76 F. 3d 624 - Kaepa Inc v. Achilles Corporation

The primary issue presented by this appeal is whether the district court erred by enjoining Defendant-Appellant Achilles Corporation from prosecuting an action that it filed in Japan as plaintiff, which essentially mirrored a lawsuit previously filed by Plaintiff-Appellee Kaepa, Inc. in state court and then being prosecuted in federal district court by Kaepa. Given the private nature of the dispute, the clear indications by both parties that claims arising from their contract should be adjudicated in this country, and the duplicative and vexatious nature of the Japanese action, we conclude that the district court did not abuse its discretion by barring the prosecution of the foreign litigation. Accordingly, we affirm the grant of the antisuit injunction.

This case arises out of a contractual dispute between two sophisticated, private corporations: Kaepa, an American company which manufactures athletic shoes; and Achilles, a Japanese business enterprise with annual sales that approximate one billion dollars. In April 1993, the two companies entered into a distributorship agreement whereby Achilles obtained exclusive rights to market Kaepa's footwear in Japan. The distributorship agreement expressly provided that Texas law and the English language would govern its interpretation, that it would be enforceable in San Antonio, Texas, and that Achilles consented to the jurisdiction of the Texas courts.1

Kaepa grew increasingly dissatisfied with Achilles's performance under the contract. Accordingly, in July of 1994, Kaepa filed suit in Texas state court, alleging (1) fraud and negligent misrepresentation by Achilles to induce Kaepa to enter into the distributorship agreement, and (2) breach of contract by Achilles. Thereafter, Achilles removed the action to federal district court, and the parties began a laborious discovery process which to date has resulted in the production of tens of thousands of documents. In February 1995, after appearing in the Texas action, removing the case to federal court, and engaging in comprehensive discovery, Achilles brought its own action in Japan, alleging mirror-image claims: (1) fraud by Kaepa to induce Achilles to enter into the distributorship agreement, and (2) breach of contract by Kaepa.

Back in Texas, Kaepa promptly filed a motion asking the district court to enjoin Achilles from prosecuting its suit in Japan (motion for an antisuit injunction). Achilles in turn moved to dismiss the federal court action on the ground of forum non conveniens. The district court denied Achilles's motion to dismiss and granted Kaepa's motion to enjoin, ordering Achilles to refrain from litigating the Japanese action and to file all of its counterclaims with the district court. Achilles timely appealed the grant of the antisuit injunction.2

Achilles's primary argument is that the district court failed to give proper deference to principles of international comity when it granted Kaepa's motion for an antisuit injunction. We review the decision to grant injunctive relief for abuse of discretion.3 Under this deferential standard, findings of fact are upheld unless clearly erroneous, whereas legal conclusions " 'are subject to broad review and will be reversed if incorrect.' "4

It is well settled among the circuit courts--including this one--which have reviewed the grant of an antisuit injunction that the federal courts have the power to enjoin persons subject to their jurisdiction from prosecuting foreign suits.5 The circuits differ, however, on the proper legal standard to employ when determining whether that injunctive power should be exercised.6 We have addressed the propriety of an antisuit injunction on two prior occasions, in In re Unterweser Reederei Gmbh7 and Bethell v. Peace.8 Emphasizing in both cases the need to prevent vexatious or oppressive litigation, we concluded that a district court does not abuse its discretion by issuing an antisuit injunction when it has determined "that allowing simultaneous prosecution of the same action in a foreign forum thousands of miles away would result in 'inequitable hardship' and 'tend to frustrate and delay the speedy and efficient determination of the cause.' "9 The Seventh and the Ninth Circuits have either adopted10 or "incline[d] toward"11 this approach, but other circuits have employed a standard that elevates principles of international comity to the virtual exclusion of essentially all other considerations.12

Achilles urges us to give greater deference to comity and apply the latter, more restrictive standard. We note preliminarily that, even though the standard espoused in Unterweser and Bethell focuses on the potentially vexatious nature of foreign litigation, it by no means excludes the consideration of principles of comity. We decline, however, to require a district court to genuflect before a vague and omnipotent notion of comity every time that it must decide whether to enjoin a foreign action.

In the instant case, for example, it simply cannot be said that the grant of the antisuit injunction actually threatens relations between the United States and Japan. First, no public international issue is implicated by the case: Achilles is a private party engaged in a contractual dispute with another private party. Second, the dispute has been long and firmly ensconced within the confines of the United States judicial system: Achilles consented to jurisdiction in Texas; stipulated that Texas law and the English language would govern any dispute; appeared in an action brought in Texas; removed that action to a federal court in Texas; engaged in extensive discovery pursuant to the directives of the federal court; and only then, with the federal action moving steadily toward trial, brought identical claims in Japan. Under these circumstances, we cannot conclude that the district court's grant of an antisuit injunction in any way trampled on notions of comity.

