                          Revised July 9, 1999

                 IN THE UNITED STATES COURT OF APPEALS

                         FOR THE FIFTH CIRCUIT

                         _____________________

                              No. 98-40682
                         _____________________


NEXT LEVEL COMMUNICATIONS LP; KK MANAGER LLC; GENERAL INSTRUMENT
CORPORATION, formerly known as Next Level Systems Incorporated;
SPENCER TRASK & COMPANY INCORPORATED,

                                 Plaintiffs-Appellees,

          v.

DSC COMMUNICATIONS CORPORATION; DSC TECHNOLOGIES CORPORATION,

                                 Defendants-Appellants.

_________________________________________________________________

           Appeal from the United States District Court
                 for the Eastern District of Texas
_________________________________________________________________
                           June 21, 1999
Before KING, Chief Judge, and REYNALDO G. GARZA and JOLLY,
Circuit Judges.

KING, Chief Judge:

     Defendants-appellants DSC Communications Corporation and DSC

Technologies Corporation appeal from a May 14, 1998 order of the

district court issuing a preliminary injunction that prevents

them from pursuing an action filed in Delaware state court on

March 5, 1998.    Because we conclude that the district court’s

preliminary injunction is proper under the relitigation exception

to the Anti-Injunction Act, 28 U.S.C. § 2283, we affirm.

                 I.   FACTUAL AND PROCEDURAL HISTORY
       Defendants-appellants DSC Communications Corporation and DSC

Technologies Corporation (collectively, DSC) design and

manufacture telecommunications equipment, including a broadband

access product referred to as Switched Digital Video (SDV).         Two

of its former employees, Thomas Eames and Peter Keeler, were

responsible for designing and marketing the SDV technology for

DSC.    In 1994, while still employed by DSC, Eames and Keeler

created a company, Next Level Communications Corporation (Next

Level I), to develop an SDV product to compete with DSC.       In July

1994, they resigned from DSC, taking six DSC employees with them.

In 1995, General Instrument Corporation (General Instrument I)

acquired Next Level I.

       In April 1995, DSC filed suit against Next Level I, Eames,

and Keeler in Texas state court.       The defendants removed the

action to the United States District Court for the Eastern

District of Texas (the First Federal Action).       See DSC

Communications Corp. v. Next Level Communications, No. 4:95cv96

(E.D. Tex. filed Apr. 1995).    In March 1996, a three-week jury

trial ensued.

       The jury ultimately found that Eames and Keeler had breached

their contractual obligations to DSC; that, as fiduciaries of

DSC, they had diverted a corporate opportunity for the benefit of

themselves and Next Level I; and that Eames, Keeler, and Next

Level I had misappropriated DSC’s trade secrets.       DSC claimed



                                   2
damages based on its future lost profits.1   The jury awarded

actual and punitive damages of $369,200,000.

     Thereafter, in April 1996, DSC moved for entry of judgment

for all actual and punitive damages awarded by the jury and

requested a permanent injunction prohibiting Next Level I, Eames,

and Keeler from further disclosing or transferring the stolen DSC

trade secrets.   Finding that the legal theories upon which the

jury had awarded damages overlapped, the district court ordered

DSC to choose between the damages for breach of contract,

diversion of corporate opportunity, and misappropriation of trade

secrets.   DSC elected the actual and punitive damages associated

with the diversion of corporate opportunity finding.    In a June

11, 1996 order, the district court denied DSC’s request for a

permanent injunction, reasoning that DSC had already been

compensated for the future harm DSC sought to enjoin.

Accordingly, on June 11, 1996, the district court entered

judgment for DSC in the amount of $136,732,000.2

     1
        DSC’s expert had calculated DSC’s future lost profits by
assuming that Next Level I would get to market first with its SDV
system and then “computing DSC’s expected market share and
profits that they would have achieved in the absence of
Defendants’ wrongful conduct and subtracting DSC’s expected
market share and profits after Defendants’ wrongful conduct.”
     2
        The June 11, 1996 judgment contained a temporary
injunction to prevent Eames, Keeler, and Next Level I from
disclosing or transferring DSC’s trade secrets except in the
ordinary course of business until they satisfied the judgment.
Because the district court had denied DSC’s request for a
permanent injunction in its June 11, 1996 order, the June 11,
1996 judgment did not contain a permanent injunction, nor any

                                 3
     Dissatisfied with the district court’s failure to include a

permanent injunction as part of the judgment, DSC filed an

expedited motion on June 13, 1996, seeking to modify the judgment

to include a limited permanent injunction.   The district court

denied this motion the same day, again reasoning that an

injunction would provide DSC with a duplicate recovery.

     On July 3, 1996, DSC filed an “Emergency Motion for

Injunction Pending Appeal,” seeking an injunction to prohibit

Next Level I from using, transferring, or disclosing DSC’s trade

secrets during the appeal.   On July 9, 1996, the district court

denied DSC’s emergency motion, reasoning that DSC’s claim that it

was entitled to an injunction in addition to the monetary damages

already awarded had a low probability of success on appeal.

