Appellants Brief — Pennzoil Co. v. Texaco Inc.

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Supreme Court, U.S,

No. 85-1798 w&

F I D

IN THE SEP 5 1986

Supreme Court of the Unite Seabesceamor, se,

OCTOBER TERM, 1986 _- a

PENNZOIL COMPANY,

Appellant,

—against—

TEXACO, INC.,

Appellee.

ON APPEAL FROM THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR APPELLANT

LAURENCE H. TRIBE

Counsel of Record

BRIAN KOUKOUTCHOS

1525 Massachusetts Avenue

Cambridge, Massachusetts 02138

(617) 495-1767

Of Counsel:

JOSEPH D. JAMAIL

JAMAIL & KOLIUS

3300 One Allen Center

Houston, Texas 77002

HARRY M. REASONER

VINSON & ELKINS

3300 First City Tower

1001 Fannin MAYER, BROWN & PLATT

Houston, Texas 77002 231 South LaSalle Street

SIMON H. RIFKIND Chicago, Illinois 60604

ARTHUR L. LIMAN

MARK A. BELNICK

PAUL, WEISS, RIFKIND

WHARTON & GARRISON

345 Park Avenue

New York, New York 10154

JOHN L. JEFFERS

G. IRVIN TERRELL

BAKER & BOTTS

3000 One Shell Plaza

Houston, Texas 77002

PAUL M. BATOR

DOUGLAS A. POE

KENNETH S. GELLER

W. JAMES KRONZER

1001 Texas, Suite 1030

Houston, Texas 77002

September 5, 1986

~ |

Pana *,

tte

QUESTIONS PRESENTED

The judgment below, which authorized a federal district

court to interfere with pending state court proceedings by

enjoining recourse to the statutes a state has adopted for

adjusting the competing interests of judgment winners and

losers pending appeal, presents the following questions:

May a federal court treat an injunction of state court

proceedings as “expressly authorized” by 42 U.S.C.

§ 1983, and therefore exempt from the Anti-Injunction

Act, by transforming into “the state” every private

litigant who invokes state judicial proceedings and may

call on state officers to help enforce the resulting

judgment?

. Having declared that enforcement of a private liti-

gant’s state court judgment is acfionable under § 1983,

may a federal court avoid the comity principles of

Younger v. Harris by declaring that the state has no

cognizable interest in such enforcement proceedings

inasmuch as the underlying action is between private

parties?

. Do Younger principles permit a federal court to excuse

deliberate bypass of judicial remedies in a state’s

appellate system where there is no procedural bar to

full and fair state court consideration of a litigant’s

constitutional challenges?

May a federal district court reward deliberate bypass

of state judicial relief from alleged barriers to effective

appeal of a trial court judgment by treating a federal

suit seeking to stay that judgment pending appeal as

“original” rather than “appellate” in nature, and

therefore as exempt from the exhaustion requirements

this Court respects in considering applications for

identical stays?

. May a federal court intervene in pending state court

proceedings to invalidate the state’s appellate security

provisions on the theory that the Due Process Clause

entitles a trial loser to an affordable stay of judgment

pending appeal?

PARTIES TO THE PROCEEDING

In addition to the parties who appear in the caption of this

case, the State of Texas appeared as Intervenor-Appellant

in the court of appeals, pursuant to 28 U.S.C. § 2403(b).

Pennzoil Company has no parent company or affiliates as

those terms are used in Supreme Court Rule 28.1. Pennzoil’s

non-wholly-owned subsidiaries are:

National Transit Company

The Eureka Pipe Line Company

Proven Properties, Inc.

TABLE OF CONTENTS

QUESTIONS PRESENTED...................--05.

PARTIES TO THE PROCEEDINGS................

TABLE OF AUTHORITIES..................--.--.

OPINIONS BELOW ..................e00cceeeeee.

cc ccccn.

CONSTITUTIONAL PROVISIONS, STATUTES AND

EEE anaes ccc esccesccccccccce

GUE EGGS Ge cesses sccccccccccess

Il. THE ANTI-INJUNCIiON ACT FORBIDS EN-

JOINING PRIVATE LITIGANTS FROM TAKING

STEPS TO ENFORCE JUDGMENTS THEY HAVE

WON IN STATE TRIALS ..................0005.

A. The Holding Below Makes Every Judgment Win-

ner a State Actor Suable Under § 1983 .........

B. So Sweeping a View of § 1983 Cannot Have Been

Contemplated By Mitchum v. Foster ...........

Il. IN ANY EVENT, THE PRINCIPLES DEVEL-

OPED BY THIS COURT UNDER YOUNGER y.

HARRIS BAR FEDERAL INTERFERENCE IN

PROCEEDINGS DESIGNED TO ASSURE THE

COLLECTIBILITY OF STATE COURT JUDG-

MENTS WHERE SUCH PROCEEDINGS OFFER

AN ADEQUATE FORUM FOR THE LITIGANT’S

EI so osc ccc cccccscsccsccccccs

PAGE

xii

PAGE

A. Younger Abstention Cannot Be Escaped In A

§ 1983 Action By Suing A Private Litigant Rather

We Ge Be SN 6c vei ndnscdtcncseucusces 18

B. The Other Escape Routes Pioneered By Texaco

And Endorsed By the Second Circuit Must Be

Closed If Younger Principles Are To Be Preserved 23

1. Forecasts of Futility Cannot Substitute For A

8 ee ee ey re 23

2. The Only “Extraordinary Circumstances”

Posed By This Case Cut Against, Not For,

Federal Judicial Intervention............... 32

(a) Under Younger, “extraordinary circum-

stances” permit federal intervention only if

they render state judicial relief inherently

EE 5b vv nk tac deca ceeWhdeeete ss 32

(b) Texaco’s “unusual factual situation”

furnishes no principled basis for distin-

guishing ordinary cases of judgment

debtors unable to post bonds ........... 34

Ill. BASIC POSTULATES OF COMITY AND THE

FRAMEWORK LEGISLATED BY CONGRESS

FOR THE FEDERAL JUDICIAL SYSTEM PRE-

CLUDE FEDERAL STAYS OF STATE TRIAL

JUDGMENTS, IN SUPPOSED AID OF STATE

OR FEDERAL APPELLATE JURISDICTION,

ABSENT EXHAUSTION OF STATE JUDICIAL

6 666 60cbsosnethnapinecesbeneaseeec 36

IV. THE JUDGMENT BELOW PREMATURELY

SECOND-GUESSES A REASONABLE ACCOM-

MODATION OF ECONOMIC INTERESTS AND

REDUCES THE STATE COURT’S JUDGMENT

TO AN EMPTY DECLARATION OF ABSTRACT

EEE 0. 8h bo wn cn 00 6405508005 640515004808S5%4 45

Coane wan beesctckkesetbiecnsecus wes 50

TABLE OF AUTHORITIES

Cases PAGE

Allen v. McCurry, 449 U.S. 90 (1980)................ 4]

Ammex Warehouse Co. v. Archer, 381 S.W.2d 478 (Tex.

PCKE AAG naa Od Rhee we nde ee ee oebeebees 28

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

motive Engineers, 398 U.S. 281 (1970) ............. 12, 38

Bergman v. West, 262 S.W.2d 435 (Tex. Civ. App.—

PE San ddn ns APNG REGEE Es Ged sesacveeeian 28

er CO. RO Ge Gis FF CHT bck ccdccdecdceses 32

Brown v. Chastain, 416 F.2d 1012 (Sth Cir. 1969), cert.

es Be Sr Se GEE os dc cas oc waencenscces 39

Brown v. Texas, 443 U.S. 47 (1979) .............005. 38

Chicago v. Atchison, T & S. F. R. Co., 357 U.S. 77

SDS 46s na OO bah on86 ede nis bees nee eens ee<s iv

City of New Orleans v. Dukes, 427 U.S. 297 (1976).... iv

Cruz v. Donnelly, 727 F.2d 79 (3d Cir. 1984).......... 14

Dandridge v. Williams, 397 U.S. 471 (1970) .......... 49

Dennis v. Sparks, 449 U.S. 24 (1980) ................ 15

Dillingham v. Putnam, 109 Tex. 1, 14 S.W. 303 (1890) 27

District of Columbia Court of Appeals v. Feldman, 460

en Pear te ies ae OE eee peng Fe passim

Dombrowski v. Pfister, 380 U.S. 479 (1965) .......... 32

Douglas v. California, 372 U.S. 353 (1963) ........... 47

Edwards v. California, 314 U.S. 160 (1941)........... 49

Evitts v. Lucey, 105 S.Ct. 830 (1985)............... .45, 47

Fuentes v. Shevin, 407 U.S. 67 (1972)................ 14

PAGE

Ganey v. Barefoot, 749 F.2d 1124 (4th Cir. 1984), cert.

Se Be tac Be CIs vc ccc cwecccccsvccces 39

Gibson v. Berryhill, 411 U.S. 564 (1973) ............. 21

Glenn v. Hollums, 73 S.W.2d 1068 (Tex. Civ. App.—

Rss Sick hei Oe ee eek eee es dew ws 30

Gras v. Stevens, 415 F. Supp. 1148 (S.D.N.Y. 1976).... 43

Hale v. Harney, 786 F.2d 688 (Sth Cir. 1986).......... 41

Henry v. First Nat’l Bank, 595 F.2d 291 (Sth Cir. 1979),

cert. denied, 444 U.S. 1074 (1980)................. 38, 39

Hernandez v. Finley, 471 F. Supp. 516 (N.D. Ill. 1978),

summarily aff'd sub nom. Quern v. Hernandez, 440

SR AiO EL Gace ire edd ea sg 25

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

Juidice v. Vail, 430 U.S. 327 (1977)................. passim

Kahn v. Shainswit, 414 F. Supp. 1064 (S.D.N.Y. 1976) 43

Kenner v. Morris, 600 F.2d 22 (6th Cir. 1979) ......... 43

Kugler v. Helfant, 421 U.S. 117 (1975). ............. passim

LeCroy v. Hanlon, 29 Tex. Sup. Ct. J. 490 (1986)..... 27

Lindsey v. Normet, 405 U.S. 56 (1972)............... 45

Logan v. Zimmerman Brush Co.,,455 U.S. 422 (1982) 47

Louisville & Nashville Railroad Co. v. Stewart, 241 U.S.

FE a ETN oe ee Ne 48, 49

Lugar v. Edmondson Oil Co., 457 U.S. 922 (1982)..... passim

Lynch v. Household Finance, 405 U.S. 538 (1972)..... 14

Mann-Gas Transmission Co. v. Osborn Oil Co., 693

S.W.2d 576 (Tex. Civ. App.—San Antonio 1985, No

Ee EE Se PE oa R IT MeCN yon Cy ee an ee 29

M.L.C. eat Bedford Township, 463 U.S. 1341 (1983) 38

Vii

PAGE

Middlesex Ethics Comm. v. Garden State Bar Assn., 457

ds MP GE Occ tc ncbectedwedetedeccresess 18, 20, 35

Mitchum v. Foster, 407 U.S. 225 (1972)............. passim

Monroe v. Pape, 365 U.S. 167 (1961).............46. 5, 40

Moore v. Sims, 442 U.S. 415 (1979) ............24.4. passim

NAACP. v. Claiborne Hardware Co., 458 U.S. 886

PED chakheevedcnbikddesasedcueeeseataenaenees 39

National Socialist Party v. Skokie, 432 U.S. 43 (1977) 38

National Union of Marine Cooks & Stewards v. Arnold,

gE Rf TPCT TT TTT TTT TTT 20, 48, 49

Nebraska Press Ass’n v. Stuart, 423 U.S. 1319 (1975).. 38

Neebuhr v. Bayer, 502 F. Supp. 1216 (N.D. Ohio 1980) 43

Nelson v. Krusen, 678 S.W.2d 918 (Tex. 1984)......... 27

New Motor Vehicle Bd. v. Fox, 439 U.S. 96 (1978) .... 49

North Dakota Pharmacy Bd. v. Snyder’s Drug Stores,

GOD Ti TP EE 6 occ kee ccebendsdbeceseceeves 44

Ohio v. Akron Park District, 281 U.S. 74 (1930) ...... 45

Ohio Bureau of Employment Services v. Hodory, 431

le ee NU ACs och ce Ped kecddkevieedeseenes 21

Ohio Civil Rights Comm’n v. Dayton Christian Schools,

Se as VU CUE oc atic ntccccvetsccdocsessden 31

Pace v. McEwen, 604 S.W.2d 231 (Tex. Civ. App.—San

Antonio 1980)............ (eeannseah cuneate 27, 28, 29, 31

Patsy v. Florida Board of Regents, 457 U.S. 496 (1982) 5, 40

Perez v. Ledesma, 401 U.S. 82 (1971)................ 32

Pope v. Ferguson, 445 S.W.2d 950 (Tex. 1969) ........ 31

Railroad Comm’n v. Pullman Co., 312 U.S. 496 (1941) 43

Vili

PAGE

Rooker v. Fidelity Trust Co., 263 U.S. 413 (Iv2.)...... passim

Smith v. Murray, 106 S.Ct. 2661 (1986) .............. 25

Sniadach v. Family Finance Corp., 395 U.S. 337 (1969) 14

Stefanelli v. Minard, 342 U.S. 117. (1951)............. 11, 36

Sumner v. Mata, 449 U.S. 539 (1981)................ 41

Svoboda v. Alexander, 3 S.W.2d 423 (Tex. Com. App.

LAVA Rede akehssvakeatenndenedebeinsieeces 30

Thomas v. Kadish, 748 F.2d 276 (Sth Cir. 1984), cert.

oo 41

Trainor v. Hernandez, 431 U.S. 434 (1977)........ 19, 21, 33

- United Benefit Fire Ins. Co. v. Metro Plumbing Co.,

363 S.W.2d 843 (Tex. Civ. App.—El Paso 1962)..... 26

Vail v. Juidice, 406 F. Supp. 951 (S.D.N.Y. 1976)...... 20

Weinberger v. Salfi, 422 U.S. 749 (1975) ............. 49

Williams v. Oklahoma City, 395 U.S. 458 (1969) ...... 47

Yandell v. Tarrant State Bank, 538 S.W.2d 684 (Tex. Civ.

ee: ME EE os baneceeveacpocvacessedes 26

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

Constitutional Provisions

U.S. Constitution, Fourteenth Amendment.......... passim

Hee We WP 0k inns beedes cacscens 26, 27, 28, 29

Statutes

, AIR Sotto). > Sr ea bes adaeneibaswens iv

I Ns ns od oc cu cbckbcovawens seeneas passim

ciel vias icc Kadeeeseubediveeeaus iv

OEE Ass Wace and wiuees vedekehudedenkans iv

PAGE

_ Let ae | = rerererrrrr rire rrr rrr ire. 9, 37, 40

PGES, Be ccccicccccsccsscnesssinscovesests 37

ED cove tcbddectecqccesedessswstg san passim

42 pai ey RAT PTT Tee ToT ery Tee TT passim

Texas Govt. BO FRG nc ccccvccccccsccscvccecs 30

DUD caoeves see ecseseresesenes 30

Texas Prop. Code Ann. § 52.001 ...........+0+++055 passim

Tex. Civ. Prac. & Rem. Code § 65.013..........+.5+: 29, 30

Rules

Be Sf RPPrrrrrrricr Tiree ri 3, 16

Texas R. Civ. P 329D.... ccc ccc cece cece ecccces 28

Texas R. Civ. P. 363... 22... cece cceeeees +aeee nate 28

Texas R. Civ. PR 3664... ccc cc ccc ccceces se eeeecees passim

Texas R. Civ. P. 365(b) ... 2... eee eee eee ee ee ee eee 28

OPINIONS BELOW

The opinion of the United States Court of Appeals for the

Second Circuit, dated February 20, 1986, is reported at 784

F.2d 1133, and is reprinted as Appendix A.* The opinion of the

United States District Court for the Southern District of New

York, dated January 10, 1986, is reported at 626 F.Supp. 250,

and is reprinted as Appendix D.