On the contrary, the facts detailed above strongly support the conclusion that the prosecution of the Japanese action would entail "an absurd duplication of effort"13 and would result in unwarranted inconvenience, expense, and vexation. Achilles's belated ploy of filing as putative plaintiff in Japan the very same claims against Kaepa that Kaepa had filed as plaintiff against Achilles smacks of cynicism, harassment, and delay. Accordingly, we hold that the district court did not abuse its discretion by granting Kaepa's motion for an antisuit injunction.14

Achilles also argues that the district court erred by failing to meet several requirements of Federal Rule of Civil Procedure 65 before issuing the antisuit injunction. Rule 65(a)(1) provides that "[n]o preliminary injunction shall be issued without notice to the adverse party." We have interpreted the notice requirement of Rule 65(a)(1) to mean that "where factual disputes are presented, the parties must be given a fair opportunity and a meaningful hearing to present their differing versions of those facts before a preliminary injunction may be granted."15 If no factual dispute is involved, however, no oral hearing is required; under such circumstances the parties need only be given "ample opportunity to present their respective views of the legal issues involved."16 In the instant case, the district court did not rely on any disputed facts in determining whether it could properly grant an antisuit injunction. Moreover, both parties presented comprehensive memoranda in support of their positions on the issue. Accordingly, the district court did not violate Rule 65(a)(1) by failing to conduct an oral hearing before granting the antisuit injunction.

Achilles also argues that the district court violated Rule 65(c) by not requiring Kaepa to post a bond. Rule 65(c) provides that "[n]o ... preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper...."17 In holding that the amount of security required pursuant to Rule 65(c) "is a matter for the discretion of the trial court,"18 we have ruled that the court "may elect to require no security at all."19 Thus, the district court did not violate Rule 65(c) by failing to compel Kaepa to post a bond.20III.

For the foregoing reasons, the district court's grant of Kaepa's motion to enjoin the litigation of Achilles's action in Japan is

AFFIRMED.

International comity represents a principle of paramount importance in our world of ever increasing economic interdependence. Admitting that "comity" may be a somewhat elusive concept1 does not mean that we can blithely ignore its cautionary dictate.2 Unless we proceed in each instance with respect for the independent jurisdiction of a sovereign nation's courts, we risk provoking retaliation in turn, with detrimental consequences that may reverberate far beyond the particular dispute and its private litigants. Amicable relations among sovereign nations and their judicial systems depend on our recognition, as federal courts, that we share the international arena with co-equal judicial bodies, and that we therefore act to deprive a foreign court of jurisdiction only in the most extreme circumstances. Because I feel that the majority's opinion does not grant the principle of international comity the weight it deserves, I must respectfully dissent.

* A

I do not quarrel with the well established principle, relied on by the majority, that our courts have the power to control the conduct of persons subject to their jurisdiction, even to the extent of enjoining them from prosecuting in a foreign jurisdiction. I write to emphasize, however, that under concurrent jurisdiction, "parallel proceedings on the same in personam claim should ordinarily be allowed to proceed simultaneously, at least until a judgment is reached in one which can be pled as res judicata in the other." Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 926-27 (D.C.Cir.1984).3 The filing of a second parallel action in another jurisdiction does not necessarily conflict with or prevent the first court from exercising its legitimate concurrent jurisdiction. Id. at 926. In the ordinary case, both forums should be free to proceed to a judgment, unhindered by the concurrent exercise of jurisdiction in another court.4

The issuance of an antisuit injunction runs directly counter to this principle of tolerating parallel proceedings. An antisuit injunction "conveys the message ... that the issuing court has so little confidence in the foreign court's ability to adjudicate a given dispute fairly and efficiently that it is unwilling even to allow the possibility." Gau Shan Co. v. Bankers Trust Co., 956 F.2d 1349, 1355 (6th Cir.1992). It makes no difference that in formal terms the injunction is only addressed to the parties. The antisuit injunction operates to restrict the foreign court's ability to exercise its jurisdiction as effectively as if it were addressed to the foreign court itself. Laker Airways, 731 F.2d at 927; see also Donovan v. City of Dallas, 377 U.S. 408, 413, 84 S.Ct. 1579, 1582-83, 12 L.Ed.2d 409 (1964). Enjoining the parties from litigating in a foreign court will necessarily compromise the principles of comity, and may lead to undesirable consequences. For example, the foreign court may react by issuing a similar injunction, thereby preventing any party from obtaining a remedy. Laker Airways, 731 F.2d at 927. The foreign court may also be less inclined to enforce a judgment by our courts. The refusal to enforce a foreign judgment, however, is less offensive than acting to prevent the foreign court from hearing the matter in the first place. Id. at 931.

