Petition — Owen Equipment & Erection Co. v. Kroger
Supreme Court brief1978
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EL RODAK, JR., CLERK
In The 7
Siupreme Court of the United States
October Term, 1977
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OWEN EQUIPMENT AND ERECTION COMPANY,
a Nebraska Corporation,
Petitioner,
v
vs.
GERALDINE KROGER, Administratrix of the Estate of
JAMES D. KROGER, Deceased,
Respondent.
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PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
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Emm F. Soporo, Davi A. Jonson
and Ronap H. Srave of the
Law Offices of Emm F. Soporo, P.C.
200 Century Professional Plaza
7000 Spring Street
Omaha, Nebraska 68106
Attorneys for Petitwoner
COCKLE PRINTING CO., 1822 St. Mary’s Ave., Omaha
en
INDEX
Pages
Opinions Below 2
Jurisdiction 2
Questions Presented 2
Constitutional and Statutory Provisions Involved... 4
Statement of Facts 7
Reasons for Granting the Writ:
1. The decision of the United States Court of Ap-
peals for the Eighth Circuit directly conflicts with
the decision of the Fourth Circuit Court of Ap-
peals in the case of Kenrose Mfg. Co., Ine. v.
Fred Whitaker Co., Inc., 512 F.2d 890 (4th Cir.
1972). 14
2. The decision of the United States Court of Ap-
peals for the Eighth Circuit directly conflicts
with the pronouncement of this Court in United
Mine Workers of America v. Gibbs, 86 S. Ct. 1130,
383 U.S. 715 (1966). 25
3. The decision of the United States Court of Ap-
peals for the Eighth Circuit directly conflicts
with the pronouncement of this Court in Aldinger
v. Howard, 96 S. Ct. 2413 (1976). 32
4. The finding of fact made by the Eighth Circuit
Court of Appeals violates petitioner’s rights under
the Fifth Amendment to the United States Con-
stitution.
Conclusion 44
&
ii
INDEX—Continued ;
Pages
Appendix A—Opinion of Court of Appeals for the
8th Circuit _App. 1
Appendix B—Order Denying Petition for Rehearing
En Banc by Evenly Divided Court App. 37
Appendix C—Affidavits of Counsel for Petitioner App. 38
CASES CITED
Aldinger v. Howard, 96 8. Ct. 2413 (1976) . ....32, 33, 34
Andrews v. Central Surety Insurance Company,
295 F. Supp. 1223 (1969) 28
Basso v. Utah Power and Light Co., 495 F. 2d 906
(10th Cir. 1974) 42
Buresch v. American LaFrance, 290 F. Supp. 265
(W. D. Pa., 1968) 16, 17, 18
Di Frischai v. New York Central Railroad, 279
F. 2d 141 (3rd Cir. 1960) 43
Emmke v. DeSilva, 293 F. 17 (8th Cir. 1923) .—.-. 42
Fawvor v. Texaco, Inc., 546 F.2d 636 (5th Cir.
1977) 34, 35
Gibson v. First Federal Savings & Loan Associa-
tion of Detroit, 504 F.2d 826 (1974) 30
Hodge v. Mountain States Tel. & Tel. Co., 555
F.2d 254 (9th Cir. 1977) 31
Kenrose Manufacturing Co. v. Fred Whittaker
Co., 53 F. R. D. 491 (1971) a 26, 27
ili
CASES CITED—Continued
Pages
Kenrose Mfg. Co., Inc. v. Fred Whitaker Co., Inc.,
512 F. 2d 890 (4th Cir. 1972) ..14, 16, 17, 22, 31, 33, 34, 39
Kurtz v. State of Michigan, 548 F.2d 172 (6th
Cir. 1977) 30
Municipal Leasing System, Inc. v. Northampton
National Bank of Easton, 382 F. Supp. 968 (1974) .27, 28
Myer v. Lyford, 2 F.R. D. 507 (M.D. Pa., 1942) 17
Olson v. United States, 38 F.R.D. 489 (D. Neb.
1965) ... 14, 16, 17, 18, 20
Page v. Wright, 116 F. 2d 453 (7th Cir. 1940) 38
Palumbo v. Western Maryland Railway Company,
271 F.Supp. 361 (1967) 18
Rivera Copper & Brass v. Aetna Casualty Co.,
426 F. 2d 709, 12 A. L. R. Fed. 389 (5th Cir., 1970)... 15
Skylar v. Hays, 1 F. R. D. 594 (E. D. Pa, 1941) 17
Union Bank & Trust Co. v. St. Paul Fire & Marine
Insurance Co., 38 F. R. D. 46 (D. Neb., 1965) 14
United Mine Workers of America v. Gibbs, 383
U.S. 715 (1966) 3, 14, 25, 29, 30
United States v. Lushbough, 200 F. 2d 77 (8th
Cir. 1951) 20, 21, 23, 24
Welder v. Washington Temperance Association,
16 F. R. D. 18 (1954) 25
iv
TEXTS CITED ;
Pages
Fed. R. Civ P. 8(b) 4, 40
Fed. R. Civ. P. 12(h) (3) 5, 38
Fed. R. Civ. P. 14 5, 21, 25
28 U.S.C. § 1332(a) 4
CONSTITUTION CITED
Fifth Amendment to the United States Constitution 6, 35
In The
Supreme Court of the United States
October Term, 1977
OWEN EQUIPMENT AND ERECTION COMPANY,
a Nebraska Corporation,
Petitioner,
vs.
GERALDINE KROGER, Administratrix of the Estate of
JAMES D. KROGER, Deceased,
Respondent.
—_ *
— ae
PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
s*.
“~
The Petitioner, Owen Equipment and Erection Com-
pany, a Nebraska corporation, prays that a Writ of Cer-
tiorari issue to review the opinion and judgment of the
Eighth Cireuit Court of Appeals rendered in these pro-
ceedings on August 16, 1977.
2
OPINIONS BELOW
The opinion of the Court of Appeals, as yet unre-
ported appears at Appendix A, infra, App. pp. 1-36. The
Order denying Petition for Rehearing en banc by an evenly
divided court is unreported and appears at Appendix B,
infra, App. p. 37.
JURISDICTION
The opinion and judgment of the Court of Appeals was
filed June 21, 1977. See Appendix A, App. pp. 1-36, infra.
Subsequent thereto a Petition for Rehearing, Moiion to Ex-
punge Portions of Opinion and Suggestion for Rehearing
in Bane was timely filed on the 16th day of August, 1977.
The Petition for Rehearing in Banc was denied by an even-
ly divided court (Appendix B). This Petition for Certiorari
was filed less than ninety days from the date of the over-
ruling of said Petition for Rehearing. The jurisdiction
of this Court is invoked under 28 U.S.C. § 1254 (1).
Kroger, Respondent, alleged the amount in contro-
versy exceeded $10,000.00. The trial court, however, nev-
er acquired subject matter jurisdiction of this action. The
alleged basis of jurisdiction was diversity of citizenship.
However, the Respondent and Owen Equipment and Erec-
tion Company, Petitioner, were both citizens of Iowa at
the time of the filing of the complaint.
QUESTIONS PRESENTED
Geraldine Kroger, Administratrix of the Estate of
James D. Kroger, Deceased, brought an action for dam-
ages for the wrongful death of Respondent’s decedent. The
action was originally brought against the Omaha Public
Power District and Paxton-Vierling Steel Company. The
3
Omaha Public Power District then filed a third party
complaint against the Petitioner. The Respondent then
brought an amended third party complaint naming the
Petitioner as a defendant.
Paxton-Vierling Steel Company and the Omaha Pub-
lic Power District were both dismissed out of the suit
leaving as party plaintiff, Geraldine Kroger an Iowa citi-
zen and as party defendant, Owen Equipment and Erec-
tion Company, a Nebraska corporation having its prin- ‘
cipal place of business in Carter Lake, Iowa, therefore
being a citizen of Iowa.
The petitioner then filed a Motion to Dismiss or in
the Alternative for Directed Verdict claiming that the
Court did not have jurisdiction of the subject matter of
the action. But the trial court overruled the Motion to
Dismiss claiming the Court acquired power to hear the
whole matter under United Mine Workers v. Gibbs, 383
U. 8. 715 (1966). The United States Court of Appeals
for the Eighth Circuit affirmed that judgment. The ques-
tions thereby arising are:
1. Whether the Trial Court acquired power to de-
cide the claim of the respondent against Petitioner.
2. Whether the Trial Court could exercise its dis-
cretion to create jurisdiction where none, in fact, existed.
3. \Whether the United States Court of Appeals for
the Eighth Circuit erred in making findings of fact that
Petitioner intentionally concealed its principal place of
business without giving Petitioner and its counsel a hear-
ing on that issue in violation of the Fifth Amendment
of the United States Constitution. 7
4
4. Whether the Trial Court erred in holding that an
independent basis of jurisdiction need not exist between
a plaintiff and a third-party defendant in order for that
plaintiff to assert a claim against the third-party defend-
ant.
5. Whether the Trial Court erred in finding that
jurisdiction existed between Respondent and Petitioner
(citizens of the same state) in Federal Court where no
federal question was presented and the main cause of ac-
tion between Respondent and the defendant Omaha Public
Power District (citizens of different states) had been dis-
missed prior to trial at request of defendant Omaha Pub-
lic Power District.
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
28 U.S.C. $1332(a):
§ 1332. Diversity of citizenship; amount in controver-
sy; costs
(a) The district courts shall have original juris-
diction of all civil actions where the matter in contro-
versy exceeds the sum or value of $10,000, exclusive
of interest and costs, and is between—
(1) citizens of different States;
(2) citizens of a State, and foreign states or
citizens or subjects thereof; and
(3) citizens of different States and in which
foreign states or citizens or subjects thereof are addi-
tional parties.
Fed. R. Civ. P. 8(b):
(b) Defenses; Form of Denials. A party shall
state in short and plain terms his defenses to each
5
claim asserted and shall admit or deny the averments
upon which the adverse party relies. If he is without
knowledge or information sufficient to form a belief
as to the truth of an averment, he shall so state and
this has the effect of a denial. Denials shall fairly
meet the substance of the averments denied. When
a pleader intends in good faith to deny only a part
or a qualification of an averment, he shall specify so
much of it as is true and material and shall deny only
the remainder. Unless the pleader intends in good
faith to controvert all the averments of the preceding
pleading, he may make his denials as specific denials
of designated averments or paragraphs, or he may
generally deny all the averments except such desig-
nated averments or paragraphs as he expressly ad-
mits; but, when he does so intend to controvert all its
averments, including averments of the grounds upon
which the court’s jurisdiction depends, he may do so
+ ae denial subject to the obligations set forth
in Rule 11.
Fed. R. Civ. P. 12(h) (3):
_ (3) Whenever it appears by suggestion of the
parties or othewise that the court lacks jurisdiction
of the subject matter, the court shall dismiss the ac-
tion.
As amended Dec. 27, 1946, eff. March 19, 1948; Jan.
ay eff. July 1, 1963; Feb. 28, 1966, eff. July 1,
1966.
Fed. R. Civ. P. 14:
(a) When Defendant may Bring in Third Party.
At any time after commencement of the action a de-
fending party, as a third-party plaintiff, may cause
@ summons and complaint to be served upon a per-
son 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 third-party plaintiff need not obtain leave
to make the service if he files the third-party com-
plaint not later than 10 days after he serves his orig-
inal answer. Otherwise he must obtain leave on mo-
tion upon notice to all parties to the action. The
person served with the summons and third-party com-
plaint, 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 occur-
rence 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 defend-
ant aticing 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 defend-
ant thereupon shall assert his defenses as provided in
Rule 12 and his counterclaims and cross-claims as
provided in Rule 13. Any party may move to strike
the third-party claim, or for its severance or separate
trial. A third-party defendant may proceed under
this rule against any person not a party to the action
who is or may be liable to him for all or part of the
claim made in the action against the third-party de-
fendant. The third-party complaint, if within the
admiralty and maritime jurisdiction, may be in rem
against a vessel, cargo, or other property subject to
admiralty or maritime process in rem, in which case
references in this rule to the summons include the
warrant of arrest, and references to the third-party
plaintiff or defen ant include, where appropriate, the
claimant of the property arrested.
Fifth Amendment to the United States Constitution:
No peson shall be held to answer for a capital, or
otherwise infamous crime, nnless on a presentment or
indictment of a Grand Jury, except in cases arisi
in the land or naval forces, or in the Militia, cies
actual service in time of War or public danger; nor
shall any person be subject for the same offense to be
twice put in jeopardy of life or limb; nor shall be com-
pelled in any criminal case to be witness against him-
self, nor be deprived of life, liberty, or property, with-
out due process of law; nor shall private property be
taken for public use, without just compensation.
STATEMENT OF FACTS
Respondent’s decedent, James D. Kroger, was an
employee of Paxton & Vierling Steel (C. A. Appendix II,
pp. 16,17).* On the 18th day of January, 1972 at the
request of a supervisor employed by Paxton & Vierling
Steel, respondent’s decedent assisted other Paxton & Vier-
ling employees in moving a large steel air tank (C. A.
Appendix II, p. 16). The steel air tank was obstructing
construction activity at a construction site within the Pax-
ton & Vierling Building (C. A. Appendix II, p. 179).
Lloyd Feller, an executive vice-president of operations
of Paxton & Vierling Steel, gave the original order to
move the steel air tank (C. A. Appendix II, p. 179). That
order was passed down to Mr. Clem Rosemaric, respond-
ent’s decedent’s immediate supervisor (C. A. Appendix II,
pp. 179, 180).
*Reference is to Appendices used on appeal before U
States Court of Appeals for the 8th Circuit. en
A large Lorraine crane was being used to move the
tank. The crane was mounted on a truck which could
move about inside the Paxton & Vierling Building (C. A.
Appendix II, p. 3).
A steel cable ran from the boom of the crane to the
chains which were wrapped around the air tank (C. A.
Appendix II, p. 19). Respondent’s decedent was standing
on the Pround next to the steel tank assisting in steady-
ing the tank as the crane moved from the construction
site to the west end of the building (C. A. Appendix II,
p. 20). When the crane reached the west end of the buitd-
ing and could go no further, the boom was raised so that
the tank could be lowered (C. A. Appendix II, pp. 20, 21).
Respondent’s decedent was still standing near the air tank
(C. A. Appendix IT, p. 23). As the boom of the crane was
lifted, it came in close proximity to overhead power lines
and an are of electrical current jumped from the air tank
into the body of respondent’s decedent, causing his death
by electrocution (C. A. Appendix IT, p. 9).
On the 24th day of November, 1972, respondent filed
her complaint in the United States District Court for the
District of Nebraska, claiming damages sustained as a re-
sult of the wrongful death of James D. Kroger (C. A.
Appendix I, p. 4). The action was brought against Omaha
Public Power District and Paxton & Vierling Steel Com-
pany (C. A. Appendix I, p. 4). Both Paxton & Vierling
Steel and Omaha Public Power District filed motions to
dismiss (C. A. Appendix I, pp. 12,18). Paxton & Vier-
ling Steel Company was dismissed out because of a juris-
dictional defect. Omaha Public Power District then
brought a third-party complaint against Paxton & Vierling
Steel Company and Owen Construction Company, Ine.
claiming that both said third-party defendants were liable
to the Omaha Public Power Company for any sums which
respondent would recover from OPPD on her complaint
(C. A. Appendix I, p. 7).
The third-party plaintiff was then granted permission
to file an amended third-party complaint naming Owen
Equipment and Erection Company, a Nebraska corpora-
tion, as an additional third-party defendant and dismiss-
ing Owen Construction Company, Inc., an Iowa corpora.
tion, from the third-party complaint (C. A. Appendix I,
pp. 13, 14). -
A motion to dismiss was then filed on behalf of Pax-
ton & Vierling Steel Company claiming that the complaint
failed to state a claim upon which relief could be granted
(C. A. Appendix I, p. 18). Owen Equipment and Erection
Company filed its answer (C. A. Appendix I, p. 19). Re
spondent was then granted leave to file amended plead-
ings adding Owen Equipment and Erection Company as
a party defendant (C.A. Appendix I, p. 23). The
amended complaint was then filed on November 9, 1973,
naming Owen Equipment and Erection Company as a
party defendant (C. A. Appendix I, p. 23). Owen Equip-
ment and Erection Company then filed its answer to the
plaintiff’s amended complaint (C. A. Appendix I, p. 31).
The trial court then granted Omaha Public Power Dis-
trict’s motion for summary judgment and dismissed it
from the lawsuit (C. A. Appendix I, p. 39). The United
States Court of Appeals for the Eighth Circuit sustained
that order of the trial court (C. A. Appendix I, p. 42).
10
Petitioner also filed a motion for summary judgment
(C. A. Appendix I, p. 40). However, that motion was sub-
sequently overruled. Petitioner then filed an additional an-
swer to the plaintiff’s amended complaint alleging that the
United States District Court for the District of Nebraska
lacked jurisdiction of the subject matter of the action (C. A.