     On July 15, 1996, DSC filed a motion for injunction pending

appeal in this court, seeking an order enjoining Next Level I

from using, transferring, or disclosing the trade secrets it had

wrongfully obtained.   On July 24, 1996, we denied DSC’s motion

for an injunction pending appeal, but expedited the appeal sua

sponte.

     On appeal, DSC asked this court to affirm the judgment for

usurpation of corporate opportunity, requested an additional $101

million in damages for trade secret misappropriation, and

requested an injunction prohibiting the transfer or disclosure of



reference to one.

                                 4
DSC’s trade secrets.   On February 28, 1997, we ruled that the

district court had not relied on clearly erroneous factual

findings or erroneous conclusions of law in denying DSC’s

injunction request and thus had not abused its discretion in

refusing to grant a permanent injunction.     See DSC Communications

Corp. v. Next Level Communications, 107 F.3d 322, 328 (5th Cir.

1997).   We also determined that the award for usurpation of

corporate opportunity could not stand, and remanded the case for

entry of judgment on the claim for misappropriation of trade

secrets.   See id. at 326, 331.

     In July 1997, before the district court had entered final

judgment after the appeal, General Instrument I, the parent

corporation of Next Level I, divided its business into three

separate publicly-held corporations.   Next Level I was acquired

by one of these three corporations, Next Level Systems, Inc.

(Systems).   On July 15, 1997, DSC filed a “Motion for Show Cause

Order” in the district court, arguing that the transaction

violated the limited temporary injunction, contained in the

district court’s June 11, 1996 final judgment, that prohibited a

disclosure or transfer of DSC’s trade secrets, other than in the

ordinary course of business, until the judgment was satisfied.

Next Level I filed a response, arguing that the trade secrets

were still owned by the same corporate entity, Next Level I, and

that the only difference was that Next Level I had become a

subsidiary of a different company, Systems.    The district court

                                  5
concluded, in an order dated July 22, 1997, that the spin-off

transaction did not violate the injunction.

     On October 28, 1997, the district court entered a new final

judgment in the total amount of $137,732,000 for the actual and

punitive damages associated with the jury finding of

misappropriation of trade secrets.   The October 28, 1997 final

judgment, like the June 11, 1996 final judgment, contained an

interim injunction that was to remain in effect until the

judgment had been fully satisfied.   Next Level I satisfied the

judgment on November 6, 1997 by paying $140,691,717.81.     A

satisfaction of the judgment was filed with the court on November

7, 1997, and the interim injunction was dissolved.

     In January 1998, Systems decided to spin off the entire

business of its wholly-owned subsidiary, Next Level I.    Systems

transferred the business as a whole, including its technology,

management, and workforce, to Next Level Communications, L.P.

(Next Level II), one of four plaintiffs-appellees in this action,

in exchange for an eighty-nine percent limited partnership

interest in Next Level II.   Another plaintiff-appellee, Spencer

Trask & Co. (Trask), created plaintiff-appellee KK Manager L.L.C.

(KK Manager).   KK Manager acquired the other eleven percent

ownership interest in Next Level II in exchange for an investment

of $10,000,000, and became operating general partner of Next

Level II.   Systems then changed its name back to General



                                 6
Instrument (General Instrument II).   General Instrument II is the

final plaintiff-appellee in this action.

     On March 5, 1998, DSC filed a complaint in the Superior

Court of the State of Delaware naming as defendants Next Level

II, KK Manager, General Instrument II, and Trask,3 and asserting

claims based on misappropriation of trade secrets (the Delaware

Action).   Specifically, DSC alleged that General Instrument II

(formerly Systems) improperly disclosed trade secrets when it

conveyed the SDV technology from Next Level I to Next Level II,

that Next Level II and KK Manager misappropriated DSC’s trade

secrets, and that Trask conspired to misappropriate DSC’s trade

secrets.   As to Next Level II and KK Manager, DSC requested an

award of unjust enrichment damages.   As to General Instrument II,

DSC sought the imposition of a constructive trust and an order

requiring the disgorgement to DSC of the consideration General

Instrument II received for its alleged improper transfer of DSC’s

trade secrets to Next Level II and KK Manager.   Finally, through

its civil conspiracy claim, DSC sought to make Trask jointly and

severally liable for any unjust enrichment and disgorgement

damages owed by the other defendants.

     On April 2, 1998, the Delaware defendants returned as

plaintiffs to the district court below, the same court that had

presided over the First Federal Action, to request a preliminary

     3
        These four entities, plaintiffs-appellees in this suit,
will be referred to as the Delaware defendants or as plaintiffs.

                                 7
and permanent injunction to prevent DSC from prosecuting the

Delaware Action.   Jurisdiction was premised on the All Writs Act,

28 U.S.C. § 1651(a), and the relitigation exception to the Anti-

Injunction Act, 28 U.S.C. § 2283.

