Royal Ins. Co. of America v. Quinn-L Capital Corp. ( 1992 )


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  •                 IN THE UNITED STATES COURT OF APPEALS
    
                             FOR THE FIFTH CIRCUIT
    
    
                                   _______________
    
                                     No. 90-7038
                                     No. 90-7070
                                   _______________
    
    
      ROYAL INSURANCE COMPANY OF AMERICA and ROYAL LLOYDS OF TEXAS,
    
                                                     Plaintiffs-Appellees,
    
    
                                         VERSUS
    
                     QUINN-L CAPITAL CORPORATION, et al.,
    
                                                     Defendants-Appellants.
    
    
                           _________________________
    
                Appeals from the United States District Court
                      for the Northern District of Texas
                           _________________________
    
                                    (May 5, 1992)
    
    
    Before WISDOM, DAVIS, and SMITH, Circuit Judges.
    
    JERRY E. SMITH, Circuit Judge:
    
           The district court enjoined the appellants from pursuing their
    
    suit in state court; the appellants contend that the injunction
    
    violates the Anti-Injunction Act ("the Act"), 28 U.S.C. § 2283. We
    
    find    that   the   portion    of    the     injunction   based   upon   the
    
    "relitigation" exception to the Act was proper.             We further find
    
    that the portion of the injunction based upon the "in aid of
    
    jurisdiction" exception was improper. We therefore affirm in part,
    
    reverse in part, and remand.
                                      I.
    
         In May 1987, some 157 investors ("the investors") brought
    
    twenty-six lawsuits in federal district court against numerous
    
    Quinn-L entities ("Quinn-L") and other parties. The investors, who
    
    alleged that they had lost money in various real estate investments
    
    offered or managed by Quinn-L, asserted claims under federal
    
    securities and anti-racketeering laws as well as Texas law.           The
    
    cases were assigned to Judge Barefoot Sanders, who consolidated
    
    them ("the federal liability suit").
    
         Subsequently, Quinn-L asked Royal Insurance Company of America
    
    and Royal Lloyds of Texas (collectively "Royal") to defend it in
    
    the federal liability suit pursuant to several insurance policies
    
    it had issued to Quinn-L.     Royal agreed to do so but reserved its
    
    right to contest coverage.        On May 10, 1988, Royal filed a
    
    declaratory judgment action ("first federal declaratory judgment
    
    action"), asking the court to determine whether Royal had a duty to
    
    defend or indemnify Quinn-L against the investors' claims brought
    
    in the federal liability suit.     This declaratory judgment action
    
    also was assigned to Judge Sanders.
    
         On June 6, the investors moved to intervene in the federal
    
    declaratory judgment action SQ a motion Royal opposed.         The court
    
    denied the motion on the ground that the investors had failed to
    
    meet the requirements for intervention as of right and that their
    
    interest would be protected adequately by Quinn-L.
    
         Royal moved for partial summary judgment on December 12, 1988.
    
    While this   motion   was   pending,   the   investors   entered   into a
    
    
                                       2
    settlement agreement dated April 5, 1989, with Mark Lovell, the
    
    sole shareholder of all but one of the Quinn-L entities.1                Lovell
    
    promised to cooperate with the investors in the litigation against
    
    Quinn-L and to assign to them any claims he might have against
    
    Royal; in return, the investors promised not to pursue any claims
    
    against    him.2     The    district       court    found   that    "settlement
    
    negotiations between the Investors' counsel and Lovell started as
    
    early as June, 1988 and resulted in a letter agreement by October
    
    11, 1988."     Royal Ins. Co. of Am. v. Quinn-L Capital Corp., 
    759 F. Supp. 1216
    , 1224 n.10 (N.D. Tex. 1990) ("Royal").               It also found
    
    that the "sole purpose" of this agreement was to pursue Royal.               Id.
    
    at 1224.
    
          On April 14, 1989, the court granted Royal's partial summary
    
    judgment motion, concluding that Royal's policies did not impose
    
    any duty to defend or indemnify Quinn-L against the investors'
    
    claims in the federal liability suit.              The court held that
    
          the    language   of    the    insurance   coverage    is
          unambiguous . . . . As a matter of law, the allegations
          in the pending suits do not state claims within coverage.
          Although the investors allege loss of their investments,
          they allege no injury to tangible property which could
          constitute an "occurrence". Additionally, none of the
          losses constitutes "property damage" as required by the
          policy. [Footnote and citation omitted.]
    
    
    The court added that "[n]either have Defendants shown that personal
    
    
          1
             The exception is Quinn-L Capital Corporation. Lovell is the sole
    owner of all of its voting stock and is the beneficial owner of all of its
    assets.
          2
             At this point, Lovell was not a party to the federal liability suit.
    The investors had, however, objected to the discharge of their claims in
    Lovell's personal bankruptcy proceeding.
    
                                           3
    injuries    (in   the   form     of    mental    anguish)   were    caused       by   an
    
    `occurrence'." The court formally entered partial summary judgment
    
    in favor of Royal on April 27.
    
         On May 4, Quinn-L notified the district court regarding the
    
    status of the litigation.             It stated that in view of the partial
    
    summary judgment, no issues remained to be litigated aside from
    
    attorneys' fees.
    
         The investors moved to dismiss all their pending actions
    
    against Quinn-L on August 3, stating that they and Quinn-L had
    
    "reached an agreement in principle for settlement of [their] claims
    
    and anticipate reaching an agreement as to the precise terms and
    
    conditions of settlement over the next few weeks" and requesting
    
    the dismissal in order to "further streamline the litigation
    
    pending    in   this    Honorable      Court."      On   August    28,    the    court
    
    dismissed the federal liability suit in its entirety, dismissing
    
    the federal claims with prejudice and SQ declining to exercise
    
    pendent    jurisdiction     SQ    dismissing       the   state     claims    without
    
    prejudice.
    
         The court entered a final judgment on the federal declaratory
    
    action on September 8.           At that time, the court again held that
    
    Royal had no duty to defend or indemnify Quinn-L for any claims
    
    brought in the federal liability suit.                   This judgment was not
    
    appealed.
    
         Approximately       five    days    later,    the   investors       filed    suit
    
    against Quinn-L in state court in Dallas County, based upon the
    
    same events and conduct at issue in the just-dismissed federal
    
    
                                              4
    liability suit. In October, Lovell, on behalf of Quinn-L, directed
    
    his personal attorney to request that Royal defend Quinn-L in the
    
    Dallas County litigation.         Royal offered to provide a defense
    
    subject to a reservation of rights SQ the same offer it had made in
    
    relation to the federal liability suit.
    
