Kokkonen v. Guardian Life Ins. Co. of America
511 U.S. 375 (1994)

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OCTOBER TERM, 1993

Syllabus

KOKKONEN v. GUARDIAN LIFE INSURANCE COMPANY OF AMERICA

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

No. 93-263. Argued March 1, 1994-Decided May 16, 1994

Following respondent's termination of an agency agreement between the parties, petitioner brought a state-court suit alleging state-law claims. Respondent removed the case to the Federal District Court on diversity grounds and filed state-law counterclaims. The parties subsequently arrived at a settlement agreement and, pursuant to Federal Rule of Civil Procedure 41(a)(1)(ii), executed a Stipulation and Order of Dismissal with Prejudice, which did not refer to the settlement agreement or reserve District Court jurisdiction to enforce it. Mter the District Judge signed the Stipulation and Order, a dispute arose as to petitioner's obligations under the settlement agreement. Respondent filed a motion to enforce the agreement, which petitioner opposed on the ground, inter alia, that the court lacked subject-matter jurisdiction. The District Court entered an enforcement order, asserting that it had "inherent power" to do so. The Court of Appeals agreed and affirmed.

Held: A federal district court, possessing only that power authorized by Constitution and statute, lacks jurisdiction over a claim for breach of a contract, part of the consideration for which was dismissal of an earlier federal suit. No federal statute makes that connection (if it constitutionally could) the basis for federal-court jurisdiction over the contract dispute. Moreover, the doctrine of ancillary jurisdiction does not apply, since the facts to be determined with regard to the alleged breach of contract are quite separate from the facts to be determined in the principal suit, and automatic jurisdiction over such contracts is in no way essential to the conduct of federal-court business. Julian v. Central Trust Co., 193 U. S. 93, 113-114, distinguished. If the parties wish to provide for the court's jurisdiction to enforce a dismissal-producing settlement agreement, they can seek to do so. In the event of dismissal pursuant to Federal Rule of Civil Procedure 41(a)(2), the court may, in its discretion, make the parties' compliance with the terms of the settlement agreement (or retention of jurisdiction over the agreement) part of its order. When dismissal occurs pursuant to Rule 41(a)(1)(ii), the district court is empowered (with the consent of the parties) to incorporate the settlement agreement in the order or retain jurisdiction over the settlement contract itself. Absent such action, however, enforce-


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376 KOKKONEN v. GUARDIAN LIFE INS. CO. OF AMERICA

ment of the settlement agreement is for state courts, unless there is some independent basis for federal jurisdiction. Pp. 377-382.

993 F.2d 883, reversed and remanded.

SCALIA, J., delivered the opinion for a unanimous Court.

Michael Reynolds Jencks argued the cause and filed briefs for petitioner.

Frank C. Morris, Jr., argued the cause for respondent.

With him on the brief were Thomas R. Bagby and Andrea R. Calem.*

JUSTICE SCALIA delivered the opinion of the Court.

After respondent Guardian Life Insurance Company 1 terminated petitioner's general agency agreement, petitioner brought suit in California Superior Court alleging various state-law claims. Respondent removed the case to the United States District Court for the Eastern District of California on the basis of diversity jurisdiction and filed state-law counterclaims. After closing arguments but before the District Judge instructed the jury, the parties arrived at an oral agreement settling all claims and counterclaims, the substance of which they recited, on the record, before the District Judge in chambers. In April 1992, pursuant to Federal Rule of Civil Procedure 41(a)(1)(ii), the parties executed a

* A brief of amici curiae urging reversal was filed for the State of Ohio et al. by Lee Fisher, Attorney General of Ohio, Richard A. Cordray, State Solicitor, and Simon B. Karas, Charles E. Cole, Attorney General of Alaska, John Payton, Corporation Counsel of the District of Columbia, Roland W Burris, Attorney General of Illinois, Robert T. Stephan, Attorney General of Kansas, Scott Harshbarger, Attorney General of Massachusetts, Joe Mazurek, Attorney General of Montana, Susan B. Loving, Attorney General of Oklahoma, Ernest D. Preate, Jr., Attorney General of Pennsylvania, and Stephen Rosenthal, Attorney General of Virginia.

1 Guardian Life is the sole respondent. The Guardian Insurance and Annuity Corporation and the Guardian Investor Services Corporation were listed as appellees below, but in fact they had been dismissed prior to trial.


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Full Text of Opinion

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