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, predecessorin-inte rest to TCB, entered into a trust agreement, as trustee,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 t o [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 ....”

2 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 o f 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 jud gment

action (“Original Action”) in federal court seeking (1) a

declaration that its duties as trus tee 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 233

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 dete rmine 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 e ffective 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

Fi fth 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 i njunction

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 claims2 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 juri sdiction, or to protect or effectuate its

judgments.

28 U.S.C. § 2283.

4 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 fou nd that the Anti-Injunction Act, 28

U.S.C. § 2283, 3 precluded the issuance of a preliminary injunction.

Specifically, the cou r t found the third exception (the

“relitigation excepti on”) in the Act inapplicable. TCB argues

that, evidenced by the court’s May 23 Order, the Original Action

“actually litigated” all issues in the re ceivership 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 relitiga tion exception were applicable, issuance of the5

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 receiver ship 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 th e time of the

Original Action; (2) the policy holders’ claims had not yet

matured; and, (3) the May 24 Order di smissed 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 app lies, a court

must ask whether “the claims or issues which the federal injunction

[would] insulate[ ] from litigation in state proceedings a ctually

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, actually6

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 asset s 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

. S ee Concerned Women for

America, Inc. v. Lafayette County

, 883 F.2d 32, 34 (5th Cir. 1989).

We find that the Original Act ion 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 th at, 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 AntiInjunction Act applies equa lly to claims that c ould 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. C ompare Deus v. Allstate Ins. Co.

, 154 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 d oes not encompass the full parameters of r es judicata

would not “in essence, read res judicata entirely out of the

statute.”

7 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. C hick Kam

Choo

, 486 U.S. at 148. 4 C hick 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 issuepreclusive effect of a federal judgment, unless t h e 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 C hick

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 the8

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 aga inst 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

F lorida’s role (in its capacity as regulator ) in this litigat ion

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 sta te of Florida, in its capacity as regulator is

dismissed. The district court’ denial of preliminary injunction is

affirmed.

AFFIRMED. State of Florida DISMISSED.