1

Revised August 12, 2002

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

 

No. 02-20343

 

MARK NEWBY; ET AL.,

Plaintiffs,

FLEMING & ASSOCIATES L.L.P.,

Plaintiff-Appellant,

DAVID JOSE; JAMES BRISTER; PETER MAXFIELD,

GEORGE ATALLAH,

Appellants.

versus

ENRON CORP; ET AL

 Defendants

ANDREW S. FASTOW; JEFFREY J. SKILLING; 

DAVID B. DUNCAN; KENNETH L. LAY

Defendants-Appellees.

 

Appeal from the United States District Court

For the Southern District of Texas

 

 August 9, 2002 

Before HIGGINBOTHAM, WIENER, and BENAVIDES, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Fleming & Associates, a Houston-based law firm, and its

clients David Jose, James Brister, Peter Maxfield, and George

Atallah appeal the district court’s order dissolving a temporary

restraining order issued by a state court and enjoining Fleming
1 The temporary restraining order expired by its own terms,

and the order directing that it be dissolved is not before us.

2 15 U.S.C. §§ 77p, 78bb(f).

3 15 U.S.C. § 77p(f)(2).

2

from filing any new Enron-related actions without leave of the

district court.

Fleming and its clients argue that the district court lacked

authority to enjoin prospective state court actions, that the AntiInjunction Act barred the district court from doing so, and that

the district court abused its discretion in issuing the

injunction.1 We affirm.

I

Fleming has thus far filed at least seven lawsuits in state

courts throughout Texas, alleging securities fraud arising out of

the business failure of Enron Corporation. Each suit stated claims

for fewer than fifty plaintiffs in complaints crafted to avoid the

provisions of the Securities Litigation Uniform Standards Act of

1998, which made federal court the exclusive venue for class

actions alleging fraud in the sale of covered securities.2 SLUSA

defines a “covered class action” as a single lawsuit in which

damages are sought on behalf of more than 50 persons,3 but

Fleming’s state court suits were each brought on behalf of less

than 50 plaintiffs. Fleming has several hundred additional clients,

and has advised this court of plans to file similar state court

securities-related lawsuits on their behalf if permitted to do so.
3

At all relevant times, over 70 cases arising from the Enron

collapse have been pending in the Southern District of Texas.

Several shareholder suits have been consolidated into a case styled

Mark Newby, et al. v. Enron Corp, et al. On April 16, 2002, the

Judicial Panel on Multidistrict Litigation transferred all such

federal Enron-related actions to the Southern District of Texas for

pre-trial coordination. On the recusal of another judge, the cases

were transferred to Judge Melinda Harmon. As the MDL judge she has

ruled on many motions and has been heavily engaged in the

considerable task of managing this complex litigation, including

the filing of a comprehensive pre-trial scheduling order. Fleming

represents clients with claims that are part of the MDL

proceedings.

On December 5, 2001 the district court denied an application

for a freeze order. Then, on January 23, 2002, the district court

ordered defendant Arthur Andersen, L.L.P. to segregate, preserve,

and protect all writings and other materials relating to Enron and

any Enron-related entities. The district court also ordered

depositions of individuals connected with Andersen on topics

relating to document and data retention and destruction.

Meanwhile, Fleming filed the first state court suit on

November 7, 2001 in Harris County, Texas on behalf of Fred and

Marian Rosen, asserting breach of fiduciary duty of loyalty and
4 Virtually all the defendants in the state court cases were

also defendants in federal cases. 

4

care.4 On January 16, 2002, Fleming filed an amended petition on

behalf of the Rosen plaintiffs, naming 21 new defendants and

transforming the action into a state court securities fraud suit.

The amended petition requested a temporary restraining order

against Andersen to prevent Andersen from destroying Enron-related

documents. Two days later, the state court in the Rosen case issued

an ex parte TRO against Andersen.

Eight days later, Fleming filed Bullock v. Andersen on behalf

of eleven plaintiffs in state court in Washington County, Texas.

Among other relief, the Bullock plaintiffs sought a TRO against

Andersen and former Enron CEO Kenneth Lay concerning the

preservation of Enron-related documents. On the same day, the state

court issued an ex parte TRO against Andersen, granting relief that

was identical to the evidence order issued by Judge Harmon in

Newby.

