In Re: Lease Oil Ant ( 2000 )

                              FOR THE FIFTH CIRCUIT
                                   No. 98-40840
                    In re: LEASE OIL LITIGATION (NO. II)
                Appeal from the United States District Court
                     For the Southern District of Texas
                                 January 11, 2000
    Before HIGGINBOTHAM, BENAVIDES, and STEWART, Circuit Judges.
         In this interlocutory appeal, we consider the preclusive
    effect of an Alabama state court judgment approving a settlement of
    a nationwide class action on a federal class action pending in a
    federal district court in Texas.         Defendant Mobil Oil Corporation
    filed   a   motion   to   dismiss,    claiming   an   Alabama   state   court
    settlement bars the federal suit against it.                We affirm the
    district court’s denial of Mobil’s motion to dismiss.               We also
    conclude that the district court did not violate Fed. R. Civ. P. 65
    in issuing an injunction against Mobil.
         This federal class action asserts claims against various crude
    oil purchasers under § 1 of the Sherman Act for underpayments on
    oil production leases. After this suit was filed, other plaintiffs
    filed a separate suit on behalf of a national class in a circuit
    court of Alabama entitled Lovelace v. Amerada Hess Corporation.
    The factual allegations in Lovelace and the federal suit were
    identical, but Lovelace asserted only state law claims.                   The
    Lovelace defendants removed the case to federal court, but the
    federal district court in Alabama granted the Lovelace plaintiffs’
    motion to remand to state court based on their representation that
    the case involved only state law claims.        Mobil then settled the
    Lovelace claims for $15 million and prospective relief, and an
    Alabama   trial   court   affirmed   the   settlement.      Part    of   that
    settlement released Mobil from all existing federal claims of the
    nationwide class.
         After settling the state suit in Alabama, Mobil moved to
    dismiss the federal case, now consolidated with five other federal
    class   actions   and   retitled.    Mobil   argued    that   the   Alabama
    settlement precluded the federal claims.       While     Mobil’s motion to
    dismiss was pending, the Texas federal district court preliminarily
    enjoined the parties from settling federal claims in other cases
    without its approval.      The injunction would bind Mobil, however,
    only if the pending motion to dismiss was denied.               The court
    subsequently denied the motion, thereby including Mobil in the
    injunction.      Mobil   appeals    the    injunction   under   28   U.S.C.
    § 1292(a)(1).
         Mobil contends that it lacked notice and an opportunity to be
    heard before the injunction issued.        We review that order for abuse
    of discretion.    See Affiliated Prof’l Home Health Care Agency v.
    164 F.3d 282
    , 284 (5th Cir. 1999).
         Rule 65 of the Federal Rules of Civil Procedure allows the
    court to issue a preliminary injunction after actual notice and an
    opportunity to be heard.     See Kaepa, Inc. v. Achilles Corp., 
    76 F.3d 624
    , 628 (5th Cir. 1996).      The form of notice is a matter for
    the trial court’s discretion.            Plaquemines Parish Sch. Bd. v.
    United States, 
    415 F.2d 817
    , 824 (5th Cir. 1969).
         Here, when the district court enjoined the other defendants,
    the order advised Mobil that it too would be enjoined if the court
    denied its motion to dismiss.      This was sufficient notice to Mobil.
    Mobil could have challenged the propriety of the injunction during
    the two months before the court denied its motion to dismiss.           We
    find no violation of Rule 65.
         Mobil also appeals the denial of its motion to dismiss. Mobil
    argues that the Full Faith and Credit Act, 28 U.S.C. § 1783,
    required the federal district court to give preclusive effect to
    the   judgment     of   the   state   court     of    Alabama   approving   the
          We must first decide whether review of the denial of the
    motion to dismiss is before us as part of the appeal of the
    preliminary      injunction.2     Our       jurisdiction   under   28    U.S.C.
    § 1292(a)(1) is not limited to the specific order appealed from.
    See Magnolia Marine Transp. Co., Inc. v. LaPlace Towing Corp., 
    964 F.2d 1571
    , 1580 (5th Cir. 1992).            Jurisdiction extends to certain
    related issues that have been sufficiently developed so as not to
    require further development at the trial court level. WRIGHT, MILLER
          The injunction and the preclusive effect of the Alabama
    judgment are so entangled as to arrive here together.                   Delaying
    review of whether Mobil has effectively settled the federal claim
    while deciding whether the federal court can enjoin Mobil from
    settling without its approval would make no practical sense, and we
    have jurisdiction to avoid that oddity.              In short, it would waste
          Mobil also argues that the federal claim is barred under the
    Rooker-Feldman doctrine. Because this Circuit has interpreted that
    doctrine as consistent with the Full Faith and Credit Act, see
    Davis v. Bayless, 
    70 F.3d 367
    , 375 (5th Cir. 1995), the two
    arguments are not distinct. Mobil’s argument would bar the very
    analysis it relies on in this appeal: the Matsushita court’s
    examination of whether a state court judgment claiming to release
    federal claims should be given preclusive effect.