     On May 8, 1998, the district court conducted a hearing on

the application for a preliminary injunction.    The court signed

an order granting the preliminary injunction on May 14, 1998.    In

its order, the district court concluded that the “Delaware

Lawsuit is based on an alleged transfer of DSC’s trade secrets

that falls within the categories of potential future acts for

which DSC has already received full compensation in the Federal

Lawsuit,” that under the district court’s rulings in the First

Federal Action, DSC would not be entitled to recover additional

damages stemming from the transfer alleged in the Delaware

Action, and that a preliminary injunction barring prosecution of

the Delaware Action was therefore appropriate.   The district

court reached this conclusion based on its “particular knowledge

and familiarity with the complex damages theory on which DSC

recovered its future lost profit damages and with the arguments

asserted by DSC in its effort to obtain additional permanent

injunctive relief from future transfers or disclosures.”   DSC

filed its timely notice of appeal on June 1, 1998 and this appeal

followed.

                      II. STANDARD OF REVIEW



                                 8
     Although generally the grant of a preliminary injunction is

reviewed for abuse of discretion, our review is de novo because

the application of the relitigation exception is an issue of law.

See Texas Commerce Bank Nat’l Assoc. v. State of Florida, 138

F.3d 179, 181 (5th Cir. 1998) (applying de novo review to legal

conclusions underlying denial of preliminary injunction under

relitigation exception); accord Transouth Fin. Corp. v. Bell, 149

F.3d 1292, 1294 (11th Cir. 1998); Prudential Ins. Co. v. Doe, 140

F.3d 785, 788 (8th Cir. 1998); Quackenbush v. Allstate Ins. Co.,

121 F.3d 1372, 1377 (9th Cir. 1997).    If the district court is

incorrect in its legal conclusion that the relitigation exception

applies, it is barred by the Anti-Injunction Act from issuing an

injunction.   See 28 U.S.C. § 2283; Atlantic Coast Line R.R. v.

Brotherhood of Locomotive Eng’rs, 398 U.S. 281, 286 (1970)

(stating that Anti-Injunction Act is absolute bar to issuance of

injunction unless one of three exceptions applies).

                          III.   DISCUSSION

     The Anti-Injunction Act prohibits a federal court from

granting an injunction to stay proceedings in a state court

“except as expressly authorized by an Act of Congress, or where

necessary in aid of its jurisdiction, or to protect or effectuate

its judgments.”   28 U.S.C. § 2283.   These exceptions are narrowly

construed.    See Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 146

(1988); Atlantic Coast Line, 398 U.S. at 287.



                                  9
     The exception allowing an injunction to “protect or

effectuate” a federal court judgment is commonly referred to as

the relitigation exception.   It “was designed to permit a federal

court to prevent state litigation of an issue that previously was

presented to and decided by the federal court” and “is founded in

the well-recognized concepts of res judicata and collateral

estoppel.”   Choo, 486 U.S. at 147.    “[A]n essential prerequisite

for applying the relitigation exception is that the claims or

issues which the federal injunction insulates from litigation in

state proceedings actually have been decided by the federal

court.”   Id. at 148.   In order to decide whether the relitigation

exception applies in this case, this court must assess the

“precise state of the record” in the First Federal Action to

determine what was actually decided.     Id.

     [A] complainant must make a strong and unequivocal showing
     of relitigation of the same issue to avoid the bar of
     section 2283, and [i]f we err, all is not lost. A state
     court is as well qualified as a federal court to protect a
     litigant by the doctrines of res judicata and collateral
     estoppel.

Texas Employers’ Ins. Ass’n v. Jackson, 862 F.2d 491, 501 n.13

(5th Cir. 1988) (en banc) (internal quotation marks omitted).

     Both parties agree that res judicata is inapplicable to the

case before us.   Thus, only if collateral estoppel principles

apply is the district court’s injunction barring the Delaware

Action proper under the relitigation exception.    Although Texas

state law governed the First Federal Action, “federal law


                                 10
determines the judgment’s preclusive effect.”     Recoveredge L.P.

v. Pentecost, 44 F.3d 1284, 1290 & n.11 (5th Cir. 1995).

     Collateral estoppel “‘is limited to matters distinctly put

in issue, litigated, and determined in the former action.’”

Brister v. A.W.I., Inc., 946 F.2d 350, 354 (5th Cir. 1991)

(quoting Diplomat Elec., Inc. v. Westinghouse Elec. Supply Co.,

430 F.2d 38, 45 (5th Cir. 1970)).     This court has determined that

collateral estoppel encompasses three elements:       “(1) the issue

at stake must be identical to the one involved in the prior

action; (2) the issue must have been actually litigated in the

prior action; and (3) the determination of the issue in the prior

action must have been a necessary part of the judgment in that

earlier action.”   Recoveredge, 44 F.3d at 1290; see Southmark

Corp. v. Coopers & Lybrand (In re Southmark Corp.), 163 F.3d 925,

932 (5th Cir. 1999), petition for cert. filed, 67 U.S.L.W. 3643

(U.S. Apr. 12, 1999); Meza v. General Battery Corp., 908 F.2d

1262, 1273 (5th Cir. 1990).   Moreover, the legal standard used to

assess the issue must be the same in both proceedings.       See

Recoveredge, 44 F.3d at 1291.   However, the actual claims and the

subject matter of each suit may differ.     See id.    Finally,

“[u]nlike claim preclusion, the doctrine of issue preclusion may

not always require complete identity of the parties.”       Meza, 908

F.2d at 1273.

