Louisiana-Pacific v. Lester Building

Volume 1 of 2
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SANDPIPER VILLAGE CONDOMINIUM 
ASSOCIATION, INC., a Florida
corporation and all others similarly
situated; CRAIG OSTERGREN, co-
conservator for Keith Ostergren, a
minor, on behalf of themselves
and all others similarly situated;
CHERYL OSTERGREN, co-conservator
for Keith Ostergren, a minor, on
behalf of themselves and all others
similarly situated; KEITH
OSTERGREN, a minor; BYRON No. 03-35058
ALTON; SUSAN ALTON; CPC LTD.,
Washington Real Estate  D.C. No.
CV-95-00879-JO
Developer, OPINION
Plaintiffs,
v.
LOUISIANA-PACIFIC CORPORATION, a
Delaware corporation,
Defendant-Appellee,
LESTER BUILDING SYSTEMS, a
division of Butler Manufacturing
Company; LESTER’S OF MINNESOTA,
INC.,
Respondents-Appellants,

14557
14558 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
STATE OF MINNESOTA, 
Respondent-Amicus,
and
HARRY A. MERLO,
Defendant,
STATE OF MINNESOTA,
Respondent,
INSURANCE COMPANY OF NORTH
AMERICA; CIGNA INSURANCE
COMPANY OF NORTH AMERICA;
NORTHWESTERN PACIFIC INDEMNITY
COMPANY, AGRICULTURAL 
INSURANCE COMPANY; NATIONAL
UNION FIRE INSURANCE COMPANY;
LEXINGTON INSURANCE COMPANY;
GRANITE STATE INSURANCE
COMPANY,
Defendant-Intervenors,
v.
JAMES W. GILLES; DALE J.
MATHERLY; DOUGLAS MECKLING;
MICHAEL L. WATTS,
Plaintiff-Intervenors.

Appeal from the United States District Court
for the District of Oregon
Robert E. Jones, District Judge, Presiding
Argued and Submitted
May 4, 2004—Portland, Oregon
Filed October 24, 2005
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14559
Before: Stephen Reinhardt, Barry G. Silverman and
Richard R. Clifton, Circuit Judges.
Opinion by Judge Clifton;
Concurrence by Judge Silverman;
Dissent by Judge Reinhardt
14562 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
COUNSEL
Kell M. Damsgaard (argued) and Brian W. Shaffer, Morgan,
Lewis & Bockius LLP, Philadelphia, Pennsylvania; Janet M.
Schroer, Hoffman, Hart & Wagner, Portland, Oregon, for the
respondent-appellant.
Michael H. Simon (argued) and Jeffrey C. Dobbins, Perkins
Coie LLP, Portland, Oregon, for the defendant-appellee.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14563
Mike Hatch, Attorney General, David Woodward, Assistant
Attorney General, for the State of Minnesota.
OPINION
CLIFTON, Circuit Judge:
Lester Building Systems and its affiliate, Lester’s of Min-
nesota, Inc. (collectively “Lester”), appeal an order perma-
nently enjoining entry of judgment on a portion of a jury
verdict rendered in favor of Lester and against Louisiana-
Pacific Corporation (“L-P”) in Minnesota state court. In re
Louisiana-Pacific Inner-Seal Siding Litigation, 234 F. Supp.
2d 1170 (D. Or. 2002). The district court exercised its author-
ity under the All Writs Act, 28 U.S.C. § 1651, to partially
enjoin entry of the judgment on the ground that the state court
award was inconsistent with the settlement reached in a prior
nationwide class action involving L-P and over which the
court retained jurisdiction. We conclude that the injunction
violates the Anti-Injunction Act, 28 U.S.C. § 2283, and
reverse.
I. Background
Class Action and Settlement
L-P manufactures building materials from industrial wood
products and pulp and markets itself as an innovator in the
development of new, affordable and environmentally
advanced products for home and commercial builders. Begin-
ning in 1985, L-P manufactured and sold an exterior
composite-wood siding designed to resemble conventional
lumber for use on residential and other structures. L-P
referred to this siding as “Inner-Seal Siding,” a registered
trademark. L-P provided a 25-year limited warranty with the
purchase of Inner-Seal Siding.
14564 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
In 1995, owners of structures on which Inner-Seal Siding
had been installed brought a class action lawsuit in the Dis-
trict Court for the District of Oregon for damages resulting
from the failure of Inner-Seal Siding. The class plaintiffs
alleged that while L-P had advertised and marketed Inner-Seal
Siding as durable, effective and superior to other types of
exterior siding, the siding had prematurely rotted, buckled,
cracked and otherwise deteriorated when exposed to normal
weather conditions.
The federal action, which covered a nationwide class of
claimants, settled shortly after it was filed. On April 26, 1996,
the district court approved and adopted a settlement agree-
ment and entered an order and final judgment. Pursuant to the
settlement agreement and order, L-P agreed to finance a set-
tlement fund and, in exchange, class claims related to the fail-
ure of Inner-Seal Siding were released.1 L-P also agreed to
1
The settlement agreement required L-P to make a minimum payment
of $275,000,000 into a settlement fund. Qualified claims were paid from
that fund and class members were barred from litigating any claim related
to the failure of Inner-Seal Siding for a period of four years from the date
of the final order and judgment. After the expiration of the fourth year, the
settlement agreement gave L-P the option of funding the remaining unpaid
claims, if any. If L-P agreed to fund the outstanding claims, all class mem-
bers remained bound by the agreement for another year. If L-P elected not
to fund the outstanding obligations, the settlement terminated with respect
to unfunded claims, leaving those class members free to pursue new law-
suits against L-P. This annual reevaluation of remaining claims continued
until the end of the seventh year, at which time the claims administrator
was ordered to notify L-P if the settlement fund proved insufficient to sat-
isfy all approved claims filed before January 1, 2003. Within 60 days of
notification, L-P was directed to advise class counsel whether it intended
to satisfy the unfunded claims. If L-P agreed to fund the remaining claims,
it was required to make additional payments “at the end of each of the next
two 12-month periods or until all claims [were] paid in full.” Satisfaction
of the “final funding” obligation bound all class members “for an addi-
tional 24-month period.” On the other hand, if L-P determined not to fund
the outstanding claims, all class members whose claims remained unsatis-
fied for a period of 90 days were authorized to “pursue whatever legal
remedies [were] available to them without regard to the release.”
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14565
reinstate the balance of the term on its 25-year warranty upon
termination of the settlement agreement, to be measured from
the date of original installation. The settlement was binding
on all class members, save those who timely requested exclu-
sion from the class.2 The settlement did not cover claims aris-
ing from the failure of new siding installed after January 1,
1996.
In addition to the release of claims against L-P, the class
members released all claims related to the failure of Inner-
Seal Siding (installed prior to January 1, 1996) against per-
sons or entities “involved in the distribution, installation, con-
struction and first time sale of structures with Exterior Inner-
Because of the large number of claimants, L-P and class counsel, with
approval of the special master overseeing the settlement, created several
alternative procedures through which class members, at their election,
could receive compensation ahead of schedule but at a discounted rate.
None of the alternative compensation procedures in any way modified or
changed the original settlement agreement.
2
All members of the “Settlement Class” were “barred and permanently
enjoined from prosecuting ‘Settled Claims’ . . . against L-P.” The “Settle-
ment Class” was defined as “all Persons who have owned, own, or subse-
quently acquire Property on which Exterior Inner-Seal Siding has been
installed prior to January 1, 1996.” The settlement agreement excluded
claimants who timely requested exclusion from the class and claimants
who were members of a certified class action in Florida titled Anderson
v. Louisiana Pacific Corp., No. 94-2458-CA-01. A “Settled Claim” was
defined as
any claim, . . . damage, loss or cost, action or cause of action, of
every kind and description that the Releasing Party has or may
have, whether known or unknown, asserted or unasserted, latent
or patent, that is, has been, could reasonably have been or in the
future might reasonably be asserted by the Releasing Party either
in the Action or in any other action or proceeding in this Court
or any other court or forum, regardless of legal theory, and
regardless of the type or amount of relief or damages claimed,
against any of the Defendants, arising from or in any way relating
to any defects or alleged defects of Exterior Inner-Seal Siding, or
any part thereof.
14566 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
Seal Siding.” This provision was included to foreclose the
possibility that class members would bring claims against
businesses located in the Inner-Seal Siding chain of distribu-
tion. Claims against L-P by persons or entities within the
chain of distribution were not released, however.
Under the settlement agreement and order, the district court
retained jurisdiction, described as follows:
[E]xclusive and continuing jurisdiction over the
Actions and Parties, including all members of the
Class, the administration and enforcement of the set-
tlement, and the benefits to the Class, including for
such purposes as supervising and implementation,
enforcement, construction, and interpretation of the
Settlement Agreement.
By September 2003, L-P had agreed to meet all funding
obligations and had made cash payments totaling approxi-
mately $509 million to about 142,000 claimants in satisfac-
tion of approximately $823 million in claims.3
Minnesota Lawsuit
Lester, a Minnesota corporation, designs, constructs and
sells pre-engineered wood buildings for livestock confine-
ment. Lester purchased Inner-Seal Siding from 1991 to 1996
and incorporated the siding into the structural wall panels of
buildings sold to its customers. As a distributor of buildings
equipped with Inner-Seal Siding, Lester was not a class mem-
ber and was not a party to the settlement agreement. Class
3
This figure includes claims that were satisfied through the alternative
funding procedures, see supra at 14564-65 n.1, which afforded claimants
an opportunity to receive discounted payments on an accelerated basis in
order to minimize delay and uncertainty. According to the special master’s
report dated November 17, 2003, only $18.1 million in valid, approved
claims remained unfunded as of the end of the claims period. L-P has also
agreed to fund those claims.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14567
member claims against Lester were released by the settle-
ment, however.
In March 2000, Lester brought an action against L-P in
Minnesota state court. Lester sought damages for breach of
contract, breach of express and implied warranties, fraud and
loss of business reputation as a consequence of having used
defective Inner-Seal Siding in its buildings. Lester alleged
that it had sold approximately 2,600 buildings with Inner-Seal
Siding but that it stopped using the siding in 1996 because of
complaints from its dealers and customers. Lester further
alleged that it “has received and will continue to receive hun-
dreds of claims and complaints . . . which must be adminis-
tered and resolved in order to avoid further losses.”
Lester recognized that new claims by class members were
foreclosed by the settlement agreement but observed that the
settlement “provide[d] no relief or monetary compensation to
[Lester], [its] dealers, or others similarly situated.” Because
its injuries were not redressed by the settlement agreement,
Lester asserted that L-P was
obligated and required: (i) to pay, reimburse, and
indemnify [Lester] for all monies [it] pay[s] and
expenses [it] reasonably incur[s] in properly satisfy-
ing the claims of [its] dealers and customers arising
from defects in and failure of L-P’s Inner-Seal; and
(ii) to pay, reimburse, and indemnify [Lester] for all
other damages and losses [it has] now incurred and
will incur as a result of [its] purchase and use of
L-P’s Inner-Seal [Siding].
Lester sought damages “in an amount to be determined at
trial” and “an affirmative injunction requiring L-P to resume
honoring its warranties and other legal obligations, including,
but not limited to reimbursing [Lester] for satisfying the
claims of [Lester’s] dealers and customers.”
14568 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
L-P disagreed with Lester’s interpretation of the res judi-
cata effect of the settlement agreement and moved for partial
summary judgment on all present and future claims against
L-P related to the failure of Inner-Seal Siding. In particular,
L-P argued that Lester’s claim for the costs to repair its cus-
tomers’ buildings was barred because a substantial portion of
Lester’s customers were members of the prior class action and
covered by the settlement agreement.
The trial court denied the motion. The court held that under
Minnesota law a distributor can recover costs it may incur in
the future with respect to a defective product that was placed
in the stream of commerce. The court concluded that there
were genuine issues of material fact as to whether the settle-
ment agreement precluded recovery of those damages and
with respect to the amount of those damages, if any.
The case was tried in September and October 2002.4 A sig-
nificant portion of the trial centered on the issue of damages.
Lester argued that moral and business compulsions required
it to remove and replace the Inner-Seal Siding on every build-
ing that it sold, even if the owner of the building had received
at least some compensation in the prior settlement with L-P.
Lester’s position was explained by its president, who testified
that
the best thing we could expect to come out of this is
that we finally get . . . the farmer what he’s entitled
to, which is he bought a building and expected to
have his siding hold up, and that’s what we need to
make happen and that’s why we’re here. We’re try-
ing to make that result happen.
4
The parties filed portions of the trial transcript with the district court.
On appeal, Lester offered additional portions of the transcript that were
previously unavailable and asked that we take judicial notice of the same.
We grant the request. See Fed. R. Evid. 201.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14569
...
I want each of you to know that we’re going to fix
these buildings. That’s why we’re here. Counsel in
some of the lead up to trial has at least left me with
some kind of general impression that, you know, is
there any guarantee that the customer will be taken
care of here? And I would ask you to look at all the
different people from Lester and its dealers that
you’ve got a chance to meet over the last two weeks
and know that we’re here because we want to fix
these buildings and that’s what we’re going to do.
Lester offered evidence that repairing the siding on every
affected building would cost $13.2 million. Of that total,
approximately $2 million was for buildings that were fabri-
cated after January 1, 1996, and thus not covered by the set-
tlement. The evidence further showed that the total cost of the
siding purchased by Lester and used in its buildings was $3.4
million, with approximately $240,000 of that amount falling
outside of the terms of the settlement.
At the conclusion of Lester’s case, L-P moved for directed
verdict. L-P again argued that a portion of Lester’s claims
were barred by the class action settlement agreement. The
trial court denied the motion. The court reasoned that the
motion was premature because L-P planned to submit expert
testimony concerning the mechanics of the class action and
settlement. The court concluded that a final resolution of the
effect of the settlement agreement could be made after further
factual development.
As the trial court anticipated, the defense focused on the
effect of the class action settlement. For instance, L-P called
the special master appointed by the district court to oversee
the settlement. The special master explained the settlement
process, the terms of the settlement and the district court’s
order and final judgment and decree. L-P also called an expert
14570 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
witness who testified that, based on a comparison of the list
of opt-outs and a list of purchasers of Lester’s buildings, none
of Lester’s customers had opted out of the class action settle-
ment. The expert further asserted that as of October 11, 2002,
$640,000 had been paid to Lester’s customers from the settle-
ment fund.5
The trial court, apparently accepting L-P’s argument that
the class action settlement precluded damages for repair costs
involving buildings that were covered by the settlement agree-
ment, instructed the jury that repair costs were not recoverable
unless they fell outside the scope of the settlement:
You have heard evidence of the settlement of a
nationwide class action against Louisiana-Pacific.
Lester is not a party to that action and therefore the
claims that it makes in this case are not barred by the
class action settlement. The Court has determined,
however, that one element of Lester’s damages, its
claims for the cost to repair the buildings with Inner-
Seal, is barred as to any particular building, unless
one of the following exceptions applies:
(a) the building was constructed on or after January
1, 1996;
(b) the building has or may have a siding perfor-
mance failure after January 1, 2003; or
(c) the building is one for which claims are submit-
5
The record does not reflect the actual number of Lester customers who
filed claims under the settlement or the amount that each customer
received in relation to their submitted claims. Two of Lester’s customers
testified at trial that recovery under the settlement was about 30% of repair
costs.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14571
ted prior to January 1, 2003, have not been paid and
the class action is not funded in August 2003.[6]
Consistent with the court’s instruction, the special verdict
form directed the jury to specify the damages, if any, awarded
for repair costs and the damages it would have awarded if the
settlement agreement had not barred certain claims.
