Revised August 12, 2002
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 02-20343
MARK NEWBY; ET AL.,
Plaintiffs,
FLEMING & ASSOCIATES L.L.P.,
Plaintiff-Appellant,
DAVID JOSE; JAMES BRISTER; PETER MAXFIELD,
GEORGE ATALLAH,
Appellants.
versus
ENRON CORP; ET AL
Defendants
ANDREW S. FASTOW; JEFFREY J. SKILLING;
DAVID B. DUNCAN; KENNETH L. LAY
Defendants-Appellees.
Appeal from the United States District Court
For the Southern District of Texas
August 9, 2002
Before HIGGINBOTHAM, WIENER, and BENAVIDES, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Fleming & Associates, a Houston-based law firm, and its
clients David Jose, James Brister, Peter Maxfield, and George
Atallah appeal the district court’s order dissolving a temporary
restraining order issued by a state court and enjoining Fleming
1
from filing any new Enron-related actions without leave of the
district court.
Fleming and its clients argue that the district court lacked
authority to enjoin prospective state court actions, that the Anti-
Injunction Act barred the district court from doing so, and that
the district court abused its discretion in issuing the
injunction.1 We affirm.
I
Fleming has thus far filed at least seven lawsuits in state
courts throughout Texas, alleging securities fraud arising out of
the business failure of Enron Corporation. Each suit stated claims
for fewer than fifty plaintiffs in complaints crafted to avoid the
provisions of the Securities Litigation Uniform Standards Act of
1998, which made federal court the exclusive venue for class
actions alleging fraud in the sale of covered securities.2 SLUSA
defines a “covered class action” as a single lawsuit in which
damages are sought on behalf of more than 50 persons,3 but
Fleming’s state court suits were each brought on behalf of less
than 50 plaintiffs. Fleming has several hundred additional clients,
and has advised this court of plans to file similar state court
securities-related lawsuits on their behalf if permitted to do so.
1
The temporary restraining order expired by its own terms,
and the order directing that it be dissolved is not before us.
2
15 U.S.C. §§ 77p, 78bb(f).
3
15 U.S.C. § 77p(f)(2).
2
At all relevant times, over 70 cases arising from the Enron
collapse have been pending in the Southern District of Texas.
Several shareholder suits have been consolidated into a case styled
Mark Newby, et al. v. Enron Corp, et al. On April 16, 2002, the
Judicial Panel on Multidistrict Litigation transferred all such
federal Enron-related actions to the Southern District of Texas for
pre-trial coordination. On the recusal of another judge, the cases
were transferred to Judge Melinda Harmon. As the MDL judge she has
ruled on many motions and has been heavily engaged in the
considerable task of managing this complex litigation, including
the filing of a comprehensive pre-trial scheduling order. Fleming
represents clients with claims that are part of the MDL
proceedings.
On December 5, 2001 the district court denied an application
for a freeze order. Then, on January 23, 2002, the district court
ordered defendant Arthur Andersen, L.L.P. to segregate, preserve,
and protect all writings and other materials relating to Enron and
any Enron-related entities. The district court also ordered
depositions of individuals connected with Andersen on topics
relating to document and data retention and destruction.
Meanwhile, Fleming filed the first state court suit on
November 7, 2001 in Harris County, Texas on behalf of Fred and
Marian Rosen, asserting breach of fiduciary duty of loyalty and
3
care.4 On January 16, 2002, Fleming filed an amended petition on
behalf of the Rosen plaintiffs, naming 21 new defendants and
transforming the action into a state court securities fraud suit.
The amended petition requested a temporary restraining order
against Andersen to prevent Andersen from destroying Enron-related
documents. Two days later, the state court in the Rosen case issued
an ex parte TRO against Andersen.
Eight days later, Fleming filed Bullock v. Andersen on behalf
of eleven plaintiffs in state court in Washington County, Texas.
Among other relief, the Bullock plaintiffs sought a TRO against
Andersen and former Enron CEO Kenneth Lay concerning the
preservation of Enron-related documents. On the same day, the state
court issued an ex parte TRO against Andersen, granting relief that
was identical to the evidence order issued by Judge Harmon in
Newby.