     Thus, the relevant questions for our determination are what

the district court in the First Federal Action actually decided,

                                 11
whether that issue is identical to the relevant issue in the

Delaware Action, and whether the issue formed a necessary part of

the judgment in the First Federal Action.4

     Plaintiffs argue that the district court in the First

Federal Action denied DSC a permanent injunction that would have

prevented the future transfer or disclosure of DSC’s trade

secrets on the ground that the future lost profits damages

awarded in the final judgment were adequate compensation for any

such future transfer or disclosure.   Plaintiffs contend that in

the Delaware Action DSC is seeking to relitigate whether it is

entitled to additional damages beyond those already recovered in

the First Federal Action.   Because the district court in the

First Federal Action decided that the damages awarded in that

suit compensated DSC fully, including for any harm stemming from

future transfers to third parties, according to plaintiffs

collateral estoppel bars the Delaware Action.     After a careful

review of the record, we agree with plaintiffs.

     A.   The Issue in the First Federal Action

     In its April 1996 post-verdict “Motion for Judgment,” DSC

argued that an injunction was necessary to prevent the disclosure

or transfer of DSC’s trade secrets “to any third party” because

     4
        Neither side raises an argument with respect to the
second element of collateral estoppel—namely, whether the issue
was “actually litigated” in the earlier action. Recoveredge, 44
F.3d at 1290. The fulfillment of this requirement obviously
depends on how the issue is defined. As we demonstrate below,
this element is not at issue in this lawsuit.

                                12
Next Level I “may attempt to cause the DSC Trade Secrets to pass

into the public domain by wrongfully disclosing them to third

parties, including without limitation . . . [Next Level I’s]

parent company, General Instrument Corporation (“GI”), or any

other entity owned in whole or in part by GI.”   This is exactly

what transpired in January 1998 when the business of Next Level I

was transferred to Next Level II.

     In its April 19, 1996 reply brief, DSC further explained its

request for a permanent injunction as follows:

     DSC suffered severe damages as a result of Defendants’
     deliberate illegal conduct for which DSC should be awarded
     monetary damages. These monetary damages were awarded to
     compensate DSC for only one type of damage—future lost
     profits. Unless this Court enjoins Defendants as requested
     in DSC’s Motion for Judgment, DSC will suffer further damage
     for which the damage award does not compensate DSC and for
     which the harm to DSC will be irreparable.

          DSC’s damages for Defendants’ misappropriation
     partially compensate DSC for the unfair advantage that
     Defendants have received by using DSC’s trade secrets.
     Because of this unfair advantage, [Next Level I] will get
     its product to market faster than it otherwise would have,
     allowing [Next Level I] to capture a greater market share
     than it otherwise would have and will cause DSC to suffer
     future lost profits. DSC may suffer further harm, however,
     unless this Court enjoins Defendants as requested by DSC.

     . . . .

     [T]here are two main purposes of an injunction: (1)
     preventing unjust enrichment of the defendant and (2)
     preventing further harm to the plaintiff.

     . . . .

          The damages awarded by the jury compensate DSC for the
     profits that DSC will lose as a result of [Next Level I’s]
     use of DSC’s trade secrets. Those damages in no way
     compensate DSC for the harm that would result if Defendants

                               13
     caused DSC’s trade secrets to enter into the public domain
     so that any of DSC’s competitors were free to use them. If
     Defendants are not enjoined as DSC requests,5 they could
     potentially destroy all value of DSC’s trade secrets through
     public disclosure and thereby allow more of DSC’s
     competitors to benefit from DSC’s technology.

          DSC requests an injunction preventing disclosure to
     avoid such irreparable harm. The requested relief comports
     with the second purpose of trade secret injunctions:
     preventing further harm to DSC. The requested relief would
     prevent [Next Level I] from destroying the value of DSC’s
     trade secrets through disclosure to others.

     As the above excerpts demonstrate, DSC premised its request

for injunctive relief on DSC’s belief that the damages already

awarded did not fully compensate it for the future harm that

would result from a transfer of the trade secrets.   The district

court nevertheless denied DSC’s request for a permanent

injunction to prevent the future disclosure or transfer of the

stolen trade secrets.   In its June 11, 1996 order, the district

court reasoned that DSC had already been “made whole” by the

damages award and stated that:

     Since the jury has found, and the Court has upheld the
     findings, that DSC has suffered future lost profits, DSC is
     not entitled to an injunction against the Defendants. . . .
     DSC premised a large portion of its damages claims on Next
     Level developing a FTTC/SDV system which competes with DSC’s
     SDV system. DSC has successfully recovered monetary damages
     for that future injury and has been “made whole” for those

     5
        The injunction DSC requested in its “Motion for Judgment”
consisted of “a permanent injunction preventing Eames, Keeler, or
[Next Level I] from disclosing or transferring to any third party
the six trade secrets identified at trial” and “an assignment to
DSC . . . of all patent applications.” Thus, the district court
was clearly aware that the relief DSC was seeking included an
injunction to prevent the future transfer or disclosure of DSC’s
trade secrets.