° The Appendices are bound together with the Jurisdictional State-

meni.

JURISDICTION

Texaco brought this action for injunctive relief in the United

States District Court for the Southern District of New York

under 42 U.S.C. § 1983 and 28 U.S.C. §§ 1331, and 1343. The

district court (Brieant, J.) granted a preliminary injunction on

_ January 16, 1986, see Appendix B, against enforcement of

certain Texas bond ard lien statutes, on the ground, inter alia,

that their application to Texaco would violate the Due Process

Clause of the Fourteenth Amendment to the United States

Constitution. See Appendix D.* The United States Court of

Appeals for the Second Circuit, affirming in part and reversing

in part, sustained the injunction against the Texas provisions

on due process grounds. See Appendix A. The judgment was

entered on February 20, 1986, see Appendix F, and the man-

date issued on March 13, 1986. Appellant’s motion to recall

the mandate and to clarify, modify or stay the judgment was

denied by the Court of Appeals on March 27, 1986. See

Appendix G. Appellant filed a timely Notice of Appeal to this

Court in the United States Court of Appeals for the Second

Circuit on March 21, 1986. See Appendix H. After remand, on

April 8, 1986, the District Court entered aii amended injunc-

tion barring enforcement of Pennzoil’s Texas judgment until

the completion of all appeals in Texas and to this Court under

28 U.S.C. § 1257. See Appendix C.

The Second Circuit, by affirming the grant of a preliminary

injunction against Pennzoil, has conclusively held the Texas

supersedeas bond and judgment lien provisions unconstitu-

tional as applied, leaving no federal issue to be resolved below.

This Court therefore has jurisdiction of this appeal under 28

U.S.C. § 1254(2). City of New Orleans v. Dukes, 427 U.S. 297,

302 (1976) (per curiam); Chicago v. Atchison, T. & S.F-R. Co.,

357 U.S. 77, 82-83 (1958).

° The District Court’s Supplemental Findings of Fact are set forth in

Appendix E.

xii

CONSTITUTIONAL PROVISIONS, STATUTES

AND RULES INVOLVED

The Fourteenth Amendment to the United States Constitu-

tion provides in relevant part that:

No State shall . . . deprive any person of life, liberty, or

property, without due process of law; nor deny to any

person within its jurisdiction the equal protection of the

laws.

Title 28, § 2283 of the United States Code provides that:

A court of the United States may not grant an injunction

to stay proceedings in a State court except as expressly

authorized by Act of Congress, or where necessary in aid

of its jurisdiction, or to protect or effectuate its judg-

ments.

Texas Rule of Civil Procedure 364 provides:

(a) May Suspend Execution. Unless otherwise pro-

vided by law or these rules, an appellant may suspend the

execution of the judgment by filing a good and sufficient

bond to be approved by the clerk, or making the deposit

provided by Rule 14c, payable to the appellee in the

amount provided below, conditioned that the appellant

shall prosecute his appeal or writ of error with effect and,

in case the judgment of the Supreme Court or Court of

Appeals shall be against him, he shall perform its judg-

ment, sentence or decree and pay all such damages as said

court may award against him.

(b) Money Judgment. When the judgment awards re-

covery of a sum of money, the amount of the bond or

deposit shall be at least the amount of the judgment,

interest, and costs.

xiii

Texas Property Code, § 52.001 provides that:

A first or subsequent abstract of judgment, when it is

recorded and indexed in accordance with this chapter,

constitutes a lien on the real property of the defendant

located in the county in which the abstract is recorded and

indexed, including real property acquired after such re-

cording and indexing.

Texas Const. Art. I, § 13 is reprinted as Appendix K.

42 U.S.C. § 1983 is reprinted as Appendix L.

28 U.S.C. § 1257 is reprinted as Appendix M.

Texas Govt. Code § 22.002 is reprinted as Appendix N.

Fed.R.Civ.P. 62 is reprinted as Appendix O.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

No. 85-1798

PENNZOIL COMPANY,

Appellant,

—against—

TEXACO, INC.,

Appellee.

ON APPEAL FROM THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR APPELLANT

STATEMENT OF THE CASE

At issue in this case is the authority of federal district courts,

notwithstanding the Anti-Injunction Act and judicially-crafted

comity principles, to interfere with pending state court pro-

ceedings by enjoining recourse to the statutes a state has

adopted for adjusting the competing interests of judgment

winners and losers pending appeal.

The Texas state court trial.

Pennzoil Company sued Texaco Inc. in a Texas state court in

February 1984 for intentionally inducing the breach of Penn-

zoil’s binding agreement to acquire 3/7 of Getty Oil Company.

In a 4-1/2 month trial, Pennzoil, in the words of the United

States Court of Appeals for the Second Circuit (A41),'

1. Citations to pages in the appendices to the Jurisdictional Statement

will be styled “A ___”; to Texaco’s Motion to Affirm, “MTA ___”; and to

the record appendix in the court of appeals, “CCA ___..”

established to the satisfaction of a Texas jury and judge

that it was unlawfully injured by Texaco’s tortious con-

duct, that as a result Pennzoil suffered enormous dam-

ages, and that Texaco’s conduct was suf ficiently egregious

to require it in addition to pay punitive damages to the

victim.

The jury awarded Pennzoil compensatory damages of $7.53

billion, based on Pennzoil’s evidence of what it would cost to

replace the vast oil reserves that Pennzoil would have acquired

under its lost agreement with Getty. (Texaco introduced no

evidence on the issue of damages.) The. jury also awarded $3

billion in punitive damages, bringing the total judgment en-

tered on December 10, 1985, including prejudgment interest

and costs, to $11.12 billion. (A126-27).

Texas law, like that of most states, provides that a party

wishing to appeal from a money judgment “may suspend the

execution of the judgment by filing a good and sufficient bond

. ...” Texas R. Civ. P. 364(a). To protect the rights of the

prevailing party while the appeal is pending, Texas law, like

that of 30 other jurisdictions,’ provides that the bond equal “at

least the amount of the judgment, interest, and costs,” id.

364(b), “[uJnless otherwise provided by law,” id. 364(a).

A judgment debtor may appeal in Texas even without post-

ing a supersedeas bond, but the prevailing party may then take

steps to enforce its judgment while the appeal is pending. In

particular, the judgment creditor may record its judgment in

any Texas county and thereby acquire a lien on any property of

the judgment debtor located in that county. Texas Prop. Code

Ann. § 52.001.

No such threat of immediate enforcement existed with re-

spect to Pennzoil’s judgment against Texaco, however (A38),

for Paragraph 7 of the judgment included, with the consent of

both parties, so-called “stand-still” provisions carefully bal-

anced to protect the interests of both litigants. See Appendix I.

These provisions prohibited Pennzoil from taking any steps to

2. See n.44 infra.

enforce its judgment, and also barred Texaco from transferring

or encumbering its assets except in the ordinary course of

business, as long as the trial court retained jurisdiction of the

case.

During this post-trial period, which lasted 3-1/2 months,

through March 25, 1986, Texaco was free to seek further relief

in the Texas trial and appellate courts from the appeal bond

and judgment lien provisions of Texas law, but it made no

attempt to do so. Indeed, to this day, Texaco has never raised

in a Texas court its objections to the validity or reasonableness

of the Texas bond and lien provisions. Nor has Texaco moved

in the Texas courts to obtain suitable alternative security

arrangements, notwithstanding the fact that, after the judg-

ment was entered, Pennzoil filed a stipulation (Appendix J) in

the Texas trial court waiving its right to a full bond and asking

that court to fashion fair and suitable security under standards

such as those contained in Fed.R.Civ.P. 62.

Texaco’s federal district court action.

Several hours before the Texas court had even entered its

judgment, Texaco, which had just given its consent to the

stand-still provisions, filed this suit against Pennzoil in the

United States District Court for the Southern District of New

York (White Plains Division) (Brieant, J.). Purporting to rely

on 42 U.S.C. § 1983, Texaco sought immediate appellate

review in the federal district court of the merits of the Texas

judgment, alleging that the judgment burdened interstate com-

merce, frustrated various provisions of the Securities Exchange

Act, and violated the Full Faith and Credit and Due Process

Clauses of the Constitution (Claims 1, 2, 4, 5, and 7). (AS,

All, A57-58). Texaco also alleged that the Texas bond and lien

provisions violated the Due Process and Equal Protection

Clauses of the Fourteenth Amendment and deprived Texaco of

its federal right of access to this Court under 28 U.S.C. § 1257.

(Claims 3 and 6). Texaco asked the district court in White

Plains (a) to invalidate these wholly conventional security

provisions, (b) to decide for itself what would be suitable

security, and (c) to impose these arrangements on the Texas

litigants and the Texas courts by means of an injunction.

On December 17, 1985, Judge Brieant issued a temporary

restraining order, and on January 16, 1986, he entered a

preliminary injunction prohibiting Pennzoil from “taking any

action of any kind whatsoever to enforce or attempt to en-

force” its Texas judgment. (A52). The district court ruled that

every one of Texaco’s claims “raise[d] serious questions” about

the “merits of the [Texas] judgment” (A63), that Texaco was

likely to be successful in its Texas appeal (A62, A66), that

punitive damages should not have been awarded (A64), and

that compensatory damages “should in no event exceed $800

million” (A66). The court also held that the Texas statute

requiring a supersedeas bond in the full amount of the judg-

ment was unconstitutional as applied to Texaco because it

burdened Texaco’s right to appeal to the Texas appellate courts

and to this Court under 28 U.S.C. § 1257. (A70-71). The

district court, concerned that “other creditors of Texaco will

. run into the courts seeking to perfect security interests

higher than that . . . available to Pennzoil” (A77), held that,

whatever the size of the appropriate judgment, it “must be

secured by assets or obligations at least equal in value. . . .”

(A77). Yet because it found the Texas award of damages to be

“absurd” (A65), the district court required Texaco to post

security of only $1 billion as a condition for injunctive relief

(A78), and otherwise left Texaco free to transfer or encumber

the assets upon which Pennzoil would have to rely to collect its

judgment.

The decision below.

On February 20, 1986, having heard Pennzoil’s appeal, the

Second Circuit directed dismissal of all of Texaco’s claims

other than those attacking the Texas lien and bond provisions

(Claims 3 and 6), holding that all but those two claims could

not be adjudicated by the lower federal courts since they had

been litigated in the Texas courts. (A19-20). The court of

appeals ruled that district court consideration of these claims

would constitute an impermissible arrogation of appellate

power: “reviewability of these claims by the Texas appellate

courts and ultimately by the Supreme Court pursuant to 28

U.S.C. § 1257 precludes an inferior federal court from exercis-

ing jurisdiction over them.” (A20).

But the Second Circuit reached a different conclusion with

respect to Texaco’s Claims 3 and 6—the claims challenging the

Texas bond and lien provisions. The court reasoned that

Texaco’s deliberate decision not to raise the question of the

validity of these provisions in the Texas state courts gave

Texaco the right to raise that question in a federal court. (A21).

It stated that cases such as Monroe v. Pape, 365 U.S. 167

(1961), and Patsy v. Florida Board of Regents, 457 U.S. 496

(1982)—holding that a plaintiff with a constitutional claim

under § 1983 may, as an original matter, choose to bring a

federal action rather than sue in state court—also give a

defendant in a pending state court proceeding the option to

carve out federal issues and take them to the “concurrent”

jurisdiction of a federal court. (A21-22). This is permitted, the

court concluded, whenever a state court litigant decides not to

submit to the state courts the issue of the validity of any state

rule that is not “inextricably intertwined” (A22) with claims

that have been adjudicated in the state courts.

The Second Circuit held that the Anti-Injunction Act, 28

U.S.C. § 2283, was likewise no bar to Texaco’s Claims 3 and 6,

because these claims were properly brought pursuant to 42

U.S.C. § 1983. Relying upon Lugar v. Edmondson Oil Co.,

457 U.S. 922 (1982), the court below declared that Pennzoil

would be acting “under color of” state law if it ever tried to

enforce its judgment or obtain security therefor, because those

acts “necessarily involve[ ] a panoply of activities undertaken

together by Pennzoil and state officials, which constitute joint

action for the purposes of § 1983.” (A26).

On the other hand, the court of appeals ruled that, although

there was “an on-going state proceeding” (A32), the principles

of federalism and comity underlying Younger v. Harris, 401

U.S. 37 (1971), did not prevent the district court from issuing

an injunction against Pennzoil. For the Second Circuit ruled

that Pennzoil—even though held to be an arm of the state for

“state-action” purposes—was, for Younger purposes, merely a

“private litigant” and its dispute with Texaco merely “a suit

between two private parties” (A34). An injunction against

Pennzoil thus did not prevent action by “any arm of the state”

(A34); and neither Texas’ interest in “protecting the rights of

its citizens to obtain and enforce judgments in the Texas

Courts,” nor its “interest in the constitutionality of its stat-

utes,” was “important” or “substantial.” (A32). Moreover, the

court reasoned that “an injunction would not adversely affect

the operation of the Texas judicial system but, on the contrary,

would facilitate its proper functioning by permitting Texaco’ S

appeal to be heard and decided.” (A14).

The Second Circuit further held that abstention was not

required because, in its opinion, the Texas state courts do not

provide “adequate procedures for adjudicating Texaco’s fed-

eral claims” (A35). Without even addressing most of the Texas

avenues of redress pressed by doth Pennzoil and the State of

Texas, which intervened on Pennzoil’s side below (Al, A3),

and without identifying a procedural bar to such adjudication,

the court simply opined that “[t]here is no assurance” that the

Texas appellate courts would grant Texaco an “immediate stay

of execution” pending a ruling on the federal claim, nor that

they would fix security in an amount that the court of appeals

would deem “reasonable.” (A37-38).

As to the merits of Texaco’s attack on the Texas lien and

bond statutes, the Second Circuit concluded, in effect; that the

Due Process Clause entitles a civil judgment debtor such as

Texaco to an affordable means of staying execution of the

judgment against it while pursuing its appeal. The court below

thus held that the Fourteenth Amendment prohibits Texas

from balancing the needs of trial winners and losers as it sees

fit, and from deeming the completion of trial an appropriate

occasion for fully securing the winning party against the risk

that its victory might prove worthless if and when the trial

court’s judgment is ultimately affirmed on appeal. The Second

Circuit accordingly “declare[d] the Texas lien and bond provi-

sions to be unconstitutional . . . as applied” (A35): “[D]enial

of a stay of execution unless a supersedeas bond in the full

amount of the judgment is posted . . . [would] amount[ ] to a

confiscation of the judgment debtor’s property without due

process . . . [and] reduce its appeal to a meaningless ritual|,]

[s]ince Texaco would be bankrupt or in liquidation by the time

its appeals were decided . . . .” (A44). The Second Circuit

proceeded to affirm the district court injunction prohibiting

Pennzoil from taking any steps in the Texas courts to facilitate

the enforcement of its judgment (A47-51), whether by invoking

the lien and bond provisions, or by requesting other forms of

protection to preserve the status quo.’