Appendix I, pp. 53, 54).
The basis for Petitioner’s claim that the United States
District Court for the District of Nebraska lacked juris-
diction of the subject matter of the action was that since
the Respondent and the Petitioner were both citizens of
the State of Iowa there was no diversity of citizenship
and thus no independent basis of jurisdiction. Petitioner
claimed that before a plaintiff could assert a claim
against a third-party defendant in the same action an
independent basis of federal jurisdiction was required.
Trial of this matter commenced on the 13th day of
January, 1976 (C. A. Appendix I, p. 51).
The jury returned a verdict in favor of the respond-
ent and against petitioner for $234,756.00 and that ver-
dict was reduced to judgment by the Clerk of the Court
(C. A. Appendix I, p. 84). The Court filed its memo-
randum and order overruling petitioner’s motion to dis-
miss for lack of subject matter jurisdiction (C. A. Ap-
pendix I, p. 87).
The trial court conceded in that memorandum (C. A.
Appendix I, p. 85) that:
“Plaintiff, an Iowa citizen, alleged that jurisdiction
was based upon 28 U.S.C. § 1332; that the defend-
ant is incorporated in the State of Nebraska and has
11
its principal place of business there. It is now un-
controverted, however, that defendant’s principal
place of business is in the State of Iowa. Hence, an
independent basis of jurisdiction does not exist.”
(C. A. Appendix I, pp. 85, 86). (Emphasis added.)
The trial court, however, went on to hold as follows:
“The law in Nebraska is that an independent
basis of jurisdiction need not exist in order for plain-
tiff to assert a claim against a third party defend-
ant. See Union Bank & Trust Co. v. St. Paul Fire
& Marine Ins. Co., 38 F.R.D. 486 (D. Neb. 1965);
Olson v. United States, 38 F. R. D. 489 (D. Neb. 1965).
Although this view was once the minority view, this
Court believes it is correct.
Properly read, United Mine Workers [v. Gibbs,
383 U. S. 715 (1966)], reemphasizes the funda-
mental principle that a federal court has jurisdic-
tional power to adjudicate the whole case, i. e., all
claims, state or federal, which derive from a com-
mon nucleus of operative facts. .. . [S]ince there
is jurisdictional power to hear the whole case, the
question is one of trial court discretion whether to
exercise that jurisdiction, considering all the fac-
tors of economy and convenience in the context of
federalism. 3 Moore’s Federal Practice § 14.27
[1], 14-569 to 14-570. “
This case is nevertheless novel, in that the third
party plaintiff was dismissed. However, having deter-
mined that ancillary jurisdiction exists, it is only
equitable that the Court now retain jurisdiction of this
‘pendant’ claim.’ Defendant waited until trial to pre-
1 The Court is aware that “pendent jurisdiction” refers to
state claims joined with federal claims and uses the
term here in its ordinary context.
12
sent its motion to dismiss. Should the Court grant
defendant’s motion, plaintiff would be left without a
cause of action, because the Iowa Statute of Limita-
tions has run. Despite the fact that defendant has
exclusive possession of the knowledge of the extent
of its own business in Iowa, it remained silent on this
issue until more than two years subsequent to the
filing of the amended complaint. No reason for the
delay has been offered and undoubtedly plaintiff was
lulled into believing defendant’s principal place of
business was in Nebraska. As a matter of sound pol-
icy and logic, ancillary jurisdiction existed once and,
under the facts presented in this case, this Court must
retain jurisdiction.”
(C. A., Appendix I, p. 86.)
Petitioner filed its motion for judgment notwith-
standing the verdict (C. A., Appendix I, p. 87) and mo-
tion for new tria! (C.A., Appendix I, p. 88), both of
which were denied by order of the Court (C. A., Appendix
I, p. 124). Petitioner then filed its notice of appeal, per-
fecting its appeal to the United States Court of Appeals
for the Eighth Cireuit (C. A., Appendix I, p. 125).
Among the issues presented on revier” to the United
States Court of Appeals for the Eighth Circuit were:
1. Whether the trial court erred in holding that an
independent basis of jurisdiction need not exist between
a plaintiff and a third-party defendant in order for the
plaintiff to assert a claim against that third-party defend-
ant?
2. Whether the trial court erred in finding that jur-
isdiction existed between respondent and petitioner (citi-
zens of the same state) in federal court where no federal
questions were presented and the main cause of action be-
tween respondent and the defendant OPPD (citizens of
13
different states) had been dismissed prior to trial at de-
fendant OPPD’s request.
The Appellate Court found:
“. . . Im the case before us, the District Court stood
squarely upon its discretionary powers in the prem-
ises, relying on Gibbs. Defendant Owen attacks the
applicability of this doctrine to the case at bar, as-
serting that the dismissal of the plaintiff’s claim
against OPPD before trial limits the discretion of the
District Court. We do not so conclude. It is but one
factor, among many others, to be considered.” (Ap-
pendix A, App. p. 21).
The Court went on to hold:
“But beyond that, however, there are other consid-
erations. By subtle and adroit pleading the defend-
ant has gained a substantial advantage. If the trial
goes well, it can keep the jurisdictional point hidden.
If the trial seems to be going badly or, indeed, if it
loses on the merits, it asserts that it can even then
challenge jurisdiction and successfully, so it argues,
since it insists that it is clear to all that jurisdiction
may be challenged by anyone at any time.
“But plaintiff overlooks the application of the Gibbs
doctrine to ancillary the litigation. The District
Court had judicial power over the case initially and
we find no abuse of its discretion in the continued
exercise of that power. But beyond that, whether
the court’s discretion was abused or not in its re-
tention of the cause, defendant’s conduct estops it
from asserting abusive discretion, not only that under
the teachings of Murphy v. Kodz, supra, but also
under the most elementary considerations of judicial
fairness. ‘Despite the fact that defendant has ex-
clusive possession of the knowledge of the extent of
its own business in Iowa, it remained silent on this
issue until more than two years subsequent to the fil-
14
ing of the amended complaint. No reason for the de-
lay has been offered. .. .’
The doctrine of the perpetual availability of juris-
dictional challenge furnishes no sanctuary to appel-
lant in the light of such conduct.” (Appendix A,
App. p. 22).
REASONS FOR GRANTING THE WRIT -
1. The decision of the United States Court of
Appeals for the Eighth Circuit directly conflicts
with the decision of the Fourth Circuit Court of
Appeals in the case of Kenrose Mfg. Co., Inc. v.
Fred Whitaker Co., Inc., 512 F. 2d 890 (4th Cir.
1972).
There is no dispute that had the respondent origi-
nally sued Owen Equipment & Erection Company, Inc.,
there would be no diversity of citizenship and thus, no
jurisdiction. However, the trial court held that under
“the law in Nebraska”, a plaintiff may assert a claim
against the third-party defendant without an independent
basis of jurisdiction. As authority for its holding, the
trial court cited cases of Union Bank & Trust Co. v. St.
Paul Fire & Marine Insurance Co., 38 F.R.D. 46 (D.
Neb., 1965); Olson v. United States, 38 F.R.D. 489 (D.
Neb., 1965); and United Mine Workers of America v.
Gibbs, 383 U. S. 715 (1966).
The first case cited hereinabove does not serve as au-
thority for the Trial Court’s holding, for in that case, a
claim was made by a third-party defendant against the
plaintiff and it was decided that no independent jurisdic-
tional base was required. This is, of course, substantially
different than the instant matter where a plaintiff is mak-
15
ing a claim against the third-party defendant. This dis-
tinction was pointed out in the case of Rivera Copper &
Brass v. Aetna Casualty Co., 426 F. 2d 709, 12 A. L. R. Fed.
389 (5th Cir., 1970). Therein, the Fifth Circuit Court of
Appeals stated:
_“A cursory review of the joinder situations to
which ancillary jurisdiction is applied reveals that
generally, it is made available to litigants in a de-
fensive posture, who would otherwise be prevented
or greatly burdened in adequately protecting their in-
terests. There is much to be said for allowing par-
ties who are involuntarily brought into federal court
to defendant against a claim or who must be allowed
to intervene in a federal action as a defendant to se-
cure their interests, to assert all their claims arising
out of the controversy in one proceeding and as this
is, or ought to be, one of the factors to be considered
_ determining the existence of ancillary jurisdic-
_ “Kchoing Professor Moore, Revere argues that
sjnce there must be an independent ground of juris-
diction to support the original plaintiff’s claim against
a third-party defendant, the same requirement must
be met by the third-party defendant in asserting a
counterclaim against the original plaintiff. Suffice it
to say that the two situations are the converse of
each other only superficially and that there are dif-
ferences which militate against identical treatment.
First of all, the plaintiff has the option of selecting
the forum where he believes he can most effectively
assert his claims, he has not been involuntarily
brought to a forum, faced with the prospect of de-
SEE dae eee Se oo: that
orum provides, or defending himself not at all. Since
the plaintiff could not initially join a non-diverse de-
so indirectly by way of a fortuitous impleader. More-
over, there is possibility, whether real or fanciful, or
16
collusion between the plaintiff and an overly coopera-
tive defendant impleading just the right third party.”
(Emphasis added. )
The differences are obvious. The Respondent here selected
the forum, Petitioner did not.
The trial court cited as further authority for its hold-
ing that the law in Nebraska is that an independent basis
of jurisdiction need not exist in order for the plaintiff
to assert a claim against the third-party defendant the
case of Olson v. United States, supra. In that case, Judge
Van Pelt chose to follow the minority rule and hold that
an independent basis of jurisdiction need not exist before
a plaintiff can assert a claim against a third-party de-
fendant. It must be emphasized, however, that this minor-
ity stand has- been taken by a very limited number of
courts that have addressed the issue. Other cases which
have commented on Olson have never followed this de-
cision, but have only criticized it.
In Kenrose Manufacturing Co. v. Fred Whitaker Co.,
53 F.R.D. 491 (1971), the United States District Court
for the Western District of Virginia stated:
“On the other hand, there are a few cases which
would not require the plaintiff to have an independent
basis of jurisdiction in order to amend his complaint
to include a third-party defendant with the same
citizenship. Buresch v. American LaFrance, 290 F.
Supp. 265 (W. D. Pa., 1968); Olson v. United States,
38 F.R.D. 489 (D. Neb. 1965). These cases regard
a plaintiff’s claim against a third-party defendant as
ancillary to the original action. In Buresch, supra,
Judge Gourley, Chief Judge of the Western District
of Pennsylvania, felt that to deny ancillary jurisdic-
tion in a case similar to the one at bar would defeat
the purpose of avoiding multiplicity of suits and
17
“Tt should be noted, however, that there is still
much disagreement on this point. For example, the
Buresch decision originated from the Western Dis-
trict of Pennsylvania in 1968. Subsequent to that
date two cases decided in that same district have re-
jected the view that no independent basis of jurisdic-
tion is required. Schwab v. Erie Lackawanna Rail-
road, 303 F. Supp. 1398 (W. D. Pa., 1969); Ayoub v.
Helm’s Express, Inc., 300 F. Supp. 473 (W.D. Pa.
rien (Judge Weber, District Judge, Decided Both
es 7?
The Kenrose Manufacturing Co. case was appealed to
the Court of Appeals for the Fourth Circuit. That ap
peal appears at 512 F. 2d 890 (4th Cir. 1972). That Court
cited four cases as following the minority view. Those
cases were: Buresch v. American LaFrance, 290 F. Supp.
265 (W. D. Pa., 1968) ; Olson v. United States, 38 F. R. D.
489 (D.C. Neb., 1965) ; Myer v. Lyford, 2 F.R.D. 507 (M.
D. Pa., 1942); and Skylar v. Hays, 1 F.R.D. 594 (E. D.
Pa., 1941). In discussing those cases that Court stated:
_ “The value of efficiency in the disposition of law-
suits by avoiding multiplicity may be readily con-
pomp ae rye not the only consideration a federal
co into account in assessing the pres-
ence or absence of jurisdiction. Especially is this
true where, as here, the efficiency plaintiff seeks to
18
avoid is available without question in the state courts.
The majority view, as outlined above, has its own
valid supporting reasons and we fail to discern any
movement away from the well-established rule, which
is directly contrary to appellant’s contention.
» “Tt is true that four lower court cases have fa-
vored appellant’s view. However, not only are these
in the minority among the decided cases, but they
have been far from convincing to other judges in the
very jurisdictions where they were rendered.”’
In a footnote discussing how other judges have re-
jected the minority view, the Court stated:
‘‘For example, subsequent to the Buresch case,
cited in note 9, two decisions issuing from the same
court specifically rejected Buresch. See Schwab v.
Erie Lackawanna R. R., 303 F. Supp. 1398 (W. D. Pa.
1969), and Ayoub v. Helm’s Express, Inc., 300 F.
Supp. 473 (W. D. Pa. 1969). In Ayoub, the Court
said :
‘¢¢There is no diversity of citizenship be-
tween the plaintiff and the present third-party
defendant against whom plaintiff wishes to assert
a direct claim. The great weight of authority
requires that there be diversity of citizenship be-
tween such parties. Although such a claim was
allowed to be asserted in Buresch * * * I do not
believe that this opinion represents the view of a
majority of the members of this District Court or
the view of the majority of the federal courts.’ ’’
In the case of Palumbo v. Western Maryland Railway
Company, 271 F. Supp. 361 (1967), Chief Judge Thomsen
of the United States District Court for the District of
Maryland, commented on Judge Van Pelt’s holding in
Olson v. United States in light of the comments of the
Advisory Committee on the Federal Rules of Civil Pro-
cedure and existing case law. Judge Thomsen stated:
19
“When Rule 14 was first adopt Professor
Moore ex pressed the opinion oe} independent
grounds of jurisdiction would be required to support
a plaintiff’s claim against a third-party defendant,
and most of the courts have taken that view. See
3A Moore’s Federal Practice, 2d ed., p. 24.27 (I) and
cases cited therein. In Friend v. Middle Atlantic
Transp. Co., 153 F. 2d 778 (2d Cir. 1946), cert. denied,
328 U. 8. 865, 66 S. Ct. 1370, 90 L. Ed. 1635, Judge
frome - we yeen. for the Second Circuit (as well as
experience as Chairman of the i
Committee on Rules) said: ee
* ‘May a defendant cause a third party to be
brought into a federal civil action under Federal
Rules of Civil Procedure, Rule 14, 28 U.S.C. A.
following section 7230, to answer, along with it,
to the plaintiff’s claim, where the plaintiff and
such party are citizens of the same state and fed-
eral jurisdiction does not otherwise appear? That
is the issue squarely presented here, and we
think it must be answered in the negative. Not-
withstanding the undoubted convenience of exten-
sive joinder in cases such as this, we must ob-
— Sey pan boundaries of federal juris-
on, e rules do not enlarge. F. R. 82.'
153 F. 2d at 779.
‘‘When Rule 14 was amended in 1948, the Advis-
ory Committee noted that ‘in any case where the
plaintiff could not have joined the third party origin-
ally because of jurisdictional limitations such as lack
of diversity of citizenship, the majority view is that
any attempt by the plaintiff to amend his complaint
and assert a claim against the impleaded third party
would be unavailing. The note referred to a number
of cases and commentators. Since the amendment,
the weight of authority has continued to require in-
dependent grounds of jurisdiction for such a claim.
Moore, op. cit., p. 14.17 (1).
**Judge Van Pelt assembled all the arguments to
the contrary in his opinion in Olson v. United States.
38 F.R.D. 489, 490 (D. Neb. 1965), and refuses to
follow the majority view. He noted that some courts
have expressed ‘the danger of collusion between the
original parties thereby enabling a plaintiff to assert
a claim against a co-citizen in the federal courts
through the use of a third-party practice.’ Fear of
collusion is not the principal argument supporting the
majority rule. Wherever the law provides for con-
tribut'-r among joint tortfeasors, or a defendant has
a possible claim for indemnity, the defendant will
ordinarily file a third-party complaint, giving plaintiff
the opportunity to assert a claim against the third-
party defendant.
‘*The principal reason for the majority rule was
tersely stated in McPherson v. Hoffman, 275 F. 2d
466 (6 Cir. 1960), as follows:
‘**Under the Federal Employers’ Liability
Act the plaintiff could bring his action against
the railroad in Federal Court without diversity
of citizenship. Section 56, Title 45, U.S.C. A. He
could not have sued the McPhersons m Federal
Court separately nor could he have joined them
with Chesapeake and Ohio because there was no
diversity of citizenship between him and the Mc-
Phersons, Section 1332, Title 28, U.S.C. What
he could not do directly could not be done for
him indirectly. The court did not have jurisdic-
tion to enter a judgment against third-parties de-
fendant in favor of the plaintiff Hoffman. Juris-
diction cannot be waived.’ 275 F. 2d at 470.”’
Moreover, in one of its prior decisions the 8th Circuit
chose to follow the majority rule and hold contrary to the
ruling of Judge Van Pelt in Olson v. United Siates, supra.