                                 14
     damages. An injunction which prevents Next Level from
     performing any act for which DSC has already been
     compensated would afford DSC a duplicative remedy.

The district court’s conclusion must be read in light of the

arguments presented to it by the parties.    See Atlantic Coast

Line, 398 U.S. at 292 (concluding that proper interpretation of

ambiguous passage can be reached “only when it is considered in

light of the arguments presented to the District Court”).

Because DSC requested an injunction to prevent the future

transfer or disclosure of its trade secrets and because the

request was premised on the inadequacy of the damages award to

compensate DSC for future transfers or disclosures, the district

court’s conclusion that an injunction would be a duplicative

remedy and that DSC had been “made whole” by the damages award

can only refer to this request.    Thus, it is clear that the

district court decided that the judgment already compensated DSC

for future transfers to third parties.

     This conclusion is confirmed by DSC’s later filings.      In

DSC’s expedited motion of June 13, 1996, DSC warned the district

court that without a permanent injunction Next Level I “will be

permitted to pay the Judgment and then disclose DSC’s trade

secrets to third parties and thereby inflict further damage upon

DSC for which it is not compensated by the Judgment.”    DSC

further argued that without an injunction

     Defendants are free to pay the Judgment and then disclose
     all of DSC’s trade secrets to third parties. Such disclosure
     would effectively destroy the value of DSC’s trade secrets

                                  15
     and might allow other competitors to use them in their
     products.

     . . . .

          Modifying the Judgment to include this limited
     permanent injunction would not be duplicative of any other
     relief the Judgment affords DSC or any other relief DSC
     sought in this action. Neither the damages awarded to DSC
     by the jury for the Defendants’ misappropriation of DSC’s
     trade secrets nor the damages awarded to DSC by the jury and
     by the Court for usurpation of corporate opportunity
     compensate DSC for the harm DSC will suffer if its trade
     secrets are disclosed to third parties by the Defendants.

          To avoid such irreparable harm, DSC requests a limited
     permanent injunction against disclosing or transferring
     DSC’s trade secrets. The requested relief would prevent
     Defendants from destroying the value of DSC’s trade secrets
     through disclosure to others and would impose no hardship on
     Defendants.

     After considering these arguments, the district court again

refused to grant DSC’s request for an injunction.    According to

the district court’s June 13, 1996 order, “DSC contends that

‘[Next Level I] should not be allowed to destroy the value of

DSC’s trade secrets after paying the Judgment.’    These claims

were resolved when the Court ruled upon DSC’s Motion for

Judgment.”     This indicates that the district court believed that

it previously had considered DSC’s claim that a transfer to third

parties would destroy the value of DSC’s trade secrets when, in

ruling on DSC’s “Motion for Judgment,” it denied DSC injunctive

relief on the ground that the judgment already compensated DSC

for that harm.     The district court further stated in its June

13, 1996 order:



                                  16
     DSC obtained monetary damages for the future damages arising
     from Defendants’ malicious usurpation of DSC’s corporate
     opportunity. As DSC’s own expert testified, these damages
     were predicated upon Defendants possessing and actively
     implementing DSC’s trade secrets. Having recovered monetary
     damages for Defendants’ future possession and use of these
     trade secrets, DSC now attempts to prevent Defendants from
     performing the very acts for which DSC has been “made
     whole.” The Court’s judgment in this case does not “vest[]
     ownership of DSC’s trade secrets in [Next Level I],” . . .
     and does not approve of the manner in which the trade
     secrets were acquired and are being used. The Court will
     not, however, award DSC a duplicate recovery when DSC has
     recovered the damages awarded by the judgment.

     Because this statement responds to DSC’s only request in its

June 13, 1996 expedited motion—the request for a “limited

permanent injunction against disclosing or transferring DSC’s

trade secrets”—it is clear that the district court decided that

Next Level I’s “future possession and use” of DSC’s trade

secrets, for which the district court found that the judgment

fully compensated DSC, permitted transfers to third parties.

     DSC next filed its July 3, 1996 “Emergency Motion for

Injunction Pending Appeal,” requesting an injunction for the

duration of the appellate process.   In this motion, DSC

recognized that the district court previously had found that the

judgment allowed Next Level I to use DSC’s trade secrets, stating

that “the Court has concluded (incorrectly in DSC’s view) that

the judgment gives DSC damages for ‘possession and use of DSC’s

trade secrets’” (citing the district court’s June 13, 1996

order).   DSC went on to insist, however, that the damages award

did not compensate it for the harm that would result if Next


                                17
Level I transferred DSC’s trade secrets to a third party: “The

damages awarded in the judgment, however, are for future lost

profits on SDV and Litespan sales, not for damages due to the

destruction in the value of DSC’s trade secrets if they are

disclosed or transferred to a third party.”

