Lead Opinion
Lester Building Systems and its affiliate, Lester’s of Minnesota, Inc. (collectively “Lester”), appeal an order permanently 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,
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. Beginning 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.
In 1995, owners of structures on which Inner-Seal Siding had been installed brought a class action lawsuit in the District 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 agreement and entered an order and final judgment. Pursuant to the settlement agreement and order, L-P agreed to finance a settlement fund and, in exchange, class claims related to the failure of Inner-Seal Siding were released.
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 persons or entities “involved in the distribution, installation, construction and first time sale of structures with Exterior Inner-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 distribution. 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:
[Ejxclusive 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 interpretation of the Settlement Agreement.
By September 2003, L-P had agreed to meet all funding obligations and had made cash payments totaling approximately $509 million to about 142,000 claimants in satisfaction of approximately $823 million in claims.
Lester, a Minnesota corporation, designs, constructs and sells pre-engineered wood buildings for livestock confinement. 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 member and was not a party to the settlement agreement. Class member claims against Lester were released by the settlement, 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 hundreds of claims and complaints ... which must be administered 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 satisfying the claims of [its] dealers and customers arising from defects in and failure of LP’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.”
L-P disagreed with Lester’s interpretation of the res judicata 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 customers’ 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 settlement agreement precluded recovery of those damages and with respect to the amount of those damages, if any.
The case was tried in September and
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 trying to make that result happen.
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 fabricated after January 1, 1996, and thus not covered by the settlement. 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 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 settlement. The expert further asserted that as of October 11, 2002, $640,000 had been paid to Lester’s customers from the settlement fund.
The trial court, apparently accepting LP’s argument that the class action settlement precluded damages for repair costs
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 performance failure after January 1, 2003; or
(c) the building is one for which claims are submitted 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.
On October 24, 2002, the trial judge signed and filed the Findings of Fact, Conclusions of Law, and Order for Judgment based on the jury verdict. In accordance with the Minnesota Rules of Civil Procedure, the judge stayed entry of judgment for 30 days.
On November 6, 2002, just three weeks after the jury verdict in favor of Lester, L-P filed a motion to enforce the settlement agreement in the Oregon federal district court with continuing jurisdiction over the settlement. L-P asked the district 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 Minnesota 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,
Based on its review of Minnesota case-law, the court determined 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.
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.
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
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.
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.,
II. Standard of Review
We review the exercise of jurisdiction de novo. Gerritsen v. Consulado Gen. De Mexico,
III. Subject Matter Jurisdiction
We first address Lester’s jurisdictional argument.
In this case, the district court had subject matter jurisdiction over the underlying class action.
Lester concedes that the district court retained jurisdiction 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 determination and thereby protect its prior judg
IV. Anti-Injunction Act
We turn to the propriety of the injunction.
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 exceptions to the Act.
Necessary in Aid of Jurisdiction Exception
The second exception to the Anti-Injunction Act authorizes injunctive relief “to prevent a state court from so interfering with a federal court’s eonsider-ation or disposition of a case as to seriously impair the federal court’s flexibility and authority to decide that case.”
The 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 consideration or disposition of the class claims. Cf. Alton Box,
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 elaborate, 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.
We are not presented with similar concerns. Lester was not a class member and
The dissent maintains that our holding “disregards the provision of the settlement agreement and the district court order expressly retaining ‘exclusive and continuing’ jurisdiction over the enforcement of the settlement agreement.” Post at 868. Relying on our decision in Flanagan v. Arnaiz, the dissent suggests that “inclusion of such a provision ... provides 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 840-41. 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 Anti-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
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.
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 an 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
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 repetitious state litigation.” Amwest Mortgage Corp. v. Grady,
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.
L-P concedes that Lester was not precluded from litigating all claims related to the failure of Inner-Seal Siding. Nevertheless, L-P contends that the issue of damages for costs related to the repair of Inner-Seal Siding was litigated to finality in the class action and released by the settlement agreement. 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 customers 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 resolution of their claims.
According to the state trial court, however, the prayer for repair costs presented a cognizable state law claim belonging 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.,
The district court’s invocation of the re-litigation exception was improper for the additional reason that any potential for relitigation of covered claims was addressed by the trial 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 instruction essentially gave L-P the legal ruling it sought and did not itself conflict with the federal court settlement.