In the case of United States v. Lushbough, 200 F. 2d
77 (8th Cir. 1951), plaintiff Lushbough brought an action
21
under the Federal Tort Claims Act against the United
States for damages he sustained in an automobile collision.
The United States impleaded Hoffman as a third-party
defendant, stating he was liable over to the United States
for any judgment Lushbough might obtain against it. The
District Court found that Hoffman’s negligence was the
cause of the collision and entered a judgment in favor of
the plaintiff Lushbough against the United States and
against Hoffman in the sum of $50,000.00. The District
Court also awarded judgment against Hoffman on the
third-party complaint of the United States. Both the
United States and Hoffman appealed from the judgment
in favor of Lushbough. This Court in reversing the judg-
ment in favor of Lushbough against Hoffman stated:
“We think the judgment against Hoffman in favor
of Lushbough must also be reversed. Lushbough
brought no action against Hoffman, asked for no
judgment against him. Rule 14(A) of the Rules of
Civil Procedure, 28 U.S. C. provides that: ‘The plain-
tiff may assert any claim against the third-party de-
fendant arising out of the transaction or occurrence
that is the subject matter of the plaintiff’s claim
against the third-party plaintiff.’ Lushbough asserted
no claim against Hoffman. But, conceding for the
argument that such an assertion was a formality not
required under the Federal Rules of Civil Procedure,
Lushbough’s right to maintain a claim against Hoff-
man is prohibited by 28 U.S. C., Section 2676, which
provides :
***The judgment in an action under Section
1346(B) of this title shall constitute a complete
bar to any action by the claimant, by reason of
the same subject matter, against the employee of
the government whose act or omission gave rise
to the claim.’
22
“The District Court, having awarded a judgment in
favor of Lushbough in his action against the United
States, could not in the face of the explicit provisions
of the Act order judgment against Hoffman in favor
of Lushbough in the same action. Prechtl v. United
States, D. D. 84 F. Supp. 889, 890; Lauterbach v.
United States, D. C. 95 F. Supp. 479, 482. Nor is
ihere any showing in the evidence of the necessary
diversity of citizenship as between Lushbough and
Hoffman. Since the reversal of the judgment against
the United States carries with it the reversal of the
judgment for the United States against Hoffman, it
is unnecessary to consider Hoffman’s contention that
the United States could not implead Hoffman as a
third-party defendant in the action.” (Emphasis ad-
ded.) |
In Kenrose Manufacturing Co. v. Fred Whitaker Co.,
supra, the United States Court of Appeals for the Fourth
Cireuit set forth the majority view on the subject, stating:
“Rule 14 of the Federal Rules of Civil Procedure
governs third-party practice and it has indeed been
held under that rule that, where there is diversity as
between plaintiff and defendant, defendant may im-
lead a third party of the same citizenship as the
plaintiff. In such case, it may be said that ancillary
jurisdiction confers power upon the court over the
third-party action.
“Rule 14 also contains language permitting a
plaintiff to
Assert any claim against the third-party defend-
ant arising out of the transaction or occurrence
that is the subject matter of the plaintiff’s claim
against the third-party plaintiff.
There is, however, no indication in the rule whether
a basis of jurisdiction independent of the main action
23
must be alleged to support plaintiff’s claim against
the third-party defendant. Where jurisdiction does
not otherwise appear, mere permission, in the rules,
to assert a claim, does not itself confer jurisdiction
over that claim. By express provision the rules are
not to be read as a source of jurisdiction. See Rule
82. To illuminate this point, we must necessarily look
elsewhere.
“Many courts have considered whether an inde-
pendent basis of jurisdiction is necessary to support
a plaintiff’s action against a third-party defendant.
With impressive consistency the overwhelming major-
ity has held an independent jurisdictional basis to be
a prerequisite to the maintenance of such a claim.
See, e.g., Stemler v. Burke, 344 F. 2d 393, 395-396
(6th Cir. 1965); McPherson v. Hoffman, 275 F. 2d
466, 470 (6th Cir. 1960); Patton v. B & O R. R. Co.,
197 F. 2d 732, 743 (3rd Cir. 1952); United States v.
Lushbough, 200 F. 2d 717, 721-722 (8th Cir. 1952);
Friend v. Middle Atlantic Transportation Co., 153 F.
2d 778, 779-780 (2nd Cir.), cert. denied, 328 U. S. 865,
66 S. Ct. 1370, 90 L. Ed. 2d 1635 (1946); Corbi v.
United States, 298 F. Supp. 521 (D. C. Pa. 1969);
Palumbo v. W. Md. Ry. Co., 271 F. Supp. 361 (D. C.
Md. 1967).
“Several supporting reasons have been advanced
by courts holding the majority view on this question.
Among them are that: (1) plaintiff should not be al-
lowed, by an indirect route, to sue a co-citizen under
diversity jurisdiction when he is not permitted to
sue that party directly; (2) the majority rule prevents
collusion between plaintiff and defendant to obtain
federal jurisdiction over a party who would otherwise
not be within the court’s reach; (3) the rule which
generally does not require diversity as between plain-
tiff and third-party defendant proceeds on the as-
sumption that the plaintiff is seeking no relief against
the third-party defendant; and (4) federal dockets
are so overcrowded that the federal courts should
24
not reach out for state law based litigation.’”’ (Em-
phasis added.) ‘
Even Judge Van Pelt acknowledged the ruling of the
majority, yet for some reason failed to follow it. He
stated :
“A number of courts have been impressed with
the fact that by not requiring diversity, the plaintiff
could assert a claim against a party whom he could
not have sued directly in the federal courts without
independent jurisdictional grounds. David Crystal,
Inc. v. Cunard 8. 8. Co., 223 F. Supp. 273 (S. D. N. Y.
1963); LaChanee v. Service Trucking Co., 208 F.
Supp. 656 (D. Maryland 1962); Pasternack v. Dalo,
17 F. R. D. 420 (W. D. Pa. 1955) ; Welder v. Washing-
ton Temperance Ass’n, 16 F. R. D. 18 (D. Minn. 1954) ;
(Dictum) United States v. Lushbough, 200 F. 2d 717,
721 (8th Cir. 1952); Hoskie v. Prudential Ins. Co. of
America, 39 F. Supp. 305 (E. D. N. Y. 1941). The
same decisions express the danger of collusion be-
tween the original parties thereby enabling a plaintiff
to assert a claim against a co-citizen in the federal
courts through the use of third party practice.” (Em-
phasis added.)
The trial court in its Memorandum addressed to the
defendant’s motion to dismiss for lack of subject matter
jurisdiction (C. A. Appendix I, p. 85), stated that the rule
that an independent basis of jurisdiction need not exist in
order for the plaintiff to assert a claim against ‘ third
party was once a minority view, but that the trial court
believed it to be correct.
Petitioner emphasizes that this still clearly remains
the minority view. No court of appeals in any circuit
in the Federal Judicial System has ever followed the
minority view, and, in fact, those addressing the issue
have criticized and dismissed the minority view as being
25
contrary to the intent and purpose of the Federal Rules
and certainly, contrary to the comments of the Advisory
Committee concerning Rule 14.
Other district courts sitting in the Eighth Circuit
have chosen to follow the majority rule. For example,
in Welder v. Washington Temperance Association, 16
F. D. R. 18 (1954), the United States District Court for
the Division of Minnesota, Second Division, stated:
“The interpleading of the third-party defendant
brought in the plaintiff’s amended complaint places
residents of Minnesota on both sides of the case,
thereby destroying the basis of this court’s jurisdic-
tion.
“Rule 14 of the Federal Rules of Civil Procedure,
28 U.S.C. A., was intended to avoid delay and mul-
tiplicity of actions and should be liberally construed,
but not to the extent of permitting such construction
to extend the jurisdiction of the court. What plain-
tiff proposed to accomplish by his amended complaint
was in effect to substitute another cause of action for
that originally commenced by him. This he cannot
do.”’
2. The decision of the United States Court
of Appeals for the Eighth Circuit directly con-
flicts with the pronouncement of this Court in
United Mine Workers of America v. Gibbs, 86
S. Ct. 1130, 383 U. 8. 715 (1966).
But even if it be assumed that the minority view is
correct, the jurisdictional limit of a federal district court
had never been extended to that which it has in the pres-
ent action. The trial court acknowledged that:
‘‘This case is nevertheless novel, in that the third-
party plaintiff was dismissed.’’? (C. A. Appendix I,
p. 85).
The holding of the trial court in this matter is likewise
novel in finding that jurisdiction existed between citizens
of the same state in the Federal Court, where no federal
question was presented and the main cause of action be-
tween plaintiff and defendant, OPPD, had been dismissed
prior to trial at defendant’s request. Prior to the trial
court’s decision, jurisdiction has never been allowed to
exist in a similar situation. The trial court stated:
“However, having determined that ancillary jur-
isdiction exists, it is only equitable that the court now
retain jurisdiction of this ‘pendent’ claim.’’ (C. A.
Appendix I, p. 86).
In Kenrose Manufacturing Co. v. Fred Whittaker Co.,
53 F.R.D. 491 (1971), the plaintiff attempted to make
a claim against the third party defendant. The Court
stated :
\
“This court agrees with the majority view that
when plaintiff amends his eomplaint to assert a direct
claim against a third-party defendant of the same citi-
zenship as plaintiff, there no longer exists diversity
with regard to the main action. Furthermore, this
court feels that diversity existing between an original
plaintiff and a defendant is required to support any
claims based on ancillary jurisdiction. Since that
diversity was destroyed when the plaintiff amended
his complaint to assert a claim against a co-citizen
there no longer exists a basis for utilizing ancillary
jurisdiction.”
27
The Court in Kenrose then emphasized the distinction be-
tween the case which was before it and the cases follow-
ing the minority views stating:
“Furthermore, in the case at bar, the third-party
plaintiff has voluntarily moved to dismiss his third-
party complaint against Kilodyne. This court is of
the opinion that this factor distinguishes this case
from the cases following the minority view, in that,
in those cases the third-party complaint was not with-
drawn but remained in the action. By analogy, this
court finds that the principle laid down in the case of
State of Maryland to Use and Ben. of Wood v. Rob-
ison, 74 F’. Supp. 279 (D. Md., 1947), applies to the
case at bar. Robinson, supra, involved an action by
Virginia plaintiffs and the Maryland defendant, par-
ties to the main action, settled their dispute out of
court. Afterwards, the third-party defendants filed
a motion to dismiss the third-party complaint for lack
of diversity of jurisdiction. The Court, in granting
that motion, rejected the general proposition that once
Jurisdiction properly attaches, it will not ordinarily
be defeated by changes in situation. 7
“In the case at bar, this Court feels that the same
principles should apply. Since the third-party plain-
tiff has voluntarily moved for a dismissal of its claim
against the third-party defendant, and that motion
has been granted, the basis for allowing a direct com-
plaint by the plaintiffs against Kilodyne, without an
independent basis of jurisdiction, no longer exists.
That third-party complaint was the only foundation
upon which the plaintiff could, relying on the minor-
ity view, Support his claim that no independent basis
of jurisdiction is necessary. For the above reasons,
this Court feels that it is without jurisdiction to de-
cide the plaintiff's amended complaint against Kilo-
dyne, Inc.” (Emphasis added.)
In the case of Municipal Leasing System, Inc. v.
Northampton National Bank of Easton, 382 F. Supp. 968
(1974), the United States District Court for the Eastern
District of Pennsylvania, Judge VanArtsdalen stated:
‘‘Count IV ‘alleges liability and seeks relief pur-
suant to the ancillary jurisdiction’ of the court. In
plaintiff’s brief, it is conceded that this count, depend-
ing on ancillary jurisdiction is only maintainable if
there is some independent basis for federal jurisdic-
tion arising out of one or more of the other counts.
The count apparently charges that the defendant bank
improperly made charges against plaintiff’s bank ac-
count, refused to honor certain checks drawn against
the account and in other ways ‘mishandled’ plaintiff’s
bank account. This is purely a matter for state court
determination. There being no diversity jurisdictional
basis, and in view of the dismissal of all other counts,
this cause of action must likewise fall.”” (Emphasis
added. )
In the case of Andrews v. Central Surety Insurance
Company, 295 F. Supp. 1223 (1969), the United States
District Court for the District of South Carolina, Judge
Simons, stated:
“The ancillary jurisdiction of the federal courts
recognized by the foregoing authorities would not ex-
tend to a situation where the main suit had been fully
concluded and there were no assets actually or con-
structively within the court’s possession and control
as a result of the principal suit.: Such was the case
in Bounougias v. Peters, 369 F. 2d 247 (7th Cir. 1966).
In that case the original tort action filed and tried in
the federal district court in connection with Bounou-
gias’ injuries had been completely terminated and its
judgment satisfied and all funds distributed before
the attorney’s suit for his fee was commenced. The
court held under such circumstances that the district
court had no jurisdiction since ‘the district court had
no property connected with this litigation in its
custody or control.’” (Emphasis added.)
In denying Petitioner’s motion for dismissal on the
basis of lack of subject matter jurisdiction, the trial court
also relied on the case of United Mine Workers of Amer-
ica v. Gibbs, 86 S. Ct. 1130, 383 U. S. 715 (1966). The
trial court quoted from Moore’s Federal Practice, stating:
“Properly read, United Mine Workers [v. Gibbs, 383
U. S. 715 (1966) ], reemphasizes the fundamental prin-
ciple that a federal court has jurisdictional power to
adjudicate the whole case, i.e., all claims, state or
federal, which derive from a common nucleus of oper-
ative facts. . . . [S]ince there is jurisdictional power
to hear the whole case, the question is one of trial
court discretion whether to exercise that jurisdiction,
considering all the factors of economy and convenience
in the context of federalism. 3 Moore’s Federal Prac-
tice § 14.27[1], 14-569 to 14-570.”
However, in Gibbs this Court was dealing with pen-
dent jurisdiction and not with the question of ancillary
jurisdiction. But the approach of this Court in that case
is indeed pertinent to the plea of the petitioner in this
action. It is true that in Gibbs this Court stated that if
the federal and state claims “derive from a common nu-
cleus of operative fact”. If the plaintiff would ordinarily
be expected to try all of his cla’ms in one judicial pro-
ceeding; and, if the federal issues are substantial in
character, then there is power in the federal court to
hear all claims. The Gibbs opinion indicated, however,
that such power is not required to be exercised in every
ease even though it is found to be in existence. There-
fore, pendent jurisdiction is a “doctrine of discretion not
of plaintiff’s right.” This Court then stated: ©
“Its justification lies in considerations of judicial
economy, convenience, and fairness to litigants; if
30
these are not present, a federal court should hesifate
to exercise jurisdiction over state claims, even though
bound to apply State law to them, Erie R. Co. v.
Tompkins, 304 U. S. 64, 58 S. Ct. 817, 82 L. Ed. 1188.
Needless decisions of state law should be avoided both
as a matter of comity and to promote justice between
the parties, but procuring for them a surer-footed
reading of applicable law. Certainly, if the Federal
claims are dismissed before trial, even though not
insubstantial in a jurisdictional sense, the state claims
should be dismissed as well.’”’ (Emphasis Added.)
This statement has been consistently construed to limit
the discretion of the district court.
In the recent case of Gibson v. First Federal Savings
& Loan Association of Detroit, 504 F. 2d 826 (1974), the
United States Court of Appeals for the Sixth Circuit
rigidly applied this Supreme Court mandate. The Court
stated therein:
“In the absence of a substantial federal claim
related to asserted state claims in such a way that
the entire case may properly be deemed one ‘case’,
federal courts do not have jurisdiction over purely
state claims. United Mine Workers of America v.
Gibbs, 383 U. S. 715, 725, 86 S. Ct. 59, 15 L. Ed. 2d 58
(1966). Dismissal of all federal claims before trial
requires dismissal of state claims as well. Id. at 726,
86 S. Ct. 59. A state court is the proper forum for
adjudication of issues of general law, particularly
where cuestions of fiduciary relationships are in-
volved.” (Emphasis added.)
See also Kurtz v. State of Michigan, 548 F. 2d 172 (6th
Cir. 1977) wherein the Court stated: 7
“Since all portions of the claims in this cause of
action which arise under federal law have now been
dismissed, the state law claims are no longer pendant
31
and must be dismissed likewise. i i
Workers v. Gibbs . . .” ee
and, Hodge v. Mountain States Tel. & Tel. Co., 555 F. 2d
254 (9th Cir. 1977), wherein the Ninth Circuit Court
stated:
_ “When a district court dismisses all federal
claims prior to trial, it should not retain jurisdiction
over pendant state claims.”
The Eighth Circuit, however, claims dismissal of the
federal claims prior to trial “is but one factor, among
many others, to be considered” by the Court in exercising
its discretion to retain jurisdiction of state law claims.