Following deliberations, the jury returned a verdict of $29.6
million in favor of Lester.7 The jury determined that an award
of $13.2 million was necessary to compensate Lester for the
cost to repair buildings. The jury listed the same figure, $13.2
million, as the amount it would have awarded but for the class
settlement. In other words, the jury determined as a factual
matter that none of the repair costs were covered by the settle-
ment. The jury also awarded Lester $3.4 million for the cost
6
Subsection (b) was likely included to reflect the exception in the settle-
ment agreement for claims for siding failures that occurred after January
1, 2003. Subsection (c) may have followed from Lester’s argument that if
L-P refused to fund the remaining claims, Lester would be entitled to dam-
ages for repair costs. Although L-P subsequently committed to funding the
remaining claims, the dates referred to in subsections (b) and (c) were still
in the future at the time the instructions were given to the jury. Thus, the
jury was, in effect, asked to anticipate the future, which might help to
explain the verdict that it reached.
7
Questions 8 and 9 of the completed verdict form provided:
8. What amount of money would fairly compensate Lester?
Cost of Inner-Seal: $3.4 million
Cost to Repair Buildings
(those not barred by the class action): $13.2 million
Lost Profits: $10.2 million
Cost to Restore Goodwill: $2.8 million
Total: $29.6 million
9. Without regard to the class action, what is the total amount
of money that would fairly and adequately compensate Lester for
the Cost to Repair Buildings (both those in and out of the class
action)?
$13.2 million
14572 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
of Inner-Seal Siding, $10.2 million for lost profits and $2.8
million to restore goodwill.
On October 24, 2002, the trial judge signed and filed the
Findings of Fact, Conclusions of Law, and Order for Judg-
ment based on the jury verdict. In accordance with the Minne-
sota Rules of Civil Procedure, the judge stayed entry of
judgment for 30 days.8 By order dated November 18, 2002,
the stay was extended at L-P’s request until post-trial motions
were resolved.
Federal Injunction
On November 6, 2002, just three weeks after the jury ver-
dict in favor of Lester, L-P filed a motion to enforce the set-
tlement agreement in the Oregon federal district court with
continuing jurisdiction over the settlement. L-P asked the dis-
trict court to enjoin the state court from entering judgment on
the portion of the verdict that was inconsistent with the class
action settlement, namely, the jury’s award of damages for the
cost to repair buildings that had Inner-Seal Siding installed
prior to January 1, 1996 and the award for the cost of the
Inner-Seal Siding that Lester had purchased from L-P.
On December 13, 2002, the district court granted L-P’s
motion in part and issued an “injunction enjoining the Minne-
sota state court from entering judgment on the portion of the
jury’s damages award that is encompassed in and precluded
by the class action settlement agreement.” In re Louisiana-
Pacific, 234 F. Supp. 2d at 1172. The court found that that
portion of the award amounted to $11.2 million.9 Id. at 1182.
8
Such a stay allows for the resolution of any post-trial motions without
the need to reopen judgment if relief is granted. See Minn. R. Civ. P. 58.01
cmt; id. 58.02.
9
The court reached this amount by subtracting $2 million—the cost to
repair and replace siding on buildings constructed after January 1, 1996—
from the $13.2 million awarded as the total repair and replacement dam-
ages. In re Louisiana-Pacific, 234 F. Supp. 2d at 1174.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14573
Based on its review of Minnesota caselaw, the court deter-
mined that the state court had erred when it held that Lester
could recover the cost to repair defective Inner-Seal Siding on
its customers’ buildings.10 Id. at 1177, 1180. Because Minne-
sota state law did not recognize the repair costs claim, the
court concluded that “the Minnesota jury verdict wrongly
includes damages expressly encompassed in and precluded by
the nationwide class action settlement.” Id. at 1177-78.
Having found that the verdict included damages covered by
the settlement, the court reasoned that allowing the judgment
to stand in full would not only “circumvent the settlement
agreement” but also “seriously impair the integrity of this
court’s Order[ ] and directly interfere with and seriously
impair [the court’s] ability to supervise, implement, enforce,
construe and interpret the class action settlement agreement
over which [the court has] retained exclusive jurisdiction.” Id.
at 1180. Because federal intervention in the state proceeding
was “necessary both in aid of [its] continued jurisdiction and
to protect and effectuate [its] Order, Final Judgment and
Decree,” the court held that the injunction was proper under
the All Writs Act and not barred by the Anti-Injunction Act.
Id. at 1178, 1180. The court did not, however, enjoin entry of
judgment on the $3.4 million in damages that represented the
difference between what Lester had paid for Inner-Seal Siding
and the actual value of the siding. Id. at 1182.
Lester timely appealed.
10
This point was made explicit during the hearing on L-P’s motion for
injunctive relief, where the district court opined that “the judge in Minne-
sota . . . did wrong. The . . . hog barn damage [claims] of people within
a class should never have been submitted to that jury. That was wrong in
every respect.” In its order granting the injunction, the court confirmed its
conclusion that “the Minnesota state court was wrong to submit Lester’s
damages claim for repair costs covered by the class action settlement to
the jury for consideration.” In re Louisiana-Pacific, 234 F. Supp. 2d at
1180.
14574 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
State Court Judgment
Before the injunction issued, L-P filed post-trial motions
for judgment notwithstanding the verdict and for a new trial
in state court. Through the motions, L-P renewed its argument
that a portion of the verdict was barred by the class settle-
ment. The motions were pending when the district court
issued the injunction.
Following entry of the injunction, the state trial court took
up and denied the motions. The court determined that the
award was supported by the evidence presented at trial and
should not be disturbed. Shortly thereafter, the court issued a
revised Order for Judgment. To comply with the injunction,
the court entered judgment awarding Lester $20,074,424.21.11
The court held that if the injunction was vacated, reversed or
lifted on appeal, it would reinstate the jury’s original award
of $29.6 million, plus costs and interest.
L-P appealed. The Minnesota Court of Appeals affirmed.
The court declined to address whether Lester’s claim for
repair costs was properly submitted to the jury, however,
because that presented an issue on appeal to this Court. Lester
Bldg. Sys. v. Louisiana Pacific Corp., No. A03-48, 2004
Minn. App. Lexis 156 (Feb. 17, 2004). The court explained
that L-P could renew its challenge to the award of repair cost
damages if the injunction was lifted. L-P’s petition for review
by the Minnesota Supreme Court was denied. Lester Bldg.
Sys. v. Louisiana Pacific Corp., No. A03-48, 2004 Minn.
Lexis 248 (Apr. 28, 2004).
11
The court reasoned that absent the injunction Lester was entitled to
recover $31,375,862.21. That figure was calculated by adding the original
jury verdict of $29.6 million, plus $1,519,811 in pre-verdict interest,
$189,255 in post-verdict interest and $66,796.21 in costs and disburse-
ments, and subtracting the portion of the verdict enjoined by the district
court, $11.2 million, and $101,438 in interest on that amount.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14575
II. Standard of Review
We review the exercise of jurisdiction de novo. Gerritsen
v. Consulado Gen. De Mexico, 989 F.2d 340, 344 (9th Cir.
1993). We review the decision to grant a permanent injunc-
tion for abuse of discretion. United States v. Yacoubian, 24
F.3d 1, 3 (9th Cir. 1994). A legal error amounts to an abuse
of discretion. Western Sys., Inc. v. Ulloa, 958 F.2d 864, 867
(9th Cir. 1992). Accordingly, “[t]he question whether the dis-
trict court had the power to issue the injunction is . . .
reviewed de novo, while its decision to exercise that power is
reviewed for an abuse of discretion.” Id. Factual findings
underlying an injunction are reviewed for clear error. Scott v.
Pasadena Unified Sch. Dist., 306 F.3d 646, 653 (9th Cir.
2002).
III. Subject Matter Jurisdiction
We first address Lester’s jurisdictional argument.12
12
In addition to its argument that the district court lacked subject matter
jurisdiction, Lester contends that it was not subject to the district court’s
equitable powers because it was not properly served and lacked the requi-
site minimum contacts with the forum state. The improper service portion
of Lester’s argument is easily resolved. Lester had actual knowledge of the
proceedings through a mailed copy of L-P’s motion to enforce the class
settlement. That gave Lester an opportunity to appear and oppose the
motion. Lester accepted the opportunity, appeared before the district court
and contested the legality of the injunction. Nothing more was required to
protect Lester and its interests. See, e.g., In re Baldwin-United Corp., 770
F.2d 328, 340 (2d Cir. 1985).
We do not separately discuss the issue of minimum contacts, however.
Although personal jurisdiction is ordinarily determined at the outset as a
threshold matter, in this case that issue is inexorably intertwined with the
merits. If the state court action threatened the jurisdiction of the district
court or implicated the res judicata effect of the settlement agreement,
Lester would be subject to the jurisdiction of the district court in Oregon,
as the court with continuing jurisdiction over the settlement. On the other
hand, if the state court lawsuit did not affect the settlement or the district
court’s jurisdiction over the same, the connection between Lester and the
forum state would be more tenuous. Because we conclude that the district
court lacked the power to enjoin the state court proceedings, we need not
examine whether the district court had the power to enter a binding order
against Lester.
14576 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
[1] Federal courts are courts of limited jurisdiction and pos-
sess “only that power authorized by the Constitution and stat-
ute.” Kokkonen v. Guardian Life Ins. Co. of America, 511
U.S. 375, 377 (1994). Even where subject matter jurisdiction
is satisfied in the original action, enforcement of a final settle-
ment agreement and order “requires its own basis for jurisdic-
tion” before the federal court may “interpret and apply its own
judgment to the future conduct contemplated by the judg-
ment.” Flanagan v. Arnaiz, 143 F.3d 540, 544-45 (9th Cir.
1998). The requisite independent basis for jurisdiction may be
supplied by a provision in the settlement agreement and order
that expressly retains jurisdiction in the district court for the
purpose of overseeing and enforcing the prior judgment. Id.
at 544. Such a provision, in conjunction with the All Writs
Act, empowers a district court to protect its judgment from a
subsequent action that frustrates the purpose of the settlement
agreement and order. In re Baldwin-United, 770 F.2d at 335;
see also Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 34
n.1 (2002); Flanagan, 143 F.3d at 544.
In this case, the district court had subject matter jurisdiction
over the underlying class action.13 The settlement agreement
and order in turn retained jurisdiction in the district court over
the “Actions and Parties, including all members of the Class,
the administration and enforcement of the settlement, and the
benefits to the Class, including for such purposes as supervis-
ing and implementation, enforcement, construction, and inter-
pretation of the Settlement Agreement.” This express
retention of jurisdiction, coupled with the All Writs Act, gave
the district court an adequate jurisdictional basis to entertain
L-P’s motion to protect the settlement agreement through an
injunction.14 See In re Baldwin-United, 770 F.2d at 335; see
also Syngenta, 537 U.S. at 34 n.4; Flanagan, 143 F.3d at 544.
13
We reject Lester’s implied collateral attack on subject matter jurisdic-
tion over the class action itself. See, e.g., Snell v. Cleveland, Inc., 316 F.3d
822, 827 (9th Cir. 2002).
14
As the Second Circuit explained in In re Baldwin-United, the author-
ity retained by a district court in a settlement agreement and order that
provides for continuing and exclusive jurisdiction, in conjunction with the
All Writs Act, conveys subject matter jurisdiction to protect a prior judg-
ment from threats by parties and nonparties alike. See 770 F.2d at 338.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14577
[2] Lester concedes that the district court retained jurisdic-
tion to protect and enforce the settlement agreement but
argues that the court did not have jurisdiction over its state
law claims. Lester misconstrues the substantive issue before
the district court. L-P did not ask the district court to resolve
Lester’s state law claims. The sole question before the court
on L-P’s motion for injunctive relief was whether the state
court action interfered with or threatened the prior settlement
agreement. The district court was thus called upon to interpret
the settlement agreement and to determine whether federal
law allowed it to enjoin the state proceedings. By retaining
jurisdiction over the enforcement of the settlement agreement,
the court preserved the authority to make such a determina-
tion and thereby protect its prior judgment from a subsequent
action that threatened the same.
IV. Anti-Injunction Act
[3] We turn to the propriety of the injunction.15 The district
court drew the authority to issue the injunction from the All
Writs Act, which allows federal courts to “issue all writs nec-
essary or appropriate in aid of their respective jurisdictions
and agreeable to the usages and principles of law.” 28 U.S.C.
§ 1651. The All Writs Act is limited by the Anti-Injunction
Act, which prevents a federal court from enjoining the “pro-
ceedings 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 judgments.” 28 U.S.C. § 2283.
The limitations expressed in the Anti-Injunction Act “rest[ ]
on the fundamental constitutional independence of the States
and their courts,” Atlantic Coast Line R.R. Co. v. Bhd. of
15
In addition to its arguments under the Anti-Injunction Act, Lester
maintains that the injunction violated the Full Faith and Credit Act, its due
process rights and the Rooker-Feldman doctrine and further contends that
L-P was not entitled to an injunction because it had an adequate remedy
at law and failed to show irreparable harm. Because we hold that the
injunction cannot be sustained under the Anti-Injunction Act, we do not
reach Lester’s other contentions.
14578 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
Locomotive Eng’rs, 398 U.S. 281, 287 (1970), and reflect
“Congress’ considered judgment as to how to balance the ten-
sions inherent in such a system,” Chick Kam Choo v. Exxon
Corp., 486 U.S. 140, 146 (1988). Rooted firmly in constitu-
tional principles, the Act is designed to prevent friction
between federal and state courts by barring federal interven-
tion in all but the narrowest of circumstances. See Alton Box
Bd. Co. v. Esprit de Corp., 682 F.2d 1267, 1271 (9th Cir.
1982); Bennett v. Medtronic, 285 F.3d 801, 805 (9th Cir.
2002). Accordingly, the limited exceptions to the Anti-
Injunction Act will not “be enlarged by loose statutory con-
struction.” Atlantic Coast Line, 398 U.S. at 287. Rather,
“[a]ny doubts as to the propriety of a federal injunction
against state court proceedings [will] be resolved in favor of
permitting the state courts to proceed,” id. at 297, which
means that we will uphold an injunction only on “a strong and
unequivocal showing” that such relief is necessary, Bechtel
Petroleum, Inc. v. Webster, 796 F.2d 252, 253-54 (9th Cir.
1986).
The district court recognized that its equitable powers were
circumscribed by the Anti-Injunction Act and held that the
injunction was permissible under the second and third excep-
tions to the Act.16 With respect to the second exception, the
court concluded that the challenged portion of the jury verdict
“directly interfere[d] with and seriously impair[ed its] ability
to supervise, implement, enforce, construe, and interpret the
class action settlement over which [it] retained exclusive
jurisdiction.” In re Louisiana-Pacific, 243 F. Supp. 2d at
1180. With respect to the third exception, the court reviewed
Minnesota law and determined that the cases relied on by the
trial court did not in fact authorize Lester to recover the cost
to repair Inner-Seal Siding. Id. Because state law did not
allow repair costs as damages, the court reasoned Lester had
effectively acted as an agent for class members by “asserting
16
The first exception to the Anti-Injunction Act, which allows an injunc-
tion where “expressly authorized by Act of Congress,” is not at issue here.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14579
damages claims that belonged to the end users.” Id. at 1177.