Five days later, on January 29, 2002, Fleming filed the Ahlich

suit in Brazos County, Texas. This suit was brought on behalf of 45

plaintiffs, purchasers of an unknown amount of Enron stock. Fleming

also sought an identical ex parte TRO against Andersen and Lay.

Defendants were given no notice of the filing of the suit or the

application for a TRO.

Eight days later, Fleming filed Jose, et al. v. Arthur
5

Andersen, L.L.P., et al. in Bexar County, Texas, making essentially

the same allegations as the previous suits against the same 37

defendants named in the Ahlich suit. Once again, Fleming sought an

ex parte TRO, which the state court granted on the same day.

Fleming provided no notice to defendants before seeking the TRO.

The TRO, like the previous orders granted by the state courts,

enjoined defendants from destroying, altering, or deleting Enronrelated documents. Unlike the others, it also prevented defendants

from transferring any property, funds, or assets to third parties

not in the ordinary course of their business and from transferring

assets out of the United States.

Five days later, Lay and Skilling urged Judge Harmon to enjoin

Fleming from requesting further injunctive relief in state court

without providing notice to them. After a hearing, the federal

district court on February 15 enjoined Fleming from filing any new

Enron-related actions without leave of the district court and

ordered Fleming to dissolve the TRO obtained in Jose. The district

court rested its authority to issue the injunction in the All Writs

Act, the Anti-Injunction Statute, and its inherent authority.

On February 19, Fleming sought leave to file two Enron-related

actions in state court, which the district court denied, noting

that Fleming failed to provide the court with copies of the

lawsuits that it wished to file. Fleming’s motion to file the state

court suits did not describe the nature of the injunctive relief
5 TEX. R. CIV. P. 680.

6

sought by Fleming or delineate the allegations made in the suits.

On February 22, Fleming petitioned this court for a writ of

mandamus, along with a motion for emergency relief seeking a stay

of the district court’s order. We denied relief, noting that orders

granting an injunction are appealable.

Fleming and the Jose plaintiffs now appeal the injunction,

arguing that the district court lacked subject matter jurisdiction

or the authority to grant it, that the Anti-Injunction Act barred

the district court from enjoining state proceedings, and that its

issue was an abuse of discretion.

II

As a preliminary matter, we note that Fleming’s argument that

the district court had no authority to order Fleming to obtain the

dissolution of the Jose TRO is moot. Under Texas state law, the TRO

was effective for only fourteen days,5 and before the expiration of

the fourteen days, Andersen removed the Jose action to federal

court. Because the TRO was never dissolved and would have expired

in any case, this issue is moot and is not likely to occur again.

III

Preliminary matters aside, we turn to the jurisdiction of the

district court to enjoin Fleming from filing any new Enron-related

actions without leave of the court. The contention here is that the

district court’s claim of authority to enjoin Fleming under “the
6 Regions Bank of La. v. Rivet, 224 F.3d 483, 493 (5th Cir.

2000) (holding that neither the All Writs Act nor the AntiInjunction Act create jurisdiction).

7 Id.; Royal Ins. Co. v. Quinn-L Capital Corp., 960 F.2d 1286,

1292 (5th Cir. 1992).

7

All Writs Act, the Anti-Injunction Statute, and its inherent

authority” is mistaken. We agree that the All Writs Act and the

Anti-Injunction Act do not afford independent grounds for the

jurisdiction of the district court.6 At the same time, the district

court plainly had jurisdiction over the actions pending before it

in the Newby litigation, and jurisdiction over the Jose state court

action was not necessary.

Similarly, a federal district court can exercise ancillary

jurisdiction over a second action in order "to secure or preserve

the fruits and advantages of a judgment or decree rendered" by that

court in a prior action,7 but we need not draw upon that power

here. It is a given that the district court, with jurisdiction over

Newby, had subject matter jurisdiction to issue an injunction to

preserve and protect its jurisdiction. As we will explain, the

district court had the authority to compel lawyers properly before

it from engaging in vexatious and needlessly harassing maneuvers

that challenged judicial efforts to maintain the cooperative

approach essential to preserving fair processes in the complex suit

in federal court.