If, as the Court in Kenrose stated, the dismissal prior
to trial of the Defendant with whom an independent basis
of jurisdiction existed does distinguish those cases follow-
ing the minority view from those adhering to the majority
view it is then of great import to note that the Defendant
OPPD was not dismissed from this action until October 1,
1975 (C. A. Appendix I, p. 42) after the statute of limita-
tions had run. Petitioner certainly could not control the
dismissal of the Defendant OPPD by the trial court and
could not ingist that OPPD be dismissed prior to the run-
ning of the statute of limitations, so that it could assert
its claim that no independent basis of jurisdiction existed
between respondent and petitioner based on.the distinction
of Kenrose.
=F €
39.
3. The decision of the United States Court
of Appeals for the Eighth Circuit directly conflicts
with the pronouncement of this Court in Aldinger
v. Howard, 96 8. Ct. 2413 (1976).
In Aldinger v. Howard, 96 S. Ct. 2413 (1976), this
Court addressed the question of whether a plaintiff who
asserted a claim against one defendant could implead a
different defendant on a state law claim where there is
no independent basis of federal jurisdiction, merely be-
cause the claim of the plaintiff against both defendants
“derived from a common nucleus of operative fact.”
In an opinion by Mr. Justice Renquist, this Court
stated : !
“The situation with respect to the impleading of
a new party, however, strikes us as being both fact-
ually and legally different from the situation facing
the Court in Gibbs and its predecessors. From a
purely factual point of view, it is one thing to auth-
orize two parties, already present in federal court by
virtue of a case over which the court has jurisdiction,
to litigate in addition to their federal claim a state
law claim over which there is no independent basis of
federal jurisdiction. But it is quite another thing to
permit a plaintiff, who has asserted a claim against
one defendant with respect to which there is federal
jurisdiction, to implead an entirely different defend-
ant on the basis of a state law claim over which there
is no independent basis of federal jurisdiction, simply
because his claim against the first defendant and his
claim against the second defendant ‘derive from a
common nucleus of operative fact.’ Ibid. True, the
same considerations of judicial economy would be
served insofar as plaintiff’s claims ‘are such that he
would ordinarily be expected to try them all in one
judicial proceeding...’ Ibid. But the addition of a
completely new party would run counter to the well-
established princig’e that federal courts, as opposed
to state trial courts of general jurisdiction, are courts
Ln ee RN Te a a ee ee
of limited jurisdiction marked out by Congress. We
think there is much sense in the observation of Judge
Sobeloff, writing for the Court of Appeals in Kenrose
Mfg. Co., Inc. v. Fred Whitaker Co., Inc., 512 F. 2d
890, 894 (C. A. 4, 1972):
** “The value of efficiency in the disposition of
lawsuits by avoiding multiplicity may be readily con-
ceded, but that is not the only consideration a federal
court should take into account in assessing the pres-
ence of absence of jurisdiction. Especially is this true
where as here the efficiency plaintiff seeks so avidly
is available without question in the state courts.’ ”
(Emphasis added.)
This Court quoted with approval the language of
Judge Sobeloff in Kenrose Mfg. Co., Inc. v. Fred Whit-
aker Co., Inc., supra. That case was cited extensively by
appellant in its original brief filed herein. This Court
emphasized that “the addition of a completely new party
would run counter to the well-established principle that
federal courts as opposed to state trial courts of general
jurisdiction, are courts of limited jurisdiction marked out
by thé Congress.” In the words of Judge Sobeloff in the
Kenrose Mfg. Co., Inc. case, “the efficiency the plaintiff
seeks so avidly is available without question in the state
courts.”
Aldinger holds that where jurisdiction is based not
on diversity of citizenship but on a federal statute other-
wise conferring jurisdiction over the subject matter, a
claim based on state law against an entirely different de-
fendant over which there is no independent basis of fed-
eral jurisdiction will only be allowed where the Court
satisfies itself (1) that Art. III of the United States
Constitution permits it and (2) that “Congress in the
statutes conferring jurisdiction has not expressly or by
implication negated its existence.” But jurisdiction does
34
not exist in a factual situation such as that which is
before the Court in the instant matter. It is stated in
Aldinger:
“From a purely factual point of view, it is one
thing to authorize two parties, already present in
federal court by virtue of a case over which the court
has jurisdiction, to litigate in addition to their fed-
eral claim a state law claim over which there is no
independent basis of federal jurisdiction. But it is
quite another thing to permit a plaintiff, who has
asserted a claim against one defendant with respect
to which there is federal jurisdiction, to implead an
entirely different defendant on the basis of the state
law claim over which there is no independent basis of
federal jurisdiction, simply because his claim against
the first defendant and his claim against the second
defendant ‘derived from a common nucleus of opera-
tive fact.’”
This Court then emphasized:
‘“‘That the addition of a completely new party
would run counter to the well-established | principle
that federal courts, as opposed to state trial courts
of general jurisdiction, are courts of limited juris-
diction marked out by Congress.”’
This is especially so where the plaintiff may seek
his remedy in the state court. In the instant matter,
respondent’s remedy was available in the state court.
There was no jurisdiction.
- In the ease of Fawvor v. Texaco, Inc., 546 F. 2d 636
(5th Cir. 1977) the Fifth Cireuit Court of Appeals con-
strued the case of Aldinger v. Howard, supra. Relying on
that decision plus the decision of the Fourth Circuit in
Kenrose Manufacturing Company, Inc. v. Fred Whitaker
Co., Inc., supra, the court stated:
35
“The authorities and cases cited above convince
this Court that an independent ground of jurisdiction
is necessary in order to support plaintiff’s claim
against the third-party defendant. No questions of
federal law are involved in either the original action
or in plaintiff’s action against the third-party defend-
ant. The basis of jurisdiction in the original com-
plaint is diversity, but no diversity exists between the
plaintiff and the third-party defendant. Neither is
there any other basis for the federal court’s asser-
tion of jurisdiction over plaintiff’s direct claim against
the third-party defendant. This is not a situation
where the same plaintiff and defendant seek to join
a state claim with a federal claim. Although it is
true that the defendant-third-party plaintiff has al-
ready brought in the third-party defendant, the de-
fendant-third-party plaintiff had no choice as to for-
um, and neither did the third-party defendant. Not
only did plaintiff have its choice of forum, but in fact
it could and did file the same action in state court.
The Constitution, statutes, rules of procedure, judicial
precedent and public policy dictate that this Court not
broaden the jurisdiction of the federal courts any
more than that clearly permitted by law. Therefore,
this Court concludes that an independent basis of jur-
isdiction is necessary for a plaintiff in a diversity
action to assert a non-federal claim against a non-
diverse third-party defendant.”
The decision of the Eighth Circuit in the instant mat-
ter most certainly conflicts with this decision of the Fifth~
Cireuit in Fawvor v. Texaco, Inc., supra.
4. The finding of fact made by the Eighth
Circuit Court of Appeals violates petitioner's
rights under the Fifth Amendment to the United
States Constitution.
Petitioner respectfully submits that the United States
Court of Appeals for the Eighth Circuit in its: opinion
36
filed June 21, 1977, made findings of fact which are not
supported by the record on appeal. The court misappre-
hended several points of law which are in direct conflict
with the decisions of other circuits and decisions of this
Court.
A finding was made concerning the conduct of peti-
tioner when that issue was never before the trial court.
The appellate court so concluded without giving petitioner
an opportunity to introduce evidence at a properly con-
ducted hearing, in violation of the due process clause of
the 5th Amendment of the United States Constitution.
The court’s opinion unequivocally claims petitioner
has perpetrated acts of fraud, not only upon respondent
but upon the Federal judicial system.
It is one thing for the trial court to assume jurisdic-
tion where none in fact exists, yet it is still another for
the Eighth Cireuit to justify its holding by claiming fraud
on the part of the petitioner. The issue of the conceal-
ment of the citizenship of the petitioner never matured
until oral argument was had before the Eighth Circuit.
Yet, a finding was made on appeal that petitioner con-
cealed the issue of diversity of citizenship until the statute
of limitations had run so as to gain “a substantial ad-
vantage” over respondent. The factual findings, however,
were not merely limited to a determination of conceal-
ment. The court elected to publish what it contended to
be the strategy underlying this fictional tactic of conceal-
ment, without ever having had the advantage of evidence
concerning the same.
“By subtle and adroit pleading the defendant has
gained a substantial advantage. If the trial goes
37
well, it can keep the jurisdictional point hidden. If
the trial seems to be going badly, or, indeed if it loses
on the merits, it asserts that it can even then chal-
lenge jurisdiction and successfully, so it argues, since
it insists it is clear-to all that jurisdiction may be
challenged by anyone at any time.” (Court’s Opinion,
Page 24). :
Now petitioner is not only expected to bear the loss,
but must wear the stain of indignity ihherent with allega-
tions and findings of“underhanded, unethical conduct.
Petitioner takes exception to the findings of the
Eighth Cireuit on the issue of concealment and the mo-
tives therefor, when no hearing has been had. The evi-
dence in the record sustained no finding other than that
petitioner was remiss in not raising the jurisdictional is-
sue at an earlier stage of the proceedings.
The only issue before the trial: court was that of
whether pendant or ancillary jurisdiction existed. Re-
spondent’s counsel commented on the lateness of the de-
fendant’s claim of no diversity of citizenship (C. A. Ap-
pendix II, pp. 156, 157).
Defendant’s attorney countered that argument and
the court agreed. The colloquy between the court and
counsel was as follows:
“Mr. Johnson: Also in regard to his initial com-
ment about our lateness in raising this, I would just
say this—
The Court: That can be raised at any time.
Mr. Johnson: That is right. This is not an equit-
able case.
The Court: That has been the rule since time
began.
"be
38
(Page 207) Mr..Johnson: As to laches, estoppel,
or waiver, the Court either has it or it doesn’t.
The Court: The only thing that concerns me is
this pendant or ancillary question. . . .” (C.A. Ap-
pendix II, pp. 159, 160).
If the trial court had indicated during ‘the trial that
concealment was an issue, Petitioner could have offered
evidence in support of its innocence. But, the trial court
emphasized that the only issue was the existence of pend-
ant or ancillary jurisdiction.
The effect of the Eighth Circuit’s finding is that a
Federal District Court may now acquire subject matter
jurisdiction over a cause of action where there is no
diversity of citizenship between the parties by the mere
running of the statute of limitations. The further effect
of the holding is that a defendant may never raise the de-
fense of lack of subject matter jurisdiction after the stat-
ute of limitations has run and any defendant that does
so is guilty of concealment and unethical conduct.
Rule 12 (h) (3) provides as follows:
“Whenever it appears by suggestion of the parties
or otherwise that the court lacks jurisdiction of the
subject matter, the court shall dismiss the action.”
That rules emphasizes that a subject matter jurisdiction
defect requires dismissal whenever that defect becomes
apparent, not merely prior to the running of the statutes
of limitations on the plaintiff’s claim.
In the case of Page v. Wright, 116 F. 2d 453 (7th
Cir. 1940), the Seventh Circuit stated:
“ . . (Jurisdiction) cannot be conferred by agree-
ment, consent or collusion of the parties, whether con-
tained in their pleadings or otherwise, and a party
cannot be precluded from raising the question by any
form of laches, waiver or estoppel. . . . The answer
of the defendant conceding jurisdiction amounted to
no more than consent, and as seen, jurisdiction can-
not be thus conferred irrespective of whether the con-
sent was the result of an honest mistake or other-
wise.
In the initial trial of Kenrose Manufacturing Co. v.
Fred Whittaker Co., found at 53 F. RB. D. 491 (1971), the
trial court stated:
“The plaintiff further contends that the third-
party defendant has waived his right to raise this
question of jurisdiction since he answered the amend-
ed complaint without challenging the lack of diversity
jurisdiction. In support of this contention the plain-
tiffs rely on Rule 12 (h) of the Federal Rules of Civil
Procedure. The plaintiffs’ contention is without
merit. Lack of diversity of citizenship of the parties
is a lack of the federal court’s subject matter juris-
diction. The third-party defendant’s motion to dis-
miss falls therefore within Rule 12 (b) (1) of the Fed-
eral Rules. A Rule 12(b) (1) motion to dismiss
raises a question of the federal court’s subject mat-
ter jurisdiction and is most typically used, as in this
case, when there is no diversity of citizenship. A
_motion attacking the court’s subject matter jurisdic-
tion may be made at any time by either party or by
the court sua sponte. If the court lacks subject mat-
ter jurisdiction, it lacks the power to hear the case.
5 Wright & Miller, Federal Practice and Procedure,
§ 1350 (1969). While it is true that Rule 12 (h) would
treat a motion to dismiss for lack of jurisdiction
over the person as waived if not timely made, such
is not the case when the court’s subject matter juris-
diction is challenged.” (Emphasis added.)
The amended complaint of respondent against the
petitioner was filed November 9, 1973 (C. A. Appendix I,
40
p. 23), approximately two months prior to the running of
the statute of limitations on January 18, 1974. In ‘its
answer to amended complaint filed November 27, 1973,
petitioner admitted that Owen Equipment and Erection
Company was a corporation organized and existing under
the laws of the State of Nebraska and denied each and
every other allegation in the Respondent’s complaint.
The Eighth Circuit found that the petitioner’s answer
did not comply with the terms of Rule 8 (b). Petitioner
emphatically claims that its answer conformed in all re-
spects to the requirements of this rule. It admitted that
Owen Equipment and Erection was a corporation organ-
ized and existing under the laws of the State of Nebraska
and denied all other al’egations. Rule 8(b) specifically
provides :
“ .. the pleader ... may generally deny all the
averments except such averments or paragraphs as
he expressly admits,. . .”
Less than two months after petitioner filed its an-
swer to the amended complaint, the statute of limita-
tions ran. No further action on the file occurred until
May 23, 1974 when a hearing on OPPD’s motion for sum-
mary judgment was had before Judge Denney (C. A. Ap-
pendix I, p. 31). The statute of limitations had already
run more than five months prior to that date. The issue
of the lack of subject matter jurisdiction of the court was
not raised by petitioner until its motion for dismissal filed
January 15, 1976, two days after trial had commenced
(C. A. Appendix I, p. 55).
If petitioner were intentionally “sandbagging” the
court, why then didn’t petitioner wait until the day after
==
41
the statute of ‘limitations had run on January 19, 1974
to raise the issue of lack of subject matter jurisdiction,
rather than waiting until the second day of trial to raise
the issue? Why wouldn’t the issue of lack of diversity of
citizenship have been raised in the answer which this
defendant filed January 13, 1976 (C. A. Appendix I, p.
49)?
The only reason this issue was not raised at an
earlier point in the proceedings was that counsel failed
to recognize that as an issue. During trial appellant’s
corporate counsel, Robert Becker of the law firm of
Swarr, May, Smith & Andersen, advised Attorney David
A. Johnson who was trying this case on behalf of Owen
Equipment and Erection Company that Owen was a Ne-
braska corporation, but that its principal place of business
was in lowa, and that there was no subject matter juris-
diction. Shortly thereafter, a motion to dismiss was filed
on hehalf of Owen Equipment and Erection Company.
This is the first time this matter was given any con-
sideration by petitioner. (See affidavits of corporate
and trial counsel from petition for rehearing in Appendix
C, App. pp. 38-39.) .
Likewise, it is obvious that the matter was never
considered to be an issue by counsel for respondent who
took at least four pre-trial depositions in the corporate
office of defendant in Carter Lake, Iowa. Two of these
depositions were taken of corporate officers.
But it is beyond the understanding of petitioner how
the issue of concealment could even come before the 8th
Cireuit. The rule in the Eighth Circuit as well as other
circuits throughout the nation has unanimously been that
42
there is @ presumption against the existence of Federal
jurisdiction, and thus the party involving the Federal
court’s jurisdiction bears the burden of proof as to its
existence. See Basso v. Utah Power and Light Co., 495
Fed. 2d 906 (10th Cir. 1974); Emmke v. DeSilva, 293 Fed.
17 (8th Cir. 1923).
The burden rested on the respondent to overcome
the presumption. Respondent discovered as early as June
3, 1974 that the principal place of business of Petitioner
was Carter Lake, Iowa. On that date at 1:30 P. M. re-
spondent’s counsel took the deposition of the President of
Petitioner in its office of Owen in Carter Lake, Iowa (C. A.
Appendix II, p. 92). During that deposition the following
questions were asked of Mr. Owen by respondent’s counsel:
**Q. And would you tell me where the headquarters of
Owen Equipment and Erection Company is?
A. Here, same headquarters.
Q. Same headquarters.
A. Webs cs
Q
I have the impression in my mind’s eye, and I
don’t know, that you have the headquarters at the
same place and you have the same officers and
it seems to be operated out of the same place. Is
one company just the same as the other?” (C. A.
Appendix II, p. 95).
On the 24th day of November, 1972 respondent filed
her complaint wherein she alleged under paragraph 5 as
follows :
“That on January 18, 1972, plaintiff’s decedent was
employed working in the capacity of a machinist for
the defendant, Paxton and Vierling Steel Company
at its place of business in Carter Lake, Iowa. . . .”
