652 F.2d 852
1981-2 Trade Cases 64,206
SEATTLE TOTEMS HOCKEY CLUB, INC., Eldred W. Barnes and
Vincent H. D. Abbey, Plaintiffs-Appellees,
The NATIONAL HOCKEY LEAGUE, et al., Defendants,
Northwest Sports Enterprises, Ltd., Defendant-Appellant.
United States Court of Appeals,
Argued and Submitted Jan. 7, 1981.
Decided Aug. 3, 1981.
Frederic C. Tausend, Seattle, Wash., argued, for defendant-appellant; James M. Rupp, Rex Stratton, Schweppe, Doolittle, Krug, Tausend & Beezer, Richard S. White, Seattle, Wash., on brief.
Wayne R. Parker, Midway, Wash., for plaintiffs-appellees.
Appeal from the United States District Court for the Western District of Washington.
Before WRIGHT, POOLE, and NORRIS, Circuit Judges.
NORRIS, Circuit Judge:
This appeal arises out of a private antitrust action brought in federal district court by appellees Vincent Abbey and Eldred Barnes, owners of the Seattle Totems, an ice hockey team in the now-defunct Western Hockey League. Named as defendants were the National Hockey League (NHL), Northwest Sports, owners of the Vancouver Canucks of the NHL, and various League officers and club owners. The suit charges defendants with unlawful monopolization of the ice hockey industry in North America and seeks, among other relief, to have certain agreements between Abbey and Barnes and Northwest Sports relating to the sale and management of the Seattle Totems declared void and unenforceable.
Approximately twenty-seven months after the filing of the antitrust action, Northwest Sports sued Abbey and Barnes in British Columbia Supreme Court for damages for breach of the same agreements that are being challenged as illegal and unenforceable in the appellees' antitrust action in federal district court. Abbey and Barnes then moved in the federal court action to enjoin Northwest Sports from prosecuting its contract claim in British Columbia on the ground that the claim constitutes a compulsory counterclaim to plaintiffs' antitrust complaint and must be pleaded in the pending federal antitrust action in Washington. The district court granted plaintiffs' motion and issued the injunction against prosecution of the Canadian suit. Northwest Sports appeals pursuant to 28 U.S.C. § 1292(a)(1).
Northwest Sports does not deny that under Federal Rule of Civil Procedure 13(a) its contract claim would constitute a compulsory counterclaim in the pending antitrust action. Rather, it contends that Canadian law, and not Rule 13(a), governs the determination whether the contract claim is compulsory and that Canadian law would not require Northwest Sports to plead its claim as a compulsory counterclaim in the pending antitrust suit. In concluding that Rule 13(a) governs, the district court below relied on the general choice of law principle, restated in § 122 of the Restatement (Second) of Conflict of Laws (1971), that a court will apply its own rules of procedure to regulate the conduct of litigation before it. See also Bournias v. Atlantic Maritime Co., 220 F.2d 152, 154 (2nd Cir. 1955). Northwest Sports argues, however, that this general rule is inapplicable because the issue in question is "one whose resolution would be likely to affect the ultimate result of the case." Restatement (Second) of Conflict of Laws § 122, Comment a (1971). We find this argument without merit.
The issue before this court is not whether Canadian law governs the interpretation or the validity of the agreements between Northwest Sports and appellees, but rather whether all claims arising out of these agreements should be heard in a single forum. A determination that appellant's claim is a compulsory counterclaim which must be pleaded in the district court of Washington cannot reasonably be expected to affect the merits of appellant's contract claim. Moreover, the Supreme Court has emphasized the federal courts' overriding interest in applying their own rules of procedure and has indicated that in federal court the Federal Rules of Civil Procedure will almost invariably be applied if there is a Federal Rule governing the point in dispute. See Hanna v. Plumer, 380 U.S. 460, 469-74, 85 S.Ct. 1136, 1142-46, 14 L.Ed.2d 8 (1965); see also TPO Inc. v. Federal Deposit Ins. Corp., 487 F.2d 131, 133-34 (3d Cir. 1973) (in a diversity action, Fed.R.Civ.P. 13(a) relating to compulsory counterclaims applies without reference to conflicting state rule); Tolson v. Hodge, 411 F.2d 123, 125-29 (4th Cir. 1969) (same).
Northwest Sports nevertheless argues that Canadian law is controlling because (1) the parties designated Canadian law as the law to be applied to the contract, and (2) Canada is the jurisdiction with the most significant relationship to the transaction. However, as noted above, the controlling choice of law principle is that a court's own local rules will be applied to determine how litigation shall be conducted. Appellants have failed to demonstrate why this principle is inapplicable in this case. Accordingly, we conclude that the district court properly looked to Fed.R.Civ.P. 13, and not Canadian law, to determine whether a defendant's contract claim must be pleaded as a compulsory counterclaim in the federal antitrust action pending before it.
