Owen Eqpt. & Erection Co. v. Kroger
437 U.S. 365 (1978)

Annotate this Case

U.S. Supreme Court

Owen Eqpt. & Erection Co. v. Kroger, 437 U.S. 365 (1978)

Owen Equipment & Erection Co. v. Kroger

No. 77-677

Argued April 18, 1978

Decided June 21, 1978

437 U.S. 365

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Syllabus

Respondent, a citizen of Iowa, sued for damages based on the wrongful death of her husband, who was electrocuted when the boom of a steel crane next to which he was walking came too close to a high-tension electric power line. The action was brought in federal court on the basis of diversity of citizenship against a Nebraska corporation (OPPD), whose negligent operation of the power line was alleged to have caused decedent's death. OPPD then filed a third-party complaint against petitioner company which owned and operated the crane, alleging that petitioner's negligence proximately caused the death. Respondent was thereafter granted leave to amend her complaint by naming petitioner, which she alleged to be a Nebraska corporation with its principal place of business in Nebraska, as an additional defendant. OPPD successfully moved for summary judgment, leaving petitioner as the sole defendant. Though, in its answer, petitioner admitted that it was a corporation organized and existing under the laws of Nebraska, during trial it was disclosed that petitioner's principal place of business was in Iowa. Since both parties were thus Iowa citizens, petitioner moved to dismiss on the basis of lack of federal jurisdiction. After the jury had returned a verdict. for respondent, the District Court denied petitioner's motion to dismiss. The Court of Appeals affirmed, holding that, under Mine Workers v. Gibbs,383 U. S. 715, the District Court had jurisdictional power, in its discretion, to adjudicate the claim, which arose from the "core of operative facts' giving rise to both [respondent's] claim against OPPD and OPPD's claim against [petitioner]," and that the District Court had properly exercised its discretion because petitioner had concealed its Iowa citizenship from respondent.

Held: The District Court had no power to entertain respondent's lawsuit against petitioner as a third-party defendant since diversity jurisdiction was lacking. Gibbs, supra, distinguished. Pp. 437 U. S. 370-377.

(a) A finding that federal and nonfederal claims arise from a "common nucleus of operative fact," the Gibbs test, does not suffice to establish that a federal court has power to hear nonfederal as well as

Page 437 U. S. 366

federal claims, since, though the constitutional power to adjudicate the nonfederal claim may exist, it does not follow that statutory authorization has been granted. Aldinger v. Howard,427 U. S. 1; Zahn v. International Paper Co.,414 U. S. 291. Pp. 437 U. S. 370-373.

(b) Here, the relevant statute, 28 U.S.C. § 1332(a)(1), which confers upon federal courts jurisdiction over civil actions where the amount in controversy exceeds $10,000 and is between citizens of different States, requires complete diversity of citizenship, and it is thus congressionally mandated that diversity jurisdiction is not available when any plaintiff is a citizen of the same State as any defendant, a situation that developed in this case when respondent amended her complaint. Pp. 437 U. S. 373-374.

(c) Under the Court of Appeals' ancillary jurisdiction theory, a plaintiff could defeat the statutory requirement of complete diversity simply by suing only those defendants of diverse citizenship and waiting for them to implead nondiverse defendants. Pp. 437 U. S. 374-375.

(d) In determining whether jurisdiction over a nonfederal claim exists, the context in which that claim is asserted is crucial. Here the nonfederal claim was simply not ancillary to the federal one, as respondent's claim against petitioner was entirely separate from her original claim against OPPD, and petitioner's liability to her did not depend at all upon whether or not OPPD was also liable. Moreover, the nonfederal claim here was asserted by the plaintiff, who voluntarily chose to sue upon a state law claim in federal court, whereas ancillary jurisdiction typically involves claims by a defending party haled into court against his will, or by another person whose rights might be irretrievably lost unless he could assert them in an ongoing action in federal court. Pp. 437 U. S. 375-376.

558 F.2d 417, reversed.

STEWART, J., delivered the opinion of the Court, in which BURGER, C.J., and MARSHALL, BLACKMUN, POWELL, REHNQUIST, and STEVENS, JJ., joined. WHITE, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 437 U. S. 377.

Page 437 U. S. 367

MR. JUSTICE STEWART delivered the opinion of the Court.

