Court Opinion

ID: 2996336
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:27:40.95176+00
Date Added: 2024-06-11T15:02:50.311515
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                    ____________

Nos. 02-2754 & 02-2835
ZURICH AMERICAN INSURANCE COMPANY,
                                     Petitioner-Appellee,
                           v.

SUPERIOR COURT FOR THE STATE OF CALIFORNIA,
COUNTY OF LOS ANGELES,
                                         Respondent,
                         v.

WATTS INDUSTRIES, INCORPORATED,
                                   Real Party-Appellant.
No. 02-2548
ZURICH AMERICAN INSURANCE COMPANY,
                                   Petitioner-Appellant,
                           v.

SUPERIOR COURT FOR THE STATE OF CALIFORNIA,
COUNTY OF LOS ANGELES,
                                         Respondent,
                         v.

WATTS INDUSTRIES, INCORPORATED
and JAMES JONES COMPANY,
                                Real Parties-Appellees.
                    ____________
2                              Nos. 02-2754, 02-2835 & 02-2548

            Appeals from the United States District Court
        for the Northern District of Illinois, Eastern Division.
              No. 01 C 7673—Elaine E. Bucklo, Judge.
                           ____________
 ARGUED SEPTEMBER 25, 2002—DECIDED SEPTEMBER 30, 2002
                OPINION—APRIL 17, 2003
                           ____________

    Before BAUER, ROVNER, and WILLIAMS, Circuit Judges.
  WILLIAMS, Circuit Judge. After seven months of litiga-
tion in a California court concerning Zurich American
Insurance Company’s duty under various insurance pol-
icies to defend Watts Industries, Inc. and James Jones
Company, Zurich filed a petition in the Northern District
of Illinois to compel arbitration. The state case continued
forward, however, leading eventually to a clash between the
district court and the California Superior Court over the
scope of an order by the district court enjoining Watts
and the California court from further proceedings pend-
ing the district court’s resolution of Zurich’s petition. That
preliminary injunction is the subject of these cross ap-
peals by Watts and Zurich. Watts asserts that the injunc-
tion violated the Anti-Injunction Act, 28 U.S.C. § 2283,
while Zurich claims it should have been broader—that
the district court was mistaken in holding that the Rooker-
Feldman doctrine applied to some of the issues. We agree
with Zurich that the Rooker-Feldman doctrine does not
apply but hold that the preliminary injunction violates
the Anti-Injunction Act and therefore reverse.


  The appeals were decided by a brief order on September 30,
2002, with a notation that an opinion would follow.
Nos. 02-2754, 02-2835 & 02-2548                                3

                     I. BACKGROUND
  Zurich issued to Watts commercial general liability
insurance policies, which provided for a duty to defend
against lawsuits. James Jones Company, Watt’s subsidiary,
was an insured under the policies (until it was later sold
by Watts). In connection with these policies, Watts entered
into deductibility agreements with Zurich, under which
Watts agreed to reimburse Zurich for various defense
and indemnity expenditures made pursuant to the general
liability policies. The deductible agreements contain
provisions requiring the arbitration of disputes arising
out of those agreements.1 The insurance policies do not.
  Watts and Jones were sued for fraud in two actions
in California, Dep’t of Water and Power ex rel. Armenta
v. James Jones and Rothschild v. James Jones Co.2 Zurich
refused to pay defense costs, so Watts and Jones sep-
arately sued Zurich in California Superior Court for cov-
erage under the policies and the two coverage actions
were consolidated. Several months into that litigation,
during settlement negotiations, Zurich asserted that,
even if it were liable under the policies, Watts would be
responsible under the deductible agreements to reimburse
Zurich for the full defense costs. Watts responded that, by
denying coverage, Zurich had repudiated the policies
and the deductible agreements and, alternatively, that
Zurich had waived any defense based on those agreements.