On March 21, 1986, contending that the decision below

threatened to make its state court judgment uncollectible,

Pennzoil moved the court of appeals to clarify, modify, or stay

its judgment so that Pennzoil would at least be free to ask the

Texas courts to extend the Texas trial court’s “stand-still”

order (see pp. 2-3 supra) or otherwise to seek security in Texas

apart from the Texas lien and bond provisions. The court of

appeals denied this motion on March 27, 1986. See Appendix

SUMMARY OF ARGUMENT

The judgment of the court below sanctions an unprece-

dented intrusion by a federal court into ongoing state court

proceedings, breaching the wall of statutes and judicial doc-

trines erected by Congress and this Court as a barrier to just

such intrusions. Despite that barrier, the Second Circuit ruled

that a federal district court in New York may entertain a

collateral attack on the validity of the application, in a Texas

lawsuit, of Texas statutes governing security arrangements

3. Having affirmed federal intervention in Texas judicial proceedings

and having sustained the $1 billion bond ordered by the district court, the

Second Circuit stated that further proceedings in the district court were

“unnecessary” pending the disposition of the Texas appeal. (A48). The

district court was to retain jurisdiction solely for the purpose of ruling on

“any application with respect to the security terms of the injunction arising

out of changed circumstances.” (A51).

pending the appeal being pursued in that suit. The court held

that the district court may displace those statutes and decide

for itself what security is “reasonable” to protect the Texas

judgment that Pennzoil won before a Texas jury and judge.

The court of appeals turned the law on its head by insisting

that the New York federal courts have this authority because

Texaco deliberately bypassed the state courts and declined to

present its constitutional objections in the ongoing Texas litiga-

tion.

The district court in White Plains has thus been given carte

blanche to supplant the courts of Texas and to exercise con-

tinuing supervision over pendente lite security arrangements

throughout the Texas litigation—preventing Pennzoil, on pain

of contempt, from pursuing any remedy in any Texas tribunal

to protect its existing and—unless and until reversed—wholly

valid Texas judgment. The Second Circuit accomplished this

intrusion by constructing a contrived complex of exceptions to

all of the statutory and judicially elaborated comity rules that,

in combination, embody the overarching principle that the

state and federal judicial systems are independent and parallel,

both subject to the governance of this Court, but without

power—apart from exceptional and rigorously cabined circum-

stances—to supervise or interfere with each other’s proceed-

ings.

The court of appeals first ruled that every state-court judg-

ment winner becomes “an arm of the state” whenever there is

any prospect that the state’s judgment enforcement machinery

will actually be engaged. The court below thus radically ex-

panded the application of 42 U.S.C. § 1983 to the private

sector, while simultaneously contracting the application of the

Anti-Injunction Act (28 U.S.C. § 2283)—the statute through

which Congress, ever since 1793, has voiced its steadfast

insistence that the federal courts not interfere with state court

proceedings.

Then, in an abrupt about-face, the court of appeals took out

of play the judicially-crafted rule of comity expounded in

Younger v. Harris, on the ground that Pennzoil, having just

been ruled a state actor for § 1983 purposes, is magically

transformed into a purely private actor for Younger purposes.

The court thereby created a capacious zone within which

comity is simply inapplicable because neither § 2283 nor ab-

stention is operative—the former because the federal action

seeks relief under § 1983 against a state-court litigant who is

deemed to wield the power of the state, and the latter because

that same state court litigation is nevertheless said to involve

merely private parties and private interests and therefore to be

undeserving of comity.

The Second Circuit compounded its corruption of abstention

doctrine by excusing Texaco from having to identify any

procedural bar preventing it from raising its constitutional

objections to the lien and bond provisions in the pending Texas

proceedings. Instead, the court below satisfied itself with

pessimistic forecasts about how Texas courts would resolve

questions that have never been put to them. But there is no

reason whatever to assume that the Texas courts, especially in

light of the “open courts” guarantee of the Texas Constitution,

would have been any less sensitive than the federal judiciary to

Texaco’s legitimate concerns, or that travelling to a federal

court half a continent away represents a more rapid or certain

path to a just outcome than would have been available in the

Texas judicial system. This Court’s decisions permit no such

distrust and disdain for state courts as fora fully willing and

able to vindicate federal rights. ;

If Texaco had presented in the state courts its constitutional

arguments against the lien and bond provisions, then—as the

court of appeals of course had to acknowledge—the only

federal forum in which Texaco could seek relief from an

adverse state ruling would be this Court, acting on direct

review under 28 U.S.C. § 1257, or a single Justice, granting a

stay under 28 U.S.C. § 1651(b) pending the full Court’s con-

sideration under § 1257 of a petition for certiorari or an

appeal. To avoid the conclusion that the federal district court

simply lacked original jufisdiction to issue the stay pending

appeal that Texaco sought—in effect, a stay in aid of the

appellate jurisdiction of the Texas judiciary or of this Court or

both—the court of appeals focused on the fact that Texaco had

carefully avoided ever asking the state courts to rule on its

constitutional objections to the state lien and bond rules. In

this way, the Second Circuit managed to conclude that Tex-

aco’s deliberate bypass of the Texas state courts affirmatively

justified Texaco’s excursion to the federal courts, rather than

constituting a decisive obstacle to the exercise of federal

jurisdiction. What should have been vice thus became virtue:

the very same failure to exhaust state procedures and appeals

that would have denied Texaco access to this Court on direct

review, was viewed by the Second Circuit as providing Texaco

a privileged entree to a federal district court in a collateral

attack under § 1983. Even though the ultimate federal statu-

tory right the court below claimed to be vindicating was access

to this Court under § 1257, it saw nothing inconsistent or

impermissible in allowing Texaco to petition a district court,

rather than this Court, for injunctive relief in aid of this

Court’s appellate jurisdiction. Whether or not this Court

construes its holdings in Rooker v. Fidelity Trust Co. , 263 U.S.

413 (1923), and District of Columbia Court of Appeals v.

Feldman, 460 U.S. 462 (1983), as literally ousting the district

court of all original jurisdiction to stay state court judgments

in supposed aid of appeals therefrom, no appreciation of the

comity principles lying behind those decisions can accommo-

date the end-run sanctioned by the court below.

The Second Circuit was comforted by its belief that its

intrusion into state proceedings was surgical in both senses of

the word: first, that it was narrow, precise, and limited to the

“unique and extraordinary” circumstances of this case, un-

likely ever to be repeated; second, that it was intended for the

benefit of the patient, inasmuch as federal intervention here

improved, rather than disrupted, the operation of the state

judicial! process.

But what the Second Circuit and Texaco believe makes this

case unique is in fact something that has yet to occur at all: a

flat insistence by Texas on rigidly enforcing the state’s lien and

bend rules in the face of an objection in its courts as to the

supposedly dire results and constitutional! iniquity of doing so

on facts like these. The point Texaco cannot be permitted to

obscure is that Texaco has never given the courts of Texas a

chance even to consider Texaco’s claims, state or federal,

against such rigid enforcement. Indeed, the more this situation

can be fairly characterized as unique, the /ess justified is the

unsubstantiated assumption—an assumption central to both

the decision below and to Texaco’s entire case for federal

intervention—that the Texas courts would mechanically apply

various state rules to these facts, oblivious of Texaco’s federal

constitutional objections to the state’s rules as so applied.

What cannot be deemed unique to this case is the practice of

endorsing federal ‘‘flanking movement{s] against the system of

State courts,’’ Stefaneilli v. Minard, 342 U.S. 117, 123 (1951)—

a practice that, if warranted on these facts, must be deemed

warranted in a wide range of situations. It would be unprinci-

pled and lawless to permit the court below to excuse its

departure from precedent by saying, in effect, ‘‘only for

Texaco.’’ And it would be imprudent to suppose that other

‘‘exeeptions’’ will not be made for other litigants.

Nor are the Second Circuit’s good intentions any justifica-

tion for displacing state tribunals as guardians of their own

appellate processes. It is condescending to presume that state

courts are in need of such strong medicine, and insensitive to

suppose that federal district courts should feel free to make a

state’s judiciary swallow such a bitter pill.

Apparently displeased by what it deemed to be an excessive

award of damages against Texaco, and aghast at what it

imagined to be the prospect of Texaco’s imminent collapse and

the consequence of widespread economic distress, the court

below promoted the virtues of quick action, brushed aside the

principles of comity, and reacted to imagined calamities that

either need never occur at all or, if they are to occur, inhere in

the very magnitude of Texaco’s adjudicated wrong and in the

very fact of ever enforcing the resulting verdict in Pennzoil’s

favor. But tomorrow, when the shouting and the tumult have

‘died, when the dust raised by this elephantine corporate strug-

gie has settled, and when the billion-dollar figures and other

technicolor facts have become the stuff of arbitrageur’s anec-

dotes and litigator’s war stories, we will still be a union of fifty

sovereign states, with parallel federal and State court systems.

And, if the Second Circuit is not reversed, the damage inflicted

on our federalism by this decision will then be painfully

apparent and all too permanent.

ARGUMENT

I. THE ANTI-INJUNCTION ACT FORBIDS ENJOIN-

ING PRIVATE LITIGANTS FROM TAKING STEPS

TO ENFORCE JUDGMENTS THEY HAVE WON IN

STATE TRIALS.

For nearly two centuries the Anti-Injunction Act has pro-

vided that a federal court may not enjoin state court proceed-

ings ‘‘except as expressly authorized by Act of Congress, or

where necessary in aid of its jurisdiction, or to protect or

effectuate its judgments.’’ 28 U.S.C. § 2283. The Act is a

linchpin of federal-state judicial relations, for ‘‘{o]bviously this

dual system could not function if state and federal courts were

free to fight each other for control of a particular case.’’

Atlantic Coast Line R.R. Co. v. Brotherhood of Locomotive

Engineers, 398 U.S. 281, 286 (1970). The “lines of demarca-

tion’’ contained in the Act are designed to permit each court

system to function “independently of the other with ultimate

review in this Court of the federal questions raised in either

system.’’ Jd. The effectiveness of the Act, and thus the integ-

rity of the dual court system, are jeopardized by the Second

Circuit’s decision in this case.‘

The Second Circuit held the Anti-Injunction Act inapplica-

ble on the ground that Texaco’s due process claim against

Pennzoil constituted an action authorized by 42 U.S.C. § 1983

and therefore, under this Court’s ruling in Mitchum vy. Foster,

_—

4. Although the injunction issued in this case was directed solely

against Pennzoil, the Anti-Injunction Act—like the application of Younger

abstention princip'es—‘‘cannot be evaded by addressing the order to the

Parties or prohibiting utilization of the results of a completed state proceed-

ing.’’ Atiantic Coast Line R.R. Co., supra, 398 U.S. at 297.

407 U.S. 225 (1972), an action in which an injunction is

‘‘expressly authorized by Act of Congress.”’ By this holding,

the court below effected an unprecedented expansion in the

application of § 1983 to private defendants and thereby under-

mined the command of the Anti-Injunction Act.

A. The Holding Below Makes Every Judgment Winner A

State Actor Suable Under § 1983.

For Texaco’s federal action to qualify as a § 1983 action,

and thus one exempted from § 2283 under Mitchum v. Foster,

Pennzoil must be deemed ‘‘a person wno may fairly be said to

be a state actor.’’ Lugar v. Edmondson Oil Co., 457 U.S. 922,

937 (1982). Relying on Lugar, the court of appeals held that

Pennzoil fits into this category because, in order to enforce its

judgment, ‘‘Pennzoil would have to act jointly with state

agents by calling on state officials to attach and seize Texaco’s

assets.’’ (A25).

This conclusion radically expands this Court’s holding in

Lugar—itself a decision that had extended the state-action

concept. Lugar sustained a § 1983 claim against a private party

who had invoked a state prejudgment attachment statute

before any judicial proceedings had occurred in the case. The

Lugar majority repeatedly stressed that the private party’s

joint action with state officials in that case involved a prejudg-

ment attachment procedure, 457 U.S. at 927, 927 n.6, 932, and

thus the judicially unsupervised seizure by an alleged creditor

of “disputed property,” id. at 933, 941 (emphasis added); the

Court twice expressly stated that its holding “was limited to the

particular context of prejudgment attachment.” /d. at 939

n.21; see id. at 942.

In equating Texas’ post-judgment, post-jury trial appellate

security procedures with Lugar’s pre-judgment, pre-trial, ex

parte attachment procedures, the Second Circuit ignored the

central principle that prevents Lugar from being distorted into

an all-purpose doctrine transforming every state-court judg-

ment winner who seeks enforcement into ‘‘the state.’’ When

the state delegates to a private person the unbridled power to

interfere with others’ property before there have been any

judicial proceedings whatever, exercise of that power is appro-

priately subjected to the constitutional constraints that bind

“‘the state.’’> But where a private person merely asks the state

to help enforce a judgment duly rendered by a jury and

confirmed by the trial court, a holding that that private person

has become the state simply because he has invoked normal

state procedures completely obliterates the distinction between

private and state action.

The critical line is between a state delegation permitting

private parties ‘‘to substitute their judgment for that of [a]

state official or body,’’ Cruz y. Donnelly, 727 F.2d 79, 82 (3d

Cir. 1984), and a system that allows a private person to invoke

public power only after the state has itself determined the

relevant rights and liabilities. The Second Circuit reasoned

that, since ‘‘state officials can act only upon Pennzoil’s uni-

lateral determination” to collect damages from Texaco (A28),

this is not a case in which “‘the independent judgment of the

State judiciary is called into play’’ (A27-28).

But surely the 4-1/2 month trial that preceded the entry of

Pennzoil’s judgment involved “the independent judgment of

the state judiciary,”’ and this is where the contrast with

Lugar—and the Second Circuit’s error—could not be more

plain. The state-court plaintiff in Lugar was a state actor

because state law abdicated to him the unilateral and unsuper-

vised power to determine, simply by filing a complaint and an

ex parte attachment petition, see 457 U.S. at 924, both that a

debt was owed and that security therefor was required pending

trial. Pennzoil wields no such power. The determination that

Texaco owes Pennzoil damages was made by a judge and jury

after a full trial; the decision presumptively to require security

for all such judgments was made by the Texas Legislature

5. Lugar thus falls within the line of cases including Sniadach v. Family

Finance Corp., 395 U.S. 337 (1969), Lynch v. Household Finance, 405 U.S.

538 (1972), and Fuentes vy. Shevin, 407 U.S. 67 (1972), which hold that the

Due Process Clause requires a fair Opportunity to be heard in connection

with private creditors’ resort to prejudgment attachment, garnishment and

replevin procedures.

pe ea

e owas

OR Re! ak et a, La ene

when it enacted § 52.001 and by the Texas Supreme Court

when it promulgated Rule 364; and the decision whether to

require full security on these facts would be made by the Texas

courts upon Texaco’s timely request.° The suggestion that

Pennzoil is here exercising unsupervised and unilateral official

state power can be advanced, therefore, only by completely

and artificially severing the issue of arranging security pending

appeal from the judicial process culminating in the judgment

being appealed.

Under the Second Circuit’s reasoning, all trial winners who

may at some point seek to enforce their judgments become

state actors fully subject to the constraints of the Due Process

and Equal Protection Clauses and vulnerable to suit under

§ 1983 with respect to any constitutional claims that can be

conjured by disgruntled trial losers. That approach to state

action clashes with this Court’s basic teaching in Dennis v.

Sparks, 449 U.S. 24, 28 (1980): ‘*merely resorting to the courts

and being on the winning side of a lawsuit”’ does not make a

private party into a state actor under § 1983, any more than

merely filing a complaint does. Accord, Lugar, supra, 457

U.S. at 939 n.21.

B. So Sweeping a View of § 1983 Cannot Have Been

Contemplated by Mitchum v. Foster.