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 Oregon 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,
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 federal litigation for an alleged breach of that agreement.
In contrast to the facts of Flanagan, Lester was not a party to the settlement agreement and was not bound by the provision placing exclusive authority in the district court. Moreover, 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 litigated in the first action and the parties and claims or issues sought to be precluded in the second action.
The dissent expresses fear that our holding will “severely 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
V. Conclusion
For the foregoing reasons, the order enjoining the Minnesota 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.
Notes
. 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 members 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 lawsuits 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 satisfy 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
Because of the large number of claimants, LP 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.
. All members of the "Settlement Class” were "barred and permanently enjoined from prosecuting 'Settled Claims’ ... against L-P.” The "Settlement Class” was defined as "all Persons who have owned, own> or subsequently 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.
. This figure includes claims that were satisfied through the alternative funding procedures, see supra at 834-35 n. 1, which afforded claimants an opportunity to receive
. 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.
. 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.
. Subsection (b) was likely included to reflect the exception in the settlement 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 damages 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.
. Questions 8 and 9 of the completed verdict form provided:
8.What amount of money would fairly compensate Lester?
Cost of Inner-Seal:
Cost to Repair Buildings (those not barred by the class action):
Lost Profits:
Cost to Restore Goodwill: Total:
$3.4 million
$13.2 million $10.2 million $ 2.8 million $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
. 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.
. 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 damages. In re Louisiana-Pacific,
. 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 Minnesota ... 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,
. 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 disbursements, and subtracting the portion of the verdict enjoined by the district court, $11.2 million, and $101,438 in interest on that amount.
. 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 requisite 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.,
. We reject Lester's implied collateral attack on subject matter jurisdiction over the class action itself. See, e.g., Snell v. Cleveland, Inc.,
. As the Second Circuit explained in In re Baldwin-United, the authority 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 judgment from threats by parties and nonparties alike. See
. 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.
. The first exception to the Anti-Injunction Act, which allows an injunction where “expressly authorized by Act of Congress,” is not at issue here.
. The dissent suggests that we have "conducted a de novo review of the factual findings underlying the district court's decision to issue the injunction under the second exception and substitutedfour] judgment for that of the district court." Post at 859. 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.” Continental Airlines, Inc. v. Intra Brokers, Inc.,
. 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 866 ("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,
The separate treatment of these provisions in the caselaw forces the dissent to concede that the necessary in aid of jurisdiction exception "is generally applied at an earlier stage of the litigation, before the settlement is fully implemented.” Post at 866. 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 jurisdiction’ exception.” Id. at 866. But the cases cited by the dissent represent exceptions explained by their particular facts. In Flanagan v. Arnaiz,
. 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 meaningless.” Post at 867. No authority is cited to support that reading of the caselaw, and we remain bound by precedent.
. 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 869. The dissent is mistaken. We acknowledge that the necessary in aid of jurisdiction exception has been applied in in personam actions, though as a limited exception to the rule. Supra at 843. We also acknowledge that some courts have rationalized 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,
. The district court also quoted extensively from the Second Circuit's decision in In re "Agent Orange" Product Liability Litigation,
. 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 proposition that the complexities of a nationwide class action justify application of the necessary in aid of jurisdiction exception. Post at 869. 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 settlement at the time the state action was filed.
. 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 findings of fact” on appeal. Post at 867. 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 866 are not factual findings. The first is a legal conclusion and the second is speculation, which the district court failed to connect to the evidence 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 decision 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” obligation, which would last until all outstanding claims were paid. See In re Inner Seal Siding Litigation,
. The dissent attaches no legal significance to the fact that Lester was not a party to the class action. Post at 859-60 & 863. 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,
. Relying on our decision in Trevino v. Gates,
. 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 judgment, 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 862 & 863-64. 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.”
. There may be some tension between the trial court’s conclusion that state law allowed Lester to recover for repair costs and the instruction barring 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 performance 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 limitations 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 explanation 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.
. 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 861. The error in the dissent’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 members of the settlement class. In Re Louisiana-Pacific,
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 propriety 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.
