IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 92-1808

_______________

ROYAL INSURANCE COMPANY OF AMERICA

and

ROYAL LLOYDS OF TEXAS,

Plaintiffs-Appellees,

VERSUS

QUINN-L CAPITAL CORPORATION, et al.,

Defendants-Appellants.

_________________________

Appeal from the United States District Court

for the Northern District of Texas

_________________________

(September 27, 1993)

Before WISDOM, DAVIS, and SMITH, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

The facts of this case are set forth in Royal Ins. Co. of Am.

v. Quinn-L Capital Corp., 960 F.2d 1286 (5th Cir. 1992)

("Royal I"). Following remand in Royal I, the district court

entered final judgment against defendant Quinn-L Capital Corp.

("Quinn-L"), granting summary judgment in favor of plaintiffs

Royal Insurance Company of America and Royal Lloyds of Texas

(collectively, "Royal") and entering a permanent injunction that

barred Quinn-L and the defendant investors from relitigating any

of the claims or issues decided in either this declaratory
2

judgment action or the first declaratory judgment action.

I.

Quinn-L argues that the federal courts do not have

jurisdiction for three reasons. First, Quinn-L contends that the

district court did not have ancillary jurisdiction over the

affirmative defenses of waiver, estoppel, and negligence. Second,

Quinn-L contends that no diversity jurisdiction exists. Third,

Quinn-L asserts that the district court had no jurisdiction to

grant summary judgment while an appeal was pending before this

court.

A.

In Royal I, we recognized that the district court had

ancillary jurisdiction to issue an anti-suit injunction to protect

or effectuate its prior judgments. 960 F.2d at 1292. Quinn-L

argues that the district court lacked jurisdiction to grant

summary judgment on the waiver, estoppel, and negligence claims

because those claims are outside the scope of the first

declaratory judgment action. Royal contends that we held in the

first action that the district court had ancillary jurisdiction

over the entire controversy and that this holding is law of the

case.

Before addressing the merits of the jurisdictional argument,

we must decide whether law of the case principles apply to appeals

of preliminary injunctions. We decide that issue here because
3

Royal relies upon the law of the case doctrine in addressing

numerous points of error raised by Quinn-L. Quinn-L argues that

the doctrine has no application in preliminary injunction

proceedings.

The law of the case doctrine was developed to "maintain

consistency and avoid [needless] reconsideration of matters once

decided during the course of a single continuing lawsuit." 18

CHARLES A. WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 4478, at 788

(1981). "These rules do not involve preclusion by final judgment;

instead, they regulate judicial affairs before final judgment."

Id. Under this doctrine, we will follow a prior decision of this

court without reexamination in a subsequent appeal unless "(i) the

evidence on a subsequent trial was substantially different,

(ii) controlling authority has since made a contrary decision of

the law applicable to such issues, or (iii) the decision was

clearly erroneous and would work manifest injustice." North Miss.

Communications v. Jones, 951 F.2d 652, 656 (5th Cir.), cert.

denied, 113 S. Ct. 184 (1992). The doctrine extends to those

issues "decided by necessary implication as well as those decided

explicitly." Dickinson v. Auto Ctr. Mfg. Co., 733 F.2d 1092, 1098

(5th Cir. 1983) (citation, quotation marks, and emphasis omitted).

We disagree with Quinn-L's suggestion that law of the case

principles have no application to an interlocutory appeal of the

granting of a preliminary injunction. As in any other

interlocutory appeal, our decision constitutes law of the case.

1B JAMES W. MOORE ET AL., MOORE'S FEDERAL PRACTICE ¶ 0.404[4.))7], at II-
4

37 (2d ed. 1993). Obviously, the doctrine extends only to matters

actually decided. Id. at II-37 to II-38. As to decisions of law,

the interlocutory appeal will establish law of the case.

As to factual determinations, however, an interlocutory

appeal of a preliminary injunction often will not establish law of

the case. To obtain a preliminary injunction, the movant need

only show a substantial likelihood of success on the merits. We

review a district court's findings of fact supporting the grant of

a preliminary injunction for clear error. Royal I, 960 F.2d at

1297. Because the standard of review for factual determinations

on direct appeal is higher than the standard applied during an

interlocutory appeal of a preliminary injunction, the

interlocutory appeal normally will not establish law of the case

on factual matters.

