§ 1367: Supplemental Jurisdiction

(a) District court will have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy

(b) If district courts have original jurisdiction founded solely on diversity (§1332), then those courts will not have supplemental jurisdiction made under Rules 14, 19, 20, or 24

(c) District courts may decline to exercise jurisdiction if:

• 
  Claim rises a novel or complex issue
  
• 
  Claim substantially predominates over the claim or claims over which the district court has jurisdiction
  
• 
  District court has dismissed all claims over which it has original jurisdiction
  
• 
  Other compelling reasons, in exceptional circumstances
  

• 
  Is there a rule that allows it? Yes, Rule 18 permits it
  
• 
  Is there supplemental jurisdiction?
  
  • 
    Probably not because it does not arise out of the same case or controversy (§ 1367)
    

• 
  Yes, supplemental jurisdiction under §1367
  
• 
  Joinder includes jurisdiction under new, additional parties
  
• 
  Arises from same case or controversy because it all arises out the one harassment incident
  

• 
  No jurisdiction because this original jurisdiction is founded solely on diversity and cannot have supplemental if brought under Rule 20 (as this was…permissive joinder)
  
• 
  This would mess up complete diversity
  

1. 
   Compulsory Counterclaims
   
   1. 
      A pleading must state as a counterclaim any claim. .
      
      1. 
         Aris[ing] out of the transaction or occurrence that is the subject matter of the opposing party's claim; and
         
      2. 
         Does not require adding another party over whom the court cannot acquire jurisdiction.
         
2. 
   Permissive Counterclaim
   

• 
  A pleading may state as a counterclaim against an opposing party any claim that is not compulsory
  

• 
  Underlying claim: Truth in Lending Act (lenders must make certain disclosures)
  
• 
  Defendants want to bring a counterclaim for her default on the debt that she owed
  
  • 
    Why did they wait? Probably because she had no money and wouldn’t be worth it to go to court
    
  • 
    Why bring it now? Plaintiff is now creating assets that lender can now recover from (damages, attorneys fees)
    
• 
  Issue: is this a compulsory counterclaim under 13(a)?
  
• 
  Why does it matter?
  
  • 
    This is defendant’s only real chance to collect their money
    
• 
  Premise: if it is, there is supplemental jurisdiction. See 28 USC 1367.
  
  • 
    Compulsory counterclaim exists when it arises out of same transaction or occurrence…there is a jurisdictional basis now under 1367
    
  • 
    If we have it under Rule 13, then we have it under 1367
    
• 
  If we don’t satisfy Rule 13, then there needs to be an independent basis for jurisdiction. There is not so court could not hear this case if this is not compulsory counterclaim
  
• 
  Court’s Holding: this is a compulsory counterclaim
  
  • 
    Logical Reasoning Test: is counterclaim logically related to claim
    
  • 
    But really is a balancing of policy options
    
    1. 
       Broad joinder: want to have controversies decided together in one court as a matter of efficiency; VERSUS…
       
    2. 
       Truth in Lending: Congress has set up statute that allows private citizens to bring lawsuits by offering attorneys fees to make sure that lenders comply with certain disclosures
       
• 
  How are these two claims related?
  
  • 
    Defense says both over the same loan
    
  • 
    Plaintiff says that there were not proper disclosures while counterclaim is how I didn’t perform on the contract
    

• 
  Failure to assert compulsory counterclaim results in waiver: defendant barred from bringing it in separate suit…so attorney should always bring all possible claims in case they are compulsory claims
  
• 
  If it’s a compulsory counterclaim, supplementary jurisdiction will attach:
  
  • 
    Explain why: how does this fit into structure of §1367?
    
  • 
    “Same transaction or occurrence” will be part of “same case or controversy”
    

A pleading may state as a cross-claim any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein or relating to any property that is the subject matter of the original action. Such cross-claim may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant

• 
  Permissive cross-claims are not permitted; must be related
  

But what about Rule 18(a)? Does 13(g) make 18(a) entirely ineffective? Must read Rule 18 in connection with 13(g)

• 
  Can only be cross-claim if it’s a related claim (under 13(g))
  
• 
  Once there is a proper 13(g) claim, then the floodgates open under Rule 18
  
• 
  Still have to have a jurisdictional basis
  

1. 
   What if M wants to assert that Dealer is responsible for any fault?
   

1. 
   Deny complaint; no cross claim proper
   

1. 
   What if M wants to sue D for amount owed on delivered cars?
   

1. 
   Not possible: cross-claim doesn’t arise from same t/o
   
2. 
   Rule 13(g)
   

1. 
   Dealer wants to assert claim against P for unpaid repair bill on different car. Possible?
   

1. 
   Yes, permissive counterclaim--but requires jurisdictional basis
   

1. 
   Dealer and Manufacturer both want to assert that there was no defect in the vehicle and that the accident was solely the result of plaintiff’s negligence. What pleading?
   
