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COMPANION LIFE INS. CO. v. MATTHEWS

September 29, 1982

COMPANION LIFE INSURANCE COMPANY, Plaintiff,
v.
MICHELLE M. MATTHEWS, as trustee u/aø 4/30/81, EXECUTIVE HEALTH EXAMINERS, P.A., Defendants



The opinion of the court was delivered by: CONNER

OPINION AND ORDER

 CONNER, D.J.

 This action is before the Court on the cross-motions of plaintiff Companion Life Insurance Company ("Companion") and defendant Michelle M. Matthews ("Matthews"). Companion has moved for an order pursuant to Rule 65, F.R.Civ.P., enjoining defendants from proceeding in any other action with regard to Companion's insurance policy number 2561023. Matthews in her cross-motion asks this Court to stay further proceedings in the instant action pending resolution of a case in the Superior Court of New Jersey, Chancery Division, Morris County, Docket Number c-3754-81, entitled Michelle M. Matthews, Trustee u/t/aø April 30, 1981 v. Companion Life Insurance Company and Executive Health Examiners, P.A. (the "New Jersey Action").

 I.

 In May 1981, Companion, a New York corporation, issued a $700,000 term life insurance policy numbered 2561023 (the "Policy") on the life of Edward Matthews, Jr. (the "Decedent"), a New Jersey resident. Matthews, Decedent's wife, was named as owner and beneficiary of the Policy, in her capacity as trustee of a trust created on April 30, 1981 to receive the proceeds of any insurance on Decedent's life. The Policy replaced an earlier policy issued by Companion in February 1981 in the amount of $600,000 (the "First Policy"). On December 29, 1981, less than eight months after the issuance of the Policy, Decedent suffered a cardiac arrest while playing handball and died. Matthews on January 20, 1982 provided Companion with proof of her husband's death, but Companion, by letter dated May 3, 1982, denied defendant's claim and returned the premiums already paid on the Policy. Matthews refused that tender.

 In connection with his application for the First Policy, Decedent underwent, at the request of Companion, a medical examination conducted by Executive Health Examiners, P.A. ("Executive Health"), a New Jersey professional association. Decedent had been examined by doctors at Executive Health on several prior occasions unrelated to these applications for insurance. Companion alleges that after examinations in 1979 and 1980, Decedent was advised by doctors at Executive Health that he had an irregular heartbeat and possible heart disease. As justification for its denial of Matthews' claim, Companion asserts that neither Matthews nor the Decedent had disclosed this information when requested to do so in the applications for both the First Policy and the Policy. Companion further alleges that defendant Executive Health did not furnish this information in the medical examiner's section of the application that it completed and filed with Companion.

 On May 3, 1982, the same day that it informed defendant Matthews of the denial of her claim, Companion filed this action for a declaratory judgment under 28 U.S.C. §§ 2201-02, seeking rescission of the Policy and an injunction preventing Matthews from filing any further actions on the Policy. Jurisdiction is based on diversity of citizenship, 28 U.S.C. § 1332. On June 4, 1982, one month after the institution of this federal action, Matthews commenced the New Jersey Action for recovery on the Policy. All the parties who appear before the Court in this suit are also before the state court in the New Jersey Action. Thus there are two contemporaneously pending lawsuits, each capable of fully resolving the existing rights among these three parties.

 II.

 At the outset, it appears that these cross-motions offer this Court three options: to enjoin the New Jersey Action and continue litigation of the dispute here, to stay this action and allow the New Jersey Action to proceed, or to allow both suits to go forward. In light of the Anti-Injunction Act, 28 U.S.C. § 2283, however, this Court finds itself limited to a choice between the latter two of these three alternatives.

 The Anti-Injunction Act 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.

 Although this statute does not prevent a federal court from restraining a party from instituting state proceedings in the future, it does establish an absolute prohibition once the state proceedings have been commenced. See e.g., Mitchum v. Foster, 407 U.S. 225, 229, 32 L. Ed. 2d 705, 92 S. Ct. 2151 (1972); C. Wright, A. Miller & E. Cooper, 17 Federal Practice and Procedure § 4222 at 318 ("Wright, Miller & Cooper"). Further, it is well settled that this prohibition cannot be evaded by framing the order, as Companion requests, so that it restrains only the parties and not the state court. Atlantic Coast Line Railroad Co. v. Brotherhood of Locomotive Engineers, 398 U.S. 281, 287, 26 L. Ed. 2d 234, 90 S. Ct. 1739 (1970).

 Companion argues that because the New Jersey Action was instituted after the commencement of this action, the Anti-Injunction Act does not apply. In support of this proposition, Companion relies on Judge -- now Supreme Court Justice -- Stevens' opinion in Barancik v. Investors Funding Corporation of New York, 489 F.2d 933 (7th Cir. 1973). In Barancik, the plaintiffs filed suit in federal court requesting damages and a declaratory judgment regarding certain real estate in Chicago. Approximately three months later, the plaintiffs moved for an injunction restraining defendant from commencing any separate legal action concerning the real property in dispute. While that motion was pending before the court, defendant filed a forcible entry and detainer action in Chicago Municipal Court. The Seventh Circuit, by Judge Stevens, affirmed the injunction of the state court proceedings, holding that "the mandatory prohibition in § 2283 against injunctions staying court proceedings does not apply to state actions commenced after a motion for injunctive relief is filed in the federal court." 489 F.2d at 938. The court was motivated by a fear that under a different rule, a party could undercut a district court's authority by commencing a state court action while the federal court was considering the motion for an injunction. See id. at 937. Thus, under the Seventh Circuit's rationale, the time the court's injunctive powers are invoked, rather than the time the injunction is actually issued, determines the applicability of the Anti-Injunction Act. This result was strongly criticized in a later Sixth Circuit case, Roth v. Bank of the Commonwealth, 583 F.2d 527 (6th Cir. 1978), which declined to follow Barancik. Instead, the Roth court applied what it considered to be the settled and firm rule that once state proceedings have commenced, the Anti-Injunction Act immediately applies and bars a later federal injunction. Id. at 533.

 The posture of this case is such that this Court need not choose between these competing rules; under either test, the Anti-Injunction Act applies. Neither party contends that the New Jersey Action has not begun; therefore, under the Roth standard the Anti-Injunction Act certainly applies. Alternatively, even if this Court compares the time of filing of the state action with the time the motion for an injunction was filed, as done in Barancik, the Act would still apply in this case. In contrast to the motion in Barancik, Companion's motion for a Rule 65 order was not made until well after it had notice that Matthews had commenced the New Jersey Action. Therefore, at the time Companion's motion was made, state proceedings were pending. In urging this Court to follow Barancik, Companion argues, albeit somewhat ambiguously, that the Court should treat the request for an injunction as having been made at the time the federal action was commenced because, as part of its original declaratory judgment complaint, Companion prayed for injunctive relief against Matthews. This I decline to do. If this Court were to extend Barancik to this degree, it would cut to the very core the coverage of the Anti-Injunction Act, whereas Barancik itself merely trimmed the edges. Further, it would be doing so in ...


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