In an action in which federal jurisdiction is based on diversity of citizenship, may the plaintiff assert a claim against a third-party defendant when there is no independent basis for federal jurisdiction over that claim? The Court of Appeals for the Eighth Circuit held in this case that such a claim is within the ancillary jurisdiction of the federal courts. We granted certiorari, 434 U.S. 1008, because this decision conflicts with several recent decisions of other Courts of Appeals. [Footnote 1]

I

On January 18, 1972, James Kroger was electrocuted when the boom of a steel crane next to which he was walking came too close to a high tension electric power line. The respondent (his widow, who is the administratrix of his estate) filed a wrongful death action in the United States District Court for the District of Nebraska against the Omaha Public Power District (OPPD). Her complaint alleged that OPPD's negligent construction, maintenance, and operation of the power line had caused Kroger's death. Federal jurisdiction was based on diversity of citizenship, since the respondent was a citizen of Iowa and OPPD was a Nebraska corporation.

OPPD then filed a third-party complaint pursuant to Fed.Rule Civ.Proc. 14(a) [Footnote 2] against the petitioner, Owen Equipment

Page 437 U. S. 368

and Erection Co. (Owen), alleging that the crane was owned and operated by Owen, and that Owen's negligence had been the proximate cause of Kroger's death. [Footnote 3] OPPD later moved for summary judgment on the respondent's complaint against it. While this motion was pending, the respondent was granted leave to file an amended complaint naming Owen as an additional defendant. Thereafter, the District Court granted OPPD's motion for summary judgment in an unreported opinion. [Footnote 4] The case thus went to trial between the respondent and the petitioner alone.

The respondent's amended complaint alleged that Owen was "a Nebraska corporation with its principal place of business

Page 437 U. S. 369

in Nebraska." Owen's answer admitted that it was "a corporation organized and existing under the laws of the State of Nebraska," and denied every other allegation of the complaint. On the third day of trial, however, it was disclosed that the petitioner's principal place of business was in Iowa, not Nebraska, [Footnote 5] and that the petitioner and the respondent were thus both citizens of Iowa. [Footnote 6] The petitioner then moved to dismiss the complaint for lack of jurisdiction. The District Court reserved decision on the motion, and the jury thereafter returned a verdict in favor of the respondent. In an unreported opinion issued after the trial, the District Court denied the petitioner's motion to dismiss the complaint.

The judgment was affirmed on appeal. 558 F.2d 417. The Court of Appeals held that, under this Court's decision in Mine Workers v. Gibbs,383 U. S. 715, the District Court had jurisdictional power, in its discretion, to adjudicate the respondent's claim against the petitioner because that claim arose from the "core of operative facts' giving rise to both [respondent's] claim against OPPD and OPPD's claim against Owen." 558 F.2d at 424. It further held that the District Court had properly exercised its discretion in proceeding to decide the case even after summary judgment had been granted to OPPD, because the petitioner had concealed its Iowa citizenship from the respondent. Rehearing en banc was denied by an equally divided court. 558 F.2d 417.

Page 437 U. S. 370

II

It is undisputed that there was no independent basis of federal jurisdiction over the respondent's state law tort action against the petitioner, since both are citizens of Iowa. And although Fed.Rule Civ.Proc. 14(a) permits a plaintiff to assert a claim against a third-party defendant, seen 2, supra, it does not purport to say whether or not such a claim requires an independent basis of federal jurisdiction. Indeed, it could not determine that question, since it is axiomatic that the Federal Rules of Civil Procedure do not create or withdraw federal jurisdiction. [Footnote 7]

In affirming the District Court's judgment, the Court of Appeals relied upon the doctrine of ancillary jurisdiction, whose contours it believed were defined by this Court's holding in Mine Workers v. Gibbs, supra. The Gibbs case differed from this one in that it involved pendent jurisdiction, which concerns the resolution of a plaintiff's federal and state law claims against a single defendant in one action. By contrast, in this case, there was no claim based upon substantive federal law, but rather state law tort claims against two different defendants. Nonetheless, the Court of Appeals was correct in perceiving that Gibbs and this case are two species of the same generic problem: under what circumstances may a federal court hear and decide a state law claim arising between citizens of the same State? [Footnote 8] But we believe that the Court of Appeals failed to understand the scope of the doctrine of the Gibbs case.

The plaintiff in Gibbs alleged that the defendant union had violated the common law of Tennessee as well as the federal

Page 437 U. S. 371

prohibition of secondary boycotts. This Court held that, although the parties were not of diverse citizenship, the District Court properly entertained the state law claim as pendent to the federal claim. The crucial holding was stated as follows:

"Pendent jurisdiction, in the sense of judicial power, exists whenever there is a claim 'arising under [the] Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority . . . ,' U.S.Const., Art. III, § 2, and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional 'case.' . . . The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff's claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole."