Contrary to Quinn-L's suggestion, however, the reason this

result does not obtain is not because law of the case principles

are inapplicable. Rather, the lesser standard of review applied

during an appeal of a preliminary injunction necessarily means

that the factual issues differ from those on direct appeal. Such

a difference often will result only from the higher standard of

review applied during the direct appeal.

With this background in mind, we now address Royal's

contentions that we previously held that the district court had

ancillary jurisdiction over the entire controversy and that this

alleged holding is law of the case. In Royal I, we held that the

district court has "ancillary jurisdiction over the present
 

1 It is uncertain whether it was proper for us to pretermit the

jurisdictional issue in Royal I while reversing the preliminary injunction as

to the waiver estoppel and negligence claims. Because of our holding today on

diversity jurisdiction, we need not address this.

 

2 What was referred to formerly as "ancillary jurisdiction" is now

included within the category of "supplemental jurisdiction." See Pub. L. No.

101-650, 104 Stat. 5113 (codified at 28 U.S.C.A. § 1367 (West Supp. 1993)). 

The amendment applies only to actions filed on or after December 1, 1990, so

it is inapplicable to the instant case.

5

controversy." 960 F.2d at 1292. Read in context, this means that

we held only that the district court had ancillary jurisdiction to

issue an anti-suit injunction under the "protect or effectuate its

judgments" exception to the Anti-Injunction Act (the "Act"),

28 U.S.C. § 2283 (1988). 960 F.2d at 1299. We also held that the

district court should have limited the scope of that injunction to

exclude the claims that arose after the first declaratory judgment

action. Id.

In other words, we held that the district court had ancillary

jurisdiction to issue an injunction but that the Act bars a

portion of the injunction. We did not have to decide, and did not

decide, the jurisdictional issue as to the claims of waiver,

estoppel, and negligence, as Quinn-L obtained a reversal on the

merits as to those claims.1 Here, the jurisdictional issue is

squarely presented, and we must decide it.

We conclude that the district court did not have ancillary

jurisdiction to address the waiver, estoppel, and negligence

claims. As noted above, the district court has ancillary

jurisdiction2 to protect or effectuate its judgments. This

jurisdiction extends no further than necessary to achieve that

purpose. But "[w]hile . . . the . . . Act is not a grant of
6

jurisdiction, no independent basis of jurisdiction is required for

a federal court to entertain an application to enjoin relitigation

in state court. The jurisdiction that the federal court had when

it entered its original judgment is enough to support its issuance

of an injunction." Mooney Aircraft Corp. v. Foster (In re Mooney

Aircraft), 730 F.2d 367, 374 (5th Cir. 1984) (citing 17 WRIGHT ET

AL., supra, § 4276, at 345 (1978)).

In Mooney, we noted that where a bankruptcy court seeks to

enjoin claims that were not encompassed in a prior judgment, no

ancillary jurisdiction exists. 730 F.2d at 374. Under Mooney,

the district court must have an independent basis for jurisdiction

over Quinn-L's waiver, estoppel, and negligence claims, as those

claims were not raised in the prior declaratory judgment

proceeding and are not barred by that proceeding under res

judicata principles.

Thus, we agree with Quinn-L that ancillary jurisdiction

extends no further than the scope of the first judgment. The

basis for allowing the federal courts to exercise ancillary

jurisdiction in issuing anti-suit injunctions is to allow them to

protect their prior judgments; where new claims are involved, the

policy basis for ancillary jurisdiction disappears. We therefore

conclude that ancillary jurisdiction to issue anti-suit

injunctions normally will not allow a federal court to exercise

jurisdiction over new claims not addressed in the judgment the
 

3 Of course, if the first action bars the new claims because of res

judicata principles, ancillary jurisdiction exists as to those claims.

7

court is seeking to protect.3
8

B.

Next, we must decide whether diversity jurisdiction exists in

this case. Royal is an unincorporated association that sells

insurance under a so-called "Lloyd's plan." For purposes of

ascertaining whether the federal courts have diversity

jurisdiction, an unincorporated association is considered to have

the citizenship of its members. Carden v. Arkoma Assocs., 494

U.S. 185, 195-96 (1990). This case turns on the question of who

constitutes a "member" of a Lloyd's plan insurance association.

