Petitioners Brief — Vendo Co. v. Lektro-Vend Corp.

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In THE

Supreme Court of the United States

Ocroser Term, 1976

No. 76-156

THE VENDO COMPANY, a Missouri corporation,

Petitioner,

vs.

LEKTRO-VEND CORP., a Delaware corporation,

HARRY B. STONER and STONER INVESTMENTS, INC.,

a Delaware corporation,

Respondents.

On Writ of Certiorari to the United States Court

of Appeals for the Seventh Circuit

BRIEF FOR PETITIONER

Earu E. Poitiock

Gary SENNER

Pump A. HaBer

Louis C. KEerer

SoNNENSCHEIN CARLIN NATH

& RosENTHAL

8000 Sears Tower

Chicago, Illinois 60606

Attorneys for Petitioner

LaMBERT M. OcHSENSCHLAGER

Wayne F.. WerEr

Rem, OcHSENSCHLAGER, Murpoy & Hupp

75 S. Stolp Ave.

Aurora, Illinois 60507

Of Counsel

CHAS. P. YOUNG-CHICAGO

INDEX

PAGE

ED I 6 os eee su dnndbekessseks 1

PEE a otadendénnsndteuedesdesvesdedaee 1

QUESTIONS PRESENTED .................0000. 2

EPI EEEE coc ce vedesccsecécecescecs 2

PET vc cececnausenstenwenseweauawes 3

BT 5 cd naceccccucess duadundlendeen 3

B. The Facts Determined by the [Illinois Supreme

DT “cacudencadadscsuakuetseutendakusenaen 5

C. The Decisions of the Illinois Courts .......... 10

ae, Bs. re 13

1. The Motion for Preliminary Injunction ... 13

2. The District Court’s Decision ............ 14

3. The Court of Appeals’ Decision .......... 16

SUMMARY OF ARGUMENT ................. aoe

BEES -b babG4ds kh dnne ye sees caneeecdbedenens 21

I THE PRELIMINARY INJUNCTION IS

BARRED BY 28 U.S.C. § 2283 ............. 22

A. Section 16 of the Clayton Act Does Not

“Expressly Authorize” an Injunction to

Stay Proceedings in a State Court ....... 23

1. The Decisions Below are Contrary to

a Previously Settled Interpretation of

Sr DA b bn Sosa pidedkackansats 24

2. The Decision Below Flouts This

Court’s Interpretation of the “Ex-

pressly Authorized Exception to $2283 26

PAGE

B. The District Court’s Injunction Was Not

“Necessary in Aid of” Its Jurisdiction

within the Meaning of § 2283 ............ 33

Il. THE INJUNCTION VIOLATES FUNDA-

MENTAL PRINCIPLES OF COMITY AND

PE «+60cdshedcnseanvadvenseean 36

Ill. THE DISTRICT COURT LACKED JURIS-

DICTION TO REVERSE, REVIEW OR RE-

VISE THE FINAL JUDGMENTS OF THE

STATE COURTS BY COLLATERAL AT-

SE Gticdhsdaunieinsescealesindeenseens 39

EES Nn ewdnce-ns ticindksneneeenedeuveeess 41

CITATIONS

CasEs: PAGE

Amalgamated Clothing Workers of America v. Rich-

man Bros., 348 U.S. 511 (1955) ........... 22-23, 29, 33

American Manufacturers Mutual Ins. Co. v. American

Broadcasting-Paramount Theatres, Inc., 1966 Trade

Se ee ee i dius ue ekeWenaseees 24

Atlantic Coast Line R. Co. v. Brotherhood of Locomo-

tive Engineers, 398 U.S. 281 (1970) ...... 22, 23, 33, 39-

40, 41, 42

Avon Pub. Co. vy. American News Co., 143 F.Supp. 516

Ss SE Sabbnsbechseccaevinnebesenuuanes 24

Bascom Launder Corp. v. Telecoin Corp., 9 F.R.D. 677

i's 8 & Beer POT PC ORT CPST CTT TTC eS 24

Carter v. Ogden Corp., 524 F.2d 74 (Sth Cir. 1975) .. 24, 26

Cooley v. Board of Wardens, 53 U.S. 299 (1852) ...... 32

Cousins v. Wigoda, 409 U.S. 1201 (1972) ..... ...... 36

Gulf Ou Corp. v. Copp Paving Co., Inc., 419 U.S. 186

SOD Sed oe bende bade dnaddnsendatenctecseeceees 32

Helfenbein v. International Industries, Inc., 438 F.2d

ee Ee GS OE 6 05.0 0:60. 0d50ndbncceccececess 25-26

ili

CasEs: PAGE

Huffman v. Pursue, Ltd., 420 U.S. 592 (1975) ...... 20, 37

In re Glenn W. Turner Enterprises Litigation, 521

¢ fg fe Sh rere rere 33, 34, 36, 40

Jennings v. Boenning and Co., 482 F.2d 1128 (3rd Cir.

EE Se bLeauG bb NEUE EDEKO SUE Ne ee Kceereeeeees 33-34

Kline v. Burke Construction Co., 260 U.S. 226 (1922) 33

Lyons v. Westinghouse Electric Corp., 109 F.Supp. 925

(S.D.N.Y. 1952), aff'd, 201 F.2d 510 (2d Cir.), cert.

denied, 345 U.S. 923 (1953) ...........cceees 24, 25, 34

Lyons v. Westinghouse Electric Corp., 222 F.2d 184

(2d Cir.), cert. denied, 350 U.S. 825 (1955) ........ 30

Mitchum v. Foster, 407 U.S. 225 (1972) .... 18, 22, 24, 26-

32, 36, 37

National Labor Relations Board v. Nash-Finch Co.,

Ee ee ee 33

Oklahoma Packing Co. v. Oklahoma Gas and Electric

i OE occ ct nse vendceedewense 22, 32, 42

Potter v. Carvel Stores of N.Y., Inc., 314 F.2d 45 (4th

See Eee Odes die ineneenenecdes 24, 26

Red Rock Cola Co. v. Red Rock Bottlers, 195 F.2d 406

is Ore ei EK eee eue eee 34,37

Reines Distributors, Inc. v. Admiral Corp., 182 F.Supp.

ED cc ceceee Ah haneheee ed chenes 24

Response of Carolina v. Leasco Response, Inc., 498

F.2d 314 (5th Cir.), cert. denied, 419 U.S. 1050 (1974) 37

Rizzo v. Goode, 423 U.S. 362 (1976) ................ 36

Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) .... 39

Sar Industries, Inc. v. Monogram Industries, Inc., 1976-

1 Trade Cases J 60,816 (C.D. Cal.) ................ 24

Singer v. Hollander & Son, Inc., 202 F.2d 55 (3d Cir.

i gio cl bee oe elec hele hGGEes bee wencensaseess 40

Stone v. Powell, 96 S. Ct. 3037 (1976) ............... 37

Studebaker Corp. v. Gittlin, 360 F.2d 692 (2d Cir. 1966) 25

CAasEs: PAGE

T. Smith & Son, Inc. v. Williams, 275 F.2d 397 (5th

Cie. 1960) ...ccccccseccescsee esse eu eee 29

Toucey v. New York Life Insurance Co., 314 U.S. 118

(1962) ....00evec0es 600s ensues meen 22

United States v. American Building Maintenance In-

dustries, 422 U.S. 273 (CIBER) «sc cvcccnntskaee 32

United States v. Bayer Company, 135 F.Supp. 65 (S.D.

N.Y. 1065) .....000sscecescocesuuneennennan 26

Vernitron Corp. v. Benjamin, 440 F.2d 105 (2d Cir.),

cert. denied, 402 U.S. 987 (1971) ............008- 29, 34

Younger v. Harris, 401 U.S. 37 (1971) ............... 36

CONSTITUTION AND STATUTES:

United States Constitution, Article III ............. 35

Anti-Injunction Statute, 28 U.S.C. § 2283 . .2-3, 15, 16, 17-

19, 22-36, 37, 42

Bankruptcy Act, 11 U.S.C. § 1 et seq. ............. 27, 31

Civil Rights Act of 1871, § 1,42 U.S.C. § 1983 .13, 14, 18, 27-

29, 31, 32, 37, 40, 41

Clayton Act § 16, 15 U.S.C. § 26 .... 2,3, 15, 16, 17, 18, 20,

23.26, 29-32, 37, 38, 40

Emergency Price Control Act of 1942, 56 Stat. 33 .. 27,31

Frazier-Lemke Farm Mortgage Act, 11 U.S.C. § 203(s)

(3) on cccccccccceeeseeeceses5ue un ann 27, 31

Judicial Code, 28 U.S.C.

€146B(@) ... ncccccscccsceesneupenennennnnn 27, 31

5 ee! UU 27, 31

€ BOGE onc cccccccscescussceuneu enn 27, 31

4B USB.C. $168 ...ccccccccesscsssbeunneneee 27,31 ~

OTHER AUTHORITIES:

Moore, Fedral Practice (2d ed. 1974) .............. 30

IN THE

Supreme Court of the Anited States

Ocroser Term, 1976

No. 76-156

THE VENDO COMPANY, a Missouri corporation,

Petitioner,

vs.

LEKTRO-VEND CORP., a Delaware corporation,

HARRY B. STONER and STONER INVESTMENTS, INC.,

a Delaware corporation,

Respondents.

On Writ of Certiorari to the United States Court

of Appeals for the Seventh Circuit

BRIEF FOR PETITIONER

Opinions Below

The opinion of the Court of Appeals (App.' 276),

affirming the issuance of a preliminary injunction against

enforcement of final state court judgments, is unofficially

reported at 1976-1 Trade Cases { 60,919. The opinion of

the District Court (App. 226) is reported at 403 F. Supp.

527.

Jurisdiction

The judgment of the Court of Appeals was entered on

May 28, 1976 (App. 292). The Court of Appeals denied

petitioner’s petition for rehearing on July 16, 1976 (App.

293). Tae petition for a writ of certiorari was filed on

1“App.” refers to the Appendix filed with this Court pursuant

to Rule 36.