Thus, the court concluded that the trial court, by submitting
“Lester’s damages claim for repair costs covered by the class
action settlement to the jury for consideration,” had improp-
erly permitted relitigation of issues resolved by the class set-
tlement and allowed a special “subclass” to recover twice on
the same claim. Id. at 1180. We address each of those excep-
tions in turn.17
Necessary in Aid of Jurisdiction Exception
[4] The second exception to the Anti-Injunction Act autho-
rizes injunctive relief “to prevent a state court from so inter-
fering with a federal court’s consideration or disposition of a
case as to seriously impair the federal court’s flexibility and
authority to decide that case.”18 Atlantic Coast Line, 398 U.S.
17The dissent suggests that we have “conducted a de novo review of the
factual findings underlying the district court’s decision to issue the injunc-
tion under the second exception and substituted [our] judgment for that of
the district court.” Post at 14609. The dissent is only partially correct. As
our caselaw explains, we must “review the legal determination of whether
the district court had the power to issue an injunction de novo.” Continen-
tal Airlines, Inc. v. Intra Brokers, Inc., 24 F.3d 1099, 1102 (9th Cir. 1994).
If we are satisfied that the district court had the authority to issue the
injunction, we then examine “its decision to exercise that power . . . for
an abuse of discretion.” Western Sys., 958 F.2d at 867. In this case, we
conclude as a matter of law that the district court lacked the power to
enjoin the state court proceedings. That is not a matter of discretion.
18
The dissent views the necessary in aid of jurisdiction exception and
the relitigation exception as parallel provisions that authorize an injunction
in essentially the same circumstances. Post at 14621 (“From a pragmatic
standpoint, the basic elements of the two exceptions are essentially the
same.”). We are not inclined to construe the Anti-Injunction Act in that
way, as it would render one of the exceptions redundant and the use of the
disjunctive “or” in the statute irrelevant, in violation of the familiar canon
that cautions against such a reading. See, e.g., Mackey v. Lanier Collection
Agency & Serv., Inc., 486 U.S. 825, 837 (1988). A distinction between the
necessary in aid of jurisdiction exception and the relitigation exception has
consistently been recognized in the caselaw. The former exception applies
14580 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
at 295. This exception “arose from the settled rule that if an
action is in rem, the court first obtaining jurisdiction over the
res may proceed without interference from actions in other
courts involving the same res.” Alton Box, 682 F.2d at 1272.
Although the second exception has since been expanded to
include some in personam actions, it remains that an injunc-
tion is justified only where a parallel state action “threatens to
‘render the exercise of the federal court’s jurisdiction nugato-
ry.’ ”19 Bennett, 285 F.3d at 806 (quoting Winkler v. Eli Lilly
& Co., 101 F.3d 1196, 1202 (7th Cir. 1996)). Indeed, the gen-
when a parallel state action “threatens to ‘render the exercise of the federal
court’s jurisdiction nugatory.’ ” Bennett, 285 F.3d at 806. The latter
exception, which was added in 1948, is used “to prevent state litigation of
an issue that previously was presented to and decided by the federal
court.” Chick Kam Choo, 486 U.S. at 147.
The separate treatment of these provisions in the caselaw forces the dis-
sent to concede that the necessary in aid of jurisdiction exception “is gen-
erally applied at an earlier stage of the litigation, before the settlement is
fully implemented.” Post at 14621. The dissent suggests that in “many of
the cases in which an injunction has been affirmed under the relitigation
exception, it has also been affirmed under the ‘necessary in aid of jurisdic-
tion’ exception.” Id. at 14621. But the cases cited by the dissent represent
exceptions explained by their particular facts. In Flanagan v. Arnaiz, 143
F.3d 540 (9th Cir. 1998), for instance, we applied both exceptions because
there was both a final settlement agreement (and judgment) and an ongo-
ing action in the form of litigation over an alleged breach of that set-
tlement agreement. Id. at 543-44. The validity of an injunction will more
often depend on one exception or the other. Compare In re Diet Drugs
Prods. Liab. Litig., 282 F.3d 220, 233 (3d Cir. 2002) (applying the neces-
sary in aid of jurisdiction exception because the federal action had not
reached final judgment), with Amalgamated Sugar Co. v. NL Indus., Inc.,
825 F.2d 634, 639-640 (2d Cir. 1987) (applying the relitigation exception
because the federal action had reached final judgment).
19
The dissent offers an exactly converse definition of the scope of the
necessary in aid of jurisdiction exception. According to the dissent, the
“ ‘necessary in aid of jurisdiction’ exception is inapplicable only when the
district court’s jurisdiction has been so completely exhausted that the
intrusion by a state court on its exercise of its jurisdiction would be mean-
ingless.” Post at 14624. No authority is cited to support that reading of the
caselaw, and we remain bound by precedent.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14581
eral rule is still that “[w]here a suit is strictly in personam . . .
there is no objection to a subsequent action in another juris-
diction, either before or after judgment, although the same
issues are to be tried and determined[,] . . . because [the sub-
sequent action] neither ousts the jurisdiction of the court in
which the first suit was brought, nor does it delay or obstruct
the exercise of that jurisdiction, nor lead to a conflict of
authority where each court acts in accordance with the law.”20
Kline v. Burke Constr. Co., 260 U.S. 226, 232 (1922); see
also Donovan v. City of Dallas, 377 U.S. 408, 412 (1964).
[5] The necessary in aid of jurisdiction exception is inappli-
cable here because the state court action did not threaten the
district court’s jurisdiction over the Inner-Seal Siding litiga-
tion. By the time that the court issued the injunction, the
Inner-Seal Siding class action had long since been resolved.
Indeed, the district court had several years earlier approved
the settlement and entered final judgment. Because the litiga-
tion was over, the state court action could not have interfered
with the district court’s consideration or disposition of the
class claims. Cf. Alton Box, 682 F.2d at 1271. Nor could it
have interfered with the court’s continuing jurisdiction over
the settlement. The membership of the class was fixed, the
parties’ respective rights and liabilities were resolved, the set-
tlement fund had been established and claims were being
20
According to the dissent, we are mired in the law as it was in 1922
and refuse to accept that the necessary in aid of jurisdiction exception has
been used in in personam actions. Post at 14627. The dissent is mistaken.
We acknowledge that the necessary in aid of jurisdiction exception has
been applied in personam actions, though as a limited exception to the
rule. Supra at 14580. We also acknowledge that some courts have ratio-
nalized the expansion of the necessary in aid of jurisdiction exception by
comparing the jurisdiction of a multidistrict court in a complex class
action to a res. See, e.g., In re Baldwin-United, 770 F.2d at 337. We offer
no comment on the validity of such a comparison. We simply hold that
however one views the class action proceedings in this case, application
of the necessary in aid of jurisdiction exception is not supported by estab-
lished law.
14582 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
paid. Lester did not seek to join or undo the class, contest the
payment of funds to class members or make a claim on the
settlement fund. Although the state court litigation arose from
the same facts as the class action, an “injunction cannot issue
to restrain a state court action” simply because it involves “the
same subject matter at issue before the federal court.” Id. at
1272; accord Bennett, 285 F.3d at 807. Instead, an injunction
is “necessary in aid of” the court’s jurisdiction only when it
is required to preserve the court’s jurisdiction. See Atlantic
Coast Line, 398 U.S. at 295; Bennett, 285 F.3d at 806-07.
Because the state court action did not seriously impair the dis-
trict court’s flexibility and authority to decide the Inner-Seal
Siding litigation or enforce the settlement agreement, an
injunction was not necessary to preserve the court’s jurisdic-
tion. See, e.g., Alton Box, 682 F.2d at 1271-73.
The authority cited by the district court, Hanlon v. Chrysler
Corp., 150 F.3d 1011 (9th Cir. 1998), is not to the contrary.21
In Hanlon, we upheld an injunction barring a federal class
member from pursuing a state class action involving claims
that were similar to those raised in a nationwide class action
that was nearing resolution. 150 F.3d at 1025. The contro-
versy in that case arose when various lawsuits were consoli-
21
The district court also quoted extensively from the Second Circuit’s
decision in In re “Agent Orange” Product Liability Litigation, 996 F.2d
1425 (2d Cir. 1993). In that case, the court held that “[a] district court, in
exceptional circumstances may use its All Writs authority to remove an
otherwise unremovable state court case in order to ‘effectuate and prevent
the frustration of orders it has previously issued in its exercise of jurisdic-
tion otherwise obtained.’ ” 996 F.2d at 1431 (quoting United States v. New
York Tel. Co., 434 U.S. 159, 172 (1977)). As noted by the district court
in its order, the Supreme Court in Syngenta Crop Protection, Inc. v. Hen-
son, 537 U.S. 28 (2002) held that the removal statute “requires that a fed-
eral court have original jurisdiction over an action in order for it to be
removed from a state court. The All Writs Act, alone or in combination
with the existence of ancillary jurisdiction in a federal court, is not a sub-
stitute for that requirement.” 537 U.S. at 34. Accordingly, the In re “Agent
Orange” rule, which was never adopted by this Circuit, is no longer
instructive.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14583
dated into one nationwide class action. Id. at 1018. Shortly
thereafter, a preliminary settlement agreement was approved
and notice was made to class members. Id. To protect the set-
tlement process, the district court ordered that “[p]ending
final determination . . . of the settlement[,] . . . no member of
the Settlement Class . . . shall commence [a lawsuit involving]
. . . any of the claims described in the . . . Settlement Agree-
ment.” Id. In contravention of that order, a disaffected class
member filed a state class action, through which he sought to
represent himself and all similarly situated residents of the
state. Id. at 1018-19. The district court enjoined the state pro-
ceedings. Id. at 1019.
We affirmed. We concluded that a temporary stay pending
settlement of the nationwide class action was appropriate
under the All Writs Act and the Anti-Injunction Act because
concurrent state proceedings at such a sensitive stage in the
federal proceedings would have threatened the jurisdiction of
the district court. Id. at 1025. Although Hanlon did not elabo-
rate, the decision clearly recognized that a competing state
class action covering a portion of the federal class posed a
significant danger to the delicate and transitory process of
approving a settlement agreement, and thereby threatened the
district court’s ability to resolve the litigation.22
22
In this way, Hanlon tracks the Third Circuit’s decision in In re Diet
Drugs, in which the court affirmed an order enjoining a parallel state
action. Our dissenting colleague relies on In re Diet Drugs for the proposi-
tion that the complexities of a nationwide class action justify application
of the necessary in aid of jurisdiction exception. Post at 14626-27. The
dissent overlooks one critical aspect of In re Diet Drugs, however. In that
case, as in Hanlon, the federal nationwide class action was nearing settle-
ment at the time the state action was filed. 282 F.3d at 237. In light of the
sensitive stage of the federal litigation, the Third Circuit reasoned that the
state court action “might interfere with the District Court’s oversight of
the settlement at that time, given the careful balancing it embodied” and,
therefore, posed “a serious threat to the District Court’s ability to manage
the final stages of this complex litigation.” 282 F.3d at 236-37. Here, the
prior (not parallel) federal class action resulted in a settlement and final
judgment nearly four years before Lester filed the state action and over six
years before the jury returned its verdict.
14584 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
[6] We are not presented with similar concerns. Lester was
not a class member and did not seek to represent class mem-
bers. Nor was the federal litigation at a sensitive stage in the
process. The membership of the Inner-Seal Siding class and
the terms of the settlement were approved and finalized long
before the district court issued the injunction. Final judgment
had been entered. There was nothing more for the district
court to do in the class action, save to ensure that the terms
of the settlement agreement were followed.23 The state court
23
The dissent contends that the federal class action remained active and
that to reach a contrary result we have improperly “disagree[d] with the
district court’s statement of the relevant facts” and made “erroneous find-
ings of fact” on appeal. Post at 14623 & 14624. Two of the three “facts”
that we assertedly ignore, however—that allowing Lester to collect on its
repair cost claim will lead to double recovery for some class members and
cause other distributors to seek damages “on behalf of customers,” post at
14622—are not factual findings. The first is a legal conclusion and the
second is speculation, which the district court failed to connect to the evi-
dence before it or to the fact of how that would threaten its jurisdiction.
We do not owe deference to such matters.
Furthermore, the dissent is mistaken about the relevance of L-P’s deci-
sion to fund claims and the possible effect of the state court action on that
decision. By the time the district court enjoined the state proceedings, L-P
had already agreed to fund the remaining claims through the seventh year.
The sole question was whether L-P would make the “final funding” obli-
gation, which would last until all outstanding claims were paid. See In re
Inner Seal Siding Litigation, 234 F. Supp. 2d at 1172-73. L-P, after the
state jury verdict, answered that question and elected to fund all remaining
claims. Accordingly, the jury verdict only had the potential to influence
L-P’s final funding decision and, ultimately, did not even affect that issue.
Moreover, even if L-P’s decision to fund the remaining claims had been
influenced by the state court action, the requisite threat to the jurisdiction
of the district court would still have been lacking. If L-P elected to fund
the remaining claims (as it did), the claims administrator would continue
paying approved claims. On the other hand, if L-P elected not to fund the
additional claims, members whose claims remained unsatisfied would be
able to “pursue [any available] legal remedies.” Id. This process of evalua-
tion and reelection to continue funding was agreed to long before Lester
brought the state court action. The parties knew that at some point L-P
might decide not to fund the remaining claims. The coming to pass of a
result that the parties themselves contemplated and provided for in their
agreement cannot legitimately be called a threat to the district court’s
jurisdiction.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14585
action could not threaten the court’s jurisdiction over that pro-
cess. Accordingly, the injunction cannot be sustained under
the necessary in aid of jurisdiction exception.
The dissent maintains that our holding “disregards the pro-
vision of the settlement agreement and the district court order
expressly retaining ‘exclusive and continuing’ jurisdiction
over the enforcement of the settlement agreement.” Post at
14625. Relying on our decision in Flanagan v. Arnaiz, the
dissent suggests that “inclusion of such a provision . . . pro-
vides a sufficient basis for the invocation of the ‘necessary in
aid of jurisdiction’ exception.” Id. We are not persuaded that
Flanagan stands for such a broad proposition. We agree with
the dissent that the “exclusive and continuing” jurisdiction
provision is important in the sense that without it (and the
authority conveyed by the All Writs Act), the district court
would have lacked subject matter jurisdiction over L-P’s
motion to enforce the settlement agreement. See supra at
14575-77. But that provision, standing alone, does not allow
the district court to enjoin any proceeding it wants to enjoin.
The power to halt a state proceeding is circumscribed by the
Ant-Injunction Act. The necessary in aid of jurisdiction
exception to that Act authorizes injunctive relief only when
the “federal court’s flexibility and authority to decide [a]
case” is “seriously impaired” by a parallel state court proceed-
ing. Atlantic Coast Line, 398 U.S. at 295.
This limitation is actually illustrated by Flanagan, in which
we upheld an order permanently barring the plaintiffs from
pursuing a state court action for breach of a prior settlement
agreement. The issue in Flanagan arose when the plaintiffs
settled a federal lawsuit against the defendants. 143 F.3d at
542. The settlement agreement effectively provided that the
district court would retain exclusive jurisdiction for the pur-
pose of resolving future disputes between the parties. Id. at
543. Less than a year after executing the settlement agree-
ment, however, the plaintiffs filed a state court action against
the same defendants for breach of the settlement agreement.