IV
8 Women’s Medical Center of Northwest Houston v. Bell, 248

F.3d 411, 419 (5th Cir. 2001); Regions Bank, 224 F.3d at 488.

9 28 U.S.C. § 2283.

10 Dombrowski v. Pfister, 380 U.S. 479, 484 n.2 (1965);

Phillips v. Chas. Schreiner Bank, 894 F.2d 127, 132 & n.8 (5th Cir.

1990).

11 See generally Younger v. Harris, 401 U.S. 37, 44-45 (1971).

12 28 U.S.C. § 1651(a).

13 In re Diet Drugs, 282 F.3d 220, 239 (3d Cir. 2002); Winkler

v. Eli Lilly & Co., 101 F.3d 1196, 1203 (7th Cir. 1996); In re

8

We review the district court’s grant of an injunction for an

abuse of discretion, and underlying questions of law de novo.

8

Although the Anti-Injunction Act is an absolute bar to any

federal court action that has the effect of staying a pending state

court proceeding unless the action falls within a designated

exception,9 it does not preclude injunctions against a lawyer’s

filing of prospective state court actions.10 Even so, we are

constrained by the overarching principle that federal courts must

be wary of infringing on legitimate exercises of state judicial

power.11 The All Writs Act provides that federal courts may “issue

all writs necessary or appropriate in aid of their respective

jurisdictions and agreeable to the usages and principles of law.”12

The Act contains the same language as the second of the three

exceptions in the Anti-Injunction Act, and the parallel “necessary

in aid of jurisdiction” language is construed similarly in both the

All Writs Act and the Anti-Injunction Act.13
Baldwin-United Corp., 770 F.2d 328, 335 (2d Cir. 1985).

14 State of Texas v. United States, 837 F.2d 184, 186 n.4 (5th

Cir. 1988).

15 CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE § 2942,

at 63-64 (2d ed. 1995).

16 Harrelson v. United States, 613 F.2d 114, 116 (5th Cir.

1980).

9

Courts have read this language narrowly, finding a threat to

the court’s jurisdiction only where a state proceeding threatened

to dispose of property that formed the basis for federal in rem

jurisdiction or where the state proceeding threatened the

continuing superintendence by a federal court.14 Here also

principles of federalism lie behind our reluctance to adopt an

expansive reading of “necessary in aid of jurisdiction,” which

extends to injunctions against prospective state court proceedings,

even though they escape the reach of the Anti-Injunction Act.

At the same time, it is widely accepted that federal courts

possess power under the All Writs Act to issue narrowly tailored

orders enjoining repeatedly vexatious litigants from filing future

state court actions without permission from the court.15 We have

upheld an order enjoining a litigant from bringing any future

litigation on any claim arising from a particular fact situation,

where the litigant was abusing the court system by harassing his

opponents.16 That order applied to both federal and state suits, and

unlike the injunction at issue here, did not invite the plaintiff

to seek leave of the court to file suit.
17 501 U.S. 32 (1991).

18 Id. at 46.

19 Id. at 42.

20 Id. at 43; ITT Cmty. Dev. Corp. v. Barton, 569 F.2d 1351,

1360 (5th Cir. 1978).

21 Chambers, 501 U.S. at 50-51.

22 Id. at 45 (citing Roadway Express v. Piper, 447 U.S. 752,

761 (1980)).

10

Similarly, federal courts also have the inherent power to

impose sanctions against vexatious litigants. In Chambers v. Nasco,

Inc.,

17 the Supreme Court upheld the imposition of sanctions against

a litigant who had repeatedly engaged in bad-faith conduct.18 The

inherent power is limited and interpreted narrowly,19 and its reach

is limited by its ultimate source—the court’s need to orderly and

expeditiously perform its duties.20 Nonetheless, the Court held that

resorting to the inherent power to sanction a vexatious litigant

was appropriate where there was repeated bad-faith conduct that was

beyond the reach of the Federal Rules of Civil Procedure.21 Although

the sanctions in Chambers were limited to attorney’s fees and

associated expenses, the Court recognized that the outright

dismissal of a lawsuit under the inherent power is within the

court’s discretion.22

While the Chambers Court held that the inherent power reaches

beyond the confines of the court to conduct that does not interfere
23 Id. at 44.