August 4, 1976, and was granted on October 4, 1976. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

Questions Presented

In a previously filed state court proceeding, the Tllinois

Supreme Court affirmed judgments to compensate petitioner

Vendo for respondent Stoner’s violation of his state-law

fiduciary duties while serving as a Vendo director and

officer, and this Court denied certiorari. Before the judg-

ments could be collected, however, Stoner obtained from

the Federal District Court a preliminary injunction against

enforcement of the judgments on the basis of Stoner’s claim

that the state proceeding and the judgments violated the

federal antitrust laws. The questions presented are:

. (1) Whether § 16 of the Clayton Act “expressly author-

izes” injunctions against state court proceedings as an

exception to the Anti-Injunction Statute, 28 U.S.C. § 2283.

(2) Whether principles of comity and federalism nor-

mally applicable to requested injunctions against state

court proceedings do not apply where the injunction is

sought under $16 of the Clayton Act.

(3) Whether a single federal district judge has juris-

diction to review and nullify a final decision of the highest

court of a state.

(4) Whether state court defendants who have deliber-

ately withdrawn their federal antitrust defense (and there-

by have prevented its consideration by the state courts)

may on the same federal antitrust ground subsequently ob-

tain a federal preliminary injunction against collection of

final judgments entered in the state proceeding.

Statutes Involved

The Anti-Injunction Statute, 28 U.S.C. § 2283, provides:

A court of the United States may not grant an in-

junction 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.

Section 16 of the Clayton Act, 15 U.S.C. § 26, provides:

Any person, firm, corporation, or association shall be

entitled to sue for and have injunctive relief, in any

court of the United States having jurisdiction over the

parties, against threatened loss or damage by a viola-

tion of the antitrust laws, including sections 13, 14, 18,

and 19 of this title, when and under the same condi-

tions and principles as injunctive relief against threat-

ened conduct that will cause loss or damage is granted

by courts of equity, under the rules governing such

proceedings, and upon the execution of proper bond

against damages for an injunction improvidently

granted and a showing that the danger of irreparable

loss or damage is immediate, a preliminary injunction

may issue: Provided, That nothing herein contained

shall be construed to entitle any person, firm, corpora-

tion, or association, except the United States, to bring

suit in equity for injunctive relief against any common

carrier subject to the provisions of the Act to regulate

commerce, approved February fourth, eighteen hrn-

dred and eighty-seven, in respect of any matter subject

to the regulation, supervision, or other jurisdiction of

the Interstate Commerce Commission.

STATEMENT

A. Introduction.

At issue is a preliminary injunction granted by the Dis-

trict Court enjoining proceedings in the Illinois state courts

to collect final judgments awarded to petitioner Vendo

against respondents Harry B. Stoner (“Stoner”) and

Stoner Investments, Inc. and affirmed by the [Illinois

Supreme Court.

Vendo is engaged in the business of manufacturing and

marketing certain types of vending machines. During the

period 1959 to 1964, Stoner was both an officer and a direc-

tor of Vendo. Stoner Investments (formerly Stoner Man-

ufacturing Corporation) is a real estate and investment

company wholly owned by Stoner and his wife.

In the state case, the Illinois Supreme Court held that

Stoner, during the 1959-64 period when he was both an

officer and director of Vendo, had repeatedly and flagrantly

violated his fiduciary duties to Vendo by, inter alia, mis-

appropriating a corporate opportunity rightfully belong-

ing to Vendo. The Illinois Supreme Court accordingly

affirmed the judgments (in the amount of $7,516,335) in

Vendo’s favor. Vendo Co. v. Stoner, 58 Ill. 2d 289, 321

N.E. 2d 1 (1974). This Court denied certiorari, 420 U.S.

975 (1975).

The judgments having become final, Vendo instituted

proceedings in the Illinois state courts to collect the judg-

ments. The Stoner interests responded to these collection

efforts by reactivating this federal action (which they had

filed over eleven years ago shortly after Vendo’s filing of

its state court action) and by obtaining from the District

Court a preliminary injunction barring Vendo from taking

“any further steps to enforce or collect, or attempt to

enforce or collect” the final state court judgments (App.

270). The Court of Appeals affirmed the injunction, and

this Court granted certiorari to review that decision.

As already noted, both the state and federal actions were

commenced over eleven years ago. Vendo filed its action on

August 10, 1965 in the Circuit Court of Kane County, TIli-

nois against Stoner and Stoner Investments. The federal

action was filed against Vendo two months later on October

21, 1965 by the respondents—Stoner and Stoner Invest-

ments (the two defendants in the state court action) plus

Lektro-Vend Corporation, a vending-machine manufac-

turer which (like Stoner Investments) is controlled by the

Stoner family.

Both in their federal complaint and their answer to

Vendo’s state court complaint (by way of affirmative de-

fense), the respondents charged that the state court litiga-

tion was brought and was being prosecuted in violation of

§§ 1 and 2 of the Sherman Act. (App. 17-19, 21-25, 31-32.)

(Subsequently, as pointed out infra, pp. 11-12, Stoner and

Stoner Investments voluntarily withdrew their federal anti-

trust defense in the state action.)

B. The Facts Determined by the Illinois Supreme Court.

In the marathon state court proceeding, it was determined

by the Illinois Supreme Court that Stoner, individually and

through Stoner Investments, had violated his fiduciary

duties to Vendo during the 1959-64 period when he was an

officer and director of Vendo (a) by secretly supporting

the development and marketing of a new type of candy

vending machine by Lektro-Vend, (b) by withholding the

facts concerning his involvement with Lektro-Vend and

misleading Vendo with regard to its possible acquisition of

the Lektro-Vend machine, and (c) by misappropriating

Vendo’s opportunity to acquire the machine.

It was also determined that Stoner and Stoner Invest-

ments had unlawfully breached the non-competition cove-

nants in their agreements with Vendo, but the Illinois Su-

preme Court held that in any event the judgments were

proper on the basis of Stoner’s violation of his fiduciary

duties “[q]uite apart from any liability which may be

predicated upon a breach of the covenants against compe-

tition . . .” and “[rjegardless of the . . . disposition of

those restraint-of-trade issues .. .” (App. 111, 117).

The basic facts are set forth in the Illinois Supreme

Court’s opinion written by Mr. Justice Schaefer (App. 100-

23).

As there pointed out, Stoner was the president and the

controlling owner of Stoner Manufacturing Corporation

(now Stoner Investments), a company which had been en-

gaged in the business of making and selling candy-vending

machines throughout the United States. In April, 1959,

Vendo and Stoner Manufacturing entered into a contract

for the purchase by Vendo of the assets of Stoner Manu-

ufacturing. Vendo’s “purpose in making the acquisition

was in part to add a candy-vending machine to its line. So

far as Harry B. Stoner was concerned, the motive for the

sale appears to have arisen from a concern that the poor

state of his health would prevent him from continuing in

the active direction of his company.” (App. 101-02.)

Under the sale contract Vendo agreed to pay Stoner

Manufacturing $3,400,000 in cash, 60,000 shares of Vendo

stock, and a share of certain profits realized from the use

of the assets being purchased for a period of 10 years.’

A non-competition covenant for the same 10-year period

was also provided.®

On June 1, 1959, Stoner executed an employment contract

with Vendo, providing for compensation of Stoner at a

salary of $50,000 a year. “Stoner was hired by [Vendo] on

the basis of the skill and experience which he could bring to

[Vendo]” (App. 112). The employment contract also con-

2 Vendo agreed to pay Stoner Manufacturing for a period of

10 years (or until such time as Vendo might exercise an option to

purchase the Stoner plant) all profits in excess of $250,000 realized

from the use of the assets being purchased, and for a period of

10 years 25% of the income received from foreign sales realized

from the use of those assets.

3 Stoner Manufacturing (now Stoner Investments) agreed that

“for a period of ten (10) years after the closing, the Company

will not in any manner, directly or indirectly, enter into or engage

in the United States or any foreign country in which Vendo or any

affiliate or subsidiary is so engaged, in the manufacture and sale of

vending machines or any business similar to that now being con-

ducted by the Company.” (App. 102-03.)

tained a non-comnetition covenant. Stoner became a di-

rector of Vendo as well as president of the Company’s Au-

rora Division (formerly the Stoner Manufacturing plant).

The candy-vending machine which was being manufac-

tured by Stoner Manufacturing at the time it sold its assets

to Vendo in 1959 was called a “drop shelf” machine. The

“Lektro-Vend” model subsequently developed with Stoner’s

secret help, at the same time he was an officer and director

of Vendo, possessed several significant advantages over the

drop-shelf model (including a “first in, first out” feature)

which made it popular and successful with companies which

purchase and service vending machines. (App. 104.)

As the result of research into the possibility of developing

a vending machine of this character, Vendo in August, 1959,

had built two developmental models. Sketches of these were

shown to Stoner.®

In mid-1960, two engineering employees of Vendo, Rod

Phillips and his son William (who had previously worked

for Stoner Manufacturing), resigned their employment at

*“5. During the term of this agreement and for a period of five

(5) years following the termination of his employment hereunder,

whether by lapse of time or by termination as hereinafter provided,

Stoner shall not directly or indirectly, in any of the territories in

which the Company or its subsidiaries or affiliates is at present con-

ducting business and also in territories which Stoner knows the

Company or its subsidiaries or affiliates intends to extend and carry

on business by expansion of present activities, enter into or engage

in the vending machine manufacturing business or any branch there-

of, either as an individual on his own account, or as a partner or

joint venturer, or as an employee, agent or salesman for any person,

firm or corporation or as an officer or director of a corporation or

otherwise .. .” (App. 103-04.)

5 While agreeing on the desirability of developing a machine

with such capabilities, Vendo personnel considered the models to be

defective in certain mechanical respects and too expensive to pro-

duce, and the research project to develop such a machine was ac-

cordingly shelved.

