Brother Records, Inc. v. Jardine

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BROTHER RECORDS, INC., a 
California Corporation,
Plaintiff-Counter-Defendant- No. 04-55096
Appellant,
v.  D.C. No.
CV-99-03829-HLH
ALAN JARDINE, an individual, OPINION
Defendant-Counter-Claimant-
Appellee.

Appeal from the United States District Court
for the Central District of California
Harry L. Hupp, District Judge, Presiding
Argued and Submitted
November 15, 2005—Pasadena, California
Filed December 19, 2005
Before: William C. Canby, Jr., Ferdinand F. Fernandez, and
Marsha S. Berzon, Circuit Judges.
Opinion by Judge Canby
16579
16582 BROTHER RECORDS v. JARDINE
COUNSEL
Philip H. Stillman, Flynn & Stillman, Cardiff, California, for
the appellant.
Lawrence C. Noble, Lawrence C. Noble & Associates, Ven-
tura, California, for the appellee.
OPINION
CANBY, Circuit Judge:
Brother Records, Inc. (“BRI”) is a California corporation
that was formed by four of the original members of the music
group “The Beach Boys.” Alan Jardine was an original band
member and is a director and shareholder of BRI. In a prior
federal lawsuit, BRI successfully sued Jardine for trademark
infringement. While that action was pending, Jardine filed suit
against BRI and its shareholders in California Superior Court,
alleging breach of fiduciary duty and related claims. The Cali-
fornia Court of Appeal held that Jardine’s suit was not barred
as res judicata under state law. BRI then filed a motion in the
federal district court for an injunction to prevent Jardine from
going forward with his state action. The district court denied
BRI’s motion, and BRI now appeals. We affirm because, in
the light of the California Court of Appeal’s ruling that res
judicata was not a bar to the state action, the district court’s
denial of the injunction was not an abuse of discretion.
BROTHER RECORDS v. JARDINE 16583
Background
In 1998, BRI issued a non-exclusive license to Michael
Love, an original member of The Beach Boys, to use the
band’s trademark. BRI declined, however, to sign a contract
authorizing Jardine also to use the mark. After Jardine began
touring under the name “Beach Boys Family & Friends” and
other variants, BRI sued in federal court for trademark
infringement. The district court granted partial summary judg-
ment in BRI’s favor. A permanent injunction was entered on
November 5, 2001, prohibiting Jardine from using “Beach
Boy” or “Beach Boys” in the name of his music group. The
district court decision was affirmed by this court in Brother
Records, Inc. v. Jardine, 318 F.3d 900 (9th Cir. 2003).
Shortly after BRI filed its motion for summary judgment in
federal court, Jardine brought an action against BRI and its
shareholders in California state court for breach of fiduciary
duties and breach of contract. The defendants filed a demurrer
on the ground that res judicata barred the claims. The state
trial court sustained the demurrer with leave to amend. When
Jardine did not amend, the complaint was dismissed. Jardine
appealed, and the California Court of Appeal reversed on the
ground that Jardine’s claims were not barred by res judicata
or collateral estoppel under state law.1
1
After the California Court of Appeal’s decision, Jardine voluntarily
dismissed BRI without prejudice, leaving BRI’s shareholders as the only
remaining defendants. Although Jardine argues otherwise, his dismissal of
BRI from the state court action does not moot BRI’s appeal to this court
because Jardine caused the dismissal, and this court can still grant effec-
tive relief. See Seven Words LLC v. Network Solutions, 260 F.3d 1089,
1095 (9th Cir. 2001) (quoting Mills v. Green, 159 U.S. 651, 653 (1895))
(stating that an appeal should be dismissed when “without any fault of the
defendant, an event occurs which renders it impossible for this court, if it
should decide the case in favor of the plaintiff, to grant him any effectual
relief whatever . . .”). A ruling in BRI’s favor here would protect it from
being brought back into the California lawsuit.
16584 BROTHER RECORDS v. JARDINE
BRI then filed a motion in the district court to enjoin the
state court proceedings pursuant to the All Writs Act, 28
U.S.C. § 1651, as qualified by the Anti-Injunction Act, 28
U.S.C. § 2283. The district court expressed its agreement with
the decision of the California Court of Appeal that res judicata
did not bar Jardine’s state lawsuit; the district court accord-
ingly denied the motion for an injunction. The district court
expressed no doubt about its power to issue an injunction if
issues arise in the state court in the course of litigation that
would be precluded by the earlier federal judgment, but ruled
that no injunction should issue because the state court could
adequately resolve such issues as they arose. BRI now appeals
the district court’s ruling.