None of the underwriters is a citizen of Texas, while at least one

attorney in fact is a resident.

A Lloyd's plan insurer consists of a group of underwriters

who join together to issue insurance through an attorney in fact

or other representative. TEX. INS. CODE ANN. §§ 18.01)02 (West

1981). Ordinarily, such insurers provide insurance for risks for

which American insurance companies otherwise would not issue

policies. ROBERT E. KEETON & ALAN I. WIDISS, INSURANCE LAW § 2.1(a)(1)

(West 1988) (practitioner's ed.). Under the Lloyd's plan, the

insured typically obtains insurance from one or more members of

the Lloyd's group; each member accepts responsibility for a

portion of the risk, and liability among the members is several

but not joint. Jones v. Hollywood Style Shop, 62 S.W.2d 167, 167

(Tex. Civ. App. )) San Antonio 1933, no writ); KEETON & WIDISS,

supra, § 2.1(a)(1). In other words, the individual member is

responsible only for the portion of the risk that it chooses to

insure.
9

The Lloyd's group underwriters appoint an attorney in fact to

act for them under a power of attorney. TEX. INS. CODE ANN.

§ 18.01-1 (West 1981). The attorney in fact has the power to

issue policies of insurance, "authorized by and acting for such

underwriters . . . ." Id. The attorney in fact is "in effect the

chief executive and managing agent of the enterprise. . . ."

Grace v. Rahlfs, 508 S.W.2d 158, 161 (Tex. Civ. App. )) El Paso

1974, writ ref. n.r.e.).

Quinn-L contends that the attorney in fact is akin to a

general partner of a general partnership and that the underwriters

are akin to limited partners. We do not find the analogy relevant

to our inquiry, as the degree of control exercised by an

individual over an entity is irrelevant to the question of whether

he is a member of the entity. Carden, 494 U.S. at 192.

Analogies to other types of state-created entities likewise

are not especially helpful. The only relevant inquiry is the

identification of the members of this particular entity.

Normally, we should examine an entity's definition of "member."

Here, such an inquiry is unnecessary, as the relationship of the

attorney in fact to a Lloyd's group is described by statute.

We agree with Royal that the attorney in fact is not a member

of a Lloyd's group insurance association; only underwriters are

members of the organization. As noted above, the attorney in fact

acts as an agent for the Lloyd's group. Grace, 508 S.W.2d at 161.

Under Texas law, the attorney in fact must be authorized by the

underwriters to execute insurance polices and acts for those
 

4 Our conclusion is not altered by the fact that Texas law requires that

the Lloyd's group appoint a resident of Texas as an attorney in fact if it

wishes to issue insurance policies in Texas. See TEX. INS. CODE ANN. § 18.02

(West 1981). Texas could have required one or more underwriters to be a

resident of the state but chose only to require the attorney in fact to be a

resident. Texas's election to require an association to employ an agent

within the state to conduct the association's business does not make the agent

any more or less an agent.

10

underwriters by so doing. TEX. INS. CODE ANN. § 18.01-1 (West

1981). Moreover, the attorney acts under powers of attorney from

the underwriters, id., who also dictate, in the articles of

agreement, where the principal office of all attorneys will be,

id. § 18.02. Thus, for purposes of determining whether diversity

jurisdiction exists, we conclude that the members of a Lloyd's

group are the underwriters alone.4

Because attorneys in fact are not members of Lloyd's plan

insurance associations, we look only to the citizenship of the

underwriters to determine whether diversity jurisdiction exists.

Here, because none of the underwriters is a Texas citizen,

complete diversity exists.

C.

Finally, we must consider Quinn-L's contention that the

district court lacked jurisdiction to grant summary judgment while

the interlocutory appeal in Royal I was pending. A district court

loses jurisdiction over all matters validly before a court of

appeals. Dayton Indep. Sch. Dist. v. U.S. Mineral Prods. Co.,

906 F.2d 1059, 1063 (5th Cir. 1990). The district court does not

have the power to "alter the status of the case as it rests before

the Court of Appeals." Id. Quinn-L argues that the summary
11

judgment determined a matter within our jurisdiction.

This case does not fall within the scope of Dayton, a case in

which the district court made a ruling that mooted an

interlocutory appeal. In other words, the district court's action

interfered with our jurisdiction to decide the issues before us.