14586 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
Id. The state court stayed the proceedings, and the plaintiffs
litigated their claims in the district court and on appeal to this
Court. Id. The plaintiffs lost on all but one count. Id. That
claim was set for trial. Id. With discovery underway in the
federal proceeding and a trial date set, the plaintiffs asked the
state court to lift the stay. Id. Understandably exasperated, the
district court enjoined the plaintiffs from pursuing the stayed
action or any other state court action alleging a breach of the
settlement agreement. Id. at 543-44.
We affirmed. We observed that the plaintiffs had engaged
in “an entirely unjustified attempt . . . to evade their own
agreement, incorporated in a court order and judgment, to
submit disputes and enforcement proceedings regarding their
settlement to the federal district court.” Id. at 546. Because
the plaintiffs had agreed to maintain exclusive jurisdiction in
federal court and their concurrent state court action threatened
the district court’s jurisdiction over a ongoing case in which
they were also parties, we held that the Anti-Injunction Act
did not bar the stay. Id.Unlike the vexatious litigants in Flanagan, Lester did not
agree to retain exclusive jurisdiction in the district court.
More importantly, the federal lawsuit was not winding its way
to trial when the injunction was issued. Rather, the class
action had achieved final judgment status more than six years
before the jury returned a verdict in the Minnesota state case.
The absence of an actual threat to an ongoing case renders the
analogy to Flanagan unsound.
Relitigation Exception
[7] The third exception to the Anti-Injunction Act, the so-
called relitigation exception, permits a federal court to enjoin
state proceedings when necessary “to protect or effectuate its
judgments.” 28 U.S.C. § 2283. This power “allows federal
courts to . . . protect the res judicata effect of their judgments
and prevent the harassment of . . . federal litigants through
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14587
repetitious state litigation.” Amwest Mortgage Corp. v. Grady,
925 F.2d 1162, 1164 (9th Cir. 1991) (citation and internal
quotation marks omitted). Because the relitigation exception
is “founded in the well-recognized concepts of res judicata
and collateral estoppel,” Chick Kam Choo, 486 U.S. at 147-
48, the “requirements of identity of the parties, . . . adequate
notice, and adequate representation apply,” Frank v. United
Airlines, Inc., 216 F.3d 845, 853 (9th Cir. 2000). In addition,
an “essential prerequisite . . . is that the claims or issues which
the federal injunction insulates from litigation in state pro-
ceedings actually have been decided by the federal court.”
Chick Kam Choo, 486 U.S. at 147-48. This “prerequisite is
strict and narrow.” Id. at 148. Accordingly, a subsequent
action may be barred only when “it arises from the same
‘transaction, or series of transactions’ as the original action
[and w]hether two events are part of the same transaction or
series depends on whether they are related to the same set of
facts and whether they could conveniently be tried together.”
Western Sys., 958 F.2d at 871 (quoting Restatement (Second)
of Judgments § 24(1), (2)). Rigorous application of res judi-
cata principles ensures that the party sought to be precluded
by the prior resolution of a claim or issue enjoyed a “ ‘full and
fair opportunity’ to litigate . . . in the earlier case.” Amwest
Mortgage, 925 F.2d at 1164-65 (quoting Allen v. McCurry,
449 U.S. 90, 95 (1980)).
[8] The relitigation exception is inapplicable here because
the Minnesota lawsuit did not challenge the res judicata effect
of the class settlement. Significantly, Lester was not named as
a party to the class action and was not a member of the
nationwide class.24 Cf. Drelles v. Metro. Life Ins. Co., 357
24
The dissent attaches no legal significance to the fact that Lester was
not a party to the class action. Post at 14610 & 14616-17. The relevance
of that fact is difficult to avoid. The relitigation exception is “founded in
the well-recognized concepts of res judicata and collateral estoppel.”
Chick Kam Choo, 486 U.S. at 147-48. Central to the concepts of res judi-
cata and collateral estoppel is the principle that only parties to a prior
14588 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
F.3d 344, 346-47 (3d Cir. 2003); Frank, 216 F.3d at 852-853.
Nor were Lester’s interests sufficiently parallel to the class
members’ interests such that privity could be implied.25 Cf.
action and parties in privity with parties to a prior action are barred from
relitigating claims or issues in a subsequent action. Tahoe-Sierra Pres.
Council, Inv. v. Tahoe Reg’l Planning Agency, 322 F.3d 1064, 1081 (9th
Cir. 2003); Frank, 216 F.3d at 853. Thus, the fact that Lester was not a
party to the prior action leaves only the possibility of privity with class
members as a basis for applying the relitigation exception. See, e.g., Amal-
gamated Sugar, 825 F.2d at 640.
25
Relying on our decision in Trevino v. Gates, 99 F.3d 911 (9th Cir.
1996), the dissent contends that Lester and its class member customers
were in “virtual” privity because Lester, “[i]n essence, . . . sought to serve
as a conduit for its customers by obtaining additional damages on their
behalf.” Post at 14619. We disagree. In Trevino, we found sufficient priv-
ity of interest between a child and her grandmother with respect to the nar-
row issue of the amount of punitive damages to be awarded for the
wrongful death of the child’s father because the issues and the interests of
the parties in the separate actions were “identical” and the child and her
grandmother enjoyed “a familial relationship,” which was “an important
factor” in finding privity. 99 F.3d at 923-34. Trevino is readily distinguish-
able. For starters, there was no familial or legal relationship, express or
implied, between Lester and its class member customers, and Lester did
not control the class members in the prior action or succeed to the class
members’ interests. Moreover, Lester’s interests and the interests of its
class-member customers were similar only in the limited sense that both
Lester and its customers wanted the buildings constructed with Inner-Seal
Siding to be repaired. Cf. Kerr-McGee Chem., 816 F.2d at 1180-81.
According to Lester, however, moral obligations and business realities
compelled it to repair the damaged buildings with or without compensa-
tion from L-P. Lester was also motivated to repair the defective siding by
a desire to rehabilitate its tarnished image and rebuild its goodwill. From
Lester’s perspective, then, the repair costs claim was far more about mak-
ing itself whole than reimbursing customers. Cf. Frank, 216 F.3d 852-53;
Kerr-McGee Chem., 816 F.2d at 1180-81. Lester’s financial and image-
related concerns were obviously not represented by the class members in
the prior action. Cf. Frank, 216 F.3d 852-53; Kerr-McGee Chem., 816
F.2d at 1180-81. Finally, the issues litigated in the two actions are not
“identical.” In the federal action, the class members sued and recovered
for their injuries, while Lester, in the state court action, sued and recov-
ered for its injuries. The mere fact that both injuries have the same root—
defective Inner-Seal Siding—does not mean that both issues are identical.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14589
Kerr-McGee Chem. Corp. v. Hartigan, 816 F.2d 1177, 1180-
81 (7th Cir. 1987). As a general rule, “one is not bound by a
judgment in personam in a litigation in which he is not desig-
nated as a party or to which he has not been made a party by
service of process.” Richards v. Jefferson County, 517 U.S.
793, 798 (1996) (quoting Hansberry v. Lee, 311 U.S. 32, 40
(1940)). For that reason, “[a] judgment or decree among par-
ties to a lawsuit resolves issues as among them, but it does not
conclude the rights of strangers to those proceedings.”26 Id.(quoting Martin v. Wilks, 490 U.S. 755, 762 (1989)). As a
stranger to the class proceedings and settlement and lacking
privity with class members, Lester was entitled to sue L-P in
state court for its own injuries. See id.; Drelles, 357 F.3d at
346-47; De Cosme v. Sea Containers, Ltd., 874 F.2d 66, 68
(1st Cir. 1989); Alton Box, 682 F.2d at 1273.
L-P concedes that Lester was not precluded from litigating
all claims related to the failure of Inner-Seal Siding. Never-
theless, L-P contends that the issue of damages for costs
related to the repair of Inner-Seal Siding was litigated to final-
ity in the class action and released by the settlement agree-
ment. L-P reaches this conclusion by assuming that Lester, in
bringing the repair cost claim, acted as a representative of its
class member customers. By litigating injuries to its custom-
26
The dissent relies on the Second Circuit’s decision in In re Baldwin-
United for the proposition that a nonparty can be bound by a prior judg-
ment, even if it was not in privity with a party to the earlier action and did
not have an opportunity to litigate its claims or seek redress for its injuries.
Post at 14614 & 14616-18. Although we do not read In re Baldwin-United
as announcing such a sweeping rule, we need not recount that opinion in
detail. The short rebuttal is that the Anti-Injunction Act was not at issue
in In re Baldwin-United. The parties to that action conceded that “the
Anti-Injunction Act [was] inapplicable . . . since the injunction below was
issued before any suits were commenced in state court.” 770 F.2d at 335.
Although the court looked to caselaw interpreting the Anti-Injunction Act
for guidance, it was not constrained by the strict requirements of the reliti-
gation exception. We are not so unconstrained. See, e.g., Atlantic Coast
Line, 398 U.S. at 287 (explaining that the exceptions provided in the Anti-
Injunction Act should not “be enlarged by loose statutory construction”).
14590 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
ers on behalf of its customers, so the argument goes, Lester
should be treated like a class member for collateral estoppel
purposes and precluded, as they would be, by the prior resolu-
tion of their claims.
[9] According to the state trial court, however, the prayer
for repair costs presented a cognizable state law claim belong-
ing to Lester. As the distributor of a defective product, the
trial court reasoned that Lester was entitled to recover the
costs it would incur to make its customers whole. See, e.g.,
DeGidio v. Ace Eng’g Co., 225 N.W.2d 217, 223 (Minn.
1974). Because the repair cost claim sought recovery of Les-
ter’s damages, albeit voluntary and future damages, Lester
was not acting as a representative of its customers seeking to
recover on behalf of its customers. The claim was instead
entirely personal to Lester. That claim could not have been
resolved in the class action together with the class claims
because Lester was neither a party to the class action nor rep-
resented by a party to the class action. See Western Sys., 958
F.2d at 871-72; Amwest Mortgage, 925 F.2d at 1164-65; De
Cosme, 874 F.2d at 68; Alton Box, 682 F.2d at 1273. Because
Lester did not have a “full and fair opportunity” to litigate its
repair costs claim in the class action, that claim was not adju-
dicated and released by the class settlement. See Drelles, 357
F.3d at 346-47; De Cosme, 874 F.2d at 68; Alton Box, 682
F.2d at 1273; cf. Chick Kam Choo, 486 U.S. at 149; Amwest
Mortgage, 925 F.2d at 1164-65. With an essential element of
the relitigation exception lacking, the district court had no
authority to enter the injunction. See Martin v. Wilks, 490
U.S. 775, 762 (1989); Chick Kam Choo, 486 U.S. at 149;
Drelles, 357 F.3d at 346-47; Amwest Mortgage, 925 F.2d at
1165; Cratsenberg v. Owners of NW 20 Real Estate (In re
Federal Shopping Way, Inc.), 717 F.2d 1264, 1270-71 (9th
Cir. 1983); Alton Box, 682 F.2d at 1273.
The district court’s invocation of the relitigation exception
was improper for the additional reason that any potential for
relitigation of covered claims was addressed by the trial
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14591
court’s instructions to the jury. Specifically, the trial court
instructed the jury that Lester could not be awarded damages
for injuries that were covered by the settlement. This instruc-
tion essentially gave L-P the legal ruling it sought and did not
itself conflict with the federal court settlement.27
L-P was no doubt disappointed by the verdict returned.
Whether Lester had adequately proven its claims presented a
question of fact, however. The trial court left it to the jury, as
the finder of fact, to assess damages according to detailed
instructions. It is not the province of the district court in Ore-
gon to say that the trial court and jury in Minnesota were
wrong in their respective determinations. The proper recourse
for L-P was to appeal through the state court system and, if
necessary, to petition the United States Supreme Court for
review. See Parsons Steel Inc. v. First Alabama Bank, 474
U.S. 518, 525-26 (1986); Atlantic Coast Line, 398 U.S. at
27
There may be some tension between the trial court’s conclusion that
state law allowed Lester to recover for repair costs and the instruction bar-
ring the recovery of such damages if the buildings involved were covered
by the class settlement. If so, that is a matter for the state courts to resolve.
It remains that the trial court instructed the jury that Lester’s repair costs
claim was barred under the settlement unless the building at issue had
been constructed after January 1, 1996, has or may have a siding perfor-
mance failure after January 1, 2003, or was one for which claims would
be submitted prior to January 1, 2003 but not paid by the settlement fund.
These imitations were derived from the class action settlement itself.
Similarly, while it may be difficult to reconcile the jury instructions and
the verdict that none of the repair costs were barred by the settlement, we
are not in a position to second guess the findings of the state court jury.
On that subject, the trial court held that “both sides presented evidence as
to what they believed [the] damage[s] for Inner-Seal should be. After a
three-week trial, the jury returned a finding of damages in the total amount
of $29.6 million which is supported by the evidence presented and this
Court sees no reason to disturb the finding of the jury.” Though that expla-
nation may not seem very persuasive or be very satisfying, we are not in
a position to second-guess the Minnesota trial judge on the subject, either.
Presumably that issue could be taken up with Minnesota’s appellate
courts.
14592 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
296; cf. Drelles, 357 F.3d at 346-47. “[L]ower federal courts
possess no power whatever to sit in direct review of state
court decisions.” Atlantic Coast Line, 398 U.S. at 296. Indeed,
“the highly intrusive remedy of a federal-court injunction
against the enforcement of [a] state-court judgment” is not
justified even where a state court mistakenly rejects the res
judicata effect of a prior federal judgment. Parsons, 474 U.S.
at 525. Instead, “[c]hallenges to the correctness of the state
court’s determination as to the conclusive effect of a federal
judgment must be pursued by way of appeal through the state-
court system and certiorari from . . . [the Supreme] Court.”
Id.; accord Chick Kam Choo, 486 U.S. at 146.
L-P, of course, did appeal the verdict and certain rulings by
the trial court through the state system. Hedging its bets, L-P
also sought a federal injunction during the brief interval
between the return of the jury verdict and entry of judgment.
