Opinion ID: 529730
Heading Depth: 2
Heading Rank: 3

Heading: the stranger exclusion

Text: 44 Finally, the federal plaintiffs suggest, somewhat tentatively and obliquely, that they are strangers to the state court litigation, and consequently, that section 2283 is not applicable. This exclusion from the Anti-Injunction Act was recognized in County of Imperial v. Munoz, 449 U.S. 54, 101 S.Ct. 289, 66 L.Ed.2d 258 (1980), and Hale v. Bimco Trading, Inc., 306 U.S. 375, 59 S.Ct. 526, 83 L.Ed. 771 (1939). The Supreme Court explained in those opinions that the Anti-Injunction Act will not apply if the federal litigants were strangers to the state court proceedings. Munoz, 449 U.S. at 59-60, 101 S.Ct. at 292-93; Hale, 306 U.S. at 377-78, 59 S.Ct. at 526-27. 45 The term stranger describes a litigant who, neither a party nor in privity with a party to the state court action, is not bound by those previous proceedings. Munoz v. County of Imperial, 667 F.2d 811, 814-15 (9th Cir.) (on remand from Supreme Court), cert. denied, 459 U.S. 825, 103 S.Ct. 58, 74 L.Ed.2d 62 (1982); Garcia v. Bauza-Salas, 862 F.2d 905, 908 (1st Cir.1988). The collateral estoppel concept of privity generally guides the decision whether a federal litigant is a stranger under the Anti-Injunction Act. See Pelfresne v. Village of Williams Bay, 865 F.2d 877, 881 (7th Cir.1989). 46 In Munoz and Bimco Trading, the injunctive type of state court relief with effects extending beyond the immediate parties was substantially different from the monetary damages sought in the state court here. If their funds are not at risk in the state court proceedings, it is dubious that the federal plaintiffs can establish the personal stake required to give them Article III standing. On the other hand, if federal court standing is based on liability for financial loss incurred in the state court suit, that same exposure is an indicia of privity. 47 Consequently, we have serious reservations that the stranger exclusion is applicable in a situation where the federal plaintiffs interest in enjoining the state damage suit depends entirely on whether they are in privity with the state defendant. Assuming, without deciding the exclusion's applicability, we conclude that Equitable is in privity with the federal plaintiffs and the Anti-Injunction Act therefore applies. 48 The federal plaintiffs here were not parties to the state court proceedings but the record establishes privity in connection with the issues relevant to the Musisko claims. The Restatement of Judgments summarizes that a litigant who is not a party to an action but who is represented by a party is bound by and entitled to the benefits of a judgment as though he were a party. A person is represented by a party who is ... [i]nvested by the person with authority to represent him in an action.... Restatement (Second) of Judgments Sec. 41(1)(b) (1982). This principle rests not only on the beneficiary-fiduciary relationship, but extends to the principal-agency relationship as well. See Temple v. Lumber Mut. Casualty Ins. Co., 250 F.2d 748, 752 (3d Cir.1958) (insurer in privity with insured); Dally v. Pennsylvania Threshermen & Farmers' Mut. Casualty Ins. Co., 374 Pa. 476, 97 A.2d 795, 796 (1953) (insurer bound by proceeding defended by insured). 49 The Equitable policy provides that the insurance company shall have the right to determine the amount of benefits, if any, payable to an employee from the Policyholder's funds and the Policyholder agrees to accept and follow such determination. In the event of legal action by an employee for Plan benefits, Equitable is contractually obliged to undertake on behalf of the Policyholder or the Employer the defense of such action and shall pay any judgment rendered therein. The policy grants Equitable the right to settle any such legal action, when it deems it expedient to do so, and directs reimbursement to Equitable for the portion of any such judgment or settlement paid from the Society's funds which represents an amount of benefits payable from the Policyholder's funds. 50 The facts of record thus establish that Equitable was entitled to act on behalf of the federal plaintiffs in the Musisko matter, and was bound to assert their interests in defending against the claims. To the extent that the claims' value do not exceed the deductible amount, the payments must ultimately be paid with the trust fund assets. Under the unambiguous terms of the policy, the federal plaintiffs would be bound by an adverse judgment against Equitable in the state court litigation; they have produced no proof nor contended otherwise. We, therefore, accept Musisko's assertion that privity exists between the federal plaintiffs and Equitable. Plaintiffs here are not strangers to the state court litigation, and are not outside the ambit of the Anti-Injunction Act.