UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-10499
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Plaintiff-Appellant,
VERSUS
STATE OF FLORIDA; and
FLORIDA DEPARTMENT OF INSURANCE,
as Receiver for Western Star Insurance Company, Ltd.,
Defendants-Appellees.
Appeal from the United States District Court
For the Northern District of Texas
April 9, 1998
Before JOLLY, DUHÉ and PARKER, Circuit Judges.
PER CURIAM:
Texas Commerce Bank National Association (“TCB”) appeals the
denial of a preliminary injunction. We dismiss the State of
Florida and affirm the denial of the preliminary injunction.
BACKGROUND
In 1993, Ameritrust Texas National Association, predecessor-
in-interest to TCB, entered into a trust agreement, as trustee,
with Western Star Insurance Company, Ltd. (“Western Star”). The
purpose of the trust agreement was to permit Western Star to issue
insurance policies capitalized in part by the trust’s corpus.
Pursuant to the trust agreement, Western Star delivered to TCB a
certificate of deposit (“CD”) in the amount of $5.4 million,
evidencing a deposit of the same amount made into First Asia
Development Bank, Ltd., Port Vila, Republic of Vanuatu (“First
Asia”).1
Some six months after executing the trust agreement, TCB
sought to resign as trustee. When Western Star rejected its
resignation, TCB filed an interpleader and declaratory judgment
action (“Original Action”) in federal court seeking (1) a
declaration that its duties as trustee had concluded as of
September 4, 1993, and (2) the deposit of the CD into the registry
of the court. In February, 1994, the State of Florida intervened
in this action, concerned that the actual trust corpus was not in
TCB’s hands and seeking to be substituted as trustee in TCB’s
place. On May 6, 1994, counsel for Western Star notified the other
parties that the CD had been canceled and First Asia had dissolved.
Thereafter the parties entered into a stipulated resolution of
the action. On May 23, 1994, the court entered an order (“May 23
1
The face of the CD states that “Ameritrust ... has lodged a
deposit in the amount of ... dollars five million and four hundred
thousand only.” Notwithstanding TCB’s assertion that the CD was
the sole asset of the trust, the trust agreement recites that
“[Western Star] has transferred to [Ameritrust] cash in U.S.
currency, Letters of Credit, Readily Marketable Securities, or any
combination thereof, valued at a total of not less than the Trust
fund Minimum Amount ....”
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Order”) stating in part that:
[TCB] has not drawn or asserted any claim
against the [CD], that [TCB] has exercised due
diligence as required by [the Trust Agreement]
to determine the value of the [CD], but is
unable to certify whether it has value or not,
and [TCB] has accounted for all assets of the
trust; the Court further finds and hereby
DECLARES, that [TCB’s] resignation as trustee
was effective as of September 4, 1993, and
accordingly, [TCB] is released and discharged
from all duties under the [Trust Agreement].
The following day, the court granted Western Star’s unopposed
motion to dismiss the Original Action as moot, given the CD had
been canceled (“May 24 Order”). When the court denied the State of
Florida’s motion to clarify the May 24 Order, the State of Florida
appealed; the Fifth Circuit denied its motion to clarify, stating
that “the court’s order of May 23, 1994, discharging Ameritrust as
trustee is affirmed. Also, the district court’s order of May 24,
1994, dismissing as moot the interpleader count of the petition is
also affirmed.”
While the motion for clarification was pending before the
Fifth Circuit, the Florida Department of Insurance, Division of
Rehabilitation and Liquidation (“Receiver”), was appointed receiver
for Western Star and a receivership action was commenced in Florida
state court. In December, 1994, Receiver sent Ameritrust a demand
notice for turnover to Receiver of $5.4 million in trust assets.
On October 8, 1996, TCB requested a preliminary injunction
from a federal district court, seeking to enjoin Receiver from
prosecuting its claims against TCB in Florida state court, or,
alternatively, seeking a declaration that Receiver had no claims
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against TCB regarding its transaction with Western Star. In
November, 1996, Receiver filed a separate action against TCB, also
in state court, alleging TCB had committed fraud while trustee
(“fraud action”). TCB then sought to enjoin the fraud action.2
The district court denied the preliminary injunction as to both
claims, and TCB appeals.
APPLICABILITY OF RELITIGATION EXCEPTION TO RECEIVERSHIP ACTION
The district court found that the Anti-Injunction Act, 28
U.S.C. § 2283,3 precluded the issuance of a preliminary injunction.
Specifically, the court found the third exception (the
“relitigation exception”) in the Act inapplicable. TCB argues
that, evidenced by the court’s May 23 Order, the Original Action
“actually litigated” all issues in the receivership action. The
district court disagreed, finding that its May 23 and 24 Orders did
not purport to discharge TCB from liability as trustee, and that
the Orders (together with the Fifth Circuit affirmance) did not
“actually litigate” all the claims of malfeasance subsequently
brought by Receiver. The district court further found that, even
if the relitigation exception were applicable, issuance of the
2
Receiver’s fraud action was not served on TCB until after
TCB filed its action for preliminary injunction. TCB later removed
the fraud claims to federal court.
3
The Act 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.
28 U.S.C. § 2283.
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injunction was in any case not appropriate: Florida courts were
perfectly capable of determining the res judicata effect of the May
23 and 24 Orders.