1
  For example, one of the deductible agreements required
arbitration of “any dispute . . . between the Company and the
Insured with reference to the interpretation of this Agreement or
their rights with respect to any transaction involved, whether
such dispute arises before or after the termination of the Agree-
ment. . . .”
2
  No. BC 173487 (Cal. Super. Ct. Los Angeles) and No. 726930
(Cal. Super. Ct. San Diego).
4                          Nos. 02-2754, 02-2835 & 02-2548

Zurich responded with a demand for arbitration, which
Watts rejected.
  Zurich then filed a petition to compel arbitration in
the district court and asked the California Superior Court
to stay the state proceedings pending the district court’s
consideration of Zurich’s petition. Shortly thereafter, the
California Superior Court granted Watts’s pending mo-
tion for summary adjudication as to Zurich’s duty to de-
fend Watts in the underlying Armenta matter. The Su-
perior Court held that Zurich had a duty to defend Watts
in that case and directed Zurich to reimburse it for rea-
sonable defense costs. It also denied Zurich’s request for
a stay, holding that the dispute under the deductible
agreements was severable from the coverage dispute
pending before it. Zurich appealed to the California Court
of Appeal, which held that the order for summary adju-
dication and the denial of Zurich’s motion to stay were not
appealable orders, and therefore dismissed the appeal.
   Watts then sought enforcement of the Superior Court’s
earlier order directing Zurich to pay defense costs, and
after the Superior Court again ordered it to pay, Zurich
filed a motion with the district court for a temporary re-
straining order enjoining further proceedings in Califor-
nia. The district court granted the motion, see Zurich
Am. Ins. Co. v. Sup. Ct. for the State of Cal., 200 F. Supp. 2d
929 (N.D. Ill. 2002), and later granted Zurich’s request
for a preliminary injunction.
  The district court held that under the Rooker-Feldman
doctrine, it lacked jurisdiction over issues already decided
by the California court. Although noting the possible
ambiguity regarding which issues were actually decided
in the California court’s order denying Zurich’s motion
for a stay, the district court interpreted that order as
limited to the arbitrability of the duty to defend issue
with respect to the Armenta case. The court found that
Nos. 02-2754, 02-2835 & 02-2548                                   5

Zurich was likely to succeed on the merits of its petition
to compel arbitration of the other issues pending in Cali-
fornia as to Watts and that Zurich would be irreparably
harmed without the injunction. It therefore enjoined fur-
ther proceedings in California concerning matters related
to Watts other than the duty to defend in Armenta. It
denied the motion as to Jones.
  The Superior Court then issued a clarification, stating
that its earlier order had held that there were presently
no arbitrable issues in either of the underlying cases,
Armenta or Rothschild. The district court refused to
consider that clarification, considering it a violation of
its injunction.
   After these appeals were filed, the California court
held that, based on its clarification of the scope of its ear-
lier order and the district court’s holding that Rooker-
Feldman barred federal jurisdiction over issues already
decided, the injunction did not bar its continued proceed-
ings and directed counsel for Watts and Jones to “proceed
forthwith with any and all motions that would effectuate
an adjudication of coverage issues.” We granted Zurich’s
and Watts’s request for judicial notice of that order, re-
minded those subject to the injunction that they were
bound until it was modified or reversed, and after oral
argument of these appeals, reversed the injunction for the
reasons we now explain.3

3
  Shortly before oral argument of these appeals, the district court
entered its final judgment, holding, along the lines of its prelimi-
nary determinations, that it lacked jurisdiction over the duty
to defend issue in Armenta, but that other disputes as to Watts
were subject to arbitration. It also held that the James Jones
Company was not bound by the arbitration provisions of the
deductible agreements. Zurich filed a timely motion to alter or
amend the judgment under Federal Rule of Civil Procedure 59(e).
                                                     (continued...)
6                           Nos. 02-2754, 02-2835 & 02-2548

                       II. ANALYSIS
  On appeal, Zurich argues that the district court erred
in holding that it lacked jurisdiction, under the Rooker-
Feldman doctrine, over those issues already determined
by the California court. Watts argues that the district
court construed the state court’s order too narrowly
and should have found that it lacked jurisdiction over
any of the issues raised in Zurich’s petition. Watts fur-
ther argues that the court’s preliminary injunction over
the California action was barred by the Anti-Injunction
Act. Because the Rooker-Feldman doctrine is jurisdic-
tional, see Lewis v. Anderson, 308 F.3d 768, 771-72 (7th Cir.
2002); Long v. Shorebank Dev. Corp., 182 F.3d 548, 554-55
(7th Cir. 1999), we address that question first before
determining whether the injunction was appropriate.