Antisuit injunctions intended to carve out exclusive jurisdiction may also have unintended, widespread effects on international commerce. Without "an atmosphere of cooperation and reciprocity between nations," the ability to predict future consequences of international transactions will inevitably suffer. Id. To operate effectively and efficiently, international markets require a degree of predictability which can only be harmed by antisuit injunctions and the resulting breakdown of cooperation and reciprocity between courts of different nations. Id. The attempt to exercise exclusive jurisdiction over international economic affairs is essentially an intrusion into the realm of international economic policy that should appropriately be left to our legislature and the treaty making process.5 As the court in Laker Airways stated, "Absent an explicit directive from Congress, this court has neither the authority nor the institutional resources to weigh the policy and political factors that must be evaluated when resolving competing claims of jurisdiction. In contrast, diplomatic and executive channels are, by definition, designed to exchange, negotiate, and reconcile the problems which accompany the realization of national interests within the sphere of international association." Laker Airways, 731 F.2d at 955.

The majority appears to require an affirmative showing that the granting of an antisuit injunction in this case would immediately and concretely affect adversely the relations between the United States and Japan. Unless there is evidence that this antisuit injunction would "actually threaten" the relations between the two countries, the majority is comfortable to assume otherwise. Cf. Allendale Mut. Ins. Co. v. Bull Data Systems, Inc., 10 F.3d 425, 431-33 (7th Cir.1993) (requiring evidence of concrete harm to the foreign relations of the United States). Some courts have gone so far as to suggest that we might expect, for example, a representative of the foreign nation to convey their country's concern regarding the issuance of an antisuit injunction in that case. See, e.g., id. at 431; Philips Medical Sys. Int'l B.V. v. Bruetman, 8 F.3d 600, 605 (7th Cir.1993). Insisting on evidence of immediate and concrete harm, in the form of a diplomatic protest or otherwise, is both unrealistic and shortsighted. As with most transnational relations, the potential harm to international comity caused by the issuance of a specific antisuit injunction will be as difficult to predict, as it will be to remedy. It is precisely this troubling uncertainty, and the recognition that our courts are ill equipped to weigh these types of international policy considerations, that cautions us to make the respectful deference underlying international comity the rule rather than the exception.

In holding that the district court in this case did not abuse its discretion by enjoining Achilles, a Japanese corporation, from proceeding with its lawsuit filed in the sovereign nation of Japan, the majority appears to rely primarily on the duplicative nature of the Japanese suit and the resulting "unwarranted inconvenience, expense, and vexation."6 The inconvenience, expense and vexation, however, are factors likely to be present whenever there is an exercise of concurrent jurisdiction by a foreign court. Sea Containers Ltd. v. Stena AB, 890 F.2d 1205, 1213-14 (D.C.Cir.1989). The majority's standard can be understood to hold, therefore, that "a duplication of the parties and issues, alone, is sufficient to justify a foreign antisuit injunction." Gau Shan Co., 956 F.2d at 1353; see also Laker Airways, 731 F.2d at 928 (concluding that this rationale "is prima facie inconsistent with the rule permitting parallel proceedings in concurrent in personam actions"). Under this standard, concurrent jurisdiction involving a foreign tribunal will rarely, if ever, withstand the request for an antisuit injunction.

By focusing on the potential hardship to Kaepa of having to litigate in two forums,7 the majority applies an analysis that is more appropriately brought to bear in the context of a motion to dismiss for forum non conveniens.8 See Laker Airways, 731 F.2d at 928. Considerations that are appropriate in deciding whether to decline jurisdiction are not as persuasive when deciding whether to deprive another court of jurisdiction. "The policies of avoiding hardships to the parties and promoting the economies of consolidation litigation 'do not outweigh the important principles of comity that compel deference and mutual respect for concurrent foreign proceedings. Thus, the better rule is that duplication of parties and issues alone is not sufficient to justify issuance of an antisuit injunction.' " Gau Shan Co., 956 F.2d at 1355 (quoting Laker Airways, 731 F.2d at 928); see also China Trade & Dev. Corp. v. M.V. Choong Yong, 837 F.2d 33, 36 (2nd Cir.1987); Compagnie des Bauxites de Guinea v. Insurance Co. of N. Am., 651 F.2d 877, 887 (3d Cir.1981), aff'd on other grounds sub nom. Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982). A dismissal on grounds of forum non conveniens by either court in this case would satisfy the majority's concern with avoiding hardship to the parties, without harming the interests of international comity.9 The district court is not in a position, however, to make the forum non conveniens determination on behalf of the Japanese court. In light of the important interests of international comity, the decision by a United States court to deprive a foreign court of jurisdiction must be supported by far weightier factors than would otherwise justify that court's decision to decline its own jurisdiction on forum non conveniens grounds.