Vendo and solicited Stoner’s financial support. In late

1960 or early 1961, Rod Phillips approached Stoner with

a request that Stoner provide financial support to cover

the development of a vending machine of the new type,

and Stoner agreed to do so. Interest-free loans which

aggregated some $200,000 were made to Phillips by Stoner

Investments during 1961 and 1962. Stoner also made avail-

able rent-free a building owned by him for use in conduet-

ing the development work. In 1961, when two more Vendo

employees resigned, they joined Rod and William Phillips

on the research and development project and received

monthly salaries aggregating $1,150 from Stoner Invest-

ments. (App. 105-06.)

By October, 1962, the developmental work on the new ma-

chine had progressed to the point where a prototype could

be exhibited at a trade show, and it won a very favorable

reaction in the industry. In December, 1962, Stoner asked

Vendo’s board chairman Elmer Pierson, to be released

from his employment contract, stating thet he had an oppor-

tunity to invest in the manufacture and sale of the Lektro-

Vend machine. “Stoner did not disclose that he had already

been giving support to the development of Lektro-Vend.”

(App. 106, italies added.)

Vendo refused to release Stoner from his contract, and

Pierson informed Stoner that Vendo itself had an interest

in buying the Lektro-Vend machine. Pierson asked Stoner

to ascertain if Rod Phillips had any interest in selling it

and, if so, to set up a meeting between Phillips and repre-

sentatives of Vendo. Stoner then wrote one of Vendo’s

vice-presidents, Spencer Childers, that Phillips would be

willing to sell if the price were high enough. Stoner told

Vendo that Phillips wanted $1,500,000 and that a third

company had expressed a willingness to pay that amount.

In March, 1963, Stoner informed Vendo that he had told

Phillips that he assumed, in the absence of further word

from Childers, that Vendo no longer had an interest in

making the purchase. Childers wrote back stating that

Vendo still had such an interest, but that the asking price

of $1,500,000 was too high. (App. 107.)

In December, 1962, Stoner’s sister-in-law—Mrs. Ruth

Netrey—lent Phillips $350,000, which was later increased

to $525,000, at an interest rate of 442%. No payment was

made on either principal or interest until September, 1963,

at which time Mrs. Netrey received a note for the amount

due her from the Lektro-Vend Corporation, which had

just been organized. The proceeds of the loan were used

in part to pay off the loan due Stoner, as Mrs. Netrey and

Stoner each knew. The original stockholders of Lektro-

Vend Corporation were Rod Phillips and William Phillips,

certain other employees, and Mrs. Netrey, who held 50%

of the stock. (App. 108.)

During 1963 Rod Phillips proceeded with his plans to

set up a manufacturing operation, and in March or April

Stoner Investments completed the construction of a build-

ing in Aurora which was made available to Phillips for this

purpose.

Stoner had a further conversation with Pierson in the

spring or summer of 1963, in which Pierson inquired as to

the actual extent of Stoner’s involvement with Phillips.

Stoner told him that the relationship had been confined to

loans and that these had since been repaid by another per-

son. Stoner did not disclose that this other person was

his sister-in-law. “This conversation marked the first oc-

casion on which Stoner disclosed any involvement with

Lektro-Vend, and the disclosure was far from complete.”

(App. 108, italies added.)

In March, 1964, Stoner Investments contracted to sell

to Lektro-Vend Corporation the new plant which had been

built by Stoner Investments during the previous year. The

purchase was made by Lektro-Vend with the proceeds of a

bank loan which was advanced subject to an agreement

by Stoner Investments to guarantee the repurchase of the

property in the event of a default on the loan.

Stoner ceased being a Vendo director in March or April

of 1964. Stoner’s contract of employment terminated June

1, 1964, and it was not renewed. On June 10, 1964, Lektro-

Vend issued 5,000 shares of stock to Mrs. Stoner, and on

July 15 it issued 5,000 shares of stock to Stoner Invest-

ments. (App. 109.)®

C. The Decisions of the Illinois Courts.

In December, 1966, the state trial court sitting without a

jury found in favor of Vendo. In response to “the ques-

tion: What is the responsibility of a man who is in a

position of trust and a fiduciary capacity to the stockhold-

ers?”, the court stated that “I find it most difficult to come

up with an answer that that sort of conduct is conducive

and in compliance with the responsibility as a director of

a corporation”. (App. 41.) The court initially entered a

judgment against the two defendants jointly for $1,100,000

and a judgment against Stoner individually for $250,000.

(App. 47.)

The defendants appealed to the Illinois Appellate Court,

which in 1969 sustained the trial court’s conclusion con-

cerning Stoner’s misconduct’? but remanded the case to the

trial court for a further hearing with respect to the amount

of damages recoverable by Vendo. (App. 49-81.)

The Illinois Appellate Court also sustained the validity

of the non-competition covenants in the sale and employ-

ment contracts. It found that the defendants’ breaches of

the covenants occurred “in-term”, i.e., during the period

® On March 28, 1976, Stoner died; and on October 1, 1976, Mrs.

Stoner as his administrator was substituted as a party plaintiff

in the District Court.

7In addition to Stoner’s violation of his fiduciary duties as an

officer and director, Stoner had also been held liable by the trial

court on the ground of theft of trade secrets belonging to Vendo

but this alternative ground was reversed by the Illinois Appellate

Court (App. 61-64) and the issue was not pursued thereafter.

specified by the contract in which Stoner was to be paid

to perform services for Vendo and in which Stoner Invest-

ments was to be paid as additional compensation a per-

centage of Vendo’s profits derived from the assets which it

had sold to Vendo. (App. 64-70.)

On the other hand, the Illinois Appellate Court held that

the trial court had erred in striking the defendants’ federal

antitrust defense and that they were entitled on remand to

a hearing on the issue. (App. 77-79.) However, just before

the second trial was to commence, Stoner and Stoner In-

vestments formally withdrew their federal antitrust de-

fense which the Illinois Appellate Court had aé their behest

sustained and had directed the trial court to consider.

(App. 82.)

At the second trial, in 1971, on the basis of additional

evidence on damages, the trial court awarded a judgment to

Vendo in the amount of $170,835 against Stoner and a

judgment against both defendants for $7,345,500. (App.

89-91.) The defendants again appealed to the Illinois

Appellate Court, which in 1973 affirmed the judgment

against Stoner but reversed the judgment against the two

defendants jointly and remanded the case for a further

hearing. (App. 94-99.) Each side filed a petition for leave to

appeal to the Illinois Supreme Court, and both petitions

were allowed.

In its opinion, written by Mr. Justice Schaefer, the Ilh-

nois Supreme Court sustained both judgments, strongly

condemning Stoner’s and Stoner Investments’ “wrongful

acts” (App. 123), “misconduct” (App. 114), and “misappro-

priating the Lektro-Vend” machine. (App. 115.) The Court

held (App. 111, 112-13):

“Quite apart from any liability which may be predt-

cated upon a breach of the covenants against compett-

tion contained in the sales agreement and the employ-

ment contract, it is clear that Stoner violated his

fiduciary duties to plaintiff during the period when he

was a director and an officer of plaintiff... .

“Stoner had a foot in each camp. Not only did his un-

disclosed individual interest in controlling the further

development and ultimately the manufacture and sale

of the Lektro-Vend create the possibility of his taking

an unfair advantage of plaintiff, but the evidence gives

strong indication that he actually misled plaintiff while

he was purportedly acting as plaintiff’s agent with

regard to plaintiff’s possible acquisition of the Lektro-

Vend.” (Italics added.)

With respect to the non-competition covenants, the II-

linois Supreme Court held (App. 116-18) :

“The appellate court concluded, in our opinion cor-

rectly, that defendants’ activities directed toward

the development and thereafter the marketing of the

Lektro-Vend, consisting of substantial financial aid,

and the provision of physical facilities, as well as

defendant’s ownership interest in the Lektro-Vend

enterprise, were so substantial as to go beyond the

limits established by the covenants.

“Regardless of the appellate court’s disposition of

those restraint-of-trade issues, the defendants may,

as we have pointed out, be held liable on the ground

of a breach of fiduciary obligation on the part of

Stoner....

“At the original trial defendants raised as an affirma-

tive defense and by way of counterclaim a charge that

the sale agreement and the employment contract vio-

lated both the Illinois Antitrust Act (Ill. Rev. Stat.

1973, ch. 38, par. 60-1 et seq.) and the Federal antitrust

laws (15 U.S.C. see. 1 et seq.). The latter charge was

withdrawn by defendants on the remand, and refer-

ences in the record indicate that at some point a suit

was filed against plaintiff in the United States District

Court for the Northern District of Illinois relating to

the alleged violations of Federal law.

“With respect to the State antitrust claim. . . the

Illinois act, having been enacted in 1965, long after the

contracts here in question were entered into, cannot

properly form the basis of a counterclaim by de-

fendants.” (Italics added.)

On November 27, 1974, the Illinois Supreme Court denied

a petition for rehearing filed by Stoner and Stoner Invest-

ments. On January 28, 1975, Mr. Justice Rehnquist denied

their request for a stay of execution pending consideration

of their petition for certiorari. On March 17, 1975, this

Court denied the petition for certiorari (420 U.S. 975).

D. The Proceedings Below.

1. The Motion for Preliminary Injunction.

On January 2, 1975, after Vendo commenced efforts to

collect its judgments, the respondents filed an amended

complaint in the federal case, not only reasserting their

antitrust claim with respeet to the state action but also

claiming under 42 U.S.C. § 1983 a denial of due process in

the state action. (App. 124-59.)

Thereafter, on January 23, 1975, Stoner and Stoner In-

vestments (but not plaintiff Lektro-Vend) filed a motion

for a preliminary injunction (App. 177), contending that, if

Vendo were permitted to collect the judgments against

them, they would be without funds to pay their attorneys

to prosecute their lawsuit against Vendo. They also claimed

that collection by Vendo would result in Vendo’s acquiring

control of Lektro-Vend.