By vastly expanding the application of § 1983 to private

conduct, the holding below retroactively pumps new meaning

into the exemption authorized by Mitchum v. Foster and

thereby drastically erodes the force of the Anti-Injunction Act.

6. A winning plaintiff like Pennzoil, which the Second Circuit credits

with ‘‘unilateral’’ power to make ‘‘state officials do [its] bidding’ (A28), in

truth wields no independent power under Texas law. Pennzoil’s role in

enforcing its judgment against Texaco is limited to asking the Texas court for

a writ of execution and delivering it to a sheriff (see A25)—a fact that Texaco

concedes. (MTA 1 n.2). And Pennzoil’s role in perfecting judgment liens

against Texaco is likewise limited to obtaining an abstract of the trial court’s

judgment from one court clerk and handing it to another for recording and

filing (see A26)—which Texaco also concedes. (MTA 2 n.3).

That Act by its very terms comes into play only where state

judicial Proceedings have been instituted. But if the invocation

of state judicial Proceedings transforms a private litigant into a

State actor whose conduct may be challenged under § 1983,

then § 2283 will be cannibalized. Even if the Second Circuit's

ruling is limited to state-court judgment winners, the result will

be to render § 2283 inoperative with respect to federal court

interference with state post-trial and appellate processes.

Surely that is not what this Court contemplated when it

decided Mitchum y. Foster, which was a real § 1983 action

against a real government officer whose official activities

constituted the sort of action at the core of Congress’ concern

when it “expressly authorized” injunctive relief under § 1983.

In moving that the judgment below be summarily affirmed,

Texaco sought to assure this Court that the Second Circuit’s

State action holding “has no impact on the breadth of the

§ 1983 exception to the Anti-injunction Act,” inasmuch as

Texaco could have chosen to seek a § 1983 “injunction. . .

against the state officials involved in the proceeding.” (MTA

19) (original emphasis). Why, then, didn’t Texaco take that

path? Obviously, Texaco sued Pennzoil instead of any state

official in an attempt to avoid Younger v. Harris, 401 U.S. 37

(1971), which would have blocked Texaco’s federal foray had it

sued “any arm of the state.” (A34). Only the Second Circuit’s

expansion of the state action concept enabled it to drive a

wedge between the Anti-Injunction Act and Younger, creating

the openine through which Texaco obtained federal relief

pendente lite. Nor can the Court derive any comfort from

Texaco’s astounding Suggestion that this case is “narrower than

Lugar v. Edmondson Oil Co., 457 U.S. 922 (1982),” because

“this is solely an injunction action, not a suit for damages”

(MTA 20). Texaco has obviously missed the point of the

Anti-Injunction Act. That Statute has restrained federal power

ever since 1793 precisely because injunctive interference in state

Proceedings is the most intrusive form of federal invasion.

When asked to expand the coverage of § 1983, courts must

consider what the expansion would do to the policies animat-

ing the Anti-Injunction Act. Such consideration is entirely

POR) Arr aeons w/a ew ie reg tO ah ime

deities —— ey,

missing from the analysis of the court of appeals. The decision

below entices state court judgment losers to mount collateral

federal attacks on state court procedures regulating the en-

forcement of state judgments and other aspects of the state

appeal process, thereby ceding to the lower federal courts a

large and wholly unjustified zone within which to enjoin

pending state proceedings.’

Il. IN ANY EVENT, THE PRINCIPLES DEVELOPED BY

THIS COURT UNDER YOUNGER v. HARRIS BAR

FEDERAL INTERFERENCE IN PROCEEDINGS

DESIGNED TO ASSURE THE COLLECTIBILITY OF

STATE COURT JUDGMENTS WHERE SUCH PRO-

CEEDINGS OFFER AN ADEQUATE FORUM FOR

THE LITIGANT’S FEDERAL CLAIMS.

Even if the Anti-Injunction Act were held not to bar the

injunction issued at Texaco’s behest, the “national policy

forbidding federal courts to stay or enjoin state proceedings

except under special circumstances” would compel the same

result here. Younger v. Harris, 401 U.S. 37, 41 (1971). In

Mitchum vy. Foster, supra, this Court unanimously held that

the fact that a case is brought under § 1983 (and thus is exempt

from the restrictions imposed by § 2283) does not “qualify in

any way the principles of equity, comity and federalism that

7. The breadth of the injunction affirmed below illustrates the range of

federal judicial intrusions portended by the Second Circuit’s holding. That

injunction enjoins Pennzoil from going to the courts of Texas for any form

of protection of its interests during the pendency of Texaco’s appeal on the

merits—even a mere extension of the bilateral stand-still that expired on

March 26, 1986. See Appendix E. Yet the only exception to § 2283 even

suggested in this case—§ 1983—bears af most upon the injunction against the

lien and bond provisions, the only Texas laws ever challenged by Texaco.

Any bootstrap plea for jurisdiction over unchallenged Texas procedures as a

means of effectuating the judgment against those that were challenged is

powerful evidence that Texaco’s purported § 1983 claim against the bond

requirement is nothing more than a subterfuge for a collateral federal attack

on the Texas judgment itself, resting on undifferentiated disdain and hostility

toward the Texas judiciary.

- must restrain a federal court when asked to enjoin a state court

proceeding.” 407 U.S. at 243 (emphasis added). Such federal

judicial “abstention is based upon the theory that the [would-

be federal plaintiff] ‘should first set up and rely upon his

defense in the state courts, even though this involves a chal-

lenge of the validity of some statute, unless it plainly appears

that this course would not afford adequate protection.’ ”

Middlesex Ethics Comm. v. Garden State Bar Assn., 457 U.S.

423, 435 (1982). The Second Circuit’s embrace of the chal-

lenges that Texaco has steadfastly refused to present in the

courts of Texas is anathema to the principle of comity.

A. Younger Abstention Cannot Be Escaped In A § 1983

Action By Suing A Private Litigant Rather Than A State

Official.

Central to the Second Circuit’s effort to escape Younger was

the court’s ruling that the Texas litigation, being a purely

“private” dispute, simply did not involve state interests of a

sort that might implicate Younger. After classifying Pennzoil as

a “state actor” (A27) under § 1983 in order to evade the

strictures of the Anti-Injunction Act, the Second Circuit thus

changed its mind—and thereby changed Pennzoil’s stripes—in

an effort to evade Younger abstention: it now appeared that no

“state official” of any kind was involved in the state court

litigation in question (A33). Having previously declared that,

for purposes of §§ 1983 and 2283, “Pennzoil cannot be

divorced from [the Texas] enforcement procedure merely be-

Cause a court authorized execution of the judgment” (A26), the

court below proceeded to divorce Texas itself from its own

enforcement procedures by holding that “the state has no

interest in the underlying action” in this case (A34).

The court of appeals, by creating a zone within which ai/

rules of comity are rendered entirely inoperative, made non-

sense of the law. If Pennzoi! is to be deemed “the State” for

§ 1983 purposes when it seeks to invoke particular state judi-

cial mechanisms, this must be because it is a surrogate wielding

the public powers of the state. But if the public powers of the

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state are in fact implicated, Younger concerns come into play

for that very reason: the point of the Younger doctrine is to

prohibit federal interference with efforts by state courts to

effectuate the state’s public policies, except in narrowly de-

fined extraordinary circumstances. Younger rests on the “belief

that the National Government will fare best if the States and

their institutions are left free to perform their separate func-

tions in their separate ways.” 401 U.S. at 44. To conclude, as

the court below did, that a § 1983 action aimed at displacing

the state judicial process for securing a duly-rendered judg-

ment is so “private” that it escapes Younger is a contradiction

in terms: by definition a § 1983 action is an action against

public authorities to curb the exercise of public power—power

“under color. . . of state law.” For that very reason, sensitiv-

ity to concerns of comity becomes imperative.

Apart from the Second Circuit’s inconsistent parsing of

“state actors” and “private litigants,” its refusal to apply

Younger principles disregarded both the specific holdings and

the animating philosophy of this Court’s cases in the Younger

line. The court of appeals gave a narrow and wooden interpre-

tation to prior abstention precedents despite this Court’s ex-

press admonition that “the principles of Younger and Huffman

are not confined solely to the type of state actions which were

sought to be enjoined in those cases,” Juidice v. Vail, 430 U.S.

327, 334 (1977). The “vital consideration” underlying Younger

and its progeny is the “notion of ‘comity,’ that is, a proper

respect for state functions,” Younger, 401 U.S. at 44, “which

counsel[s] against interference by federal courts, through in-

junctions or otherwise, with legitimate state functions, particu-

larly with the operation of state courts.” Trainor v. Hernandez,

431 U.S. 434, 441 (1977).

Thus, in Juidice v. Vail, supra, this Court applied Younger

abstention to a federal plaintiff who was, like Texaco, a state

court judgment debtor. There, as here, the judgment was

entered in a purely private civil lawsuit. There, as here, the

federal claim was a § 1983 action challenging state laws and

procedures enabling a successful plaintiff to protect his interest

in the judgment—in that case, by moving for contempt in the

event the adjudged debtor failed to honor a privately-issued

subpoena to appear for a privately-taken deposition about the

existence of assets sought in satisfaction of the judgment. 430

U.S. at 329-30.

__ The Second Circuit’s conclusion that “[h]ere the state has no

interest in the underlying action” (A34) would have been just

as apt—or inapt—in Juidice, where New York had no particu-

lar interest in the private financial dispute underlying the

privately-taken deposition and the privately-issued subpoena.

But just as New York had a substantial interest—one requiring

federal abstention—in “civil contempt proceedings . . . initi-

ated by private parties to enforce compliance with subpoenas

issued by private attorneys,” Vail v. Juidice, 406 F.Supp. 951,

958 (S.D.N.Y. 1976), so Texas has a vital interest in the

functioning and enforcement of its bond and lien laws,

“process[es] through which [it] vindicates the regular opera-

tions of its judicial system,” Juidice v. Vail, 430 U.S. at 335.

Texas’ pendente lite security scheme, like New York’s privately-

initiated contempt process, exists to make state court judg-

ments collectible: it “stands in aid of the authority of the

judicial system, so that its orders and judgments are not

rendered nugatory.” Id. at 336 n.12 (emphasis added).*

Pennzoil does not contend that Texas has any special interest

in this particular judgment or in the underlying dispute be-

tween Pennzoil and Texaco. Rather, the “state’s substantial

interest in thfis] litigation” arises from the “[p]roceedings

necessary for. . . the functioning of the state judicial system.”

Middlesex Ethics Comm., 457 U.S. at 432. Surely Texas’

judicial procedures for accommodating the competing interests

of judgment debtors and creditors pending appeal serve a

8. Texaco itself concedes that “a state court has ‘inherent power to use

its processes to induce compliance with a supplemental order reasonably

issued in aid of execution.’ ” (MTA 12 n.22) (quoting Nat’! Union of Marine

Cooks & Stewards v. Arnold, 348 U.S. 37, 44 (1954)). In the Marine Cooks

case, where dismissal of a state appeal for failure to post proper security was

upheld as a means of “sustaining the effectiveness of a state’s judicial

process,” 348 U.S. at 45, this Court noted the importance of a state’s interest

in averting “frustration” of its judgments, id. at 44.

siet ah ma.

“legitimate state function,” Trainor v. Hernandez, 431 U.S. at

441. How to order those countervailing interests—and how

best to adjust a generic statutory rule to unusual circum-

stances—are issues in which the State of Texas, as well as the

parties in any given case, has a very significant interest.” And

equitable principles of comity and federalism “are designed to

allow a State an opportunity to ‘set its own house in order’ ’

when the federal issue can be raised and resolved in pending

state proceedings. Ohio Bureau of Employment Services v.

Hodory, 431 U.S. 471, 479-80 (1977).

The court of appeals opined that to allow Younger to

operate here “would broaden Younger to cover almost every

§ 1983 case and thus undermine the Supreme Court’s holding

in Mitchum that federal courts are empowered by § 1983 to

enjoin ongoing state proceedings.” (A32). But the unanimous

Mitchum opinion itself made absolutely clear that Mitchum is

not in any way “undermined” by the applicability of Younger;

in fact, the Court justified its conclusion in Mitchum by noting

that Younger comity principles will be fully operative precisely

when § 2283 is not. 407 U.S. at 243.'° Mitchum unmistakably

9. Indeed, the State of Texas intervened as an appellant below. (Al,

A3).

10. The resulting application of abstention principles in such circum-

stances would not in the least imperil the vitality of § 1983, inasmuch as

Younger, like the Anti-Injunction Act itself, admits of several important

exceptions. Specifically, since its first modern incarnation in the Younger

decision, abstention doctrine has been held not to bar federal judicial

interference in state court proceedings in the face of prosecutorial bad faith,

see Younger, 401 U.S. at 47-48, 54, harassment by state officials, id., biased

state tribunals, see Huffman v. Pursue, Lid., 420 U.S. 592, 594 (1975); see

also Gibson y. Berryhill, 411 U.S. 564, 577 (1973), or similar instances of

“official lawlessness in a statute’s enforcement” or “perversion of the very

[state] process that is supposed to provide vindication.” Younger, 401 U.S. at

56 (Stewart, J., joined by Harlan, J., concurring). These exceptions cover the

very circumstances that were believed by the authors of the Civil Rights Act

to require a federal judicial remedy that would not only operate independent

of the state courts, but also against those courts: “Proponents of the

legislation noted that state courts were being used to harass and injure

individuals [and that] state courts were . . . [sometimes] in league with those

who were bent upon abrogation of federally protected rights.” Mitchum v.

Foster, 407 U.S. at 240.

stands for the proposition that, in rea/ § 1983 actions seeking

to enjoin real state officials and agencies from litigating in

State courts, Younger is fully applicable. Yet the court below

held that, when a self-styled § 1983 action is instead brought

against private persons, federal injunctions may be granted

entirely without comity constraints. This has the perverse result

of making § 1983 a far more radical instrument for federal

intervention against private litigants—who are at the margins

of the policies of § 1983—than against the state officials who

are the central focus of those policies.

When combined, the Second Circuit’s § 1983 and Younger

holdings threaten to spawn an entirely new and populous breed

of federal lawsuits aimed at the actions of ordinary citizens and

corporations who happen to have garnered an enforceable

judgment in a state court. Since fundamental principles of

comity do not apply in the no-man’s land inhabited by this

species of litigation, nothing remains to prevent such lawsuits

from repeatedly disrupting pending state judicial proceed-

ings.'’ The Second Circuit’s holding that Younger is entirely

inapplicable to this case thus contravenes this Court’s govern-

ing cases and creates an alarming gap in fundamental princi-

ples of comity.

11. The Second Circuit’s assault on private state court litigation cannot

be limited to issues surrounding security pending appeal. The state statute

books are stuffed with procedural and structural rules governing the judicial

processing of private disputes, and the law reporters are filled with cases

attacking the fairness and reasonableness of such rules and alleging that their

enforcement would work irreparable harm. Under the Second Circuit’s

ruling, all these issues are easy prey to federal collateral attack during

on-going state proceedings; all that is needed is a bit of artful pleading to

make it appear that the federal defendant is suable under § 1983 because his

invocation of state judicial proceedings—whether before or after judgment—

converts him into a state actor. Since that makes the Anti-Injunction Act

inapplicable and since, under the ruling below, Younger is also inapplicable,

the road is clear for wide-scale evasions of this Court’s comity rulings.

= an tt tid

B. The Other Escape Routes Pioneered By Texaco And

Endorsed By the Second Circuit Must Be Closed If

Younger Principles Are To Be Preserved.