         While awaiting Quinn-L's response, Royal retained an attorney,
    
    Coyt Randal Johnston, to represent Quinn-L in the Dallas County
    
    case.    Because Royal had not received a response from Quinn-L
    
    regarding its offer of a qualified defense, Johnston entered a
    
    general denial on November 17.
    
         On January 9, 1990, Lovell rejected Royal's offer and demanded
    
    an unqualified defense.      As the district court later found, "[t]he
    
    evidence conclusively establishes that Lovell, on behalf of the
    
    Quinn-L Entities, refused Royal's offer of a defense subject to a
    
    reservation of rights at the urging of the Investor Plaintiffs."
    
    Royal, 759 F. Supp. at 1224.3             Royal declined to acknowledge
    
    coverage and instructed Johnston to take no further action in the
    
    Dallas County action.
    
         Royal repeatedly notified Lovell and his personal attorney
    
    that Johnston would no longer take any action in that suit.              In a
    
         3
             In a deposition taken on October 18, 1990, Lovell stated:
               There was certainly an offer of some type of a defense
         offered me by Royal or to the companies. I had gone through a
         similar situation like that with Royal on other situations [i.e.,
         in the federal liability action]. And for two reasons, one, my
         own and, two for the purposes as part of my settlement agreement
         with the [investors], I advised to keep them informed.
               I refused to accept a settlement or a defense unless there
         was a full defense. Coverage, I guess, is what it is. I would
         still maintain that because of those two things that I just
         mentioned.
    
    
                                          5
    letter dated April 24, Johnston warned them of the "significant
    
    risk" of default if they failed to retain new counsel.
    
          On May 16, Johnston filed his motion to withdraw, which was
    
    granted on May 30.     On May 21, while Johnston's withdrawal motion
    
    was pending, the investors served Quinn-L (through Johnston) with
    
    numerous requests for admissions.         Johnston answered the requests,
    
    denying the majority of them.        On June 27, the investors moved to
    
    strike the responses on the ground that Johnston had prepared them
    
    without his client's input.        On July 6, a visiting judge granted
    
    the   investors'   unopposed    motion    to   deem   the    denied   requests
    
    "admitted."4
    
          The Dallas County litigation proceeded to trial the first week
    
    of August; Quinn-L did not make an appearance.              Based solely upon
    
    the deemed admissions obtained by the investors, the court entered
    
    a default judgment against Quinn-L in the amount of $741 million,
    
    including "actual damages consisting of [lost] investment, . . .
    
    damages for bodily injury including mental pain, suffering and
    
    anguish which has manifested itself physically," attorneys' fees,
    
    and exemplary damages "in an amount equal to treble the actual
    
    damages suffered by each Plaintiff."
    
          On September 4, Quinn-L (through Lovell) assigned its rights
    
    and causes of action against Royal to the investors.             In exchange,
    
    the investors agreed to pay (1) Quinn-L ten dollars, and (2) Lovell
    
    
    
          4
             In their brief, the appellants note that "[b]y this time, Johnston
    finally had withdrawn from Quinn-L's defense. Quinn-L, however, was unable
    financially to hire its own counsel to defend the suit, and, therefore, was
    unrepresented and did not participate further."
    
                                          6
    five percent of any future recoveries against Royal in excess of
    
    the $741 million default judgment.5
    
          On the same day the assignment was executed, the investors
    
    filed suit against Royal in state court in Cameron County, bringing
    
    claims in two capacities.       As assignees of Quinn-L, the investors
    
    brought tort, waiver, and estoppel claims based upon Royal's
    
    handling of the Dallas County litigation.            As judgment creditors,
    
    the investors sought recovery of the Dallas County judgment under
    
    the applicable insurance policies.        On September 17, the investors
    
    filed a second action in Cameron County seeking a declaration of
    
    coverage for the damages awarded in the Dallas County judgment.
    
          The Cameron County litigation proceeded at an accelerated
    
    pace.     The day after suit was filed SQ before Royal had even been
    
    served SQ the court set a trial date of December 10.              This was in
    
    violation of the court's rules, which provide that a case will be
    
    set for trial only after the filing of an answer.                 See Cameron
    
    County Civ. Ct. R. 1.5(a).        On October 12, the investors filed a
    
    motion    for   summary   judgment,    which   was    set   for   hearing   on
    
    November 8.
    
          The present action stems from Royal's attempt to enlist the
    
    federal district court's aid in enforcing the September 1989
    
    declaratory judgment issued in its favor.          On March 9, 1990, while
    
    the Dallas County action was pending, Royal filed this suit in
    
    
    
          5
             In the Cameron County action, discussed infra, the investors seek to
    treble the amount of the default judgment. Lovell's share of the potential
    $2.2 billion judgment would be some $74 million. See Royal, 759 F. Supp. at
    1226 n.13.
    
                                          7
    federal court (again, before Judge Sanders) seeking a declaratory
    
    judgment that would establish that it had no duty to defend or
    
    indemnify Quinn-L in the Dallas County litigation.
    
         Quinn-L   filed   an   answer   on   August   15.   It   asserted   as
    
    affirmative defenses, inter alia, those claims the investors would
    
    bring on September 4 in the Cameron County litigation as Quinn-L's
    
    assignees (i.e., the tort, waiver, and estoppel claims).                 On
    
    September 4, Royal moved to add the investors as defendants.
    
         On October 30, Royal asked the federal court to issue a
    
    preliminary injunction against further prosecution of the entire
    
    Cameron County litigation.       After a hearing, the court granted
    
    Royal's request.    The court found that
    
         [t]o state the facts bluntly but fairly, the Investor
         Plaintiffs bought Lovell's cooperation with their
         April 5, 1989 Agreement and through their collusion with
         Lovell obtained an enormous default judgment against
         Lovell's companies.
    
    759 F. Supp. at 1226.       The appellants now ask us to reverse the
    
    district court's order granting Royal's request for a preliminary
    
    injunction.
    
         Prior to oral argument of this case, the appellants filed a
    
    petition for writ of prohibition, and in the alternative, a motion
    
    for a stay, to prevent the district court from considering any
    
    other aspects of this case pending their appeal of the preliminary
    
    injunction.    We denied their requests on September 9, 1991.        Oral
    
    argument was held on October 2.
    
         On October 29, the appellants asked this court to reconsider
    
    its earlier denial of the stay.      On December 20, while this motion
    
    
                                         8
    was pending, the district court (1) denied the appellants' motion
    
    to dismiss filed pursuant to Fed. R. Civ. P. 12(b)(7); (2) denied
    
    their   motion     for   continuance       and    reopening      of   discovery;
    
    (3) granted Royal's motion for summary judgment on the appellants'
    
    affirmative      defenses   of    tort,     waiver,      and     estoppel;   and
    
    (4) deferred consideration of Royal's application for permanent
    
    injunctive relief, pending this appeal.                 On December 24, the
    
    appellants asked us to "vacate all orders entered by the court
    
    below during the pendency of the improperly issued preliminary
    
    injunction,   including     the   December       20,   1991    summary   judgment
    
    order." Thus, in addition to the propriety of the district court's
    
    preliminary injunction, we consider the appellants' request to
    
    vacate the district court's orders of December 20.
    