In its response, Vendo formally offered to enter into a

consent decree which would preclude Vendo’s acquiring

such control of Lektro-Vend. (App. 208-10.)*

8 After the District Court issued its opinion but before the

District Court entered its injunction order, Vendo proposed an

even more far-reaching consent decree. This second proposed con-

sent decree would have categorically prohibited Vendo from acquir-

ing any stock of either Lektro-Vend or Stoner Investments. (App.

257-59.)

In respondents’ post-hearing reply brief, after Vendo had

submitted its brief, Lektro-Vend moved to join in the re-

quest for injunctive relief.

2. The District Court’s Decision.

In its decision on May 29, 1975, granting the preliminary

injunction, the District Court acknowledged that it did not

have jurisdiction to collaterally review the state court judg-

ments. Accordingly, the Court refused to entertain re-

spondents’ due process claim based upon 42 U.S.C. § 1983.

(App. 225-27, n.1.) However, the District Court concluded

that “... the state court proceedings must be examined by

this Court fur the purpose of determining whether Vendo

prosecuted those cases as part of an anti-competitive

scheme”. (App. 232.) The District Court (App. 232, n.4)

stated that the Illinois Supreme Court opinion “makes such

a review imperative” because the Illinois Court “expressly

refused to consider the allegations that the state proceed-

ings were part of an anticompetitive scheme” (notwith-

standing the fact that the only reason the Illinois Supreme

Court did not consider Stoner’s federal antitrust defense

was because it had been voluntarily withdrawn by Stoner

—see pp. 11-12, supra).

On that basis, the District Court made its own conclusory

findings and held that there had been an adequate showing

of likelihood of ultimate success. The District Court, how-

ever, neither found nor held that enforcement of the judg-

ments would violate the antitrust laws. Instead, the Court

merely concluded that the non-competition covenants “were

overly broad” (App. 233) and that “There is persuasive

evidence that Vendo’s activities in its litigation against the

Stoner interests in Illinois state court were not a genuine

attempt to use the adjudicative process legitimately” (App.

237, citing only events in the 1963-66 period).®

The District Court held it to be immaterial that Vendo’s

state action had been found to be meritorious and that

the Illinois Supreme Court—‘“[q]uite apart from” and

“(rlegardless of” the non-competition covenants—had up-

held the judgments on the basis of Stoner’s violation of his

fiduciary duties as a director and officer. The District Court

reasoned that Stoner would not have been a director of

Vendo if it had not been for the 1959 agreements, and that

“(t]he 1959 agreements were cut from one piece of anti-

competitive cloth and cannot be snipped apart.” (App.

234-35.)

The District Court held that 416 of the Clayton

Act is a statute which “expressly authorizes” stays of state

court proceedings within the first exception provided in

28 U.S.C. § 2283. The District Court also held § 2283 inap-

plicable on the ground that the injunction is necessary to

protect the jurisdiction of the Court, within the second

§ 2283 exception, since in the Court’s view (notwithstanding

Vendo’s offer of a consent decree with respect to both those

companies) two of the three plaintiffs, Stoner Investments

and Lektro-Vend, might be eliminated from the case by

Vendo’s further collection efforts. (App. 239-41.)

The District Court further held that “Principles of

comity and federalism do not prevent the issuance of an

injunction .. .” since “The federal action here is based in

part on the very proceeding sought to be enjoined.” (App.

241.)

® The District Court also stated that, “Zf the state court litigation

was itself part of the anticompetitive scheme, a judgment arising

from such litigation is not an ordinary debt” (App. 238, italies

added), and “Jf federal law is violated by continuation of the state

action the paramount national interest requires court intervention”

(App. 241, italies added), but reached no conelusion as to whether

continuation of the state action (i.e., through collection of the state

judgments) would violate the antitrust laws.

The Court’s decision also granted Lektro-Vend’s post-

hearing request to join in the preliminary injunction motion.

(App. 227, n.2.)

On June 27, 1975, the District Court issued its Order

Granting Preliminary Injunction (App. 266-75) prohibit-

ing all efforts by Vendo to collect its final state court

judgments and requiring respondents to post an injunction

bond of only $2,500.00.

3. The Court of Appeals’ Decision.

On May 28, 1976, the Court of Appeals affirmed the

District Court’s decision.

In its opinion, the Court of Appeals held that 28 U.S.C.

§ 2283 did not bar the injunction. The Court held that § 16

of the Clayton Act “expressly authorizes” injunctions

against state court proceedings, within the scope of that

exception to § 2285, on the ground that § 16 grants equitable

jurisdiction only to federal courts. (App. 286, 288.)

The Court of Appeals also rejected Vendo’s argument

that, entirely apart from the absolute prohibition of § 2283,

principles of comity and federalism barred the District

Court’s injunction against enforcement of the decision of

the highest court of a state. The Court of Appeals held:

“The principle of comity has no applicability when the

exclusive remedy for an injury lies in the federal court.”

(App. 289.)

In addition, the Court of Appeals expressly approved

the District’s Court’s assertion of its jurisdiction to review

a final decision of the Illinois Supreme Court. (App. 289.)

SUMMARY OF ARGUMENT

The decision below sanctions a procedure whereby a

single federal district judge—through the device of a pre-

liminary injunction—has effectively nullified final state

court judgments which the Illinois Supreme Court affirmed

after nearly ten arduous years of litigation and which this

Court declined to review. The district judge, moreover, did

so on the very same federal claim which the plaintiffs in

this case had deliberately withdrawn as a defense in the

state proceeding.

Such a procedure is fundamentally at war with settled

law regarding the Anti-Injunction Statute, principles of

comity and federalism, and collateral review of state court

judgments.

The Anti-Injunction Statute, 28 U.S.C. § 2283 (supra, pp.

2-3), provides that a federal court “may not grant an in-

junction to stay proceedings in a state court except as

expressly authorized by Act of Congress, or where neces-

sary in aid of its jurisdiction, or to protect or effectuate its

judgments.” This Court has repeatedly admonished that

the exceptions to § 2283 are to be strictly and narrowly con-

strued to prevent needless friction between state and fed-

eral courts.

Section 16 of the Clayton Act (supra, p. 3) does not

“expressly authorize” injunctions against state court pro-

ceedings within the meaning of the first exception to § 2283.

By its terms, § 16 does not provide for such injunctions; if

anything, the statutory language is directly to/the contrary.

Nor is there any basis for construing § 16 to guthorize such

injunctions through some implied grant of power.

1. Prior to the District Court’s decisigf in this case, no

court had ever held that § 16 “expressly Authorizes” injunc-

tions against state court proceedings¢ Indeed, every court

which had expressly consi ie issue—ineluding the

Second and Fourth Circuits—had uniformly held to the

contrary.

2. Only eight federal statutes have been recognized by

this Court to “expressly authorize” injunctions against state

court proceedings. See Mitchum v. Foster, 407 U.S. 225,

234-35 (1972). Each of these eight statutes either contains

specific language providing for stays of state proceedings

or, in the absence of such language, necessarily requires by

its very nature and function that conflicting state judicial

proceedings must be enjoined in order to achieve the statu-

tory purpose. Thus, in Mitchum, this Court found that “the

very purpose of § 1983” of the Civil Rights Act was to

transform the previously existing relationship between fed-

eral and state courts and to prevent abuses by (inter alia)

state courts.

Section 16 of the Clayton Act clearly is not a statute of

this type. Even apart from the absence of specific language

providing for stays of state proceedings, there is not the

slightest basis (and the Court of Appeals pointed to none)

for believing that §16 was designed to prevent abuses by

state courts or that it was “the will of Congress” to place

injunctive restraints on state court proceedings.

The crux of the decision below is that the state suit would

allegedly be enjoinable in the absence of § 2283 and there-

fore the application of § 2283 would impair § 16 jurisdiction

in this case. But the whole object of § 2283 is to bar certain

injunctions which might otherwise be appropriate, “regard-

less of how extraordinary the particular circumstances may

be” (Mitchum, 407 U.S. at 229). Plainly the possible impact

on any particular case—as distinguished from achievement

of an overall statutory purpose—does not justify a conclu-

sion that a federal statute “expressly authorizes” stays of

state court proceedings.

Indeed, if it were otherwise, then every federal statute

authorizing injunctive relief would fall within the “ex-

pressly authorized” exception and would permit enjoining

state court proceedings—a result which is completely anti-

thetical to the entire purpose of § 2283 and this Court’s

interpretation of it.

The “necessary in aid of jurisdiction” exception to § 2283

—which was relied upon by the District Court but not by

the Court of Appeals—also is plainly inapplicable in this

case.

According to the District Court, the preliminary injunc-

tion was “necessary” to its jurisdiction on the ground that

Vendo’s enforcement of its judgments might result in

Vendo’s taking control of Stoner Investments and Lektro-

Vend, thereby possibly eliminating two of the three plain-

tiffs in the federal suit as independent parties. Such

reasoning is doubly erroneous.

First of all, Vendo had offered a consent decree which

would eliminate any possibility of Vendo’s acquiring con-

trol of those two plaintiffs. Therefore, an injuncticn against

enforcement of the state court judgements could not pos-

sibly be “necessary” to the District Court’s jurisdiction.

Second, there is wholly lacking any authority for holding

thaCi@state court proceeding may be enjoined to preserve

federal plaintiffs’ compliance with the “case or controversy

requirement. Even more clearly, there is no justification

for enjoining a state court proceeding to preserve the

standing of only some of the plaintiffs in the federal case.

Here, irrespective of the standing of Stoner Investments .

and Lektro-Vend, Stoner (or his administrator) would con-

tinue to be an adverse party and, therefore, the District

Court would not in any event be deprived of jurisdiction.

Il.

Even apart from § 2283, the injunction granted by the

District Court violates fundamental principles of comity

and federalism which must restrain a federal court when

asked to enjoin a state court proceeding. These principles

apply even where an injunction is sought under a federal

statute that “expressly authorizes” injunctions against

state court proceedings. See Huffman v. Pursue, Ltd., 420

U.S. 592 (1975).

