Forum shopping for arbitration decisions: federal courts' use of antisuit injunctions against state courts.

Author:Sternlight, Jean R.

"The facts of this case demonstrate the quagmire into which federal courts frequently have been thrust in arbitration disputes in which the parties have involved both state and federal tribunals."(1)

"This case is about forum-shopping, by one and all."(2)


Arbitration clauses, which are supposed to do away with litigation, have ironically spawned many complicated and expensive court fights. Some of the most complex cases involve both forum shopping by the parties and jurisdictional turf battles between federal and state courts. Federal courts have, on quite a few occasions, actually gone so far as to enjoin a state court from continuing to consider a pending case because the federal court concluded that the matter ought to be arbitrated.(3) The Supreme Court, however, has never ruled on hether or when such "arbitral antisuit injunctions" are permissible. In Moses H. Cone Memorial Hospital v. Mercury Construction Corp.,(4) the Supreme Court expressly reserved ruling on the question of whether, given abstention principles, federal courts "might stay a state-court suit pending arbitration,"(5) and the Court has not come back to the question since then.(6)

These arbitral antisuit injunction decisions, which often read like intellectual versions of a playground sandbox battle, raise four important and, to some degree, conflicting policy concerns. First, multiple federal courts have held that such injunctions are necessary and appropriate to support the 1925 Federal Arbitration Act's ("FAA's")(7) pro-arbitration policy.(8) While recognizing that the FAA does not explicitly authorize antisuit injunctions,(9) such courts have explained that unless they are permitted to enjoin state courts' actions, the parties will be unable to secure the speedy and inexpensive arbitration envisioned by the FAA.(10) This Article examines whether such injunctions are, in fact, necessary and appropriate to support the FAA's approval of arbitration.(11) Second, in an era declaimed as resurgent for states' rights and federalism,(12) should federal courts be permitted to enjoin ongoing state court actions? Such injunctions, through which a federal entity completely shuts down the actions of a state court, may be seen as a direct threat to comity(13) and federalism.(14) Third, do such injunctions support efficient and effective use of judicial resources?(15) And fourth, do such injunctions encourage or discourage inappropriate forum shopping or vexatious litigation behavior?(16)

Antisuit injunctions are extremely significant to the parties in arbitration cases because, in the words of two lawyers who have represented multiple companies in arbitration actions in both federal and state court, "Federal courts have generally proved more receptive to arbitration than have their state counterparts."(17) While parties may differ in their characterizations of this dichotomy, either calling the federal courts "overenthusiastic" or calling the state courts "hostile" toward arbitration, it does seem that state courts are more likely to refuse to enforce arbitration agreements than are federal courts.(18) Although no empirical studies have been done to verify this anecdotal observation,(19) and while it is not easy to come up with a clear explanation as to why the attitudes of federal and state court judges should differ toward arbitration,(20) the decided cases do seem to support such a general differentiation. For example, when the Montana Supreme Court initially considered Casarotto v. Lombardi,(21) Justice Trieweiler railed against "those federal judges who consider forced arbitration as the panacea for their `heavy case loads' and who consider the reluctance of state courts to buy into the arbitration program as a sign of intellectual inadequacy."(22) By contrast, a number of federal courts have interpreted arbitration clauses extremely broadly, proving quite willing to reject asserted defenses of fraud, waiver, unconscionability, and nonarbitrability.(23) Thus, permitting federal courts to enjoin state court interpretations of arbitration clauses is likely to result in more disputes being resolved through arbitration, rather than through litigation.(24)

Arbitral antisuit injunctions are also very significant, in that certain kinds of parties are more likely to prefer to litigate in federal court, and others are more likely to prefer state court. In analyzing the published decisions involving arbitral antisuit injunctions, one learns that it is virtually always a "little guy," that is a consumer, employee, franchisee, or dealer, who has filed in state court, whereas it is usually a "big guy," such as a manufacturer or franchisor, who has sought the protection of the federal courts.(25)