Five days later, on January 29, 2002, Fleming filed the Ahlich
suit in Brazos County, Texas. This suit was brought on behalf of 45
plaintiffs, purchasers of an unknown amount of Enron stock. Fleming
also sought an identical ex parte TRO against Andersen and Lay.
Defendants were given no notice of the filing of the suit or the
application for a TRO.
Eight days later, Fleming filed Jose, et al. v. Arthur
4
Virtually all the defendants in the state court cases were
also defendants in federal cases.
4
Andersen, L.L.P., et al. in Bexar County, Texas, making essentially
the same allegations as the previous suits against the same 37
defendants named in the Ahlich suit. Once again, Fleming sought an
ex parte TRO, which the state court granted on the same day.
Fleming provided no notice to defendants before seeking the TRO.
The TRO, like the previous orders granted by the state courts,
enjoined defendants from destroying, altering, or deleting Enron-
related documents. Unlike the others, it also prevented defendants
from transferring any property, funds, or assets to third parties
not in the ordinary course of their business and from transferring
assets out of the United States.
Five days later, Lay and Skilling urged Judge Harmon to enjoin
Fleming from requesting further injunctive relief in state court
without providing notice to them. After a hearing, the federal
district court on February 15 enjoined Fleming from filing any new
Enron-related actions without leave of the district court and
ordered Fleming to dissolve the TRO obtained in Jose. The district
court rested its authority to issue the injunction in the All Writs
Act, the Anti-Injunction Statute, and its inherent authority.
On February 19, Fleming sought leave to file two Enron-related
actions in state court, which the district court denied, noting
that Fleming failed to provide the court with copies of the
lawsuits that it wished to file. Fleming’s motion to file the state
court suits did not describe the nature of the injunctive relief
5
sought by Fleming or delineate the allegations made in the suits.
On February 22, Fleming petitioned this court for a writ of
mandamus, along with a motion for emergency relief seeking a stay
of the district court’s order. We denied relief, noting that orders
granting an injunction are appealable.
Fleming and the Jose plaintiffs now appeal the injunction,
arguing that the district court lacked subject matter jurisdiction
or the authority to grant it, that the Anti-Injunction Act barred
the district court from enjoining state proceedings, and that its
issue was an abuse of discretion.
II
As a preliminary matter, we note that Fleming’s argument that
the district court had no authority to order Fleming to obtain the
dissolution of the Jose TRO is moot. Under Texas state law, the TRO
was effective for only fourteen days,5 and before the expiration of
the fourteen days, Andersen removed the Jose action to federal
court. Because the TRO was never dissolved and would have expired
in any case, this issue is moot and is not likely to occur again.
III
Preliminary matters aside, we turn to the jurisdiction of the
district court to enjoin Fleming from filing any new Enron-related
actions without leave of the court. The contention here is that the
district court’s claim of authority to enjoin Fleming under “the
5
TEX. R. CIV. P. 680.
6
All Writs Act, the Anti-Injunction Statute, and its inherent
authority” is mistaken. We agree that the All Writs Act and the
Anti-Injunction Act do not afford independent grounds for the
jurisdiction of the district court.6 At the same time, the district
court plainly had jurisdiction over the actions pending before it
in the Newby litigation, and jurisdiction over the Jose state court
action was not necessary.
Similarly, 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,7 but we need not draw upon that power
here. It is a given that the district court, with jurisdiction over
Newby, had subject matter jurisdiction to issue an injunction to
preserve and protect its jurisdiction. As we will explain, the
district court had the authority to compel lawyers properly before
it from engaging in vexatious and needlessly harassing maneuvers
that challenged judicial efforts to maintain the cooperative
approach essential to preserving fair processes in the complex suit
in federal court.
IV
6
Regions Bank of La. v. Rivet, 224 F.3d 483, 493 (5th Cir.
2000) (holding that neither the All Writs Act nor the Anti-
Injunction Act create jurisdiction).
7
Id.; Royal Ins. Co. v. Quinn-L Capital Corp., 960 F.2d 1286,
1292 (5th Cir. 1992).