    
    
                                        II.
    
         First, the appellants challenge the district court's subject
    
    matter jurisdiction over the present controversy.               They argue that
    
    the requirement of complete diversity is absent, see Carden v.
    
    Arkoma Assocs., 
    494 U.S. 185
    , 187 (1990) (citing Strawbridge v.
    
    Curtiss, 7 U.S. (3 Cranch) 267 (1806)), as Royal Lloyds of Texas,
    
    one of the plaintiffs, is a Texas citizen, as are several of the
    
    defendants.      They also question whether the district court had
    
    jurisdiction over the first declaratory judgment action.
    
    
    
                                         A.
    
         Royal Lloyds of Texas is an unincorporated association of
    
    
                                           9
    insurance underwriters.               Citizenship of such an unincorporated
    
    association is determined by the citizenship of its "members." Id.
    
    at 195-96.       None of the underwriters is a Texas citizen.6                      Texas
    
    law, however, requires that "Lloyd's Plan" insurers such as Royal
    
    Lloyds     of    Texas    designate      "an      attorney       in   fact    or    other
    
    representative[]" to execute "[p]olicies of insurance."                       Tex. Ins.
    
    Code Ann. art. 18.01-1.          The attorney-in-fact must be a citizen of
    
    Texas, see id. art. 18.02, and Royal Lloyds of Texas's attorney-in-
    
    fact is Royal Lloyds, Inc., a Texas corporation.
    
          The appellants argue that as attorney-in-fact, Royal Lloyds,
    
    Inc., is a "member" of the unincorporated association of Royal
    
    Lloyds of Texas. Royal disagrees, arguing that an attorney-in-fact
    
    is a mere agent of the underwriters, not a member.                          We need not
    
    resolve this question, however, for the district court could
    
    exercise ancillary jurisdiction over this controversy regardless of
    
    the citizenship of the parties.
    
          It is well settled that a federal district court can exercise
    
    ancillary jurisdiction over a second action in order "to secure or
    
    preserve     the   fruits      and    advantages     of     a    judgment    or    decree
    
    rendered" by that court in a prior action. Southmark Properties v.
    
    Charles House Corp., 
    742 F.2d 862
    , 868 (5th Cir. 1984) (quoting
    
    Local     Loan   Co.     v.   Hunt,    
    292 U.S. 234
    ,       238   (1934)).      Such
    
    jurisdiction is appropriate where the effect of an action filed in
    
    state court would "effectively nullif[y]" the judgment of a prior
    
    
          6
             According to Royal, the Royal Lloyds of Texas underwriters are
    citizens of New York and North Carolina.
    
                                                 10
    federal action.   Id.   This is true even where the federal district
    
    court would not have jurisdiction over the second action if it had
    
    been brought as an original suit.       Local Loan Co., 292 U.S. at 238;
    
    Southwest Airlines Co. v. Texas Int'l Airlines, 
    546 F.2d 84
    , 89-90
    
    (5th Cir.), cert. denied, 
    434 U.S. 832
     (1977).
    
         As discussed more fully infra, Royal returned to federal court
    
    in order to prevent the appellants from robbing it of the "fruits
    
    and advantages" of the federal declaratory judgment rendered in its
    
    favor.    Because   both   the   Dallas    County   and   Cameron   County
    
    litigation had the potential of "effectively nullify[ing]" the
    
    previous declaratory judgment, we conclude that the district court
    
    had ancillary jurisdiction over the present controversy.
    
    
    
                                       B.
    
         The appellants also argue that the district court did not have
    
    subject matter jurisdiction over the first declaratory judgment
    
    action.   From this they conclude that Royal should not be able to
    
    bootstrap its way into federal court by filing a second action that
    
    depends upon a prior action over which the district court had no
    
    jurisdiction.
    
         The appellants, however, cannot launch such a collateral
    
    attack of the district court's subject matter jurisdiction. As the
    
    Supreme Court has stated,
    
         A party that has had an opportunity to litigate the
         question of subject-matter jurisdiction may not . . .
         reopen that question in a collateral attack upon an
         adverse judgment.    It has long been the rule that
         principles of res judicata apply to jurisdictional
         determinations SQ both subject matter and personal.
    
                                       11
    Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de
    
    Guinee, 
    456 U.S. 694
    , 702 n.9 (1982) (citations omitted).
    
         The question is not whether the issue of subject matter was
    
    actually    litigated,   but   instead     whether   the   parties   had   the
    
    opportunity to raise the question.          Republic Supply Co. v. Shoaf,
    
    
    815 F.2d 1046
    , 1053 (5th Cir. 1987).          If the parties against whom
    
    judgment was rendered did not appeal, the judgment becomes final
    
    and the court's subject matter jurisdiction is insulated from
    
    collateral attack.       Id.   See also Donovan v. Mazzola, 
    761 F.2d 1411
    , 1416 n.2 (9th Cir. 1985).
    
         The final judgment in the first declaratory action was not
    
    appealed.    The subject matter jurisdiction of the district court
    
    thus is not subject to collateral attack.7
    
    
    
                                        III.
    
         The appellants next contend that the preliminary injunction
    
    violates the Anti-Injunction Act, 28 U.S.C. § 2283, which provides,
    
              A court of the United States may not grant an
         injunction to stay proceedings in a State court except as
         expressly authorized by Act of Congress, or where
         necessary in aid of its jurisdiction, or to protect or
         effectuate its judgments.
    
    
          7
             The investors respond that this is not a "collateral attack" because
    they were not parties to the first declaratory action (their motion to
    intervene having been denied). Thus, they argue, they had "no opportunity to
    litigate subject matter jurisdiction." As a preliminary matter, the
    investors, as assignees of Quinn-L, would stand in no better position than
    Quinn-L, which is bound by the earlier judgment. In addition, as developed
    more fully infra, the investors are also bound to the first declaratory
    judgment as judgment creditors, for they were "virtually represented" by
    Quinn-L during the first declaratory judgment action. See infra part III.A.3.
    
    
    
                                         12
    The district court utilized the second and third exceptions to
    
    enjoin two different types of claims at issue in the Cameron County
    
    litigation.
    