(Emphasis added.) (C. A. Appendix I, p. 4).
So on the 3rd day of June, 1974, respondent knew that it
could not go forward with its burden of proving subject
matter jurisdiction. However, the Eighth Circuit chose
to believe that petitioner connived respondent and the
trial court and concealed from both the principal place of
business of the petitioner until the second day of trial.
Isn’t it just as conceivable that the exact opposite
conclusion could have been reached by the Eighth Circuit
on these same facts? After June 3, 1974, it certainly
would have behooved respondent to conceal the jurisdic-
tional issue. Respondent had nothing .to lose for the
statute had already run. She could later claim tardiness
when the petitioner raised the issue. |
The court relies heavily on the case of Di Frischai v.
New York Central Railroad, 279 Fed. 2d 141 (3rd Cir.
1960) as authority for its findings. In his treatise of
Law of Federal Courts, Wright questions this decision
stating:
“This argument seems to assume that the court has
discretion to hear a case where jurisdiction is not
present, a very questionable assumption.” Law of
Federal Courts, Charles Alan Wright, West Publish-
ing Co., 1970, page 17.
°
44
CONCLUSION
The decision of the Eighth Cireuit Court of Appeals
in this matter most certainly conflicts with the decisions
of every other circuit which has addressed the question
presented by this Petition. A federal court may not ex-
ercise discretion to retain jurisdiction over a claim where
jurisdiction in fact does not exist. There is no such
power in the federal judicial system. This petitioner re-
spectfully submits that the trial court did not have jur-
isdiction over the subject matter of the action and thus
had no power to enter the verdict and resultant judgment
against this petitioner. A plaintiff may not sue a defend-
ant having a common state citizenship with the plaintiff
in a United States District Court in any state; but, both
the trial court and the Eighth Cireuit Court of Appeals in
this matter allowed the maintenance of such an action.
Petitioner has been found to have concealed the issue
of its citizenship from both the court and the respond-
ent. Information concerning the citizenship of the peti-
tioner was equally available to respondent and petitioner,
yet both the trial court and the Eighth Circuit have
chosen to place the responsibility for respondent’s failure
to prove citizenship upon the defendant. Claims of con-
cealment have been manufactured against this petitioner
so that the judgment in the amount of $234,756.90 in favor
of the plaintiff may be allowed to stand. There is no con-
stitutional or statutory power given to any court to create
jurisdiction when it is absent.
If this decision is allowed to stand then no defend-
ant may ever raise the issue of lack of subject matter
45
jurisdiction of a court after the statute of limitations has
run.
All federal courts, by virtue of this decision, may
now acquire jurisdiction once the statute of limitations ~
runs, whether or not the requisite diversity of citizenship
is present. Such a rule cannot be allowed to exist.
The Eighth Circuit has concluded that the petitioner
has played “fast and loose with the judicial machinery”,
yet the only act of which petitioner is guilty is answering
in accordance with Rule 8b of the Federal Rules of Civil
Procedure.
This petitioner, therefore, respectfully requests that
this court grant a writ of certiorari to the United. States
Court of Appeals to the Eighth Circuit to review the
opinion and judgment of the Eighth Cireuit Court of Ap-
peals, rendered in these proceedings on October 16, 1977.
Respectfully submitted,
Emi. F. Soporo
Daviy A. Jonson and
Ronatp H. Stave
of the Law Offices of Emu. F. Sopvoro, P.C.
200 Century Professional Plaza
7000 Spring Street
Omaha, Nebraska 68106
Attorneys for Petitioner
App. 1
APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 76-1187
GERALDINE KROGER, ADMINISTRATRIX OF THE
ESTATE OF JAMES D. KROGER, DECEASED,
Appellee,
vs.
OWEN EQUIPMENT & ERECTION COMPANY,
a Nebraska Corporation,
, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF NEBRASKA
Submitted: November 10, 1976
Filed: June 21, 1977 \
Before LAY and BRIGHT, Circuit Judges, and TALBOT
SMITH,* Senior District Judge.
This case involves the death of a workman assisting
in moving a large steel tank. The tank was being moved
by a large crane, the boom of which came into contact
with high tension electric power lines, resulting in the
workman’s electrocution. At the time the deceased was
28 years of age with a wif2 and four children. The plain-
tiff, his widow, as administratrix of his estate, was award-
ed a jury verdict of $234,756. We affirm.
*TALBOT SMITH, Senior District Judge, Eastern District of
Michigan, sitting by designation.
App. 2
The crane involved was owned by the Owen Equip-
ment and Erection Company (hereafter “Owen”), and
leased by Paxton & Vierling Steel Company (hereafter
“Paxton”) for heavy lifting. The case was initiated by
a bili of complaint filed by plaintiff, an Iowa citizen,
against Omaha Public Power District (hereafter “OPPD”),
a Nebraska corporation, and Paxton, also a Nebraska
corporation. The course of the pleadings thereafter was
long and involved and will be found in the Appendix
hereto. We note here only that Owen was impleaded
as a third-party defendant by OPPD.
The relationship between defendant Owen and Pax-
ton was somewhat involved. Paxton was engaged in the
fabrication of structural steel and the manufacture of
farm and similar products. It is a non-union plant. To
avoid possible labor trouble in “erecting steel on the out-
side, which is strictly a union proposition,” it formed
Owen, both corporations having the same headquarters
and the same officers, Owen being 100% owned by Paxton.
Owen owned two cranes, operated by Fred (father) and
David (son) Morrow, both of whom were on Paxton’s
payroll. Both of them held union ecards. It was David
who was operating,the crane at the time of decedent’s
death. :
After Owen was organized it hired one Harry Flynn,
a qualified crane operator and member of the crane oper-
ator’s union, to be its erection superintendent. It was
he who trained Fred Morrow in the use and upkeep of
the cranes and it was Fred himself who trained his son
on the job. Fred Morrow retired in 1969. Mr. Flynn -
retired shortly before the accident and was not replaced
App. 3
by a successor. David Morrow then remained the sole
operator qualified to operate Owen’s big outside cranes.
When Paxton required the big cranes, the operators went
with the crane and “they ran that crane.” Mr. Owen,
President of Owen, agreed in his deposition that it
“wouldn’t do [Owen] a bit of good to own those cranes
unless [Owen] had operators for them * * *.”
After long and involved pleadings, a summary of
which, as we have noted, will be found in the Appendix,
the parties had, by trial date, January 12, 1976, been re-
duced to two: plaintiff Kroger, an Iowa citizen, and de-
fendant Owen, charged to be ‘‘a Nebraska corporation,”
and consistently self-admitted in the pleadings to be such.
So stood the description of the parties until noon on
the third day of the trial. At this juncture, defendant
Owen elicited from witness Petersen, Secretary of Owen,
that Owen’s principal place of business was in Carter
Lake, Iowa. Having done so, defendant, the same after-
noon, challenged the jurisdiction of the court on the
ground of lack of diversity.
The court and the plaintiff were taken by surprise
because of defendant’s pleadings. Plaintiff’s amended
complaint, filed on November 9, 1973, some two years
prior to trial, had unequivocally charged that “Owen
Equipment and Erection Co. is a Nebraska corporation
with its principal place of business in Nebraska.” De-
fendant had not denied this outright. It had utilized a
qualified general denial. It “[a]dmit[ted] that Owen
- Equipment and Erection Company is a corporation or-
ganized and existing under the Laws of the State of Ne-
braska,” and “[dJenie[d] each and every other allegation
App. 4
contained in said Amended Complaint * * *.” This form
of answer was in violation of fed. R. Civ. P. 8(b) which
provides that “[w]hen a pleader imtends in good faith to
deny only a part or a qualification uf an averment, he
shall specify so much of it as is true and material and
deny only the remainder.”* Thus, defendart’s admission
of part of an averment and denial of the baance in a
qualified general denial clearly does not meet the require-
ments of the Rule quoted. Nor, as also required by Rule
8(b), does it fairly meet the substance of the avermeni
denied.
Appellant finally admitted on oral argument to us,
after close questioning, a point clear from the pleadings,
namely, that it had not specifically challenged the diversity
jurisdiction of the court at any time during the long
course of the pleadings, and particularly had not done so
in response to the plaintiff’s amended bill of complaint,
filed on November 9, 1973, charging Owen to be “a Ne-
braska corporation with its principal place of business
in Nebraska.” Owen waited until near the close of the
trial to make its challenge. The point had been concealed
during the entire period of time since the filing of the
amended complaint some two years theretofore. Under
1 See Kirby v. Turner-Day & Woolworth Handle Co., 50 F.
_ Supp. 469, 470 (E.D. Tenn. 1943); 2A Moore’s Federal
Practice ¥] 8. 23, at 1828 (2d ed. 1975) (hereafter “Moore’s’’);
5 C. Wright & A. Miller, Federal Practice and Procedure
§ 1266, at 284 (1969) (hereafter “Wright & Miller’).
App. 5
similar circumstances, the Third Cireuit has held the alle-
gation as to defendant’s citizenship to be admitted.’
The District Court rejected the challenge to its juris-
diction, holding, in its Memorandum Opinion, that al-
though no independent basis of jurisdiction existed as to
Owen, nevertheless it had discretion under the Gibbs case,’
to exercise its judicial power over the case. It held, in
part, that:
The law in Nebraska is that an iadependent
basis of jurisdiction need not exist in order for plain-
tiff to assert a claim against a third party defend-
ant. See Union Bank & Trust Co. v. St. Paul Fire &
Marine Ins. Co., 38 F. R. D. 486 (D. Neb. 1965) ; Alson
v. United States, 38 F. R. D. 489 (D. Neb. 1965). Al-
though this view was once the minority view, this
Court believes it is correct.
Properly read, United Mine Workers [v. Gibbs, 383
U. S. 715 (1966) ], reemphasizes the fundamental prin-
ciple that a federal court has jurisdictional power to
2 In Biggs v. Public Service Coordinated Transport, 280 F. 2d
311 (3d Cir. 1964), the pleader asserted a proper amount
in controversy, and, further, that defendant was a New
Jersey corporation doing business in Pennsylvania. De-
fendant’s answer specifically denied that the amount in
controversy was in excess of the statutory minimum, but
the allegation that defendant was incorporated in New
Jersey was only met by a qualified general denial. The
Biggs court held:
We cannot for a moment believe that defendant's
counsel was denying in good faith that his client was
a New Jersey corporation. We think the only fair inter-
pretation of the pleading in this case is that the denial
does not run to the allegation of defendant's citizen-
ship. Therefore, that allegation must be deemed to be
admitted. Fed. R. Civ. P. 8 (d).
280 F.2d at 313-14 (footnote omitted; emphasis added).
3 United Mine Workers v. Gibbs, 383 U.S. 715 (1966).
App. 6
adjudicate the whole case, i. e., all claims, state or fed-
eral, which derive from a common nucleus of opera-
tive facts. . . . [S]ince there is jurisdictional power
to hear the whole case, the question is one of trial
court discretion whether to exercise that jurisdiction,
considering all the factors of economy and conveni-
ence in the context of federalism. 3 Moore’s Federal
Practice § 14.27[1], 14-569 to 14-570.
This case is nevertheless noyel, in that the third party
plaintiff was dismissed. However, having determined that
ancillary jurisdiction exists, it is only equitable that the
Court now retain jurisdiction of this “pendent” claim.‘
Defendant waited until trial to present its motion to dis-
miss. Should the Court grant defendant’s motion, plain-
tiff would be left without a cause of action, because the
Iowa Statute of Limitations has run.’ Despite the fact
that defendant has exclusive possession of the knowledge
of the extent of its own business in Iowa, it remained
silent on this issue until more than two years subsequent
to the filing of the amended complaint. No reason for
the delay has been offered and undoubtedly plaintiff was
lulled into believing defendant’s principal place of busi-
ness was in Nebraska. As a matter of sound policy and
logic, ancillary jurisdiction existed once and, under the
facts presented in this case, this Court must retain juris-
diction.
The problem presented arises in the area of ancillary
and pendant jurisdiction. We start, of course, with the
4 The Court is aware that eer jurisdiction” refers to
state claims joined with federal claims and uses the term
here in its ordinary context. (Footnote in original.)
5 We express no opinion on this point, it not having been
briefed by either party hereto and being only one of the
factors to be considered in the exercise of the Court's dis-
cretion. (Footnote ours.) y
a
App. 7
proposition that federal courts are courts of limited juris-
diction.6 However, under the developing doctrines of
pendent and ancillary jurisdiction,’ there has been ex-
pansion of federal jurisdiction into areas which ordinarily
do not come under the jurisdiction of the federal courts.
The limits of this expansion are our immediate concern.
Modern analysis starts with the landmark decision in
United Mine Workers v. Gibbs, 383 U. S. 715 (1966).* In
this case, the plaintiff, a mining superintendent and haul-
ing contractor, was prevented from the performance of
his contract by a local union which had forcibly prevented
the opening of the mine. Suit was brought in the federal
court alleging violation of section 303 of the Labor Man-
/
6 U.S. Const. art. Ill, § 2; Act of Sept. 24, 1789, 1 Stat. 73
(Judiciary Act).
7 Differentiations of many kinds may be made between the
doctrines of ancillary and pendent jurisdiction. As to the
utility thereof, see Aldinger v. Howard, 427 U.S. 1, 13
(1976):
Given the complexities of the many manifestations of
federal jurisdiction, together with the countless factual
rmutations possible under the Federal Rules, there is
ittle profit in attempting to decide, for example,
whether there are any “principled” differences between
pendent and ancillary jurisdiction; or, if there are,
what effect Gibbs had on such differences.
The historical development of both of these doctrines,
which had disparate origins, may be found in Comment,
Pendent and Ancillary jurisdiction: Towards a Synthesis
of Two Doctrines, 22 U.C.L.A. L. Rev. 1263, 1265-70
(1975) (and cases and articles therein cited); Note, The
Evolution and Scope of the Doctrine of Pendent Jurisdic-
tion in the Federal Courts, 62 Colum. L. Rev. 1018 (1962);
Note, Rule 14 Claims and Ancillary Jurisdiction, 57 Va. L.
Rev. 265, 267-72 (1971).
8 For a discussion of Gibbs, see Note, UMW v. Gibbs and
Pendent Jurisdiction, 81 Harv. L. Rev. 657 (1968).
App. 8
agement Relations Act,® to which was joined a state claim
for mal vivus interference with contract rights. Plaintiff
prevailed on both claims, but upon motion for judgment
n.0o.v. the federal claim was held non-actionable and
judgment entered on the state claim, with affirmation by
the Court of Appeals following.'°
The Supreme Court affirmed the assumption of jur-
isdiction over the pendent state claim."' The significance
of the Gibbs case for our purposes lies in its disearding
of the test established in Hurn v. Oursler, 289 U.S. 238,
246 (1933), for pendent jurisdiction, under which pendent
jurisdiction was present when “two distinct grounds in
support of a single cause of action’? [were] alleged, one
only of which present[ed] a federal question,” but not
“where two separate and distinct causes of action [were]
alleged, one only of which [was] federal in character.”
In place of the Hurn test, the Court held that pendent
jurisdiction is present whenever the state and federal
claims “derive from a common nucleus of operative fact”
to the degree that a plaintiff would ‘‘ordinarily be ex-
pected to try them all in one judicial proceeding.” If,
the Court continued, the state claim is so related to the
9 29 U. S. C. § 187.
10 aan v. United Mine Workers, 343 F.2d 609 (6th Cir.
11 In dealing with the merits, however, the Court reversed.
12 This phraseology had caused much difficulty in the lower
courts due to the metaphysical nature of “‘cause of action.”
See Gibbs, supra, 383 U.S. at 722-24; Note, The Evolution
and Scope of the Doctrine of Pendent Jurisdiction in the
Federal Courts, supra note 7, at 1029-30. (Footnote ours.)
13 383 U.S. at 725.
App. 9
federal claim thai there is “but one constitutional ‘case’,”
there is power to exercise pendent jurisdiction and it is
“unnecessarily grudging” to limit the availability of pend-
ent jurisdiction more narrowly than is constitutionally re-
quired."¢
Owen, as noted supra, was impleaded by OPPD as a”
third-party defendant pursuant to Fed. R. Civ. P. 14 (a)."s
14 Id. at 725.
15 “(a) When Defendant May Bring in Third Party. 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 M nee ah claim against him. The third-
plaintiff need not obtain leave to make the serv-
ice if he files the third-party complaint not later than
10 days after he serves his original answer. Otherwise
he must obtain leave on motion upon notice to all
parties to the action. The person served with the sum-
mons 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 ed
assert against the plaintiff any defenses which the third-
party plaintiff has to the plaintiffs claim. The third-
party defendant may also assert any claim against the
laintiff 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 or laintiff, 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. Any party
may move to strike the third-party claim, or for its
severance or separate trial. A third-party defendant
may proceed under this rule against any person not a
party to the action who is or may be liable to him for
all or part of the claim made in the action against the
third-party defendant. * * *.”