7
We review the district court’s grant of an injunction for an
abuse of discretion, and underlying questions of law de novo.8
Although the Anti-Injunction Act is an absolute bar to any
federal court action that has the effect of staying a pending state
court proceeding unless the action falls within a designated
exception,9 it does not preclude injunctions against a lawyer’s
filing of prospective state court actions.10 Even so, we are
constrained by the overarching principle that federal courts must
be wary of infringing on legitimate exercises of state judicial
power.11 The All Writs Act provides that federal courts may “issue
all writs necessary or appropriate in aid of their respective
jurisdictions and agreeable to the usages and principles of law.”12
The Act contains the same language as the second of the three
exceptions in the Anti-Injunction Act, and the parallel “necessary
in aid of jurisdiction” language is construed similarly in both the
All Writs Act and the Anti-Injunction Act.13
8
Women’s Medical Center of Northwest Houston v. Bell, 248
F.3d 411, 419 (5th Cir. 2001); Regions Bank, 224 F.3d at 488.
9
28 U.S.C. § 2283.
10
Dombrowski v. Pfister, 380 U.S. 479, 484 n.2 (1965);
Phillips v. Chas. Schreiner Bank, 894 F.2d 127, 132 & n.8 (5th Cir.
1990).
11
See generally Younger v. Harris, 401 U.S. 37, 44-45 (1971).
12
28 U.S.C. § 1651(a).
13
In re Diet Drugs, 282 F.3d 220, 239 (3d Cir. 2002); Winkler
v. Eli Lilly & Co., 101 F.3d 1196, 1203 (7th Cir. 1996); In re
8
Courts have read this language narrowly, finding a threat to
the court’s jurisdiction only where a state proceeding threatened
to dispose of property that formed the basis for federal in rem
jurisdiction or where the state proceeding threatened the
continuing superintendence by a federal court.14 Here also
principles of federalism lie behind our reluctance to adopt an
expansive reading of “necessary in aid of jurisdiction,” which
extends to injunctions against prospective state court proceedings,
even though they escape the reach of the Anti-Injunction Act.
At the same time, it is widely accepted that federal courts
possess power under the All Writs Act to issue narrowly tailored
orders enjoining repeatedly vexatious litigants from filing future
state court actions without permission from the court.15 We have
upheld an order enjoining a litigant from bringing any future
litigation on any claim arising from a particular fact situation,
where the litigant was abusing the court system by harassing his
opponents.16 That order applied to both federal and state suits, and
unlike the injunction at issue here, did not invite the plaintiff
to seek leave of the court to file suit.
Baldwin-United Corp., 770 F.2d 328, 335 (2d Cir. 1985).
14
State of Texas v. United States, 837 F.2d 184, 186 n.4 (5th
Cir. 1988).
15
CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE § 2942,
at 63-64 (2d ed. 1995).
16
Harrelson v. United States, 613 F.2d 114, 116 (5th Cir.
1980).
9
Similarly, federal courts also have the inherent power to
impose sanctions against vexatious litigants. In Chambers v. Nasco,
Inc.,17 the Supreme Court upheld the imposition of sanctions against
a litigant who had repeatedly engaged in bad-faith conduct.18 The
inherent power is limited and interpreted narrowly,19 and its reach
is limited by its ultimate source—the court’s need to orderly and
expeditiously perform its duties.20 Nonetheless, the Court held that
resorting to the inherent power to sanction a vexatious litigant
was appropriate where there was repeated bad-faith conduct that was
beyond the reach of the Federal Rules of Civil Procedure.21 Although
the sanctions in Chambers were limited to attorney’s fees and
associated expenses, the Court recognized that the outright
dismissal of a lawsuit under the inherent power is within the
court’s discretion.22
While the Chambers Court held that the inherent power reaches
beyond the confines of the court to conduct that does not interfere
17
501 U.S. 32 (1991).
18
Id. at 46.
19
Id. at 42.
20
Id. at 43; ITT Cmty. Dev. Corp. v. Barton, 569 F.2d 1351,
1360 (5th Cir. 1978).
21
Chambers, 501 U.S. at 50-51.
22
Id. at 45 (citing Roadway Express v. Piper, 447 U.S. 752,
761 (1980)).