            Mobil contends that the plaintiffs in one of the class
    actions have no standing to defend against Mobil’s motion because
    they opted out of the Lovelace settlement.      We agree with the
    district court that this argument is irrelevant. Other plaintiffs
    did not opt out, and our decision on the preclusion issue will be
    law of the case on further proceedings, regardless of whether the
    class actions ultimately proceed to trial separately.
    judicial resources without any offsetting benefit in the form of a
    more fully developed record.       We have jurisdiction, and it is
    appropriate to decide the preclusive effect of the Alabama judgment
    as part of the § 1292(a)(1) appeal.
         The Full Faith and Credit Act requires a federal court to give
    state court judgments the same preclusive effect they would have in
    another court of the same state.       See Parsons Steel, Inc. v. First
    Ala. Bank, 
    474 U.S. 518
    , 523 (1986).           In Matsushita Electric
    Industrial Company, the Supreme Court held that a federal court
    must give effect to a state court approval of a class action
    settlement, even if the settlement releases federal claims within
    the exclusive jurisdiction of the federal courts, as long as the
    law of the state would give preclusive effect to the judgment.
    Matsushita Elec. Indus. Co., Ltd. v. Epstein, 
    516 U.S. 367
    , 375,
    380 (1996).
         The issue in this case is thus whether Alabama courts would
    preclude the federal suit following a settlement that claimed to
    release federal antitrust claims.        Mobil argues that Alabama law
    precludes the suit as a matter of contract and as a matter of res
    judicata.     First, Mobil claims that Alabama would enforce the
    settlement as a matter of contract law.       A footnote in Matsushita
    comments that if a state chooses to approach the preclusive effect
    of a judicially-approved settlement “as a question of pure contract
    law,” the federal court must follow that approach. Matsushita, 516
    U.S. at 379 n.6.
           We are not persuaded that Alabama treats the preclusive effect
    of judicially-approved settlements as a question of pure contract
    law.    The cases and statute cited by Mobil stand for the ordinary
    proposition that a settlement will be enforced according to its
    terms, not that Alabama follows a particular approach to preclusion
    law. Mobil’s reference to Adams v. Robertson, 
    676 So. 2d 1265
    1995), is also not on point.         The Adams settlement settled no
    federal claims, and the Alabama Supreme Court’s opinion, which
    reviewed the settlement for fairness, decided no preclusion issues.
    The passage cited by Mobil, stating the power of a court to release
    claims over which it does not have jurisdiction, is drawn from
    general language found in the trial court’s lengthy findings, which
    were appended to the Alabama Supreme Court’s opinion.         Adams, 676
    So.2d at 1300.     This case is not precedent for the proposition that
    Alabama embraces a pure contract law approach to preclusion.
           Mobil’s second preclusion argument is that res judicata bars
    the action.      Alabama insists that for a prior judgment to control,
    it must have been rendered by a court of competent jurisdiction.
    See Carlisle v. Phenix City Bd. of Educ., 
    543 So. 2d 194
    , 195 (Ala.
    1989).     The    jurisdictional   competency   requirement   extends   to
    judgments following settlements. See Parmater v. Amcord, Inc., 
    699 So. 2d 1238
    , 1240-41 (Ala. 1997).
           Alabama’s law of res judicata is not unique.      It is the test
    previously used by Delaware and described in Matsushita, where the
    state judgment would not have had preclusive effect on the federal
    suit: “[e]arly cases suggested that Delaware courts would not
    afford claim preclusive effect to a settlement releasing claims
    that    could   not   have   been   presented   in   the   trial   court.”
    Matsushita, 516 U.S. at 376.        The result in Matsushita followed
    from the Delaware Supreme Court’s elimination of the jurisdictional
    requirement in the context of a settlement releasing federal
    claims.    Id. at 376-77.      We see no indication that Alabama has
    abandoned its jurisdictional requirement for judicially-approved
           Because federal antitrust claims are within the exclusive
    jurisdiction of the federal courts, see Marrese v. American Academy
    of Orthopaedic Surgeons, 
    105 S. Ct. 1327
    , 1331 (1985), those claims
    could not have been litigated in the Alabama suit.          Given current
    Alabama law requiring jurisdictional competency as a condition to
    the preclusive bite of res judicata, the Alabama judgment approving
    the settlement entered by its state court in Lovelace does not bar
    the federal action under that doctrine.
           We hold that the district court met the requirements of Rule
    65 in enjoining Mobil.       We further hold that the Full Faith and
    Credit Act did not require the federal district court to give
    preclusive effect to the judgment of the state court of Alabama
    approving the Lovelace settlement.