24 See id. at 60 (Scalia, J., dissenting); id. at 67 (Kennedy,

J., dissenting).

25 See supra notes 13-14 and accompanying text.

11

with the conduct of trial,23 we recognize that this represents the

outer reaches of the inherent power.24 Given that the district court

has power under the All Writs Act to issue narrowly tailored orders

enjoining repeatedly vexatious litigants from filing future state

court actions,25 we leave the question of its ability to do so under

its inherent power for another day.

The district court in this case was attempting to rein in a

law firm that represents over 750 plaintiffs but has artfully

avoided the Securities Litigation Uniform Standards Act by filing

lawsuits in counties across the State of Texas that are not

denominated class actions and each with fewer than 50 plaintiffs.

Fleming’s efforts to avoid the Standards Act are not themselves an

abuse of the courts. Certainly that effort would alone not support

an order enjoining the filing of state court suits in the future

without the district court’s permission, as we will explain. The

problem is Fleming’s unjustified and duplicative requests for ex

parte temporary restraining orders, without notice to lawyers

already across the counsel table from Fleming and engaged in the

prosecution and defense of virtually identical claims in federal

suits.
12

V

Fleming did not attempt to provide defendants with advance

notice before seeking temporary restraining orders, and the

applications for TRO and form orders filed in state court by

Fleming indicated on their face that the TROs were sought without

notice to the defendants. Fleming ignored defendants’ attempts to

communicate with them and their requests for notice. The TROs

obtained by Fleming granted relief that had already been obtained

from the district court in the Newby litigation, and in one case

provided relief that the district court had denied after a hearing

at which all parties were present. Fleming has expressed its

intention to continue filing these state court suits and has not

agreed to notify defendants before seeking a TRO against them.

In sum, the district court did not err in concluding that

Fleming’s actions constitute a sufficiently serious and systematic

abuse of the courts to warrant the injunction. We hold that the

district court had authority under the All Writs Act to enjoin

Fleming from filing future state court actions without its

permission and did not abuse its discretion in doing so.

VI

Only this narrowly crafted injunction is before us. The

district court retains the authority to modify or dissolve the

injunction as this saga plays out. It also has a duty to consider

Fleming’s requests for leave to file suit in state court. Fleming
13

did not raise or argue before us the district court’s denial of

leave to file two cases in state court, and the district court

properly denied leave based upon Fleming’s failure to provide

copies of the lawsuits it planned to file or to give assurance that

it will cease the ex parte tactics.

But the district court cannot predicate future denials of

leave solely upon Fleming’s desire to avoid the reach of the

Securities Litigation Uniform Standards Act. We do not question the

filing of suits tailored to avoid federal jurisdiction. Nor do we

countenance any preemptive federal dominion. The parallel exercise

of state and federal judicial power is inherent in our government

of dual sovereignty. This duality, however, offers no shelter to

sharp practice from the enforcing arm of the state or federal

courts. Nor is zealous duty to a client a cover for rude refusals

to afford opposing counsel the common courtesy of notice. That the

rules contemplate specific circumstances where ex parte relief

without notice may be obtained offers no comfort to Fleming. It

bears emphasis that when Fleming made the contested state court

filings, it was already counsel in the federal proceedings, engaged

with the counsel to the same parties in federal court that it

sought ex parte relief from in state court. The district court

properly saw these moves in state court to be unjustified efforts

to harass parties to the federal cases, and viewed its response as

not burdening rights to proceed to state court.
14

The advocate is duty-bound to protect his client’s interests,

and choices of venue and timing belong to him. But the court has

the power, indeed the duty, to remind counsel that they are

professionals and order their return to the playing field. This is

no matter of rules of fine etiquette. Rather, it is the matter of

lawyers as officers of the court conducting themselves in ways that

do not impede the work of the courts—the genuine and not false

service to their clients. We do not mean to be unduly critical in

the sense of singling out the law firm now on the carpet. We are

aware that such sharp practice is increasingly common, even among

able lawyers as those before us. We have no reason to believe this

was other than an unfortunate episode that will not occur again.

In any event, the district court had the power and duty to stop it,

as she did.

AFFIRMED.