### IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 07-30833
BLANCHARD 1986, LTD., TORTUGA OPERATING CO., TORTUGA INTERESTS, INC., JOHN E. HINE, and PETER L. TURBETT Plaintiffs - Appellants TEXACO EXPLORATION & PRODUCTION CO., and LINDER OIL CO. Intervenors - Plaintiffs - Appellants v. PARK PLANTATION, LLC, NANCY BLANCHARD, and NANCY BLANCHARD AS INDEPENDENT EXECUTRIX ON BEHALF OF BETTY D. BLANCHARD Defendants - Appellees PAUL MACLEAN Third Party Defendant - Appellee

Appeal from the United States District Court for the Western District of Louisiana
Before HIGGINBOTHAM, STEWART, and SOUTHWICK, Circuit Judges. PATRICK E. HIGGINBOTHAM, Circuit Judge: We review in this case the district court’s dismissal of a lawsuit that sought toenjoin on-going Louisiana statecourt proceedings. Appellants contend the district court had ancillary subject matter jurisdic tion to effectuate the United States Court of Appeals

Fifth Circuit 

### F I L E D December 16, 2008 Charles R. Fulbruge III ClerkNo. 07-30833

1 28 U.S.C. § 2283.

2 Park Plantation LLC v. Blanchard, et al. , 71 Fed. App’x 441, 2003 WL 21418102 (5th Cir. 2003). 2 decisionsofan earlier federal court and should have enjoined the statecourt suit under the “relitigation exception” of the Anti-Injuncti on Act. 1 We affirm the district court’sdecisi o

n todeny an injunction becausewefind discretion counsels against intermeddling in the state court proceedings. I This suit continues lengthy litigation over a mineral lease. Betty and Nancy Blanchard own 547.59 acres in Louisiana which has been leased to Appellants or their predecessors since 1942. In 1986, the Blanchards brought a suit in Louisiana state court seeking cancellation of the l ease due to the lessees’ failure to perform (“Blanchard I”). The parties entered into a settlement agreement in 1996, under which the lease was amended and Betty Blanchard granted Appellants a purchase option on 150 acres of the leased tract, exercisable upon the Blanchards’ assertion of any claim of environmental damage to the property or upon the transfer of the property. Following settlement the lease continued, but differences remained. In 2001, Park Plantation LLC, the corporation that had meanwhile been formed by Nancy Blanchard to hold the leased land, sued the Appellants again, this time in federal district court (“Blanchard II”). The claims in the suit came in two counts. First, the suit sought cancellation of the 1996 settlement agreement alleging that Betty Blanchard had not knowingly agreed to the terms of an agreement that wasvague and ambiguous. Second, the suit claimed Appellants breached the lease, as modified by the settlement agreement, by failing to drill an 8,000foot well within oneyear ofthe settlement. The district court, adopting the report and recommendation ofthe magistratejudge, dismissed the suit with prejudice. This court affirmed. 2 The lease continued on.No. 07-30833

3 See NewYork Life Ins. Co. v. Gillispie , 203 F.3d 384, 386-87 (5th Cir. 2000) (“The only issue before the Court is the proper scope and application of the relitigation exception to the Anti-Injunction Act. Our review is therefore de novo.”).

4 28 U.S.C. § 2283.

5 Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 147 (1988). 3 Unsatisfied, Nancy Blanchard and Park Plantation sued again in 2004, this ti me back in a Louisiana state court and claiming, among other claims, environmental damages and waiver of the settlement agreement’s purchase option (“Blanchard III”). Appellants responded with a plea of res judicata, pointing to the Blanchard II federal district court suit. The state court rejected the bar, reasoni ng both that Blanchard II was dismissed for lack of subject matter jurisdiction and that the instant claims did not arise out of the same transaction or occurrence at issue in the federal suit. In response, over 22 years after the initiation of litigation between these parties, Appellants filed this action in federal district court (“Blanchard IV”) seeking to enjoin the on-going state court suit. A federal district court dismissed the lawsuit and refused to issue the injunction. We now review de novo on appeal. 3 II The Anti-Injunction Act generally bars federal courts from granting injunctions tostay proceedings in state courts. However, the Act includes three exceptions under which a federal court may enjoin state court proceedings in limited circumstances: A Court of the United States may not grant an injunction to stay proceedings in a State Court except as expressly authorized by Congress, or where necessary in aid of itsjurisdiction, or to protect or effectuate its judgments. 4 The last of the three exceptions listed in the statute, termed the “relitigation exception,” permits an injunction where necessary to “prevent state litigation of an issue that previously was presented toand decided by the federal court.”5 TheNo. 07-30833