A. Rooker-Feldman doctrine
  The Rooker-Feldman doctrine bars review by lower
federal courts of state court judgments. See Rooker v.
Fidelity Tr. Co., 263 U.S. 413, 415-16 (1923); District
of Columbia Ct. App. v. Feldman, 460 U.S. 462, 482-86
(1983). It “rests on the principle that district courts have
only original jurisdiction; the full appellate jurisdiction
over judgments of state courts in civil cases lies in the
Supreme Court of the United States.” GASH Assocs. v. Vill.
of Rosemont, 995 F.2d 726, 728 (7th Cir. 1993). We review
the district court’s application of the Rooker-Feldman

3
   (...continued)
After we issued our order reversing the preliminary injunction,
the district court withdrew its opinion and has not yet ruled on
the Rule 59 motion. The district court’s final order and opinion
is therefore not before us.
Nos. 02-2754, 02-2835 & 02-2548                                   7

doctrine de novo. Remer v. Burlington Area Sch. Dist., 205
F.3d 990, 996 (7th Cir. 2000).
  Because the doctrine comes into play when there is a
prior state court judgment,4 it is often confused with res
judicata, “[b]ut the two are not coextensive.” GASH Assocs.,
995 F.2d at 728. As the district court recognized, in deter-
mining application of the doctrine the pivotal question
is whether the plaintiff’s federal claim is independent of
the state court’s action; if so, the relevant doctrine is res
judicata, not Rooker-Feldman:
    The Rooker-Feldman doctrine asks: is the federal
    plaintiff seeking to set aside a state judgment, or does
    he present some independent claim, albeit one that
    denies a legal conclusion that a state court has reached
    in a case to which he was a party? If the former, then
    the district court lacks jurisdiction; if the latter, then
    there is jurisdiction and state law determines wheth-
    er the defendant prevails under principles of preclusion.
GASH Assocs., 995 F.2d at 728; see also Brokaw v. Weaver,
305 F.3d 660, 664-65 (7th Cir. 2002); Remer, 205 F.3d
at 998; Long, 182 F.3d at 555. Stated differently, “the
fundamental and appropriate question to ask is whether
the injury alleged by the federal plaintiff resulted from
the state court judgment itself or is distinct from that
judgment. If the injury alleged resulted from the state court
judgment itself, Rooker-Feldman directs that the lower

4
  We need not determine to what extent the Rooker-Feldman
doctrine applies to interlocutory orders, see Schmitt v. Schmitt,
Nos. 02-1470 & 02-1471, 2003 WL 1479091, at * 2 (7th Cir. March
25, 2003); Centres, Inc. v. Town of Brookfield, 148 F.3d 699, 702
n.4 (7th Cir. 1998); Owens-Corning Fiberglas Corp. v. Moran, 959
F.2d 634, 635 (7th Cir. 1992), because our conclusion would be
the same even if the district court was right that the interlocutory
character of the rulings didn’t matter.
8                          Nos. 02-2754, 02-2835 & 02-2548

federal courts lack jurisdiction.” Garry v. Geils, 82 F.3d
1362, 1365-66 (7th Cir. 1996); see also Johnson v. De
Grandy, 512 U.S. 997, 1005-06 (1994) (“a party losing
in state court is barred from seeking what in substance
would be appellate review of the state judgment . . . based
on the losing party’s claim that the state judgment itself
violates the loser’s federal rights”); Lewis, 308 F.3d at
772; Durgins v. City of East St. Louis, 272 F.3d 841, 844
(7th Cir. 2001); GASH Assocs., 995 F.2d at 728-29.
   Although the district court identified the correct test of
when Rooker-Feldman applies, it arrived at the wrong
answer. If it applied the analysis we just described, the
district court must have determined that Zurich’s petition
to compel arbitration was at least partly dependent on
the state court’s prior adjudication when it held that it
lacked jurisdiction over issues the California court had
already decided. But Zurich’s federal claim arises under
the Federal Arbitration Act (FAA) and would exist even
if the state court had determined the duty to defend or
arbitrability issues in Zurich’s favor or if these issues had
never been before it. The federal claim does not therefore
seek to set aside the state court’s orders and does not
depend on a determination that the court erred. See Remer,
205 F.3d at 998 (distinguishing cases in which, “but for
the state court determinations, the federal plaintiffs
would have had no complaint”).
  Similarly, Zurich’s injury was not caused by the state
court, but by its adversary’s conduct (Watts’s refusal to
arbitrate); its only gripe with the state court is that it
failed to remedy that conduct. But that court’s alleged
erroneous application of federal law is not itself a cogniza-
ble injury, and Zurich has not alleged any other pos-
sible federal claims against the California court. See
Homola v. McNamara, 59 F.3d 647, 650 (7th Cir. 1995) (“a
decision by a state court, however erroneous, is not itself
a violation of the Constitution actionable in federal court”);
Nos. 02-2754, 02-2835 & 02-2548                              9