TCB characterizes the receivership action as merely attempting
to recover the trust corpus. Because TCB claims the May 23 Order
established that it had already returned all trust assets, TCB
maintains that allowing the receivership action to proceed thus
amounts to a “relitigation” of the Original Action. Receiver
contends that the receivership action is brought, not only to
recover trust assets, but also “specifically on behalf of” Western
Star’s insureds. Receiver characterizes the receivership action as
including claims against TCB for “liability for representations
made to issuers of insurance policies.” The receivership action is
not a relitigation of the Original Action, according to Receiver,
because (1) Receiver had not been appointed at the time of the
Original Action; (2) the policy holders’ claims had not yet
matured; and, (3) the May 24 Order dismissed the interpleader
action as moot, since the CD had been canceled.
Resolution of this issue turns on the proper characterization
of both the Original Action and the subsequent receivership action.
In deciding whether the relitigation exception applies, a court
must ask whether “the claims or issues which the federal injunction
[would] insulate[] from litigation in state proceedings actually
have been decided by the federal court.” Chick Kam Choo v. Exxon
Corp., 486 U.S. 140, 148 (1988)(emphasis added). Thus, the inquiry
here is whether the federal court, in the Original Action, actually
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decided the claims or issues sought to be litigated by Receiver in
the receivership action.
The May 23 and 24 Orders in the Original Action are somewhat
ambiguous. While the May 23 Order stated that TCB “has accounted
for all assets of the trust,” the May 24 Order dismissed the
interpleader count as moot. The Fifth Circuit, denying Florida’s
motion for clarification, affirmed both Orders. The district court
relied on the Fifth Circuit affirmance and construed its two Orders
to mean that “Ameritrust was discharged as trustee, and the
interpleader count of the Original Action Complaint was dismissed
as moot.” We review these legal conclusions underlying the refusal
to grant a preliminary injunction de novo. See Concerned Women for
America, Inc. v. Lafayette County, 883 F.2d 32, 34 (5th Cir. 1989).
We find that the Original Action merely dismissed TCB as
trustee and did not “actually litigate” anything regarding the
trust assets given the dismissal of the interpleader action as
moot. Therefore, the relitigation exception does not apply.
APPLICABILITY OF RELITIGATION EXCEPTION TO FRAUD CLAIM
TCB asserts that, although Receiver’s fraud claims were not
“actually litigated” in the Original Action, they are nonetheless
barred by res judicata and should be enjoined. Thus, TCB asks this
Court to recognize that the relitigation exception to the Anti-
Injunction Act applies equally to claims that could have been
raised before the federal court, but were not in fact litigated
there. TCB contends that there is a conflict in Fifth Circuit
jurisprudence on this issue. Compare Deus v. Allstate Ins. Co., 15
6
F.3d 506, 524-25 (5th Cir. 1994), with Farias v. Bexar County Board
of Trustees for Mental Health Mental Retardation Services, 925 F.2d
866, 879-80 (5th Cir. 1991).
Contrary to TCB’s contentions, however, the Supreme Court in
Chick Kam Choo emphasized that claims must be actually litigated in
federal court to qualify for the relitigation exception. Chick Kam
Choo, 486 U.S. at 148.4 Chick Kam Choo has been interpreted by
commentators Wright, Miller and Cooper as requiring a narrow
reading of the relitigation exception:
There can be no federal injunction against state
proceedings, based on the claim-preclusive or issue-
preclusive effect of a federal judgment, unless the
judgment has actually decided the claim or issue in
question. The prerequisite to reliance on the third
exception is strict and narrow. It requires an
assessment of the precise state of the record and of what
the earlier federal order actually did.
Wright, Miller & Cooper, Federal Practice & Procedure § 4226 (Supp.
1997). We perceive no intra circuit conflict on this question.
While Deus implied that res judicata might trigger the relitigation
exception, that language was purely dicta. See Deus, 15 F.3d at
524-525. Following the Supreme Court’s explicit direction in Chick
Kam Choo, we hold that an issue must be “actually litigated” in
federal court before an injunction can issue under the relitigation
exception. Therefore, the Anti-Injunction Act bars an injunction
on the fraud claims, since they were not actually litigated in the
4
Res judicata and collateral estoppel may underlie the
relitigation exception but they are not actually found in the text
of the Act. Thus, contrary to TCB’s contention, a finding that the
exception does not encompass the full parameters of res judicata
would not “in essence, read res judicata entirely out of the
statute.”
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Original Action.
SOVEREIGN IMMUNITY
The State of Florida contends that it is entitled to Eleventh
Amendment immunity from TCB’s proposed injunction. TCB takes the
position that its “Application for Preliminary Injunction is only
directed against the Florida Department of Insurance in its
capacity as receiver for [Western Star].” Likewise, the Receiver
agrees that the “sovereign State of Florida is not a party to the
Florida actions Texas Commerce sought to enjoin.” The State of
Florida’s role (in its capacity as regulator) in this litigation
was limited to its intervention in the Original Action, where it
sought appointment as substitute trustee. We find that the State
of Florida, in its sovereign capacity as regulator, is not a proper
party to this litigation, and therefore dismiss the State of
Florida from this litigation.
CONCLUSION
The state of Florida, in its capacity as regulator is
dismissed. The district court’ denial of preliminary injunction is
affirmed.
AFFIRMED. State of Florida DISMISSED.
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