Source: https://caselaw.findlaw.com/us-2nd-circuit/1367059.html
Timestamp: 2019-03-23 19:34:39
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Federal Deposit Insurance Corporation, Plaintiff, v. HANDLER | FindLaw
Federal Deposit Insurance Corporation, Plaintiff, v. HANDLER
MLE REALTY ASSOCIATES, as assignee of the judgment entered on behalf of the FDIC, as receiver for The First New York Bank for Business, Plaintiff-Appellee, Federal Deposit Insurance Corporation, Plaintiff, v. Emmerich HANDLER and Rita Handler, Defendants-Appellants.
No. 98-6263.
Before: FEINBERG, WALKER, and CALABRESI, Circuit Judges. Wayne M. Greenwald, Bienenfeld & Wertman, New York, NY, for Defendants-Appellants. Rod Kovel, Weinstock, Joseph, Klatsky, Nisonoff & Schwartz, LLP, Belle Harbor, NY, for Plaintiff-Appellee.
Defendants-appellants Emmerich and Rita Handler appeal from an interlocutory order of the United States District Court for the Southern District of New York (Patterson, J.), ordering the Handlers to withdraw their pending state court action against plaintiff-appellee MLE Realty Associates (“MLE”) with prejudice and enjoining them from instituting any further actions of a similar nature. We vacate the district court's order and remand for further proceedings consistent with this opinion.
This appeal stems from MLE's attempts to collect a judgment entered against the Handlers. A New York state trial court originally entered judgment against the Handlers on behalf of the First New York Bank for Business (the “Bank”). Subsequently, the State of New York declared the Bank to be in an unsound condition and appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. On November 17, 1993, the district court adopted the judgment of the state court and entered judgment against the Handlers and for the FDIC in the amount of $492,370.05. That judgment was summarily affirmed on appeal to this court. See FDIC v. Handler, 57 F.3d 1063 (2d Cir.1995). It has never been paid.
On November 13, the district court issued an order instructing the Handlers to withdraw their pending state champerty action against MLE with prejudice and enjoining them from instituting any similar state court actions. The court noted that in the course of post-judgment proceedings, MLE had presented evidence “that the Handlers have concealed property from the [FDIC] and the subsequent holder of the judgment.” The court commented further:
On appeal, the Handlers argue (1) that the district court improperly issued the injunction sua sponte, without giving them notice and an opportunity to be heard; and (2) that the injunction was barred by the Anti-Injunction Act, 28 U.S.C. § 2283 (1994).
We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1292, which gives the courts of appeals jurisdiction over “[i]nterlocutory orders of the district courts ․ granting ․ injunctions.” Id. § 1292(a)(1).
Under the All-Writs Act, 28 U.S.C. § 1651(a), district courts “may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” Id. The All-Writs Act grants district courts the power, under certain circumstances, to enjoin parties from filing further lawsuits. See, e.g., Shuffman v. Hartford Textile Corp. (In re Hartford Textile Corp.), 613 F.2d 388, 390-91 (2d Cir.1979) (per curiam) (noting that, under the All-Writs Act, the district court may, sua sponte, enjoin further filings by vexatious litigants). Even when such a sua sponte injunction is proper, however, and even when the district court's action is understandable in light of the vexatiousness of the litigation, such an injunction may not issue without notice to the party enjoined and an opportunity for that party to be heard. See id. at 390. We recently reaffirmed that “[t]he unequivocal rule in this circuit is that the district court may not impose a filing injunction on a litigant sua sponte without providing the litigant with notice and an opportunity to be heard.” Moates v. Barkley, 147 F.3d 207, 208 (2d Cir.1998) (per curiam).
B. The Anti-Injunction Act
A district court's authority under the All-Writs Act is limited by the Anti-Injunction Act, 28 U.S.C. § 2283. That Act reads:
Id. The Act is “an absolute prohibition against enjoining state court proceedings, unless the injunction falls within one of three specifically defined exceptions.” Atlantic Coast Line R.R. Co. v. Brotherhood of Locomotive Eng'rs, 398 U.S. 281, 286, 90 S.Ct. 1739, 26 L.Ed.2d 234 (1970).
The district court found that the injunction was proper under the third exception; injunctions may issue where necessary “to protect or effectuate [a federal court's] judgments.” 28 U.S.C. § 2283. This exception is also known as the relitigation exception. As the Supreme Court has explained, “[t]he relitigation exception was designed to permit a federal court to prevent state litigation of an issue that previously was presented to and decided by the federal court. It is founded in the well-recognized concepts of res judicata and collateral estoppel.” Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 147, 108 S.Ct. 1684, 100 L.Ed.2d 127 (1988). The Court went on to note that “an essential prerequisite for applying the relitigation exception is that the claims or issues which the federal injunction insulates from litigation in state proceedings actually have been decided by the federal court. Moreover, ․ this prerequisite is strict and narrow.” Id. at 148, 108 S.Ct. 1684.
In Staffer v. Bouchard Transportation Co., 878 F.2d 638 (2d Cir.1989), this Court interpreted this language in Chick Kam Choo to mean that the relitigation exception is narrower than the doctrine of res judicata, holding:
The Handlers' state court suit against MLE's putative champerty is based on the assignment of the FDIC's judgment to Israel Weinstock (a lawyer) and thence to MLE, in alleged violation of section 488 of the New York Judiciary Law, which prohibits attorneys from buying or taking assignment of any “thing in action, with the intent and for the purpose of bringing an action thereon.” N.Y. Jud. Law § 488(1) (McKinney 1983). Notably, the Handlers did not raise a champerty defense in the district court. In the course of the post-judgment proceedings in the district court, the parties did, however, dispute the question of whether MLE should be substituted as plaintiff in the collection action. This issue was briefed and argued. And it was resolved by a stipulation mentioning the assignment and providing:
it Is Hereby Stipulated And Agreed: that MLE Realty Associates be substituted for and in place of the federal Deposit Insurance Corporation as plaintiff and judgment creditor in this action․
We do not decide whether this stipulation itself collaterally estops the Handlers from litigating their champerty claim in state court. Nor do we decide whether, apart from collateral estoppel, the stipulation sufficiently decides the matter so that it permits an injunction under the relitigation exception as defined in Staffer. We note, however, that were the district court to hold a hearing on the bona fides of the assignment, which, despite the stipulation, are now being contested by the Handlers, and if both parties had a full and fair opportunity to litigate the champerty defense in the context of that hearing, the district court's judgment as to the validity of the assignment would be binding. That is, it would collaterally estop either party from revisiting that issue in a state court action, see United States v. Hussein, 178 F.3d 125, 129 (2d Cir.1999) (setting out the requirements for collateral estoppel), and it would have concomitant consequences under the relitigation exception to the Anti-Injunction Act.