383 U.S. at 383 U. S. 725 (emphasis in original). [Footnote 9]

It is apparent that Gibbs delineated the constitutional limits of federal judicial power. But even if it be assumed that the District Court in the present case had constitutional power to decide the respondent's lawsuit against the petitioner, [Footnote 10] it does not follow that the decision of the Court of Appeals

Page 437 U. S. 372

was correct. Constitutional power is merely the first hurdle that must be overcome in determining that a federal court has jurisdiction over a particular controversy. For the jurisdiction of the federal courts is limited not only by the provisions of Art. III of the Constitution, but also by Acts of Congress. Palmore v. United States,411 U. S. 389, 411 U. S. 401; Lockerty v. Phillips,319 U. S. 182, 319 U. S. 187; Kline v. Burke Constr. Co.,260 U. S. 226, 260 U. S. 234; Cary v. Curtis, 3 How. 236, 44 U. S. 245.

That statutory law as well as the Constitution may limit a federal court's jurisdiction over nonfederal claims [Footnote 11] is well illustrated by two recent decisions of this Court, Aldinger v. Howard,427 U. S. 1, and Zahn v. International Paper Co.,414 U. S. 291. In Aldinger, the Court held that a Federal District Court lacked jurisdiction over a state law claim against a county, even if that claim was alleged to be pendent to one against county officials under 42 U.S.C. § 1983. In Zahn, the Court held that, in a diversity class action under Fed.Rule Civ.Proc. 23(b)(3), the claim of each member of the plaintiff class must independently satisfy the minimum jurisdictional amount set by 28 U.S.C. § 1332(a), and rejected the argument that jurisdiction existed over those claims that involved $10,000 or less as ancillary to those that involved more. In each case, despite the fact that federal and nonfederal claims arose from a "common nucleus of operative fact," the Court held that the statute conferring jurisdiction over the federal claim did not allow the exercise of jurisdiction over the nonfederal claims. [Footnote 12]

Page 437 U. S. 373

The Aldinger and Zahn cases thus make clear that a finding that federal and nonfederal claims arise from a "common nucleus of operative fact," the test of Gibbs, does not end the inquiry into whether a federal court has power to hear the nonfederal claims along with the federal ones. Beyond this constitutional minimum, there must be an examination of the posture in which the nonfederal claim is asserted and of the specific statute that confers jurisdiction over the federal claim, in order to determine whether "Congress in [that statute] has . . . expressly or by implication negated" the exercise of jurisdiction over the particular nonfederal claim. Aldinger v. Howard, supra, at 427 U. S. 18.

III

The relevant statute in this case, 28 U.S.C. § 1332(a)(1), confers upon federal courts jurisdiction over "civil actions where the matter in controversy exceeds the sum or value of $10,000 . . . and is between . . . citizens of different States." This statute and its predecessors have consistently been held to require complete diversity of citizenship. [Footnote 13] That is, diversity jurisdiction does not exist unless each defendant is a citizen of a different State from each plaintiff. Over the years, Congress has repeatedly reenacted or amended the statute conferring diversity jurisdiction, leaving intact this rule of complete diversity. [Footnote 14] Whatever may have been the original

Page 437 U. S. 374

purposes of diversity of citizenship jurisdiction, [Footnote 15] this subsequent history clearly demonstrates a congressional mandate that diversity jurisdiction is not to be available when any plaintiff is a citizen of the same State as any defendant. Cf. Snyder v. Harris,394 U. S. 332, 394 U. S. 338-339. [Footnote 16]

Thus, it is clear that the respondent could not originally have brought suit in federal court naming Owen and OPPD as codefendants, since citizens of Iowa would have been on both sides of the litigation. Yet the identical lawsuit resulted when she amended her complaint. Complete diversity was destroyed just as surely as if she had sued Owen initially. In either situation, in the plain language of the statute, the "matter in controversy" could not be "between . . . citizens of different States."

It is a fundamental precept that federal courts are courts of limited jurisdiction. The limits upon federal jurisdiction, whether imposed by the Constitution or by Congress, must be neither disregarded nor evaded. Yet under the reasoning of the Court of Appeals in this case, a plaintiff could defeat the statutory requirement of complete diversity by the simple expedient of suing only those defendants who were of diverse citizenship and waiting for them to implead nondiverse defendants. [Footnote 17] If, as the Court of Appeals thought, a "common

Page 437 U. S. 375

nucleus of operative fact" were the only requirement for ancillary jurisdiction in a diversity case, there would be no principled reason why the respondent in this case could not have joined her cause of action against Owen in her original complaint as ancillary to her claim against OPPD. Congress' requirement of complete diversity would thus have been evaded completely.