Durgins, 272 F.3d at 844 (holding that Rooker-Feldman
does not apply when the only claim is that the state court
failed to remedy an injury by some other actor); see also
Long, 182 F.3d at 556 (holding that Rooker-Feldman did
not apply to plaintiff’s claim under the Fair Debt Collec-
tion Practices Act, which “was independent of and com-
plete prior to the entry of [the state court order]”). Zurich’s
federal claim simply seeks to bypass the state court’s order,
and does not directly attack it, so Rooker-Feldman does
not apply. See Nesses v. Shepard, 68 F.3d 1003, 1004 (7th
Cir. 1995); see also Rizzo v. Sheahan, 266 F.3d 705, 714 (7th
Cir. 2001); Garry, 82 F.3d at 1367-68.
   The district court may have been led astray by two
opinions from other circuits discussing Rooker-Feldman
in the context of petitions to compel arbitration under
the Federal Arbitration Act. In Brown & Root, Inc. v.
Breckenridge, 211 F.3d 194 (4th Cir. 2000), a case relied
upon by Watts, the Fourth Circuit held that Rooker-
Feldman barred jurisdiction over the plaintiff’s petition
to compel arbitration because a state court had previously
denied its motion seeking the same relief. The court
quoted with approval our decision in Long, which identified
the appropriate inquiry as whether the federal plain-
tiff sought to set aside the state decision or was instead
presenting an independent claim. Brown & Root, 211 F.3d
at 202 (citing Long, 182 F.2d at 555). The Fourth Circuit
concluded that the plaintiff’s claim was dependent on
the state court’s decision denying the petition to compel
arbitration, and therefore that Rooker-Feldman barred
the federal claim. Id. But like Zurich’s federal claim, the
plaintiff’s petition to compel arbitration in Brown &
Root was not based on any injury by the state court
but instead sought to bypass the state court’s adverse rul-
ing and was therefore independent of that decision. See
id. Because the Fourth Circuit’s conclusion in Brown &
Root is inconsistent with our circuit’s well-setteled under-
10                         Nos. 02-2754, 02-2835 & 02-2548

standing of the limits of Rooker-Feldman, we respectfully
decline to follow it.
  By contrast, the Second Circuit, in Doctor’s Associates,
Inc. v. Distajo, 107 F.3d 126 (2d Cir. 1997), held that
Rooker-Feldman did not apply to the plaintiff’s petition
to compel arbitration because the federal action was filed
before any ruling on the merits in the state court. We
need not comment on the district court’s efforts at distin-
guishing Doctor’s Associates because the Second Cir-
cuit’s conclusion in that case was based on its understand-
ing that Rooker-Feldman “ ‘at a minimum’ is coextensive
with preclusion principles,” 108 F.3d at 137 (quoting
Moccio v. New York State Office of Ct. Admin., 95 F.3d 195,
199-200 (2d Cir. 1996)), a view that is fundamentally at
odds with this court’s interpretation of the doctrine. See,
e.g., Durgins, 272 F.3d at 844; Rizzo, 266 F.3d at 713;
Centres, Inc., 148 F.3d at 701; GASH Assocs., 995 F.2d
at 728 (explaining that “[e]quating the Rooker-Feldman
doctrine with preclusion is natural . . . [b]ut the two are not
coextensive”).
  Nevertheless, Watts argues that Rooker-Feldman not
only bars claims that attack the state court decision, but
also those that are “inextricably intertwined” with that
decision. In determining whether a claim is so intertwined
with the judgment as to be barred by Rooker-Feldman, our
cases say that we must decide whether the “ ‘district court
is in essence being called upon to review the state-court
action.’ ” Ritter v. Ross, 992 F.2d 750, 754 (7th Cir. 1993)
(quoting Feldman, 460 U.S. at 483-84 n.16); see also
Centres, Inc., 148 F.3d at 702. According to Watts, because
Zurich’s petition to compel arbitration might require
the district court to reach a conclusion on arbitrability
different than the California court’s, it would “in essence”
be reviewing the California court’s order.
  This circuit has already commented on the difficulty
in identifying which claims are “inextricably intertwined”
Nos. 02-2754, 02-2835 & 02-2548                                11

