KAG West, LLC v. Malone

          ORDER DENYING PETITIONERS’ MOTION TO ENJOIN STATE COURT PROCEEDINGS

          THELTON E. HENDERSON United States District Judge

         This matter came before the Court on July 11, 2016 for a hearing on Petitioners’ motion to enjoin Respondent’s counsel and/or their client(s), including but not limited to, James Patrick Souza Jr., from filing and/or prosecuting duplicative claims or actions, or in the alternative, to stay such claims or actions (“Mot.”). Docket No. 34. Having carefully considered the parties’ written and oral arguments, the Court now DENIES Petitioners’ motion for the reasons set forth below.

         BACKGROUND

         The above-captioned action, as well as the related action Malone v. KAG West, LLC, et al., No. 15-CV-04262-TEH, concerns Respondent Patrick Malone’s various wage and hour claims against Petitioners KAG West, LLC and the Kenan Advantage Group (collectively “Petitioners”). The Court granted Petitioners’ Motion to Compel Arbitration on November 3, 2015. Compel Order at 8 (Docket No. 26). In its order compelling arbitration, the Court noted that Respondent did not challenge the validity of the Arbitration Agreement at issue, and that the parties had agreed that the Arbitration Agreement delegated threshold questions to the arbitrator by incorporating the American Arbitration Association Rules. Id. at 4.

         With those observations in mind, the Court held that the issues of whether the dispute should be arbitrated on an individual or class-wide basis and the arbitrability of Respondent’s PAGA claims were threshold questions to be decided by the arbitrator. Id. at 5-7. The Court stayed all of Respondent’s claims pending a decision by the arbitrator, and noted that if the arbitrator decided that the PAGA claims are not arbitrable, those claims would be stayed pending arbitration of Respondent’s other claims due to their derivative nature. Id. at 7-8. The parties stipulated to arbitrate before JAMS, and an arbitrator was assigned on April 5, 2016. Mot. at 5 (Docket No. 34). The matter is currently in arbitration, and a hearing regarding the threshold issues of clause construction regarding class and representative arbitration was held on June 29, 2016.

         In the instant motion, Petitioners seek to enjoin an action filed by Respondent’s counsel on May 4, 2016 in Alameda County Superior Court, on behalf of Plaintiff James Patrick Souza, Jr. See Ex. A to Notice of Duplicative Action (Docket No. 38). Briefing was timely completed on the instant motion. See Opp’n (Docket No. 40); Reply (Docket No. 41). Mr. Souza’s claim is a “PAGA only” action, raises the exact same violations, facts and theories as Respondent’s complaint, and is governed by the same Arbitration Agreement as Respondent’s claims.

         LEGAL STANDARD

         Although the Federal Arbitration Act (“FAA”) requires courts to stay their own proceedings where the issues being litigated are subject to an agreement to arbitrate, 9 U.S.C. § 3, “it does not specifically authorize federal courts to stay proceedings pending in state courts.” Ultracashmere House, Ltd. v. Meyer, 664 F.2d 1176, 1180 (11th Cir. 1981) (overruled on other grounds by Baltin v. Alaron Trading Corp., 128 F.3d 1466 (11th Cir. 1997)). Therefore, the district court’s authority to enjoin state-court proceedings is subject to the legal and equitable standards for injunctions generally.

         The Anti-Injunction Act, 28 U.S.C. § 2283, establishes “the general rule that courts of the United States shall not enjoin proceedings in state courts.” Merle Norman Cosmetics, Inc. v. Victa, 936 F.2d 466, 468 (9th Cir. 1991). However, the Act establishes three specific exceptions to the general rule: A federal court may enjoin state proceedings “only ‘as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.’ ” Id. (quoting the Anti-Injunction Act).^[1] These exceptions to the Anti-Injunction Act must be construed narrowly. Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir. 1987); Atl. Coast Line R.R. Co. v. Bhd. of Locomotive Eng’rs, 398 U.S. 281, 287 (1970).

         Unless one of the three statutory exceptions applies, a federal injunction restraining prosecution of a lawsuit in state court is absolutely prohibited. Belzberg, 834 F.2d at 739-40. Doubts as to the propriety of a federal injunction against a state court proceeding should be resolved in favor of permitting the state action to proceed. Id. at 739; Atl. Coast Line, 398 U.S. at 297. Furthermore, the fact that an injunction may issue under the Anti-Injunction Act does not mean that it must issue, Blalock Eddy Ranch v. MCI Telecomms. Corp., 982 F.2d 371, 375 (9th Cir. 1992), and the decision whether to enjoin a state court proceeding pursuant to the narrow exceptions in the Anti-Injunction Act is committed to the discretion of the district court. Bechtel Petroleum, Inc. v. Webster, 796 F.2d 252, 253 (9th Cir. 1986).

         DISCUSSION

         I. The Anti-Injunction Act Applies, Regardless of the Order of Filings

         As the parties are aware, Petitioners’ motion to enjoin was filed prior to the filing of Mr. Souza’s claim in state court. The Anti-Injunction Act only prohibits interference in a “pending” state proceeding. Dombrowski v. Pfister, 380 U.S. 479, 484 n.2 (1965). Circuit Courts are in disagreement as to whether the Anti-Injunction Act applies when the federal suit is filed first – i.e., if a court considering whether a state action is “pending” should look only at the time the motion to enjoin was filed, or if it may consider subsequent filings. The Ninth Circuit has not spoken on this issue.

         The Seventh, Eighth, and First Circuits have held that the Anti-Injunction Act does not apply when the federal suit is filed prior to the state suit; rather, courts should decide whether a state court suit is pending at the “time when the federal court’s injunctive powers are invoked.” Barancik v. Inv’rs Funding Corp., 489 F.2d 933, 936-37 (7th Cir. 1973); see also Nat’l 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). The general reasoning behind the Seventh, Eighth and First Circuits’ holdings ...