It is true, as the Court of Appeal noted, that the exercise of ancillary jurisdiction over nonfederal claims has often been upheld in situations involving impleader, cross-claims or counterclaims. [Footnote 18] But, in determining whether jurisdiction

Page 437 U. S. 376

over a nonfederal claim exists, the context in which the nonfederal claim is asserted is crucial. See Aldinger v. Howard, 427 U.S. at 427 U. S. 14. And the claim here arises in a setting quite different from the kinds of nonfederal claims that have been viewed in other cases as falling within the ancillary jurisdiction of the federal courts.

First, the nonfederal claim in this case was simply not ancillary to the federal one in the same sense that, for example, the impleader by a defendant of a third-party defendant always is. A third-party complaint depends at least in part upon the resolution of the primary lawsuit. Seen 3, supra. Its relation to the original complaint is thus not mere factual similarity, but logical dependence. Cf. Moore v. New York Cotton Exchange,270 U. S. 593, 270 U. S. 610. The respondent's claim against the petitioner, however, was entirely separate from her original claim against OPPD, since the petitioner's liability to her depended not at all upon whether or not OPPD was also liable. Far from being an ancillary and dependent claim, it was a new and independent one.

Second, the nonfederal claim here was asserted by the plaintiff, who voluntarily chose to bring suit upon a state law claim in a federal court. By contrast, ancillary jurisdiction typically involves claims by a defending party haled into court against his will, or by another person whose rights might be irretrievably lost unless he could assert them in an ongoing action in a federal court. [Footnote 19] A plaintiff cannot complain if ancillary jurisdiction does not encompass all of his possible claims in a case such as this one, since it is he who has chosen the federal, rather than the state, forum, and must thus accept its limitations. "[T]he efficiency plaintiff seeks so avidly is available without question in the state courts." Kenrose Mfg. Co. v. Fred Whitaker Co., 512 F.2d 890, 894 (CA4). [Footnote 20]

Page 437 U. S. 377

It is not unreasonable to assume that, in generally requiring complete diversity, Congress did not intend to confine the jurisdiction of federal courts so inflexibly that they are unable to protect legal rights or effectively to resolve an entire, logically entwined lawsuit. Those practical needs are the basis of the doctrine of ancillary jurisdiction. But neither the convenience of litigants nor considerations of judicial economy can suffice to justify extension of the doctrine of ancillary jurisdiction to a plaintiff's cause of action against a citizen of the same State in a diversity case. Congress has established the basic rule that diversity jurisdiction exists under 28 U.S.C. § 1332 only when there is complete diversity of citizenship. "The policy of the statute calls for its strict construction." Healy v. Ratta,292 U. S. 263, 292 U. S. 270; Indianapolis v. Chase Nat. Bank,314 U. S. 63, 314 U. S. 76; Thomson v. Gaskill,315 U. S. 442, 315 U. S. 446; Snyder v. Harris, 394 U.S. at 394 U. S. 340. To allow the requirement of complete diversity to be circumvented as it was in this case would simply flout the congressional command. [Footnote 21]

Accordingly, the judgment of the Court of Appeals is reversed.

It is so ordered.

[Footnote 1]

Fawvor v. Texaco, Inc., 546 F.2d 636 (CA5); Saalfrank v. O'Daniel, 533 F.2d 325 (CA6); Parker v. W. W. Moore & Sons, 528 F.2d 764 (CA4); Joseph v. Chrysler Corp., 513 F.2d 626 (CA3), aff'g 61 F.R.D. 347 (WD Pa.); Kenrose Mfg. Co. v. Fred Whitaker Co., 512 F.2d 890 (CA4).

[Footnote 2]

Rule 14(a) provides in relevant part:

"At any time after commencement of the action a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to him for all or part of the plaintiff's claim against him. . . . The person served with the summons and third-party complaint, hereinafter called the third-party defendant, shall make his defenses to the third-party plaintiff's claim as provided in Rule 12 and his counterclaims against the third-party plaintiff and cross-claims against other third-party defendants as provided in Rule 13. The third-party defendant may assert against the plaintiff any defenses which the third-party plaintiff has to the plaintiff's claim. The third-party defendant may also assert any claim against the plaintiff arising out of the transaction or occurrence that is the subject matter of the plaintiff's claim against the third-party plaintiff. The plaintiff may assert any claim against the third-party defendant arising out of the transaction or occurrence that is the subject matter of the plaintiff's claim against the third-party plaintiff, and the third-party defendant thereupon shall assert his defenses as provided in Rule 12 and his counterclaims and cross-claims as provided in Rule 13."