1. Forecasts of Futility Cannot Substitute For A

Procedural Bar.

The Second Circuit held that, in the circumstances of this

case, compliance with Younger requirements was also excused

because the Texas state courts do not provide adequate proce-

dures for the adjudication of Texaco’s federal claims. (A35). In

assessing this conclusion, it is essential to remember that, to

this day, Texaco has made no attempt whatsoever to raise its

objections to the application of the Texas lien and bond

provisions in the Texas courts. The Second Circuit freely

acknowledged that its dire predictions of irreversible economic

harm to Texaco could not come to pass until the expiration of

the stand-still order in Paragraph 7 of the judgment. (A38).

Texaco thus had 3-1/2 months (A7-8 & n.3) to obtain from the

trial court a ruling on the construction and constitutionality of

the lien and bond provisions and, absent a favorable ruling, to

seek review in the Texas appellate courts, either by expedited

direct appeal or by mandamus (A10). In fact, it is “abundantly

clear that appellees had an opportunity to present their federal

claims in the state proceedings. No more is required to invoke

Younger abstention.” Juidice v. Vail, 430 U.S. at 337 (original

emphasis). Texaco’s “failure to avail [itself] of such opportuni-

ties does not mean that the state procedures were inadequate.”

Id. Yet the Second Circuit nevertheless concluded that it was

unreasonable to ask Texaco initially to present its complaint

about a Texas rule to the Texas court in which it was currently

litigating. (A37-38).

The gravamen of Texaco’s argument, accepted by the court

below, is not that it could not have raised its constitutional

challenge in the Texas courts, but that such a challenge would

probably have failed since, says Texaco, none had ever suc-

ceeded in the past. The Second Circuit’s conclusion about the

inadequacy of Texas procedures is based on nothing more than

distrustful speculations about Texas law and Texas courts.

Thus, the court below opined that it “appears unlikely” that

Texaco “could have been assured” of a timely decision on the

constitutional issues by the Texas trial court (A35), and that

there was “no assurance” that the Texas appellate courts would

have fixed security in an amount the Second Circuit would

deem “reasonable” (A37-38). The Second Circuit further spec-

ulated that seeking relief from the bond requirement in Texas

would have been futile since the rule had consistently been

enforced “as written,” and therefore “the Texas trial judge

would in all probability deny relief sought on constitutional

grounds.” (A36).

This argument is as fallacious as it is familiar. The appellee

in Huffman v. Pursue, Ltd., 420 U.S. 592 (1975), like Texaco,

contended that recourse to state remedies should not be re-

quired because such efforts would be “futile” and “doomed to

failure.” Jd. at 610. The appellee in Huffman based its argu-

ment on a state case that had upheld rigid application of the

statute in question but that had “absolutely nothing to say with

respect to appellee’s” federal constitutional challenge. /d.

Here, Texaco and the Second Circuit rendered their verdict of

“inadequate” based on Texas decisions routinely fleshing out

what constitutes a “full” bond but saying absolutely nothing

with respect to any sort of challenge to the bond rule, let alone

a challenge along the federal constitutional lines pressed by

Texaco.'* And in Huffman this Court flatly rejected the propo-

sition that the “considerations of comity and federalism which

underlie Younger” permit the abstention requirement to be

“truncat(ed]” merely “because the losing party in the state

court of general jurisdiction believes that his chances of success

. . are not auspicious.” 420 U.S. at 610."

12. These wholly inapposite Texas cases are collected by the court below

at page A9 of its opinion.

13. Indeed, in the parallel context of federal habeas corpus, even the

existence of a prior state supreme court decision rejecting the precise

argument in question will not excuse a federal plaintiff's failure to first raise

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The “only pertinent inquiry” is not how the Texas courts

might rule but whether “state procedural law barred presenta-

tion of [Texaco’s] claims.” Moore v. Sims, 442 U.S. 415, 430,

432 (1979) (emphasis added). In the absence of such a bar,

Younger abstention is required—and may not be evaded on the

basis of self-serving predictions that recourse to the state

courts would be “futile.”'* The requisite procedural barrier

does not exist in this case, and the Second Circuit did not even

suggest otherwise. Indeed, the only “barrier” to prompt and

adequate state relief appears to be Texaco’s adamant refusal to

give the Texas courts an opportunity to address Texaco’s

challenge to the lien and bond provisions.'° There is no

the argument in pending state proceedings. “ ‘Allowing criminal defendants

to deprive the state courts of [the] opportunity’ to reconsider previously

rejected constitutional claims is fundamentally at odds with . . . principles

of comity. . . .” Smith v. Murray, 106 S.Ct. 2661, 2666 (1986). “[I}t is the

very prospect that a state court ‘may decide, upon reflection, that the

contention is valid’ that undergirds the established rule that ‘perceived

futility alone cannot constitute cause.’” /d. A fortiori, the Second Circuit

cannot evade the demands of comity in this case by endorsing Texaco’s

forecasts of futility, since no court in Texas has ever considered, let alone

rejected, the constitutional claims asserted by Texaco against the lien and

bond provisions.

14. Texaco errs in relying on Hernandez v. Finley, 471 F.Supp. 516

(N.D.II. 1978), summarily aff'd sub nom. Quern v. Hernandez, 440 U.S.

951 (1979), for the proposition that something less than a “procedural bar”

to raising one’s federal claims will suffice to suspend the abstention require-

ment. (MTA 26 n.51). As this Court has itself observed, Moore v. Sims, 442

U.S. at 426 n.9, the three-judge court in Hernandez in fact found just such

an absolute procedural bar to the raising of a constitutional challenge. See

471 F.Supp. at 519.

15. Texaco argues that it tried to “confer” with the Texas trial court

about the severity of the financial crisis allegedly caused by the entry of

judgment, only to be rebuffed by that court and opposed by Pennzoil. (MTA

4). Texaco fails to mention that this “conference”—which it requested on

December 13, 1985, three days after it sought injunctive relief and appellate

review of the Texas judgment in the federal district court in White Plains—

would have concerned only alleged “uncertainties” in the Paragraph 7

“stand-still” arrangement, and not the state or federal constitutionality of

(

indication that the Texas trial or appellate courts could not

have fashioned an arrangement like the stand-still order pend-

ing appeal, whether or not those courts held Pennzoil to its

express stipulation in the Texas trial court that it would not

invoke any alleged right, under Texas law, to demand an

appeal bond in the full amount of the judgment.'®

In fact, the Texas courts have, from the outset, stood fully

prepared to consider Texaco’s claim that the state’s lien and

bond provisions, if rigidly applied, would effectively deny

Texaco its,state-created right to appeal from the trial court’s

judgment. Indeed, the Texas Supreme Court has repeatedly

and emphatically held that the “open courts” provision of that

State’s own Constitution, Art. I, § 13, see Appendix K, re-

quires a Texas court to suspend the literal operation of any

Statutory or other condition that, as a practical matter, renders

applying the lien and bond provisions to Texaco. (A10). Texaco also elides

the fact that it submitted its “request” for this “conference” by /etter rather

than by motion or petition, as if it were litigating in forma pauperis, and the

fact that Texaco failed to repond to requests by both Pennzoil and the Texas

trial court that Texaco comply with the Texas Rules of Civil Procedure if it

wished a hearing. (See District Court Findings Nos. 82, 85-87, A101-02).

16. | The Second Circuit denigrated Pennzoil’s waiver of its state-created

right to a full bond as a mere “unilateral request” to the Texas trial court to

determine security pending appeal by applying the standards of Fed.R.Civ.P.

62. (A48). Yet if the challenged Texas lien and bond provisions indeed

operate only upon Pennzoil’s “unilateral determination” (A28), it is unclear

at best how the Second Circuit found any Article III “case” or “controversy”

over Pennzoil’s hypothetical invocation of those provisions against Texaco,

since Pennzoil expressly waived whatever “unilateral” rights those provisions

conferred upon it. Pennzoil’s waiver, duly filed in the Texas trial court as a

“stipulation” pursuant to Texas practice (Appendix J), is effective as a

matter of Texas law to bind Pennzoil. The lien and bond provisions were

intended for the benefit of judgment creditors such as Pennzoil, and their

waiver obv@Usly does~mot adversely affect the rights of the judgment

debtor—just the opposite. See Yandell v. Tarrant State Bank, 538 S.W.2d 684

(Tex.Civ.App.—Ft. Worth 1976); United Benefit Fire Ins. Co. v. Metro.

Plumbing Co., 363 S.W.2d 843 (Tex.Civ.App.—El Paso 1962). Even the

district court recognized that “consent” by Pennzoil would remove the

alleged constitutional defect in the lien and bond statutes. (A68, A75).

unavailable the access to appellate courts that Texas law

guarantees. Thus, in Dillingham v. Putnam, 109 Tex. 1, 5, 14

S.W. 303, 305 (1890), the court stated:

“[A]n Act of the Legislature which makes the right. . .

to prosecute an appeal . . . depend on the giving of a

supersedeas bond, without reference to the ability or

inability. . . to give such bond, is violative of the [Texas]

Constitution.”

See Nelson v. Krusen, 678 S.W.2d 918, 921 (Tex. 1984)

(reaffirming Dillingham)."’

This principle lives in Texas practice as well as theory. In

Pace v. McEwen, 604 S.W.2d 231 (Tex.Civ.App.—San Anto-

nio 1980), the Texas intermediate appellate court enjoined

enforcement of a trial court order just ten days after entry

because that order, requiring a judgment debtor to turn over

real estate for sale in satisfaction of a money judgment,

effectively rendered the appeal meaningless. The Pace court

viewed its injunction as necessary to preserve its own appellate

jurisdiction, id. at 232-33, and further held that the trial court

itself had the power to grant the same injunctive relief “to

prevent damage to an appellant,” id. at 233.

The Second Circuit dismissed the Texas “open courts”

guarantee and the rule announced in Dillingham by assuming

that they protected only the abstract right to appeal as such,

and could not be applied to stay enforcement of a judgment

17. In its most recent statement on this subject, the Texas Supreme

Court avowed that “state courts have not hesitated to look to their own

constitutions to protect individual rights. This court has been in the main-

stream of that movement.” LeCroy v. Hanlon, 29 Tex.Sup.Ct.J. 490, 492

(July 2, 1986). In particular, the “open courts provision specifically guaran-

tees all litigants the right to redress their grievances—to use a popular and

correct phrase, the right to their day in court.” /d. at 493-94. In LeCroy, the

Texas Supreme Court struck down a law raising the state district court filing

fee from $98 to $173 on the ground that, since $40 of the fee went to general

revenue, not court-related expenses, the state had not fulfilled its burden of

“show|ing} that the legislative purpose outweighs the interference with the

individual’s right of access.” Jd. at 494.

pending an appeal. (A31 n.12). But the Pace decision, which

was argued to the court below, clearly demonstrates the Sec-

ond Circuit’s misunderstanding of Texas law. Texaco has

likewise belittled the State’s “open courts” guarantee and, in

urging summary affirmance of the judgment below, palmed

the issue inia footnote and argued that Pace v. McEwen

actually proves that Texas remedies would have been too little,

too late. (MTA 27 n.53).

Texaco’s claim that Texas remedies are inadequate—a claim

without which Texaco’s entire case crumbles—is built upon a

series of flat misrepresentations of Texas law. If Texaco and

the Second |Circuit had made any real effort to take the state’s

law seriously, they would have found that there are several

expeditious avenues by which Texaco could have obtained a

stay of th¢ judgment while presenting a challenge to the lien

and bond provisions. '® First, like the judgment debtor in Pace

v. McEwen, Texaco could have sought a stay of the judgment

directly from the Texas Court of Appeals without filing any

supersedeas bond.'° Tex.R.Civ.P. 365(b) provides that “the

appellate court may review for excessiveness the amount of the

18. Texaco nowhere denies that, even without posting a supersedeas

bond, it still had 3-//2 months in which to ask the Texas courts for relief.

Texaco filed its federal injunction action on December 10, 1985—before the

Texas judgment had even been entered—even though the stand-still agree-

ment to which Texaco had that very day consented ensured that Texaco need

fear no enforcement of the judgment or attachment of liens until mid-March

of 1986. (Appendix I; A127).

19. Urging summary affirmance, Texaco told this Court that it would

have had to waive its new trial motion in order to perfect an appeal and to

petition the appellate court for such relief in mid-December of 1985. (See

MTA 27 n.53). That is simply not so. It is black letter law in Texas that

Texaco could have perfected its appeal by filing a very small cost bond (not a

supersedeas bond) on the very day the trial court entered judgment, see

Tex.R.Civ.P. 363; and “if a motion for new trial is timely filed by any party,

the trial court, regardless of whether an appeal has been perfected, has

plenary power to grant a new trial. . . .” Tex.R.Civ.P 329b(e) (emphasis

added). See Ammex Wurehouse Co. v. Archer, 381 S.W.2d 478, 482 (Tex.

1964); Bergman v. West, 262 S.W.2d 435, 436 (Tex.Civ.App.—Waco 1953).

[supersedeas or cost] bond or deposit fixed by the trial court

and may reduce the amount if found to be excessive.” Under

Texas law, “the trial court is not authorized to set a bond

which would be grossly inequitable; to do so would seriously

interfere and in fact often defeat the right of appellant to

suspend the judgment pending appeal.” Mann-Gas Trans-

mission Co. v. Osborn Oil Co., 693 S.W.2d 576, 577 (Tex.Civ.

App.—San Antonio 1985, no writ).

Second, the Texas trial court itself, in the words of the Chief

Justice of the Texas Court of Civil Appeals, is a/so “vested”

with the power “to grant a temporary injunction to prevent

damage to an appellant,” when enforccment of a civil judg-

ment would render the right to appeal “meaningless,” Pace,

supra, 604 S.W.2d at 233, 232.”

Third, a Texas trial court has explicit statutory power to

“stay a judgment” if the complainant can show himself “equi-

tably entitled to be relieved against” part or all of that

judgment. Tex.Civ.Prac.& Rem.Code § 65.013. Contrary to

Texaco’s contention that such relief will not lie if the judgment

debtor has not filed a supersedeas bond in compliance with

Tex.R.Civ.P. 364 (MTA 27 n.53), Rule 364 itself, as amended

in 1984, explicitly recognizes that in appropriate circumstances

other statutes may govern the suspension of a judgment.”

Neither the amending language to Rule 364(a) nor the “open

courts” guarantee of the Texas Constitution has ever been

20. | Contrary to Texaco’s recent misrepresentation in urging summary

affirmance, the judgment at issue in Pace was not a “judgment . . . for

recovery of specific real property.” (MTA 27 n.53). The Texas appellate court

there enjoined a “forced sale” of real property that had been ordered to

satisfy “a money judgment,” 604 S.W.2d at 232 (emphasis added)—precisely

the sort of judgment Pennzoil has been awarded against Texaco. The case

thus sounded in Rule 364(b)—the rule applicable to money judgments—and

is therefore directly on point.

21. The language of the first paragraph of the rule was broadened in

1984 to provide that execution of a judgment may be suspended only by the

filing of a full supersedeas bond, “[u]nless otherwise provided by law. . . .”

Tex.R.Civ.P. 364 (a). Tex.Civ.Prac.& Rem. Code § 65.013 does “otherwise

provide[ }.”

raised or addressed in any adjudication involving the Texas

supersedeas bond requirement. Texaco’s only authorities (see

MTA 27 n.53) for the proposition that § 65.013 cannot be

applied to mitigate the full bond requirement of Rule 364

pre-date the 1984 amendment by half a century and are in any

event utterly irrelevant: neither case involved a constitutional

challenge such as Texaco’s; in neither case did the judgment

debtor argue that the required bond would be unaffordable or

unnecessary; and—contrary to Texaco’s belief—neither case

was governed by the “statutory predecessor to § 65.013” (MTA

27 n.53).”