Here, the district court's continuing jurisdiction during the

pending interlocutory appeal did not interfere with our ability to

decide the issues presented in Royal I. Accordingly, the district

court had jurisdiction to enter summary judgment.

II.

Quinn-L argues that the declaratory judgment and permanent

injunction must be vacated because they violate the Act, which

provides as follows: "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 jurisdiction, or to protect or effectuate its judgments." 

28 U.S.C. § 2283 (1988). The Act is "an absolute prohibition

against enjoining state court proceedings unless the injunction

falls within one of [the] three specifically defined exceptions."

Atlantic Coast Line R.R. v. Brotherhood of Locomotive Eng'rs, 398

U.S. 281, 286 (1970). The Court also has warned that "the

exceptions should not be enlarged by loose statutory

construction." Id. at 287.

Here, the district court rendered a declaratory judgment on

the waiver, negligence, and estoppel claims and enjoined
12

defendants from proceeding therewith in state court. On its face,

then, this judgment falls squarely within the "protect or

effectuate its judgments" exception to the Act. We have stated,

however, that "[i]f an injunction would be barred by § 2283, this

should also bar the issuance of a declaratory judgment that would

have the same effect as an injunction." Texas Employers' Ins.

Ass'n v. Jackson, 862 F.2d 491, 506 (5th Cir. 1988) (en banc)

(citation and quotation marks omitted), cert. denied, 490 U.S.

1035 (1989). Quinn-L argues that because we held in Royal I that

the Act barred the preliminary injunction as to the waiver,

estoppel, and negligence claims, Jackson necessarily bars the

declaratory judgment and permanent injunction on those claims.

In Jackson, the plaintiff sought relief under the Longshore

and Harbor Workers' Compensation Act (LHWCA) using the normal

administrative process. Before that process was complete, he sued

his employer's LHWCA insurer in state court, alleging, inter alia,

deceptive trade practices, fraud, bad faith, and intentional

infliction of emotional distress. The insurer filed a plea in bar

asserting LHWCA preemption. The state court denied the petition,

and extensive discovery was conducted. Later, the insurer filed a

declaratory judgment action in federal court seeking an injunction

against prosecution of the state court suit.

The district court granted the injunction on the basis of the

"protect or effectuate its judgments" exception to the Act. The

panel reversed and barred the grant of injunctive relief but

allowed the declaratory judgment to stand. Texas Employers' Ins.
13

Ass'n v. Jackson, 820 F.2d 1406 (5th Cir. 1987). The en banc

court held that the declaratory judgment was invalid as well,

because it was "plain that the only purpose and effect of TEIA's

federal suit was to defeat Jackson's state suit against it and to,

in effect, overrule the state trial court's denial of TEIA's plea

in bar." 862 F.2d at 491. Expressing our concern over the

apparent attempt to interfere with a state proceeding, we observed

that "[t]o allow declaratory relief in these circumstances would

be to transform section 2283 from a pillar of federalism

reflecting the fundamental constitutional independence of the

states and their courts, to an anachronistic, minor technicality,

easily avoided by mere nomenclature or procedural sleight of

hand." Id.

As we noted above, we stated in Jackson that if "an

injunction would be barred by § 2283, this should also bar the

issuance of a declaratory judgment that would have the same effect

as an injunction." 862 F.2d at 506. Our inquiry here then

depends upon the resolution of two issues. First, we must decide

whether the Act would prevent the federal courts from issuing an

injunction under the facts of this case. If it would not, then

Jackson does not apply. Second, if an injunction would be barred,

we must decide whether Jackson is distinguishable.

To decide whether the Act would bar an injunction on the

waiver, estoppel, and negligence claims, we must address a

question that is res nova in this circuit. Quinn-L injected these

claims into the federal proceedings before it had filed any state
14

court actions on these claims. In other words, Royal filed a

declaratory judgment action seeking an anti-suit injunction prior

to the commencement of any state proceedings. Before a state

court suit is filed, the Act has no application, and a federal

court may enjoin parties from ever filing suit in state court.

Jackson, 862 F.2d at 507 (citing 17 WRIGHT ET AL., supra, § 4222, at

506-07 (1988)).

A circuit split exists on the question of whether the Act has

any application where the injunction is sought before a state suit

has been filed but is not issued until after a state suit was

filed. Three circuits have adopted the rule that the Act does not

apply where the federal suit is filed first. See Barancik v.