[Footnote 3]

Under Rule 14(a), a third-party defendant may not be impleaded merely because he may be liable to the plaintiff. Seen 2, supra; see also Advisory Committee's Notes on 1946 Amendment to Fed.Rule Civ.Proc. 14, 28 U.S.C.App. pp. 7752-7753. While the third-party complaint in this case alleged merely that Owen's negligence caused Kroger's death, and the basis of Owen's alleged liability to OPPD is nowhere spelled out, OPPD evidently relied upon the state common law right of contribution among joint tortfeasors. See Dairyland Ins. Co. v. Mumert, 212 N.W.2d 436, 438 (Iowa); Best v. Yerkes, 247 Iowa 800, 77 N.W.2d 23. The petitioner has never challenged the propriety of the third-party complaint as such.

[Footnote 4]

Judgment was entered pursuant to Fed.Rule Civ.Proc. 54(b), and the Court of Appeals affirmed. Kroger v. Omaha Public Power Dist., 523 F.2d 161 (CA8).

[Footnote 5]

The problem apparently was one of geography. Although the Missouri River generally marks the boundary between Iowa and Nebraska, Carter Lake, Iowa, where the accident occurred and where Owen had its main office, lies west of the river, adjacent to Omaha, Neb. Apparently the river once avulsed at one of its bends, cutting Carter Lake off from the rest of Iowa.

[Footnote 6]

Title 28 U.S.C. § 1332(c) provides that,

"[f]or the purposes of [diversity jurisdiction] . . . , a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business."

[Footnote 7]

Fed.Rule Civ.Proc. 82; see Snyder v. Harris,394 U. S. 332; Sibbach v. Wilson & Co.,312 U. S. 1, 312 U. S. 10.

[Footnote 8]

No more than in Aldinger v. Howard,427 U. S. 1, is it necessary to determine here

"whether there are any 'principled' differences between pendent and ancillary jurisdiction; or, if there are, what effect Gibbs had on such differences."

Id. at 427 U. S. 13.

[Footnote 9]

The Court further noted that, even when such power exists, its exercise remains a matter of discretion based upon "considerations of judicial economy, convenience and fairness to litigants," 383 U.S. at 383 U. S. 726, and held that the District Court had not abused its discretion in retaining jurisdiction of the state law claim.

[Footnote 10]

Federal jurisdiction in Gibbs was based upon the existence of a question of federal law. The Court of Appeals in the present case believed that the "common nucleus of operative fact" test also determines the outer boundaries of constitutionally permissible federal jurisdiction when that jurisdiction is based upon diversity of citizenship. We may assume without deciding that the Court of Appeals was correct in this regard. See alson 13, infra.

[Footnote 11]

As used in this opinion, the term "nonfederal claim" means one as to which there is no independent basis for federal jurisdiction. Conversely, a "federal claim" means one as to which an independent basis for federal jurisdiction exists.

[Footnote 12]

In Monell v. New York City Dept. of Social Service,436 U. S. 658, we have overruled Monroe v. Pape,365 U. S. 167, insofar as it held that political subdivisions are never amenable to suit under 42 U.S.C. § 1983 -- the basis of the holding in Aldinger that 28 U.S.C. § 1343(3) does not allow pendent jurisdiction of a state law claim against a county. But Monell in no way qualifies the holding of Aldinger that the jurisdictional questions presented in a case such as this one are statutory, as well as constitutional, a point on which the dissenters in Aldinger agreed with the Court. See 427 U.S. at 427 U. S. 22 n. 3 (BRENNAN, J., joined by MARSHALL and BLACKMUN, JJ., dissenting).

[Footnote 13]

E.g., 7 U. S. Curtiss, 3 Cranch 267; Coal Co. v. Blatchford, 11 Wall. 172; Indianapolis v. Chase Nat. Bank,314 U. S. 63, 314 U. S. 69; American Fire & Cas. Co. v. Finn,341 U. S. 6, 341 U. S. 17. It is settled that complete diversity is not a constitutional requirement. State Farm Fire & Cas. Co. v. Tashire,386 U. S. 523, 386 U. S. 530-531.

[Footnote 14]

The various Acts are enumerated and described in 1 J. Moore, Federal Practice

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