Federal Rule of Civil Procedure 13(a) requires a defendant in federal court to state as a counterclaim any claim he may have against the plaintiff that "arises out of the transaction or occurrence that is the subject matter" of the plaintiff's claim. The purpose of requiring a defendant to assert his claim as a counterclaim in a pending action is "to prevent multiplicity of actions and to achieve resolution in a single lawsuit of all disputes arising out of common matters." Southern Construction Co. v. Pickard, 371 U.S. 57, 60, 83 S.Ct. 108, 110, 9 L.Ed.2d 31 (1962). The Rule bars a party who failed to assert a compulsory counterclaim in one action from instituting a second action in which that counterclaim is the basis of the complaint. See Southern Construction Co. v. Pickard, 371 U.S. at 60, 83 S.Ct. at 110; Wright & Miller, Federal Practice and Procedure, Civil §§ 1417-1418 (1971). It is well-settled that in order to enforce this bar, a federal court may enjoin a party from bringing its compulsory counterclaim in a subsequent federal court action. See, e. g., Warshawski & Co. v. Arcata Nat. Corp., 552 F.2d 1257 (7th Cir. 1977); Columbia Plaza Corp. v. Security Nat. Bank, 525 F.2d 620 (D.C.Cir.1975); Scott & Fetzer Co. v. McCarty, 450 F.Supp. 274 (N.D.Ohio 1977). Northwest Sports maintains, however, that the district court abused its discretion by restraining Northwest Sports from proceeding in the courts of a foreign country in order to enforce the dictates of Rule 13(a) and avoid duplicative litigation. We disagree.
A federal district court with jurisdiction over the parties has the power to enjoin them from proceeding with an action in the courts of a foreign country, although the power should be "used sparingly." Philp v. Macri, 261 F.2d 945, 947 (9th Cir. 1958). "The issue is not one of jurisdiction, but one ... of comity." Canadian Filters Ltd. v. Lear Siegler, Inc., 412 F.2d 577, 578 (1st Cir. 1969). See also Chase Manhattan Bank v. State of Iran, 484 F.Supp. 832, 836 (S.D.N.Y.1980).
In re Unterweser Reederei Gmbh, 428 F.2d 888 (5th Cir. 1970), aff'd on rehearing en banc, 446 F.2d 907 (1971), rev'd on other grounds sub nom. Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), is instructive. In that case, a federal district judge enjoined Unterweser Reederei from proceeding in the High Court of Justice in London, England on a claim that had been pleaded as a counterclaim in an action already pending in federal district court. In affirming the district court's issuance of the injunction, the Fifth Circuit noted that foreign litigation may be enjoined when it would (1) frustrate a policy of the forum issuing the injunction; (2) be vexatious or oppressive; (3) threaten the issuing courts in rem or quasi in rem jurisdiction; or (4) where the proceedings prejudice other equitable considerations. It then went on to hold that "allowing simultaneous prosecution of the same action in a foreign forum thousands of miles away would result in 'inequitable hardship' and 'tend to frustrate and delay the speedy and efficient determination of the cause.' " Id. at 896, quoting In re Unterweser Reederei, Gmbh, 296 F.Supp. 733, 735-36 (M.D.Fla.1969).
Similarly, in Bethell v. Peace, 441 F.2d 495 (5th Cir. 1971), a federal district court held that a land-sale contract executed in Florida between Florida residents involving land in the Bahamas was invalid, and issued an injunction restraining the defendant from prosecuting an action in the Bahamas to quiet title. The Fifth Circuit affirmed, holding that it was within the district court's discretion to enjoin the foreign suit where the action would relieve the moving party "of the expense and vexation of having to litigate in a foreign court." Id. at 498. See also Gage v. Riverside Trust Co., 86 F. 984 (C.C.S.D.Cal.1898) (defendants restrained from proceeding with an action in the courts of England on a claim raising issues already pending in federal court). Cf. Sperry Rand Corp. v. Sunbeam Corp., 285 F.2d 542 (7th Cir. 1960) (reversing order enjoining plaintiff from bringing foreign suit where disposition of the action in federal court would not dispose of the issues raised in the foreign action and where there was no evidence that the foreign litigation was vexatious or harassing).
In the case before us, the validity of the 1972-74 agreements will be a central issue in both the Canadian and American litigations. Adjudicating this issue in two separate actions is likely to result in unnecessary delay and substantial inconvenience and expense to the parties and witnesses. Moreover, separate adjudications could result in inconsistent rulings or even a race to judgment.
In granting the injunction against Northwest Sports, the district court noted that it had considered the relevant factors, including "the convenience to the parties and witnesses, the interest of the courts in promoting the efficient administration of justice, and the potential prejudice to one party or the other," and concluded that the equitable balance weighs heavily in favor of plaintiffs, Abbey and Barnes. It also concluded that the policies animating Rule 13(a) and the rationale of the cases upholding injunctions against subsequently-filed federal court actions applied with equal force to this case where the compulsory counterclaim was brought in the courts of Canada. In view of these policies and cases, we cannot say that the district court abused its discretion by enjoining Northwest Sports from prosecuting its contract claim in Canadian court.