with the judgment. See Brokaw, 305 F.3d at 664; Remer,
205 F.3d at 996; Centres, Inc., 148 F.3d at 702. We have
used the phrase to refer to different situations, including
those involving claims that are related to the judgment the
plaintiff is attacking, but which were not raised before the
state court, see, e.g., Levin v. Attorney Registration and
Disciplinary Comm’n of the Sup. Ct. of Ill., 74 F.3d 763,
766-67 (7th Cir. 1996); Garry, 82 F.3d at 1369; see also
Feldman, 460 U.S. at 483 n.16, and to claims that were
in fact dependent on the judgment, such as if there would
be no injury but for the state court’s action. See, e.g., Epps
v. Creditnet, Inc., 320 F.3d 756, 759-61 (7th Cir. 2003);
Long, 182 F.3d at 557; Garry, 82 F.3d at 1366-67; John-
son v. Sup. Ct. of Ill., 165 F.3d at 1142. Zurich’s fed-
eral claim is not dependent in any way on the state’s
judgment, nor is it related to a claim that is dependent
on that judgment. A mere assertion that a district court,
in considering a claim that is independent of the state
court judgment, might negate a legal conclusion that
the state court reached is insufficient to trigger applica-
tion of Rooker-Feldman. See GASH Assocs., 995 F.2d at
728.5

5
  In a similar vein, the district court reasoned that Rooker-
Feldman applied because the only way it could grant the relief
Zurich seeks (a judgment compelling arbitration) would be to undo
the California court’s orders. While there is no jurisdictional bar
to the parallel proceedings here, the law of res judicata (claim
and issue preclusion) may be raised as a defense to further liti-
gation once there is an order or judgment entitled to preclusive
effect under the relevant law. See Durgins, 272 F.3d at 844; Rizzo,
266 F.3d at 713; Centres, Inc., 148 F.3d at 701; GASH Assocs.,
995 F.2d at 728. The federal district court is required to give
whatever preclusive effect to the Superior Court’s orders that
California would. 28 U.S.C. § 1738; Durgins, 272 F.3d at 843; see
also Merrill Lynch v. Haydu, 637 F.2d 391, 398 (5th Cir. 1981).
                                                     (continued...)
12                            Nos. 02-2754, 02-2835 & 02-2548

B. Anti-Injunction Act
  The Anti-Injunction Act, 28 U.S.C. § 2283, bars a dis-
trict court from enjoining pending state litigation unless
the injunction falls within one of the Act’s three stated
exceptions:
     A court of the United States may not grant an injunc-
     tion 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. The Act rests on the “fundamental
constitutional independence of the States and their courts,”
and its purpose is to make the dual system of state
and federal courts work without “ ‘needless friction.’ ” Atlan-
tic Coast Line R.R. Co. v. Bhd. of Locomotive Eng’rs., 398
U.S. 281, 286-87 (1970) (quoting Okla. Packing Co. v. Okla.
Gas & Elec. Co., 309 U.S. 4, 9 (1940)). We review the
district court’s decision to enjoin the state action for abuse
of discretion, see In Re VMS Sec. Litig., 103 F.3d 1317,
1323 (7th Cir. 1996); Commonwealth Edison Co. v. Gulf
Oil Corp., 541 F.2d 1263, 1274 (7th Cir. 1976), evaluating
its factual findings for clear error, and its legal conclu-
sions, including its interpretation of the scope of the Anti-
Injunction Act, de novo. See Winkler v. Eli Lilly & Co., 101
F.3d 1196, 1203-04 (7th Cir. 1996).
  Because of the Act’s constitutional foundation, its three
exceptions are to be applied narrowly, and “[a]ny doubts
as to the propriety of a federal injunction against state