Investors Funding Corp., 489 F.2d 933, 937 (7th Cir. 1973);

National City Lines v. LLC Corp., 687 F.2d 1122, 1127 (8th Cir.

1982); Hyde Park Partners, L.P. v. Connolly, 839 F.2d 837, 842 n.6

(1st Cir. 1988). Two circuits, on the other hand, have held that

the Act should be applied to the case as it stands, regardless of

the order in which the actions were filed. Roth v. Bank of the

Commonwealth, 583 F.2d 527, 533 (6th Cir. 1978), cert. dismissed,

442 U.S. 925 (1979); see also Standard Microsystems Corp. v. Texas

Instruments, 916 F.2d 58, 61-62 (2d Cir. 1990) (disapproving of

the reasoning in Barancik)).

The leading case holding that the Act does not apply when the

federal suit is filed first is Barancik, in which the court

reasoned that the Act does not apply because the applicability of

the Act should be determined at the time the federal court's
 

5 Rule 65(b) reads in relevant part as follows:

A temporary restraining order may be granted without written

or oral notice to the adverse party or that party's attorney only

if (1) it clearly appears from specific facts shown by affidavit

or by the verified complaint that immediate and irreparable

injury, loss, or damage will result to the applicant before the

adverse party or that party's attorney can be heard in opposition,

and (2) the applicant's attorney certifies to the court in writing

the efforts, if any, which have been made to give the notice and

the reasons supporting the claim that notice should not be

required. Every temporary restraining order granted without

notice shall be indorsed with the date and hour of issuance; shall

be filed forthwith in the clerk's office and entered of record;

shall define the injury and state why it is irreparable and why

the order was granted without notice . . . .

15

injunctive powers are invoked. 489 F.2d at 937. The court was

concerned that otherwise a litigant could defeat a well-founded

motion for an anti-suit injunction by filing a suit in state

court. Id. The thrust of this reasoning is weakened, however, by

the fact that a federal district court often issues a temporary

restraining order (TRO) against filing a state court suit while it

is considering a motion for a preliminary injunction seeking such

relief. Such an action goes a long way to avoid the danger raised

by the Barancik court.

The Barancik court felt that using TRO's would encourage the

liberal granting of the kind of protective orders that the statute

was designed to prevent. We also disagree with this analysis,

which assumes the district court will decide the issue wrongly and

that granting a TRO will prejudice the decision on the merits.

Such logic proves too much, as no TRO would be justified under

this reasoning. Although the issuance of a TRO should not be

automatic and is subject to, inter alia, the requirements of FED.

R. CIV. P. 65(b),5 the TRO is a useful tool where appropriate.

The Barancik court, moreover, held that the Act does not
16

apply where the federal suit is filed first. In this class of

cases, then, Barancik eviscerates the statutory bar against antisuit injunctions. The Barancik court also expressed concern that

the court might have to take action without notice to the opposing

party. We find this reasoning to be questionable as well, as it

assumes that district courts will ignore the requirements of rule

65(b).

We subscribe to what we think is the better view )) that the

Act applies regardless of when the federal and state suits were

filed. The plain language of the statute contains no exception

for a situation in which the federal suit was filed first. As the

Roth court notes, 583 F.2d at 533, the Supreme Court has held that

the statute provides an absolute prohibition on injunctions unless

one of the three exceptions applies.

The Court repeatedly has emphasized that those exceptions are

exclusive and that federal courts may not craft new ones. Any

doubts should be resolved in favor of denying the injunction.

Roth, 583 F.2d at 533 (citing Atlantic Coast Line R.R., 398 U.S.

at 286-87). Given the Court's consistently narrow interpretation

of the Act, the presumption in favor of denying an injunction, and

the absence of language in the statute suggesting that its

application depends upon the time of filing of the state suit, we

think Roth provides the better analysis. We conclude, therefore,

that the Act applies whenever a state suit is pending, regardless

of when it was filed.

Because the Act applies even when the federal suit is filed
 

6 We reject Quinn-L's suggestion that Royal is judicially estopped from

claiming that Jackson does not apply to the facts of this case. Royal merely

offered a legal opinion regarding Jackson's application. As Royal properly

argues, a statement of opinion on the law does not create a judicial estoppel. 