Considerations of comity and federalism are especially

critical where, as in the present case, (1) the attack upon

state court proceedings is against final judgments which

had been affirmed by the highest court of the state and (2)

the attack is on grounds which actually were presented to

the state courts and which would have been adjudicated by

the state courts except for respondents’ deliberate with-

drawal of those issues from the state court proceeding.

The Court of Appeals clearly erred in holding—in direct

conflict with Fifth Circuit decisions—that principles of

comity and federalism do not apply to injunctions issued

under §16 of the Clayton Act. Contrary to the decision

below, a federal injunction against the final state court

judgments was not the respondents’ “exclusive remedy”

under the federal antitrust laws. Instead, respondents had

an opportunity for full and fair litigation of the antitrust

issues in the state court proceeding—and could then have

presented the matter to this Court on certiorari—but they

chose for their own tactical reasons to withdraw those

issues from the state courts’ consideration.

Il.

The District Court also lacked jurisdiction to reverse,

review or revise the final judgments of the state courts by

collateral attack. Such a judgment, affirmed by the highest

court of the state, can be reviewed only by this Court (which

in this case denied certiorari) and not by any lower federal

court.

ARGUMENT

The decision below and the theories offered to support it

constitute an affront to the most basic principles underlying

federal-state relations and the use of federal equity power.

As set forth more fully in the Statement (supra, pp.

11-13), the Illinois Supreme Court, after nearly ten arduous

years of litigation, affirmed judgments to compensate

Vendo for Stoner’s flagrant violations of his state-law

fiduciary duties while serving as a Vendo director and

officer. This Court denied certiorari, and the state judg-

ments were unequivocally final and entitled to full faith

and credit. But then, in order to forestall collection of

the judgments against them, Stoner and Stoner Invest-

ments hit upon a new strategem. They obtained from the

District Court a preliminary injunction against enforce-

ment of the judgments on the claim that the state suit from

its very inception was violative of the federal antitrust

laws—the same claim, moreover, which they had deliber-

ately withdrawn as a defense in the state proceeding (and

thereby prevented the state courts and this Court from

adjudicating in that proceeding).

The ramifications of this procedure—approved by the

Court below—are, to say the least, extraordinary. It would

give to every district judge the power to review, set aside,

and nullify final state court judgments through the prelim-

inary injunction device. It would reduce the highest tribu-

nals of any state to the status of special masters subject

to de novo control by a single district judge. Nor is there

any reason why such control should be exercised only under

the federal antitrust laws; on precisely the same theory,

final state court judgments—even, as here, after the denial

of certiorari—could likewise be preliminarily enjoined

under myriad other federal statutes as well.

To permit this new avenue of appeal from a final state

court judgment to a federal district court would undermine

the integrity of state judicial processes and thrust the

state and federal courts into frequent and bitter conflict. It

also would—as this “Bleak House” case (now in its twelfth

year) dramatically illustrates—significantly contribute to

indefensible delay in the disposition of litigation.

As we shall show, the decision below sanctioning such a

procedure is fundamentally at war with settled law regard-

ing the Anti-Injunction Statute, principles of comity and

federalism, and collateral review of state court judgments.

I. THE PRELIMINARY INJUNCTION IS BARRED

BY 28 U. S. C. § 2283.

The Anti-Injunction Statute, 28 U.S.C. § 2283 (supra, pp.

2-3), provides that a federal court “may not grant an in-

junction to stay proceedings in a state court except as

expressly authorized by Act of Congress, or where neces-

sary in aid of its jurisdiction, or to protect or effectuate its

judgments.”

This statute represents “a limitation of the power of the

federal courts dating almost from the beginning of our his-

torv and expressing an important Congressional policy—to

prevent needless friction between state and federal courts”.

Oklahoma Packing Co. v. Oklahoma Gas and Electric Co.,

309 U.S. 4, 8-9 (1939). See also Toucey v. New York Life

Insurance Co., 314 U.S. 118, 129 (1941); Mitchum v. Foster,

407 U.S. 225, 232-233 (1972).

Pursuant to this fundamental policy, the statute consti-

tutes an absolute bar to a federal court injunction against

pending state proceedings except where one of the three

specifically stated exceptions applies. Atlantic Coast Line

R. Co. v. Brotherhood of Locomotive Engineers, 398 U.S.

981, 286-287 (1970); Mitchum v. Foster, 407 U.S, 225, 228-

29 (1972).

This Court has repeatedly held that the three exceptions

to § 2283 are to be strictly and narrowly construed. Thus,

in Amalgamated Clothing Workers of America v. Richman

Bros., 348 U.S. 511 (1955), the Court stated, in referring to

the enactment in 1948 of 4 2283 in its present form, that

“. .. Congress made clear beyond cavil that the prohibition

is not to be whittled away by judicial improvisation” (p.

514) and that “This is not a statute conveying a broad

general policy for appropriate ad hoc application” (pp. 515-

516, italics added). Similarly, in the Atlantic Coast Line

case, supra, the Court admonished that “the exceptions

should not be enlarged by loose statutory construction.”

(398 U.S. at 287, italics added; see also p. 297.)

In this case, the District Court held that two of the

exceptions applied; the Court concluded that 416 of the

Clayton Act “expressly authorizes” injunctions against

state court proceedings, and that such an injunction was

also “necessary in aid of” the District Court’s jurisdic-

tion. (App. 239-41.) The Court of Appeals rested its

decision as to § 2283 solely on the “expressly authorized”

exception and did not pass on the applicability of the “in

aid of jurisdiction” exception.

Both decisions below are directly contrary to the estab-

lished law interpreting § 2283 and the clearly defined legis-

lative and judicial policies against ad hoc expansion of the

exceptions to the statute.

A. Section 16 of the Clayton Act Does Not “Expressly

Authorize” an Injunction to Stay Proceedings in

a State Court.

By its terms, of course, § 16 of the Clayton Act (set forth

supra, p. 3) plainly does not “expressly authorize” an

injunction to stay proceedings in a state court. On the con-

trary, the statute merely permits “. . . injunctive relief, in

any court of the United States having jurisdiction over

the parties, against threatened loss or damage by a violation

of the antitrust laws ..., when and under the same condi-

tions and principles as injunctive relief against threatened

conduct that will cause loss or damage is granted by courts

of equity, under the rules governing such proceedings .. .”

(italics added). If anything, the text of the statute clearly

indicates that § 16 injunctions are subject to the usual and

customary restrictions on federal equity power—including,

preeminently, § 2283’s restriction against enjoining state

proceedings.

Furthermore, as we shall show, § 16 does not “expressly

authorize” injunctions against state court proceedings by

way of some implied grant of power.

1. The Decisions Below Are Contrary to a Pre-

viously Settled Interpretation of § 2283 and

§ 16.

In aeeordance with the principle that § 2283 exceptions

are to be strictly construed, and as pointed out in Mitchum

v. Foster, supra, 407 U.S. at 234-37, only a small number of

federal statutes have been found by this Court to “express-

ly authorize” injunctions against state court proceedings.

And, prior to the District Court’s decision in this case,

no court had ever held that § 16 was such a statute. On

the contrary, every court which had expressly considered

the issue—including the Second and Fourth Cireuits—

had uniformly held that § 16 does not “expressly author-

ize” injunctions against state court proceedings.'®

10 See Lyons v. Westinghouse Electric Corp., 201 F.2d 510 (2d

Cir.), cert. denied, 345 U.S. 922 (1953), affirming 109 F. Supp.

925, 926 (S.D.N.Y. 1952); Potter v. Carvel Stores of N.Y., Inc.,

314 F.2d 45 (4th Cir. 1963), affirming 203 F. Supp. 462 (D. Md.

1962); Reines Distributors, Inc. vy. Admiral Corp., 182 F. Supp.

226 (S.D.N.Y. 1960); Bascom Launder Corp. v. Telecoin Corp.,

9 F.R.D. 677 (S.D.N.Y. 1950); Avon Pub. Co. v. American News

Co., 143 F. Supp. 516 (S.D.N.Y. 1956); American Manufacturers

Mutual Ins. Co. vy. American Broadcasting-Paramount Theatres,

Inc., 1966 Trade Cases § 71,918 (S.D.N.Y.). See also the recent

decision in Carter v. Ogden Corp., 524 F.2d 74, 75 (5th Cir. 1975),

reversing an injunction issued under § 16 of the Clayton Act and

holding “that under 28 U.S.C.A. § 2283 this injunction was pro-

hibited. . . .” On the other hand, compare Sar Industries, Inc. v.

Monogram Industries, Inc., 1976-1 Trade Cases { 60,816 (C.D.

Cal.), relying on the I strict Court’s decision in this case.

Lyons v. Westinghouse Electric Corp., 201 F.2d 510 (2d

Cir.), cert. denied, 345 U.S. 923 (1953), involved cireum-

stances remarkably similar to those present in the instant

case. Westinghouse had sued Lyons and others in the New

York state courts for breach of a contract and an account-

ing. The state court defendants raised a federal antitrust

defense in the state suit, claiming that the contract violated

the antitrust laws. Thereafter, they brought suit in the

federal court against Westinghouse under the federal anti-

trust laws advancing the same federal antitrust grounds

which they had asserted by way of defense in the state

proceeding. The District Court held that it could not

enjoin the state proceedings, “even though the [federal]

Anti-Trust Laws are involved in both actions, as in this

ease,” because “a stay of these State court proceedings is

not expressly authorized by any act of Congress, and it is

not required in aid of this court’s jurisdiction or to effec-

tuate its judgments.” 109 F. Supp. 925-26 (S.D.N.Y. 1952)

(italies added). The Court of Appeals for the Second

Cireuit affirmed, specifically holding that the District Court

“rightly held that 28 U.S.C.A. § 2283 prevents the issuance

of such a stay.” 201 F.2d at 510 (italies added).™

11 The Court below placed heavy reliance on Studebaker Corp. v.

Gittlin, 360 F.2d 692, 698 (2d Cir. 1966). (App. 287-88.) That ease,

however, did not involve either the Clayton Act or any antitrust

issues. The passing reference to the Clayton Act in Studebaker, by

way of dictum, did not conclude that § 16 “expressly authorizes”

injunctions against state court proceedings and did not even re-

motely overrule the Second Circuit’s prior decision in Lyons, supra.