     The district court obviously disagreed with DSC’s assessment

of the scope of the judgment because, in its July 10, 1996 order,

it once again denied DSC’s request for an injunction pending

appeal, stating that “DSC’s claims of DSC’s entitlement to an

injunction as well as monetary future damages . . . have a low

probability of success upon appeal.”6

     6
       In light of DSC’s repeated requests for an injunction to
prevent the transfer or disclosure of its trade secrets, we
reject DSC’s argument that the district court denied its
requested injunction on the ground that DSC had been made whole
only for the future damages associated with Next Level I
developing an SDV system that competes with DSC’s system, instead
of on the ground that DSC had been compensated for any future
damages associated with the transfer of SDV technology to third
parties. This argument ignores completely the context of the
district court’s rulings, which arose solely in response to DSC’s
requests for an injunction to prevent transfer or disclosure of
its trade secrets. The district court’s finding that DSC had
been made whole must be read in light of these requests, and thus
DSC is incorrect that the district court “ruled only that DSC had
been ‘made whole’ with respect to [DSC’s] claim for lost
profits.”
      We also reject DSC’s alternate argument that the district
court considered only the potential harm that would result if
DSC’s trade secrets were disseminated to the public at large,
causing them to become completely valueless because many others
could then develop competing systems. The record makes clear
that the district court considered the harm that would flow from
any potential transfer. In any event, if the only potential harm
considered by the district court was the harm flowing from a
dissemination of the trade secrets to the public at large, and
yet the district court still repeatedly held that the judgment

                               18
     DSC pressed its arguments for an injunction further.     In its

motion for an injunction pending appeal filed in this court on

July 15, 1996, DSC argued that it was entitled to both monetary

damages and injunctive relief because monetary damages “in no way

compensate DSC for the harm that would result if [Next Level I]

caused DSC’s trade secrets to enter into the public domain so

that any of DSC’s other competitors were free to use them”

(emphasis omitted).   This court denied DSC’s motion for an

injunction pending appeal.

     In its appellate brief, DSC again argued that it was

entitled to a limited permanent injunction in addition to

monetary damages to prevent the transfer or disclosure of its

trade secrets:

     The trade secret damages would compensate DSC for its lost
     profits on SDV product sales due to the unfair competitive
     advantage enjoyed by Next Level because of its ability to
     use DSC’s trade secrets, but in no way would compensate DSC
     for the harm that would result if Defendants caused DSC’s
     trade secrets to enter into the public domain so that any of
     DSC’s other competitors were free to use them.

     . . . .

          If Defendants are not enjoined as DSC requests, they
     could potentially destroy all remaining value of DSC’s trade
     secrets through public disclosure, thereby allowing other
     competitors to benefit from DSC’s technology.




fully compensated DSC, then, a fortiori, the district court also
held that the judgment compensated DSC for the harm that would
flow from the transfer of DSC’s trade secrets to just one other
party.

                                19
(emphasis omitted).   DSC alternatively requested an injunction to

prevent Next Level I from using DSC’s trade secrets at all:      “A

trade secret use injunction would prevent Next Level from being

unjustly enriched by its use of the property it wrongfully took

from DSC.”

     This court rejected DSC’s arguments and affirmed the

district court’s refusal to grant either type of injunction.7     We

concluded that the district court “did not rely on clearly

erroneous factual findings or an erroneous conclusion of law.”

DSC Communications Corp., 107 F.3d at 328.    Thus, in denying DSC

both forms of injunctive relief, we, by necessity, passed on the

question of whether the district court had incorrectly concluded

that DSC was entitled to no further relief beyond the judgment

and concluded that the district court had not erred.8

     Based on the foregoing, it is clear that the district court

decided that DSC had been made whole by the damages award and

that future transfers would not entitle DSC to any relief in

addition to what it had already received.    Furthermore, this


     7
       Before this court, DSC had requested “either a limited
injunction in combination with monetary damages or a total
injunction prohibiting Next Level from using the trade secrets
the jury found it misappropriated.” DSC Communications Corp.,
107 F.3d at 328.
     8
        Thus, the requirement found in Hicks v. Quaker Oats Co.,
662 F.2d 1158, 1168 (5th Cir. Unit A Dec. 1981), “that if a
judgment is appealed, collateral estoppel only works as to those
issues specifically passed upon by the appellate court,” has been
satisfied.

                                20
court agreed that the district court had not made clearly

erroneous factual findings or erroneous conclusions of law, and

therefore affirmed the district court’s refusal to grant

permanent injunctive relief.   See id.

     B.   The Issue in the Delaware Action

     The issue in the First Federal Action—litigated vigorously

by DSC, decided by the district court, and affirmed by this

court—is the same as the issue that DSC seeks to litigate in

Delaware court, namely, DSC’s entitlement to additional relief

beyond the damages it recovered in the First Federal Action for

any transfer of DSC’s trade secrets occurring after the judgment

in the First Federal Action.   In its Delaware complaint, DSC

contends that it is entitled to recover damages for the transfer

of DSC’s trade secrets by General Instrument II to Next Level II.

The district court concluded, and this court found no error in

the conclusion, that the judgment in the First Federal Action

fully compensated DSC and that DSC was not entitled to relief

beyond that afforded by the judgment for the future transfer of

its trade secrets.

