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I.J.A. INC. v. MARINE HOLDINGS

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA


June 24, 1981

I.J.A. INC. d/b/a NORTHEAST JET COMPANY, INC. and EARL HOLTZ, Plaintiffs
v.
MARINE HOLDINGS LTD., INC., THE BANK OF NOVA SCOTIA, SHELDON MINTZBERG, et al, Defendants

The opinion of the court was delivered by: TROUTMAN

Before HON. E. MAC TROUTMAN, District Judge.

 Now, according to the allegations of the complaint, in January, 1981, defendant Marine Holdings Ltd. delivered to the plaintiff Northeast Jet Company a 1967 Gates Lear jet which, pursuant to an agreement between the parties, Northeast utilized in its air charter business. Marine Holdings agreed to pay for all fuel, oil, landing fees, taxes, labor, parts, maintenance, management fees, et cetera in return for a share of the profit. By May, 1981, these charges totaled over $ 60,000.

 On or about May 8th, defendant Mintzberg, an officer of Marine Holdings, in payment thereof executed a series of five personal checks amounting to slightly over $ 56,000 payable to the order of Northeast as well as a security agreement covering the aircraft. Mintzberg later obtained from defendant, the Bank of Nova Scotia, a letter unconditionally guaranteeing payment of the checks in return for which the plaintiff cancelled the security agreement. This was necessary to accomplish the transfer of the Lear jet to Canada, its deregistry in the United States and its registry in Canada.

 However, the defendant Mintzberg later tried to stop payment on all of the checks and instituted litigation in this Court, docketed as Civil Action No. 81-2243, seeking a TRO and preliminary relief to enjoin Northeast from endorsing or negotiating the checks. Upon appearing before the Court on June 4, 1981, the parties entered into extended settlement negotiations lasting for the better part of two days. Subsequently, the plaintiffs in that suit withdrew the complaint pursuant to Federal Rules of Civil Procedure 41(a). The defendants in that litigation, now the plaintiffs in the instant suit, have instituted this suit to recover compensatory damages exceeding $ 38,000, which represents various maintenance and repair service costs, as well as expenses incurred in defending the prior action, which the present plaintiffs consider to have been pressed as part of an "illegal, unlawful, wicked and malicious conspiracy" to withhold payment of funds.

 Most importantly for present purposes, plaintiffs seek to enjoin the defendant from proceeding with litigation which the defendants have commenced in the Superior Court of Canada, Province of Quebec, District of Montreal and docketed as Civil Action No. 500-05-007553-819, which involves a pre-judgment garnishment procedure and an attempt to enjoin the bank from honoring its unconditional letter of credit. We are advised that the Canadian court has scheduled a hearing in this matter tomorrow, Thursday, June 25th, 1981, hence the need for immediate relief in this Court. Accordingly, the plaintiffs seek a temporary restraining order, and ultimately a preliminary and a permanent injunction, enjoining the defendants from continuing the Canadian litigation pending the outcome not only of the matter presently before this Court but also the conclusion of the entire lawsuit.

 To obtain injunctive relief, the plaintiffs must demonstrate irreparable injury that will occur if relief is not granted until a final adjudication on the merits, a reasonable likelihood of success on the merits, and the improbability of harm to the nonmoving party specifically and the public generally. See Continental Group, Incorporated v. Amoco Chemical Corporation, 614 F.2d 351 (3d Cir. 1980) and Accord, Kennecott v. Smith Corp., 637 F.2d 181 (3d Cir. 1980), Nissin Foods (USA Company) v. National Labor Relations Board, 515 F. Supp. 1154 (Eastern Dist. of Pa., 1981), Perkins v. Wagner, 513 F. Supp. 904 (Eastern Dist. of Pa., 1981). Most recently, see F.H.I. of Florida, Inc. v. Insurance Company of North America, 652 F.2d 310 (3d Cir. 1981).

