Court Opinion

ID: 16662
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:56:31+00
Date Added: 2024-06-11T15:04:40.422893
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                        FOR THE FIFTH CIRCUIT

                       Nos. 98-30516 & 98-30518
                           Summary Calendar

IN RE:   JOSEPH P CONTE, TOYOTA, INC.

                                          Debtor

JOSEPH P. CONTE, JR.

                                          Appellant

                                versus

DORIS L. CONTE and SUSAN C CONTE

                                          Appellees

           Appeals from the United States District Court
               for the Eastern District of Louisiana
                    (97-CV-2938-J & 97-CV-3910)

                          December 21, 1998

Before HIGGINBOTHAM, JONES, AND DENNIS, Circuit Judges.

PER CURIAM:*

     Joseph P. Conte, Jr., appeals both a permanent injunction and

a grant of summary judgment against him. Underlying both judgments

are preclusion issues, and we consolidate them for review. For the

reasons below, we affirm.

                                   I

     *
      Pursuant to 5th Cir. R.47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5th Cir. 47.5.4.
     The         cases     before    us    are   shrapnel      from    a    contentious

bankruptcy.           In   the   bankruptcy,       the   directors     of    the    debtor

corporation disagreed about whether to settle a suit in which the

debtor was plaintiff. The bankruptcy court approved the settlement

over the objections of Joseph P. Conte, Jr., and in its findings of

fact concluded that Mr. Conte owned 25% of the debtor, with the

Joseph P. Conte Family Trust owning another 37.5% and Doris L.

Conte       also    owning    37.5%.       These    findings    were       necessary     to

determine          whether    the    corporation         properly     agreed       to   the

settlement, which Doris Conte and Susan Conte approved on behalf of

the trust.          Conte appealed, but the district court dismissed the

appeal      as     moot    because   the    plan    of    reorganization       had      been

implemented, and we affirmed.               See In re Joe Conte Toyota, Inc.,

1996 WL 190103 (E.D. La.), aff’d, 105 F.3d 654 (5th Cir. 1996).

     Joseph Conte subsequently filed three separate lawsuits.                            The

first was an adversary proceeding in the bankruptcy court to

determine the extent of his shareholder interest in the debtor.

The bankruptcy court dismissed the action on preclusion grounds,

and Conte filed but dismissed an appeal.                    The second was a legal

malpractice action against two attorneys who he alleged gave him

negligent legal advice that initially led to the appointment of

Doris and Susan Conte as directors.                 The third was a quo warranto

suit1 seeking to require Doris and Susan Conte to show their

        1
      Under Louisiana law, a writ of quo warranto “is limited to
determining by what authority a person is holding office in a
corporation.” Morris v. Thomason, 672 So. 2d 433, 434 (La. App.),
writ denied, 679 So. 2d 105 (La. 1996).

                                             2
authority to act as directors of Conte Toyota.                       Both of these

actions    were    removed        to   federal    court   and     referred   to    the

bankruptcy    court.        Finding      the     claims   barred    by    both    claim

preclusion and issue preclusion, the bankruptcy court granted

summary judgment against Joseph Conte on both claims, and the

district court affirmed.

     Meanwhile Doris and Susan Conte filed a suit for permanent

injunction.    The bankruptcy court granted judgment in their favor,

prohibiting Joseph Conte from filing any further litigation against

Doris and Susan Conte arising from the facts and issues previously

determined in the bankruptcy court. The court found that enjoining

state proceedings was “necessary . . . to protect or effectuate its

judgments,”       28    U.S.C.     §   2283,    and   thus   allowed      under   this

relitigation exception to the Anti-Injunction Act.

     On this consolidated appeal, we consider both the summary

judgment in the quo warranto proceeding and the entry of the

permanent injunction.            The legal malpractice action is not before

us here.

                                           II

     We    first       consider    the   summary      judgment.      If   preclusion

doctrines apply, the bankruptcy court’s factual findings clearly

control.     In the quo warranto proceeding, Joseph Conte seeks to

show that the elections of Doris and Susan Conte as directors were

perpetrated by a fraud. This assertion conflicts directly with the

bankruptcy court’s conclusion that their approval of the settlement

was valid.