5
  (...continued)
But since the parties have not briefed us on the preclusive effect
of those orders under California law (if any) and because the
possible application of res judicata does not affect our jurisdiction
to decide this appeal, see Brokaw, 305 F.3d at 664 n.4, we do not
consider it further.
Nos. 02-2754, 02-2835 & 02-2548                                13

court proceedings should be resolved in favor of permit-
ting the state courts to proceed in an orderly fashion to
finally determine the controversy. The explicit wording
of § 2283 itself implies as much, and the fundamental
principle of a dual system of courts leads inevitably to
that conclusion.” Atlantic Coast Line, 398 U.S. at 297; see
Ramsden v. AgriBank, FCB, 214 F.3d 865, 869 (7th Cir.
2000). And even if the injunction is authorized by one of
the exceptions, a district court must still determine wheth-
er an injunction is an appropriate exercise of its authority,
Winkler, 101 F.3d at 1203; see also Chick Kam Choo v.
Exxon Corp., 486 U.S. 140, 151 (1988) (“The fact that an
injunction may issue under the Anti-Injunction Act does
not mean that it must issue.”), recognizing the respect
due the courts of a sovereign state. See Mitchum v. Foster,
407 U.S. 225, 243 (1972) (noting that the Court’s holding
that the injunction was authorized by an exception did
not “qualify in any way the principles of equity, comity,
and federalism that must restrain a federal court when
asked to enjoin a state court proceeding”). The extraordi-
nary relief of an injunction of state court proceedings
must also be supported by the traditional equitable re-
quirements such as irreparable harm for which there is
no adequate remedy at law. See Owens-Corning Fiberglas
Corp., 959 F.2d at 635 (citing Pennzoil Co. v. Texaco Inc.,
481 U.S. 1, 10-11 (1987)); see also Ramsden, 214 F.3d at
868 (7th Cir. 2000).
  Zurich does not argue that the exception for injunctions
“expressly authorized” by Congress applies, nor does it
argue, at least not directly, that the court had authority
to enjoin the state proceedings “to protect or effectuate
its judgments.”6 Instead, Zurich asserts that the district

6
  Zurich cites cases finding the injunction authorized under the
latter exception, see, e.g., Commonwealth Edison Co., 541 F.2d at
                                                    (continued...)
14                           Nos. 02-2754, 02-2835 & 02-2548

court was correct in holding that the exception for injunc-
tions “necessary in aid of its jurisdiction” applies. We
disagree.
  “Necessary in aid of its jurisdiction” means that “federal
injunctive relief may be necessary to prevent a state court
from so interfering with a federal court’s consideration
or disposition of a case as to seriously impair the federal
court’s flexibility and authority to decide that case.” Atlantic
Coast Line, 398 U.S. at 295. Historically, this exception
applied only to in rem rather than in personam proceed-
ings, see Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 641
(1977) (plurality opinion), the general rule being that
parallel in personam proceedings should be allowed to
continue concurrently. Id. at 641-42; Commonwealth Ed-
ison Co., 541 F.2d at 1274. Thus, the possibility that a
parallel state proceeding might “interfere with a pro-
tected federal right” or erroneously apply federal law does
not make an injunction “necessary” to aid the court’s
jurisdiction:
     [T]he state and federal courts had concurrent jurisdic-
     tion in this case, and neither court was free to pre-
     vent either party from simultaneously pursuing claims
     in both courts. . . . Therefore the state court’s assump-
     tion of jurisdiction over the state law claims and the

6
   (...continued)
1274, but that exception, often known as the “relitigation” ex-
ception, “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.” Chick Kam Choo, 486 U.S. at 147. It does
not apply in this case because the district court had not yet ruled
on Zurich’s petition. See id. at 148 (“[A]n essential prerequisite
for applying the Act’s relitigation exception is that the claims
or issues which the federal injunction insulates from state court
litigation actually have been decided by the federal court . . .
[t]his prerequisite is strict and narrow.”).
Nos. 02-2754, 02-2835 & 02-2548                                15