 In the case at bar, we conclude that the plaintiff has failed to demonstrate the requisite likelihood of success on the merits. Ordinarily, one court will not interfere with proceedings in another court. See Donovan v. City of Dallas, 377 U.S. 408, 12 L. Ed. 2d 409, 84 S. Ct. 1579 (1964). This principle enjoys a long history of acceptance. See McKim v. Voorhies, 11 U.S. (7 Cranch) 279, 3 L. Ed. 342 (1812), Diggs v. Wolcott, 8 U.S. (4 Cranch) 179, 2 L. Ed. 587 (1807). Where both the federal and state courts have jurisdiction, both lawsuits may continue until a party in one of them obtains a judgment, which may then be res judicata in the other. See Princess Lida v. Thompson, 305 U.S. 456, 83 L. Ed. 285, 59 S. Ct. 275 (1939).

 A finding that the second action is duplicative and therefore vexatious does not require a different result, for an injunction interferes with the comity which federal courts owe to courts of other jurisdictions, particularly a court in a foreign jurisdiction. Compagnie Des Bauxites de Guinea v. Insurance Company of North America, 651 F.2d 877 (3d Cir. 1981). Similarly, directing the injunction towards the parties, that is, the litigants as opposed to the foreign court itself, will not alter this conclusion, for as the Court of Appeals recently noted in the case cited, "restraining a party from pursuing an action in a court of foreign jurisdiction involves a delicate question of comity and therefore 'requires that such action be taken only with care and great restraint.'" See pages 18 and 19 and footnote 10 in the foregoing Bauxites case. Also, see Canadian Filters (Harwich) Ltd. v. Lear-Siegler, Inc., 412 F.2d 577, 578 (1st Cir. 1969).

 In the case at bar, the plaintiffs allege vexatious conduct on the part of the defendants, loss of credit, financial losses, inconvenience and harassment which the defense of the Canadian action entails. Regrettably for the plaintiffs, the Court of Appeals for this circuit has expressly rejected this argument in the very recent case above cited, the Bauxites case. Accordingly, plaintiffs' motion for a temporary restraining order will be denied.

 This then brings us to the plaintiffs' request for a preliminary injunction following the decision on the application for a TRO. A reading of the Bauxites case so recently decided by the Circuit Court, as I have stated, June 10th, 1981, discloses that there the District Court and I believe it was the Western District of Pennsylvania /--- had entered an order enjoining the defendants from maintaining an action commenced by them in London. The District Court based its conclusions upon express findings that the action instituted in the English Courts was duplicative, harassing and vexatious.

 The Circuit Court, referring to the findings of the District Court, concluded that such findings or such finding, as the case may be, "does not affect our decision." It also stated specifically, as previously noted, and we quote, "Likewise, there is no difference between addressing an injunction to the parties and addressing the foreign court itself." The court continued, 'enjoining the parties necessarily affects the court and compromises 'the comity which the Federal Courts owe to the Courts of other jurisdictions.'"

 Thus, if following a hearing on plaintiffs' application for a preliminary injunction, this Court were to find that the Canadian litigation is duplicative, involving the same parties, involving the same issues, vexatious and of a harassing nature, damaging to the plaintiffs' reputation and to its line of credit and business reputation as alleged throughout plaintiffs' complaint, we would be obliged nonetheless to deny injunctive relief, either preliminary or permanent.

 Just as the Circuit Court there reversed the order of the District Court granting a permanent injunction restraining the prosecution of the suit in England in the High Court of Justice, Queens Bench Division, so here this Court would suffer reversal were it to grant injunctive relief restraining the prosecution of the suit in the Superior Court of Canada, Province of Quebec, District of Montreal under the circumstances here alleged.

 Accordingly, an appropriate order will be entered denying the plaintiffs' application for a TRO and a preliminary injunction and a permanent injunction.

 [EDITOR'S NOTE: PAGINATION IN THE HARD COPY SOURCE ENDS AT THIS POINT.]

 MR. WORK: May I ask, however, that you consider one aspect of the question for a preliminary injunction, and that is in order to afford complete relief -- and I understand the Court for the reasons stated cannot afford the relief requested in the TRO -- but in the preliminary injunction, we have asked for, in essence, what amounts to a declaratory relief that the unconditional letter of guarantee dated May 13th, 1981, Northeast Jet Company, be declared -- well, to put it another way, that the Bank of Nova Scotia be required to honor its unconditional letter of guarantee because what the practical result of your decision is to tie up that letter of guarantee for an indefinite period of time, quite frankly during the possible pendency of the lawsuit in chief, if you will, the basic complaint that was filed here. What that amounts to is basically providing the defendants in this lawsuit the relief that they asked for in the preliminary injunction they filed before. In other words, by preventing the Bank of Nova Scotia from honoring its letter of guarantee, in spite of the fact that that letter says that there will be no inquiry into the merits of the controversies between the parties, amounts to affording the defendants the exact relief that they asked for by way of their preliminary injunction, and precisely the relief that they are asking for in Canada.