App. 10
The provisions of Rule 14 (a) governing third-party prac-
tice are extremely broad, permitting the third-party de-
fendant to assert against the plaintiff “any claim * * *
arising out of the transaction or occurrence that is the
subject matter of the plaintiff’s claim against the third-
party plaintiff,” and the plaintiff to assert against the
third-party defendant “any claim * * * arising out of the
transaction or occurrence that is the subject matter of the
plaintiff’s claim against the third-party plaintiff.”
Rule 14, however, is silent as to whether independent
jurisdictional grounds are required for such claims and
thus arises our question. It is to be noted, however, that
Rule 14 (a) does not by itself extend the jurisdiction of
the federal courts."© It is clear that many of the claims
which Rule 14(a) permits to be joined with the main
‘claim asserted by the plaintiff have been allowed without
an independent basis of jurisdiction under the doctrine of
ancillary jurisdiction. Professors Wright and Miller state
that ‘*[t]he cases on point almost all hold that defendant’s
claim against a third-party defendant is within the an-
cillary jurisdiction of the federal courts,”” even though
there may be no diversity between these parties. See,
e. g., Waylander-Peterson Co. v. Great Northern Ry. Co.,
201 F. 2d 408, 415 (8th Cir. 1953). The courts have also
allowed, without an independent basis of jurisdiction, the
third-party defendant’s claim against the plaintiff, arising
16 Fed. R. Civ. P. 82 provides:
These rules shall not be construed to extend or
limit the jurisdiction of the United States district courts
17 6 Wright & Miller § 1444, at 223 (footnote omitted).
App. 11
out of the same transaction as the plaintiff’s main claim.” ~
Since much of what we are about to write concerns diver-
sity, we think it not inappropriate to point out that such
action against the plaintiff has been held to be within
the court’s ancillary jurisdiction, even when the main
claim is based upon diversity jurisdiction and both the
third-party defendant and plaintiff are citizens of the same
state."® Thus, in view of the breadth of Rule 14 (a), com-
bined with current ancillary and pendent jurisdiction doc-
trine it is not unusual for courts to adjudicate ancillary
claims having no independent jurisdictional basis.*°
On the other hand, the great numerical majority of
cases have held that if the plaintiff asserts a claim against
the third-party defendant, as permitted by Rule 14 (a),
there must be independent grounds for jurisdiction.** The
18 See Revere Copper & Brass Inc. v. Aetna. Cas. & Sur. Co.,
426 F.2d 709 (5th Cir. 1970), but note comments thereon
in Fawvor v. Texaco, Inc., 546 F. 2d 636, 642 (5th Cir. 1977);
General Dynamics Corp., 486 F. 2d 763, 772 (7th Cir. 1973),
cert. denied, 414 U.S. 1146 (1974) (adopting the reasoning
of the Fifth Circuit in Revere Copper); L & E Co. v. U.S.A.
ex rel. Kaiser Gypsum Co., 351 F.2d 880, 882 (9th Cir.
1965).
19 See, e.g., Revere Copper & Brass Inc. v. Aetna Cas. & Sur.
Co., supra note 18.
20 For a summary of the many instances in which the district
courts adjudicate ancillary claims having no independent
jurisdictional basis, see 13 Wright & Miller § 3523, at 66-70.
21 See, e.g., Fawvor v. Texaco, Inc., supra note 18. But see,
e. g., Morgan Suey 8 oe bg o., 69 ie D. 697 (D.
Kan. 1975) (holdin at ntiff, in ropriate cases, may
assert a claim pon B-. third-party defendant without there
being an wages eg basis of jurisdiction). The cases pro
and con on ther independent jurisdictional grounds are
uired for plaintiff to assert a claim against third-
defendant are gathered in Fawvor, supra, 546 F.2d at 63
n. 7, and in te, Rule 14(a) and Ancil Jurisdiction:
Plaintiff's Claim Against Non-Diverse Third-Party Defend-
ant, 33 Wash. & Lee L. Rev. 796, 798-99 nn. 10-12 (1976).
App. 12
older, pre-Gibbs, cases, including one from our court,”
support the proposition with almost complete unanimity,”
as did the first edition of Prof. Moore’s treatise.*
After the landmark decision in Gibbs, however, the
underpinnings of the restrictive rule were swept away.
Prof. Moore’s later edition, following the holding in Gibbs,
submitted that the matter of accepting jurisdiction should
be within the trial court’s discretion, arguing trenchantly
that:
Properly read, United Mine Workers reemphasizes the
fundamental principal that a federal court has juris-
dictional power to adjudicate the whole case, i. e., all
claims, state or federal, which derive from a common
nucleus of operative facts. Thus it is now possible
for lower federal courts to reach decisions allowing
jurisdiction over some joined claims and parties,
which previously would probably have been rejected
for lack of subject matter jurisdiction. If United
Mine Workers does signal such relaxation of the pro-
hibitory rule as to original joinder of claims and par-
ties, then, consequently its corrollary rule forbidding
22 United States v. Lushbough, 200 F.2d 717 (8th Cir. 1952).
We note the holding in Lushbough that diversity was re-
uired to “eee a judgment in favor of plaintiff against
ird-party defendant was an alternative ground of deci-
sion, the other ground being that plaintiff was precluded
from “—* against third-party defendant by 28 U.S. C.
§ 2676. In view of developments in the law of pendent
and ancillary jurisdiction subsequent to Lushbough, we
deem it wise to reexamine the position taken by us in that
case on the jurisdictional issue at bar.
23 But see L & E Co. v. U.S.A. Kaiser Lame ge Co., 351 F. 2d
880, 882 (9th Cir. 1965); Olson v. United States, 38 F. R. D.
489 (D. Neb. 1965); Myer v. Lyford, 2 F.R.D. 507 (M.D.
a} so Sklar v. Hayes, 1 F. R. D. 594, 596 (E. D. Pa.
24 1 Moore’s § 14.02, at 748 (1st ed. 1938).
App. 13
ancillary jurisdiction of a claim by the plaintiff
against the third-party defendant must also be re-
laxed.
But regardless of jurisdictional developments un-
der Rules 18 and 20, United Mine Workers can au-
thorize an independent relaxation of the rule against
ancillary jurisdiction over plaintiff’s amended claims
against the third-party defendant. At the outset, the
question must be redefined. It should not be a ques-
tion of pure law posing the choice “either there is an
ancillary jurisdiction and the court must take it, or
there is no ancillary jurisdiction, and the court cannot
take it.” Instead, since there is jurisdictional power
to hear the whole case, the question is one of trial
court discretion whether to exercise that jurisdiction,
considering all the factors of economy and conveni-
ence in the context of federalism. Once this basic
redefinition takes place, the traditional reasons given
for supporting a rule of flat prohibition do not neces-
sarily disappear. Instead they become factors for the
trial court to consider in exercising its discretion.*
25 3 Moore’s §[ 14.27 [1], at 14-569 to 14-570 (footnotes omit-
ted; emphasis in original).
In Kenrose Mfg. Co. v. Fred Whitaker Co., 512 F. 2d
890, 893-94 (4th Cir. 1972), Judges Sobeloff, summarized
the arguments ogten given in support of the majority
view that independent jurisdictional grounds are required
in order for plaintiff to assert claim against third-party de-
fendant:
Several supporting reasons have been advanced by
courts holding the majority view on this question.
Among them are that: (1) plaintiff should not be al-
lowed, an indirect route, to sue a co-citizen under
diversity jurisdiction when he is not permitted to sue
that party directly; (2) the majority rule precents collu-
sion between plaintiff and defendant to obtain federal
jurisdiction over a party who would otherwise not be
within the court’s reach; (3) the rule which generally
does not require diversity as between plaintiff and
(Continued on following page)
App. 14
(Continued from previous page)
third-party defendant proceeds on the assumption that
the plaintiff is seeking no relief against the third-party
defendant; and (4) federal dockets are so overcrowded
that the federal courts should not reach out for state
law based litigation. [Footnotes omitted. ]
Professor Moore has incisively criticized these arguments
in his treatise. See 3 Moore’s ¥ 14.27 [1], at 14-570 to
572. See also Morgan v. Serro Travel Trailer Co., supra, 69
F.R. D. at 702-04.
In response to the argument that plaintiff should not
be able to do indirectly what he cannot do directly, Pro-
fessor Moore replies:
ze shouldn’t A. B. [plaintiff] be able to do it in-
irectly? A.B. took his chance in suing C. D. [defend-
ant] alone in the federal court. It was C.D.’s choice,
not A. B.’s, .o bring in E. F. [third-party defendant], and
now that E. F. is before the court, judicial economy and
convenience may dictate that the court dispose of the
whole case by allowing all claims deriving from a com-
mon nucleus of operative fact.
3 Moore’s J 14.27 [1] at 14-570 to 571 (footnote omitted).
The argument that the majority rule prevents collusion
has been termed “the raison d’etre” of that rule; the
other arguments being described as ae ly ‘make-
weights’.” Morgan, supra, 69 F.R. D. at 702-03. Professor
Moore states and we agree, that 28 U.S.C. § 1359, which
provides that “[a] district court shall not have jurisdiction
of a civil action in which any party * * * has been improp-
erly or collusively made or joined to invoke the jurisdiction
of such court, is an adequate answer to the specter of
collusion.” 3 Moore’s 7 14.27 [1], at 14-571. “Fears of
—_— do not justify a wholesale denial of jurisdiction.”
The third argument given in support of the majority rule
rests on an overly narrow view of ancillary jurisdiction.
Professor Moore puts it this way:
Ancillary jurisdiction is a much broader concept resting
u mu reasons of economy and convenience.
us, it is clearly established that ancillary jurisdiction
tween C.D. [third-party plaintiff] and €. F. [third-party
tween C. D. [thi . F.
defendant] even those claims lack shout and
jurisdictional amount and could not have been brought
(Continued on following page)
7
App. 15
The solution to the problem presented as to the Dis-
trict Court’s retention of jurisdiction in the case at bar
is clearly outlined in Gibbs. That decision enunciated a
two step process for the resolution of the ancillary-pend-
ent jurisdiction problem: First, the determination of
whether or not there is power in the federal courts to hear
the whole matter. If there is, the Court continues, “That
power need not be exercised in every case in which it is
found to exist. It has consistently been recognized that
pendent jurisdiction is a doctrine of discretion, not of
plaintiff’s right. Its justification lies in considerations of
judicial economy, convenience and fairness to litigants
* * @ 9926
At the time the plaintiff amended her complaint to
assert a claim against Owen there is no question but that
(Continued from previous page)
as original law suits. The same broad principle and re-
sult should not be offensive when applied to ancilla
jurisdiction between A. B. [plaintiff] and E. F. If E. F.
ad voluntarily entered the suit as a non-indispensable
defendant by intervention under Rule 24(a), there clear-
ly can be ancillary jurisdiction over the claims between
fl F. and A. B. e same result should be obtained
whether E. F. enters voluntarily under Rule 24 or invol-
untarily by C. D.’s impleader under Rule 14. In brief,
there should be no rule forbidding building one ancil-
lary jurisdiction on another.
Id. at 14-571 to 572 (footnotes omitted).
The fourth argument in support of the majority rule,
that federal courts are too busy to “reach out for state law
based litigation,” rests upon a parochial view of federalism.
“If federal courts refuse to use conceptual tools to dispose
of all related claims with the test economy and con-
venience, the federal courts add to the total in-
economy and inconvenience which itigants must suffer to
obtain justice on the merits of their claims.” Id. at 14-572
(footnote omitted).
26 383 U.S. at 726 (footnote omitted).
App. 16
the court had jurisdiction over plaintiff’s claim against
OPPD and OPPD’s third-party claim against Owen,’
But the question presented is whether the court also had
power over the plaintiff-Owen’s claim.
Within the framework of the Gibbs decision, Kroger’s
claim against Owen arises out of the core of “operative
facts” giving rise to both Kroger’s claim against OPPD
and OPPD’s claim against Owen. All parties were before
the court and it is both paradoxical and anomalous to
hold in this situation that, although Kroger can go against
OPPD which can go against Owen, and Owen may pro-
ceed against Kroger, Kroger cannot proceed against Owen.
This result is not demanded by Rule 14 and has its origins
in the mists of the precedents of earlier days and crystal-
lized concepts that cannot stand the light of searching
modern examination.
It is an over-simplification of the result we seek to
cast the problem in terms of black and white, that is, jur-
isdiction or no jurisdiction. The matter is broader than
that. Once the court has before it all of the parties to
the controversy, sharing common and interrelated facts,
it has power in the jurisdictional sense to dispose of the
case. To say, in a modern court, under modern rules,#
that a third-party defendant may sue a plaintiff of the
same state, but not the converse, is a monument to the
27 The power as to the Kroger-OPPD claim rested upon
diversity, and as to the OPPD-Owen third-party claim, the
court had ancillary jurisdiction. Waylander-Peterson Co. v.
Great Northern Ry. Co., supra; 6 Wright & Miller 4 1444,
at 223 (quoted supra at p. 11).
28 “Under the [Federal Rules of Civil Procedure], the impulse
is toward entertaining the broadest possible scope of action
consistent with fairness to the parties; joinder of claims,
parties, and remedies is strongly encouraged.” Gibbs,
supra, 383 U.S. at 724 (footnote omitted).
App. 17
triumph of rule over reason, “a step backward to the time
when piecemeal litigation, tactical maneuvering by proce-
dural devices, inconvenience to litigants, duplication of
litigation in different courts, and a resulting waste of
judicial and litigant time and resources were the hallmarks
of formalistie rules of civil procedure.’’”
29 We bn 14 Claims and Ancillary Jurisdiction, supra note
, at .
Owen contends that the recent Supreme Court deci-
sion, Aldinger v. Howard, 427 U.S. 1 (1976), supports its
contention that the District Court was without power to
exercise jurisdiction over Kroger’s direct claim against it.
We disagree.
The Aldinger court’s holding was a narrow one:
All that we hold is that where the asserted basis of
federal jurisdiction over a municipal corporation is not
diversity of citizenship, but is a claim of jurisdiction
pendent to a suit brought against a municipal officer
within [28 U.S.C.] § 1343, the refusal of Congress to
authorize suits against municipal corporations under
the cognate provisions of [42 U.S.C.] § 1983 is suffi-
cient to defeat the asserted claim of pendent-party jur-
isdiction.
id. at 17-18 n. 12. The Aldinger court carefully limited its
decision to the context of claims brought under 28 U.S.C.
§ 1343 (3) and 42 U.S.C. § 1983:
[W]e decide here only the issue of so-called
“pendent party” jurisdiction with respect to a claim
brought under §4 1343 (3) and 1983. Other statutory
grants and other alignments of parties and claims might
call for a different result.
Id. at 18 (emphasis added).
The instant case presents an alignment of parties and
claims significantly different from that presented in Al-
dinger. In Aldinger, the municipal corporation over which
plaintiff sought to have the court assert pendent jurisdic-
tion, was a “new party * * * not otherwise subject to
federal jurisdiction.” Id. The impleading of such a party,
presents “a more serious obstacle to the exercise of pen-
dent jurisdiction than if parties already before the court
are required to litigate a state-law claim.” /Id. In the in-
stant case, Owen was already before the court on OPPD’s
third-party claim, a state law claim within the court’s ancil-
lary jurisdiction. See p. 11 and note 27, supra.
App. 18
The judicial power is there. Whether or not to use
it answers to no ipse dizit. The question is whether to
exercise that power, ‘‘considering all the factors of econ-
omy and convenience in the context of federalism.”*°
Thus remains the exercise of discretion. And it is for
this reason, we are convinced, that we are warned, from
the earliest cases to the latest, that there can be no blanket
rule governing all cases, no per se dogma to serve as an
easy substitute for thought.
As we indicated at the outset of this opinion, the
question of pendent-party jurisdiction is “subtle and
complex,” and we believe it would be as unwise as it
would be unnecessary to lay down any sweeping pro-
nouncement upon the existence or exercise of such
jurisdiction.+*
The factors governing the exercise of discretion were
expressed in Gibbs to be “judicial economy, convenience,
and fairness to litigants.”** The satisfaction here of the
first two requirements requires no exegesis. It is upon
the element of fairness that we shall speak. The defend-
ant before us has connived for himself an unfair advan-
tage. But what he has overlooked in all of this is the
court’s exercise of discretion in terms of fairness. It is
not without significance that well prior to Gibbs the dis-
cretion of the trial court was relied upon in denying be-
lated challenges to jurisdiction in situations of oppres-
sion.*? In the Di Frischia case, after a series of plead-
30 3 Moore’s ¥ 14.27 [1], at 14-570.
31 Aldinger, supra, 427 U. S. at 18.
32 383 U.S. at 726.
