In Re: Lease Oil Ant ( 2000 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 98-40840
In re: LEASE OIL LITIGATION (NO. II)
“ALL PLAINTIFFS”
Plaintiff-Appellee,
versus
“ALL DEFENDANTS”
Defendant-Appellant.
Appeal from the United States District Court
For the Southern District of Texas
January 11, 2000
Before HIGGINBOTHAM, BENAVIDES, and STEWART, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
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.
I
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
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injunction. Mobil appeals the injunction under 28 U.S.C.
§ 1292(a)(1).
II
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.
Shalala, 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.
III
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
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the judgment of the state court of Alabama approving the
settlement.1
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
& COOPER, FEDERAL PRACTICE & PROCEDURE: JURISDICTION 2D § 3921.1 (1999).
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
1
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.
2
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.
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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.
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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 (Ala.
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
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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
settlements.
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.
AFFIRMED.
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