771 F.

2d 464

SPAN-ENG ASSOCIATES, et al., Plaintiffs-Appellants,

v.
Stephen M. WEIDNER, et al., Defendants-Appellees.
No. 84-1185.

United States Court of Appeals,

Tenth Circuit.
Aug. 28, 1985.

Neil Wake, Phoenix, Ariz. (Leo R. Beus, Joseph A. Schenk, Merwin D.

Grant and Stephen C. Rich, Phoenix, Ariz., on brief), of Beus, Gilbert,
Wake & Morrill, Phoenix, Ariz., for plaintiffs-appellants.
Chris Wangsgard, Salt Lake City, Utah (Norman S. Johnson and Eric C.
Olson, Salt Lake City, Utah, with him, on brief; James S. Lowrie and
Janet C. Graham of Jones, Waldo, Holbrook & McDonough, Salt Lake
City, Utah, with him, on brief, for defendant-appellee First Interstate Bank
of Utah; Harold G. Christensen, R. Brent Stephens, Robert H. Henderson
and Shawn E. Draney of Snow, Christensen & Martineau, Salt Lake City,
Utah, with him on brief, for defendant-appellee Andrew P. Brucker;
Elwood Powell and Denton Hatch of Christensen, Jensen & Powell, Salt
Lake City, Utah, with him on brief, for defendant-appellee Schekter, Aber
& Hecht; and Richard W. Giauque, Gary F. Bendinger and Scott A. Call
of Giaque & Williams, Salt Lake City, Utah, and Anthony J. Constantini,
Asst. Gen. Counsel, New York City, Peat, Marwick, Mitchell & Co., on
brief, for defendant-appellee Peat, Marwick, Mitchell & Co.) of Van Cott,
Bagley, Cornwall & McCarthy, Salt Lake City, Utah, for defendantsappellees Musick, Peeler & Garrett and Roger B. Baymiller.
Before HOLLOWAY, Chief Judge, and SETH, and SEYMOUR, Circuit
Judges.
SEYMOUR, Circuit Judge.

This is an appeal from a grant of a preliminary injunction by the United States

District Court for the District of Utah. Appellants are plaintiffs in a securities

fraud action brought in Utah district court against a number of defendants. At

the request of several of these defendants, the Utah court enjoined plaintiffs and
their attorneys from proceeding in another related securities fraud action they
had subsequently filed in the United States District Court for the District of
Arizona. We reverse.
I.
2

In October 1981, plaintiffs Span-Eng Associates ("Span-Eng"), a Utah limited

partnership, and 47 of its limited partners filed suit in Utah district court against
various individuals and professional entities involved in the offering of the
Span-Eng partnership interests ("the Utah defendants"). These defendants
include Musick, Peeler & Garrett, a California law firm, and member attorney
Roger Baymiller; Schekter, Aber and Hecht, a New York law firm, and former
member attorney Andrew Bricker; Peat, Marwick, Mitchell & Company, a
national accounting firm, and member accountant David Winder; Steven
Weidner, the organizer and promoter of Span-Eng, and Alta Communications,
Inc. ("Alta"), a corporation which was owned by Weidner and was the general
partner in Span-Eng.1 Plaintiffs' original complaint alleged numerous violations
of Section 10(b) of the Securities Exchange Act of 1934 and sections 12(2) and
17 of the Securities Act of 1933. The complaint also alleged violations of the
Utah Uniform Securities Act, breach of fiduciary duty, conspiracy, and
common law fraud.

In March 1982, plaintiffs filed an amended complaint dropping among others

the claims of conspiracy and violation of section 17 of the Securities Act. In
June, three days before a hearing on defendants' motion to dismiss this first
amended complaint, plaintiffs filed a second amended complaint which
repeated the allegations in their first amended complaint but added First
Interstate Bank of Utah as a new defendant. The district court subsequently
dismissed certain counts of the first amended complaint, and several days later
plaintiffs filed a third amended complaint.

