plaintiffs and respondents for a rehearing was denied March 5, 2003, and the opinion was modified to read as printed above.

1 Based on our research, it appears that the Minnesota Supreme Court has not addressed the standards for issuing antisuit injunctions. A lower court has held that a Minnesota court could enjoin parallel litigation proceeding in Texas, based on the substantial similarity of the cases and the first filed status of the Minnesota case. (First State Ins. v. Mn. Min. and Mfg. (Minn.Ct.App. 1995) 535 N.W.2d 684, 689.)

2 All statutory references are to the Business and Professions Code unless otherwise stated.