 What I am suggesting and requesting the Court to consider is having the hearing on the preliminary injunction, to award the declaratory relief to us on that unconditional letter of credit. In that fashion, we would have the trial first. We would have gotten the record corrected that would have afforded this Court the opportunity to give us that relief, and it would be perfectly consistent with this Court's opinion just rendered that both cases could go to trial, and the first court that reaches a decision would be hopefully the controlling decision on the merits. We need that immediate relief. We will suffer irreparable harm if we don't have it for the reasons stated yesterday because of the effect on our credit in the aviation industry because of the fact that Gates Lear Jet has put us on COD because we are unable to deal with this credit restriction totally as a result of the improper dishonoring of the irrevocable letter of credit by the Bank of Nova Scotia. I might also point out that it seems apparent that the reason that the Bank of Nova Scotia has not honored the first presentation of the check on that irrevocable letter of credit is because it is acting in concert with its depositor and it has no reason to deal with Northeast Jet Company to whom it's issued its letter of credit when it has a depositor in Montreal who has litigation for the sole purpose of tying that letter up.

 What I am trying to point out is that there is -- while we understand perfectly your decision not to enter the TRO, what we are saying, that does not in any way change the irreparable harm we will suffer if we do not have an immediate declaratory relief on the issue of the letter of credit which could be afforded by the Court by way of a preliminary injunction and complete relief. And I think we have cited cases in the memorandum for the preliminary injunction and would be separate and distinct of the relief which is asked for by prosecuting the case in Canada.

 THE COURT: There are other issues remaining in the case. Maybe that is one of them, but they are not the subject of the injunctive relief. Damages, for instance, are alleged and remain as part of the case. I haven't dismissed the case.

 MR. WORK: I understand that. What I am trying to say is if we -- and we will, of course, go on with the complaint that has been filed -- but as you know, this could be a year or more in getting to trial. In that interim, no decision has been reached on the question of the letter of credit.

 THE COURT: That's a matter of perhaps scheduling, or what have you; also, a matter of an answer being filed, if any, and matters of that kind. And I think at this point we might better close this record, and I will be glad to discuss those areas with you.

 MR. WORK: Very well. Thank you, your Honor.

 THE COURT: I do not think, as I said, that it's a matter of injunctive relief, whether it be by way of a TRO, a preliminary injunction or a permanent injunction. But that is subject, of course, to the fact that there are certain issues remaining in the case.

 (Thereupon, at 10:14 a.m., court was adjourned.)

 I certify that the foregoing is a correct transcript from the record of proceedings in the above-entitled matter.

 BENCH OPINION

 THE COURT: The matter of IJA, Inc., doing business as Northeast Jet and Earl Holtz vs. Marine Holdings Ltd., Sheldon Mintzberg and others, Civil Action No. 81-2480. We shall seek to dispose of the issues before the Court this morning in a bench opinion, thus foregoing the niceties of a carefully drafted opinion, and this because of the obvious need for immediate relief by the plaintiffs, or at least some immediate indication as to the Court's disposition of the issues.

 In historical context, the Court received a call last Friday afternoon, June 19th, 1981, about 4:00 p.m. in which it was advised by plaintiffs' counsel of the filing and application for a temporary restraining order and a preliminary injunction. Counsel was directed by the Court to attempt to serve the defendants, contact their Canadian counsel and also their former United States counsel who had appeared in a case involving the same parties before this Court several weeks ago. All such assignments were competently accomplished by plaintiffs' counsel as detailed on the record yesterday. Application for a temporary restraining order was scheduled for hearing yesterday at 4:00 p.m. and was reached at 4:50 p.m. following the conclusion of a trial day in an ongoing, protracted criminal case. This morning, prior to the commencement of the scheduled criminal trial, we shall seek to dispose of this matter from the bench to afford the plaintiff an immediate response to their emergency needs and at the same time continue with the ongoing jury trial heretofore mentioned.

19810624

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