. 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 settlement agreement and the availability of repair costs, had been resolved by the trial court. Cf. Ramsden v. AgriBank, FCB,
. The cases cited by L-P are easily distinguishable. In the only binding precedent cited, Class Plaintiffs v. City of Seattle,
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 support. See In re Prudential Ins. Co.,
. 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 preempted by federal law, even when the interference is unmistakably clear.” Atlantic Coast Line,
Concurrence Opinion
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 — litigate 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 immediately could have moved for an injunction in the district court. Instead, it asserted res judicata in the state court, arguing that the settlement agreement between L-P and a nationwide 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
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 settlement agreement, despite expert testimony that none of Lester’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 possible relitigation of its judgment.
In Parsons Steel, Inc. v. First Alabama Bank,
Ramsden v. AgriBank,
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,
Once a state court considers a res judi-cata defense and rules that a prior federal judgment does not actually bar a claim, the affront of federal court intervention stripping the state court of power to continue is greatly magnified. After such a ruling, the interests in preventing possible relitigation are therefore generally outweighed by the heightened comity concerns except in the most extraordinary circumstances.
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 legitimately 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.
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,
I agree with Judge Clifton that the district court abused its discretion in issuing
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 members will break from the ranks and file separate actions elsewhere, 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 judica-ta defense in a state forum and that court rules on the issue, the Anti-Injunction Act prevents its relitigation in federal court.
. 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 judicata issue, as the Minnesota trial court did here, regardless of whether a final judgment has been entered.
Dissenting Opinion
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 further litigation in state courts on a state-by-state basis, litigation 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 provisions 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 settlement agreement and the district court order and judgment adopting it. There is no dispute that if one of Lester’s customers 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 appropriate. The only difference between that case and the one 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 customers’ 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
I.
In 1996, the district court approved a nationwide class settlement of a number of consolidated lawsuits alleging damages resulting from serious defects in Inner-Seal Siding, a product of the Louisiana-Pacific Corporation. In the settlement 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 distribution 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 Minnesota 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 “[wjithout regard to the class action, what is the total money that would fairly and adequately compensate Lester for the Cost to Repair Buildings (both those in and out of the class action)?” (emphasis added), the jury responded with the same figure — $13.2 million. In view of the evidence introduced by the plaintiffs, it is clear that, although the jury offered conflicting and inconsistent answers to the questions it was asked, the $13.2 million portion of the verdict it returned included both the $11.2 million 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
Because Lester’s customers would receive a double recovery, the district court permanently enjoined entry of judgment in the state court on $11.2 million of the jury’s verdict, ie., 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 verdict 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 authorized 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 jurisdiction[ ] 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 authorized by ... Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” 28 U.S.C. § 2283. The interplay of the two Acts is well established in 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.,
Despite these acknowledgments, the majority impermissibly 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 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 continuing jurisdiction over the federal action. This is essentially a factual dispute involving the exercise of judgment by the district judge. There is simply no allegation by the majority that the district court erred in its legal conclusions, that it exercised 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 Sciences Univ.,
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 permit 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,
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, obligation,] damage, loss or cost, action or cause of action, of every kind and description that the Releasing Party [as defined] has or may have, whether known or unknown, asserted or unas-serted, latent or patent, that is, has been, could reasonably have been or in the future might reasonably be asserted*860 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,
In March, 2000, Lester filed an action in Minnesota state court seeking to recover damages for numerous injuries, specifically including the cost to its customers of repairing their buildings covered by the settlement agreement. When the ease 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 million of that amount being allocated to barns built after January 1, 1996, and therefore not covered by the settlement agreement. Despite the trial judge’s instruction to award damages only for the cost of repairing barns not covered by the settlement agreement, the jury returned a verdict covering the costs of repairing all the barns, both those covered by the settlement agreement and those outside its scope. Thus, instead of awarding Lester only the $2 million it. sought for barns constructed post-January 1, 1996, it also awarded an additional $11.2 million for the cost of repairs to the settlement agreement 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 re-litigation exception if ‘there could be an actual conflict between the subsequent state court judgment and the prior federal judgment.’ ” G.C. & K.B. Invs.,
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.