Both Pennzoil and the Attorney General of Texas explained

these state remedies at length to the court below, but they were

dismissed out of hand” on the basis of the Second Circuit’s

22. The judgment debtors in Texaco’s first authority, Glenn v. Hollums,

73 S.W.2d 1068 (Tex.Civ.App.—Amarillo 1934), sought to enjoin a judgment

on the basis of an entirely distinct Depression-era foreclosure moratorium

Statute, id. at 1069, and the court held that “all rights in this suit which the

[judgment debtors] have, if any, exist solely and alone in virture of the

[moratorium] statute . . . .” Jd. at 1070. And in Svoboda vy. Alexander, 3

S.W.2d 423 (Tex.Com.App. 1928), which did not even involve any issue

relating to a supersedeas bond, a temporary injunction against enforcement

of a judgment was in fact granted by the trial court. Jd. at 424. To the extent

that Texas law could be read Texaco’s way, Younger abstention would give

the Texas courts an opportunity to construe ambiguous state rules so as

“intelligently [to] mediate federal constitutional concerns and state interests.”

Moore v. Sims, 442 U.S. at 429-30. But in fact Texaco has yet to produce

even arguable support for its mechanical reading of Texas law.

23. The only state remedy that the Second Circuit deigned to discuss was

the possibility of a petition to the Texas Supreme Court for a writ of

mandamus, Tex. Gov’t Code, § 22.002(a) (1986), reprinted in Appendix N.

(A36-38). The court below parsed Texas cases and statutes and found, not

the absolute “procedural bar” required by Moore v. Sims, 442 U.S. at 430-31

n.13, but a route that offered “no assurance” that a Texas Court would fix

security in what the Second Circuit deemed “a reasonable amount.” (A37-

38). The Second Circuit’s superficial reading of Texas law errs on several

counts. First, since the amendments of 1983, Tex.Govt.Code § 22.221(b)

authorizes the intermediate appellate courts, as well as the Supreme Court of

Texas, to issue “all writs of mandamus” even when their jurisdiction is not

threatened. Second, contrary to the Second Circuit’s statement (A38), a writ

assumptions (1) that the Texas courts could not act within the

3-1/2 month stand-still period and (2) that the Texas courts

would, if asked, simply refuse to safeguard federal and state

constitutional rights and would instead mechanically apply the

supersedeas bond rule as written.” As to the former assump-

tion, Pace confirms that the Texas appellate courts are indeed

fully capable of hearing and deciding Texaco’s petition for

relief from Rule 364 with whatever speed might be needed.”

And as to the latter, there is absolutely no basis for assuming

that the courts of Texas, intimately familiar with this state

court tort litigation, would be any less able or willing than a

federal court half a continent away promptly to address and

fairly to resolve all of Texaco’s claims of peculiar unfairness

and unique hardship.”* Unless, of course, one starts with the

of mandamus will issue to direct a trial court to enter a particular order

providing particular relief. Pope v. Ferguson, 445 S.W.2d 950, 954 (Tex.

1969). The court below relied on a 115-year-old case in reaching the opposite

conclusion (A38), even though that ancient case was expressly characterized

as out-dated by the Texas Supreme Court in the Pope decision, from which

the Second Circuit itself quoted at length. Third, the Second Circuit’s

conclusion that mandamus, like other proposed state remedies, would be

inadequate inasmuch as Rule 364’s bond requirement is mandatory and a

trial court cannot fruitfully be asked or ordered to act beyond its statutory

discretion, rests on a dubious premise: “it would seem an unsual doctrine

. to say that a [state tribunal] could not construe its own statutory

mandate in the light of federal constitutional principles.” Ohio Civil Rights

Comm’n v. Dayton Christian Schools, 106 S.Ct. 2718, 2724 (1986). If the

supreme law of the land requires that Rule 364 be modified as applied to

these facts, then a trial court of general jurisdiction certainly has the power

to do so, and mandamus would certainly lie to compel that course of action.

24. ‘In support of this prediction, the Second Circuit cited only irrelevant

Texas cases routinely applying rule 364. (A9). See n. 12 supra.

25. The Texas Court of Appeals in Pace enjoined enforcement of a trial

court judgment just ten days after it had been entered. 604 S.W.2d at 231-32.

26. As to the hardship claims in particular—e.g., the thousands who

would supposedly lose their jobs were Texaco to have to post a full bond or

pay its judgment in full (A40)—a Texas court, if persuaded that Texaco

employees or suppliers would by some odd turn of events not be retained by

a reorganized Texaco, would obviously take into account Texaco’s argument

premise “that state court judges will not be faithful to their

constitutional responsibilities.” Huffman v. Pursue, 420 U.S.

at 611. Such a premise is impermissible.

2. The Only “Extraordinary Circumstances” Posed By This

| Case Cut Against, Not For, Federal Judicial Intervention.

In defending its refusal to require federal abstention, the

court below made much of the “unique and extraordinary

circumstances” of this case. (A35, A38, A39-40). Texaco like-

wise belabors this point (MTA 25-26), obviously hoping to fit

within this Court’s observation that there may be cases whose

“extraordinary circumstances” make abstention inappropriate.

See, e.g., Moore v. Sims, 442 U.S. at 432-33. But that

catch-phrase provides no excuse for the federal interference in

State proceedings upheld by the court below.

(a) Under Younger, “extraordinary circumstances” permit federal

intervention only if they render state judicial relief inherently

inadequate.

Federal equitable intervention in state proceedings may well

be appropriate upon “a showing of ‘bad faith’ or ‘harassment’

by state officials responsible for the prosecution,” Kugler vy.

Helfant, 421 U.S. 117, 124 (1975),”’ or upon a demonstration

that due process compels some bending of the lien and bond rules on such

facts. Yet those dire consequences can find a comfortable home only in the

imaginations of Texaco and of the court below, not in sound economic

theory or in modern industrial reality. If Texaco were forced to sell assets or

divisions in order to satisfy the Texas judgment, Texaco’s property, far from

being destroyed, would merely be transferred to new owners. And Texaco’s

employees, far from being thrown out of work, would merely find them-

selves working for a new employer. In any event, it is a Strange notion of law

that counsels bending principles of judicial federalism to effectuate a sup-

posedly desirable allocation of economic resources.

27. Typical examples of such bad faith include those state prosecutions

under obscenity laws, see, e.g., Perez v. Ledesma, 401 U.S. 82, 85 (1971), or

anarchy or public disorder statutes, See, €.g., Younger v. Harris, 401 U.S. at

47-48; Boyle v. Landry, 401 U.S. 77, 80-81 (1971); Dombrowski vy. Pfister,

380 U.S. 479, 482 (1965), in which no conviction is hoped for and in which it

is the prosecution in and of itself that constitutes a constitutionally cogniza-

ble injury to First Amendment rights.

that the state law in question is “ ‘flagrantly and patently

violative of express constitutional provisions in every clause,

sentence and paragraph.’” Younger v. Harris, 401 U.S. at 53.

Obviously, neither of those exceptions applies here.” But those

examples reveal what this Court has definitively declared: that

the underlying concern—in extraordinary as well as mundane

circumstances—is with the ability of pending state proceedings

to provide an adequate hearing on the complainant’s federal

claims. The deference to state proceedings mandated by the

rules of comity and federalism may be relaxed “[ojnly if

‘extraordinary circumstances’ render the state court incapable

of fairly and fully adjudicating the federal issues before it.”

Kugler v. Helfant, 421 U.S. at 124 (emphasis added); Moore v.

Sims, 442 U.S. at 433; Trainor v. Hernandez, 431 U.S. at 442

n.7.

The circumstances of this case, as described by the Second

Circuit, are extraordinary “merely in the sense of presenting a

highly unusual factual situation.” Kugler, 421 U.S. at 125.

That is manifestly insufficient to warrant a federal injunction.

Id. Abstention is in order so long as there has been “no

perversion of the very [state] process that is supposed to

provide vindication,” Younger v. Harris, 401 U.S. at 56 (Stew-

art, J., joined by Harlan, J., concurring), and nothing ap-

proaching that has even been alleged here.*°

28. The Texas lien and bond provisions are obviously not criminal

statutes; and Texaco challenges them not on their face but only as applied in

this particular case.

29. In Moore v. Sims, this Court stated that “[t]he most extensive

explanation of those ‘extraordinary circumstances’ that might constitute

great, immediate, and irreparable harm is that in Kugler v. Helfant, 421 U.S.

117 (1975). Although its discussion is with reference to state criminal

proceedings, it is fully applicable in thf{e civil] context as well.” 442 U.S. at

433.

30. In any event, the existence of “extraordinary circumstances” must be

assessed “at the time the state proceedings were enjoined.” Moore v. Sims,

442 U.S. at 433. Texaco has never denied what even the Second Circuit has

admitted (A7-8 & n.3): when the district court in White Plains issued its

Temporary Restraining Order on December 17, 1985, Texaco had—even

without posting a supersedeas bond—three-and-a-half months in which to

(b) Texaco’s “unusual factual situation” furnishes no principled

basis for distinguishing ordinary cases of judgment debtors

unable to post bonds.

The court of appeals purpurted to limit its decision to “the

extraordinary circumstances of this case, which are unlikely

ever again to recur,” including the large amount of the judg-

ment and the “clear inability” on the part of the judgment

debtor to comply with the superseadeas bond requirement.

(AS50).

It is true, of course, that the size of the judgment against

Texaco is unprecedented. But it is no larger, in relation to

Texaco’s assets (or in relation to Texaco’s tort), than thousands

of judgments entered against less wealthy parties. In the only

sense relevant to the debtor, it could be just as “impossible”

for a “Mom-and-Pop” grocery store that had been held liable

for $100,000 or even $10,000 in damages in a slip-and-fal! tort

action to post a bond in that amount as it is for Texaco to

secure the Pennzoil judgment. Mom and Pop could easily have

net illiquid assets in excess of the judgment, but be unable to

post security because of a limited cash flow and the nature of

their inventory and other assets. And their appeal from an

adverse trial judgment would consequently be “destroyed” no

less surely than Texaco claims its own to be, since Mom and

Pop could, like Texaco, allege that execution of the judgment

before the completion of the appeals process would leave their

business—and perhaps even their lives—irreversibly altered.

Such lawsuits and such judgments, accompanied by such

circumstances, are commonplace, not “extraordinary.” And

the Second Circuit’s rationale would justify federal judicial

intervention whenever a judgment debtor must post a bond—

whether its size is set by statute or by a state court’s discre-

tion—large enough to threaten that debtor with the same

irreversible injury that would accompany immediate execution

of the judgment.

ask the Texas courts for relief. For the stand-still agreement in Paragraph 7

of the Texas judgment, to which Texaco had consented, ensured that Texaco

need fear no enforcement of the judgment or attachment of liens until March

25, 1986.

The only “unique” or “extraordinary” aspect of Texaco’s

case that distinguishes its situation from these more mundane

scenarios is the size of the judgment against it. It is unsurpris-

ing that Texaco should plead for a different bond require-

ment—and a different set of abstention rules—for gargantuan

corporations that are in a position to commit massive torts

and, consequently, to be assessed enormous damages. What is

surprising is that the Second Circuit should likewise endeavor

to create for this case, and this case alone, a special and more

favorable set of rules. For the Rule in Texaco’s Case can be

limited to Texaco—or to other huge companies with huge

judgments against them—only by the most arbitrary and unju-

dicious fiat.

Indeed, the position advanced by Texaco and adopted by the

Second Circuit involves a painfully obvious dilemma: if the

burden the Texas bond requirement imposes on Texaco’s right

of appeal were as unprecedented and as uniquely devastating

as the court of appeals evidently believed (see A39-40), there

could be no reason short of blatant mistrust of the Texas courts

to assume that those courts would mechanically and blindly

apply the bond rule to Texaco’s detriment. As Texaco itself

stresses, its claim “does not attack the facial validity of the lien

and bond provisions” but argues only “that application of the

provisions would be irrational in the ‘unique and extraordinary

circumstances of this case.’ (A35).” (MTA 11) (original empha-

sis). To presume that the courts of Texas will simply refuse to

consider a federal as-applied challenge when those supposedly

“unique” circumstances are called to their attention is unac-

ceptable. For “[mJinimal respect for the state processes, of

course, precludes any presumption that the state courts will not

safeguard federal constitutional rights.” Middlesex Ethics

Comm. v. Garden State Bar Assn., 457 U.S. 423, 431 (1982)

(original emphasis).*' In indulging just that presumption, the

31. As this Court wrote in Huffman v. Pursue:

Appellee obviously believes itself possessed of a viable federal claim,

else it would not so assiduously seek to litigate in the District Court.

Yet Art. VI. . . declares that ‘the Judges in every State shall be bound’

by the Federal Constitution . . . . Appellee is in truth urging us to base

a rule on the assumption that state judges will not be faithful to their

constitutional responsibilities. This we refuse to do.

420 U.S. at 610-11.

Second Circuit manifested a disrespect for state processes that

our federal system cannot abide.

Il. BASIC POSTULATES OF COMITY AND THE

FRAMEWORK LEGISLATED BY CONGRESS FOR

THE FEDERAL JUDICIAL SYSTEM PRECLUDE

STAYING STATE TRIAL JUDGMENTS, IN SUP-

POSED AID OF STATE OR FEDERAL APPELLATE

JURISDICTION, ABSENT EXHAUSTION OF STATE

JUDICIAL REMEDIES.

The final excuse for federal intervention proffered by Texaco

and the Second Circuit reveals both disdain for the Texas

courts and misunderstanding of our carefully articulated fed-

eral judicial hierarchy. Texaco argued, and the courts below

agreed, that staying the state court judgment pending the

completion of all state appeals and of review by this Court

under 28 U.S.C. § 1257 “would not adversely affect the opera-

tion of the Texas judicial system but, on the contrary, would

facilitate its proper functioning by permitting Texaco’s appeal

to be heard and decided” (A14) and would indeed protect the

“federally created right to petition for certiorari.”*? Thus,

according to Texaco, federal interference with state proceed-

ings in this case has actually “advance[d] the same interest that

every Younger case has sought to protect” (MTA 24) and

should be welcomed as an aid to this Court. A more conde-

scending notion of federalism, and a more peculiar perspective

on the federal judicial system, would be hard to imagine.

The sort of federal judicial missionary work championed by

Texaco is no less offensive to state sovereignty and to princi-

ples of comity than are the intrusions sought by the most

openly opportunistic of litigants. It is therefore unsurprising

that, in its Younger line of cases, this Court has unanimously

rejected the view that “federal judicial action would advance,

rather than offend, ‘the mutual relationship poignantly

described by Justice Black as Our Federalism.’” Kugler v.

Helfant, 421 U.S. at 129; see also Stefanelli v. Minard, 342

32. Texaco’s Third Cause of Action, Amended Complaint € 75 (CCA

331). The court below relied in part on Texaco’s Third Cause of action in

affirming the district court injunction. (A6, A43-44).

U.S. 117 (1951).*? But there is no need to rely on the Younger

line, or indeed even to hold Younger applicable here, to expose

the fallacy of the notion that an inferior federal court may play

the role of clearing the channels of appeal from a state trial

judgment, and may do so unhindered by the principle that

state judicial remedies must be exhausted.