     C.   The Issue was Necessary to the Judgment

     The conclusion that DSC was already compensated fully by the

judgment and was not entitled to additional relief for future

transfers of its trade secrets was a necessary part of the

district court’s decision to deny DSC’s request to include


                                21
permanent injunctive relief as part of the final judgment.

Because the final judgment contained an interim injunction only,

it is clear that an integral part of the final judgment was the

district court’s denial of the request for permanent injunctive

relief.9   In order for the district court to conclude that DSC

was not entitled to a permanent injunction to prevent the

transfer of DSC’s trade secrets to third parties, it was

necessary for the district court to decide whether such an

injunction would constitute an improper double recovery.    The

district court’s conclusion that DSC was already fully

compensated by the judgment for future transfers to third parties

was thus necessary to its denial of the permanent injunction and

necessary to the judgment.   We therefore conclude that all the

requirements of collateral estoppel are met and that the Delaware

Action is barred.

     D.    DSC’s Arguments


     9
          We reject DSC’s argument that the denial of permanent
injunctive relief was not necessary to the district court’s final
judgment because the final judgment did not mention the denial of
permanent injunctive relief. DSC itself has previously
recognized that the final judgment did in fact deny it the
permanent injunctive relief that it had requested despite the
fact that the denial of injunctive relief did not appear in the
final judgment. DSC characterized the judgment in its July 3,
1996 “Emergency Motion for Injunction Pending Appeal” as follows:
“The judgment awards DSC’s damages only for the Defendants’
usurpation of a corporate opportunity that belonged to DSC.
Although the judgment incorporates the April 10, 1996 [temporary]
[i]njunction, it denies both permanent injunctive relief and
adequate protection of DSC’s trade secrets pending appeal.”
(Emphasis added).

                                22
     DSC argues strenuously that collateral estoppel does not bar

the Delaware Action.    First, DSC argues that the facts are

different in each case because, in Delaware, DSC has sued

different defendants, three of whom did not exist during the

First Federal Action, for a new and different tort that occurred

after the First Federal Action concluded.          Specifically, DSC

argues that the First Federal Action was premised on Eames,

Keeler, and Next Level I’s 1994 misappropriation of trade

secrets, and included a claim for lost profits damages only,

whereas the Delaware action is premised on the misappropriation

of trade secrets that occurred after the conclusion of the First

Federal Action when General Instrument II transferred DSC’s trade

secrets to Next Level II in January 1998 and states an entirely

different claim for relief, requesting only unjust enrichment and

disgorgement damages.

     These distinctions, while perhaps meaningful for purposes of

res judicata, are irrelevant to the application of collateral

estoppel.   It does not matter that the claims in each suit are

different, or that the subject matter of each suit is different,

so long as the issue litigated in each suit is identical.           See

Recoveredge, 44 F.3d at 1291 (“Collateral estoppel will apply in

a second proceeding that involves separate claims if the claims

involve the same issue . . . and the subject matter of the suits

may be different as long as the requirements for collateral

estoppel are met.”); RESTATEMENT (SECOND)   OF   JUDGMENTS § 27 (1982)

                                  23
(“When an issue of fact or law is actually litigated and

determined by a valid and final judgment, and the determination

is essential to the judgment, the determination is conclusive in

a subsequent action between the parties, whether on the same or a

different claim.”) (emphasis added).   Nor is it significant that

DSC is suing different defendants in Delaware than it sued in the

First Federal Action because there need not be complete identity

of parties for collateral estoppel to apply.   See Meza, 908 F.2d

at 1273; see also Royal Ins. Co. v. Quinn-L Capital Corp., 960

F.2d 1286, 1289, 1291, 1297 (5th Cir. 1992) (applying collateral

estoppel principles in upholding injunction under relitigation

exception even though parties enjoined in second action were not

identical to those in first action that was deemed to have

preclusive effect).10




     10
        In contrast to the factual circumstances of Royal
Insurance, in the case at bar, the party against whom the
district court has issued an injunction barring future
prosecution of a state court action, DSC, is in fact a party both
to the state court action to be enjoined and to the earlier
action, making the application of collateral estoppel less
troubling because DSC itself previously litigated the issue.
Moreover, despite the fact that the Delaware defendants were not
parties to the First Federal Action, DSC itself is seeking to use
the district court’s judgment in the First Federal Action to
collaterally estop the Delaware defendants from challenging the
fact that the trade secrets at issue were stolen from DSC. In
DSC’s complaint filed in Delaware court, DSC states: “The
judgment in the Texas case operates as collateral estoppel (issue
preclusion) not just as to the defendants in the Texas case, but
also their privies and successors in interest, including the
defendants in this action.”

                               24
     Second, DSC argues that collateral estoppel is inapplicable

because a different legal standard applies in Delaware:     The

Delaware Action will be governed by Delaware law, which includes

the Uniform Trade Secrets Act, whereas Texas law, which does not

include the Uniform Trade Secrets Act, governed the First Federal

Action.   However, that the Uniform Trade Secrets Act applies in

Delaware will not change the standard necessary to determine the

relevant issue in Delaware—whether DSC is entitled to relief for

the January 1998 transfer of its trade secrets in addition to the

damages it already recovered in the First Federal Action.