10
with the conduct of trial,23 we recognize that this represents the
outer reaches of the inherent power.24 Given that the district court
has power under the All Writs Act to issue narrowly tailored orders
enjoining repeatedly vexatious litigants from filing future state
court actions,25 we leave the question of its ability to do so under
its inherent power for another day.
The district court in this case was attempting to rein in a
law firm that represents over 750 plaintiffs but has artfully
avoided the Securities Litigation Uniform Standards Act by filing
lawsuits in counties across the State of Texas that are not
denominated class actions and each with fewer than 50 plaintiffs.
Fleming’s efforts to avoid the Standards Act are not themselves an
abuse of the courts. Certainly that effort would alone not support
an order enjoining the filing of state court suits in the future
without the district court’s permission, as we will explain. The
problem is Fleming’s unjustified and duplicative requests for ex
parte temporary restraining orders, without notice to lawyers
already across the counsel table from Fleming and engaged in the
prosecution and defense of virtually identical claims in federal
suits.
23
Id. at 44.
24
See id. at 60 (Scalia, J., dissenting); id. at 67 (Kennedy,
J., dissenting).
25
See supra notes 13-14 and accompanying text.
11
V
Fleming did not attempt to provide defendants with advance
notice before seeking temporary restraining orders, and the
applications for TRO and form orders filed in state court by
Fleming indicated on their face that the TROs were sought without
notice to the defendants. Fleming ignored defendants’ attempts to
communicate with them and their requests for notice. The TROs
obtained by Fleming granted relief that had already been obtained
from the district court in the Newby litigation, and in one case
provided relief that the district court had denied after a hearing
at which all parties were present. Fleming has expressed its
intention to continue filing these state court suits and has not
agreed to notify defendants before seeking a TRO against them.
In sum, the district court did not err in concluding that
Fleming’s actions constitute a sufficiently serious and systematic
abuse of the courts to warrant the injunction. We hold that the
district court had authority under the All Writs Act to enjoin
Fleming from filing future state court actions without its
permission and did not abuse its discretion in doing so.
VI
Only this narrowly crafted injunction is before us. The
district court retains the authority to modify or dissolve the
injunction as this saga plays out. It also has a duty to consider
Fleming’s requests for leave to file suit in state court. Fleming
12
did not raise or argue before us the district court’s denial of
leave to file two cases in state court, and the district court
properly denied leave based upon Fleming’s failure to provide
copies of the lawsuits it planned to file or to give assurance that
it will cease the ex parte tactics.
But the district court cannot predicate future denials of
leave solely upon Fleming’s desire to avoid the reach of the
Securities Litigation Uniform Standards Act. We do not question the
filing of suits tailored to avoid federal jurisdiction. Nor do we
countenance any preemptive federal dominion. The parallel exercise
of state and federal judicial power is inherent in our government
of dual sovereignty. This duality, however, offers no shelter to
sharp practice from the enforcing arm of the state or federal
courts. Nor is zealous duty to a client a cover for rude refusals
to afford opposing counsel the common courtesy of notice. That the
rules contemplate specific circumstances where ex parte relief
without notice may be obtained offers no comfort to Fleming. It
bears emphasis that when Fleming made the contested state court
filings, it was already counsel in the federal proceedings, engaged
with the counsel to the same parties in federal court that it
sought ex parte relief from in state court. The district court
properly saw these moves in state court to be unjustified efforts
to harass parties to the federal cases, and viewed its response as
not burdening rights to proceed to state court.
13
The advocate is duty-bound to protect his client’s interests,
and choices of venue and timing belong to him. But the court has
the power, indeed the duty, to remind counsel that they are
professionals and order their return to the playing field. This is
no matter of rules of fine etiquette. Rather, it is the matter of
lawyers as officers of the court conducting themselves in ways that
do not impede the work of the courts—the genuine and not false
service to their clients. We do not mean to be unduly critical in
the sense of singling out the law firm now on the carpet. We are
aware that such sharp practice is increasingly common, even among
able lawyers as those before us. We have no reason to believe this
was other than an unfortunate episode that will not occur again.
In any event, the district court had the power and duty to stop it,
as she did.
AFFIRMED.
14