Even assuming arguendo that the federal interference

wrought by Texaco’s foray to White Plains could ultimately be

deemed to have enhanced Texaco’s right of appeal in Texas and

its right to seek review in this Court, Texaco has not denied—

nor could it—that Congress has never conferred upon lower

federal courts the power to displace either state tribunals or

this Court in protecting either the state appellate process or this

Court’s appellate jurisdiction.

It is axiomatic that only the court rendering a judgment, and

the courts with jurisdiction to hear appeals from that judg-

ment, have power to process such appeals, including power to

review and correct procedural barriers that are said to limit the

value of those appeals—whether by issuing a stay or otherwise.

By Act of Congress, this Court is the only federal tribunal

empowered to review state court judgments. 28 U.S.C. § 1257.

See District of Columbia Court of Appeals v. Feldman, 460

U.S. 462 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413

(1923). This Court is therefore the only federal court that has a

relevant appellate jurisdiction to protect or supervise. Congress

has furnished this Court with varied means to afford just such

protection, e.g., 28 U.S.C. §§ 1257(3), 1651, 2101(f), 2283.” it

32. The federal plaintiff whose suit for injunctive relief was dismissed in

Kugler had argued that ‘‘federal factfinding’’ on the admissibility in a state

court of allegedly coerced grand jury testimony ‘‘would free the New Jersey

courts from even the appearance of partiality . . . [and] thus assur[e] the

integrity of the state judicial process without ultimately interfering with the

State’s right to enforce its own criminal laws . . . .’’ 421 U.S. at 129.

34. Implicit in the holding below is the suggestion that this Court is

incapable of protecting its own appellate jurisdiction over state court judg-

ments, and therefore is in need of aid from the federal district courts. But

even if the Second Circuit were correct that, as a practical matter, the Texas

courts could not or would not act on Texaco’s constitutional claims with

sufficient speed, Texaco would have an available remedy in this Court under

28 U.S.C. § 1257—the very statute on which appellee bases its claim of

is accordingly the exclusive province of this Court to decide

whether, when and how to protect appellate jurisdiction over

state court judgments.

As Justice Black explained for the Court in the Aflantic

Coast Line case:

[I]f, because of the Florida [trial court’s] action, the

[federal complainant] faced the threat of immediate irrep-

arable injury sufficient to justify an injunction under

usual equitable principles, it was undoubtedly free to seek

such relief from the Florida appellate courts, and might

possibly in certain emergency circumstances seek such

relief from this Court as well. Unlike the Federal District

Court, this Court does have potential appeilate jurisdic-

tion over federal questions raised in state court proceed-

ings, and that broader jurisdiction allows the Court

correspondingly broader authority to issue injunctions

“necessary in aid of its jurisdiction.”

398 U.S. at 296 (emphasis added).*°

right—because Texaco would then have satisfied § 1257’s requirement of

exhausting remedies in “the highest court of a state in which a decision could

be had.” See Brown v. Texas, 443 U.S. 47, 50 (1979). And, under 28 U.S.C.

§ 1651(b), a Circuit Justice of this Court could grant a stay of the judgment

pending appeal through the state system and review in this Court. See, e.g.,

M.1.C. Ltd. v. Bedford Township, 463 U.S. 1341, 1342-43 (1983) (Brennan,

J., in chambers). See also Nat’! Socialist Party v. Skokie, 432 U.S. 43, 44

(1977) (per curiam); Nebraska Press Ass*n v. Stuart, 423 U.S. 1319, 1327-2°

(1975) (Blackmun, J., in chambers). The relief granted in Skokie and

Nebraska Press was identical to that sought by Texaco here: stay of

enforcement of a state court judgment to enable a state litigant to pursue a

meaningful appeal.

35. The district court injunction upheid in Henry v. First Nat’l Bank,

595 F.2d 291 (Sth Cir. 1979), cert. denied, 444 U.S. 1074 (1980), stayed

enforcement of a non-final state court judgment (1) awarding damages and

(2) enjoining racial protests. With respect to staying enforcement of the

award of damages, the injunction was not issued to preserve appellate

jurisdiction over the state judgment, but in aid of a prior, never-appealed and

never-dissolved injunction issued by the district court itself, which concerned

bank accounts containing the funds of the state court defendant. Thus the

district court's injunction issued to preserve its own, pre-existing original

jurisdiction. The state court judgment “expressly authorizeld] the state court

It creates no lacuna in the scheme crafted by Congress to

hold that the lower federal courts are without authority to pass

on those features of state appellate procedure that are alleged

to impede meaningful review of state trial judgments. If such

defects are challenged in the state’s own judicial system, this

Court sits to review the outcome and to issue appropriate

stays; if they are mot challenged there, the bypass of state

remedies should be deemed fatal. Until the court below held to

the contrary, this was the accepted view of the courts of

appeals.*°

In deputizing the district court in White Plains as a supervi-

sory ombudsman over Texas appeals, the Second Circuit was

not merely indifferent to the virtues of exhaustion: it ruled that

Texaco’s deliberate bypass of the Texas judiciary affirmatively

justified Texaco’s excursion to the federal courts. (A22). The

court of appeals seized upon Texaco’s deliberate refusal to

exhaust the appellate remedies available in the pending Texas

plaintiffs to execute the damages award against the funds which [were] the

subject of the earlier federal dispute,” 595 F.2d at 307; therefore, the “only

satisfactory resolution of this unseemly tension [lay] in delaying execution of

the state court judgment until the prior federal injunction ha[d] been

removed.” /d.

To the extent that the federal injunction against enforcement of the state

court judgment enjoining racial protests can be understood as signifying that

the district court had power to preserve appellate jurisdiction over the state

judgment, the decision’s viability in the wake of the Feldman case is dubious.

But this does not mean that this Court would never have had the opportunity

to review and correct the state court judgment, as it ultimately did in

NAACP v. Claiborne Hardware Co., 458 U.S. 886 (1982). For the NAACP

exhausted its state appellate remedies before it filed its § 1983 action in a

federal district court. 595 F.2d at 302. At that time, this Court would have

had jurisdiction to consider an application for a stay of the state judgment

under §§ 1257 and 1651. See n. 34 supra.

36. See, e.g., Brown v. Chastain, 416 F.2d 1012, 1013 (Sth Cir. 1969),

cert. denied, 397 U.S. 951 (1970) (lower federal courts have no jurisdiction to

make state appellate process more meaningful by directing state court to

provide a transcript to an indigent mother in a custody battle); Ganey v.

Barefoot, 749 F.2d 1124, 1127-28 (4th Cir. 1984), cert. denied, 105 S.Ct. 3484

(1985) (similar facts) (“Neither the district court nor this court . . . is

empowered to exercise that kind of appellate supervision of state court

procedures”).

litigation as rendering the Rooker and Feldman holdings

wholly inapplicable to this case. Those decisions hold that only

this Court has authority to review any judgment of a state

court. That rule would concededly have barred Texaco from

the district court if it had litigated its objections to the lien and

bond rules in the Texas courts. But according to the Second

Circuit’s novel analysis, that barrier can be scaled by the

simple expedient of failing to raise a question in a state

proceeding—thereby precluding, by definition, the character-

ization of subsequent collateral federal district court considera-

tion of that question as appellate “review.” (A21). The court of

appeals reasoned that cases such as Monroe v. Pape, 365 U.S.

167 (1961), and Patsy v. Florida Board of Regents, 457 US.

496 (1982)—holding that a plaintiff with a constitutional claim

under § 1983 may, as an original matter, choose to file a federal

suit rather than having to sue as a plaintiff in the state

courts—also give a defendant in a pending state court proceed-

ing the option to carve out federal issues that are unrelated “to

the merits of [a state court] judgment” (A23, A41) and take

them to the “concurrent” jurisdiction of a federal court (A21-

22).

What had been vice thus became virtue: the very same

failure to exhaust state procedures and appeals that would

have all but doomed a stay application by Texaco to this Court

pursuant to 28 U.S.C. § 1651 was viewed by the Second Circuit

as providing Texaco a privileged entree to a federal district

court under § 1983.*’ The ruling below thereby arrogates to the

lower federal courts even more power to intercede in state

appeals than this Court possesses under §§ 1257 and 1651, thus

37. The Second Circuit’s inversion of traditional exhaustion reasoning is

all the more bewildering in the wake of this Court’s opinion in Feldman.

There the Court dealt with the bypass issue and concluded that bypassing the

state courts did not authorize otherwise impermissible federal court litiga-

tion:

[T]he fact that we may not have jurisdiction to review a final state-

court judgment because of a petitioner’s failure to raise his constitu-

tional claims in state court does not mean that a United States district

court should have jurisdiction over the claims. By failing to raise his

claims in state court a plaintiff may forfeit his right to obtain review of

the state-court decision in any federal court.

460 U.S. at 482-84 n.16 (emphasis added).

reconstituting the district courts as more potent and inviting

fora in collateral proceedings than this Court on direct

review.*®

There is no authority whatever for the Second Circuit’s

proposition that Rooker-Feldman precludes only district court

review of substantive claims concerning the merits of a state

case and not consideration of the numerous procedural and

structural issues posed by the processing of state litigation.

Under 28 U.S.C. § 1257, this Court reviews “judgments or

decrees,” not claims or issues; the enforceability of the judg-

ment obtained by Pennzoil in Texas is the very matter that the

courts below purported to review, and the very matter that

those courts stayed.*® To say that a judgment is not “inextri-

cably intertwined,” Feldman, supra, 460 U.S. at 482-83 n.16

(quoted at A22-23), with its enforcement is not so much to

draw a line as to fantasize one—and a wholly artificial one at

38. The holding below obviously makes federal forum shopping enticing

indeed. It is also completely inconsistent with myriad decisions of this Court

encouraging state court litigants to give state courts an initial opportunity to

resolve all questions, see, e.g., Sumner v. Mata, 449 U.S. 539, 549 (1981);

Allen v. McCurry, 449 U.S. 90, 105 (1980); Huffman v. Pursue, 420 U.S. at

603-09, and with the system devised by Congress for the orderly raising of

federal questions in pending state court litigation, with review first in the

state courts and ultimately in this Court.

39. Before the decision below (A22-23, A27), the federal courts of

appeals had not supposed that the Rooker-Feldman doctiine may be limited

to instances in which a federal court is literally asked to reverse the result of a

state court adjudication—a limitation that would reduce the doctrine to one

of mere issue preclusion. Compare Feldman, 460 U.S. at 488-90 (Stevens, J.,

dissenting). See, e.g., Hale v. Harney, 786 F.2d 688 (Sth Cir. 1986) (applying

Rooker-Feldman to uphold dismissal of § 1983 complaint, where challenge to

constitutionality of parts of Texas Family Code had mor been raised in state

divorce proceedings but could have been, even though federal plaintiff

insisted that review of the merits of the state court judgment against it was

being sought only in its state court appeal and that its federal complaint

independently challenged several discrete provisions of Texas law); Thomas

v. Kadish, 748 F.2d 276, 282 (Sth Cir. 1984), cert. denied, 105 S.Ct. 3531

(1985) (“deliberate bypass of those procedures that envisioned (ultimately) a

reviewable final state-court judgment, itself under Feldman not subject to

federal district court review, should not. . . entitle the [plaintiff] to a review

of his constitutional claims by a federal district court that would have been

unavailable to him if he had pursued his claim to final state court judg-

ment”).

that. And to say that lower federal courts, while powerless to

review state court judgments pending appeal, remain free to

enjoin enforcement of those same judgments pending those

same appeals, is to split fine philosophical hairs indeed. A

judgment which the judicial system is not free even to consider

enforcing or securing pending appeal is a judgment in name

only.

By order of a federal district court, Pennzoil’s judgment

against Texaco has been reduced, throughout the appellate

process in Texas and in this Court, to a piece of paper

signifying only an empty declaration of abstract rights, except

to the degree the federal court deems it reasonable to secure

that judgment—a determination that itself cannot be made

without evaluating the state court judgment.“ Under Rooker

Feldman, the district court was therefore without jurisdiction

to consider Texaco’s request for such relief.

But even if Rooker and Feldman were read so narrowly that

the district court could be said to have had subject matter

jurisdiction in this case, the court below nevertheless erred in

not directing the district court to impose an exhaustion require-

ment on Texaco’s challenge to the Texas lien and bond provi-

sions. See n.37 supra. For, by focusing on the narrow factual

context of Feldman, the Second Circuit failed to probe beneath

the surface for the principles of comity that provided the

substructure for what this Court held. The core of this Court’s

comity jurisprudence is the proposition that

[flew public interests have a higher claim on the discretion

of a federal chancellor than the avoidance of needless

friction with state policies, whether the policy relates to

the enforcement of the criminal law, or the administration

of a specialized scheme for liquidating embarrassed busi-

40. The district court required security in the amount of $1 billion,

based on its “review [of] the Texas trial and judgment on the merits (but

without benefit of the trial record)” (A47). The Second Circuit deemed this

procedure “clearly erroneous” (A47), but went on to survey for itself

Texaco’s state and federal challenges to the Texas judgment, declaring them

“non-frivolous” (A42). The court of appeals then upheld the injunction and

declined to remand to the district court for a proper “application of equitable

principles” (A47-48), since the “facts relied upon by us in our foregoing

analysis are undisputed” (A47).

ness enterprises, or the final authority of a state court to

interpret [state law}.

Railroad Comm’n v. Pullman Co., 312 U.S. 496, 500 (1941)

(Frankfurter, J., for the Court) (quoted in Moore v. Sims, 442

U.S. at 428).

Since the Texas policy for accomodating the interests of

judgment debtors and creditors pending appeal is certainly

entitled to comity, and since the injunction upheld below

undeniably interfered with that policy, the Second Circuit

cannot escape comity principles by insisting that it has not

reviewed, or interfered with proceedings on, the merits of the

Texas judgment, but “only” enjoined any and all state pro-

ceedings to enforce that judgment or to arrange security for it

pending appeal (A23, A35). It made no difference in Juidice v.

Vail that the federal plaintiff sought to enjoin “only” an

ancillary contempt proceeding, not the debt action itself nor

even the judgment collection process. See 430 U.S. at 329-31.

And in Trainor v. Hernandez, comity was held to bar federal

interference even with an attachment proceeding that was

merely incidental to the underlying fraud action. 431 U.S. at

446 n.9.*' Thus, in insisting that its decision “does not displace

any state court adjudication” (A23)—and therefore s»nposedly

is not barred by Rooker-Feldman—the court below ove. looked

the fact that its decision does displace the Texas appellate

courts and this Court as guardians of state appellate process

and of this Court’s appellate jurisdiction, and thereby under-

mines the very pillars of federalism that Rooker-Feldman

sought to buttress.

41. | Texaco’s bald assertion, when urging summary affirmance, that

Younger comity principles apply only to cases wi. e¢ “the federal plaintiff

sought to stop an ongoing state proceeding in its tracks” (MTA 24), thus

dissolves upon a quick review of the federal reporters. See also, e.g., Kenner

v. Morris 600 F.2d 22 (6th Cir. '% 2) (federal court may not enjoin state

divorce court from following discriminatory alimony statute in awarding

pendente lite support payments); Neebuhr v. Bayer, 502 F.Supp. 1216 (N.D.

Ohio 1980) (may not reinstate plaintiff’s state court tort action); Gras v.

Stevens, 415 F.Supp. 1148 (S.D.N.Y. 1976) (three-judge court) (Friendly, J.)

(may not protect state court divorce plaintiff from discriminatory statute

requiring him to pay defendant’s state court counsel fees and costs); Kahn v.

Shainswit, 414 F.Supp. 1064 (S.D.N.Y. 1976) (federal court may not force

state courts to allow divorce defendant to present an adultery counterclaim).