         First, it used the "protect or effectuate" judgments, or
    
    "relitigation," exception to enjoin the investors' claims brought
    
    as judgment creditors.    759 F. Supp. at 1235.     These "direct"
    
    claims were brought under the policy to recover damages up to the
    
    policy limits.   The district court found that it had decided the
    
    issue of "coverage" under the language of the applicable Royal
    
    policies in the first declaratory judgment action, id. at 1234, and
    
    that therefore any attempt to relitigate the coverage issue SQ such
    
    as an attempt to recover under the policy language SQ was barred.
    
    Id. at 1235.
    
         Second, it enjoined the remaining tort, waiver, and estoppel
    
    claims under the "in aid of jurisdiction" exception. These claims,
    
    which depend upon conduct and events that occurred after the
    
    issuance of the first declaratory judgment, were brought by the
    
    investors as assignees of Quinn-L. The district court enjoined the
    
    pursuit of these "post-declaratory judgment" claims, which were
    
    also before the district court as affirmative defenses to Royal's
    
    second declaratory judgment action, on the ground that "absent the
    
    injunctive relief sought by Royal, the [Cameron County court] could
    
    irreparably injure the [district court's] ability to decide the
    
    present case."   Id.   We will consider the two separate facets of
    
    the preliminary injunction in turn.
    
    
    
    
                                     13
                                          A.
    
         The relitigation exception was "designed to permit a federal
    
    court to prevent state litigation of an issue that previously was
    
    presented to and decided by the federal court."               Chick Kam Choo v.
    
    Exxon Corp., 
    486 U.S. 140
    , 147 (1988).           The exception is grounded
    
    in principles of res judicata and collateral estoppel.                    Id.   An
    
    "essential   prerequisite"      for   application        of   the   relitigation
    
    exception    "is   that   the   claims     or   issues    which     the    federal
    
    injunction insulates from litigation in state proceedings actually
    
    have been decided by the federal court."             Id. at 148.          See also
    
    Texas Employers' Ins. Ass'n v. Jackson, 
    862 F.2d 491
    , 501 (5th Cir.
    
    1988) (en banc), cert. denied, 
    490 U.S. 1035
     (1989).
    
         In determining which issues have been "actually decided," the
    
    emphasis is on the record and on what the earlier federal court
    
    actually said, not on the court's post hoc judgment as to what the
    
    previous judgment was intended to say.          Chick Kam Choo, 486 U.S. at
    
    148. Any doubt as to whether the order precludes subsequent claims
    
    must be resolved in favor of allowing the state court to proceed.
    
    Jackson, 862 F.2d at 499.
    
         This analysis requires us to compare the issues "actually
    
    decided" by the district court in the first federal declaratory
    
    judgment action with the issues raised in the direct contractual
    
    obligation claim brought by the investors in Cameron County.
    
    
    
    
                                          14
                                          1.
    
          Royal's contractual obligations rest on the policy language8
    
    in question, which requires it to
    
          pay on behalf of [Quinn-L] all sums which [it] shall
          become legally obligated to pay as damages because of
    
                (A) bodily injury or
                (B) property damage
    
          to which this insurance applies, caused by an occurrence
          . . . .
    
    
    "Occurrence" is defined as
    
          [a]n accident, including continuous or repeated exposure
          to conditions, which results in bodily injury or property
          damage neither expected nor intended from the standpoint
          of the insured.
    
          In its final judgment disposing of the declaratory judgment
    
    action dated September 8, 1989, the court stated,
    
                    1. The allegations in the pending[] suits do
          not allege an "occurrence," as defined by the policies;
    
                    2. The allegations in the pending suits do not
          allege[] "property damage," or "personal injury" as
          defined by the policies;
    
                    3.   Petitioners, Royal Insurance Company of
          America and Royal Lloyds of Texas, have no duty to defend
          the Defendants in the pending suits . . . .
    
    The appellants first argue that the federal declaratory judgment
    
    has   little   or   no   binding   effect   because   it   was   a   "specific
    
    declaration with respect to existing pleadings that were subject to
    
    change before, during, or even after trial."           The appellants then
    
    stress that the final judgment "declares nothing with respect to
    
    
          8
             Although numerous policies were at issue throughout the federal and
    state litigation, the parties agree that this is the essential policy
    language.
    
                                          15
    Royal's obligations should the pleadings be amended, let alone with
    
    regard to a different lawsuit not even pending at the time the
    
    declaration issued."       In other words, the declaratory judgment
    
    should be read as applicable only to those pleadings pending before
    
    the district court at the time.
    
         Taken to its logical extreme, this argument defeats itself.
    
    Under appellants' rule, the losing party could defeat an adverse
    
    declaratory judgment by changing one word of its pleadings and
    
    filing them in state court.        We thus reject the appellants'
    
    construction    of   the   declaratory     judgment    as   artificial    and
    
    unnecessarily formalistic.9
    
         Instead, we give the district court's decision a more natural
    
    reading.   Based upon the language of the policy, there must be an
    
    occurrence and an injury in order for there to be coverage.                In
    
    this case, the district court found that the investors' injuries SQ
    
    as alleged in the complaint SQ were not caused by an occurrence.
    
    Without an occurrence, there could be no coverage, and thus there
    
    was no duty to defend.10     In sum, the district court did not simply
    
    
         9
             The appellants indeed take their argument to the logical extreme.
    Focusing upon the district court's use of the "pending suits" language, the
    appellants contend that the declaratory judgment has no meaning because there
    were no liability suits pending before the district court at the time (The
    federal liability suit had been dismissed by the court on August 28; the final
    declaratory judgment action was issued on September 8.) We again reject
    appellants' needless formalism.
          10
              The appellants reject this reading of the policy. They emphasize
    the policy's definition of "occurrence." They conclude that in order for
    there to be an occurrence, there must be an accident and injury. From this,
    they argue that the district court did not necessarily conclude that there was
    no accident, but rather could have based its "no occurrence" finding on "no
    injury" SQ i.e., no mental anguish.
          This argument neglects the fact that the district court, in order to
    find that Royal had no duty to defend the federal liability suit, was
    obligated to consider the investors' claims of mental anguish. An insurer may
    