Sturm v. Boker, 150 U.S. 312, 336 (1893).

 

7 See ERWIN CHERMERINSKY, FEDERAL JURISDICTION § 12.1, at 593 (1989) ("The

term abstention refers to judicially created rules whereby federal courts may

not decide some matters before them even though all jurisdictional and

justiciability requirements are met.").

 

8 See also Garrett v. Hoffman, 441 F. Supp. 1151, 1155-56 (E.D. Pa.

1977) (declaratory judgment should be barred only where judgment would lead to

unseemly interference with state court litigation).

17

first, we now must address Quinn-L's contention that our holding

in Jackson mandates reversal here. Royal argues that because the

federal suit was filed first in this case, Jackson is

distinguishable and hence is not controlling here.6 To resolve

this question, we return to policy concerns underlying our

decision in Jackson.

At oral argument, the parties characterized Jackson as a new

type of abstention. We agree with this characterization, as no

language in the Act or the Declaratory Judgment Act, 28 U.S.C.

§§ 2201, 2202 (1982), specifically commands the result in

Jackson.

7 As we recently recognized, our decision in Jackson was

based upon principles of federalism and comity. Travelers Ins.

Co. v. Louisiana Farm Bureau Fed'n, 996 F.2d 774, 776 (5th Cir.

1993).8

In Jackson, the federal suit offended principles of comity

and federalism because the plaintiff sought an overruling of a

state court decision on LHWCA preemption. 862 F.2d at 505. Here,

Royal has not attempted to interfere with the state courts.

Instead, it sued to enforce a prior federal judgment, and Quinn-L
 

9 A race to judgment often is condoned. See Moses H. Cone Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 15 (1983) (approving of parallel

proceedings in all but exceptional circumstances); PPG Indus. v. Continental

Oil Co., 478 F.2d 674, 677 (5th Cir. 1973) (citing Kline v. Burke Constr. Co.,

260 U.S. 206, 230 (1922)).

18

injected new state claims into the federal action. Royal sought

relief in federal court nearly six months before the state actions

against Royal were filed. Moreover, significant proceedings took

place during that time, including the filing of Royal's original

and amended complaints, the filing of Quinn-L's answer, and the

district court's consideration and denial of two motions for

dismissal based on the lack of jurisdiction. The only

interference results from the potential for a race to judgment.9

Where the federal case is filed substantially prior to the

state case, and significant proceedings have taken place in the

federal case, we perceive little, if any, threat to our

traditions of comity and federalism. See Moses H. Cone Hosp., 460

U.S. at 21-22 (fact that substantial proceedings have occurred is

a relevant factor to consider in deciding whether to abstain). In

fact, by filing a state suit after a federal action has been

filed, the state plaintiff can be viewed as attempting to use the

state courts to interfere with the jurisdiction of the federal

courts. We agree with Royal that if we were to hold that Jackson

applied in this scenario, litigants could use Jackson as a sword,

rather than a shield, defeating federal jurisdiction merely by

filing a state court action. Neither Jackson nor the concerns

underlying it mandate such a result.

Citing Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 238
 

10 Younger v. Harris, 401 U.S. 37 (1971).

19

(1984), Quinn-L argues that abstention doctrines apply regardless

of when the state suit is filed. See also Hicks v. Miranda, 422

U.S. 332, 349 (1975). We find this contention flawed for two

reasons. First, Quinn-L mischaracterizes Midkiff. There, the

Court noted that if substantial proceedings have occurred in

federal court, that court need not abstain. 467 U.S. at 238. In

other words, in some cases the date on which the state court suit

was filed can make a difference in the application of the

abstention doctrine. Where substantial proceedings have begun,

the federal court is allowed to proceed to prevent the state from

employing abstention as a means to delay litigation.

Second, we find other types of abstention distinguishable.

For example, in the case of Younger10 abstention, the Court was

concerned with federal court interference with a state's ability

to function. By blocking proceedings involving state governments,

federal courts could interfere unduly with the state's ability to

govern. These federalism concerns are implicated no matter when

the federal and state suits are filed: A state's ability to

conduct proceedings is compromised if the officials conducting

those proceedings are involved in discovery in federal court.