From June to December 1982 the parties filed a series of counterclaims, crossclaims, and third party claims. During this period they also participated in a
scheduling conference at which they adopted an initial deposition schedule,
established a discovery cut-off date, set tentative dates for pretrial conferences
and trial, and engaged in some discovery. In addition, the Utah district court
approved and entered as an order a stipulation executed by plaintiffs and
defendants. This stipulation included specific negotiated language for certain
jury instructions governing key aspects of plaintiffs' damage claims.2

The Utah court also issued various orders limiting and defining the scope of
discovery in an attempt to focus the litigation. The most significant of these
orders prohibited plaintiffs from pursuing discovery into matters related to
certain investment offerings in coal mining ventures involving defendant
Weidner. The court directed that while plaintiffs were free to pursue this
discovery in another pending action,3 they were to confine discovery in the
Utah action to the facts of the Span-Eng offering.

In February 1983, plaintiffs moved for leave to file a fourth amended complaint
and sought to add six additional defendants.4 They also sought to reintroduce
conspiracy claims against all defendants and to reinstate claims based on
section 17 of the Securities Act, both of which claims plaintiffs had dropped
when they first amended their original complaint. In May, the Utah court
rejected the proposed fourth amended complaint on the grounds that the motion
was untimely and failed to set forth with particularity the basis for the
amendment as required by Fed.R.Civ.P. 7(b) and 15. After twice permitting
plaintiffs time to provide sufficient facts to support the amendment, the court
again denied the motion. The court found that: (1) the motion was untimely; (2)
plaintiffs had failed to exercise due diligence in bringing the motion and in
discovering new facts to support it; (3) plaintiffs had failed to make a sufficient
factual showing in support of the justness of allowing the motion, as required
by Rule 15; and (4) plaintiffs' reasons for adding additional parties were
insufficient.

In November 1983, plaintiffs filed an action in Arizona district court against the
same six defendants the Utah court had refused to join. Except for minor
adjustments, the Arizona complaint is a verbatim recitation of the counts and
relief sought in the proposed fourth amended complaint rejected by the Utah
court, including the claims of conspiracy and violation of section 17 of the
Securities Act. The Arizona complaint reiterates all of the factual allegations
against defendants in the Utah action, although none of the Utah defendants are
named as defendants in the Arizona action. The complaint also reiterates
allegations regarding the coal mining ventures that the Utah court had ruled
were beyond the scope of discovery in the Utah action.

Two Utah defendants sought to enjoin plaintiffs and their counsel from
proceeding in the Arizona action during the pendency of the action in Utah.
The Utah court issued an order enjoining Utah plaintiffs and their counsel
"from further prosecuting the action styled Span-Eng Associates et al. Civil
No. 83-2204 PHX VAC ("the Arizona action"), prior to the entry of final
judgment in this action disposing of all legal and factual matters at issue

between the parties to this action." Rec., vol. XIV at 3502-03.

9

The court based its decision to enjoin plaintiffs on (1) the possibility of
inconsistent results in the Utah and Arizona actions; (2) duplication of judicial
effort; (3) the probability that plaintiffs were engaged in forum shopping or
judge shopping; and (4) plaintiffs' ability to obtain complete relief in the Utah
action. On appeal, plaintiffs argue that the Utah district court lacked the power
to issue the injunction and even if the court had the power to do so, issuance in
this case was an abuse of discretion.

II.
10

The order enjoining plaintiffs from proceeding in Arizona involved an exercise

of judicial discretion. See Kerotest Manufacturing Co. v. C-O-Two Fire
Equipment Co., 342 U.S. 180, 183-84, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952);
Commodity Futures Trading Commission v. Chilcott Portfolio Management,
Inc., 713 F.2d 1477, 1484 (10th Cir.1983). The exercise of such discretion calls
for a balancing of competing interests. Id.