The district court agreed with L-P that Minnesota law did not
permit Lester to recover the costs to repair Inner-Seal Siding
and that the trial court had erred in submitting such a claim
to the jury. That ruling was tantamount to a judgment revers-
ing a state court on a matter of state law. Cf. Atlantic Coast
Line, 398 U.S. at 293. Lower federal courts enjoy no such
power. Parsons, 474 U.S. at 525-26. It is the sole responsibil-
ity of the state courts to determine whether state law allows
a particular claim in a given dispute. See Erie v. Tompkins,
304 U.S. 64, 78 (1938). In failing to appreciate the state
court’s right to decide issues of state law, the district court
exacerbated the inherent conflict between federal and state
courts.28 See Chick Kam Choo, 486 U.S. at 146. Indeed,
28
According to the dissent, “whether or not Lester had a ‘cognizable
state law claim’ is inconsequential,” because “[t]he jury awarded damages
for the very same repair costs previously provided for in the settlement
agreement and district court order.” Post at 14612-13. The error in the dis-
sent’s premise is similar to the mistake made by the district court when it
concluded, contrary to the decision of the state trial court, that Minnesota
law did not allow Lester to recover repair costs if its customers were mem-
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14593
allowing L-P to lose on the merits in state court, yet run to
federal court for an injunction just days before the state court
decision achieved preclusive status, offends the very “princi-
ples of equity, comity, and federalism” that undergird the
Anti-Injunction Act.29 See Parsons, 474 U.S. at 526; Rams-
den, 214 F.3d at 870-71.
bers of the settlement class. In Re Louisiana-Pacific, 234 F. Supp. at 177
(“I have studied [the cases cited by Lester and relied on by the state court]
carefully and find them to be readily distinguishable and thus not control-
ling.”); id. at 1180 (“[T]he Minnesota state court was wrong to submit
Lester’s damages claim for repair costs covered by the class action settle-
ment to the jury for consideration.”). While the dissent is far more
thoughtful in its expression than the district court, the central premise is
the same: the state trial court’s ruling and state jury’s verdict notwith-
standing, Lester was not actually litigating claims for its own injuries; it
was litigating claims for its customers’ injuries. The difficulty with that
premise is that the trial court held that Minnesota law recognized Lester’s
repair costs claim, and the jury returned a verdict stating that Lester, as a
matter of state law, was entitled to the damages awarded. If we are to take
seriously the rule that we do not sit in review of state court determinations,
see, e.g., Parsons, 474 U.S. at 525-26, we must accept that Lester was not
acting as a representative of its customers or as a conduit funneling money
to its customers. We must accept that Lester was acting as a business,
injured by LP and seeking to be made whole through its own claims for
its own future damages, and that its damages were proven to the satisfac-
tion of the jury. Perhaps the state trial court and jury were wrong in their
respective determinations. A federal court, however, either explicitly as in
the district court order or implicitly as in the dissent, is not in a position
to say so.
In allowing the state court to resolve issues of state law for itself, we
do not, as the dissent implies, disclaim our obligation to evaluate the pro-
priety of the injunction ourselves. If we believed the issue in this case was
as straightforward as the dissent suggests, we may well have come to a
different conclusion.
29
Although the trial court’s rulings and the verdict had not been reduced
to a final judgment, the underlying issues, including the effect of the set-
tlement agreement and the availability of repair costs, had been resolved
by the trial court. Cf. Ramsden v. AgriBank, FCB, 214 F.3d 865, 869-70
(7th Cir. 2000); De Cosme, 874 F.2d at 68-69. At some point, federal
courts must accept that a state court action has progressed too far to war-
rant intervention, even if a technical prerequisite to final judgment
remains. See Ramsden, 214 F.3d at 870-71.
14594 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
The case relied by on the district court, Flanagan v. Arnaiz,
is not to the contrary. As discussed, Flanagan involved both
a settlement agreement (and final judgment) and ongoing fed-
eral litigation for an alleged breach of that agreement. 143
F.3d at 543. As the dispute over the settlement agreement
made its way to trial, the plaintiffs in the federal litigation
asked a state court to resolve their breach of settlement agree-
ment claim. Id. The district court ended their efforts. Id. at
544. We upheld the injunction under the relitigation exception
because the first action had been decided in federal court and
the parties had expressly agreed to maintain exclusive juris-
diction in federal court. Id. 546. The final judgment of a fed-
eral court and the accompanying settlement agreement were
therefore threatened by a subsequent state court action that
was brought by the very parties to the prior judgment. See id.In contrast to the facts of Flanagan, Lester was not a party
to the settlement agreement and was not bound by the provi-
sion placing exclusive authority in the district court. More-
over, the Minnesota action did not arise from the settlement
agreement itself. Rather, Lester brought claims for its own
injuries in the court of its choice, as it was entitled to do. A
federal court does not have the power to prevent a plaintiff
from pursuing a state law claim simply because that claim
shares a common factual background with a claim litigated in
an earlier case. There must be, as there was in Flanagan, the
requisite nexus between the parties and claims or issues liti-
gated in the first action and the parties and claims or issues
sought to be precluded in the second action.30
30
The cases cited by L-P are easily distinguishable. In the only binding
precedent cited, Class Plaintiffs v. City of Seattle, 955 F.2d 1268 (9th Cir.
1992), we upheld an anti-suit provision in a class action settlement agree-
ment against attack by a group of settlement beneficiaries that had not
individually approved the agreement because we determined that they
were in privity with and adequately represented by their trustee, who had
been a party to the settlement and was authorized to act for the beneficia-
ries. 955 F.2d at 1277-79. We reasoned that the Anti-Injunction Act did
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14595
[10] The dissent expresses fear that our holding will “se-
verely limit[ ] the authority of district courts to protect [their]
jurisdiction and to preserve [their] settlement agreements . . .
[and] render[ ] federal court orders and judgments vulnerable
to further litigation in state courts.” Post at 14604. Even if the
dissent’s concerns were valid, the authority of federal courts
is not unlimited. In any event, we do not perceive such broad
dangers. We recognize that others in Lester’s position,
encouraged by the jury verdict, may pursue similar claims if
the laws of their respective states so allow and if the respec-
tive statutes of limitations have not expired. But a release of
claims by distributors was not a benefit that L-P bargained for
in the settlement agreement. We simply hold that a plaintiff,
who was not a party or in privity with a party to a prior fed-
eral action and who asserts claims that were not resolved in
the prior action, is not precluded from litigating its state law
claims in state court. This holding is entirely consonant with
established law and faithfully allows the settlement agreement
to shape the scope of our ruling: parties who agreed to the set-
tlement and released their claims remain bound. On the other
not bar the anti-suit provision because the district court was empowered
to protect the settlement from attack by parties and parties in privity with
parties to the settlement agreement. See id.In contrast to Class Plaintiffs, the class members in the underlying
action were not in privity with Lester and did not adequately represent
Lester’s interests. Thus, Lester was not bound by the settlement. If Lester
was not bound by the settlement, it follows that Lester’s state law claims
were not foreclosed by the settlement, even if those claims rested on some
of the same facts involved in the class action.
The nonjurisdictional cases cited by L-P are of comparably little sup-
port. See In re Prudential Ins. Co., 261 F.3d 355, 366-68 (3d Cir. 2001)
(holding that a class settlement could bar future claims by class members,
even though those claims were not raised by the class members in the
original action); In re Baldwin-United, 770 F.2d at 335 (observing that
“the parties agree that the Anti-Injunction Act is inapplicable here since
the injunction below was issued before any suits were commenced in state
court”).
14596 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
hand, claimants like Lester, class plaintiffs who opted out of
the settlement or the plaintiffs in the class action in Florida,
who were never part of the underlying action, may litigate
their claims in accordance with the laws of their respective
states.31
V. Conclusion
[11] For the foregoing reasons, the order enjoining the Min-
nesota court from entering judgment on the $11.2 million in
damages awarded to Lester for repair costs violates the Anti-
Injunction Act. The injunction is vacated.
REVERSED.
31
We should not lose perspective. The contested portion of the award is
limited to the narrow issue of recovery for repair and replacement costs.
L-P concedes, at least on appeal, that Lester had the right to bring its other
claims. Nor should we assume that the Minnesota appellate courts will fail
to correct errors, if any, that occurred in the trial court. “[A] federal court
does not have inherent power to ignore the limitations of [the Anti-
Injunction Act] and to enjoin state court proceedings merely because those
proceedings interfere with a protected federal right or invade an area pre-
empted by federal law, even when the interference is unmistakably clear.”
Atlantic Coast Line, 398 U.S. at 294. Accordingly, the “state proceedings
‘should normally be allowed to continued unimpaired by intervention of
the lower federal courts, with relief from error, if any through the state
appellate courts and ultimately, [the Supreme] Court.’ ” Choo, 486 U.S. at
146 (quoting Atlantic Coast Line, 398 U.S. at 287). That avenue remains
open to L-P.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14597
Volume 2 of 2
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14599
SILVERMAN, Circuit Judge, concurring:
I agree that the Anti-Injunction Act prohibits the injunction
that the district court entered in this case. I write separately
because I do not believe that we should address the merits of
L-P’s res judicata defense. Having elected to assert that
defense in the state trial court, L-P cannot come running to
federal court to enjoin the state proceedings the moment it
gets a verdict that is not to its liking. If L-P is unhappy with
the result of its state court trial, it must take that up with the
Minnesota appellate courts. It cannot have it both ways — lit-
igate in state court and hope for a win, but obtain a federal
injunction of the state proceedings when it loses. To put it
another way, what happens in state court stays in state court.
When Lester sued L-P in Minnesota state court, L-P imme-
diately could have moved for an injunction in the district
court. Instead, it asserted res judicata in the state court, argu-
ing that the settlement agreement between L-P and a nation-
wide class of building owners precluded some or all of
Lester’s claims. That turned out to be a good decision, at least
up until the time that the jury rendered its verdict. Until then,
L-P had succeeded in persuading the trial court to issue jury
instructions that barred Lester from recovering damages for
work it performed for class members who had already
received settlement proceeds, even though the trial court had
previously ruled that Minnesota law permitted Lester to assert
claims against L-P independent of the building owners’
claims. So far, so good.
14600 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
Then, things went sour for L-P. The jury awarded $13.2
million for costs to repair buildings that were not covered by
the federal class action, and also decided that same amount
would compensate Lester for its costs to repair all buildings,
including those covered by the class action. In other words,
the jury concluded that every repair for which Lester sought
damages was performed on a building not covered by the set-
tlement agreement, despite expert testimony that none of Les-
ter’s customers had opted out of the class and that $640,000
had been paid to them from the settlement fund. Unhappy
with what it perceived as a double recovery for some class
members, L-P ran to district court and sought to enjoin the
state court proceedings. At that point, however, it was too
late. In my view, once L-P raised its res judicata defense in
state court and that court ruled on it, the interests of comity
outweighed the district court’s perceived need to prevent pos-
sible relitigation of its judgment.
In Parsons Steel, Inc. v. First Alabama Bank, 474 U.S. 518,
524-25 (1986), the Supreme Court held that once a state court
rules on the preclusive effect of a prior federal court judg-
ment, a federal court considering enjoining the state court pro-
ceedings must first “look to that state’s law of judgments to
determine whether another court of that state would view the
res judicata ruling as final and binding.” The Court rejected
the idea that, notwithstanding the Full Faith and Credit Act,
the Anti-Injunction Act “empowers a federal court to be the
final adjudicator as to the res judicata effects of its prior judg-
ments on a subsequent state action.” Id. at 522 (internal quota-
tion marks omitted). Because of the “important values of
federalism and comity embodied in the Full Faith and Credit
Act,” the Court limited the relitigation exception to the Anti-
Injunction Act to those situations in which the state court has
not yet ruled on the merits of the res judicata issue. Id. at 524(“Once the state court has finally rejected a claim of res judi-
cata, then the Full Faith and Credit Act becomes applicable.
. . .”).
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14601
Ramsden v. Agribank, 214 F.3d 865 (7th Cir. 2000), dealt
with a similar issue: the propriety of enjoining state court pro-
ceedings where the state court rules that a prior federal judg-
ment does not bar the claim at issue, but state law would not
give preclusive effect to that ruling. The Ramsdens sued Agri-
bank and Hass, an employee of Agribank, alleging tortious
conduct in the sale of farm property. While the Ramsdens
appealed the state court’s dismissal of Hass, they filed a sec-
ond state court action against Agribank alone, which was
removed to federal district court. The district court dismissed
the action on the merits. On remand in state court, Hass
unsuccessfully moved for summary judgment based on the
preclusive effect of the federal court ruling. Agribank (whose
counsel also represented Hass) then returned to federal court
and obtained an injunction that barred the state court from fur-
ther considering any issues between the parties relating to the
purchase.
The Seventh Circuit vacated the injunction. Initially, it
noted that, although Wisconsin courts would not consider the
state court’s denial of summary judgment as sufficiently final
to warrant preclusion, that did not mean the district court was
right to invoke the relitigation exception. Id. at 869 (“[J]ust
because a federal court has the statutory power to enjoin a
state court proceeding does not mean that it should exercise
that authority.”). Instead, in light of the comity concerns in
Parsons Steel, the Seventh Circuit held that:
Once a state court considers a res judicata defense
and rules that a prior federal judgment does not actu-
ally bar a claim, the affront of federal court interven-
tion stripping the state court of power to continue is
greatly magnified. After such a ruling, the interests
in preventing possible relitigation are therefore gen-
erally outweighed by the heightened comity con-
cerns except in the most extraordinary
circumstances.
14602 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
Id. at 870-71. Restricting the district court’s discretion in that
manner was necessary to “prevent the relitigation exception
from simply being turned into a vehicle for seeking appellate
review of a state court decision in federal court.” Id. at 872.
I agree with the reasoning of the Seventh Circuit and would
adopt its holding here. In state court, L-P asserted res judicata
in its motions for summary judgment, directed verdict and
judgment notwithstanding the verdict, and during its case in
chief, presented extensive testimony about the settlement
agreement and its effect on Lester’s claims. L-P cannot legiti-
mately contend that it did not have a full and fair opportunity
to litigate the res judicata issue. Also, there is no question that
the trial court squarely addressed the issue multiple times.
That should end a federal court’s inquiry.1 Following Rams-
den, we do not have to decide whether L-P’s res judicata
defense has any merit, in particular the complicated issues of
privity and virtual privity. The matter is now in the hands of
the Minnesota appellate courts.
It would be tempting to conclude that the jury’s apparent
confusion over the district court’s instructions not to award
damages for buildings covered by the settlement agreement
was an unforeseeable occurrence, entitling L-P to a mulligan
in federal court. As Judge Clifton points out, however, L-P
will have the opportunity in the Minnesota appellate courts to
seek correction of any errors in the verdict. See Ramsden, 214
F.3d at 872 (noting that defendants “would still have an
opportunity to appeal the state trial court’s decision up
through the state appeals process”). Having chosen the forum
1
Referring to the fact that L-P moved for an injunction just before final
judgment was entered in state court, Judge Clifton cites to Ramsden and
states that “[a]t some point, federal courts must accept that a state court
action has progressed too far to warrant intervention, even if a technical
prerequisite to final judgment remains.” I believe a state court action
reaches that point of no return when the state court rules on the res judi-
cata issue, as the Minnesota trial court did here, regardless of whether a
final judgment has been entered.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14603
in which to assert res judicata, L-P cannot now abandon the
state review process and seek federal court intrusion, even if
the jury (or the trial court) got it wrong. See Parsons Steel,
474 U.S. at 525 (“Even if the state court mistakenly rejected
respondents’ claim of res judicata, this does not justify the
highly intrusive remedy of a federal-court injunction against
the enforcement of the state-court judgment.”). Indeed, in
affirming a district court’s denial of a request to enjoin state
court proceedings, we have recognized that “state courts are
just as capable as federal courts in applying applicable law.”
Merle Norman Cosmetics, Inc. v. Victa, 936 F.2d 466, 468
(9th Cir. 1991) (“nothing prevented Merle Norman from rais-
ing its defenses of res judicata and collateral estoppel in the
California courts”).
I agree with Judge Clifton that the district court abused its
discretion in issuing the injunction under the “necessary in aid
of jurisdiction” exception to the Anti-Injunction Act. It is
worth noting that, aside from its concerns that the trial court’s
instructions confused the jury and led to a subclass of class
members who “enjoy special treatment not available to other
class members” — an issue which, as I explain above, now
belongs in the Minnesota appellate courts — the only reason
that the district court offered for the injunction was that there
was a “substantial risk that others in Lester’s position, encour-
aged by the jury verdict, will pursue similar claims.” While
we typically defer to a district court’s determination that it
must act to protect its jurisdiction in a pending class action,
see Blalock Eddy Ranch v. MCI Telecomm. Corp., 982 F.2d
371, 375 (9th Cir. 1992), I fail to see how the district court’s
speculation about future lawsuits complies with the Anti-
Injunction Act. See Bechtel Petroleum, Inc. v. Webster, 796
F.2d 252, 253-54 (9th Cir. 1986) (requiring “a strong and
unequivocal showing” that a federal injunction is necessary).