                                           3
     The familiar requirements for claim preclusion are that (1)

the parties from the two actions must be identical or in privity

with one another; (2) the judgment in the prior action was rendered

by a court of competent jurisdiction; (3) the prior action must

have concluded with a final judgment on the merits; and (4) the

same claim or cause of action must be involved in both suits.                See,

e.g., Eubanks v. FDIC, 977 F.2d 166, 169 (5th Cir. 1992).

     The second prong is undisputed, and despite Joseph Conte’s

protests, the first and fourth prongs are straightforward.                    The

parties from the first action are in privity with those in the

current   action.        In    a    bankruptcy    proceeding,    the   corporate

officers, directors, and shareholders of a debtor corporation are

considered parties to that proceeding, or at least “in privity”

with the corporation.         See Fox v. Maulding, 112 F.3d 453, 460 (10th

Cir. 1997); Horwitz v. Alloy Automotive Co., 992 F.2d 100, 103 (7th

Cir. 1993). “Under the ‘same claim’ inquiry, the critical issue is

whether the two actions under consideration are based on the same

nucleus of operative facts.” Rivet v. Regions Bank, 108 F.3d 576,

588 (5th Cir. 1997); see also Agrilectric Power Partners, Ltd. v.

General   Elec.   Co.,    20       F.3d   663,   665   (5th   Cir.   1994)   (“The

substantive theories advanced, forms of relief requested, types of

rights asserted, and variations in evidence needed do not inform

this inquiry.”).         Joseph Conte’s new claims involve the same

nucleus of operative facts involved in the prior proceeding.

     The third prong, requiring that the judgment be “on the

merits,” is more subtle, because the district court dismissed the

                                           4
appeal as moot rather than reaching the merits.                   This dismissal,

however, does not deprive the bankruptcy court’s judgment of

preclusive    effect.       The   Supreme       Court    confronted     a   similar

situation in United States v. Munsingwear, Inc., 340 U.S. 36

(1950).      It    held   that   where    the   losing    party    in   the   prior

adjudication did not seek vacatur of judgment upon dismissal, the

lower court judgment was still entitled to res judicata.                       This

doctrine was discussed and reaffirmed in U.S. Bancorp Mortgage Co.

v. Bonner Mall Partnership, 115 S. Ct. 386 (1994), in which the

Supreme Court found that mootness by reason of a settlement does

not justify vacatur of the judgment under review.                       Under the

Munsingwear logic, the district court’s dismissal of the appeal

from the bankruptcy court without vacating the bankruptcy court

judgment means that judgment still has preclusive effect. The quo

warranto action is thus barred.

                                         III

     We now turn to the injunction.             The relitigation exception to

the Anti-Injunction Act permits a federal court to enjoin a state

court action barred by claim preclusion.             See Carpenter v. Wichita

Falls Ind. Sch. Dist., 44 F.3d 362, 370 (5th Cir. 1995).                    A court

has the inherent authority to protect its jurisdiction through

injunction.       See Villar v. Crowley Maritime Corp., 990 F.2d 1489,

1499 (5th Cir. 1993) (“[F]ederal courts have broad powers to

protect their judgments and the integrity of the courts as a

whole.”) (citing In re Marhn-Trigona, 737 F.2d 1254, 1262 (2d Cir.

1984), abrogated on other grounds by Marathon Oil Co. v. A.G.

                                          5
Ruhrgas, 145 F.3d 211 (5th Cir. 1998) (en banc).         Factors relevant

to whether a court can enter injunctive relief include the history

of the litigation, the litigant’s motives, whether the litigant was

represented   by   counsel,   whether   the   litigant   caused   needless

expense to others, and whether other sanctions would be sufficient.

See, e.g., Shafii v. British Airways, 895 F. Supp. 451, 458

(E.D.N.Y. 1995), aff’d in part, vacated in part, 83 F.3d 566 (2d

Cir. 1996).      None of these factors significantly helps Joseph

Conte, and we find no abuse of discretion or error in the grant of

the injunction.

                                   IV

     Doris and Susan Conte cross-appeal the bankruptcy court’s

refusal to    impose   monetary   sanctions   on   Joseph   Conte.    This

litigation was not frivolous, and the bankruptcy court’s refusal to

impose sanctions was well within its discretion.              See Placid

Refining Co. v. Terrebonne Fuel & Lube, Inc. (In re Terrebonne Fuel

& Lube, Inc.), 108 F.3d 609, 613 (5th Cir. 1997).

     AFFIRMED.

                                    6