Submitted: August 4, 2015.
[Copyrighted Material Omitted]
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 13 C 8021 -- William T. Hart, Judge.
Before POSNER, KANNE, and HAMILTON, Circuit Judges.
Hamilton, Circuit Judge.
The principal question in this appeal is whether the district court correctly refused to enjoin a state court from adjudicating a case that the state-court plaintiff had voluntarily dismissed in an earlier incarnation in federal court. In the earlier federal case, FirstMerit Bank had sued CFE Group, LLC and related parties (for simplicity, CFE) to enforce a promissory note and guaranties. CFE moved to dismiss that complaint. The district court granted the motion and dismissed FirstMerit's complaint without prejudice, but with leave to amend. Rather than amend, FirstMerit filed a notice of voluntary dismissal of the action under Federal Rule of Civil Procedure 41(a)(1)(A)(i).
FirstMerit then filed a new complaint in an Illinois state court asserting the same claims. CFE moved to dismiss the new suit, arguing that the earlier federal dismissal meant that FirstMerit's claims were barred by claim preclusion (res judicata). The state trial court denied the motion. CFE responded to that denial by filing this new federal action asking the district court to enjoin the state court under the relitigation exception to the federal Anti-Injunction Act, 28 U.S.C. § 2283. The district court refused, ruling that the dismissal of the first federal case was not a judgment on the merits and therefore did not preclude the state action. The district court dismissed this action with prejudice. CFE has appealed.
We affirm. We agree with the district court's reasoning and add that CFE's request for an injunction was also barred by the Full Faith and Credit Act, 28 U.S.C. § 1738. We affirm the district court's judgment dismissing the case. We also find that the appeal is frivolous and that sanctions on CFE are appropriate under Federal Rule of Appellate Procedure 38.
I. Factual and Procedural Background
FirstMerit's federal lawsuit was short-lived. FirstMerit sued CFE in federal court in November 2012 to enforce a promissory note and guaranties executed by CFE. See FirstMerit Bank, N.A. v. CFE Group, LLC, No. 12 C 9510 (N.D.Ill. dismissed May 1, 2013). FirstMerit alleged that two years earlier CFE had become delinquent on loans with a principal amount of $300,000. FirstMerit had acquired the loans from the Federal Deposit Insurance Corporation, which had been appointed receiver when the original lender to CFE was closed by its Illinois regulator.
One of the CFE defendants moved to dismiss the complaint, arguing that under Federal Deposit Ins. Corp. v. Elefant, 790 F.2d 661, 666 (7th Cir. 1986), the FDIC's relationship to the suit divested the district court of diversity jurisdiction. A week later, FirstMerit filed a memorandum ...