In fact, the threat of other lawsuits is not extraordinary at
all. In any class action culminating in a global settlement
agreement, there is always the chance that absent class mem-
14604 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
bers will break from the ranks and file separate actions else-
where, driving up the defendant’s litigation expenses. Of
course, res judicata will always be an available defense to
such actions, perhaps even warranting a prompt dismissal. As
previously noted, when such actions arise a party must decide
whether to assert res judicata in the state court or return to
federal court and seek an injunction. All we need to hold here
is that once the party chooses to litigate its res judicata
defense in a state forum and that court rules on the issue, the
Anti-Injunction Act prevents its relitigation in federal court.
REINHARDT, Circuit Judge, dissenting:
At a time when Congress is expanding the jurisdiction of
the federal courts over national class-action lawsuits, see 28
U.S.C. § 1332(d), the majority’s decision severely limits the
authority of district courts to protect that jurisdiction and to
preserve the settlement agreements they have authorized. It
renders federal court orders and judgments vulnerable to fur-
ther litigation in state courts on a state-by-state basis, litiga-
tion that can reopen what are intended to be final damage
awards and undermine the orderly implementation of complex
national settlement agreements. Further, it allows parties and
third parties alike to circumvent federal class-action orders by
relying on state law claims that contravene the specific provi-
sions of such orders.
The specific question is whether a federal court may enjoin
entry of a final judgment by a state court when the state court
jury awards damages that are barred by a federal court settle-
ment agreement and the district court order and judgment
adopting it. There is no dispute that if one of Lester’s custom-
ers had sued Louisiana-Pacific in a Minnesota state court
seeking the recovery of funds to make repairs covered by the
settlement agreement, an injunction would have been appro-
priate. The only difference between that case and the one
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14605
before us is that Lester’s customers did not sue Louisiana-
Pacific directly. Instead, the action was filed by Lester which
sought to recover funds from Louisiana-Pacific on its custom-
ers’ behalf and for their benefit. Lester assured the jury that
the funds would be used to make repairs to the customers’
buildings, the very same repairs for which funds are provided
to those same customers under the settlement agreement. The
majority views the difference in plaintiffs as dispositive. I
view it as immaterial. In effect, the majority condones a dou-
ble recovery by a sub-group of class members in direct con-
travention of the settlement agreement and encourages the
proliferation of similar sub-groups and similar lawsuits in
other states. In light of these circumstances, it is difficult to
comprehend why the majority concludes that the district court
erred when it enjoined the Minnesota state court from enter-
ing judgment on the portion of the state jury’s verdict that
provided for the double recovery.
I.
In 1996, the district court approved a nationwide class set-
tlement of a number of consolidated lawsuits alleging dam-
ages resulting from serious defects in Inner-Seal Siding, a
product of the Louisiana-Pacific Corporation. In the settle-
ment agreement and the order approving it, the district court
retained “exclusive and continuing” jurisdiction over any
claim which in any way relates to any defect or alleged defect
of Inner-Seal Siding that could reasonably be asserted by a
class member and brought against Louisiana-Pacific in any
court or forum, regardless of legal theory. The national class
was composed of all individuals who owned or acquired a
building that had Inner-Seal Siding installed prior to January
1, 1996. In return for Louisiana-Pacific’s agreement to pay a
then-undetermined amount of damages (which according to a
special master’s report dated November 17, 2003 involves
claims in excess of $820 million), class members released it
from all claims associated with their use of Inner-Seal Siding.
They also fully released any entities within the chain of distri-
14606 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
bution for Inner-Seal Siding. Among the distributors enjoying
this collateral benefit of the settlement is the appellant, Lester,
a manufacturer of hog barns. The agreement was formally
approved by court order.
Despite the release it was granted by its customers in the
settlement agreement, Lester sued Louisiana-Pacific in a Min-
nesota state court. Among the damages it sought, and the jury
awarded, was the cost of repairs to its customers’ buildings
necessitated by the use of Inner-Seal Siding during the period
covered by the settlement agreement. Lester’s evidence at the
state court trial was that the full cost of repairs to all of its
customers’ hog barns was $13.2 million, approximately $2
million of which was for barns built after January 1, 1996,
and therefore not covered by the settlement agreement and
order. The trial judge instructed the jury that although Lester
was not a party to the settlement agreement, recovery on any
claims for the cost of repairs to the buildings built prior to
January 1, 1996 (during the period covered by the agreement)
was barred, with two exceptions that are not relevant here.
The jury nevertheless returned a verdict awarding Lester the
full $13.2 million for the “Cost to Repair Buildings (those not
barred by the class action)” (emphasis added). However,
when asked on the special verdict form “[w]ithout regard to
the class action, what is the total money that would fairly and
adequately compensate Lester for the Cost to Repair Build-
ings (both those in and out of the class action)?” (emphasis
added), the jury responded with the same figure — $13.2 mil-
lion. In view of the evidence introduced by the plaintiffs, it is
clear that, although the jury offered conflicting and inconsis-
tent answers to the questions it was asked, the $13.2 million
portion of the verdict it returned included both the $11.2 mil-
lion in damages barred by the settlement agreement and the
approximately $2 million for the period not covered by the
agreement. In short, the jury awarded Lester compensation for
the cost of repairs to all its customers’ hog barns and not
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14607
merely for the cost of those that were not covered by the
terms of the settlement agreement.1
Because Lester’s customers would receive a double recov-
ery, the district court permanently enjoined entry of judgment
in the state court on $11.2 million of the jury’s verdict, i.e.,
that portion of the verdict awarding Lester damages for the
cost of repairs to its customers’ hog barns during the period
covered by the settlement agreement and court order. The
majority now holds that the jury’s verdict does not constitute
a threat to the district court’s “exclusive and continuing”
jurisdiction, that the district court may not set aside the ver-
dict in aid of its jurisdiction over the implementation of the
settlement, that the injunction is not necessary to protect the
settlement and the court order, that the injunction is not autho-
rized under the relitigation exception to the Anti-Injunction
Act, and that Lester’s interests in the state court action are not
parallel to or in privity with those of its customers who are
class members. I strongly disagree in all respects.
II.
Under the All Writs Act, a district court may “issue all
writs necessary or appropriate in aid of [its] respective juris-
diction[ ] and agreeable to the usages and principles of law.”
28 U.S.C. § 1651. The district court’s power to issue an
injunction against proceedings in a state court is limited by
the Anti-Injunction Act which prohibits a federal court from
enjoining state court proceedings “except as expressly autho-
rized by . . . Congress, or where necessary in aid of its juris-
diction, or to protect or effectuate its judgments.” 28 U.S.C.
§ 2283. The interplay of the two Acts is well established in
1
Lester obtained a total verdict of $29.6 million against Louisiana-
Pacific covering all of its claims. Louisiana-Pacific does not challenge the
propriety of the portion of damages that redresses direct losses that Lester
itself suffered. It challenges only the award of repair costs of class mem-
bers covered by the settlement agreement.
14608 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
the federal courts. As we have explained, under the Acts an
injunction is appropriate when (1) Congress has expressly
authorized it; (2) it is necessary in aid of the federal court’s
jurisdiction; or (3) it is necessary to protect or effectuate the
federal court’s judgments. See Bennett v. Medtronic, Inc., 285
F.3d 801, 805 (9th Cir. 2002). When any of these exceptions
to the Anti-Injunction Act is present, the district court may
issue an injunction, but it is not required to do so. See Chick
Kam Choo v. Exxon Corp., 486 U.S. 140, 151 (1988). The
decision to issue the injunction is committed to the sound dis-
cretion of the district court, Blalock Eddy Ranch v. MCI Tele-
com. Corp., 982 F.2d 371, 375 (9th Cir. 1992), and its
exercise is reviewed for an abuse of that discretion. See West-
ern Sys., Inc. v. Ulloa, 958 F.2d 864, 867-68 (9th Cir. 1992).
The majority acknowledges that it is required to apply an
abuse of discretion standard in reviewing a district court’s
exercise of its discretion to grant an injunction. Under that
standard, a reviewing court cannot reverse the trial court
unless it has a definite and firm conviction that the lower
court committed a clear error of judgment in the conclusion
that it reached upon a weighing of the relevant factors, see
United States v. Finley, 301 F.3d 1000, 1007 (9th Cir. 2002),
or that the lower court’s conclusion was based on an error of
law. See Western Sys., Inc. v. Ulloa, 958 F.2d 864, 867-68
(9th Cir. 1992). The majority also acknowledges, as it must,
that factual findings underlying the district court’s decision to
grant the injunction are reviewed for clear error. See Scott v.
Pasadena Unified Sch. Dist., 306 F.3d 646, 653 (9th Cir.
2002).
Despite these acknowledgments, the majority impermiss-
ibly conducts a de novo review of the district court’s ruling
that the injunction was appropriate under both the second and
third exceptions to the Anti-Injunction Act. The majority may
be correct that the district court’s ruling with respect to the
third exception turned purely on a question of law — whether
Lester was in privity with its class-member customers — and
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14609
thus was subject to de novo review. However, the majority’s
complaint regarding the district court’s reliance on the second
exception is based entirely on the majority’s factual analysis
of the effect of the Minnesota verdict upon the court’s contin-
uing jurisdiction over the federal action. This is essentially a
factual dispute involving the exercise of judgment by the dis-
trict judge. There is simply no allegation by the majority that
the district court erred in its legal conclusions, that it exer-
cised its discretion to an end not justified by the evidence, or
that its judgment was clearly against the logic and effect of
the facts as they were found. See Rabkin v. Or. Health Sci-
ences Univ., 350 F.3d 967, 977 (9th Cir. 2003). Instead of
applying a deferential standard, the majority conducted a de
novo review of the factual findings underlying the district
court’s decision to issue the injunction under the second
exception and substituted its judgment for that of the district
court. This, it may not do. Scott, 306 F.3d at 653. Regardless,
however, of the standard applied, the majority plainly erred in
reversing the district court’s decision to issue an injunction on
the bases of both the second and third exceptions to the Anti-
Injunction Act.
III.
I will discuss the second and third exceptions to the Anti-
Injunction Act in reverse order, starting with the rule that
injunctions may be issued when “necessary to protect or
effectuate federal court judgments.” That exception is also
known as the relitigation exception. It “was designed to per-
mit a federal court to prevent state court litigation of an issue
that was previously presented to and decided by a federal
court.” G.C. & K.B. Invs., Inc. v. Wilson, 326 F.3d 1096, 1107
(9th Cir. 2003) (citation omitted).
The district court issued the injunction under the relitiga-
tion exception on the ground that “by permitting Lester to
pursue to verdict claims for damages plainly covered by the
class action settlement, the Minnesota court allowed relitiga-
14610 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
tion of issues already presented to and decided by this court
many years ago.” In re Louisiana-Pacific Inner-Seal Siding
Litig., 234 F. Supp. 2d 1170, 1180 (D. Or. 2002). The major-
ity disagrees primarily for the reason that “Lester was not
named as a party to the class action and was not a member of
the nationwide class. Nor were Lester’s interests sufficiently
parallel to the class members’ interests such that privity could
be implied.” Maj. op. at 14587-88 (citations and footnotes
omitted). The first reason is irrelevant and the latter is con-
trary both to the facts in the record and to indisputable princi-
ples of law.
There is no question that the Minnesota state court verdict
involved the relitigation of issues that had been resolved by
the settlement agreement. The settlement agreement covers
any claim, [liability, right, demand, suit, matter, obli-
gation,] damage, loss or cost, action or cause of
action, of every kind and description that the Releas-
ing Party [as defined] has or may have, whether
known or unknown, asserted or unasserted, latent or
patent, that is, has been, could reasonably have been
or in the future might reasonably be asserted by the
Releasing Party either in the Action or in any other
action or proceeding in this Court or any other court
or forum, regardless of legal theory, and regardless
of the type or amount of relief or damages claimed,
against any of the Defendants, arising from or in any
way relating to any defects or alleged defects of
[Inner-Seal Siding], or any part thereof.
In re Louisiana-Pacific, 234 F. Supp. 2d at 1172 (quoting the
settlement agreement) (emphasis added). The scope of the
agreement is broad and comprehensive. It resolves any claim,
damage, loss, or cost which in any way relates to any defect
or alleged defect of Inner-Seal Siding that might reasonably
be asserted by any class member and brought against
Louisiana-Pacific in any court or forum, regardless of legal
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14611
theory. The effect of the settlement agreement is to bar any
future claim for the same damage, loss, or cost, including
principally the cost of repairs arising from any defect in Inner-
Seal Siding.
In March, 2000, Lester filed an action in Minnesota state
court seeking to recover damages for numerous injuries, spe-
cifically including the cost to its customers of repairing their
buildings covered by the settlement agreement. When the case
went to trial, Lester offered evidence that the removal and
replacement of Inner-Seal Siding on all of its customers’ hog
barns would cost $13.2 million, with approximately $2 mil-
lion of that amount being allocated to barns built after January
1, 1996, and therefore not covered by the settlement agree-
ment. Despite the trial judge’s instruction to award damages
only for the cost of repairing barns not covered by the settle-
ment agreement, the jury returned a verdict covering the costs
of repairing all the barns, both those covered by the settle-
ment agreement and those outside its scope. Thus, instead of
awarding Lester only the $2 million it sought for barns con-
structed post-January 1, 1996, it also awarded an additional
$11.2 million for the cost of repairs to the settlement agree-
ment barns. As a result, the jury’s verdict conflicts directly
with the settlement agreement and federal court order, and it
may properly be enjoined. We have stated the rule plainly: “A
district court may properly issue an injunction under the reliti-
gation exception if ‘there could be an actual conflict between
the subsequent state court judgment and the prior federal
judgment.” G.C. & K.B. Invs., 326 F.3d at 1107 (quotations
omitted).
The majority asserts that the issue of the jury’s disregard of
the trial judge’s instruction is a matter for the state courts to
resolve.2 Although the question of the effect on the state court
2
Had the jury followed the trial judge’s instructions, it would have
returned a verdict of only $2 million for repair costs instead of $13.2 mil-
lion. Although the jury clearly violated the trial judge’s directives, the
judge declined to disturb the verdict, thus upholding the double recovery
award. See Maj. op. at n.27.
14612 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
proceedings of the jury’s disregard of the instruction may be
a matter for the state courts, the question whether the verdict
the jury returned is consistent with the settlement agreement
and the federal court order is a federal question. See In re
Agent Orange, 996 F.2d 1425, 1431 (2d Cir. 1993) (“The
court best situated to make this determination [as to the scope
of the settlement agreement] is the court that approved the set-
tlement and entered the judgment enforcing it.”). For purposes
of the relitigation exception, there is no difference between a
verdict that results from the jury’s disregard of the court’s
instruction and one in which the instruction was not given at
all. In either case, entry of final judgment on the verdict as
returned by the Minnesota jury would have the impermissible
effect of allowing the circumvention of the settlement agree-
ment and the receipt of duplicate damages and costs that are
directly covered by it. See In re Louisiana-Pacific, 234 F.