Equally inapposite are the other two cases cited by the Court

below concerning § 2283. (App. 286-87.) Helfenbein v. International

Industries, Inc., 438 F.2d 1068, 1071 (8th Cir. 1971), neither held

nor implied that § 16 “expressly authorizes” injunctions against

state court proceedings. Helfenbein merely decided that, since the

plaintiff’s injury had not resulted from an antitrust violation, no

(Footnote continued on p. 26)

Potter v. Carvel Stores of New York, Inc., 314 F.2d 45

(4th Cir. 1963), likewise involved companion state and

federal lawsuits in which the state court defendant was the

plaintiff in a federal antitrust action brought against the

state court plaintiff. The District Court refused to enjoin

the state action on the ground that it was barred by § 2283,

specifically agreeing that “Section 16 of the Clayton Act, 15

U.S.C.A. § 26, which provides for private antitrust injune-

tive relief is not one of the ‘Act of Congress’ exceptions

engrafted into the flat prohibition of 28 U.S.C.A. § 2283.”

203 F. Supp. 462, 465 (D. Md. 1962). The Court of Appeals

for the Fourth Circuit affirmed, holding that “. .. for the

reasons stated by [the District Court], we think that the

refusal to enjoin the state court proceedings is unassailable

on appeal.” 314 F.2d at 46.

See also the recent decision in Carter v. Ogden Corp., 524

F.2d 74 (5th Cir. 1975), reversing an injunction issued

under § 16 of the Clayton Act and holding “that under 28

U.S.C.A. § 2283 this injunction was prohibited. . . .”

2. The Decision Below Flouts This Court’s Inter-

pretation of the “Expressly Authorized” Ex-

ception to § 2283.

As previously stated (supra, pp. 22-23), this Court has

repeatedly held that the exceptions to 4 2283 are to be

strictly and narrowly construed. In Mitchum v. Foster,

407 U.S. 225 (1972), this Court dealt specifically with the

“expressly authorized” exception.

(Footnote continued from p. 25)

injunction of any sort was authorized by § 16. The Court did not

even reach the question whether, if a proper showing of causation

had been made, the injunction would nevertheless have been barred

by § 2283. United States v. Bayer Company, 135 F. Supp. 65

(S.D.N.Y. 1955), was based on a different exception to § 2283—

the “effectuate its judgments” exception—and does not even refer

to the “expressly authorized” exception.

The Court in Mitchum (pp. 234-35) reviewed the seven

federal statutes under which “the Court through the years

found that federal courts were empowered to enjoin state

court proceedings, despite the anti-injunction statute, in

carrying out the will of Congress ... .* The Court

pointed out that this had been essential “if the import and

purpose of other Acts of Congress were to be given their

intended scope” (ibid.).

Applying the same criteria, the Court then analyzed in

depth “the import and purpose” of the statute involved in

Mitchum—4 1983 of the Civil Rights Act (407 U.S. at 239-

40, 241-42):

“Section 1983 opened the federal courts to private citi-

zens, offering a uniquely federal remedy against in-

12 The seven statutes enumerated by the Court are as follows:

(1) the provisions in the Bankruptey Act expressly providing for

stays of suits against the bankrupt; (2) 28 U.S.C. § 1446(e), pro-

viding that upon ihe filing of a petition to remove @ state suit to

federal court the “State court shall proceed no further unless and

until the case is remanded”; (3) 46 U.S.C. § 185, providing that

upon filing of a shipowner’s petition in federal court for limitation

of his liability and deposit of the requisite funds by the shipowner

with the court, “all claims and proceedings against the owner with

respect to the matter in question shall cease”; (4) 28 U.S.C. § 2361,

providing that in federal interpleader actions “a district court may

... enter its order restraining [fall claimants] . . . from instituting

or prosecuting any proceeding in any State or United States court

affecting the property, instrument, or obligation involved in the

interpleader action”; (5) 11 U.S.C. § 203(s) (2), the provision of

the Frazier-Lemke Farm Mortgage Act expressly staying “all

judicial or official proceedings in any court”; (6) 28 U.S.C. § 2251,

providing that a federal court before which a habeas corpus pro-

ceeding is pending may “stay any proceeding against the person

detained in any State Court .. . for any matter involved in the

habeas corpus proceeding”; (7) the Emergency Price Control Act

of 1942, establishing a wartime system of judicial remedies and

specifically authorizing the Government to bring enforcement

actions in both state and federal courts.

cursions under the claimed authority of state law upon

rights secured by the Constitution and laws of the

Nation.

“It is clear from the legislative debates surrounding

passage of § 1983’s predecessor that the Act was in-

tended to enforce the provisions of the Fourteenth

Amendment ‘against state action, . . . whether that

action be executive, legislative, or judicial.’ Ex parte

Virginia, 100 U.S. 339, 346 (emphasis supplied). Pro-

ponents of the legislation noted that state courts were

being used to harass and injure individuals, either

because the state courts were powerless to stop de-

privations or were in league with those who were bent

upon abrogation of federally protected rights.” (Em-

phasis the Court’s; footnote omitted.)

“Those who opposed the Act of 1871 clearly recognized

that the proponents were extending federal power in

an attempt to remedy the state courts’ failure to secure

federal rights. The debate was not about whether the

predecessor of § 1983 extended to actions of state

courts, but whether this innovation was necessary or

desirable.

“This legislative history makes evident that Congress

clearly conceived that it was altering the relationship

between the States and the Nation with respect to the

protection of federally created rights; it was concerned

that state instrumentalities could not protect those

rights; it realized that state officers might, in fact, be

antipathetic to the vindication of those rights; and it

believed that these failings extended to the state courts.

“Section 1983 was thus a product of a vast transfor-

mation from the concepts of federalism that had pre-

vailed in the late 18th century when the anti-injunction

statute was enacted. The very purpose of § 1983 was

to interpose the federal courts between the States and

the people, as guardians of the people’s federal rights

—to protect the people from unconstitutional action

under color of state law, ‘whether that action be ex-

ecutive, legislative or judicial.’” (Italics added; foot-

note omitted.)

Based on that analysis, this Court determined that § 1983

qualified as the eighth statute within the “expressly author-

ized” exception.

In this case, in holding that § 16 of the Clayton Act also

meets that standard, the Court below wholly misapplied

the Mitchum rationale. The decision below represents, in

fact, a broad departure from the whole line of this Court’s

eases concerning § 2283 and sets forth an approach which,

if generally accepted, would have serious consequences for

the relationship between the federal and state courts, not

only in the antitrust field but in many other areas of the

law as well.

Without even attempting to analyze “the import and

purpose” of § 16, in the way this Court analyzed § 1983 in

Mitchum, the Court below held that 4 16 created a “uniquely

federal remedy” merely on the ground that its grant of

injunctive powers to enforce the antitrust laws was con-

ferred only on the federal courts. (App. 286, 288.) Accord-

ing to the Court below (ibid.), this jurisdiction “would

be frustrated” if Vendo were allowed to enforce its state

court judgments. However, it is well established that a

grant of exclusive jurisdiction does not justify holding that

the “expressly authorized” exception applies. Amalga-

mated Clothing Workers of America v. Richman Bros., 348

U.S. 511, 515 (1955)."°

13 In Amalgamated, this Court specifically held that § 2283 may

bar an injunction even where a state court has acted “wholly with-

out jurisdiction over the subject matter, having invaded a field

preempted by Congress.” Accord, e.g., 7. Smith & Son, Inc., v.

Williams, 275 F.2d 397 (5th Cir. 1960); Vernitron Corp. v. Ben-

jamin, 440 F.2d 105, 108 (2d Cir.), cert. denied, 402 U.S. 987

(1971). In the instant case, there is not even any such preemption.

Furthermore, in the context of this case, it is especially

clear that Stoner’s federal antitrust remedy against Vendo’s

prosecution of its state court action was by no means

“gniquely federal.” While the Clayton Act confers only

federal jurisdiction of original claims for relief brought

under the federal antitrust laws, it is well-settled that the

state courts have jurisdiction to adjudicate federal anti-

trust defenses to state law claims, as the Illinois Appellate

Court specifically held in this case. (App. 77-79.)'* Here

Stoner and Stoner Investments had such a remedy, but

they chose to withdraw their federal antitrust defense at

the opening of the second state court trial. If that defense

to Vendo’s claims was valid, they could and should have

asserted it in the state court preceedings, and they could

thereby have “nipped in the bud” any alleged “injury”

from the state action.

Unlike this Court’s decision in Mitchum, the decision be-

low does not remotely explain how $16 would be “frus-

trated” or “could [not] be given its intended scope” if fed-

eral courts were not empowered to enjoin state court

proceedings. Stripped of such conclusions, the decision

boils down to the proposition that the state suit would

allegedly be enjoinable in the absence of § 2283 and there-

fore the application of § 2283 would impair the exercise

of equity jurisdiction im this case. But the whole object

of § 2283 is to bar certain injunctions which might other-

wise be appropriate, “regardless of how extraordinary the

porticular circumstances may be” (407 U.S. at 229, italics

added). Plainly the possible impact on any particular case

—as distinguished from achievement of an overall statutory

purpose—does not justify a conclusion that a federal stat-

ute “expressly authorizes” stays of state court proceedings.

Indeed, if it were otherwise, then every federal statute

14 See also, e.g., Lyons v. Westinghouse Electric Corp., 222 F.2d

184, 187 (2d Cir.), cert. denied, 350 U.S. 825 (1955); IA Moore,

Federal Practice { 0.208 (2d ed. 1974), p. 2325.

authorizing injunctive relief would fall within the “ex-

pressly authorized” exception.