Accordingly, I believe that the standard followed by the Second, Sixth, and D.C. Circuits more satisfactorily respects the principle of concurrent jurisdiction and safeguards the important interests of international comity. Under this stricter standard, a district court should look to only two factors in determining whether to issue an antisuit injunction: (1) whether the foreign action threatens the jurisdiction of the district court; and (2) whether the foreign action was an attempt to evade important public policies of the district court.10 Gau Shan Co., 956 F.2d at 1355; China Trade, 837 F.2d at 36; Laker Airways, 731 F.2d at 927. Neither of these factors are present in this case.

"Courts have a duty to protect their legitimately conferred jurisdiction to the extent necessary to provide full justice to litigants." Laker Airways, 731 F.2d at 927. Where the concurrent proceeding effectively threatens to paralyze the jurisdiction of the court, or where the foreign court is attempting to carve out exclusive jurisdiction over the action, an antisuit injunction may legitimately be necessary to protect the court's jurisdiction. In those rare cases where the foreign action is interdictory rather than parallel, the issuance of an antisuit injunction is primarily a defensive action not inconsistent with the principles of international comity. The court in Laker Airways affirmed the issuance of an antisuit injunction where the foreign action "was instituted by the foreign defendants for the sole purpose of terminating the United States claim." Id. at 915. In fact, the British Court of Appeals had enjoined the plaintiff from pursuing its claims against British defendants in a United States court under United States law. Id. Significantly, the United States district court in Laker Airways also made clear that its injunction was intended solely to protect its jurisdiction by preventing the defendants from taking any action before a foreign court or governmental authority that would interfere with the litigation pending before the district court. Id. at 919. The injunction was not intended to prevent all concurrent proceedings in foreign courts, only those which directly threatened the district court's jurisdiction. There is no evidence in this case that Achilles' action in Japan in any way threatens the district court's exercise of its concurrent jurisdiction. While the Japanese action may eventually proceed to a judgment which can be pled as res judicata in the district court, no attempt has been made to carve out exclusive jurisdiction on behalf of the foreign tribunal.11

As an example of where a court may need to act in order to protect its jurisdiction, a long-standing exception to the rule tolerating concurrent jurisdiction has been recognized for proceedings in rem or quasi in rem. China Trade, 837 F.2d at 36.12 Because the second action may pose an inherent threat to the court's basis for jurisdiction, an antisuit injunction may be appropriate in an in rem or quasi in rem proceeding. Id. "Where jurisdiction is based on the presence of property within the court's jurisdictional boundaries, a concurrent proceeding in a foreign jurisdiction poses the danger that the foreign court will order the transfer of the property out of the jurisdictional boundaries of the first court, thus depriving it of jurisdiction over the matter. This concern of course is not present in this in personam proceeding." Gau Shan Co., 956 F.2d at 1358. Likewise, this concern is not present in the current in personam proceeding, the focus of which is a distribution agreement. I note that In re Unterweser Reederei, Gmbh, relied on by the majority, was an in rem proceeding, justifying the more permissive standard applied to the issuance of an antisuit injunction in that case.13

Under the second factor of the stricter standard, an antisuit injunction may also be appropriate where a party seeks to evade important policies of the forum by bringing suit in a foreign court. Gau Shan Co., 956 F.2d at 1357. "While an injunction may be appropriate when a party attempts to evade compliance with a statute of the forum that effectuates important public policies, an injunction is not appropriate merely to prevent a party from seeking 'slight advantages in the substantive or procedural law to be applied in a foreign court.' " China Trade, 837 F.2d at 37 (quoting Laker Airways, 731 F.2d at 931, n. 73).14 The policy favoring the resolution in a single lawsuit of all disputes arising out of a common matter does not, as noted earlier, outweigh the important interests of international comity. Rather, the principle enunciated under the second factor is "similar to the rule that a foreign judgment not entitled to full faith and credit under the Constitution will not be enforced within the United States when contrary to the crucial public policies of the forum in which enforcement is requested." Laker Airways, 731 F.2d at 931. Under this principle, a court is not required to give effect to a judgment that does violence to the forum's own fundamental interests. Id. Since the issuance of an antisuit injunction is a much greater and more direct interference with a foreign country's judicial process than is the refusal to enforce a judgment, it follows that an antisuit injunction should only be issued in the most extreme circumstances. Although the majority questions the purity of Achilles' motives in filing suit in Japan, there is no evidence that Achilles is attempting to evade any important policy of the United States forum.

Because neither factor supports the issuance of an antisuit injunction in this case, I believe the district court abused its discretion by enjoining Achilles from prosecuting an action filed in Japan. Accordingly, I respectfully dissent.