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 settlement agreement because “the prayer for repair costs presented a cognizable state law claim belonging to Lester.” Maj. op. at 849. Lester argues, and the majority agrees, that notwithstanding 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 question we must decide — whether the jury’s award is inconsistent 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 district 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 conflict 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,
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 settlement agreement, but the state court jury awarded Lester substantial 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 settlement 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 Baldwin-United Corp., thirty-one states that were
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 distributors 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 proceedings.” G.C. & K.B. Invs.,
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
The majority attempts to avoid the problem posed by double 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 somehow different from compensating Lester’s customers directly. However, because Lester seeks recovery for the same damage, 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 compensation for those same customers for that same harm, it is irrelevant that Lester was not itself a party to the settlement agreement. The terms of the settlement agreement clearly provide that the fund it establishes shall be the exclusive source of relief for class members and shall fully resolve any damage, loss, or cost to those class members. Whether the jury’s award is given to Lester’s customers or to Lester for the benefit 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 established in federal law. InIn re Baldwin-United Corp., the thirty-one States Attorneys General who brought the action sought “to enforce state laws authorizing them in their representative capacities to seek restitution and monetary recovery from the defendants to be paid over to those of the states’ citizens who are plaintiffs in the consolidated class actions.... ”
no defendant in the consolidated federal actions ... could reasonably be expected to consummate a settlement of those claims if their claims could be reasserted*864 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 ‘restitution’ 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 additional damages to be used for the benefit of class members in satisfaction of claims for which they have already been compensated under the settlement agreement. The fact that a third party brings the action in its own name is without consequence. In re Baldwin-United Corp. is the leading case in the area; it is correct, and there is no reason to create a direct conflict with it.
The majority contends, nevertheless, that privity is necessary for a non-party to be bound by the settlement agreement. See Maj. op. at 848 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 litigation that he represents precisely the same right in respect to the subject matter involved.” United States v. Schimmels (In re Schimmels),
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 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 simply 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 granddaughter each sought separate recoveries for their own
Although Lester may not have had a full opportunity to litigate 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,
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,
In reaching its decision regarding the “necessary in aid of jurisdiction” exception, the district court explained that serious 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 subclass that would enjoy special treatment unavailable to other class members, specifically the double recovery of their damages. Second, the district court expressed concern that if the 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 customers 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.
The majority disagrees with the district court’s statement of the relevant facts and its analysis of them. It premises its decision 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 consideration or disposition of the class claims. 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 settlement fund had been established and claims were being paid.
Maj. op. at 844 (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 jurisdiction. 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 miseharac-terize 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
Here, although 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,” Maj. op. at 846, 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 settlement 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 jurisdiction and the final settlement of all claims were, in the district court’s judgment, seriously threatened. Accordingly, the court had the discretion to issue the injunction under the “necessary in aid of jurisdiction” exception.
Second, the majority disregards the provision of the settlement agreement and the district court order expressly retaining “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 Flanagan, 143 F.3d at 540, we held that the inclusion of such a provision, 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 Composers,
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 rem should be able to proceed in one jurisdiction -without interference from another. See Maj. op. at 846. 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 846. However, the majority fails to recognize that, despite the “general rule” against issuing 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,
The district court found that “the Minnesota state court’s actions seriously impaired the integrity of the court’s Order, and directly interfere^] 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,
The majority does not offer any valid explanation as to why the consequences that would flow from entering the Minnesota jury verdict in this complex litigation do not constitute serious threats to the orderly administration of the class settlement. Although my colleagues may disagree with the district court’s decision, all of the court’s underlying findings are supported 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 determined that the injunction should issue under the “necessary in aid of jurisdiction” exception. In fact, in my opinion, the district 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 pursued 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 condones a double recovery by a sub-group of class members in direct contravention of the settlement agreement, but it encourages similar disruptive litigation in other states. Because the Minnesota jury’s verdict clearly included damages covered by the settlement, allowing it to stand would circumvent 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 district 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.
. 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 members covered by the settlement agreement.
. 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 million. 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 850 n.27.
. Judge Silverman's concurrence asserts that “once [Louisiana-Pacific] raised its res judi-cata 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 837.) 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 federal court issued the injunction. Thus, the principal cases upon which Judge Silverman relies in his concurrence, Parsons Steel, Inc. v. First Alabama Bank,
. 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 relationship but rather that “the interests of Trevino and her grandmother are so similar that Trevino’s grandmother virtually represented Trevino in [the prior litigation].”
. The settlement agreement provides that "the [district] Court shall retain exclusive and continuing jurisdiction of the Action, all Parties and Settlement Class members, to interpret and enforce the terms, conditions, and obligations of this release.” In re Louisiana-Pacific,
. 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 considered only the fact that the settlement agreement had conferred continuing jurisdiction; we did not