The finality and exhaustion rules that limit this Court’s

consideration of applications to stay enforcement of state

judgments—rules that would concededly have made Texaco’s

refusal to raise its federal challenge in the pending Texas

proceedings a bar to interim relief in this Court on direct

review—are, after all, more than mere guides to “ ‘good

judicial administration.’” North Dakota Pharmacy Bd. v.

Snyder’s Drug Stores, 414 U.S. 156, 159 (1973). They are

mechanisms carefully designed to “avoid[ ] piecemeal review

of state court decisions . . . and to leave at a minimum federal

intrusion in state affairs.” Jd. Thus, even if the Second Circuit

were correct that Texaco’s deliberate bypass of the state courts

circumvents the precise holding of Feldman, it is beyond cavil

that Texaco’s flanking maneuver has entailed both “piecemeal

review” of state court proceedings and “federal intrusion in

state affairs.” Just as “all the evils at which Younger is directed

. . inhere in federal intervention prior to completion of state

appellate proceedings, . . . as surely as . . . if such interven-

tion occurred at or before trial,” Huffman v. Pursue, 420 U.S.

at 608, so all the evils at which Feldman is directed inhere in

federal district court resolution of issues surrounding the

enforcement and securing of a state court judgment, as surely

as if the district court presumed to resolve the merits of the

judgment itself.

In sum, the Second Circuit impermissibly treated a federal

district court stay in aid of appellate jurisdiction as an exercise

of original jurisdiction exempt from exhaustion requirements.

The same mode of analysis would permit piecemeal shopping

trips to federal fora on other procedural and structural issues

that can readily be labeled “collateral” and made the basis of

supposedly independent causes of action under § 1983. The

judgment below thus invites state court litigants to carve issues

out of pending cases and cart them to a federa! district court in

search of what they perceive to be a more favorable resolution.

Despite admonitions from this Court that federal courts must

be even “ ‘more reluctant ... to intervene piecemeal to try

collateral issues,’” Kugler v. Helfant, 421 U.S. at 130, the

Second Circuit would allow litigants to assemble jurisdictional

sandwiches to suit their tastes—a state slice here, a federal slice

there. This a la carte approach to federal-state judicial rela-

tions is utterly unpalatable and wholly alien to Our Federalism.

IV. THE JUDGMENT BELOW PREMATURELY SEC-

OND-GUESSES A REASONABLE ACCOMMODA-

TION OF ECONOMIC INTERESTS AND REDUCES

THE STATE COURT’S JUDGMENT TO AN EMPTY

DECLARATION OF ABSTRACT RIGHTS.

If this Court agrees that the courts below violated control-

ling principles of federalism for any of the three related but

independent reasons advanced in Parts I, II, and III, supra, it

need read no further, for the judgment below must then be

reversed. But that judgment would be insupportable in any

event. For, reaching a due process claim it should have left to

the state courts, the Second Circuit incorrectly held that the

Due Process Clause guarantees judgment debtor Texaco an

affordable bond and entitles it to retain, in unencumbered

form, the fruits of its tortious conduct pending appeal—as if

the Texas trial court had never rendered a judgment at all.

While conceding the legitimacy of protecting a judgment credi-

tor’s interests pending appeal (A35; MTA 11), the court below

held (A44) and Texaco argues here (MTA 11) that it is irra-

tional and thus unconstitutional for Texas to apply its security

rules in this particular case.

The court below embraced Texaco’s claim under § 1983 that

conditioning a stay of execution on Texaco’s posting of a $12

billion supersedeas bond “would at least amount to a depriva-

tion of [Texaco’s] property in violation of its right to due

process” (A24), since such a bond could force Texaco into

bankruptcy “by the time its appeals were decided” (A44),

thereby rendering its appeal a “meaningless ritual.” (A44).

It is conceded by all that due process does not require a state

to provide an appeal, Lindsey v. Normet, 405 U.S. 56, 77

(1972); Ohio v. Akron Park District, 281 U.S. 74, 80 (1930),

but does prohibit states from imposing irrational or arbitrary

requirements on the appellate opportunities they choose to

make available. Evitts v. Lucey, 105 S.Ct. 830, 840 (1985). The

State of Texas has not, of course, limited Texaco’s appeal

rights as such: Texaco’s appeal was argued and submitted to

the Texas Court of Appeals on July 31, 1986, and prosecution

of that appeal did not and does not now depend upon the

posting of any security for the judgment, upon obtaining a stay

of the judgment’s execution, or upon a suspension of the Texas

judgment lien provisions. What Texas has done, by adopting a

general rule that ordinarily requires a judgment debtor like

Texaco to post a bond in the full amount of the judgment as a

condition of a stay, is presumptively to prefer (1) full protec-

tion for the winning party against the risk of partial or

complete uncollectibility should the trial judgment ultimately

be affirmed, over (2) full protection for the losing party against

the risk of interim harm that may prove impossible to undo in

its entirety should the trial judgment ultimately be reversed.

There is no basis for Texaco’s assumption that this general

rule would in fact be applied to require a full bond of Texaco,

rather than fine-tuned in light of the facts at hand, since the

injunction sought by Texaco and upheld by the court below has

prevented the Texas courts from even addressing this question.

But, even assuming that Texas courts would indeed decline to

adjust the lien and bond rules to the degree Texaco deems

warranted on these facts, there would be nothing in the least

“irrational” in a decision to favor the security interests of

Pennzoil as a victorious plaintiff over those of Texaco as a

judgment debtor. Nor would it be the least bit “arbitrary” for

Texas to deem the completion of the trial in this case a

watershed, and to use that event as the basis for significantly

readjusting the relative situations of the parties. For states are

surely free to strike their own balance between the interests of

judgment creditors and those of judgment debtors.

Under the Due Process Clause, state treatment of trial court

judgments can run the gamut from denying any appeal at all,

thereby making trial determinations final and completely dis-

positive, to granting the appellant a right of completely de

novo review, thereby making challenged trial judgments mere

triggers for virtual retrials of the facts and law. Within that

broad spectrum, a state’s policy on enforcement of or security

for money judgments pending appeal may range anywhere

from requiring immediate payment of damages, thereby mak-

ing the appellant fight literally to get its money back, all the

way to granting an automatic stay of execution, without any

security, upon the filing of a notice of appeal, thereby leaving

the appellant entirely free to encumber er transfer assets and

exposing the appellee to the unmitigated risk that its judgment

will prove uncollectible even if upheld on appeal. To concede,

as Texaco (MTA 10-11) and the Second Circuit (A43) do, that

an appeal could constitutionally be dispensed with altogether,

while insisting that, if an appeal is made available, the state is

compelled to opt for a point nearer the end than the beginning

of this wide spectrum, is nonsensical.”

As one might expect, the appellate rules of the states are

scattered across the entire range of options. Thus, a handful of

states in New England favor tne debtor by providing for an

unsecured, automatic stay of execution upon appeal.*® Some 30

other states, including Texas, have decided that, once a trial is

complete, the judgment creditor is presumptively entitled to a

supersedeas bond equal to or greater than the judgment, as

assurance that the creditor will be able to collect the award

(and interest) if it is ultimately affirmed.*“* Nothing in the Due

42. It is not as if the state’s refusal to grant Texaco, along with other

judgment debtors, a stay of judgment in this case would independently

violate some constitutional norm, or would make a constitutionally invidious

distinction—as might be the case, for example, if stays of enforcement were

available to everyone but the poor, or if access to a “meaningful” appeal

were contingent upon wealth. Cf. Douglas v. California, 372 U.S. 353 (1963)

(unconstitutional to refuse to pay for appellate counsel for indigents);

Williams v. Oklahoma City, 395 U.S. 458 (1969) (refusal to waive cost of trial

transcript for indigent). On the contrary, it is the special rule for billion-dol-

lar multinational corporations and their billion-dollar torts, proposed by

Texaco and adopted by the court below, that invidiously discriminates among

judgment debtors. Nor does applying a rule favoring trial winners over

judgment debtors even remotely resemble a decision to render an appeal

ineffectual by allowing ineffective assistance of counsel to squander a

criminal defendant’s appeal, see Evitts v. Lucey, 105 S.Ct. 830 (1985); or a

decision to allow a clerical snafu to obliterate forever a civil plaintiff's

administrative cause of action, see Logan v. Zimmerman Brush Co., 455

U.S. 422 (1982). Thus, norhing in this Court’s prior cases supports the

invalidation of the accommodation Texas has made between the interests of

parties pending appeal.

43. Rhode Island, Connecticut, Maine, Massachusetts, New Hampshire,

and Vermont. (Relevant citations are collected at JS 25 n.16).

44. Of these, the law in 11 states in addition to Texas requires the

posting of a full bond: Alabama, Arkansas, Delaware, lowa, Louisiana,

Process Clause empowers a federal court to arrogate to itself

the authority to countermand that state policy choice simply

because the federal tribunal might strike the balance differently

or come to a different conclusion about the size of the threat to

the judgment creditor’s interests or the importance of minimiz-

ing that threat.

Until the ruling below, it was well established that a civil

litigant, however sympathetic its case, has no due process right

to be free from the execution of a judgment pending its appeal.

In fact, this Court has expressly so held. In National Union of

Marine Cooks & Stewards v. Arnold, 348 U.S. 37 (1954), a

judgment debtor refused to file a bond protecting the judg-

ment creditor pending appeal and, in order to “safeguard the

collectibility” of the judgment, the state court dismissed the

debtor’s appeal. Jd. at 41. This Court concluded that there had

been no violation of the Due Process Clause. Jd. at 44. A

fortiori Texaco, with its right to appeal unrestricted by the

Texas bond and lien provisions, has no right to be free from

security requirements pending that appeal. There is simply “no

obligation upon the State to provide for suspension of judg-

ment” pending whatever appeal process it has made available.

Louisville & Nashville Railroad Co. v. Stewart, 241 U.S. 261,

263 (1916).

However a state chooses to strike the balance between

judgment creditors and debtors, that substantive legislative

Michigan, Minnesota, Nebraska, New Mexico, Oklahoma, and South Da-

kota. Nineteen jurisdictions have laws presumptively requiring a full bond,

but explicitly allowing the trial court some equitable discretion to reduce the

size of the bond: Alaska, Arizona, District of Columbia, Georgia, Idaho,

Indiana, Kansas, Kentucky, Maryland, Mississippi, Missouri, New Jersey,

New York, Oregon, Pennsylvania, Tennessee, Virginia, Washington, and

Wyoming. (The relevant citations are collected at JS 26 n.17). Such provi-

sions cannot distinguish the rule in those 19 states from the rule at issue here.

For the nub of Texaco’s complaint here must be that the the particular bond

demanded in this case would unjustifiably work the same injury pending

appeal as immediate execution of Pennzoil’s judgment. Were a $12 billion

bond to be set in the discretion of a Texas judge after a full hearing, Texaco’s

due process theories would still allow it to claim a violation of its constitu-

tional rights on the ground that, given Texaco’s net worth, the lack of a full

bond poses no real risk to Pennzoil and the requirement of such a bond

therefore “eviscerate[s]}” Texaco’s “right to appeal . . . without advancing

the state interest at issue.” (MTA 11).

choice ought to be respected by federal courts—subject, at ihe

most, to invalidation if it fails the test of minimum rationality.

“At least since the demise of the concept of ‘substantive due

process’ in the area of economic regulation, this Court has

recognized that ‘[lJegislative bodies have broad . . . [discre-

tion] to subordinate the . . . rights” of some economic actors

“to the conflicting rights” of others. New Motor Vehicle Bd. v.

Fox, 439 U.S. 96, 107 (1978); id. at 112 (Marshall, J., concur-

ring). Even in the heyday of searching review of economic

legislation, not a single Justice of this Court saw any constitu-

tional infirmity in a rule requiring a supersedeas bond equal to

110% of the judgment. Louisville & Nashville Railroad Co. v.

Stewart, supra, 241 U.S. at 263. And, “[o]nce having enacted a

reasonable general scheme . . . [a state] [i]s not required to

provide for a prior individualized hearing each and every time

the provisions” of the scheme adversely affect a given party,

New Motor, supra, 439 U.S. at 108. See also Weinberger v.

Salfi, 422 U.S. 749, 772-74, 776-77, 782-83 (1975); Dandridge

v. Williams, 397 U.S. 471, 484-85 (1970).

Lurking behind the Second Circuit’s ruling is the premise

that, because of the circumstances of this case, Texaco is

entitled as a matter of federal law to avoid, pending appeal,

the consequences of its trial loss—in effect, to proceed with

business as usual, almost as though the Texas trial court had

never entered a judgment against Texaco. The court below

essentially held that, on this record, the Texas judicial system

has no claim at all in the matter until all appeals within and

from that system have been exhausted. To state that conten-

tion is to refute it: the most elementary axioms of respect for

state judicial proceedings prevent federal courts from ever

reducing state court judgments, throughout the pendency of

the state appellate process, to empty declarations of abstract

rights—like so many ‘‘bequest[s] in a pauper’s will,’’ Edwards

v. California, 314 U.S. 160, 186 (1941) (Jackson, J., concur-

ring).*°

45. As Texaco itself concedes—and as this Court has held—“a state

court has ‘inherent power to use its processes to induce compliance with a

supplemental order reasonably issued in aid of execution’ ” when, during the

pendency of an appeal, “ ‘the effectiveness of a money judgment is jeopard-

ized by the judgment debtor.”” (MTA12 n.22) (quoting Nat’ Union of

Marine Cooks & Stewards v. Arnold, 348 U.S. 37, 44 (1954)).

The court below seemed to recognize that the legitimacy of

such intervention is extraordinarily dubious, for it went to

great lengths to insist that injunctive relief was necessary here

because the Texas courts were supposedly unable and unwilling

to grant Texaco interim relief from the Pennzoil judgment.

(A35, A50-51). Yet for all we know, the courts of Texas might

well have suspended the trial judgment on these facts without

requiring a full bond—if Texaco had only asked. See Part II.,

supra.

We return, therefore, to the very center of this case: the

proper place for Texaco to have raised its claims against the

rigid enforcement it feared was in the Texas courts and, if its

claims were rebuffed there, in this Court on direct review.

Texaco’s deliberate bypass of state avenues of relief that might

have promptly mooted the entirely hypothetical due process

argument it presses upon this Court does not entitle it to a

decision on the merits of that argument.

CONCLUSION

For the several independent reasons presented above, the

judgment below must be reversed.

Respectfully submitted,

LAURENCE H. TRIBE

Counsel of Record

BRIAN KOUKOUTCHOS

1525 Massachusetts Avenue

Cambridge, Massachusetts 02138

(617) 495-1767

September 5, 1986

Of Counsel:

JOSEPH D. JAMAIL

JAMAIL & KOLIUS

3300 One Allen Center

Houston, Texas 77002

HARRY M. REASONER

VINSON & ELKINS

3300 First City Tower

1001 Fannin

Houston, Texas 77002

SIMON H. RIFKIND

ARTHUR L. LIMAN

MARK A. BELNICK

PAUL, WEISS, RIFKIND

WHARTON & GARRISON

345 Park Avenue

New York, New York 10154

JOHN L. JEFFERS

G. IRVIN TERRELL

BAKER & BOTTS

3000 One Shell Plaza

Houston, Texas 77002

PAUL M. BATOR

DOUGLAS A. POE

KENNETH S. GELLER

MAYER, BROWN & PLATT

231 South LaSalle Street

Chicago, Illinois 60604

W. JAMES KRONZER

1001 Texas, Suite 1030

Houston, Texas 77002

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.