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March 10, 1960

REINES DISTRIBUTORS, INC., suing on behalf of itself and of all others similarly situated, Plaintiff,
ADMIRAL CORPORATION, Admiral Credit Corporation, and Admiral Distributing Corp., Defendants

The opinion of the court was delivered by: METZNER

On February 27, 1959, plaintiff, Reines Distributors, Inc., commenced this action based in part on alleged illegal price discrimination in violation of the antitrust laws. Subsequently, on or about March 19, 1959, but prior to serving their answer, the defendants, Admiral Corp. et al., commenced 41 separate actions in the New York state courts against Reines on notes and trade acceptances made by Reines to Admiral and on an open account between the parties. Then in this court Admiral asserted these claims as compulsory counterclaims under Rule 13(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. Of the 41 actions commenced by Admiral, 39 have been discontinued by stipulation. Two are still pending. Reines moved in the state court for a stay of these two actions. The motion was granted by the Supreme Court at Special Term, but subsequently the Appellate Division reversed and vacated the stay. 9 A.D.2d 410, 194 N.Y.S.2d 932 (Dec. 31, 1959). Application for leave to appeal granted subsequent to opinion, 10 A.D.2d 657, 197 N.Y.S.2d 446. Reines now moves in this court for an order enjoining Admiral from further prosecuting the state court actions.

In moving to restrain Admiral, Reines relies principally on (1) the policy of Rule 13(a) of the Federal Rules of Civil Procedure, and (2) the exclusive jurisdiction of the federal courts over antitrust suits, 15 U.S.C.A. § 15, and their power to prevent and restrain violations of the Antitrust Acts, 15 U.S.C.A. §§ 4, 26. Plaintiff asserts that aggregating the policies enunciated in Rule 13(a) and the antitrust laws, and further adding the alleged intent of the defendants to harass the plaintiff so as to prevent the suit in this court from reaching a determination, the sum total vests in this court the power to stay the state court proceedings 'in aid of its jurisdiction.' 28 U.S.C.A. § 2283.

Plaintiff realizes that the general prohibition against enjoining state court actions contained in 28 U.S.C. 2283 is a formidable barrier to overcome to gain the relief sought here. Section 2283 provides that:

 'A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.'

 Section 2283 was formerly known as Section 265 of the Judicial Code and read as follows:

 'The writ of injunction shall not be granted by any court of the United States to stay proceedings in any court of a State, except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy.'

 In Toucey v. New York Life Insurance Co., 1941, 314 U.S. 118, 62 S. Ct. 139, 86 L. Ed. 100, the Supreme Court traced the long history of Section 265 dating back to 1793. The court said:

 'Section 265 is not an isolated instance of withholding from the federal courts equity powers possessed by Anglo-American courts. As part of the delicate adjustments required by our federalism, Congress has rigorously controlled the 'inferior courts' in their relation to the courts of the states.' 314 U.S. at page 141, 62 S. Ct. at page 147.

 The court pointed out that apart from five specific statutory exceptions to the rule embodied in Section 265 the only other exceptions are the 'res' cases, and in this connection quoted from the case of Kline v. Burke Construction Co., 260 U.S. 226, 235, 43 S. Ct. 79, 83, 67 L. Ed. 226:

 'The rank and authority of the (federal and state) courts are equal but both courts cannot possess or control the same thing at the same time, and any attempt to do so would result in unseemly conflict. The rule, therefore that the court first acquiring jurisdiction shall proceed without interference from a court of the other jurisdiction is a rule of right and of law based upon necessity, and where the necessity, actual or potential, does not exist, the rule does not apply. Since that necessity does exist in actions in rem and does not exist in actions in personam, involving a question of personal liability only, the rule applies in the former but does not apply in the latter.'

 In 1948, when Section 265 was amended and became Section 2283 of Title 28 U.S.C., Congress changed the exception which read 'authorized by any law relating to proceedings in bankruptcy' to a generalized exception reading 'as expressly authorized by Act of Congress'. The amendment added two further exceptions: (1) 'where necessary in aid of its jurisdiction', and (2) 'to protect or effectuate its judgments'.

 In Amalgamated Clothing Workers of America v. Richman Bros., 1955, 348 U.S. 511, 75 S. Ct. 452, 99 L. Ed. 600, the court reviewed the amendments to Section 265 as found in Section 2283. The court said:

 'By that enactment (Section 2283), Congress made clear beyond cavil that the prohibition is not to be whittled away by judicial improvisation.' 348 U.S. at page 514, 75 S. Ct. at page 454.

 The court further said, in discussing the argument that the restrictions of Section 2283 do not apply whenever it is shown that the state court is without jurisdiction over the subject matter and is ...

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