Although, as DSC points out, Delaware law allows recovery for

both actual loss and unjust enrichment, it only allows recovery

for “unjust enrichment . . . that is not taken into account in

computing actual loss.”   DEL. CODE ANN. tit. 6, § 2003.   Thus,

like Texas law, Delaware law does not allow plaintiffs to recover

twice for the same injury.   If the Delaware Action is allowed to

proceed, the Delaware court would have to decide whether the

damages DSC requested there are duplicative of the damages DSC

already recovered.   This is exactly the legal standard that

applied when the district court in the First Federal Action

decided that DSC’s requested injunctive relief would constitute

an improper double recovery.   Thus, the legal standard used by

the district court in the First Federal Action, in deciding that

DSC was not entitled to permanent injunctive relief to prevent

the transfer of DSC’s trade secrets to third parties, is the same

                                25
as the standard the Delaware court would have to use to determine

whether DSC is entitled to damages for the January 1998 transfer

of DSC’s trade secrets—namely, whether the earlier judgment

provides a complete recovery or whether the January 1998 transfer

would justify additional relief.     This determination will hinge

on an examination of the scope of the judgment, an issue already

decided conclusively by the district court in the First Federal

Action.

     DSC next argues that because, in the First Federal Action,

the issue was decided in the context of a request for injunctive

relief and because this court reviewed the district court’s

denial of a permanent injunction only for abuse of discretion,

the same legal standards will not apply in Delaware, where the

trial court will have to make the determination of whether the

unjust enrichment damages claimed by DSC are duplicative of the

damages awarded in the First Federal Action without reference to

the standards governing equitable relief or to an abuse of

discretion standard.   While it is true, as DSC states, that

“[o]ne might . . . easily fail to obtain an injunction and yet be

entitled later to recover damages at law,” Kelliher v. Stone &

Webster, Inc., 75 F.2d 331, 333 (5th Cir. 1935), it was not the

particular standard of review that prevented DSC from obtaining

its injunction, either here or in the district court, but the

district court’s conclusion, which we agreed was not in error,

that the judgment already compensated DSC for the harm it sought

                                26
to enjoin.    Although the district court decided the issue in the

First Federal Action in the context of a request for a permanent

injunction, the district court ultimately did not decide that DSC

was not entitled to an injunction because injunctions are drastic

remedies or because there were adequate legal remedies that DSC

could seek elsewhere.   Instead, as outlined above, the district

court denied the injunction specifically because DSC had already

obtained compensation for the harm DSC sought to enjoin.   This

court, in affirming the district court’s denial of injunctive

relief, concluded that the district court had not made clearly

erroneous factual findings or erroneous conclusions of law.    The

issue to be decided in Delaware will be the same, and thus it is

irrelevant that the issue was decided in the First Federal Action

in the context of a request for injunctive relief or that we

reviewed the district court’s conclusions for abuse of

discretion.

     Finally, to bolster its argument that collateral estoppel

does not bar the Delaware Action, DSC points to several cases in

which courts denied injunctive relief in one suit, but later

allowed a second suit for monetary damages when the conduct that

the plaintiffs sought to enjoin in the first suit actually

transpired.    See Lawlor v. National Screen Serv. Corp., 349 U.S.

322 (1955); Kelliher v. Stone & Webster, Inc., 75 F.2d 331 (5th

Cir. 1935); June v. George C. Peterson Co., 155 F.2d 963 (7th

Cir. 1946).   These cases are all distinguishable because not one

                                 27
involves a court’s denial of an injunction on the ground that the

movant had already been compensated for the conduct the movant

sought to enjoin.    These cases stand for the unremarkable

proposition that the failure to get an injunction in one suit

does not prevent an action for damages when the conduct initially

sought to be prevented happens.    None of the cases involves a

denial of an injunction on the ground that the damages awarded

already compensated the movant for the future harm that later

transpired.

     E.   Summary

     DSC pressed the district court in the First Federal Action

to decide DSC’s entitlement to relief for the future transfer of

its trade secrets.    We need not (and do not) here decide whether

the many judges who addressed that issue in the First Federal

Action reached the correct result.     It is enough to say that the

issue was conclusively determined in that action.    We conclude

that DSC is collaterally estopped from arguing in Delaware court

that the January 1998 transfer of DSC’s trade secrets from Next

Level I to Next Level II caused it additional injuries for which

it is entitled to seek monetary compensation.    Because it is

clear that collateral estoppel bars the relitigation of this

issue, it would be unjust to allow the Delaware Action to

proceed, which would force the parties to bear the costs of

litigation in Delaware.    Thus, we hold that the relitigation



                                  28
exception to the Anti-Injunction Act applies, and therefore

affirm the district court’s preliminary injunction.

                         IV.   CONCLUSION

     For the foregoing reasons, we AFFIRM the district court’s

grant of the requested preliminary injunction.




                                29
