Opinion
No. 11916.
May 23, 1972. On Rehearing July 24, 1972. En Banc Rehearing Denied September 12, 1972. Writ Refused October 17, 1972.
APPEAL FROM FIRST JUDICIAL DISTRICT COURT, PARISH OF CADDO, WILLIAM J. FLENIKEN, J.
Simon Herold, Shreveport, Alston, Miller Gaines, Atlanta, Ga., Hargrove, Guyton, Van Hook Ramey by Billy R. Pesnell, James A. Van Hook, Shreveport, for plaintiff-applicant.
Blanchard, Walker, O'Quin Roberts by Robert Roberts, Jr., John T. Cox, Jr., Wiener, Weiss Wiener by Jacques L. Wiener, Shreveport, for defendants-respondents.
Before AYRES, BOLIN, PRICE, HEARD and HALL, JJ.
Belle Virginia Goldblum, testamentary executrix of the succession of George J. Woolhandler, filed suit in the First Judicial District Court, Caddo Parish, Louisiana, on March 17, 1972 against 32 defendants. She sought to annul a certain voting trust entered into by Woolhandler on the grounds that (1) it violated the provisions of Section 5 of the Securities Act of 1933, 15 U.S.C. § 77e; (2) it violated LSA-R.S. 51:701 et seq.; (3) it violated the Business Corporation Law of Louisiana, specifically LSA-R.S. 12:78(G)(H), 12:638; (4) no consideration was paid to Woolhandler for its execution. In the alternative, Goldblum sought a decree that the Woolhandler children own 275 shares of the capital stock of Doctors' Hospital, Inc. unencumbered by said voting trust.
On the same day she filed the State court suit, and only shortly thereafter, Goldblum filed suit in the United States District Court for the Western District of Louisiana against four of the aforementioned 32 defendants. The Federal suit was styled as a class action. It also sought annulment of the voting trust on the sole ground that it violated the Securities Act of 1933, 15 U.S.C. § 77e.
The 32 defendants in State court filed an exception to stay the proceedings which was sustained, and the trial judge rendered judgment staying all proceedings in State court until discontinuance or final judgment in the Federal suit.
Goldblum petitioned this court for writs of certiorari, prohibition, and mandamus. Under our supervisory jurisdiction, we granted writs in order to study this matter more closely. After careful consideration, we are of the opinion that the trial judge was correct in sustaining the exception and staying the proceedings.
Goldblum argues that the trial judge erred in staying the proceedings because the State court suit was filed first, and our law only provides for a stay of the second suit. LSA-C.C.P. Art. 532 provides:
"When a suit is brought in a Louisiana court while another is pending in a court of another state or of the United States on the same cause of action, between the same parties in the same capacities, and having the same object, on motion of the defendant or on its own motion, the court may stay all proceedings in the second suit until the first has been discontinued or final judgment has been rendered."
Comment (c) under this article states:
"This article applies only where the suit in the foreign jurisdiction or in the federal court is filed first. To extend the provisions of the article to cases where the Louisiana action has been filed first would require the Louisiana courts to abdicate their judicatory power."
We believe the purpose of this article would be defeated if we held that a state court suit filed a few minutes before a Federal suit could never be stayed. We are of the opinion that where the suits are filed a few minutes apart, they are filed simultaneously and, if other requirements are met, the trial judge is not prevented from staying proceedings in the State court suit. There are some indications in our law that fractions of days are to be disregarded. See LSA-C.C. Arts. 2057-2059; LSA-C.C.P. Art. 5059. However, our holding above is based not so much on statutory law, but more on a desire to avoid hypertechnical and meaningless distinctions. Therefore, we find no merit in Goldblum's argument that the trial judge could not sustain the exception because the State court suit was filed first.
Goldblum also argues that the trial court erred in sustaining the exception because the Federal suit would not operate as a res judicata bar to the State suit. Where identical suits are pending in our State courts the trial judge must dismiss all but the first suit if the defendant so moves. LSA-C.C.P. Art. 531. Where identical suits are pending in State and Federal court, the trial judge may stay proceedings in the second suit. By the same token, as a matter of comity, the trial judge may stay proceedings in the State suit if the Federal suit will dispose of some of the issues before the State court. Comment (a) under LSA-C.C.P. Art. 532 provides:
"The jurisprudence of Louisiana is well settled that the strict rules of lis pendens will not be applied unless the suits are pending in Louisiana courts, and that these rules do not apply when the first action is pending either in a federal court, or in a court of another state or a foreign country."
There is no doubt that if there are identical suits in Federal and State courts the State court does not have to stay proceedings. We also believe that if there are similar suits pending in Federal and State courts the State court may stay proceedings. As stated by the United States Supreme Court:
"* * * the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants."