In Jackson, on the other hand, the filing of the federal suit

demonstrated an attempt to overrule a decision by a state trial

court. Federalism and comity concerns arose only because a

litigant attempted to use the federal courts to interfere with

ongoing state court proceedings. Thus, while the time of filing
 

11 The investors also argue that we should not give effect to the

federal district court's declaratory judgment under the circumstances of this

case, even though the federal court's judgment was rendered first. This is

because, the investors argue, the federal court injunction prevented the state

court from reaching judgment first. 

The district court rendered its summary judgment on December 20, 1990,

about 31⁄2 months after the investors filed their state court actions on

September 4, 1990. The state court set a tentative trial date for December 10

but, given the complexity of this action, we find it extremely unlikely that

the state court could have tried this case and rendered judgment before

December 20. We are persuaded, therefore, that the state court would not have

entered judgment before the December 20 judgment of the federal district

court, even if the federal court's October 30, 1990, injunction had not

issued. Accordingly, we need not decide, in this case, whether the

possibility that the state trial and judgment would have occurred first could

be relevant under other circumstances.

20

of the federal and state suits is irrelevant to the application of

the Act, it can be an important consideration in determining

whether to abstain under Jackson.

We conclude, however, that federal courts need not abstain

from declaratory judgment actions under Jackson where the federal

suit is filed substantially prior to any state suits, significant

proceedings have taken place in the federal suit, and the federal

suit has neither the purpose nor the effect of overturning a

previous state court ruling. We recently characterized the rule

in Jackson as applying only where "a declaratory defendant has

previously filed a cause of action in state court against the

declaratory plaintiff." Travelers, 996 F.2d at 776 (emphasis

added). Even where the state court suit is filed first, a class

of exceptions to the Jackson rule exists. Id. at 776-79. Our

decision today, declining to extend the rule to a case in which

the federal suit has been the subject of significant proceedings

before the state suit is even filed, comports with the policy

concerns that prompted our decision in Jackson.

11
21

III.

Quinn-L next contends that Royal was collaterally estopped

from pursuing the second declaratory judgment action because it

originally sought to reopen the first declaratory judgment action

by filing a motion on January 3, 1990. In the February 28, 1990,

order denying the request to reopen the first action, the district

court stated the following: "Because this case has been closed

and the issues may be litigated in the current state court

litigation, the Court DENIES the Motion." Quinn-L argues that

this order is determinative with respect to the forum in which the

coverage issues are to be decided.

Quinn-L cites New Orleans Pub. Serv. Co. v. Majoue, 802 F.2d

166 (5th Cir. 1986), for that proposition. In Majoue, the

defendant removed a state court suit, but the district court

remanded it. The defendant later filed a federal declaratory

action directed to the state claims. We stated that the original

order remanding the case was "res judicata as to the forum." Id.

at 168. 

We find Majoue distinguishable. A decision to remand to

state court may not be appealed, and the district court may not

later change its mind. Id. at 167. In Majoue, we relied upon the

language of 28 U.S.C. § 1447(d) (1988), which states that a remand

order is not reviewable on appeal or otherwise. By filing a

declaratory judgment action, the party was attempting to attack

the district court's remand order collaterally, an action that is

prohibited by statute.
 

12 We reject Quinn-L's contention that it did not have a full and fair

opportunity to litigate these issues. See Allen v. McCurry, 449 U.S. 90, 95

(1980). Quinn-L had more than adequate representation and ample opportunity

to litigate the coverage question.

22

Here, on the other hand, the declaratory judgment is not an

attempt to attack the prior order collaterally, nor does any

statute prohibit the action. Moreover, as Royal argues, Majoue

involved an attempt to evade a final judgment. Here there is no

final judgment that could have any res judicata effect. We

reason, accordingly, that the February 28, 1990, order does not

collaterally estop Royal from pursuing this matter.

IV.

We next address Quinn-L's contention that the declaratory

judgment and injunction must be vacated because the investors were

not parties to the first declaratory judgment and because Royal I

is not preclusive on the issue of coverage for negligently caused

mental anguish and bodily injury. Royal argues that our decision

in Royal I is law of the case as to both issues. Quinn-L

disagrees and also argues that our decision was clearly

erroneous.12

First, Quinn-L claims that the investors are not bound by the

first declaratory judgment because they were not in privity with

Quinn-L. We disagree with Royal's contention that Royal I

establishes as law of the case that the investors were in privity

with Quinn-L. As we noted in Royal I, the issue of privity is a

question of fact for the trial court. 960 F.2d at 1297. Because
23

the appeal was interlocutory, we reviewed that finding only for

clear error. Id. Here, on the other hand, we review the district

court's findings de novo, because that court has rendered summary

judgment. As we discussed above, law of the case may not be

established on issues of fact where a later appeal involves a more

demanding standard of review.