Even more important, the impropriety of holding that

§16 “expressly authorizes” stays of state proceedings is

demonstrated by comparing §16 with the seven statutes

reviewed in Mitchum (407 U.S. at 234-35) and with § 1983

of the Civil Rights Act. Each of these statutes either

contains specific language providing for stays of state pro-

ceedings or, in the absence of such language, necessarily

requires by its very nature and function that conflicting

state judicial proceedings must be enjoined in order to

achieve the purpose of the statute.

Four of the seven statutes reviewed in Mitchum" contain

specific language authorizing stays of state court proceed-

ings (the Bankruptcy Act, the Interpleader Act, the

Frazier-Lemke Farm Mortgage Act, and the Federal

Habeas Corpus Act). A fifth statute, concerning federal

removal procedures, specifically provides that “the state

court shall proceed no further unless and until the case is

remanded.” A sixth statute, dealing with shipowners’ lia-

bility, specifically provides that on the deposit of certain

funds “all claims and proceedings against the owner with

respect to the matter in question shall cease.” The seventh

statute, the Emergency Price Control Act of 1942, was a

wartime measure construed by this Court as impliedly

amending the Anti-Injunction Statute because the Act pro-

vided an intricate system of judicial remedies and author-

ized the Government to enforce the Act in both federal and

state courts. Then, in Mitchum, as already noted, the Court

held that § 1983 of the Civil Rights Act also fell within the

“expressly authorized” exception because the “very pur-

pose of § 1983” was to transform federal-state relations and

to impose restraints on state governmental bodies including

state courts.

15 See footnote 12, supra.

Section 16 of the Clayton Act is clearly not a statute of

this type. Even apart from the absence of specific lan-

guage providing for stays of state proceedings, there is

not the slightest basis (and the Court of Appeals pointed

to none) for believing that § 16—unlike, e.g., § 1983 of the

Civil Rights Act—was designed to prevent abuses by state

courts or that it was “the will of Congress” (407 U.S. at

234) to place injunctive restraints on state court proceed-

ings.

Moreover, the special concerns expressed in Mitchum

concerning the role of the federal courts in enforcing

federal constitutional guaranties against the states and

their courts have no counterpart in the area of the anti-

trust laws. While 41983 may have been “a product of a

vast transformation from the concepts of federalism that

had prevailed in the late 18th century” (407 U.S. at 242),

there surely is no reason to conclude that any such trans-

formation in federal-state relations was contemplated by

the passage of the federal antitrust laws generally or § 16

of the Clayton Act in particular. On the contrary, it appears

that Congress intended thereby to continue the comple-

mentary relationship between state and federal jurisdic-

tions that has prevailed in the field of business regulation

ever since the Supreme Court’s decision in Cooley v. Board

of Wardens, 53 U.S. 299 (1852). See, e.g., Gulf Oil Corp.

v. Copp Paving Co., Inc., 419 U.S. 186 (1974); United

States v. American Building Maintenance Industries, 422

U.S. 271 (1975).

Of course, as the Court below pointed out, the federal

antitrust laws express an important public policy. But the

same is true of numerous other federal statutes as well as

the Anti-Injunction Statute itself. See, e.g., Oklahoma Pack-

ing Co. v. Oklahoma Gas and Electric Co., 309 U.S. 4, 8-9

(1939). Clearly the importance of the antitrust laws is

not a proper criterion for determining whether the “ex-

pressly authorized” exception to § 2283 is applicable.

B. The District Court’s Injunction Was Not “Nec-

essary in Aid of” Its Jurisdiction within the Mean-

ing of § 2283.

The “necessary in aid of jurisdiction” exception—which

was also relied upon by the District Court in this case but

not by the Court of Appeals—is plainly inapplicable.

Like the entire statute of which it is a part, this exception

must be strictly and narrowly construed. See Atlantic

Coast Line R. Co. v. Brotherhood of Locomotive Engineers,

supra, 398 U.S. at 295.

The long-standing rule with respect to im personam ac-

tions has been that “[e]ach court is free to proceed in its

own way and in its own time, without reference to the pro-

ceedings in the other court”, allowing for the possibility

that either may go to judment first. Kline v. Burke Con-

struction Co., 260 U.S. 226, 230 (1922); Atlantic Coast Line

R. Co. v. Engineers, supra, 398 U.S. at 295-296. Cf. National

Labor Relations Board v. Nash-Finch Co., 404 U.S. 138,

141-142 (1971); Amalgamated Clothing Workers of Amer-

ica v. Richman Bros., supra, 348 U.S. at 518-519.

These principles were recently applied by the Court of

Appeals for the Third Circuit in Jennings v. Bocnning and

Co., 482 F.2d 1128 (3d Cir. 1973), and In re Glenn W.

Turner Enterprises Litigation, 521 F.2d 775, 780 (3d

Cir. 1975). In both cases, the Court of Appeals reversed

a preliminary injunction against execution of a prior state

court judgment and specifically rejected the applicability

of the “necessary in aid of jurisdiction” exception to § 2283.

The Jennings case was procedurally very similar to the

present one. Defendant Boenning had previously sued the

Jennings (who were the plaintiffs in the federal suit) in

state court and obtained a judgment based on a state-law

cause of action. The Jennings could have, but did not, raise

a defense to the state suit based on the Securities and

Exchange Act of 1934. In the course of their subsequent

federal suit under that Act for damages against Boenning,

the Jennings sought a preliminary injunction against ex-

ecution of the state court judgment. The Court of Appeals

held that, even “. . . assuming without deciding that [the

plaintiffs] have a proper claim for money damages. the

federal Anti-Injunction Act prevents the issue of an injune-

tion restraining state proceedings to enforce the state judg-

ment.” (482 F.2d at 1135.)

The Court of Appeals for the Second Circuit came to the

same conclusion in Vernitron Corp. v. Benjamin, 440 F.2d

105, 108 (2d Cir. 1971), also arising under the Securities

and Exchange Act of 1934, and holding that “Vernitron

should not be permitted to use the exceptions to Section

2283 as a means of avoiding an adverse state decision and

in effect obtaining appellate review thereof in a federal

district court.”

This has also been the law in antitrust cases. See, e.g.,

Red Rock Cola Co. v. Red Rock Bottlers, 195 F.2d 406

(Sth Cir. 1952); Lyons v. Westinghouse Electric Corp., 109

F.Supp. 925 (S.D.N.Y. 1952), aff’d, 201 F.2d 510 (2d Cir.),

cert. denied, 345 U.S. 923 (1953).

In its very recent decision in the Glenn W. Turner Enter-

prises case, supra, the Third Circuit held that 4 2283 bars

a federal injunction against proceedings to collect a state

court judgment even where the effect of those proceedings

would be to render the federal defendants incapable of

paying any judgment that might be obtained against them

in the federal suit. The Court held that such facts did

not bring such an imjunction within the “necessary in aid

of jurisdiction” exception, “. . . especially . . . where the

federal action, as here, has not culminated in a judg-

ment... .” (521 F.2d at 780.)

In the instant case, according to the District Court, its

application of the “necessary in aid of jurisdiction” excep-

tion to § 2283 was based entirely on its concern that Vendo’s

= 2 ore eee oe

enforcement of its judgments against Stoner and Stoner

Investments might result in Vendo’s taking control over

Stoner Investments and Lektro-Vend, thereby possibly

eliminating two of the three plaintiffs in the federal suit as

independent parties. (App. 241.) The District Court rea-

soned that, in that event, there would no longer be a “case

or controversy” within the meaning of Article III of the

United States Constitution as to those two plaintiffs.

The Court’s reasoning is wrong on the law and wrong on

the facts. To begin with, we are unaware of even a single

decision holding that a state court proceeding may be en-

joined to preserve compliance with the “case or contro-

versy” requirement. Even more clearly, there is no justifi-

cation for enjoining a state court proceeding to preserve

compliance with that requirement as to only some of the

plaintiffs in the federal case.

The decision below ignores the obvious fact that Stoner

(or his administrator )—irrespective of Stoner Investments

and Lektro-Vend—would continue to be an adverse party

and, therefore, the District Court would not in any event

be deprived of jurisdiction under Article III. Furthermore,

both before the hearing on the preliminary injunction mo-

tion and afterwards, Vendo made a variety of proposals on

the reeord—including two proposed consent decrees—to in-

sure that Stoner Investments and Lektro-Vend would re-

main independent of Vendo’s ownership and control (see

supra, p. 13). Under no possible view of the law under

§ 2283, however, novel or contrived, can any such injune-

tion be regarded as “necessary” to protect the Court’s

jurisdiction.

Although not mentioned by the District Court with re-

spect to § 2283, the respondents argued in the Court of

Appeals that a preliminary injunction against collection of

the state judgments is needed to enable plaintiffs to finance

their federal treble-damage litigation. In this connection,

they pointed out that “Stoner and Stoner Inv. sustained

$661,000 in legal fees and expenses” and asserted that their

liquid assets “have been earmarked for the prosecution of

this case”.’® Thus, according to respondents’ argument

below, collection of the state judgments should be enjoined

so that the money can instead be paid to their counsel in the

federal case. The short answer is that the “necessary in aid

of jurisdiction” exception to § 2283 does not permit enjoin-

ing state court judgments in order to finance federal liti-

gation.

Indeed, as the Third Circuit recently held in the Glenn W.

Turner Enterprises case, supra, “State litigants should not

be barred from collecting fully on their judgments merely

to facilitate the collection of judgments resulting from

federal actions” and “This is especially true where the

federal action, as here, has not culminated in a judg-

ment... .” 521 F.2d at 780. The Court further pointed

out that “... the inability of defendants to pay a [federal]

judgment .. . still would not be sufficient justification to

issue the federal injunction” (ibid.). A fortiori, state court

judgments cannot be enjoined to enable plaintiffs to seek

a federal judgment.

Il. THE INJUNCTION VIOLATES FUNDAMENTAL

PRINCIPLES OF COMITY AND FEDERALISM.