    federal preclusion issue did not hinder the federal
    court’s jurisdiction so as to make an injunction neces-
    sary to aid that jurisdiction.
Atlantic Coast Line, 398 U.S. at 294-96; Texas v. United
States, 837 F.2d 184, 186 n.4 (5th Cir. 1988). Instead of an
injunction by the federal district court, the aggrieved
party’s recourse is by appeal through the state court sys-
tem and, ultimately, to the Supreme Court. Atlantic Coast
Line, 398 U.S. at 296.
  There has been some limited expansion of this exception
beyond in rem actions, most notably in the context of
school desegregation cases, see Swann v. Charlotte-
Mecklenburg Bd. of Ed., 501 F.2d 383 (4th Cir. 1974), and
consolidated multidistrict litigation, see Winkler, 101 F.3d
at 1202. In Winkler, for example, we held that a federal
court managing multidistrict litigation was authorized
to enjoin parallel state proceedings in order to protect
the integrity of its pretrial discovery orders. Id. at 1203.
In this case, by contrast, there were no federal court or-
ders to protect, and Zurich has cited no circuit court case
that expands the “in aid of its jurisdiction” exception
under similar circumstances.7
  Nevertheless, Zurich asks us to extend the exception
to this case because of the important federal interest
favoring arbitration represented in the Federal Arbitra-
tion Act. It asserts that, absent an injunction, the state

7
  Zurich argues that Whiteside v. Teltech Corp., 940 F.2d 99, 102
(4th Cir. 1991), provides authority for the injunction. But in
Whiteside, the Fourth Circuit held that the district court had
erred in abstaining in favor of the pending state law case, and
did not discuss the appropriateness of an injunction. Moreover,
on the issue of abstention, we prefer to be guided by this
court’s decision in CIGNA Healthcare of St. Louis, Inc. v. Kaiser,
294 F.3d 849, 854 (7th Cir. 2002), which we discuss below.
16                        Nos. 02-2754, 02-2835 & 02-2548

court could (before the district court has a chance to rule
on the petition for arbitration) make rulings that, by
operation of preclusion principles, might bind Zurich in
later arbitration. This would be contrary, according to
Zurich, to the federal interest supporting the parties’
selection of an arbitral rather than judicial forum. A sim-
ilar argument for such an expansion of the “in aid of its
jurisdiction” exception was rejected by the Eleventh Cir-
cuit, which held that the exception does not apply if the
federal court has not yet ordered arbitration. See Transouth
Financial Corp. v. Bell, 149 F.3d 1292, 1297 (11th Cir.
1998).
  Furthermore, Zurich’s argument is based on an assump-
tion that the state court cannot competently protect the
parties’ federal rights. This assumption, however, strikes
at the heart of the Anti-Injunction Act, which “evidences
confidence in state courts.” See Commonwealth Edison Co.,
541 F.2d at 1274; see also Chick Kam Choo, 486 U.S. at 149-
50 (state courts “are presumed competent to resolve
federal issues”). Zurich’s argument is also undermined
by the structure of the FAA, which provides concurrent
jurisdiction to states to enforce arbitration agreements,
with a federal forum available only when diversity or
federal question jurisdiction is otherwise established. See
9 U.S.C. § 4; Moses H. Cone Mem. Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 25 n.32 (1983). Although the FAA
represents “federal policy to be vindicated by the fed-
eral courts where otherwise appropriate,” Moses H. Cone,
460 U.S. at 25 n.32, it does not suggest that state courts
are less competent to give effect to its provisions. Ultra-
cashmere House, Ltd. v. Meyer, 664 F.2d 1176, 1180 (11th
Cir. 1981) (noting that Congress “viewed state courts
as fully capable of effectuating those policies”); CIGNA
Healthcare of St. Louis, Inc. v. Kaiser, 294 F.3d 849, 854
(7th Cir. 2002) (The FAA “requires both federal and
state courts to apply a federal common law of arbitrability
Nos. 02-2754, 02-2835 & 02-2548                            17

