United States District Court, N.D. Oklahoma
OPINION AND ORDER
E. DOWDELL UNITED STATES DISTRICT JUDGE.
Court has for its consideration Plaintiffs Motion for Remand
and Brief in Support (Doc. 28). Defendant filed a Response
and Objection (Doc. 35), Plaintiff filed a Reply (Doc. 41),
and both parties submitted supplemental briefs (Doc. 50, 51).
Zeeco, Inc. ("Zeeco"), an Oklahoma corporation,
contracted with Fernas Construction India Pvt. Ltd.
("Fernas") to supply and install a flare system at
a site in India owned by ONGC Petro Additions, Ltd.
("OPAL"). (Doc. 2 at 67 of 104 [First Am. Compl. at
¶ 16]). As part of the Zeeco-Fernas transaction,
Zeeco caused JPMorgan Chase Bank ("Chase") to issue
bank guarantees ("the Bank Guarantees") to Fernas
in an amount totaling approximately USD $1, 500, 000.
(Id. at 67-68 [First Am. Compl. at ¶ 17]). The
Bank Guarantees were secured by letters of credit issued
under loan agreements between Chase and Zeeco. (Id.
at 68 [First Am. Compl. at ¶ 17]).
to Zeeco's First Amended Complaint, Zeeco performed all
related work to the satisfaction of OPAL, and OPAL issued
Zeeco a Certificate of Completion on April 28, 2016.
(Id. [First Am. Compl. at ¶¶ 19-20]).
Despite this Certificate of Completion, Fernas made a demand
for payment under the Bank Guarantees in India on or about
October 25, 2016. (Id. [First Am. Compl. at ¶
21]). Zeeco contends that Fernas sought fraudulent payment
under the Bank Guarantees due to its own financial woes.
(Id. [First Am. Compl. at ¶ 22]).
October 26, 2016, Zeeco initiated an action in the Tulsa
County District Court and filed a motion seeking to enjoin
Chase from paying or transferring any funds to Fernas.
(Id. at 13, 23). The Tulsa County District Court
granted an ex parte temporary restraining order that
same day, stating that "Defendant JP Morgan [Chase] is
Restrained from transferring or paying Fernas Construction
India Pvt Ltd." (Id. at 27). Despite the TRO,
Chase honored the Bank Guarantees and made payment to Fernas
no later than 12:20 p.m. on October 27, 2016 (Mumbai time).
(Id. at 72 [First Am. Compl. at ¶ 33]).
20, 2017, Zeeco filed its First Amended Verified Petition and
Claim for Restitution, which includes three counts: (1)
wrongful honor of the Bank Guarantees and breach of the loan
agreements, (2) misappropriation of funds, and (3) indirect
contempt of court. (Id. at 74-77 [First Am. Compl.
at ¶¶ 38-57]). Chase was served with a copy of the
summons and the amended petition on June 20, 2017. (Doc. 2 at
1 [Notice of Removal at ¶ 2]). On June 30, 2017, Chase
filed a Notice of Removal based on diversity of citizenship.
(Id. at 2-3 [Notice of Removal at¶¶4-5]).
31, 2017, Zeeco filed a Motion for Remand and Brief in
Support (Doc. 28). In that Motion, Zeeco argued that the
entire case should be remanded pursuant to the
Younger abstention doctrine. (Id. at 14).
In the alternative, Zeeco argued that this Court should
remand only the civil contempt proceeding and stay the
remaining claims. (Id. at 21). Zeeco has since
abandoned the first argument and is no longer requesting
remand of the entire case. (See Doc. 41 at 3, 10).
Court will first address whether the Younger
abstention doctrine applies in this case. In Younger v.
Harris, a California man filed a complaint in federal
court seeking to enjoin the state from prosecuting him. 401
U.S. 37, 38-39 (1971). A three-judge panel held that the
California Criminal Syndicalism Act under which he was
charged was unconstitutional and, therefore, restrained the
state district attorney from further prosecution of the man
for violating the Act. Id. at 40. The Supreme Court
reversed the panel's judgment on the basis that federal
courts must not "stay or enjoin pending state court
proceedings except under special circumstances."
Id. at 41. According to the Court, "Congress
has, subject to few exceptions, manifested a desire to permit
state courts to try state cases free from interference by
federal courts." Id. at 43. One reason behind
this "longstanding public policy" is "the
basic doctrine of equity jurisprudence that courts of equity
should not act . . . when the moving party has an adequate
remedy at law and will not suffer irreparable injury if
denied equitable relief." Id. at 43-44.
Specifically, duplicative legal proceedings should be avoided
"where a single suit would be adequate to protect the
rights asserted." Id. at 44. Another reason for
restraint is "the notion of 'comity, ' that is,
a proper respect for state functions, a recognition of the
fact that the entire country is made up of a Union of
separate state governments, and a continuance of the belief
that the National Government will fare best if the States and
their institutions are left free to perform their separate
functions in their separate ways." Id. In
short, "the normal thing to do when federal courts are
asked to enjoin pending proceedings in state courts is not to
issue such injunctions." Id. at 45.
the Younger doctrine arose in a criminal context, it
has since been applied in other circumstances. In Juidice
v. Vail, the main case on which Zeeco relies, a judgment
debtor and other co-plaintiffs brought a class action suit in
federal court to enjoin the state's use of its statutory
contempt procedures, arguing that the procedures violated the
Fourteenth Amendment. 430 U.S. 327, 330 (1977). The Supreme
Court held that the Younger doctrine applied and the
federal case had to be dismissed. Id. at 335-37.
Notably, the Court described a state's contempt power as
lying "at the core of the administration of a
State's judicial system." Id. at 335.
According to the Court, "federal-court interference with
the State's contempt process is 'an offense to the
State's interest . . . likely to be every bit as great as
it would be were this a criminal proceeding.'"
Id. at 336 (quoting Huffman v. Pursue,
Ltd., 420 U.S. 592, 604 (1975)).
also points to the Supreme Court case Pennzoil Co. v.
Texaco, Inc., 481 U.S. 1 (1987). In Pennzoil,
Texaco filed a § 1983 case to challenge the
constitutionality of Texas's judgment enforcement
procedures. 481 U.S. at 6. Before the Texas court had entered
judgment in the state court case, Texaco filed the federal
case seeking to enjoin the opposing party from taking any
action to enforce the state court judgment. Id.
Again, the Supreme Court held that the Younger
abstention doctrine applied and ordered the district court to
dismiss the case. Id. at 13, 18.
Younger, Juidice, and Pennzoil have in
common is that they all involved plaintiffs filing separate
federal suits in an attempt to enjoin ongoing state
proceedings-be it a prosecution (Younger), a
contempt proceeding (Juidice), or the enforcement of
a civil judgment (Pennzoil). Unlike in those cases,
there is no ongoing ...