11

This case involves the somewhat unusual situation in which a party to one
lawsuit seeks to enjoin another party from proceeding in a related case where
identical issues and parties are not present.5 In Chilcott, this court was faced
with a similar challenge to an order enjoining parties from proceeding in related
but different lawsuits.6 There we noted that "where a movant seeks relief that
would delay court proceedings by other litigants he must make a strong
showing of necessity because the relief would severely affect the rights of
others." Id. (emphasis added). We further observed that even when the relief
sought is only a stay of the case in which the motion is made:

12
"[T]he
suppliant for a stay must make out a clear case of hardship or inequity in
being required to go forward, if there is even a fair possibility that the stay for which
he prays will work damage to someone else. Only in rare circumstances will a
litigant in one cause be compelled to stand aside while a litigant in another settles
the rule of law that will define the rights of both."
13

Id. (quoting Landis v. North American Co., 299 U.S. 248, 255, 57 S.Ct. 163,
166, 81 L.Ed. 153 (1936) (emphasis added).

14

We emphasized in Chilcott that "[t]he right to proceed in court should not be

denied except under the most extreme circumstances," id. (quoting Klein v.
Adams & Peck, 436 F.2d 337, 339 (2d Cir.1971) ), and that "these precautions
are of particular importance where, as here, restraints on other courts are

contemplated," id. "When an injunction sought in one federal proceeding would

interfere with another federal proceeding, ... such injunctions should be granted
only in the most unusual cases." Bergh v. Washington, 535 F.2d 505, 507 (9th
Cir.), cert. denied, 429 U.S. 921, 97 S.Ct. 318, 50 L.Ed.2d 288 (1976)
(emphasis added).
15

Under Chilcott, the Utah defendants were required to make a "strong showing"
that the injunction was necessary and that "the disadvantageous effect on others
would be clearly outweighed." 713 F.2d at 1484. Our review of the record
indicates that the Utah defendants have not made the requisite showing that this
case presents the extreme or unusual circumstances necessary to support the
district court's order. Assuming arguendo that such an injunction is within a
court's equity powers, see Chilcott, 713 F.2d at 1484-85, defendants failed to
make the clear case required for it.

Inconsistent Results
16

The district court first noted "[t]he Utah action involves the same limited
partnership offering, the same alleged misrepresentations and omissions, the
same principal actors and the same events." Rec., vol. XIV at 3510. The court
then concluded "[b]ecause the claims asserted are the same with only minor
variations, the risk of inconsistent results is manifestly present." Id. at 3510-11.
As plaintiffs point out, however, every defendant in the two cases played a
different role in the Span-Eng offering. There is nothing impermissibly
inconsistent between a finding in Utah that a Utah defendant was guilty of
securities fraud and an Arizona finding that an Arizona defendant was not
guilty of the same charge. In any lawsuit with different defendants,
inconsistency in the ultimate determinations of individual liability is entirely
possible and not improper.

17

Defendants argue that certain issues such as reliance, causation, and damages
under federal securities laws, will be the same in both actions for all plaintiffs.
They assert that allowing the Arizona and Utah actions to proceed
independently increases the risk of different findings on issues otherwise open
to collateral estoppel. While this is true, the opportunity for collateral estoppel
works to defendants' benefit. Findings against particular plaintiffs on issues in
one action should, under the doctrine of collateral estoppel, bind the same
plaintiffs in the other action. See Parklane Hosiery Co. v. Shore, 439 U.S. 322,
99 S.Ct. 645, 58 L.Ed.2d 552 (1979); Blonder-Tongue Laboratories, Inc. v.
University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788
(1971). The risk of inconsistent results detrimental to defendants will therefore
be minimal. Inconsistent results that operate to plaintiffs' detriment are properly

a matter of concern to plaintiffs, not defendants.

Judicial Economy and Efficiency
18

The court also found that the Arizona action was a "waste of time and energy,"
rec., vol. XIV at 3511, and that it "would result in [a] needless waste of judicial
energy and resources," id. at 3510. Defendants claim that allowing the Arizona
action to proceed will result in expensive, burdensome, and duplicative
discovery. We are not persuaded.