to the arbitration of disputes arising under contracts
in commerce, a common law applicable equally in federal
and state courts.”) (citing Allied-Bruce Terminix Cos. v.
Dobson, 513 U.S. 265, 272 (1995); Southland Corp. v.
Keating, 465 U.S. 1, 14-15 (1984)).
  This case is therefore not so much about preserving
the federal interest in arbitration, but in preserving Zu-
rich’s choice of a federal forum to enforce the arbitration
agreement. Under similar circumstances, we have held
that a district court may abstain from consideration of
the arbitration question when the issue was already be-
fore, and much closer to resolution in, the state court.
See CIGNA Healthcare, 294 F.3d at 855. Although not
controlling on the question before us, CIGNA Healthcare’s
holding that the plaintiff’s choice of a federal forum may
give way to principles of judicial economy takes away
much of the force of Zurich’s argument that its interest
justifies expansion of the “in aid of its jurisdiction” excep-
tion. If the ordinary rule that parallel proceedings should
be allowed to continue can be overcome in appropriate
circumstances by reasons of judicial economy, allowing
the district court to abstain from consideration of the
arbitration question, see id. at 853, it is hard to see why
concurrent state proceedings could be seen as such a se-
rious threat to the district court’s authority that they
must be halted by an injunction. Without, at the very
least, some evidence that the state court was indifferent
to or hostile to the parties’ rights under the FAA, see
Diane P. Wood, Fine-Tuning Judicial Federalism: A
Proposal for Reform of the Anti-Injunction Act, 1990 BYU L.
Rev. 289, 316 (suggesting that injunction might be war-
ranted if the state law was hostile to arbitration
and refused a stay); cf. CIGNA Healthcare, 204 F.3d at 855,
a state court’s erroneous application of federal law does
not justify the extraordinary remedy of an injunction and
is not authorized by the “in aid of its jurisdiction” excep-
18                            Nos. 02-2754, 02-2835 & 02-2548

tion. See Atlantic Coast Line, 398 U.S. at 295-96; Texas v.
United States, 837 F.2d at 186 n.4 (“In no event may
the ‘aid of jurisdiction’ exception be invoked merely be-
cause of the prospect that a concurrent state proceeding
might result in a judgment inconsistent with the federal
court’s decision.”).
   In this case, the California Superior Court rejected
Zurich’s request for a stay, but we find nothing to suggest
that, in reaching that decision, it was indifferent to its
responsibilities under the FAA. The court’s decision was
based on its conclusion that the dispute under the deduct-
ible agreements was severable from the dispute pending
before it concerning Zurich’s duties under the insurance
policies. The court also held that no arbitrable dispute
had yet arisen and expressed its willingness to consider
the question again if defense costs were paid and reim-
bursement under the deductible agreements was dis-
puted. The state court’s conclusions differed from the
district court’s preliminary determination—in evaluating
Zurich’s likelihood of success on the merits—that all
issues as to Watts (not already decided in the California
litigation) were subject to arbitration. Whether or not the
state court’s conclusions are ultimately correct (an issue
upon which we offer no opinion), they were not so unrea-
sonable as to suggest hostility to the requirements of the
FAA.8 And we have no reason to believe that, if presented
with a federal judgment compelling arbitration of issues
it had thought were not arbitrable, the Superior Court
would refuse to give effect to that judgment or to stay

8
   The Superior Court’s reluctance to adhere to the injunction was
based, we think, not on any indifference to the FAA but on its
application of the district court’s Rooker-Feldman holding in
light of its interpretation of its own prior order and its frustra-
tion with the district court’s refusal to entertain its clarification
of that order.
Nos. 02-2754, 02-2835 & 02-2548                                   19

further proceedings. See Cal. Code of Civ. P. § 1281.4
(requiring court in which action is pending to stay pro-
ceedings if a “court of competent jurisdiction” has ordered
arbitration); cf. Moses H. Cone, 460 U.S. at 26 (“[S]tate
courts, as much as federal courts, are obliged to grant stays
of litigation under § 3 of the Arbitration Act.”). If it did
refuse, then an injunction might be warranted under the
“protect or effectuate its judgments” rationale. See We
Care Hair Dev., Inc. v. Engen, 180 F.3d 838, 844 (7th Cir.
1999); Commonwealth Edison Co., 541 F.2d at 1273; D.
Wood, supra, at 316. But given principles of comity, we
cannot lightly assume that a state court would disregard
federal law.9

                      III. CONCLUSION
  The district court abused its discretion in issuing the
preliminary injunction, and the injunction is therefore
REVERSED. The case is REMANDED to the district court
for further proceedings. Each party will bear its own costs
on appeal.

A true Copy:
        Teste:

                            ________________________________
                            Clerk of the United States Court of
                              Appeals for the Seventh Circuit

9
  Because we conclude that the injunction was barred by the
Anti-Injunction Act, we do not address Zurich’s contention that
the district court erred in failing to extend the injunction to issues
pending in the Superior Court regarding the James Jones Com-
pany.

                      USCA-02-C-0072—4-17-03