Supp. 2d at 1180. In both cases, the intrusion into the district
court’s domain by the state court is the same; the potential
judgment constitutes a serious threat to the court’s ability to
protect its settlement agreement and, accordingly, the district
court is authorized to prevent its entry.
The majority concludes that even if the jury’s disregard for
the settlement agreement is not a question for the state courts
alone, the Minnesota verdict does not conflict with the settle-
ment agreement because “the prayer for repair costs presented
a cognizable state law claim belonging to Lester.” Maj. op. at
14590. Lester argues, and the majority agrees, that notwith-
standing the settlement agreement and notwithstanding the
trial court’s instruction, the $11.2 million award for repair
costs that Lester received was an award to which Lester was
entitled under Minnesota law. Once again, the fundamental
problem with this argument is that whether or not Lester had
a “cognizable state law claim” is inconsequential to the ques-
tion we must decide — whether the jury’s award is inconsis-
tent with the settlement agreement. There can be no doubt that
it is. The jury awarded damages for the very same repair costs
previously provided for in the settlement agreement and dis-
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14613
trict court order. In doing so, it stripped Louisiana-Pacific of
the protection against further liability that lies at the heart of
the settlement agreement. The jury’s verdict is in direct con-
flict with that agreement and with the federal court order.
The settlement agreement completely resolved the issue of
liability for any damage, loss, or cost incurred by Lester’s
customers as a result of their use of Inner-Seal Siding. Even
if the majority were correct that Lester’s “cognizable state law
claim” was not itself litigated in the class action, the fact that
the issue on which that claim relies has been fully litigated in
federal court is sufficient justification for the district court’s
injunction. See Chick Kam Choo, 486 U.S. at 147 (stating that
the relitigation exception is “designed to permit a federal
court to prevent state litigation of an issue that previously was
presented to and decided by the federal court”). If enterprising
litigants like Lester were allowed to relitigate claims covered
by the settlement agreement merely by alleging them as a
matter of a particular state’s law, “the finality of virtually any
class action . . . could be defeated by subsequent suit brought
by [parties] asserting rights derivative of those released by the
class members.” In re Baldwin-United Corp., 770 F.2d 328,
336 (2d Cir. 1985).
Here, of course, not only was the issue of the compensation
for the cost of repairs due to the owners of barns built with
Inner-Seal Siding fully litigated and resolved by the settle-
ment agreement, but the state court jury awarded Lester sub-
stantial damages for the purpose of making the same repairs
already paid for by Louisiana-Pacific under the damage award
in that agreement. In the absence of the injunction, this double
recovery would have occurred notwithstanding the district
court’s 1996 order and judgment, under which the class settle-
ment damages were intended to be the only damages
Louisiana-Pacific would be required to pay on account of the
harm to the barns involved. The Second Circuit has held, in
an important and highly persuasive opinion, that the issuance
of an injunction is appropriate in such circumstances. In In re
14614 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
Baldwin-United Corp., thirty-one states that were not parties
to a federal court settlement against a group of securities
broker-dealers were enjoined from bringing state court actions
against the dealers where the damages sought by the states
were intended to be paid over to persons who were parties to
the settlement agreement. See In re Baldwin-United Corp.,
336 F.2d at 337. The Second Circuit upheld the injunction,
stating, “[i]f the states or others could derivatively assert the
same claims on behalf of the same class members or members
of it, there could be no certainty about the finality of any fed-
eral settlement . . . . The effect would be to threaten to reopen
the settlement . . . .” Id. In short, the Second Circuit warned,
the same claims could be relitigated in every state and the dis-
trict court judgment would be indeterminate.
As in In re Baldwin-United Corp., the finality of the district
court’s order and judgment are in jeopardy in the case before
us. The settlement agreement would be meaningless if distrib-
utors or others in the chain of distribution, like Lester, could
circumvent the federal judgment by filing suit in their own
name, and then recover damages for the benefit of their class
member-customers. Had the verdict been entered as returned,
Louisiana-Pacific would have been required to pay Lester
$11.2 million to make repairs for its customers who had
already been compensated for the damage they suffered and,
thus, contrary to the settlement agreement, would, unlike all
other class members, receive double compensation for the
damage to their barns. I can conceive of no reason why entry
of a verdict cannot be enjoined when a state court jury awards
money to compensate a party for loss or damage for which
that party has already been compensated under a settlement
agreement in federal court — an agreement expressly
designed to provide the exclusive remedy for those damages.
In fact, “[e]ven if no actual conflict is possible, an injunction
could still be proper if res judicata would bar the state court
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14615
proceedings.” G.C. & K.B. Invs., 326 F.3d at 1107 (quotations
omitted).3
Lester clearly sought a double recovery for its customers.
As a result of the settlement agreement, Lester had no liability
to its vendees and no risk associated with potential lawsuits
by them. Thus, the award for “Cost to Repair Buildings” cov-
ered by the settlement agreement could not result from any
damage Lester suffered. Accordingly, the only recovery Les-
ter could have sought was on behalf of its customers. We need
not speculate on this point, however. At trial in the Minnesota
state court, Lester’s president testified. He told the jury that
the company sought damages to “fix these buildings” and to
get each customer “what he’s entitled to.” Lester’s “Cost to
Repair Buildings” damage award was undeniably made for
3
Judge Silverman’s concurrence asserts that “once [Louisiana-Pacific]
raised its res judicata defense in state court and that court ruled on it,” the
district court should have deferred to the state court’s ruling and thus
declined to consider the relitigation exception. It is unclear to which state
court ruling Judge Silverman is referring, and his implication that the state
court ruled against Louisiana-Pacific on the res judicata issue prior to the
district court’s issuance of its injunction is wrong. In fact, the converse is
true: the state court instructed the jury that the settlement agreement
barred recovery for repair costs incurred during the settlement period.
(Indeed, even the majority opinion acknowledges that the trial court ruled
in Louisiana-Pacific’s favor on the res judicata issue. See Maj. op. at
14570.) The jury then returned the disputed verdict. Before the state court
issued any ruling with respect to the validity of the jury’s action, the fed-
eral court issued the injunction. Thus, the principal cases upon which
Judge Silverman relies in his concurrence, Parsons Steel, Inc. v. First Ala-
bama Bank, 474 U.S. 518 (1986), and Ramsden v. Agribank, FCB, 214
F.3d 865 (7th Cir. 2000), in both of which the state courts had expressly
rejected a res judicata defense before the injunction issued are completely
inapposite. Moreover, in Parsons the state court had entered its judgment
prior to the federal court injunction, a fact that was central to the Supreme
Court’s ruling: “We hold, therefore, that the Court of Appeals erred by
refusing to consider the preclusive effect . . . of the state-court judgment.”
474 U.S. at 525. Here, the Minnesota court had not ruled on the legality
of the jury’s verdict, let alone entered judgment, prior to the issuance of
the injunction.
14616 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
the purpose of satisfying the same claims resolved by the
class settlement. This is why the Minnesota court gave the
instruction that the jury disregarded: any claim for damages
covered by the settlement agreement was barred. The $11.2
million enjoined by the district court was awarded solely for
the damage to Lester’s customers’ property, not Lester’s.
There can be no dispute that the $11.2 million enjoined by the
district court is an award for the benefit of the class member-
customers, and not for the benefit of Lester.
The majority attempts to avoid the problem posed by dou-
ble recovery on the basis that Lester was not a party to the
class action. It asserts that compensating Lester so that it may
pay the costs of repairing its customers’ hog barns is some-
how different from compensating Lester’s customers directly.
However, because Lester seeks recovery for the same dam-
age, loss, or cost that has already been paid to its customers
under the settlement agreement, and because Lester is simply
serving as a conduit for the obtaining of additional compensa-
tion for those same customers for that same harm, it is irrele-
vant that Lester was not itself a party to the settlement
agreement. The terms of the settlement agreement clearly pro-
vide that the fund it establishes shall be the exclusive source
of relief for class members and shall fully resolve any dam-
age, loss, or cost to those class members. Whether the jury’s
award is given to Lester’s customers or to Lester for the bene-
fit of its customers, Louisiana-Pacific would be required
under the prospective state court judgment to pay double
compensation in order to remedy the harm for which it had
already paid the agreed-upon compensation. Regardless of
Lester’s lack of participation in the federal case, the jury’s
award is inconsistent with the settlement agreement.
That a non-party may be precluded from relitigating in state
court an issue already decided in federal court is well estab-
lished in federal law. In In re Baldwin-United Corp., the
thirty-one States Attorneys General who brought the action
sought “to enforce state laws authorizing them in their repre-
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14617
sentative capacities to seek restitution and monetary recovery
from the defendants to be paid over to those of the states’ citi-
zens who are plaintiffs in the consolidated class actions . . . .”
770 F.2d at 332-33. The states were, like Lester, beneficent
strangers to the class settlement and possessed a cognizable
state law claim. They argued, like Lester, that they were not
barred by the settlement agreement from obtaining a recovery
in their own right, albeit for the benefit of class members.
They acknowledged that their intent was “to pursue remedies
in the state[s’] name[s]” by “tak[ing] back the restitution that
consumers deserve.” Id. at 332 n.1. For this reason, they
claimed that any damages received by the states would not
constitute a “double recovery,” even though the class mem-
bers would be the ultimate beneficiaries. Id. The Second Cir-
cuit upheld the district court’s injunction on the ground that
no defendant in the consolidated federal actions . . .
could reasonably be expected to consummate a set-
tlement of those claims if their claims could be reas-
serted under state laws, whether by states on behalf
of the plaintiffs or by anyone else, seeking recovery
of money to be paid to the [class] plaintiffs. Whether
a state represented itself to be acting as a ‘sovereign’
in such a suit or described its prayer as one for ‘resti-
tution’ or a ‘penalty’ would make no difference if
the recovery sought by the state was to be paid over
to the [class] plaintiffs.
Id. at 336-37 (emphasis added). The court’s holding was not
dependent upon any finding that the states were in privity
with class members. Nor did the court find it relevant that the
states were authorized to file their action under applicable
state laws or that they asserted a “cognizable state law claim.”
Whether Lester was a party to the settlement agreement or
was in privity with any such party is beside the point. The
jury’s verdict can be enjoined simply because it awards addi-
tional damages to be used for the benefit of class members in
satisfaction of claims for which they have already been com-
14618 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
pensated under the settlement agreement. The fact that a third
party brings the action in its own name is without conse-
quence. In re Baldwin-United Corp. is the leading case in the
area; it is correct, and there is no reason to create a direct con-
flict with it.
The majority contends, nevertheless, that privity is neces-
sary for a non-party to be bound by the settlement agreement.
See Maj. op. at 14587-88 n.24. Even if it is, the district court’s
order would stand. Privity “is a legal conclusion designating
a person so identified in interest with a party to former litiga-
tion that he represents precisely the same right in respect to
the subject matter involved.” United States v. Schimmels (In
re Schimmels), 127 F.3d 875, 881 (9th Cir. 1997) (quotation
marks and citation omitted). Although privity was originally
reserved for specific relationships such as indemnitors and
indemnitees, we have noted that “[r]ecent cases apply the
privity concept in a much more flexible manner . . . and courts
have found the existence of privity in an array of disparate
circumstances summarized under the heading of ‘virtual rep-
resentation.’ ” See Kourtis v. Cameron, No. 03-56703, slip op.
at 10584 (9th Cir. Aug. 15, 2005). An example of one such
relationship is where a party to a pending action has “suffi-
ciently similar interests” to a non-party that litigated the same
issue in a prior action. See Trevino v. Gates, 99 F.3d 911, 924
(9th Cir. 1996) (holding that a child who filed an action seek-
ing punitive damages as the result of the killing of her father
was in privity with her grandmother who earlier sued con-
cerning the same events, because the grandmother had a “tre-
mendous incentive” to recover punitive damages); United
States v. ITT Rayonier, Inc., 627 F.2d 996, 1003 (9th Cir.
1980) (“Courts have recognized that a non-party may be
bound if a party is so closely aligned with its interests as to
be its ‘virtual representative.’ ” (citation omitted)).
The majority simply asserts that Lester’s interests were not
“parallel” to those of the class members and, thus, they were
not in privity. It provides no explanation as to why Lester’s
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14619
claim for an award of “Cost to Repair Buildings” owned by
class members and covered by the settlement agreement is not
parallel to those of the class members themselves. Lester sim-
ply sought to obtain a further recovery for the same injury
suffered by the class members, with the intention of passing
the recovery along to those members. In essence, Lester
sought to serve as a conduit for its customers by obtaining
additional damages on their behalf. The privity here is far
stronger than in Trevino where the grandmother and grand-
daughter each sought separate recoveries for their own benefit.4
Certainly, the class members here had a “tremendous incen-
tive” to recover the damages that Lester later sought on their
behalf. See Trevino, 99 F.3d at 924. Certainly, Lester and its
customers had “sufficiently similar interests. See id. Accord-
ingly, I conclude that Lester has no greater, or different, inter-
est in the “Cost to Repair Buildings” covered by the
settlement than did its customers, and that Trevino, which
binds us, compels the affirmance of the district court’s injunc-
tion.
Although Lester may not have had a full opportunity to liti-
gate its customers’ claims in the federal court, its customers
themselves adequately represented any interest that Lester
might have had in seeing that its customers’ hog barns were
repaired. See ITT Rayonier, 627 F.2d at 1003. As such, Les-
ter’s interests and those of its customers are absolutely paral-
lel and Lester’s interests were fully represented and
4
The majority’s assertion that Trevino is “readily distinguishable”
because here there is no familial relationship between the parties in privity
misses the point. In Trevino, the critical issue was not the familial relation-
ship but rather that “the interests of Trevino and her grandmother are so
similar that Trevino’s grandmother virtually represented Trevino in [the
prior litigation].” 99 F.3d at 924. The facts here are fundamentally indis-
tinguishable; Louisiana-Pacific’s own president testified during the state
court trial that the focus of that litigation was to get each customer “what
he’s entitled to.” However, as in Trevino, his customers’ interests had been
fully represented in the prior federal action and were protected by the set-
tlement agreement.
14620 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
vigorously pursued by the customers during the settlement
proceedings. See Schimmels, 127 F.3d at 881; Trevino, 99
F.3d at 924. Accordingly, Lester is in privity with its custom-
ers and is barred from receiving the portion of the jury’s ver-
dict that would compensate its customers twice for the cost of
the same repairs. See In re Baldwin-United Corp., 770 F.2d
at 336; TBK Partners, Ltd. v. Western Union Corp., 675 F.2d
460-62 (2d Cir. 1982) (holding that claims based on the
“identical factual predicate” as those covered by the settle-
ment agreement were barred by a prior judgment on the settle-
ment). The district court did not err when it issued the
injunction pursuant to the relitigation exception.
IV.
The district court also based its injunction on the second
exception to the Anti-Injunction Act, injunctions that are
“necessary in aid of [ ] jurisdiction.” 28 U.S.C. § 2283.
Regarding that exception, the district court held that:
[I]n the exercise of my discretion [I] conclude that
the requested injunction is proper and should issue.
. . . [Allowing Lester’s case in Minnesota to proceed
would] circumvent the settlement agreement and the
elaborate negotiated claims resolution procedures
contained therein, and create, as [Louisiana-Pacific]
suggests, a “subclass” of class members whose
claims would, if the jury verdict is permitted to
stand, enjoy special treatment not available to other
class members. Moreover, there is a substantial risk
that others in Lester’s position, encouraged by the
jury verdict, will pursue similar claims, thus further
impairing the class action settlement and interfering
in this court’s stewardship over it.