19

First, as we noted in Chilcott, "considerations [of judicial economy] should

rarely if ever lead to such broad curtailment of the access to the courts." 713
F.2d at 1485. This is particularly true here, where the record contains no
specific findings regarding the extent of any duplication of effort or resulting
burden on defendants. When defendants sought to enjoin the Arizona
proceedings, only six depositions totaling twenty six days had been taken in a
lawsuit involving forty seven plaintiffs and seven defendants.

20

We also are not persuaded by defendants' argument that allowing the Arizona
action to proceed will permit inconsistent treatment of discovery concerning the
coal mining ventures. First, nothing in the record indicates that such discovery
cannot already be conducted against defendants in the Semegen action, see note
3 supra, to the extent that the Utah defendants are discoverable witnesses in that
action. Furthermore, the Utah court's order prohibiting such discovery is limited
only to the Utah action. If the coal mining ventures are relevant to claims
against the Arizona defendants, then permitting this discovery in Arizona is not
impermissibly inconsistent. If defendants, as discoverable witnesses in Arizona,
are subjected to inconsistent or burdensome discovery requests, they may seek
relief from the Arizona court.

21

Finally, if the two actions pose the problem of overlapping and duplicative
discovery, referral to the Multidistrict Panel is a viable alternative for the
district court.7 See 28 U.S.C. Sec. 1407 (1982). The record does not indicate
that the district court considered this as a means of coordinating and
simplifying pretrial and discovery activities.

Forum Shopping
22

The district court also found that plaintiffs' filing of the Arizona action was "an
attempt to avoid or undermine the orders of this court ... to avoid the
consequences of the court's rulings...." Rec., vol. XIV, at 3511. The court
reasoned that the policy considerations of judicial economy and avoidance of

inconsistent results
"apply with even more force where the parties enjoined are plaintiffs in both actions
23
and the parties sued in the second action have already been before this court and the
plaintiffs have been denied the opportunity to join them due to the equitable
considerations implicit in the proper application of Rule 15. If plaintiffs believe that
Rule 15 has been improperly applied in this case to deny them the right to amend
their complaint, they have their protection through direct appeal. To allow plaintiffs
to bypass that direct avenue of review by filing the rejected complaint in another
federal district court is manifestly against public policy."
24

Id. at 3512-13. Plaintiffs argue to the contrary that filing of the Arizona action
was a permissible attempt to protect themselves against expiration of the statute
of limitations on claims against the Arizona defendants they were unable to join
in the Utah action.

25

We agree that the district court could take into account circumvention of the
rules of procedure or court rulings in assessing the propriety of an injunction.
Cf. Hospah Coal Co. v. Chaco Energy Co., 673 F.2d 1161, 1164-65 (10th Cir.),
cert. denied, 456 U.S. 1007, 102 S.Ct. 2299, 73 L.Ed.2d 1302 (1982). A court's
rulings must be capable of enforcement in order to preserve judicial authority
and to preserve control of its docket. Moreover, a court may employ its
injunctive power "to prevent a misuse of litigation in the nature of vexatious
and oppressive foreign suits." O'Hare International Bank v. Lambert, 459 F.2d
328, 331 (10th Cir.1972); see also Hospah, 673 F.2d at 1163. We do not agree,
however, with the court's conclusion that plaintiffs' filing of the Arizona
complaint was an impermissible avoidance of its ruling which warranted an
injunction. In the context of this case, filing to protect against the statute of
limitations was not vexatious and oppressive. See O'Hare, 459 F.2d at 331.