                                         16
    decide whether the investors had alleged "injury" caused by an
    
    "occurrence,"     but   instead     necessarily     determined     that   the
    
    investors' allegations did not fit within the coverage of the
    
    policy language.11
    
    
    
    be excused from its duty to defend only if "no state of facts could be proved"
    that would come within the policy coverage. Green v. Aetna Ins. Co., 
    349 F.2d 919
    , 926 (5th Cir. 1965). Thus, as Royal argues, "the court could not
    properly have ignored the Investors' allegations of personal injury SQ which
    had long been before it in Quinn-L's counterclaim and summary judgment briefs,
    in the Investors' proposed amended petitions, and in the Investors'
    representation that such injuries were `subsumed in' their previously asserted
    claims . . . ." The district court could not, as a matter of law, rule that
    the investors suffered no bodily injury, for that would be a disputed factual
    issue. The only decision it could make, as a matter of law, would be that
    whatever the injuries, they were not caused by an occurrence or accident. And
    this is what the court did indeed conclude in its April 14, 1989, partial
    summary judgment order when it stated that the "Defendants [failed to show]
    that personal injuries (in the form of mental anguish) were caused by an
    `occurrence'." See infra n.11.
          11
             This conclusion is further supported by the district court's order
    of April 14, 1989. In its memorandum opinion and order, which awarded partial
    summary judgment in Royal's favor, the district court stated,
          The Court finds that the language of the insurance coverage is
          unambiguous . . . . As a matter of law, the allegations contained
          in the pending suits do not state claims within coverage.
          Although the investors allege loss of their investments, they
          allege no injury to tangible property which could constitute an
          "occurrence".3 Additionally, none of the losses constitutes
          "property damage" as required by the policy.
          --------------
                3
                  Neither have Defendants shown that personal injuries (in
          the form of mental anguish) were caused by an "occurrence".
    [Citation and footnote omitted.] In other words, the investors suffered "no
    injury" SQ either to property or in the form of mental anguish SQ that "could
    constitute an `occurrence'" within the terms of the policy.
    
          We recognize that orders of partial summary judgment, standing by
    themselves, have no preclusive effect, as they are interlocutory. Avondale
    Shipyards, Inc. v. Insured Lloyd's, 
    786 F.2d 1265
    , 1269-72 (5th Cir. 1986).
    Avondale, however, does not prevent us from considering the preclusive effect
    of the summary judgment order in this case.
    
          As we noted in Avondale, the partial summary judgment order in that case
    had no preclusive effect because the final judgment "made no direct or
    indirect reference whatever to the [prior] partial summary judgment or to
    prior orders in general . . . ." Id. at 1272. By contrast, the September 8
    final judgment explicitly states that Royal "move[s] this Court to enter this
    Final Judgment against [Quinn-L] in light of the Court's ruling on [Royal's]
    Motion for Partial Summary Judgment." The "partial" summary judgment was
    "partial" in name only. It decided the major issues in the case and entry of
    the final judgment was a mere formality.
    
                                          17
          The cases cited by the appellants discussing the complaint-
    
    allegation rule are not to the contrary.         It is true that "[u]nder
    
    Texas law, the insurer's duty to defend is determined solely from
    
    the face of the pleadings and without reference to facts outside of
    
    the pleadings."    Rhodes v. Chicago Ins. Co., 
    719 F.2d 116
    , 119 (5th
    
    Cir. 1983). Application of this "complaint-allegation" rule "gives
    
    rise to a duty to defend if one or more of the plaintiff's claims,
    
    `if   taken   as   true,   [are]   sufficient     to   state   a   cause    of
    
    action . . . coming within the terms of the policy.'"                      Id.
    
    (citation omitted).
    
          But simply because the duty to defend is determined on the
    
    face of the complaint, and not with reference to the truth or
    
    falsity of the allegations contained therein, does not mean that
    
    the preclusive effect of a declaration of no duty to defend must be
    
    limited to the precise allegations contained in the pleadings.              In
    
    this case, the district court determined the issue of coverage SQ
    
    that no "occurrence" had befallen the investors within the terms of
    
    the policy SQ and this determination can be applied to allegations
    
    in subsequent complaints.12
    
    
    
          12
             The appellants argue that the district court erroneously applied
    principles of claim preclusion, as opposed to issue preclusion, in coming to
    this conclusion. Although the court did mention claim preclusion in its
    opinion, its analysis of the first declaratory judgment plainly states that
    "the Court finally interpreted the language in certain policy clauses, and the
    issue of the meaning of those clauses was necessary and essential to the
    Court's Judgment," 759 F. Supp. at 1234 (emphasis added) SQ language of issue
    preclusion. We therefore disagree with the appellants that the district court
    ran afoul of Jackson. See Jackson, 862 F.2d at 501 (noting that "true" res
    judicata, or claim preclusion, "appears to be inconsistent with Chick Kam
    Choo's admonishment that the relitigation exception `is strict and narrow' so
    that only `claims or issues which . . . actually have been decided' in the
    prior proceeding as reflected by what the prior `order actually said' are
    protectable thereunder" (citation omitted)).
    
                                         18
                                              2.
    
         We now must compare the foregoing interpretation of the
    
    district court's final judgment with the investors' claims in the
    
    Cameron   County      litigation.      In      their     original    petition,    the
    
    investors allege the following:
    
              29. The injuries suffered by Plaintiffs as a result
         of Quinn-L Entities['] conduct, for which damages have
         been awarded by [the Dallas County] Judgment are injuries
         which are covered by the relevant insurance policies
         issued by Defendants The Royal Insurance Group . . . .
    
              30.   The allegations of Plaintiffs' complaint in
         [the Dallas County petition] stated an "occurrence" which
         had resulted in "property damage" or "bodily injury," as
         defined by the insurance policies . . . . The Quinn-L
         E[n]tities' conduct . . . has caused the Plaintiffs
         property damage and bodily injury and, therefore, the
         Defendants are responsible for the payment of the
         Judgment entered therein.
    
         . . .
    
              32. [Royal is] liable directly to Plaintiffs, as
         judgment creditors under the [Dallas County judgment].
         The Plaintiffs, judgment creditors, would further allege
         that [Royal is liable] to them for the entirety of the
         judgment rendered [in the Dallas County judgment] against
         the Quinn-L Entities . . . for the reason that the
         policies of insurance purchased by Quinn-L Entities
         provide coverage for the injuries caused to Plaintiffs by
         the Quinn-L entities and upon which judgment was granted
         by the [Dallas County court]. [Emphasis added.]
    
         Given     that     the   investors     allege     that   the    Dallas    County
    
    judgment would be covered by the policy language, the question
    
    is whether the investors, after the issuance of the first federal
    
    declaratory judgment, amended their pleadings in such a way as to
    
    bring their claims within policy coverage.                 Indeed, the investors
    
    argue   that     they    substantially         altered    their     claims    between
    
    September    8   (the    date   the   district       court    entered    its    final
    
    
                                              19
    declaratory judgment) and September 14 (the date the investors
    
    refiled their state claims in Dallas County state court).
    
         The crucial difference, they argue, is that in the Dallas
    
    County action they "alleged mental anguish caused by Quinn-L's
    
    negligence and gross negligence" in making a number of improper
    
    management decisions.13      They argue that in the first declaratory
    
    judgment action, the sole dispute was over whether the investors
    
    alleged mental anguish.           In the words of the appellants, "the
    
    declaratory judgment only decided that the then pending action did
    
    not allege mental anguish."
    