[Landis v. North American Co., 299 U.S. 248, 254, 57 S.Ct. 163, 166, 81 L.Ed. 153 (1936)]
To reiterate, the strict rules of lis pendens apply to suits pending in State courts. Where the suits are pending in Federal and State courts, the strict rules do not apply. This is evident from the fact that LSA-C.C.P. Art. 531 calls for dismissal and LSA-C.C.P. Art. 532 calls for a stay. This stay of proceedings is discretionary with the State court whether or not the suits are identical.
Regardless of the outcome of this Federal suit, a State suit may still be necessary. However, a conflict may be avoided through a stay of the State court proceedings. Above all, it should be kept in mind that this stay is a matter of comity and not of power.
Accordingly, for the reasons assigned, the writs heretofore issued are now recalled and the judgment of the lower court is affirmed at relator's cost.
HALL, J., dissents with written reasons.
BOLIN, J., dissents for the reasons expressed by HALL, J.
The district court sustained an exception filed by defendants-respondents and stayed all proceedings in this suit until discontinuance or final judgment in a related action filed in federal district court. Plaintiff-applicant petitioned this court for writs of certiorari, prohibition and mandamus, seeking to set aside the district court's stay order. Writs were granted. The original majority decision of this court recalled the writs and affirmed the action of the district court, with two judges dissenting. On application of plaintiff-applicant, a rehearing was granted.
After careful reconsideration of the issues presented, which have been expertly briefed by able counsel for all parties, we now adopt the dissenting opinion previously filed as the majority opinion of this court.
For the reasons assigned in that opinion, the writs granted are made absolute, the judgment of the district court staying proceedings in this suit is reversed and set aside, and the case is remanded to the district court for further proceedings.
* * * * * *
HEARD, Judge, dissents for the reasons expressed in his original opinion.
It is my opinion that the writs granted in this case should be made absolute and the order of the district court staying proceedings should be set aside.
The authority for staying proceedings where a suit is filed in state court while another suit is pending in federal court or the court of another state is Article 532 of the Code of Civil Procedure, which provides:
"When a suit is brought in a Louisiana court while another is pending in a court of another state or of the United States on the same cause of action, between the same parties in the same capacities, and having the same object, on motion of the defendant or on its own motion, the court may stay all proceedings in the second suit until the first has been discontinued or final judgment has been rendered."
The instant case does not fall within the requirements of this Article for two reasons:
(1) The federal court suit was not filed first and was not pending when the state court suit was filed.
(2) The state court suit involves causes of action, parties and objects in addition to those involved in the federal court suit.
Discussing the first reason, it is to be noted that Official Revision Comment (c) under Article 532 states:
"This article applies only where the suit in the foreign jurisdiction or in the federal court is filed first. To extend the provisions of the article to cases where the Louisiana action has been filed first would require the Louisiana courts to abdicate their judicatory power."
Comment (b) states that the object of this Article is to curtail as far as practical the practice of filing the same action in both the Louisiana court and a federal court, and prosecuting to final judgment the proceeding in which plaintiff feels he has the best chance of succeeding. To some extent this is what we have here. However, note the Caveat which appears prior to Article 531 in which Professor McMahon states that Article 532 will not accomplish its purpose of preventing the harassment of a defendant through the simultaneous prosecution of identical suits in the state and federal courts unless the United States district courts in Louisiana cooperate by adopting a reciprocal rule. In other words, what Professor McMahon is saying is that there needs to be a similar rule in federal court so that where the state court suit is filed first the federal court can stay proceedings in the federal court suit.
Here the state court suit was, in fact, filed first, although on the same day as the federal court suit. Even if we accept the reasoning that Louisiana law does not take into account fractions of a day and that the suits were filed simultaneously, it is still a fact that the federal court suit was not filed "first" and Article 532 does not apply. In my opinion, however, there is no legal basis for disregarding the fact that the state court suit was, in fact, filed first. In Landry v. Landry, 192 So.2d 237 (La.App. 4th Cir. 1966), the court in considering an exception of lis pendens held that a suit filed by the husband on a legal holiday was considered filed as of the opening hour of the clerk's office the next day and was, therefore the "first suit" in opposition to a suit filed later in the same day by the wife.
In all of the cases cited by defendants where a stay order was granted, the federal court suit was filed first and was pending at the time the state court suit was filed.
Discussing the second reason why this case does not fall within the provisions of Article 532, the state court proceeding includes causes of action, parties and objects not involved in the federal court suit and over which the federal court would have no jurisdiction. A judgment in the federal court suit would not be res judicata as to some of the issues and some of the parties involved in the state court suit. This is the test frequently applied in determining whether an exception of lis pendens under Article 531 is proper. Article 532 providing for a stay of proceedings is identical to Article 531 providing for dismissal, except Article 532 deals with prior suits pending in federal court and courts of other states whereas Article 531 deals with prior suits pending in the same or other courts of this state.