   1. 
      Deny plaintiff’s allegation that it was defective (this is not an affirmative defense)
      

1. 
   Persons Who May Join or Be Joined.
   

1. 
   Plaintiffs: Persons may join in one action as plaintiffs if:
   

1. 
   They assert any right to relief . . . arising out of the same transaction, occurrence, or series of transactions or occurrences; and
   
2. 
   Any question of law or fact common to all these plaintiffs will arise in the action.
   

• 
  Who sued GM? 10 employees as individuals and as class representatives
  
  • 
    Variety of different alleged discriminatory acts:
    
  • 
    Discrimination on basis of ___ in _____:
    
    • 
      A>>>Race--promotions>>>>
      
    • 
      B>>>Race--firing>>>>>>>>>
      
    • 
      C>>>Race--hiring>>>>>>>>>
      
    • 
      D>>>Gender--hiring>>>>>>>
      
    • 
      E>>>Race & gender--relief time>>
      
• 
  Why did plaintiffs want to join in single suit? Looks better to a jury to have a large group and the cumulative evidence will look more compelling against GM
  
• 
  Why didn’t GM? At an individual trial, GM will make the defense that he wasn’t fired because he was black but because he was a bad employee…easier to make this case with one person rather than with a whole group of them
  
• 
  What did the Court say and why?
  
  • 
    District court tried to separate actions; 8^th Circuit said this was abuse
    
  • 
    Asked: do these claims “arise[] out of the same transaction?” Same general policy of discrimination…by all of them bringing claims together (alleged in their complaint)
    
  • 
    Logical relationship test
    
    • 
      Is there a “common issue of law or fact?”
      
  • 
    By concluding that cases should be joined together, they are taking a stand on substantive issue (procedural have impact on substantive merits of the case)
    

• 
  Is this the same or different than Mosley?
  
  • 
    Different than Mosley. Do not happen out of same occurrence or transaction.
    
  • 
    Not like City of Oxford had a general policy of negligence (to go around hitting people)
    
  • 
    Plaintiff’s lawyers: City hasn’t been training employees properly (or doesn’t have a good safety policy) and so these accidents occur
    

More on Rule 20

• 
  What are the consequences of misjoinder? You won’t have your case dismissed, but claim could be divided up
  
• 
  Procedural dance:
  
  • 
    Plaintiff may attempt to join under Rule 20
    
    • 
      Local rule re: identification of related claims (?)…Designate it as related according to local rules
      
  • 
    Defendant can then challenge joinder (plaintiffs usually want to join)
    
  • 
    REGARDLESS of Rule 20 decision, judge exercises independent power under Rule 42
    
    • 
      Under 42(a): Court may consolidate all or portions of cases that “involve a common question of law or fact”
      
    • 
      Under 42(b), Court may order “separate trial of one or more” issues, claims, etc. “to avoid prejudice, or to expedite and economize.”
      
      • 
        Even if Defense lose under Rule 20, they can argue to separate under Rule 42…then will be up to the judge
        
• 
  What are the consequences of a broad joinder rule for future litigants against GM? Pitfalls of Broad Joinder: An Imaginary Mosley Sequence
  
  • 
    Mosley goes to judgment.
    
  • 
    Next lawsuit:
    
  • 
    12 Women employees v. GM
    
  • 
    >>Discrimination on basis of Pregnancy>>
    
    • 
      Same time period as Mosley
      
    • 
      Some plaintiffs also plaintiffs in Mosley
      
  • 
    What’s GM’s winning defense to this suit? Res judicata. These are precluded, and the women should have had to bring these claims with the original Mosley plaintiffs
    
    • 
      Broad joinder = broad preclusion
      
  • 
    What remedy will the women employees be left with?
    

• 
  Rule 8
  
  • 
    Allows alternative claims
    
• 
  Rule 18
  
  • 
    Allows joining of unrelated claims, once you have one
    
• 
  Rule 20
  
  • 
    Allows joining more plaintiffs & defendants from same t/o and common question of law or fact
    
• 
  Rule 13(a)&(b)
  
  • 
    Allows counterclaims
    
• 
  Rule 13(g)
  
  • 
    Allows cross-claims among co-parties
    

But, in addition to Rules, we have to have a jurisdictional basis (i.e. PJ and SMJ)

A defending party may, as a third-party plaintiff, serve a summons and complaint on a non-party who is or may be liable to it for all or part of the plaintiff's claim against it.