In re Louisiana-Pacific, 234 F. Supp. 2d at 1180. As the dis-
trict court’s ruling demonstrates, the “necessary in aid of
jurisdiction” exception is quite similar to the relitigation
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14621
exception, and in some respects, overlapping. From a prag-
matic standpoint, the basic elements of the two exceptions are
essentially the same. The principal difference is that the for-
mer exception is generally applied at an earlier stage of the
litigation, before the settlement is fully implemented. Never-
theless, in many cases in which an injunction has been
affirmed under the relitigation exception, it has also been
affirmed under the “necessary in aid of jurisdiction” excep-
tion. See, e.g., Flanagan v. Arnaiz, 143 F.3d 540, 545-46 (9th
Cir. 1998); Battle v. Liberty Nat’l Life Ins. Co., 877 F.2d 877,
881-83 (11th Cir. 1989) (holding that both exceptions applied
where a judgment pursuant to a settlement agreement in fed-
eral court was entered five years prior to the enjoined state
court action, and the federal court had retained jurisdiction for
the purpose of construing and implementing terms of the set-
tlement); United States v. Am. Soc’y of Composers, Authors
& Publishers, 442 F.2d 601, 603 (2nd Cir. 1971). Thus, to the
extent that I have already responded to the majority’s argu-
ments in discussing the relitigation exception, I will not reiter-
ate that analysis here. Nor will I reiterate any of the
affirmative arguments I have already advanced as to why the
issuance of the injunction was necessary. I will note only that
for the reasons offered earlier, it is clear to me not only that
the district court did not err when it issued its injunction in
reliance on the relitigation exception, but also that it did not
abuse its discretion when it relied on the “necessary in aid of
jurisdiction” exception as well.
In reaching its decision regarding the “necessary in aid of
jurisdiction” exception, the district court explained that seri-
ous issues pertaining to the implementation of the federal
class settlement remained unresolved. First, the district court
found that insofar as Lester claimed damages for the cost of
repairing its customers’ hog barns, those customers covered
by the settlement agreement would effectively become a sub-
class that would enjoy special treatment unavailable to other
class members, specifically the double recovery of their dam-
ages. Second, the district court expressed concern that if the
14622 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
jury’s verdict were allowed to stand, a flock of enterprising
Lester-like plaintiffs might appear in state courts around the
country, seeking remuneration for claims on behalf of custom-
ers covered by the settlement agreement. The possibility of
these occurrences threatened the settlement agreement
because, among other reasons, there would be a risk that the
agreement would no longer provide the exclusive relief for
customers that the parties intended.5 Third, the district judge
found that the state court verdict, if not enjoined, would “seri-
ously impair the integrity of this court’s Order, and directly
interfere with and seriously impair my ability to supervise,
implement, enforce, construe and interpret the class action
settlement agreement over which I have retained exclusive
jurisdiction.” These concerns are not trivial and taken
together, there can be no question that they created a substan-
tial and serious risk that the district court’s jurisdiction over
the class would become “nugatory.” See Bennett, 285 F.3d at
806.
The district court’s third factual finding, that the state court
verdict would substantially impair its ability to supervise the
settlement agreement, was made at a time when Louisiana-
Pacific was still very much in the process of satisfying the
terms of that agreement. The majority, in its effort to make it
appear as though the federal litigation was over and done with
and that the district court had little if any supervision left to
perform, makes much of the fact that, as of September, 2003,
5
The settlement agreement provides that “the [district] Court shall retain
exclusive and continuing jurisdiction of the Action, all Parties and Settle-
ment Class members, to interpret and enforce the terms, conditions, and
obligations of this release.” In re Louisiana-Pacific, 234 F. Supp. 2d at
1173 (quoting the settlement agreement) (emphasis added). Similarly, the
district court order approving the agreement states that the district court
retains “exclusive and continuing jurisdiction over the Actions and Parties,
including all members of the Class, the administration and enforcement of
the settlement, and the benefits to the Class, including for such purposes
as supervising and implementation, enforcement, construction, and inter-
pretation of the Settlement Agreement.” (emphasis added).
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14623
Louisiana-Pacific had paid approximately $509 million in sat-
isfaction of $823 million in claims and that less than $20 mil-
lion remained in valid and approved unfunded claims.
However, those were not the facts before the district court
when it issued its injunction in December, 2002. At that time,
the final day for class members to file claims against
Louisiana-Pacific had not yet arrived and the company had
not yet decided whether to satisfy in full all of the remaining
valid and approved unfunded claims. In fact, one mechanism
for funding outstanding claims, the Claimant Offer Program,
was not approved until March 24, 2003, three months after the
injunction was issued. Thereafter, on June 27, 2003, the court
approved a stipulation between class members and Louisiana-
Pacific regarding the implementation of that program. Thus,
the majority mischaracterizes the facts regarding the status of
the federal litigation, which the appointed special master
described as “one of the largest and most complex class action
settlements ever reached in the United States.” The settlement
was still at a sensitive stage and the district court acted within
its discretion when it concluded that the state court action
threatened its stability.
The majority disagrees with the district court’s statement of
the relevant facts and its analysis of them. It premises its deci-
sion on the misguided assumption that the district court’s
work was done (in which case the relitigation exception
would still apply). The majority writes:
[t]he necessary in aid of jurisdiction exception is
inapplicable here because the state court action did
not threaten the district court’s jurisdiction over the
Inner-Seal Siding litigation. By the time that the
court issued the injunction, the Inner-Seal Siding
class action had long since been resolved. Indeed,
the district court had several years earlier approved
the settlement and entered final judgment. Because
the litigation was over, the state court action could
not have interfered with the district court’s consider-
14624 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
ation or disposition of the class claims. Nor could it
have interfered with the court’s continuing jurisdic-
tion over the settlement. The membership of the
class was fixed, the parties’ respective rights and lia-
bilities were resolved, the settlement fund had been
established and claims were being paid.
Maj. op. at 14581 (internal citation omitted). In other words,
the majority finds, erroneously, that the district court had,
from a practical standpoint, exhausted its jurisdiction. It
asserts that the class action “had long since been resolved,”
and that there was, therefore, no threat to the court’s jurisdic-
tion. It concludes, therefore, that the court was without the
authority to issue an injunction under the “necessary in aid of
jurisdiction” exception.
The first problem with the majority’s holding is that it is
based on erroneous findings of fact improperly made by an
appellate court. My colleagues mischaracterize the status of
the class action and ignore the district court’s factual findings
regarding the threat that the jury verdict posed to the ongoing
implementation of the complex settlement agreement. The
majority holds that the “necessary in aid of jurisdiction”
exception is inapplicable because “the Inner-Seal Siding class
action had long since been resolved[,] . . . [t]he membership
of the class was fixed, the parties’ respective rights and liabil-
ities were resolved, the settlement fund had been established
and claims were being paid.” Maj. op. at 14581 (citation omit-
ted). That is, of course, a different view of the status of the
case than the district court expressed when it determined that
the jury verdict interfered with the ongoing administration of
the settlement fund. It is also a different view than is revealed
by an examination of the factual record. The “necessary in aid
of jurisdiction” exception is inapplicable only when the dis-
trict court’s jurisdiction has been so completely exhausted that
the intrusion by a state court on its exercise of its jurisdiction
would be meaningless. The exception is not, as the majority
suggests, inapplicable simply because the district court has
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14625
entered a settlement agreement that is in the process of being
implemented under the active supervision of the court.
Here, although the “membership of the Inner-Seal Siding
class and the terms of the settlement were approved and final-
ized long before the district court issued the injunction,” Maj.
op. at 14584, all class members’ claims had not been paid
(nor had they all even been made) as of the date the injunction
was issued, and the administration of the settlement was
ongoing. Much remained to be done to carry out the settle-
ment both by the parties and the court. The district court’s
injunction was designed to ensure that the remaining class
claims would be funded and paid, and that Louisiana-Pacific
would not be required to compensate class members for the
same damage, loss, or cost in another forum at any time in the
future. Without the injunction, the court’s enforcement juris-
diction and the final settlement of all claims were, in the dis-
trict court’s judgment, seriously threatened. Accordingly, the
court had the discretion to issue the injunction under the “nec-
essary in aid of jurisdiction” exception.
Second, the majority disregards the provision of the settle-
ment agreement and the district court order expressly retain-
ing “exclusive and continuing” jurisdiction over the
enforcement of the settlement agreement, “including [ ] such
purposes as supervising and implementation, . . . construction,
and interpretation of the Settlement Agreement.” In Flana-
gan, 143 F.3d at 540, we held that the inclusion of such a pro-
vision, establishing “exclusive” enforcement jurisdiction in
the district court provides a sufficient basis for the invocation
of the “necessary in aid of jurisdiction” exception. See id. at
546; see also Battle, 877 F.2d at 880-83; Am. Soc’y of Com-
posers, 442 F.2d at 603. The reason is that the court’s juris-
diction over the settlement agreement finds its source in the
express provision of the settlement agreement and court order
retaining exclusive and continuing jurisdiction; it is “more
than just a continuation or renewal of jurisdiction.” See Flan-
agan, 143 F.3d at 544 (quotations omitted). In this case, the
14626 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
district court included in its order exactly the kind of express
provision described in Flanagan. Accordingly, the district
court’s reliance upon Flanagan was not improper, and its
invocation of the “necessary in aid of jurisdiction” exception
was appropriate.6
The third reason that the district court’s decision should be
affirmed pursuant to the “necessary in aid of jurisdiction”
exception is that the mere complexity of the settlement justi-
fies the court’s issuance of the injunction under that excep-
tion. In re Diet Drugs, 282 F.3d 220, 236 (3d Cir. 2002). The
settlement agreement in the case before us, which is well in
excess of a half-billion dollars, brought to a conclusion litiga-
tion that combined three nationwide class actions plus a num-
ber of similar statewide actions. The settlement agreement’s
comprehensiveness is especially important because the district
court and the parties invested enormous resources in its
approval and enforcement. Because the settlement agreement
is complex, it is especially vulnerable to state actions that may
frustrate the district court’s attempt to oversee its administra-
tion. See id., 282 F.3d at 235-37 and 235 n.12 (“It is in the
nature of complex litigation that the parties often seek compli-
cated, comprehensive settlements to resolve as many claims
as possible in one proceeding. These cases are especially vul-
nerable to parallel state actions . . . .”).
The majority disregards the complexity of this case. It
asserts only that, historically-speaking, the “necessary in aid
of jurisdiction” exception arose from the rule that actions in
6
In its analysis of the necessary in aid of jurisdiction exception, the
majority seeks unsuccessfully to distinguish Flanagan on the ground that,
in that case, disputes arising from the settlement agreement were still
being litigated in federal court when the plaintiffs sought to pursue their
state court claims. The majority’s argument ignores the fact that in our
analysis of the Anti-Injunction Act’s exceptions in Flanagan we consid-
ered only the fact that the settlement agreement had conferred continuing
jurisdiction; we did not once mention the import of ongoing disputes in
federal court. See 143 F.3d at 545-46.
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14627
rem should be able to proceed in one jurisdiction without
interference from another. See Maj. op. at 26-27. Relying on
Supreme Court case law from 1922, the majority concludes
that the “general rule” today is that where an action is strictly
in personam, there is no objection to a subsequent action in
another jurisdiction. Maj. op. at 27. However, the majority
fails to recognize that, despite the “general rule” against issu-
ing injunctions in in personam actions, there is an exception
for complex litigation cases. “In several cases, courts have
analogized complex litigation cases to actions in rem.” In re
Diet Drugs, 282 F.3d at 235-36 and 235 n.12 (citing cases);
see also Battle, 877 F.2d at 882 (“it makes sense to consider
this case, involving years of litigation and mountains of
paperwork, as similar to a res to be administered . . . This
lengthy, complicated litigation is the ‘virtual equivalent of a
res.’ ”(citations omitted)); In re Baldwin-United Corp., 770
F.2d at 337 (same). Thus, as the district court found, the set-
tlement before us is akin to a res and any state court action
that might interfere with that court’s oversight of it constitutes
a serious threat to the federal court’s ability to manage the
final stages of this complex litigation. Far from weakening the
justification for the application of the “necessary in aid of
jurisdiction” exception, the substantial progress of the district
court proceedings in resolving this complex dispute made the
threat of the Minnesota court all the more serious and made
the injunction all the more necessary.
The district court found that “the Minnesota state court’s
actions seriously impaired the integrity of the court’s Order,
and directly interfere[d] with and seriously impair[ed] [the
court’s] ability to supervise, implement, enforce, construe and
interpret the class action settlement agreement over which [it]
retained exclusive jurisdiction.” In re Louisiana-Pacific, 234
F. Supp. 2d at 1180. Although, as the majority says, “the
membership of the class was fixed, the parties’ respective
rights and liabilities were resolved, the settlement fund had
been established and claims were being paid,” the district
court, aware, inter alia, of the prospect that Louisiana-Pacific
14628 LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS
could decline to continue funding the settlement, found that
the risks flowing from the Minnesota verdict were sufficiently
serious that the court’s continuing jurisdiction over the settle-
ment would be jeopardized. The majority arbitrarily rejects
this finding. It also refuses to recognize that a double recovery
for a particular sub-class of the class plaintiffs constitutes a
threat to the settlement agreement and the court order, and it
is not willing to acknowledge the potential for harm that could
result from the proliferation of state-by-state third party bene-
factor litigation. These potential occurrences, however, as the
district court found, constitute serious and substantial threats
to the exercise of the court’s jurisdiction. It was well within
the discretion of the district court to reach that determination.
The majority does not offer any valid explanation as to why
the consequences that would flow from entering the Minne-
sota jury verdict in this complex litigation do not constitute
serious threats to the orderly administration of the class settle-
ment. Although my colleagues may disagree with the district
court’s decision, all of the court’s underlying findings are sup-
ported by the record, and the district judge reasonably relied
upon the law of our circuit and others. The district judge did
not abuse his discretion or commit clear error when he deter-
mined that the injunction should issue under the “necessary in
aid of jurisdiction” exception. In fact, in my opinion, the dis-
trict court did a remarkably good job with the law and reached
the correct result with respect to both Anti-Injunction Act
exceptions on which it relied.
V.
In conclusion, it is clear that Lester’s state law claims pur-
sued on behalf of and for the benefit of its customers may be
enjoined under both exceptions relied upon by the district
judge, the relitigation exception and the “necessary in aid of
jurisdiction” exception. The majority’s decision not only con-
dones a double recovery by a sub-group of class members in
direct contravention of the settlement agreement, but it
LOUISIANA-PACIFIC v. LESTER BUILDING SYSTEMS 14629
encourages similar disruptive litigation in other states.
Because the Minnesota jury’s verdict clearly included dam-
ages covered by the settlement, allowing it to stand would cir-
cumvent the settlement agreement and seriously impair its
integrity, as well as the federal court’s ability to supervise,
implement, enforce, construe, and interpret the class action
settlement over which it has exclusive jurisdiction. In arriving
at the determination that the injunction should issue, the dis-
trict court reasonably relied upon the law of our circuit and
others and made underlying findings that were supported by
the evidence and which may not be disturbed by an appellate
court. I would affirm.
I respectfully dissent.