We have jurisdiction pursuant to 28 U.S.C. § 1291. We
review for abuse of discretion the district court’s denial of the
injunction. See, e.g., Sports Form, Inc. v. United Press Int’l.,
Inc., 686 F.2d 750, 752 (9th Cir. 1982). The district court’s
decision “will be reversed only if [it] relied on an erroneous
legal premise or abused its discretion.” Id.
Discussion
1. The Relitigation Exception to the Anti-Injunction
Act
[1] The district court’s authority to issue an injunction
under the All Writs Act, 28 U.S.C. § 1651, is limited by the
Anti-Injunction Act, 28 U.S.C. § 2283. The Anti-Injunction
Act prohibits federal courts from enjoining state court pro-
ceedings unless one of three narrow exceptions applies. 28
U.S.C. § 2283.2 The exception that most arguably applies here
2
The Anti-Injunction Act is admirably succinct. It provides in full:
A court of the United States may not grant an injunction to stay
proceedings in a State court except as expressly authorized by
Act of Congress, or where necessary in aid of its jurisdiction, or
to protect or effectuate its judgments.
28 U.S.C. § 2283.
BROTHER RECORDS v. JARDINE 16585
is the “relitigation” exception, which allows a district court to
issue an injunction when necessary to “protect or effectuate
its judgments.” Id. This exception is grounded in “the well-
recognized concepts of res judicata and collateral estoppel,”
Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 147 (1988),
and is intended to “prevent the harassment of successful fed-
eral litigants through repetitious state litigation,” Amwest
Mortgage Corp. v. Grady, 925 F.2d 1162, 1164 (9th Cir.
1991). Thus, the exception permits a district court to enjoin
state court litigation if that litigation is barred by the res judi-
cata effect of the district court’s earlier judgment. See Blalock
Eddy Ranch v. MCI Telecomms. Corp., 982 F.2d 371, 375
(9th Cir. 1992).
The district court did not write on a blank slate in address-
ing the question whether its earlier judgment barred the state
court action under the principles of res judicata or collateral
estoppel. The California Court of Appeal had already ruled
that the state action was not barred when the district court
denied the injunction. We conclude that this denial was not an
abuse of discretion because of the very considerable weight
that the California Court of Appeal’s decision carries in these
circumstances.
[2] It is true, as we have already pointed out, that a federal
court may enjoin a state court action that is barred by the res
judicata effect of the federal court’s judgment. At the outset
of such state litigation, the federal court may decide the res
judicata issue and rule accordingly. See id. The Supreme
Court has held, however, that the situation is drastically
changed when the state court has already ruled that the state
action is not barred by the res judicata effect of the federal
judgment. See Parsons Steel, Inc. v. First Ala. Bank, 474 U.S.
518, 524 (1986). That state court ruling itself may be binding
on the federal court under the Full Faith and Credit Act, 28
U.S.C. § 1738. That Act provides that state court proceedings
“shall have the same full faith and credit in every court within
the United States . . . as they have by law or usage in the
16586 BROTHER RECORDS v. JARDINE
courts of such State . . . from which they are taken.” 28 U.S.C.
§ 1738. Thus, the district court was required to give the Cali-
fornia Court of Appeal’s decision “the same preclusive effect
it would have had in another court of the same State.” Par-
sons, 474 U.S. at 525. This requirement applies “[e]ven if the
state court mistakenly rejected respondents’ claim of res judi-
cata . . . .” Id.
[3] The next question, then, is whether the Court of
Appeal’s res judicata ruling is preclusive on other California
courts under California law. The answer is not entirely clear.
In California, a judgment has res judicata effect on another
case if: (1) the issues decided in the prior case were or could
have been raised in the subsequent case; (2) there was final
judgment on the merits; and (3) the party against whom the
res judicata plea was asserted was a party in the prior case.
See Bernhard v. Bank of Am. Nat’l Trust & Sav. Ass’n, 19
Cal. 2d 807, 813 (1942). There is conflicting California
authority on whether the Court of Appeal’s decision reversing
and remanding on res judicata grounds is a final judgment.
Compare Doudell v. Shoo, 159 Cal. 448, 453 (1911) (stating
that “[a] judgment is final ‘when it terminates the litigation
between the parties on the merits of the case and leaves noth-
ing to be done but to enforce by execution what has been
determined’ ” (citations omitted)) and People v. Scott, 85 Cal.