33 See Di Frischia v. New York Cent. R. R., 279 F.2d 141 (3d
Cir. 1960); Klee v. Pittsburgh & W. Va. Ry., 22 F.R. D. 252
(W. D. Pa. 1958).
App. 19
ings, preparations for trial, and a stipulation of diversity,
a defendant sought to amend its answer on the eve of
trial, once again bringing up the matter of jurisdiction.
The District Court dismissed the action, but the Court of
Appeals reversed, resting decision on the discretion vested
in the trial court and stating that “[a] defendant may not
play fast and loose with the judicial machinery and de-
ceive the courts.’
A situation similar in principle and with similar re-
sults in the retention of jurisdiction is found in Murphy
34 279 F.2d at 144. The Di Frischia court held in part:
We are equally cognizant of our or in Hospoder
v. United States, 3 Cir., 1953, 209 F. 2d 427, 429, where
we stated:
“It is axiomatic that jurisdiction may not be con-
ferred or waived by the parties and that courts at
every stage of the proceedings may and must
examine into its existence.”
However, the instant case is _—— by a different
line of authority that is equally well recognized. In
Young v. Handwork, 7 Cir., 1949, 179 F.2d 70, 16
A. L. R. 2d 825, certiorari denied 1950, 339 U.S. 949, 70
S. Ct. 804, 805, 94 L. Ed. 1363, we have a similar state
of facts, for after raising the question of lack of diver-
sity in its answer the defendants omitted such question
from their amended motion and in n court admitted
the facts in plaintiff's complaint. Following determina-
tion by the court on the merits, the defendant once
again attempted to raise the issue, but the court denied
leave to file the amendment and the action was sus-
tained by the court of appeals. Similarly, in the instant
case the defendant had its opportunity to have the issue
heard and to present its position but chose to admit
the allegations of plaintiff's complaint. Thereafter it
fully participated in the appropriate discovery and pre-
trial p ures preparatory to trial of the action on the
merits. Having done so, a further attempt to amend
its answer to return to its previous defense of lack of
diversity could certainly not be made as of right. Al-
lowance of such an amendment under the circum-
stances would be an abuse of discertion. Cf. Klee v.
(Continued on following page)
App. 20
v. Kodz, 351 F. 2d 163 (9th Cir. 1965). There the plain-
tiff’s decedent was killed in a mid-air collision, plaintiff
bringing action in state court against one Shupe and
other parties. Mr. Shupe, alleging that he was an officer
of the Fonrgst Service acting in his official capacity at
the time of the accident, had the case removed to the
District Court, pursuant to 28 U.S.C. § 1442 (a) (1). No
head of federal jurisdiction was alleged as to the remain-
ing defendants. The trial resulted in a judgment in favor
of Shupe, but the jury was unable to agree on the liability
of the other defendants. As to them, a new trial resulted
in plaintiff’s favor, whereupon defendants moved to re-
mand the case to the state court, arguing that the federal
court had lost further jurisdiction of the case upon entry
of the judgment for Shupe, who was the sole party en-
titled to invoke that court’s jurisdiction.
The motions were denied by the District Court. The
Ninth Circuit affirmed, finding an analogy “in the penum-
bral area of federal jurisdiction, so-called ancillary or
pendent jurisdiction,” citing, among other cases, Hurn v.
Oursler, supra. After a review of the authorities appli-
cable to the particular area of jurisdiction at bar, which,
as the court noted, has analogies to pendent and ancillary
(Continued from previous page)
msg & West Virginia Railway Co., D.C. W. D. Pa.
1958, F.R.D. 252. A defendant may not play fast
and loose with the judicial machinery and deceive the
courts.
Id. See also Biggs, supra note 2. Di Frischia is commented
upon in C, a t, Handbook of the Law of Federal Courts
8, at 18-19 (3d ed. 1976); Stephens, Estoppel to Den
ederal Jurisdiction—Klee and Di Frischia Break Ground,
68 Dick. L. Rev. 39 (1963); 15 U. Miami L. Rev. 315 (1961);
7 Utah L. Rev. 258 (1960).
App. 21
jurisdiction, the court stated that the District Court had
discretion in the premises and concluded in language
equally applicable to the case before us:
We need not rest our decision on any claim of
judicial economy, for we are impressed that no op-
portunity for exercise of that discretion was accorded
the District Court by motion to remand at the close
of the federal facet of the case. That the District
Court proceeded with the non-federal claims does not,
in this instance, afford a ground for reversal: Fail-
ure of the appellants to bring to the attention of
the court considerations requiring an exercise of dis-
cretion estops them from asserting that privilege after
decision on the merits. [Citing cases.] To hold
otherwise would encourage litigants to wager on their
success on the merits, and if they lost, permit them
to call the contest a nullity.*s
In the case before us, the District Court stood
squarely upon its discretionary powers in the premises,
relying on Gibbs. Defendant Owen attacks the applicabil-
ity of this doctrine to the case at bar, asserting that the
dismissal of the plaintiff’s claim against OPPD before
trial limits the discretion of the District Court. We do
not so conclude. It is but one factor, among many others,
to be considered.*°
35 351 F.2d at 168.
36 See 6 Wright & Miller § 1444, at 234-237, and cases therein
cited. In language that is ee applicable to the case
at bar, Professors Wright and Miller state that “if there has
been a substantial commitment of the court’s or litigant’s
resources prior to the termination of the main claim, dis-
missal of Rule 14 claim will run counter to the rationale
justifying ancillary jurisdiction and third-party practice.”
- | on See aiso Dery v. Wyer, 265 F. 2d 804, 808 (2d
x ; |
(Continued on following page)
App. 22
But beyond that, however, there are other considera-
tions. By subtle and adroit pleading the defendant has
gained a substantial advantage. If the trial goes well, it
‘can keep the jurisdictional point hidden. If the trial
seems to be going badly or, indeed, if it loses on the
merits, it asserts that it can even then challenge jurisdic-
tion and successfully, so it argues, since it insists that it
is clear to all that jurisdiction may be challenged by any-
one at any time.*”
(Continued from previous page)
Generally, in a diversity action, if jurisdictional pre-
requisites are satisfied when the suit is begun, subse-
uent events will not work an ouster of jurisdiction.
Citing cases.] This result is not attributable to an
specific statute or to any language in the statutes which
confer jurisdiction. It stems rather from the general
notion that the sufficiency of jurisdiction should be
determined once and for all at the threshold and if
found to be present then should continue until final
disposition of the action. * * *
Considerations of policy * * * accord with
meno policy with our
37 Distinguished scholars have oe so far as to suggest,
with respect to the dogma of “challenge jurisdiction any
ave time” that we are becoming involved in mere
shism.”
lf the record fails to disclose a basis for federal juris-
diction, the court not only will but must refuse to pro-
ceed further with the determination of the merits of
the controversy unless the failure can be cured. This
is true whether the case is at the trial stage or the ap-
pellate stage, and whether the defect is called to the
court’s attention “by suggestion of the parties or other-
wise.” Probably it would be sible to fill the rest
of this book with citations and thumbnail abstracts of
cases illustrating the application of this principle.
This is established practice. Is it fetichism [sic]?
Or is it grounded on solid considerations of policy
and of legislative and j udicial statesmanship? Why
(Continued on following page)
App. 23
But plaintiff overlooks the application of the Gibbs
doctrine to ancillary litigation. The District Court had
judicial power over the case initially and we find no abuse
of its @iscretion in the continued exercise of that power.
But beyond that, whether the court’s discretion was abused
(Continued from previous page)
should not a party who has invoked federal jurisdiction,
or failed seasonably to object to it, be held to have
waived any defect, or be estopped from asserting it?
P. Bator, P. Mishkin, D. Shapiro, & H. Wechsler, Hart &
Wechsler’s The Federal Courts and The Federal System
835-36 (2d ed. 1973). Consider also the comments of the
distinguished American Law Institute reflecting the dis-
turbance, not only of distinguished scholars, but of many
courts:
At the present time and peng acme the history
of the federal judicial system, it has n possible for
either party to raise, or for the court on its motion to
consider, a question of jurisdiction over the subject
matter at any stage in the course of litigation. ,
e.g., Mansfield, Coldwater & Lake Mich. By. v. Swan,
111 U.S. 379 (1884). Even the party who has invoked
jurisdiction may subsequently challenge it if the result
of a trial on the merits is unfavorable. See, e. g., Amer-
ican Fire and Cas. Co. v. Finn, 341 U.S. 6 (1951). And
a wily defendant may conceal a known jurisdictional
defect until the period of the statute of limitations has
run, then obtain dismissal, and achieve total immunity
from suit. Some decisions indicate that he may even
do this by controverting jurisdictional facts previously
alleged or admitted. £.g., Page v. Wright, 116 F.2d
449 (7th Cir. 1940) [Ramsey v. Mellon Nat'l Bank &
Trust Co., 350 F.2d 874 (3d Cir. Lg) But see Di
on. v. New York Cent. R.R., 279 F.2d 141 (3d Cir.
1960).
As many commentators have noted, e. g., 1 Moore
Federal Practice §[ 0.60 (4) (2d ed. 1948), this fetish of
federal jurisdiction is wholly inconsistent with sound
judicial administration and can only serve to diminish
respect for a system that tolerates it. Some effective
limitation on the raising and consideration of jurisdic-
tional issues seems long overdue.
American Law Institute, Study of the Division of Juris-
diction Between State and Federal Courts 366 (1969)
App. 24
or not in its retention of the cause, defendant’s conduct
estops it from asserting abuse of discretion, not only un-
der the teaching of Murphy v. Kodz, supra, but also un-
der the most elementary considerations of judicial fair-
ness. “Despite the fact that defendant has exclusive pos-
session of the knowledge of the extent of its own busi-
ness in lowa, it remained silent on this issue until more
than two years subsequent to the filing of the amended
complaint. No reason for the delay has been offered
& & & 9798
The doctrine of the perpetual availability of jurisdic-
tional challenge furnishes no sanctuary to appellant in the
light of such conduct.
Proceeding to the merits, the case was submitted to
the jury under, among others, the following instruction:
A plaintiff may proceed in a case under more
than one theory of law. In this case, plaintiff alleges
two theories, as subsequently explained, only one of
which he need prove in order to recover: r
1, That the crane supplied by defendant was un-
safe for the purpose it was intended.
2. That the crane operator was in the employment
of defendant and that defendant is therefore
oe for the negligent acts of the crane opera-
r.
There was no error in this instruction. It is well es-
tablished that the trial court has the duty to submit to
the jury all issues raised by the pleadings which have
evidentiary support. Flentie v. American Community
Stores Corp., 389 F. 2d 80, 82 (8th Cir. 1968) (applying
Iowa law); Campbell v. Martin, 257 Iowa 1247, 136 N. W.
2d 508, 511 (1965). In addition the court properly in-
38 District Court Memorandum Opinion, quoted more fully
at pp. 5-6, supra.
App. 25
structed the jury on the establishment of negligence, caus-
ation, and damage.
Here there was ample and controverted evidence sub-
mitted on each of the theories of the plaintiff. The first
issue presented by the court in its instructions related to
the safe or unsafe condition of the crane concededly
owned by defendant Owen. On this issue plaintiff’s expert
testified, as to described safety devices, that
Well, with these safety devices available, I just don’t
think it is right to put a product out anywhere for
rent or use for anybody unless it is equipped with
it. You cannot assume, for example, that whoever
it goes to are necessarily trained in safety and are
going to take all the precautions and when a safety
device is available and is being used in the industry,
it is my opinion that these cranes and booms should
be so equipped.
One of the issues most vigorously argued at trial was
whether the crane operator, David Morrow, was a serv-
ant of Paxton or of defendant Owen, loaned by Paxton
to Owen for this particular job. What the court was faced
with was thus the notoriously complex “borrowed servant”
problem,’ that is, the problem of vicarious liability be-
tween the general employer, from whose employ the serv-
ant came, or the special employer, who was utilizing at
39 “The law that defines or seeks to define the distinction
between general and special employers is beset with
distinctions so delicate that chaos is the consequence.
No lawyer can with assurance in any situa-
tion when one enahe gee yee fap eye
The wrong choice of defendants is often made, with
instances, all too many, in which justice has miscarried.”
Cardoza, A Ministry of Justice, 35 Harv. L. Rev. 113, 121
(1921).
App. 26
the time the servant so obtained. On this issue, the trial
court instructed the jury, essentially, that it must decide
whether David Morrow was, at the time of the accident,
acting as Owen’s servant, and that the test of agency as
between the general and the special employer was which
had the right to control the manner of performance of
the work being done. The evidence as to control, as
well as other facets of the employment relation, was con-
flicting and presented a jury question. The instructions,
read in their entirety in the light of the unique facts ad-
duced as to Morrow’s employment and duties, summarized
supra, fairly presented the controlling issue to the jury
and we find no error therein. Bengford v. Carlem Corp.,
156 N. W. 2d 855, 863 (Iowa 1968); Houlahan v. Brock-
meier, 258 Iowa 1197, 141 N. W. 2d 545, 548 (1966); An-
derson v, Abramson, 234 Iowa 792, 13 N. W. 2d 315
(1° 4); Kanipe v. Grundy County Rural Electric Co-op,
231 Iowa 187, 300 N. W. 662, 665 (1941).+°
We find no merit in the Workmen’s Compensation
issue as to Kroger. He was in no sense an employee of -
Owen, borrowed or direct.
Affirmed.
BRIGHT, Circuit Judge, dissenting.
Regretfully, I am unable to join in Judge Talbot
Smith’s opinion determining that the district court pos-
40 Appellee relies also on Nepstad v. Lambert, 235 Minn. 1
50 N. W. 2d 614 (1951), citing Smith, Scope of the Busi-
ney: Poy Borrowed aves on : Mich. L. Rev.
, commen upon in Ohi I
553-57 (1967). c; AR fe
App. 27
sessed subject matter jurisdiction over the claims between
Kroger and Owen Equipment & Erection Company.
Concededly, the defendant, Owen Equipment, although
a Nebraska chartered corporation, maintains its principal
business in Iowa, and is, therefore, an Iowa citizen. Con-
gress made clear that for purposes of diversity jurisdic-
tion, 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.” 28 U.S.C. $1332
(c).
I do not believe that the holding in United Mine
Workers v. Gibbs, 383 U. S. 715 (1966), can be said to
authorize the exercise of jurisdiction over a claim made
by a plaintiff against an impleaded third-party defendant
without diversity between the parties. In Gibbs, the dis-
trict court already possessed subject matter jurisdiction
over a federal claim between the two parties, so it was
appropriate and within the federal court’s judicial power
to resolve a state claim appended to the federal claim.
Here, the threshold question is whether ancillary jurisdic-
tion supports Kroger’s claim even though she has no claim
against Owen with an independent jurisdictional basis.
I believe that the Supreme Court’s pronouncements
in Aldinger v. Howard, 427 U. S. 1 (1976), and cases
such as American Fire & Cas. Co. v. Finn, 341 U. S. 6
(1951), require that we dismiss the case for want of jur-
isdiction.
Aldinger was an action brought under 28 U.S.C.
§ 1343 (3) and 42 U.S.C. $1983 against several county
officials. The plaintiff attempted to join state law claims
against the county itself arising out of the same facts
App. 28
on a theory of pendent or ancillary jurisdiction. The
Supreme Court rejected that attempt and with it the sort
of reasoning found in the majority opinion.
In response to arguments that “pendent party” jur-
isdiction over a state law claim should be allowed even in
the absence of another claim between the same parties
with an independent jurisdictional base, the Court said:
From a purely factual point of view, it is one thing to
authorize two parties, already present in federal court
by virtue of a case over which the court has jurisdic-
tion, to litigate in addition to their federal claim a
state-law claim over which there is no independent
basis of federal jurisdiction. But it is quite another
thing to permit a plaintiff, who has asserted a claim
against one defendant with respect to which there
is federal jurisdiction, to implead an entirely differ-
ent defendant on the basis of a state-law claim over
which there is no independent basis of federal juris-
diction, simply because his claim against the first de-
fendant and his claim against the second defendant
“derive from a common nucleus of operative fact.”
[Gibbs, 383 U. S. at 725]. True, the same considera-
tions of judicial economy would be served insofar as
plaintiff’s claims ‘‘are such that he would ordinarily
be expected to try them all in one judicial proceed-
ing....” Ibid. But the addition of a completely new
party would run counter to the well-established prin-
_ ciple that federal court, as opposed to state trial
courts of general jurisdiction, are courts of limited
jurisdiction marked out by Congress. We think there
is much sense in the observation of Judge Sobeloff,
writing for the Court of Appeals in Kenrose Mfg. Co.
v. Fred Whitaker Co., 512 F. 2d 890, 894 (CA 4 1972):
“The value of efficiency in the disposition of
lawsuits by avoiding multiplicity may be readily
conceded, but that is not the only consideration
a federal court should take into account in assess-
App. 29
ing the presence or absence of jurisdiction. Es-
pecially is this true where, as here, the efficiency
plaintiff seeks so avidly is available without ques-
tion in the state courts.”