Reviewing the district court's decision de novo, we affirm.

There is no material issue of fact as to privity, and the district

court properly held that Quinn-L is the investors' virtual

representative.

Second, Quinn-L contends that our Royal I decision was

clearly erroneous on the question of the scope of the first

declaratory judgment. Here, we agree with Royal that our prior

holding is law of the case, and we will not set it aside unless it

is "clearly erroneous and would work manifest injustice." North

Miss. Communications v. Jones, 951 F.2d 652, 656 (5th Cir.), cert.

denied, 113 S. Ct. 184 (1992). The res judicata effect of a prior

judgment is an issue of law that depends upon an interpretation of

the court's opinion. See Chick Kam Choo v. Exxon Corp., 486 U.S.

140, 148 (1988). Our decision in Royal I establishes a finding of

law on the scope of the first declaratory judgment. In this

situation, an interlocutory appeal establishes law of the case.

Nor do we perceive a reason to revisit Royal I. Quinn-L

argues that in Royal I we ignored the requirement that an issue

must be actually litigated and decided for issue preclusion to

apply. See Jackson, 862 F.2d at 500. Quinn-L contends that the
 

13 See also Royal I, 960 F.2d at 1295 nn. 10, 11 (discussing footnote 3

of partial summary judgment opinion, which acknowledged mental anguish as

(continued...)

24

question of whether an accident had occurred was not litigated.

The term "occurrence" is defined in the policies as "an

accident . . . which results in bodily injury or property

damage . . . ." Quinn-L contends that a finding of no

"occurrence" by the district court could mean either (1) that the

pleading does not allege an "accident" or (2) that the accident

alleged in the pleading is not alleged to have caused either

"property damage" or "bodily injury." We agree with Quinn-L's

characterization of a finding of "no occurrence": That finding

could have either meaning.

Quinn-L goes on to contend that we assumed in Royal I that

the first declaratory judgment determined that there had been no

accident. Quinn-L argues that this issue was never litigated in

the first declaratory judgment action. We disagree.

The district court made separate findings in the first

declaratory judgment action, to the effect that the pleadings do

not allege an "occurrence," "property damage," or "personal

injury" as defined by the policies. If the finding of no

occurrence does not constitute a finding that no accident

occurred, there would have been no need to enter a separate

finding that no property damage or personal injury had occurred.

The only reasonable reading of the first declaratory judgment

opinion is that the court decided both that there was no accident

and that no property damage or personal injury had occurred.13
 

13(...continued)

personal injury but still concluded that such injury was not caused by an

"occurrence").

25

Moreover, this allegation actually was litigated. In its

motion for summary judgment, Royal requested that the court make

separate findings that no "occurrence" had been alleged and,

additionally, that no "personal injury" or "property damage" had

been alleged. Again, if Royal was seeking to litigate only the

absence of personal injury or property damage, it would not have

needed to ask for both findings.

In addition, Quinn-L's counterclaim placed the issue of

whether an "occurrence" was alleged before the district court.

The district court obviously felt that the issue was before it, as

it concluded that despite the allegation of mental anguish (an

injury Royal conceded would be covered), no "occurrence" had been

alleged. Finally, Quinn-L contends that we erred in Royal I

by ignoring the "actually decided" requirement for collateral

estoppel. Quinn-L claims that the issue of coverage for mental

anguish was not "actually decided" by the court in the first

declaratory judgment action. We disagree. As we explained in

Royal I, the district court expressly indicated that any mental

anguish was not caused by an occurrence within the meaning of the

policy. 960 F.2d at 1295 & nn. 10, 11. The court did actually

decide the issue.
26

V.

Essentially for the reasons given by the district court, we

agree that no material issue of fact exists as to the claims of

waiver, estoppel, and negligence, and we affirm the district

court's grant of summary judgment on those claims. We find

Quinn-L's claim that the district court should have recused itself

to be completely without merit and therefore affirm on that issue.

AFFIRMED.