App. 4th 905, 919 (2000) (holding that a decision is final
when “no further judicial act remains to be done to end the lit-
igation”) with Rymer v. Hagler, 211 Cal. App. 3d 1171, 1180
(1989) (explaining that collateral estoppel “requires only a
final adjudication of the issue sought to be precluded in the
second action”) and Sandoval v. Super. Ct., 140 Cal. App. 3d
932, 936 (1983) (adopting and quoting the Restatement (Sec-
ond) of Judgments’ rule that “for purposes of issue preclusion
. . . ‘final judgment’ includes any prior adjudication of an
issue in another action that is determined to be sufficiently
firm to be accorded conclusive effect”).
BROTHER RECORDS v. JARDINE 16587
[4] We need not resolve this question, however, to decide
the case before us. If the Court of Appeal’s decision is final
and preclusive under state law, then the district court was
required to follow it and thus acted properly in denying the
injunction. See Parsons, 474 U.S. at 525. Even if the decision
is not final and preclusive, we conclude that the district court
did not abuse its discretion in giving it effect. Absent a preclu-
sive final judgment, the district court could still determine
“the propriety of a federal-court injunction under the general
principles of equity, comity, and federalism . . . .” Parsons,
474 U.S. at 526. The Court of Appeal’s decision on res judi-
cata was sufficiently definitive that all three of these princi-
ples are satisfied by according great weight to the state court’s
ruling. The parties argued the res judicata issue before the
state trial court and the Court of Appeal, and the latter court
explicitly decided the issue, which was determinative of the
entire appeal. We agree with the Seventh Circuit’s observa-
tion that once the state court has considered and decided the
res judicata issue, “the affront of federal court intervention
stripping the state court of power to continue is greatly magni-
fied.” Ramsden v. Agribank, FCB, 214 F.3d 865, 870 (7th Cir.
2000). By adhering to the state court’s decision, the district
court furthered the purpose of Parsons and the Anti-
Injunction Act, which is to “prevent friction between federal
and state courts by barring federal intervention in all but the
narrowest of circumstances.” Sandpiper Vill. Condo. Ass’n,
Inc. v. La.-Pac. Corp., 428 F.3d 831, 842 (9th Cir. 2005).
Therefore, regardless of whether the California Court of
Appeal’s decision was final for purposes of res judicata, the
district court did not abuse its discretion in denying the
injunction under the relitigation exception.3
3
In holding that the district court did not abuse its discretion in giving
effect to the state Court of Appeal’s ruling even if it was not final, we do
not decide whether there are circumstances in which the district court must
give such a state court ruling preclusive effect. In Ramsden, 214 F.3d at
871-72, the Seventh Circuit held that a state trial court’s ruling rejecting
a defense of res judicata, although non-final for state preclusion purposes,
precluded the federal court from enjoining the state litigation.
16588 BROTHER RECORDS v. JARDINE
2. The Exception to the Anti-Injunction Act for
Injunctions Necessary in Aid of the Federal Court’s
Jurisdiction
[5] BRI contends that the district court should have
enjoined the state court action under the Anti-Injunction Act’s
exception for injunctions “necessary in aid of [the district
court’s] jurisdiction.” 28 U.S.C. § 2283. We reject this con-
tention for many of the same reasons that caused us to reject
the argument that the relitigation exception to the Act applied.
Both exceptions serve a similar purpose: “to prevent a state
court from so interfering 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.” Atl.
Coast Line R.R. Co. v. Bhd. of Locomotive Eng’rs, 398 U.S.
281, 295 (1970). The authorities on which BRI relies involve
instances where a state court threatened to interfere with a
continuing exercise of jurisdiction and administration of a
particular subject matter by a federal court. See, e.g., United
States v. Alpine Land & Reservoir Co., 174 F.3d 1007, 1015
(9th Cir. 1999). Jardine’s breach of fiduciary duty claim does
not threaten the district court’s continuing jurisdiction to
enforce the injunction, which prohibits Jardine from using the
Beach Boys trademark. Even if there was some question
about the possibility of interference with the injunction,
“[a]ny doubts as to the propriety of a federal injunction
against state court proceedings should be resolved in favor of
permitting the state courts to proceed in an orderly fashion to
finally determine the controversy.” Atl. Coast Line R.R. Co.,
398 U.S. at 297.
[6] We conclude, therefore, that the district court acted
properly within its discretion in denying the injunction. The
decision of the district court is
AFFIRMED.