         As noted above, however, the declaratory judgment did more
    
    than that.    The appellants' reading of the judgment simply ignores
    
    the fact that the court held that "allegations in the pending[]
    
    suits do not allege an `occurrence,' as defined by the policies."
    
    Thus,   the   only   way   that    the    appellants    could    overcome   the
    
    declaratory judgment hurdle was to allege, in the Dallas County
    
    petition, a basis for finding an occurrence.
    
         The   allegedly    improper     acts     on   Quinn-L's    part,   however,
    
    remained constant from the federal liability suit to the Dallas
    
    County suit.      Thus, the district court's determination of the
    
    coverage issue would dispose of the appellants' claims to recover
    
    
          13
              In the Dallas County petition, the investors alleged that
    "Plaintiffs' . . . injuries and damages were proximately caused by the
    negligent conduct of Defendant in," among other things, "improperly treating
    all partnerships and companies as one entity for financial purposes,"
    "syndicating partnerships while having lack of the financial wherewithal to
    fund the cash needs of the partnerships," and "improperly managing and
    structuring the companies and partnerships and thereby creating tax problems
    with the IRS concerning various entities." These improper acts caused the
    investors to "suffer[] bodily injury, including mental pain, suffering and
    anguish."
    
                                             20
    under the policy language.                 We therefore affirm the district
    
    court's injunction of the appellants' direct contractual claims
    
    under the relitigation exception.
    
    
    
                                               3.
    
         The investors respond that they cannot be bound by the first
    
    declaratory judgment because they were not parties to the action
    
    (their    motion     to       intervene    having       been    denied).         We    have
    
    recognized,    however,         that    "it    is    within    the   discretion       of a
    
    district court to expand the scope of an otherwise valid injunction
    
    issued    pursuant       to    the     relitigation      exception        of   the    Anti-
    
    Injunction Act to include those in privity with parties to the
    
    federal court action."           Quintero v. Klaveness Ship Lines, 
    914 F.2d 717
    , 721 (5th Cir. 1990), cert. denied, 
    111 S. Ct. 1322
     (1991).
    
         Indeed,    a    non-party         will    be     considered     "in   privity,      or
    
    sufficiently close to a party in the prior suit so as to justify
    
    preclusion," where the party to the first suit is so closely
    
    aligned with       the     nonparty's      interests      as    to   be    his   "virtual
    
    representative."          Benson & Ford, Inc. v. Wanda Petroleum Co., 
    833 F.2d 1172
    , 1174-75 (5th Cir. 1987). See also Aerojet-Gen. Corp. v.
    
    Askew, 
    511 F.2d 710
    , 719 (5th Cir.), cert. denied, 
    423 U.S. 908
    
    (1975).    In order for virtual representation to arise, however,
    
    there must be "an express or implied legal relationship" between
    
    the party and the nonparty "in which [the] part[y] to the first
    
    suit [is] accountable to [the] non-part[y] who file[s] a subsequent
    
    suit raising identical issues."                    Benson & Ford, 833 F.2d at 1175
    
    
                                                  21
    (citation omitted).
    
         The question of "whether a party's interests in a case are
    
    virtually representative of the interests of a nonparty is one of
    
    fact for the trial court."   Aerojet-Gen., 511 F.2d at 719.   In the
    
    preliminary injunction context, we review findings of fact for
    
    clear error.   Apple Barrel Prods. v. Beard, 
    730 F.2d 384
    , 386 (5th
    
    Cir. 1984).
    
         In this case, the district court found that the investors were
    
    in privity with Quinn-L.      759 F. Supp. at 1232.      The court
    
    concluded that the "Investor Plaintiffs bought Lovell's cooperation
    
    with their April 5, 1989 Agreement and through their collusion with
    
    Lovell obtained an enormous default judgment against Lovell's
    
    companies." Id. at 1226. The court further found that "settlement
    
    negotiations between the investors' counsel and Lovell started as
    
    early as June, 1988 and result in a letter agreement by October 11,
    
    1988."   Id. at 1224 n.10.   Thus, Lovell and the investors came to
    
    a cooperation agreement long before anything of substance was
    
    adjudicated in the first declaratory judgment action.
    
         The appellants stress that in the October 1988-April 1989
    
    assignment, Lovell gave the investors only the right to sue in
    
    Lovell's name for the damages Royal had caused him personally and
    
    that only later (September 4, 1990) did Quinn-L assign its rights
    
    to the investors to pursue Royal.     But simply because the formal
    
    legal relationship between Quinn-L and the investors did not arise
    
    until September 4, 1990, does not mean that there was no privity
    
    between them before that time.
    
    
                                     22
         The district court found that Lovell had sole authority to act
    
    for Quinn-L, 759 F. Supp. at 1219 n.1,14 that Lovell was "bought
    
    off" by the settlement agreement, id. at 1226, that the "sole
    
    purpose" of that agreement was to pursue Royal,15 id. at 1224, and
    
    that from that point on the investors and Quinn-L (through Lovell)
    
    pursued a course of conduct to obtain a hefty payment from Royal in
    
    which they would all share, id. at 1226 & n.13.         The district court
    
    did not clearly err in concluding that the investors were virtually
    
    represented by Quinn-L in the first declaratory judgment action.
    
    We therefore determine that the investors can be bound by the first
    
    declaratory judgment action.
    
    
    
                                         B.
    
         In their Cameron County suit, the investors also seek to
    
    recover damages from Royal based upon Royal's post-declaratory
    
    judgment conduct.      As Quinn-L's assignees, the investors allege,
    
    inter alia, that Royal (1) "wrongfully refused" an unqualified
    
    defense of the Dallas County litigation; (2) "negligently failed"
    
    to settle the Dallas County litigation; (3) waived its right to
    
    challenge coverage and is estopped from denying coverage because of
    
    its representations to Quinn-L; (4) was negligent in its handling
    
    
    
          14
             In January 1989, the bankruptcy court returned Quinn-L's valueless
    stock to Lovell. Since Lovell filed for personal bankruptcy in 1987, Quinn-L
    has had no officers, directors, or significant assets. Thus, since January
    1989 Lovell has had sole authority to act for Quinn-L. See Royal, 759 F.
    Supp. at 1219 n.1.
          15
             In a letter written to Lovell's counsel, the investors' attorney
    noted that "the whole point of the [April 5] Compromise and Settlement
    Agreement was for Plaintiffs to be able to pursue Royal Insurance Company."
    
                                         23
    of the Dallas County litigation; and (5) breached its "duty of good
    
    faith and fair dealing."
    