These federal arbitral antisuit injunctions are worth studying, not only because of their practical significance, but also because they raise intriguing jurisdictional questions.(26) In particular, where a state court has previously issued an order stating that a dispute need not be arbitrated, the federal court must decide whether the Federal Full Faith and Credit statute,(27) principles of claim and issue preclusion,(28) or the Rooker-Feldman doctrine(29) prevent the federal court from reconsidering this question. Even where the state court has not issued such a ruling, the federal court must determine whether it is permitted to enjoin an ongoing state proceeding in light of the All Writs Act,(30) traditional equitable principles,(31) the Anti-Injunction Act (the "AIA"),(32) and various abstention doctrines.(33) Each of the above doctrines is extremely complex, and many commentators have noted that the entire doctrinal foundation of federal jurisdiction is rather convoluted and confused, and perhaps in need of an overhaul.(34) Thus, the convergence of all of these doctrines around the issue of federal antisuit injunctions creates a real intellectual and policy morass.(35)

Unfortunately, most courts that have considered the propriety of issuing an arbitral antisuit injunction have granted the injunction without considering many of the statutes and doctrines that are directly on point.(36) Further, almost none of the decisions look in depth at the important policy questions raised by these cases.(37) Rather, many are cursory examinations consisting primarily of cites to earlier decided cases, which are themselves lacking in analysis.(38) In a typical ruling, the federal court simply: (1) determines it has jurisdiction; (2) finds that arbitration is required by the parties' agreement and thus grants the motion to compel arbitration; and (3) concludes that having compelled arbitration, it is justified in enjoining the state court proceeding either to protect the federal court judgment or to protect federal court jurisdiction.(39) While perhaps appearing reasonable at first glance, these decisions often fail to take note of important factual distinctions between the cases, and therefore fail properly to analyze the relevant doctrines and policies.(40) The decisions also fail to take into account the fact that recent Supreme Court decisions have undercut the reasoning of some of the early cases granting injunctions against state courts.(41) Those few courts that have denied the requested injunctions typically engage in a somewhat more detailed analysis, but even their discussions fail fully to consider the complexly interwoven policy and doctrinal issues?(42)

This Article thus attempts to determine when, if ever, federal courts should be permitted to enjoin state court determinations in order to allow arbitration to proceed.(43) Part I considers the phenomenon of federal courts' issuance of antisuit injunctions in the arbitration context, analyzing the cases in which such injunctions have been sought, and pointing out some important distinctions among them. Part I focuses, in particular, on four key differences among the cases: 1) whether the federal action was filed prior or subsequent to the state suit, 2) the stage of the state suit at the time the injunction was sought, 3) the stage of the federal suit at the time the federal injunction was sought, and 4) the extent to which either party may be said to have engaged in vexatious litigation.(44)

Part II examines the primary policy concerns that courts should consider in determining whether to grant such injunctions. It takes a close look at each policy and shows that the relative strength of the competing policies at issue will vary according to the factual context of each case.(45)

Parts III and IV examine the various statutes and doctrines that determine whether or not federal courts may enjoin state court actions to ensure that a dispute goes to arbitration. Part III first examines the two doctrines governing whether a federal court may effectively overrule a state determination that a dispute is nonarbitrable: the Full Faith and Credit Statute(46) and the Rooker-Feldman doctrine.(47) Part IV then discusses those doctrines that govern whether a federal court may enjoin an ongoing state action, regardless of whether the state court has already determined that the dispute is nonarbitrable. After first examining federal courts' power to issue injunctions under the All Writs Act,(48) Part IV examines the limits imposed by the traditional equitable constraints on the issuance of injunctions,(49) the AIA,(50) and the relevant abstention doctrines.(51) With respect to each doctrine, Parts III and IV first provide background context, then examine whether and how courts have applied the doctrine to arbitral antisuit injunctions, and finally discuss how the doctrine should be applied to such injunctions. These Parts show that although courts have often failed to apply these doctrines properly in the context of arbitral antisuit injunctions, courts' applications of the doctrines in other contexts often draw on precisely the policies discussed in Part II.(52) These Parts also show the importance of...

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