6 Chick Kam Choo, 486 U.S. at 147.

7 Id. at 151.

8 The Supreme Court’s opinion in Parsons Steel, Inc. v. First Ala. Bank, 474 U.S. 518 (1986) does not preclude an injunction in this case. There, the Court construed the Full Faith and Credit Act, 28 U.S.C. § 1738, to limit the relitigation exception "to those situations in which the state court has not yet ruled on the merits ofthe resjudicata issue." Parsons Steel , 474 U.S. at 524. No federal injunction of a state proceeding may issue "once the state court has finally rejected a claim ofresjudicata." I d. We apply state law to determine when a ruling is "final." See Duffy & McGovern Accommodation Servs. v. QCI MarineOffshore, Inc. , 448 F.3d 825, 828 (5th Cir. 2006). Here, the Louisiana state court held in a pretrial order that resjudicata did not apply, in part because it found that the Blanchard II federal court dismissed the claims for lack of jurisdictional standing. The Louisiana Fifth Circuit Court of Appeals in turn refused a writ to review the interlocutory order. Both a denial of a peremptory exception of res judicata by a Louisiana trial court and a denial of writs of review by a Louisiana appellate court are interlocutory as opposed to final judgments under Louisiana law. Both judgments are also subject to further review at later stages of the proceedings. Thus, the Full Faith and Credit Act does not foreclose a federal injunction, if appropriate under the relitigation exception, because the Louisiana state courts have not "finally rejected a claim of res judicata."

9 Southern Cal. Petroleum Corp. v. Harper, 273 F.2d 715, 718 (5th Cir. 1960).

10 298 U.S. 281 (1970). 4 e xception is “founded in thewell-recognized conceptsofresjudicata and collateral estoppel,” but is “strict and narrow,” requiring that “the claims or issues which the federal injunction insulatesfrom litigation in state proceedings actually have been decided by the federal court.”6 The exception permits, but does not mandate, that federal courts enjoin duplicative state court proceedings. 7 A The nature of this case causes us to pause and consider that an injunction, even where allowed by the letter ofthe relitigation exception, 8 remains permissive at the discretion ofthe federal court, which discretion should be “exercised in the light of the historical reluctance of federal courts to interfere with state judicial proceedings.”9 As Justice Black remarked in Atlantic Coast Line R. Co. v. Brotherhood of Locomotive Engineers, 10 the Anti-Injunction Act’s “prohibition” of injunctions against state court proceedings is grounded in federalism and “restsNo. 07-30833