26

In addition, because the Arizona action involves entirely different defendants,

the policy concerns raised by forum shopping are absent in this case. A
plaintiff is generally free to file a lawsuit in the forum of its choosing so long as
the suit meets jurisdictional and venue requirements. The reasons underlying
the Utah court's denial of plaintiffs' motion to amend were relevant and proper
with respect to the Utah action. None of these reasons, however, operate as a
bar to plaintiffs' initially bringing their action against the six new defendants in
Arizona. Had plaintiffs filed their Arizona action without first moving to
amend their Utah complaint, the Utah defendants certainly could not have
opposed the Arizona action on the grounds they asserted in opposing plaintiffs'
motion to amend their complaint in Utah. We fail to see why the result should
be any different when plaintiffs, having pursued and lost their motion to amend,

subsequently file a lawsuit they are unquestionably entitled to bring. Plaintiffs'

actions were not manifestly against public policy and the district court erred in
so construing them.
Ability to Obtain Complete Relief
27

The court also reasoned that plaintiffs could obtain complete relief in the Utah
action. Defendants argue that "[w]ith numerous solvent defendants ... the Utah
action fills every current need the Plaintiffs may have to air their claims arising
from their Span-Eng investment." Brief of Appellees at 24. We disagree. Any
conclusion that plaintiffs can obtain complete relief in the Utah action is
speculative at best. The fact that plaintiffs have chosen to seek relief in Arizona
belies any suggestion that they are satisfied that complete relief in Utah is a
certainty. The Utah action provides plaintiffs with no opportunity to obtain
relief from the Arizona defendants. A defendant's mere assertion of such a
claim cannot control a plaintiff's exercise of the right to pursue a cause of
action against other defendants. It is not for a defendant to decide the legal
needs of an opposing plaintiff.

28

This case does not present the extreme circumstances that would justify this
exercise of a court's equitable power. Defendants have failed to make a strong
showing of need or undue burden that outweighs the disadvantageous effect on
plaintiffs in the Arizona action. See Chilcott, 713 F.2d at 1484. Accordingly,
the district court abused its discretion in issuing the injunction. The order
enjoining plaintiffs from proceeding in Arizona is reversed.

The complaint also named another law firm and two other individuals whom
plaintiffs subsequently dropped from the Utah action and who have no further
involvement in any aspect of the case

The stipulation was achieved after defendants released third party claims they
had against Weidner Communications, Inc. (WCI), a corporation wholly owned
by plaintiffs. Plaintiffs had acquired all of the stock in WCI from defendant
Weidner in 1980, prior to the filing of the Utah action

These offerings are the subject of an action, styled Semegen, et al. v.

Hammond, et al., No. Civ. 21-1531, filed in United States District Court in
Arizona in December 1981. Some of the Utah plaintiffs are also plaintiffs in the
Semegen action

The six additional defendants are (1) Martin Hecht, an attorney formerly with

defendant Sheckter, Aber & Hecht; (2) Burke Willsey, an attorney formerly
with defendant Musick, Peeler & Garrett; (3) Vibert Kesler, an attorney; (4)
Senior & Senior, a Utah law firm where Mr. Kesler worked at the time of the
Span-Eng offering; (5) Kesler & Rust, a Utah law firm where Mr. Kesler was
then working; and (6) Melvin Stanford, a former business associate of
defendant Weidner
5

In the more typical case, one party seeks to enjoin another from proceeding in
an identical, later-filed action involving the same parties in another forum. See,
e.g., O'Hare International Bank v. Lambert, 459 F.2d 328 (10th Cir.1972);
Cessna Aircraft Company v. Brown, 348 F.2d 689 (10th Cir.1965); Chicago
Pneumatic Tool Co. v. Hughes Tool Co., 180 F.2d 97 (10th Cir.1950). While
those cases also involve an exercise of judicial discretion, they do not implicate
the concerns present when a party's right to proceed against third parties is
curtailed. Those cases do not therefore provide a standard governing the
exercise of judicial discretion in a case such as this

While the facts in Chilcott were different from those in this case, the standard
for issuing an injunction set forth in Chilcott certainly applies to this case. We
therefore reject defendants' argument that the Chilcott decision is inapplicable

We reject defendants' claim that the use of the multidistrict mechanism was
infeasible due to the advanced stage of discovery in the Utah action. At the time
defendants sought the injunction, very little discovery had actually occurred. In
their brief on appeal, defendants refer to sixty eight days of depositions, but
forty two of these days occurred after the court issued the injunction. Discovery
that has occurred since the injunction issued cannot be used to justify the order