• 
  “If it is me, then it is him.” NOT: “It’s not me; it’s him.”
  
• 
  Rule 14 doesn’t create substantive liability--would go to contribution (tort law) or express or implied indemnity (contract law)
  

Jill consumer -------- Hardware Store

Injury from defective product

• 
  Store sold product in original carton.
  
• 
  State law makes store liable if product defective
  
• 
  What should store do? Look at contract to see if manufacturer would indemnify (expressly or impliedly) the store
  
  • 
    Under tort law, any judgment against store could get contribution from manufacturer
    

What if…

–Defective product

–Judgment for plaintiff
#2. Store v. Manufacturer

–Indemnity for defective product

–Manufacturer precluded from contending that the product was not defective because they were precluded from first lawsuit and didn’t have an opportunity to raise it

• 
  So you could wind up with differing jury verdicts
  

If Retailer can implead Manufacturer----

1. 
   There may be some minor cost savings to system from having one rather than two proceedings involving the same injury.
   
2. 
   Because Manufacturer is a party, it will be bound by the determination of the defectiveness of the product.
   

• 
  Store counterclaims against Consumer for unpaid bill
  
  • 
    Compulsory or permissive counterclaim? Would want to know what it is an unpaid bill for (compulsory--if it is for the saw that injured her)
    
  • 
    Permissive will have to have independent basis for jurisdiction
    
• 
  Consumer has turned financial affairs over to financial consultant, to whom bills are supposed to go and who is supposed to pay them.
  
  • 
    What should Consumer do when served with counterclaim? Double impleader. If Store am liable for unpaid bill, then so is the service I use to pay my bills, and Jill (consumer) can implead a third party (Rule 14(b)). Store can implead manufacturer.
    

• 
  Court allows Latco to bring in ITW
  
• 
  There MUST BE a substantive basis under Alabama law for allowing the impleader (which the court finds this doctrine of implied indemnification)
  

• 
  “if third party’s liability is in some way dependent on outcome of original action.”
  
  • 
    “third party liability must in some way be derivative of the original claim.”
    
  • 
    “third party may be impleaded only when the original defendant is trying to pass all or part of the liability onto that third party”
    
• 
  But not—
  
  • 
    If third party “solely liable to the plaintiff”
    
  • 
    “A third party claim is not appropriate where defendant . . . says, in effect, ‘It was him, not me.’”
    
• 
  Impleader creates no substantive liability.
  
  • 
    If Court had decided that Alabama law did not allow “implied contractual indemnity” then no “may be liable” theory and no impleader?
    
• 
  If there’s a right to indemnity or contribution in the substantive law, impleader allows the suit for indemnity to be combined with the suit that creates the conditions for indemnification.
  

• 
  Once impleaded, could ITW assert a claim against Latco for an unpaid bill?
  
  • 
    Yes, 14(a)(2)
    
• 
  Could Price assert a claim against ITW?
  
  • 
    Yes, 14(a)(3)
    
• 
  Can ITW assert that the houses weren’t defective at all, but instead Price’s poor maintenance led to their failure?
  
  • 
    No, this is a defense you would make at trial/motion for SJ based on facts
    
• 
  If Latco believes that the houses were in fact destroyed by Farmer Jones, a rival chicken farmer, can Latco implead Jones?
  
  • 
    No
    

• 
  (a) Yes
  
• 
  (b) Yes, 14(a)(5)
  
  • 
    But Nails waited 6 months to bring in Metal Co.
    
  • 
    14(a)(1) deals with timing: third party plaintiff must obtain courts leave after 14 days after serving its original answer
    
  • 
    Two objections: not a proper impleader (not “is or may be liable”) and timeliness
    

Problems (p.761)

1. 
   #1
   
   1. 
      Possible cross-claim (13(g))
      
      1. 
         We have a rule, but we need jurisdiction (1367): arises out of the same transaction
         
      2. 
         1367(b): because this is founded on diversity only under 1332, must look here, but none rules of these apply
         
      3. 
         So federal court will have supplemental jurisdiction over a state law claim
         
   2. 
      Wouldn’t file a pleading (not asserting a claim against anyone…)
      
      1. 
         All they are saying “it wasn’t me, it was him”
         
      2. 
         So they would just answer and assert this
         
   3. 
      Does not satisfy 13(g) because it is not arising out of the same transaction
      
      1. 
         But if this was related, under Rule 18, the manufacturer can assert other unrelated claims
         
   4. 
      D wants to assert counterclaim against plaintiff
      
      1. 
         Allowed under 13(b)--permissive counterclaim
         
      2. 
         Jurisdiction? Yes.
         
   5. 
      Can assert contributory negligence
      
2. 
   #2
   
   1. 
      Defendant wants to sue plaintiff and competitor
      
   2. 
      13(a) counterclaim against plaintiff
      
   3. 
      20 claim against competitor
      

*See note-cards for other problems

• 
  Kroger brought a wrongful death suit against OPPD based on diversity
  
• 
  Possible defendants:
  
  • 
    OPPD
    
  • 
    Paxton (employer)
    
    • 
      Limited recovery because of Workers Comp.
      