11 Harper, 273 F.2d at 719.

12 In Parsons Steel , the Supreme Court declined to consider whether the relitigation exception allows injunctions based on resjudicata “where the later state action involvesclaims that could have been litigated, but were not actually litigated, in the prior federal action.” 474 U.S. at 526 n.4. Currently, there is disagreement amongst the circuits regarding the scope of the relitigation exception; and this circuit has given conflicting signals as to its position on the issue. Most circuits that have considered the issue strictly interpret Chick Kam Choo’s “actually decided” language as “mak[ing] clear that the part ofthe relitigation exception to the Anti-Injunction Act that is based on concerns ofresjudicata is more narrowly tailored than the doctrine ofresjudicata.” Staffer v. Bouchard Transp. Co. , 878 F.2d 638, 643-44 (2d Cir. 1989); see, e.g., Jonesv. St. Paul Cos. , 495 F.3d 888, 892-93 (8th Cir. 2007); Am. Town Ctr. v. Hall 83 Assocs. , 912 F.2d 104, 112 n.2 (6th Cir. 1990); Delta Air Lines, Inc. v. McCoy Rests., Inc. , 708 F.2d 582, 585-87 (11th Cir. 1983). Under this interpretation, the exception only protects from relitigation matters actually decided, not matters that could have been brought and decided in previous federal litigation. See Staffer, 878 F.2d at 643-44. The Fifth Circuit has endorsed this position, stating that an injunction that rests on true res judicata, a doctrine broadly barring any claims that are part of the same transaction or series of transactions raised in a previous action, “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 5 on the fundamental constitutional independence of the States and their courts.” This Circuit, recognizing that these issues of federal and state comity remain equally at play in the relitigation exception as in the rule itself, has stated: We take the view that a complainant must make a strong and unequivocal showing of relitigation of the same issue in order to overcome the federal courts' proper disinclination to intermeddle in state court proceedings. If we err, all is not lost. A state court is as well qualified as a federal court to protect a litigant by the doctrines of res adjudicata and collateral estoppel. 11 The power to curtail duplicative litigation in this case exists directly in the Louisiana state courts through the well-developed doctrines of res judi cata and collateral estoppel. In light of the state’s power, we should not wield the extraordinary equitable remedy of a federal injunction without a “strong and unequivocal” showing ofrelitigation. That inquiry, however, is complicated by the fact that there is disagreement over the precise reach of the relitigation exception’s protections; whether it resembles issue preclusion, claim preclusion, or a hybrid of the two. 12 In light of the nebulous standard, on our reading of theNo. 07-30833

have been decided’ in the prior proceeding

. . . are protectable thereunder.” T ex. Employers’ Ins. Assoc. v. Jackson, 862 F.2d 491, 501 (5th Cir. 1988) (en banc). Accordingly, the J ackson court would limit the reach ofthe relitigation exception tosituationswhere a statesuit’sclaims are precluded under a collateral estoppel theory, which bars relitigation of issues actually determined and litigated in a prior suit. Id. at 500-01. The Ninth Circuit, however, expressly disagrees, holding that the relitigation exception applies “whenever resjudicata would bar relitigation of a claim.” Western Sys., Inc. v. Ulloa, 958 F.2d 864, 868 (9th Cir. 1992). The U lloa court rejected limiting the relitigation exception to issues “actually litigated” because to do so “would in essence be to read resjudicata entirely out of [the relitigation exception,]” as any issues “actually litigated” would fall under the bar of collateral estoppel. The Fifth Circuit, despite its earlier endorsement in J ackson of the “actually litigated” standard, hasmore recently gravitated towardsthe Ninth Circuit’s position by employing a transactional test in relitigation exception cases, asking whether the two claims are based on the same nucleus ofoperative fact. See NewYork Life Ins. Co. v. Gillispie , 203 F.3d 384, 387 (5th Cir. 2000); AssuranceCo. ofAm. v. Kirkland, 312 F.3d 186, 189 n.8 (5th Cir. 2002). Such a test is traditionally associated with the doctrine of res judicata, and its preclusive effect potentially extends beyond claims actually litigated to claims that could have been litigated. See Nevada v. US , 463 U.S. 110, 131 n.12 (1983); Agrilectric Power Partners, Ltd. v. General ElectricCo. , 20 F.3d 663, 665 (5th Cir. 1994); Restatement (Second) Judgments § 24(2).