          These claims were brought before the federal district court on
    
    August 15, 1990, when Quinn-L answered Royal's declaratory judgment
    
    petition of March 9, 1990.         They were presented to the Cameron
    
    County court on September 4, 1990, when the investors filed suit
    
    therein.     The    district    court    enjoined    these       post-declaratory
    
    judgment claims under the "in aid of jurisdiction" exception to the
    
    Anti-Injunction Act.16
    
    
    
                                            1.
    
          The "in aid of jurisdiction" exception is designed to "prevent
    
    a   state   court   from   so    interfering       with     a    federal   court's
    
    consideration or disposition of a case as to seriously impair the
    
    federal court's flexibility and authority to decide that case."
    
    Atlantic Coast Line R.R. v. Brotherhood of Locomotive Eng'rs, 
    398 U.S. 281
    , 295 (1970).       The district court noted that "[t]his is
    
    precisely such a case; absent injunctive relief the Court will
    
    likely lose the ability to decide this case (filed well before
    
    either [Cameron      County]    Action)      and   may    well   have   its   prior
    
    Judgments (which are inextricably intertwined with the present
    
    action) nullified by contrary state court decrees."                  759 F. Supp.
    
    at 1235.
    
          The "in aid of jurisdiction" exception, however, does not
    
    
          16
             Royal has conceded that the injunction of these claims cannot be
    justified under the relitigation exception.
    
                                            24
    reach this far.       In Texas v. United States, 
    837 F.2d 184
    , 186 n.4
    
    (5th Cir.), cert. denied, 
    488 U.S. 821
     (1988), we noted the
    
    following:
    
         In cases decided under [the "in aid of jurisdiction"]
         exception, courts have interpreted the language narrowly,
         finding a threat to the court's jurisdiction only where
         a state proceeding threatens to dispose of property that
         forms the basis for federal in rem jurisdiction, or where
         the   state   proceeding    threatens    the   continuing
         superintendence by a federal court, such as in a school
         desegregation case.     In no event may the "aid of
         jurisdiction" exception be invoked merely because of the
         prospect that a concurrent state proceeding might result
         in a judgment inconsistent with the federal court's
         decision. [Emphasis added.] [Citations omitted.]
    
    See also Phillips v. Chas. Schreiner Bank, 
    894 F.2d 127
    , 132 (5th
    
    Cir. 1990) (exception only applies to in rem actions, citing Texas
    
    v. United States).       The post-declaratory judgment claims at issue
    
    in this case do not fit in either category described in Texas v.
    
    United States.       They obviously do not involve the district court's
    
    in rem jurisdiction, nor do they implicate any "superintendence"
    
    jurisdiction on the district court's part.
    
         Royal correctly points out that the contours of the categories
    
    described in Texas v. United States are not well-defined.                    The
    
    district     court   relied   upon   an     Eleventh   Circuit    holding   that
    
    "lengthy, complicated litigation is the `virtual equivalent of a
    
    res,'" Battle v. Liberty Nat'l Life Ins. Co., 
    877 F.2d 877
    , 882
    
    (11th Cir. 1989) (citation omitted), and indeed our opinion in
    
    Texas   v.   United    States   does      not   specifically     preclude   such
    
    
    
    
                                           25
    interpretation.17     But even if we were to broaden the "in aid of
    
    jurisdiction"     exception      to   include     "lengthy,     complicated
    
    litigation" that is the "equivalent of a res," we would not put the
    
    present action in that category.
    
         The Cameron County court posed no threat to the district
    
    court's continuing jurisdiction to decide the post-declaratory
    
    judgment claims, other than the fact that there was a possibility
    
    that it could reach judgment first.           This is not sufficient to
    
    invoke the "in aid of jurisdiction" exception.             Texas v. United
    
    
    
         17
             The district court also relied heavily upon our decision in In re
    Corrugated Container Antitrust Litig., 
    659 F.2d 1332
     (5th Cir. Unit A Oct.
    1981), cert. denied, 
    456 U.S. 936
     (1982), which involved a massive antitrust
    class action against manufacturers of corrugated containers that was
    consolidated by the Judicial Panel on Multidistrict Litigation and transferred
    to the Southern District of Texas. The multidistrict court approved of
    "settlements executed between the class plaintiffs and most of the
    defendants." Id. at 1335.
          Some of the class plaintiffs, apparently unhappy with the settlements,
    went to state court with their claims. A panel of this court held that the
    injunction of the state action was proper because the multidistrict court's
    approval of the settlements would "bar the South Carolina litigation" on
    principles of res judicata. Id. Thus, the panel based its decision upon the
    relitigation exception, and to that extent the case does not support the
    district court's injunction of the tort, waiver, and estoppel claims.
          The Corrugated Container case does contain some jurisdictional language,
    but it must be construed in light of the factual circumstances of the case.
    When the plaintiffs filed in state court, they asked for and immediately
    obtained an injunction prohibiting the defendants (many of whom were
    defendants in the multidistrict litigation) from "preparing, disseminating or
    utilizing any settlement document . . . wherein such settlement document
    contains any release of any antitrust claims" under state law. Id. at 1335.
    The panel noted that this limitation "would clearly interfere with the
    multidistrict court's ability to dispose of the broader action pending before
    it." Id. The court also noted that the multidistrict court's injunction of
    the state suit would not flout "the policies of federalism" because the
    plaintiffs' attorneys "ha[d] taken, and manifested an intention to continue to
    take, actions threatening this court's exercise of its proper jurisdiction and
    the effectuation of its judgments, by filing and threatening to file
    duplicative and harassing litigation in the courts of various states and by
    seeking therein orders disrupting the proceedings" in the multidistrict
    litigation. Id. (quoting the multidistrict court).
          This interference, however, was based upon the attorneys' (and,
    presumably, the state court's) apparent disregard of the prior federal
    settlement judgment SQ again, a consideration more appropriate for the
    relitigation exception. Thus, we disagree with the district court when it
    states that "[t]he same considerations [as those posed in Corrugated
    Container] apply to the present action . . . ." 759 F. Supp. at 1236.
    
                                          26
    States, 837 F.2d at 186 n.4 (citing Atlantic Coast Line).18                It is
    
    true that, as Royal argues, the district court invested a great
    
    deal of time in resolving the first declaratory judgment action and
    
    in    enforcing   the   first     declaratory    judgment     in    the   second
    
    declaratory judgment action.         But that investment is adequately
    
    protected by the relitigation exception, which avoids "costly and
    
    judicially wasteful" duplicative proceedings.              Quintero, 914 F.2d
    
    at 721.
    