In Younger v. Harris, 401 U.S. 37, 43-45 (1971), and in

Mitchum vy. Foster, supra, 407 U.S. at 243, this Court re-

affirmed the principles of comity and federalism “that must

restrain a federal court when asked to enjoin a state court

proceeding,” even in a case where such an injunction is not

absolutely barred by § 2283. See also Rizzo v. Goode, 423

U.S. 362, 379-80 (1976) ; Cousins v. Wigoda, 409 U.S. 1201,

1205-06 (1972).

16 Brief of Plaintiffs-Appellees (7th Cir.), pp. 54, 55. Subse-

quently, in addition to 1975 payments of $73,918.37, the respond-

ents submitted to the District Court a petition for approval of

payment of additional fees and expenses amounting to $269,925.21,

bringing the total to $1,004,843.58 (of which $850,156.31 has been

paid). Transcript of Proceedings, October 1, 1976, p. 10.

Thus, such principles apply even where an injunction is

sought under a federal statute that “expressly authorizes”

injunctions against state court proceedings. In Huffman v.

Pursue, Ltd., 420 U.S. 592 (1975), this Court specifically

held that principles of comity and federalism barred an

injunction against a civil state court proceeding in the con-

text of a suit brought under § 1983 of the Civil Rights Act

—the very statute which Mitchum held was designed to

afford protection against unconstitutional acts by (inter

alia) state courts.

Principles of comity and federalism are no less applicable

to injunctions sought under $16 of the Clayton Act. See,

e.~., Response of Carolina v. Leasco Response, Inc., 498

F.2d 314 (5th Cir.), cert. denied, 419 U.S. 1050 (1974),

and Red Rock Cola Co. v. Red Rock Bottlers, 195 F.2d

406 (5th Cir. 1952). In both eases, federal injunctions

against state court proceedings were sought under 416. In

both cases, the requested injunctions had been granted by

the district courts. But in both eases the Fifth Circuit re-

versed, holding that—even apart from § 2283-—the injunc-

tions were improper on the basis of principles of comity

and federalism.

These principles are controlling even in the far less

sensitive situation where the state court proceeding being

attacked in federal court is in a preliminary unadjudicated

status. But considerations of comity and federalism are

especially critical where, as in the present case, the state

court proceeding being attacked is a proceeding to enforce

final judgments which had been unanimously affirmed on

appeal by the highest court of the state (and which this

Court had declined to review on certiorari).

Furthermore, the state courts specifically provided “an

opportunity for full and fair litigation” of the very same

federal antitrust issues. See Stone v. Powell, 96 S.Ct. 3037,

3046, 3052 (1976). But the respondents then voluntarily

withdrew those issues from consideration by the state

courts. They did so, it should be emphasized, after the

Illinois Appellate Court, on appeal from the first state

court trial, expressly held that the state trial court should

hear and determine the matter. (App. 77-79.)

Thus, not only do respondents attack the final, fully re-

viewed judgments of the state courts on grounds which

they could have presented to the state courts by way of

defense, but the respondents do so on grounds which they

actually did present, which the state courts held they were

entitled to present, and which would have been adjudicated

by the state courts except for respondents’ deliberate with-

drawal of those issues from the state proceeding. To

allow federal courts to upse* state court judgments on

such grounds would make a mockery of the concept of

federalism and would provoke that needless friction be-

tween state and federal courts that the principle of comity

is intended to prevent.

Nevertheless, in direct conflict with decisions of the Fifth

Cireuit (supra, p. 37), the Court below held that prin-

ciples of comity and federalism were inapplicable in an

action under 416 of the Clayton Act on the ground that

respondents’ “exclusive remedy” was in the federal courts.

The Court’s decision is erroneous both in law and in fact.

Clearly a federal injunction against the enforcement of

the state court judgments was never Stoner’s “exclusive

remedy” under the federal antitrust laws. As already

pointed out, Stoner and Stoner Investments had another

remedy in the state courts—a remedy which, if their de-

fense was meritorious, would have prevented the very

“injury” of which they now complain.

No greater insult to the processes of a state judicial

system can be conceived than that which has occurred here:

Having deliberately abandoned the assertion of their

federal antitrust defense in the state courts, which had

provided them with “an opportunity for full and fair litiga-

tion” of that defense, and having elected to proceed to final

judgment in the state courts on that basis, the Stoner group

then attacked the result of that process by asserting in

federal court, as justification for an injunction against the

state judgments, the same issues that they had withdrawn

from the state courts’ consideration. Thus, far from being

inapplicable, principles of comity and federalism are par-

ticularly relevant in the circumstances of this case and

should have barred such a flagrant abuse of federal equity

power.

III. THE DISTRICT COURT LACKED JURISDICTION

TO REVERSE, REVIEW OR REVISE THE FINAL

JUDGMENTS OF THE STATE COURTS BY COL-

LATERAL ATTACK.

The preliminary injunction issued by the District Court

is nothing more than an attempt to reverse by collateral

attack the final judgments of the Illinois courts in favor of

Vendo and against Stoner and Stoner Investments. It

seeks to abort the results of Vendo’s successful siate court

action. Furthermore, it attacks that action on the basis of

the very same federal antitrust issues which Stoner and

Stoner Investments were explicitly afforded an opportunity

to present to the state courts, by way of defense to Vendo’s

claims, but which they then voluntarily withdrew from the

state courts’ consideration.

A lower federal court has no jurisdiction to review a final

judgment of a state court of competent jurisdiction. See,

e.g., Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923). Such

a judgment, affirmed by the Illinois Supreme Court, can be

reviewed only by this Court (which in this case denied

certiorari) and not by any lower federai court.

In Atlantic Coast Line R. Co. v. Brotherhood of Loco-

motive Engineers, 398 U.S. 281, 286 (1970), this Court

pointed out:

“Thus from the beginning we have had in this country

two essentially separate legal systems. Each system

‘proceeds independently of the other with ultimate re-

view in this Court of the federal questions raised in

either system”.

The Court also warned (ibid.):

“Obviously this dual system could not function if state

and federal courts were free to fight each other for

control of a particular case.”

See also, e.g., Singer v. A. Hollander & Son, Inc., 202 F.2d

55, 59 (3d Cir. 1953) (“... it is not our business to review

the correctness of fact conclusions reached by the Vice

Chancellor of the State of New Jersey and its Supreme

Court”); In re Glenn W. Turner Enterprises Litigation,

521 F.2d 775, 780 (3d Cir. 1975) (“... the state and lower

federal courts are independent, and .. . a federal action is

not superior to a state proceeding merely because of its

federal character... . - As a corollary to this principle,

judgments resulting from federal actions are not preferred

to judgments resulting from state actions because of their

federal character.”).

In this ease, the District Court itself recognized the

validity of these fundamental principles in rejecting plain-

tiffs’ claim for relief under the Civil Rights Act (42 U.S.C.

§ 1983). The Court (App. 226-27, n.1) correctly held that

it “has no jurisdiction to entertain this claim” and (quoting

another decision) that “. . . no court of the United States

other than the United States Supreme Court can entertain

a proceeding to reverse or modify a state court judgment

which is in error.” Yet, inexplicably, the District Court

concluded that it had such jurisdiction under §16 of the

Clayton Act. (App. 232.) The Court of Appeals “agreed” on

the ground that the [Illinois Supreme Court “expressly re-

fused to consider” the federal antitrust issues raised by the

Stoner group. (App. 289.)

However, although acknowledged in a footnote (App.

282), the Court below then disregarded the fact that it was

the respondents themselves who withdrew the federal anti-

trust issues from consideration by the state courts, and

that it was only for this reason that the Illinois Supreme

Court did not pass on those issues. Clearly, the Illinois

Supreme Court never “expressly refused to consider” the

federal antitrust issues. No such issues were even before

the Illinois Supreme Court since they had been withdrawn

by respondents years before and had never been raised

again; and the Illinois Supreme Court merely noted that

fact in its opinion.

In any event, the decision of the Illinois Supreme Court

is final and entitled to full faith and credit. This Court,

which is the only federal court with power to review the

final decision of the highest court of a state, denied cer-

tiorari, and the matter should have rested there. The anti-

trust laws confer no greater power on a federal district

court to perform this Court’s reviewing functions than the

Civil Rights Act or any other federal law. See Atlantic

Coast Line R. Co. v. Brotherhood of Locomotive Engineers,

supra, 398 U.S. at 286.

CONCLUSION

Under the analysis of the Court below, wherever a fed-

eral statute provides for a private injunction action main-

tainable only in the federal courts, then:

1. The bar of § 2283 would not apply, and state

court proceedings would therefore be subject to federal

stays without regard to the Anti-Injunction Statute;

2. No considerations of comity or federalism would

apply in considering whether to grant such injunc-

tions; and

3. Even a final judgment of a state court, reviewed

by the highest court of that state, would be subject to

collateral review by a federal district court in such

an injunction action.

Through this technique, state court defendants would be

able to utilize the federal courts to frustrate and inter-

fere with state court proceedings, and (as in this case) even

to nullify final judgments reviewed by the highest state

courts. Moreover, it is not only the antitrust laws that

might be utilized in that way by state court defendants, but

indeed many other federal statutes as well.

Reversal of the decision below is essential, we submit, in

order “to prevent needless friction between state and fed-

eral courts,” Oklahoma Packing Co. v. Oklahoma Gas and

Electric Co., 309 U.S. 4, 8-9 (1939), and to respect the

“fundamental constitutional independence of the States

and their Courts.” Atlantic Coast Line R. Co. v. Brother-

hood of Locomotive Engineers, supra, 398 U.S. at 287.

For the foregoing reasons, it is respectfully submitted |

that this Court should reverse the judgment of the Court of

Appeals and vacate the preliminary injunction prohibiting

enforcement of the final state court judgments.

Earzu E. Poittock

Gary SENNER

Puiuip A. HaBer

Louis C. Kremer

SONNENSCHEIN CaRLIN NATH

& RoseNTHAL

Attorneys for Petitioner

LAMBERT M. OcHSENSCHLAGER

Wayne F. WerErR

Rem, OcHSENSCHLAGER, Murpray & Hupp

Of Counsel

Dated: October 28, 1976.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.