Commercial Litigation and Arbitration

Does the Anti-Injunction Act Permit an Injunction That Is Sought before the Initiation of State Court Proceedings But Wouldn’t Issue until after the State Court Suit Is Filed? (Circuit Split)

Monster Beverage Corp. v. Herrera, 2013 U.S. Dist. LEXIS 189315 (C.D. Cal. Dec. 16, 2013):

The Anti-Injunction Act does not prohibit injunctions that prevent the initiation of a state court proceeding. Dombrowski v. Pfister, 380 U.S. 479, 485 (1965); Bank One Delaware, 2003 WL 21703627, at *2. There is a circuit split as to whether, as is the situation here, the Act applies when the federal injunction is sought before the initiation of state court proceedings, but would not be issued until after the state court suit is filed. Royal Ins. Co. of Am. v. Quinn-L Capital Corp., 3 F.3d 877, 884 (5th Cir. 1993). Three circuits have held that the Act does not apply. See Barancik v. Investors Funding Corp., 489 F.2d 933, 937 (7th Cir. 1973); National City Lines v. LLC Corp., 687 F.2d 1122, 1127 (8th Cir. 1982);; Hyde Park Partners, L.P. v. Connolly, 839 F.2d 837, 842 n.6 (1st Cir. 1988). The majority of circuits that have considered the issue, however, have held the Act applies regardless of the order in which the actions were filed. See Roth v. Bank of the Commonwealth, 583 F.2d 527, 533 (6th. 1978); Royal Ins. Co. of Am., 3 F.3d 877, 884 (5th Cir. 1993); Denny's, Inc. v. Cake, 364 F.3d 521, 529 (4th Cir. 2004); see also Standard Microsystems Corp. v. Texas Instruments, 916 F.2d 58, 61-62 (2d Cir. 1990) (disapproving of the reasoning in Barancik).

In Barancik, the leading opinion holding that the Anti-Injunction Act does not apply, the Seventh Circuit held that whether the mandatory character of the Act applies is determined when the federal court's injunctive powers are invoked. 489 F.2d at 937. The Court reasoned that "unless the applicability of the statutory bar is determined by the state of the record at the time the motion for an injunction is made, a litigant would have an absolute right to defeat a well-founded motion by taking the very step the federal court was [*30]  being urged to enjoin." Id. The Court concluded that although the Act does not prohibit an injunction when the federal action is filed before the state court action, federal courts should still exercise discretion and consider the "principles of equity, comity and federalism that must restrain a federal court when asked to enjoin a state court proceeding." Id. at 938 (quoting Mitchum v. Foster, 407 U.S. 225, 243 (1972)).

In Denny's, the Fourth Circuit disagreed with the reasoning in Barancik, and found that under the plain language of the Anti-Injunction Act and the Supreme Court's narrow interpretation of the exceptions of the Act, the Act applies regardless of when the complaint for the injunction was filed. 364 F.3d at 530. The plain language of the Act "clearly and unequivocally prohibits a federal court from granting 'an injunction to stay proceedings in a State court.'" Id. at 529 (citing 28 U.S.C. § 2238). Nothing in the plain language suggests that the Act applies only when the federal plaintiff requests injunctive relief after the state court suit had been filed. Id. The Fourth Circuit discussed the policy concerns cited in Barancik, and found they would be better addressed through the use of temporary restraining orders enjoining the initiation of the state court [*31]  proceeding. Id. at 530-32. The court concluded that the Act applies regardless of whether the request for a federal injunctive relief was made before or after the state court action was filed. Id.

The Court finds the Fourth Circuit's reasoning in Denny's persuasive, especially in light of the Supreme Court's instruction that "[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." Atlantic Coast Line R.R. Co. v. Bhd. of Locomotive Eng'rs, 398 U.S. 281, 297 (1970); Bennett v. Medtronic, Inc., 285 F.3d 801, 805 (9th Cir. 2002) (quoting Atlantic Coast Line R.R. Co., 398 U.S. at 297.) Accordingly, the Court finds the Act applies here, and notes that even if the Act does not apply when a request for a federal injunction is made before the state court proceedings are filed, the Court would exercise its discretion in light of the principles of equity, comity and federalism and refrain from granting an injunction that would effectively enjoin the state court proceeding.


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