13 L A
. C IV
. CODE A NN
. Art. 2031. 6 Blanchard II judgment and the Blanchard III pleadings, it is not unequivocally clear that Blanchard III raises issues already decided by the Blanchard II court. We note, however, that this is not because the Blanchard II court dismissed the suit for lack ofconstitutional standing, as the district court and the Louisiana state courts have found, and with which we disagree. Based on our reading of the magistrate’s report, the Blanchard II court reached the merits in dismissing both the breach ofcontract claim and the rescission claim. Although the report stated as to the rescission claim that “Park lacks standing to void the settlement agreement,” that statement pertained to “statutory standing,” not Article III standing. The magistrate’s report reasoned that Park lacked standing because under the elements of Louisiana’s relative nullity jurisprudence, it was not authorized tosue; relative nullity “may be invoked only by those personsfor whose interest the ground for nullity was established.” 13 Because Park was not in existence when Betty Blanchard entered into the settlement agreement, it couldNo. 07-30833

14 Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 89 (1998) (quoting Bell v. Hood, 327 U.S. 678, 682 (1946)).

15 Dismissalsfor lack ofjurisdiction "are not considered adjudications on the merits and ordinarily do not, and should not, preclude a party from later litigating the same claim, provided that the specificdefect has been corrected." Barisv. Sulpicio Lines, Inc. , 74 F.3d 567, 571 (5th Cir. 1996) (citing WRIGHT , MILLER & COOPER F ED
. P RAC
. & P ROC
. § 4436). Dismissals with prejudice for failure tostate a claim, on the other hand, are "decision[s] on the merits and essentially end[] the plaintiff's lawsuit." Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir. 1977). 7 not bring a relative nullity claim. This question of whether or not a particular cause ofaction authorizes an injured plaintifftosue is a merits question, affecting statutory standing, not a jurisdictional question, affecting constitutional standing. In the words of the Supreme Court, once a plaintiff has suffered sufficient injury tosatisfy the “case and controversy” requirement ofArticle III, “jurisdiction is not defeated by the possibility that the averments might fail tostate a cause ofaction on which petitioners could actually recover.” 14 Thus, the district court dismissed the rescission claim under Fed. R. Civ P. 12(b)(6) for failure to state a claim upon which relief can be granted, and not Fed. R. Civ. P. 12(b)(1) for lack of subjectmatter jurisdiction. The Blanchard II judgments, therefore, have preclusive effect. 15 Even considering this preclusive effect, it is not clear at this stage of the Blanchard III proceedings that the case involves issues already decided in Blanchard II. For instance, while both Count Two in Blanchard III and the rescission claim in Blanchard II question the validity ofthe Appellants’ purchase option, the claims measure the option’s validity at different times and against different standards. In Blanchard II, the district court dismissed the Appellees’ rescission claims by focusing on the time of formation and found that there was no error in the settlement’s formation, that the settlement was not in contravention of public policy, that a rescission claim was prescribed, and that Park lacked statutory standing. Count Two, in contrast, challenges the purchaseNo. 07-30833

16 CompareWestern Systems, Inc. v. Ulloa, 958 F.2d 864, 871 (9th Cir. 1992) (affirming an injunction of state proceedings in a case that had been litigated in f ederal court for seventeen years). 8 option from the angle ofwhether it was waived through inaction following events that gave Appellants the right to exercise the option. They are different claims focusing, at least based on the initial state court pleadings, on different issues. As the claims unfold, the state court will be in a better position to consider collateral estoppel and res judicata. Declining an injunction as a matter of discretion is also appropriate here because ofthe nature ofthis case. Over the past twenty years, these parties have engaged in protracted litigation which started in Louisiana state courts, which turns on Louisiana causes of action, and which involves Louisiana land. This is a long-running state dispute, with only a single appearance in federal court, and the Louisiana courts are more familiar with the issues the case presents. 1 6 Preventing dupli cative litigation could potentially shorten this carousel ride of litigation; but, the power to effectuate federal judgments is not uniquely federal and is best left to the state courts in this state dispute. Accordingly, the mere possibility that previously-decided issues may resurface in Blanchard III does notjustify reversing the district court’s refusal to enjoin the state court. It is possible that none of the judgments of Blanchard II will be raised in the adjudication ofthe claims brought in Blanchard III. We leave it to the state court to recognize and decide, as the claims in Blanchard III unfold, whether that remains the case. AFFIRMED.