The state court suit was brought by Mrs. Goldblum as executrix of the Succession of Dr. Woolhandler against Dr. C. E. Boyd, Doctors' Hospital, Incorporated, the four remaining trustees under a voting trust agreement, and thirty-one individuals who entered into the voting trust agreement and/or a separate shareholders' agreement. The suit seeks (1) to rescind the voting trust agreement on the grounds that (a) it violates the federal Securities Act of 1933, (b) it violates the Louisiana Blue Sky Law, (c) it fails to comply with the Louisiana Business Corporation Law, and (d) the provisions of the agreement have not been followed; (2) to set aside a first refusal agreement between Dr. Woolhandler and Dr. Boyd for lack of serious consideration and as an illegal restraint on alienation of property; (3) to annul a shareholders' agreement for lack of serious consideration and as an illegal restraint on alienation of property; and, alternatively (4) to declare the shares of stock inherited by the Woolhandler children as being unaffected by any of the agreements because of lack of authority by Dr. Woolhandler to encumber their stock.
The federal court action was brought by Mrs. Goldblum as a class action on behalf of the shareholders of Doctors' Hospital, Incorporated against the four trustees under the voting trust agreement. The action seeks a judgment declaring the voting trust agreement to be unenforceable for failure to comply with the Securities Act of 1933.
Although the primary relief sought in both suits may be to declare the voting trust agreement unenforceable as violative of the federal Securities Act, the state court suit involves other causes of action and seeks other relief of real substance. Any judgment rendered in the federal court suit will not dispose of these additional issues which will ultimately have to be tried in state court.
The cases cited by defendants are not applicable. In Ferriday v. Middlesex Banking Co., 118 La. 770, 43 So. 403 (1907), decided long before adoption of Article 532, a subsequent state court suit was stayed as a matter of comity where the res (realty) was within the jurisdiction of the federal court having first become seized with jurisdiction. Judgment had already been rendered in the federal court suit, although it was not yet final.
In Transamerica Ins. Co. v. Whitney National Bank, 251 La. 800, 206 So.2d 500 (1968), the parties, causes of action and objects were identical. Also the federal court suit was filed first. In Reid v. Crain Brothers, 134 So.2d 917 (La.App. 3d Cir. 1961), plaintiff was barred from proceeding with his state court suit under a specific federal statute and decision of the United States Supreme Court under that statute. The first suit was a limitation of action proceeding filed in federal court by the owner of a vessel. Subsequently, the injured seaman filed a direct action in state court against the insurers of the owner and the vessel. The state court suit was stayed during pendency of the federal court action under the authority of Maryland Cas Co. v. Cushing, 347 U.S. 409, 74 S.Ct. 608, 98 L.Ed. 806 (1954), which held that to allow a direct action during the pendency of a limitation action would thwart the objectives of the federal statute. No conflict with a federal statute is involved in the instant case. It should be noted that the opinion in Reid incorrectly referred to the Maryland Casualty Company case as involving a stay of proceedings in a state court suit whereas the case actually involved a stay of one of two suits pending in the same federal district court. The only issue actually presented in the Reid case was whether the state court proceeding should be dismissed or merely stayed under the Supreme Court decision dealing with a particular statute.
If the district court's order to stay proceedings in this case is to be sustained it seems to me that it must be done on some authority other than Article 532, such as general principles of comity or inherent power of the court to regulate its docket. If an exercise of the principles of comity is called for in this situation, then it seems to me that it should be exercised by the federal court in relation to the progress of the action pending there.
I find no authority in Louisiana jurisprudence for staying state court proceedings in an in personam action, where another suit is pending in federal court, as a matter of comity or power or otherwise, particularly where the federal court action was not commenced first. The majority opinion states that it is based on comity, not power, but cites Landis v. North American Co., 299 U.S. 248, 57 S.Ct. 163, 81 L.Ed. 153 (1936), in which the Supreme Court viewed "the problem as one of power, and of power only, . . .". Landis involved multiple suits pending in various federal district courts concerning the Public Utility Holding Company Act of 1935. The Supreme Court stayed proceedings in one of the district courts pending a decision of the principal issue at the trial court level in another district court, under compelling and unusual circumstances involving "cases of extraordinary public moment", "great issues . . . great in their complexity, great in their significance", and of "far-reaching importance." The instant case can hardly be compared to Landis in terms of an appropriate exercise of the inherent power of the court to control the disposition of cases on its docket.
To stay the state court suit until final conclusion of the federal court action, necessarily involving a substantial period of time, amounts to an abdication of the state courts' judicatory power and a denial of access to the courts of this state.
I respectfully dissent.
I concur with the reasons expressed by HALL, J., and accordingly respectfully dissent from the majority opinion.