[427 U. S. at 14-15 (emphasis added).]
The situation is the same here. That the same facts may
have been involved in Kroger’s claim against Owen as
those in Kroger’s claim against the Omaha Public Power
District is not by itself sufficient basis for ancillary or
pendent jurisdiction over the claim against Owen. Had
Kroger wished to sue both Owen and the Power District
in a single forum, she could have done so in a state court.
See Fawvor v. Texaco, Inc., 546 F. 2d 636, 640-41, 643
(5th Cir. 1977). Aldinger’s reliance on Kenrose Mfg. Co.
v. Fred Whitaker Co., supra, 512 F. 2d 890, which also
involved an attempt by a plaintiff in a diversity case to
assert state law claims against a nondiverse third-party
defendant is especially instructive.
The majority in distinguishing Aldinger fails to ad-
dress the rationale for disclaiming federal jurisdiction
presented in Aldinger:
Before it can be concluded that such jurisdiction ex-
ists, a federal court must satisfy itself not only that
Art. III permits it, but that Congress in the statutes
conferring jurisdiction has not expressly or by im-
plication negated its existence. [Jd. at 18.]
As Aldinger makes clear, 427 U. S. at 15-16, United Mine
Workers v. Gibbs, 383 U. S. 715 (1966), explicates the
federal courts’ power under article ITI in the face of con-
gressional silence. See also Comment, Aldinger v. Howard
and Pendent Jurisdiction, 77 Colum. L. Rev. 127, 128-30,
140-42 (1977). Gibbs does not deal with the issue before
App. 30
us, for here the Congress expressly limits by statute, 28
U.S. C. § 1332, the parties to which diversity jurisdiction
extends.
Since Strawbridge v. Curtiss, 7 U. 8. (3 Cranch) 267
(1806), it has been the rule that general diversity juris-
diction over a state law claim requires complete diversity
between plaintiffs and defendants. The parties to this
claim do not satisfy this requirement. Congress has com-
manded that diversity jurisdiction not extend to claims
involving parties such as these. See Fawvor v. Texaco,
Inc., supra, 546 F. 2d at 638-39; Comment, supra, 77
Colum. L. Rev. at 147.4" As Judge Smith correctly ob-
serves, supra at 12 and 14 n. 25, citing Fawvor v. Texaco,
Inc., supra, 546 F. 2d 636, and Kenrose Mfg. Co. v. Fred
Whitaker Co., supra, 512 F. 2d 890, the majority of fed-
eral courts support the view that an independent basis
of jurisdiction is necessary to support a plaintiff’s action
against a third-party defendant. It also appears that we
are thé first court of appeals to rule to the contrary. In
41 A congressional intent to negate pendent jurisdiction
cannot be inferred from the majority of jurisdictional
statutes, which are intended as affirmative grants of
jurisdiction only. Some jurisdictional statutes, how-
ever, evince a congressional decision that certain claims
should not be heard in federal court. The federal ques-
tion and diversity statutes, in particular, require that
the claims exc $10,000, and, in the diversity statute,
that the parties be of diverse citizenship. The policies
which called for the exclusion of claims not meeting
pete lenener> also seem to demand that they not
‘be through the exercise of pendent jurisdiction.
Since Congress excluded these claims from federal
jurisdiction, their adjudication through pendent juris-
diction seems clearly to frustrate congressional intent.
[77 Colum. L. Rev. at 147 (footnotes omitted). ]
App. 31
addition to the cases cited by the majority, see Saalfrank
v. O’Daniel, 533 F. 2d 325 (6th Cir.), cert. denied sub nom.
Saalfrank v. Parkview Mem. Hosp., 429 U. S. 922 (1976) ;
Rosario v. American Export-Isbrandtsen Lines, Inc., 531
F. 2d 1227, 1233 & n. 17 (3d Cir.), cert. denied sub nom.
Rosario v. United States, 429 U. S. 857 (1976). Thus, I
would conclude that Congress did not intend that federal
courts take jurisdiction over a plaintiff’s claim against a
third-party defendant, in the absence of independent jur-
isdictional grounds.
I agree with Judge Smith’s critical comments relating
to Owen’s concealment of the facts concerning diversity
until well into the trial. However, it is well settled that
a party cannot by his conduct be precluded through laches,
waiver, or estoppel from raising a lack of federal subject
matter jurisdiction. See, e.g., American Fire & Cas. Co.
v. Finn, 341 U.S. 6 (1951) (party who removed case to
federal court, and successfully resisted plaintiff’s at-
tempts to have it remanded, can raise want of jurisdiction
after verdict for plaintiff); Mitchell v. Maurer 293 U.S.
237 (1934) (party never raised lack of jurisdiction in any
court); Mansfield, C. @ L. M. Ry. v. Swan, 111 U.S. 379
(1884) (same as Finn, supra). That counsel for defend-
ant played fast and loose with the court calls for sanctions
by the court against the responsible parties, not the exer-
cise of jurisdiction which the federal court does not other-
wise possess. See Mansfield, C. d L. M. Ry. v. Swan,
supra, 111 U.S. at 386-89; Basso v. Utah Power & Light
Co., 495 F.2d 906, 910 (10th Cir. 1974); Page v. Wright,
116 F. 2d 449, 454-55 (7th Cir. 1940).
When a litigant’s attorney has intentionally misled
the court as to the jurisdictional facts and thus ‘‘sand-
App. 32
bags’’ his opponent and the district judge, as appears to
be the case here, the court possesses ample power to im-
pose appropriate sanctions against the malefactor. Under
somewhat similar circumstances, the Tenth Circuit dis-
missed the plaintiff’s cause for lack of diversity, but
directed that ‘‘all reasonable costs and expenses should be
assessed against defendant including a reasonable attor-
ney’s fee on appeal.’’ That court also noted the existence
of a state ‘‘saving statute’’ which would permit the plain-
tiff to pursue a remedy in state court after the federal dis-
missal, despite the passage of the usual limitations period
for the type of action involved. Basso v. Utah Power &
Itght Co., supra, 495 F.2d at 910-11.
Similarly, I would remand this case to the district
court with directions to dismiss the action for want of
subject matter jurisdiction, leaving plaintiff free to pursue
her remedy in the Iowa state courts.*? Moreover, on re-
mand, I would direct the district court to conduct a hear-
ing relative to imposing sanctions against defendant or
defendant’s counsel, or both. If found appropriate, those
sanctions may include all costs and expenses incurred by
42 | do not agree with the district court’s conclusion that if
this action is dismissed for lack of jurisdiction, Kroger will
be barred from all relief by the statute of limitations. lowa
Code Ann. § 614.10 (West), provides that
If, after the commencement of an action, the plain-
tiff, for any cause except negligence in its prosecution,
fails therein, and a new one is brought within six
months thereafter, the second shall, for the purposes
paeete contemplated, be held a continuation of the
rst.
The facts of this case appear to bring it within this savings
provision.
App. 33
plaintiff, Geraldine Kroger, in pressing the action against
Owen Equipment and may include a reasonable sum for
attorneys’ fees for services, pretrial, trial, and on this
appeal.
In sum, while I disagree with the majority’s disposi-
tion of this appeal, I emphatically agree that a drastic
remedy is necessary to deter other litigants from engag-
ing in concealment and delay in presenting known juris-
dictional facts to the court by the party in possession of
those facts in order to obtain an advantage in the con-
duct of litigation at the expense, not only of the oppos-
ing party, but of the court itself. Such conduct substan-
tially hinders the proper and efficient administration of
justice and wastes the time of judges, court personnel, and
juries in the already overburdened federal courts. This
dissenter suggests that such sanctions may be a more ap-
propriate remedy for the abuse practiced in this case than
opening the door to even more diversity cases than those
already competing for judicial attention on the crowded
dockets of the federal courts, particularly when state
courts can dispose of all the state law claims involved in
such cases. See Ayoub v. Helm’s Express, Inc., 300 F.
Supp. 473 (W. D. Pa. 1969).
A true copy.
Attest :
CLERK, U. S. COURT OF APPEALS
EIGHTH CIRCUIT
App. 34
APPENDIX
The case was commenced by a complaint filed on No-
vember 24, 1972, by Geraldine Kroger, an Iowa citizen,
administratrix of the estate of James D. Kroger, deceased,
against the Omaha Public Power District (hereafter
“OPPD”), a public corporation existing under the laws of
the State of Nebraska, and having its principal place of
business in Omaha, for negligence in the construction,
maintenance, and operation of its power transmission line
alleged to have been the proximate cause of plaintiff’s
decedent’s death. The Paxton & Vierling Steel Company
(hereafter “Paxton”), also a Nebraska corporation, was
made a party defendant “for the sole and only purpose of
determining its rights under the Workmen’s Compensation
Act, if any * * *.” The parties agree that Paxton was
dismissed out of this phase of the action, appellant stat-
ing, “because of a jurisdictional defect.” The order with
respect thereto is not found in the record before us.
OPPD thereafter filed a third-party complaint against
Paxton and “Owen Construction Co., Inc.” (hereafter
“Owen Construction’). Shortly thereafter, OPPD filed a
motion for dismissal of Owen Construction, having ascer-
tained that its proper corporate name was Owen Equip-
ment and Erection Co. (hereafter “Owen Equipment”’).
The motion was granted and the court ordered that Owen
Construction, “an Iowa corporation,” be dismissed with
prejudice and granted OPPD permission to file an
‘Amended Third-Party Complaint naming Owen Equip-
ment and Erection Co., a Nebraska corporation, as an ad-
ditional Third-Party Defendant * * *.” OPPD’s amended
third-party complaint against Owen Equipment, “a Ne-
App. 35
braska corporation,” was subsequently filed. This ‘is the
Owen corporation remaining in the case.
Owen Equipment’s answer to OPPD’s amended third-
party complaint stated as follows:
1. Admits that Owen Equipment and Erection Com-
pany is a corporation organized and existing un-
der the laws of the State of Nebraska.
2. Denies each and every other allegation con-
tained in said Third-Party Complaint except those
allegations which would be in the nature of ad-
missions against the interest of the third-party
plaintiff.
Plaintiff Kroger moved also for an order permitting
her to add as a party defendant Owen Equipment, “a
Nebraska corporation.’’ Plaintiff filed such amended com-
plaint against Owen Equipment, on November 9, 1973,
describing it as “a Nebraska corporation with its prin-
cipal place of business in Nebraska.” Owen Equipment’s
answer thereto stated in pertinent part that it:
1. Admits that Owen Equipment and Erection Com-
pany is a corporation organized and existing un-
der the Laws of the State of Nebraska.
2. Denies each and every other allegation contained
in said Amended Complaint, except those allega-
tions which would be in the nature of admissions
against the interest of the plaintiff.
OPPD hcd moved for summary judgment on October
30, 1973. On September 9, 1975, this court affirmed the
District Court’s judgment in favor of OPPD against the
plaintiff, dismissing OPPD, a Nebraska corporation, from
the cause. Kroger v. Omaha Public Power District, 523
F. 2d 161 (8th Cir. 1975).
App. 36
Shortly thereafter Owen Equipment’s motion for sum-
mary judgment, which had been filed in September of
1974 was heard and denied by the court. This motion,
by Owen Equipment, “a Nebraska Corporation,” raised no
issue of jurisdiction, made no point as to lack of diversity,
nor did it make any mention of where Owen Equipment’s
principal place of business might be. The motion was de-
nied on November 14, 1975, and trial commenced on Jan-
uary 12, 1976.
On January 13, 1976, during the trial, Owen Equip-
ment filed an answer asserting that the court lacked sub-
ject matter jurisdiction, but failing to specify lack of
diversity as the reason therefor. On January 14, 1976,
after having raised lack of diversity, Owen Equipment
moved for leave to file another amended answer which
like the answer of January 13, asserted lack of subject
matter jurisdiction but failed to specify lack of diversity.
The court denied Owen Equipment’s motion for leave to
file an‘amended answer.
?
App. 37
‘APPENDIX B
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
September Term, 1976
ty
Vw
76-1187
io)
GERALDINE KROGER, ETC.,
Appellee,
vs.
OWEN EQUIPMENT & ERECTION CO., ETC.,
Appellant.
st
Ww
APPEAL FROM THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF NEBRASKA
The Court having considered petition for rehearing
en banc filed by counsel for appellant and, being fully
advised in the premises, it is ordered that the petition
for rehearing en banc be, and it is hereby, denied by an
evenly divided Court.
Considering the petition for rehearing en banc as a
petition for rehearing, it is ordered that the petition for
rehearing also be, and it is hereby, denied.
August 16, 1977
App. 38
APPENDIX ©
STATE OF NEBRASKA)
) APFIDAVIT
COUNTY OF DOUGLAS)
Af..ant, being duly sworn on oath deposes and states
as follows:
1. That he is an attorney associated with the law firm
of Swarr, May, Smith & Andersen, 3535 Harney Street, Omaha, Neb-
raska. That said firm represents Paxton & Vierling Steel Co. and
Owen Equipment and Erection Co. (during the period of the latter's
corporate existence) on a regular basis. That during 1972 and
1973 Paxton & Vierling Steel Co. and Owen Equipment and Erection
Co. were served with summons in a case in the United States District
Court for the District of Nebraska entitled Geraldine Kroger v.
Omaha Public Power District, case number 72-0-481. That defense
of any ciaims made against the above two parties was immediately
turned over to the parties’ liability carrier. The carrier
employed the law offices of Emil F. Sodoro to represent the
parties.
2. That the undersigned saw to it that all information,
documents and records of the parties requested by the carrier or
its attorneys was provided. Other than providing such documents,
being present at conferences, depositions of the employees of the
parties, and at trial, our firm was not involved in the above-
captioned litigation, nor familiar with the progression of said
litigation.
3. On the morning of January 6, 1976, I was informed
by Mr. David Johnson that trial was to commence at 1:30 P.M. of
that day. During the noon hour of January 6, 1976, another
lawyer in the firm and I were discussing the case in a conver-
sational manner when he inquired of me what the basis of federal
jurisdiction was and where Paxton & Vierling Steel Co.'s princi-
pal place of business was. He was interested in that he was in
the process of commencing suit in federal court on the client's
behalf. This conversation aroused my curiosity concerning the
Kroger case. Upon my return to the office, I examined our firm
file to determine whether plaintiff was an Iowa or Nebraska
resident. I discovered plaintiff was an Iowa resident. I
attemptéd to call Mr. Johnson but could not reach him.
4. Since someone from the firm had been asked by the
client to observe the trial, I went to the courthouse that after-
noon and arrived during voir dire examination. After selection of
the jury, there was a recess. During the recess, I informed Mr.
Johnson that it appeared to me that there was no jurisdiction
because in my view Owen Equipment and Erection Co. had its princi-
pal place of business in Carter Lake, Iowa. Mr. Johnson stated
that that fact had never occurred to him. I suggested he should
apprise the court of that possibility. Mr. Johnson stated he
would check it out first.
5. The following morning, I was present in Mr. Johnson's
office prior to trial. Mr. Johnson was interviewing Mr. David
Morrow. After the interview was completed, we again discussed
the question of jurisdiction. Prior to leaving Mr. Johnson's office,
we reviewed the pleadings and it appeared to us from the pleadings
that there had never been complete diversity. Mr. Johnson instruct-
ed a law clerk to research the question and submit a brief to Mr.
Johnson as quickly as possible.
Purther Affiant saith not.
App. 39
STATE OF NEBRASKA)
) ss APFPIDAVIT
DAVID A. JOHNSON, of lawful age, being first duly
sworn on oath, deposes and says:
l. That he is associated with the law firm of Emil
F. Sodoro, P.C., the firm that represented Owen Equipment and
Erection Company in this action. The litigation file was
assigned to this affiant on or about November, 1973, and this
affiant was actively involved as attorney for the said Owen
from that time through trial.
2. This affiant has carefully reviewed the opinion
of this court filed June 21, 1977, particularly in light of this
court's finding that defendant engaged in “subtle and adroit
pleading", that defendant “connived for himself an unfair
advantage” and that the question of the citizenship of Owen had
been “concealed” for some two years after the filing of the
Amended Complaint. This affiant adamantly denies that any of
the above findings by this court are true.
3. This affiant further states that he never engaged
in any intentional concealment of the citizenship of Owen. That
he is unaware of anyone associated or employed by defendant or
any of defendant's representatives or anyone, for that matter,
who intentionally concealed the citizenship of Owen at any time
before trial.
4. This affianc is unaware of the issue ever being
discussed, communicated, alluded to, or thought of by anyone
until the second day of trial when Mr. Robert Becker, corporate
counsel for Owen, mentioned the question to this affiant.
This affiant had the question researched and upon affirmation
that this was, in fact, a viable issue it was presented to the
court during trial.
Further affiant saith not.
Subscribed and sworn to before me s 29th day of
June, 1977.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.