Parsons Steel, Inc. v. First Alabama Bank

Supreme Court of the United States · 1986 · Federal Courts

Federal CourtsFull Faith and CreditAnti-Injunction ActRes Judicata28 U.S.C. § 173828 U.S.C. § 2283full faith and creditAnti-Injunction Act

Facts

Petitioners sued the bank in Alabama state court over allegedly fraudulent conduct involving control and ownership of a subsidiary, and later filed a federal action based on the same conduct under the Bank Holding Company Act amendments. The federal action went to trial first, and after a jury verdict for petitioners, the District Court entered judgment n.o.v. for the bank, which was affirmed on appeal. The bank then raised res judicata and collateral estoppel in the state action based on the federal judgment, but the Alabama court ruled that res judicata did not bar the case, and a jury later returned a general verdict for petitioners. After losing in state court, the bank returned to federal court and obtained an injunction against further prosecution of the state action.

Issue

When a state court has already considered and rejected a res judicata defense based on an earlier federal judgment, may a federal court nevertheless enjoin the state proceedings under the relitigation exception to the Anti-Injunction Act? Or must the federal court instead give the state court's judgment the preclusive effect required by the Full Faith and Credit Act?

Rule

The Anti-Injunction Act and the Full Faith and Credit Act must be read consistently by limiting the relitigation exception to situations in which the state court has not yet ruled on the merits of the res judicata issue. Once a state court has finally rejected a claim of res judicata, federal courts must apply the Full Faith and Credit Act and give the state judgment, including its resolution of the res judicata issue, the same preclusive effect it would receive in that state's courts.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Phoenix, Nora Kim won a federal judgment against Devon Pike on a business-tort claim. Devon then filed a state action in Arizona arising from the same underlying transaction, and before the Arizona court ruled on Devon's res judicata defense to Nora's federal judgment, Nora asked the federal court to enjoin the state suit.

How should the federal court analyze Nora's request?

Explanation. The majority harmonized the Anti-Injunction Act with the Full Faith and Credit Act by limiting the relitigation exception to situations in which the state court has not yet ruled on the merits of the res judicata issue. At that stage, a federal injunction is not categorically forbidden, though its propriety would still depend on further equitable and federalism considerations. (Derived from Parsons Steel, Inc. v. First Alabama Bank (1986).)