           The   district   court's    investment    of    time   and     energy   in
    
    resolving the coverage issue would be protected by an injunction
    
    barring relitigation of that issue SQ not by barring any claim
    
    dependent upon that issue. We therefore conclude that the district
    
    court should have limited the scope of its injunction to enjoining
    
    relitigation of the coverage issue and that its injunction of the
    
    post-declaratory judgment claims was improper.
    
    
    
                                          2.
    
           Royal offers a slightly different justification for enjoining
    
    the   post-declaratory    judgment     claims.        It   contends    that    the
    
    district court "was entitled to conclude that the [Cameron County]
    
    litigation should be temporarily enjoined until the district court
    
    had an opportunity to sort through the complex web of claims raised
    
    against enforcement of its prior judgment."                In essence, Royal
    
    
    
           18
             The nature of the "threat" is shown most vividly by the fact that
    the district court entered an order disposing of these claims on December 20,
    1991. The district court's resolution of these claims is discussed infra part
    IV.
    
                                          27
    argues that, given that this is a preliminary injunction, the
    
    district court should be given greater leeway with regard to the
    
    injunction's scope, especially considering what the district court
    
    found to be collusive behavior on the appellants' part.
    
         Although we are sympathetic, we cannot allow the exceptions to
    
    be stretched beyond their justifications.          As the Court noted in
    
    Chick Kam Choo, "the exceptions are narrow and are `not [to] be
    
    enlarged by loose statutory construction.'"               486 U.S. at 146
    
    (citation    omitted).     Moreover,     the     district   court   plainly
    
    recognized that there were two types of claims at issue SQ those
    
    wholly dependent upon the prior declaratory judgment (the direct
    
    claims as judgment creditors) and those "inextricably intertwined"
    
    with the issues settled by the declaratory judgment (the post-
    
    declaratory judgment claims).
    
         The    district   court   therefore   did    not    enjoin   the   post-
    
    declaratory judgment claims in order to "sort things out"; rather,
    
    it did what it said it was doing SQ enjoining the Cameron County
    
    action because the state court "could irreparably injure the
    
    Court's ability to decide the present case."            Royal, 759 F. Supp.
    
    at 1235. As noted above, however, the only irreparable injury that
    
    the state court posed was deciding the claims.               This sort of
    
    "interference" is not sufficient to overcome the obstacle of the
    
    Anti-Injunction Act.
    
    
    
                                       IV.
    
         Finally, we consider the various motions, pending in this
    
    
                                       28
    court, to prevent the district court from considering aspects of
    
    the case not directly at issue in this appeal.               Prior to oral
    
    argument, the appellants asked us to stay the district court
    
    proceedings pending appeal. Essentially, this would have prevented
    
    the district court from considering the merits of the appellants'
    
    tort, waiver, and estoppel claims brought as affirmative defenses
    
    to Royal's request for declaratory judgment.          We denied the motion
    
    without opinion on September 6, 1991.
    
         After oral argument, on October 29, the appellants submitted
    
    a motion to reconsider the motion for stay of the district court
    
    proceedings.    On December 20, while the motion for reconsideration
    
    was pending, the district court disposed of, inter alia, the post-
    
    declaratory judgment claims adversely to the appellants.                By a
    
    December 24 letter, the appellants asked us to "vacate all orders
    
    entered by the court below during the pendency of the improperly
    
    issued preliminary injunction, including the December 20, 1991
    
    summary judgment order" covering the post-declaratory judgment
    
    claims.   Thus, the motion for reconsideration is partially mooted19
    
    by the orders of the district court, and we now consider the
    
    appellants' request to vacate the orders entered while this appeal
    
    was pending.
    
         We decline to vacate these orders.              As noted above, the
    
    appellants' tort, waiver, and estoppel claims were before both the
    
    federal district court and the Cameron County court.              There was
    
    
         19
             The district court did not rule on Royal's request for a permanent
    injunction, deferring that issue pending the outcome of this appeal.
    
                                         29
    always the possibility that the federal court would win the race to
    
    judgment; in fact, the odds were heavily in the federal court's
    
    favor.     It had dealt with the litigation among these parties for
    
    over three years by the time the tort, waiver, and estoppel claims
    
    were placed before it on August 15, 1990; therefore, it was
    
    familiar with the facts and legal disputes.              By contrast, the
    
    Cameron County court's first exposure to the case was September 4,
    
    1990, when the appellants filed their suit.
    
         At most, what the district did by enjoining these claims was
    
    to ensure it would win the race.      We are well aware of the general
    
    rule that parallel state and federal actions should be allowed to
    
    proceed without interference from either court.               Atlantic Coast
    
    Line, 398 U.S. at 295-96.        Vacating the orders of the district
    
    court, however, would do nothing to put the state and federal
    
    courts back on an even footing.      Indeed, the district court would
    
    be free to re-enter its orders the moment after they were vacated.
    
    Thus, even if vacating orders would be appropriate in some cases,
    
    it would merely be an academic exercise in this case.
    
         Finally, we note that the equities do not weigh in the
    
    appellants' favor.     They created this tangled web of litigation by
    
    seeking to evade the effect of the first declaratory judgment
    
    action:     Having encountered a roadblock in federal court, they
    
    brought their claims to state court, collusively obtained an
    
    inflated    default   judgment   there,   and   sought   to    collect   that
    
    judgment (and more) in another state court.         That their "victory"
    
    on the "in aid of jurisdiction" question is a somewhat hollow one
    
    
                                        30
    does not persuade us to vacate the district court's orders.             The
    
    appellants presumably may appeal the district court's disposition
    
    of their tort, waiver, and estoppel claims.
    
    
    
                                        V.
    
          In conclusion, we find that the district court had ancillary
    
    jurisdiction over this matter.           In addition, we find that the
    
    portion of the injunction based upon the relitigation exception SQ
    
    the   injunction   of   the   appellants'   direct   claims   as   judgment
    
    creditors under the insurance contract SQ was proper.          We further
    
    find that the portion of the injunction based upon the "in aid of
    
    jurisdiction" exception SQ the injunction of the appellants' tort,
    
    waiver, and estoppel claims brought as assignees SQ was improper.
    
    We therefore AFFIRM in part, REVERSE in part, and REMAND. Finally,
    
    we DENY the appellants' request to vacate the district court's
    
    orders entered during the pendency of this appeal.
    
    
    
    
                                        31
    

Document Info

DocketNumber: 90-7038

Filed Date: 5/20/1992

Precedential Status: Precedential

Modified Date: 12/21/2014

Authorities (23)

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Texas Employers' Insurance Association v. Leroy Jackson , 862 F.2d 491 ( 1988 )

Edgar H. Battle, D/B/A Edgar H. Battle Funeral Home v. ... , 877 F.2d 877 ( 1989 )

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