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Idaho Trust Bank v. Bancinsure, Inc.

United States District Court, D. Idaho

February 16, 2018

IDAHO TRUST BANK, an Idaho corporation, Plaintiff,
BANCINSURE, INC., an Oklahoma corporation; CONTINENTAL CASUALTY COMPANY, an Illinois corporation, Defendants.


          Honorable Ronald E. Bush Chief U.S Magistrate Judge.

         Pending is Plaintiff's Motion to Lift Stay and for Entry of Preliminary Injunction (Dkt. 216). The Court has carefully considered the record and reviewed the briefing and affidavits submitted in connection with this motion. The Court also conducted a hearing on this motion on September 21, 2017. Being fully advised, the Court enters the following Memorandum Decision and Order:

         I. BACKGROUND

         Plaintiff Idaho Trust Bank (“Idaho Trust”) alleges that Defendants Continental Casualty Company (“CNA”) and BancInsure, Inc. (“BancInsure”) were required, but failed, to fully indemnify and defend Idaho Trust from claims made against Idaho Trust by Inland Storage, Inc. and James Hutchens. The case began in the Fourth Judicial District of the State of Idaho, in and for the County of Ada, on December 23, 2011 (Dkt. 1-1). BancInsure removed the case to this federal court on January 24, 2012 (Dkt. 1). Defendant CNA was dismissed with prejudice by stipulation on July 1, 2013 (Dkts. 81, 86).

         Subsequently, this Court denied BancInsure's motion for summary judgment and granted Idaho Trust's motion for summary judgment. The effect of those rulings was to to establish liability but not damages with respect to Idaho Trust's claims against BancInsure. (Dkts. 95, 98, 132). A two-day trial on damages was set for September 2, 2014. (Dkt. 139). Then, less than a month before trial, BancInsure moved for a temporary stay of this action and filed notice here that an Oklahoma state court had placed it into liquidation and appointed a receiver. (Dkt. 152). Reluctantly, the Court granted the initial motion to stay (Dkt. 173) and the damages trial was vacated. (Dkt. 176). Subsequent motions to continue the stay have been granted, such that this case has been stayed since August of 2014 - now well over three years ago. (Dkts. 176, 183, 196, 200, 211).

         In 2015, Idaho Insurance Guaranty Association (“IIGA”) was permitted to intervene in this case after its motion to substitute as defendant for BancInsure was denied. (Dkts. 180, 193).

         Idaho Trust now moves to lift the stay and for entry of a preliminary injunction barring BancInsure's Receiver from seeking to readjudicate Idaho Trust's claims in the Oklahoma receivership proceeding. (Dkt. 216). Its primary basis for this motion is that, despite this Court's Memorandum Decision and Order granting summary judgment against BancInsure on its liability to Idaho Trust, the Receiver has recommended in the Oklahoma liquidation proceeding that BancInsure have no liability to Idaho Trust on the proofs of claim that correspond to the causes of action raised here. (Dkts. 216, 216-1, 223). Through the Receiver, BancInsure opposes the motion and defends its right and duty to make recommendations in the receivership proceeding as to filed claims. (Dkt. 224). IIGA likewise opposes the motion. (Dkt. 225).


         A. Idaho Trust's Motion for Preliminary Injunction Is Denied.

         At issue here is whether this Court is authorized to enjoin the BancInsure Receiver from pursuing a particular legal strategy in the Oklahoma receivership proceeding. Although federal courts have the power to issue preliminary injunctions under appropriate circumstances (Fed. R. Civ. P. 65; see also 28 U.S.C. § 636(c)(1)), in cases such as this one the authority is largely limited by the Anti-Injunction Act, 28 U.S.C. § 2283. The Act provides that “[a] court of the United States may not grant an injunction 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.” The prohibition of the Act “cannot be evaded by addressing the order to the parties” instead of to the state court itself. Atl. Coast Line R.R. Co. v. Bhd. of Locomotive Eng'rs, 398 U.S. 281, 287 (1970). “Ordering the parties not to proceed is tantamount to enjoining the proceedings.” Bennett v. Medtronic, Inc., 285 F.3d 801, 805 (9th Cir. 2002).

         The exception to the Act permitting a federal court to enjoin state court proceedings to “protect or effectuate its judgments” is known as the relitigation exception. Blalock Eddy Ranch v. MCI Telecomms. Corp., 982 F.2d 371, 375 (9th Cir. 1992). This exception is “designed to implement well-recognized concepts of claim and issue preclusion.” Smith v. Bayer Corp., 564 U.S. 299, 306 (2011) (quotation marks and citation omitted). It is “narrow and [is] not to be enlarged by loose statutory construction.” Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 146 (1988) (quotation marks and citation omitted). “Deciding whether and how prior litigation has preclusive effect is usually the bailiwick of the second court. . . . So issuing an injunction under the relitigation exception is resorting to heavy artillery.” Smith, 564 U.S. at 307.

         The relitigation exception applies where there is the possibility of a conflict between a state court judgment and a prior federal judgment. Montana v. BNSF Ry. Co., 623 F.3d 1312, 1315 (9th Cir. 2010). But a conflict can only exist if the federal court has decided the claims or issues presented in the subsequent state action. Id. (citing Blalock, 982 F.2d at 376); see also Smith, 564 U.S. at 306. Even so, however, “if no actual conflict is possible, [an] injunction could still be proper if res judicata would bar the state court proceedings.” Blalock, 982 F.2d at 375. “Res judicata applies when there is ‘(1) an identity of claims, (2) a final judgment on the merits, and (3) privity between parties.'” Montana v. BNSF Ry. Co., 623 F.3d at 1316 (quoting Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 2003)).

         Finally, “the fact that an injunction may issue under the Anti-Injunction Act does not mean that it must issue.” Chick Kam Choo, 486 U.S. at 151. Moreover, “[a]ny doubts as to the propriety of a federal injunction against state court proceedings should be resolved in favor of permitting the state courts to proceed in an orderly fashion to finally determine the controversy.” Atl. Coast Line R.R. Co., 398 U.S. at 297. “[A]n injunction can issue only if preclusion is clear beyond peradventure.” Smith, 564 U.S. at 308.

         Here, Idaho Trust seeks a preliminary injunction prohibiting the Receiver from seeking to adjudicate Idaho Trust's claims in the Oklahoma receivership proceeding, on the grounds that the Receiver has recommended denial of the claims in that forum despite this Court's prior order on summary judgment establishing liability on the very same claims. Mem. in Supp. of Mot. to Lift Stay and for Entry of Prelim. Inj. 1-2 (Dkt. 216-1). Idaho Trust contends that by recommending denial in the Oklahoma receivership proceeding, the Receiver is violating Idaho and ...

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