  • 
    Owen Equipment (owner of crane)
    
• 
  Kroger originally just sues OPPD
  
• 
  Kroger wants to now assert a claim against Owen--14(a) permits it, but does court have jurisdiction?
  
• 
  District court dismisses OPPD…so we are left with Kroger and Owen
  
• 
  Owen wanted to claim that there wasn’t SMJ because they are from the same state
  
  • 
    Owen moved to dismiss under Rule 12(h)(3)--do not waive SMJ…can even be raised at trial
    
• 
  US SC: since there is no complete diversity of citizenship, there can be no jurisdiction
  
• 
  In original matter, Kroger could not have sued Owen and OOPD. Cannot sue later either.
  
• 
  1367(b) codifies Kroger
  
• 
  Rules would be useless if you could get around them, as Kroger tried to do once they got into federal court
  

• 
  Is there federal question jurisdiction?
  
  • 
    Joined claim arises under federal law
    
• 
  Is there diversity jurisdiction?
  
  • 
    Complete diversity of citizenship AND
    
  • 
    Claim is for more than $75,000
    
• 
  Is there supplemental jurisdiction under 1367?
  
  • 
    Is original claim founded on federal question?
    
• 
  If so, then there is supplemental jurisdiction over the joined claim if the joined claim arises out of the same case or controversy. 1367(a)
  
  • 
    Is original claim founded on diversity jurisdiction?
    
• 
  If so, then there is still supplemental jurisdiction over the joined claim if it arises out of the same case or controversy UNLESS it is a claim by the plaintiff against a party joined under Rule 14, 19, 20, or 24 AND exercising supplemental jurisdiction destroys complete diversity. 1367(b).
  

• 
  Rule 19: Parties arguing that justice will not be served if court proceeds without some non-party.
  
• 
  Rule 24: Non-party arguing that justice will not be served if court does not allow intervention of that non-party.
  

(a) Persons Required to be Joined if Feasible

(1) Required Party. A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if:

(A) In that person’s absence, the court cannot accord complete relief among existing parties; or

(B) That person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may:

(i) As a practical matter impair or impede the person’s ability to protect the interest; or

(ii) Leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.
Overview of Rule 19

• 
  19(a): is non-party important enough to case that it should be joined if possible?
  
  • 
    Explored in Temple
    
  • 
    If not, no 19(b) analysis necessary
    
• 
  19(b): is non-party “indispensable” such that court cannot proceed without it?
  
  • 
    Explored in Helzberg’s
    

Note 6: most frequent cases for joinder under Rule 19

• 
  Joint obligees or obligors, but not all joint obligees or obligors are joined as parties
  
• 
  Ownership of real or personal property in which some persons claiming an interest are not included as parties
  
• 
  Representative parties in which either the representative or some of the parties being represented are not included
  
• 
  Limited fund or pool of assets, such that potential claimants who are not parties will find the funds depleted when their cases are heard
  

• 
  Temple is injured when a “plate and screw” was implanted in his lower spine. He sued the manufacturer of the device (Synthes) for products liability in federal court.
  
• 
  Temple also sued the doctor and hospital for negligence/malpractice in state court
  
• 
  Synthes’ argument under Rule 19: two cases going on that involve the same plaintiff and controversy (efficiency argument)
  
• 
  US SC: district court “abused its discretion”
  
  • 
    Not necessary for all joint tortfeasors to be named as defendants in a single lawsuit
    
  • 
    A tortfeasor with the usual joint and several liability is merely a permissive party to action against another with like liability
    
  • 
    No inquiry into Rule 19(b) is necessary because the threshold requirement of Rule 19(a) has not been satisfied
    
    • 
      In that person’s absence, the court cannot accord complete relief among parties
      
      • 
        Doesn’t meet this because complete relief will be given in two court hearings (federal and state proceedings)
        
    • 
      That person clams an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may
      
      • 
        Impair or impede the person’s ability to protect his interest:
        
        • 
          Doctor/Hospital can still argue in state court that they did not do anything wrong because they were not parties to federal litigation so their interests were not impeded
          
      • 
        Inconsistent judgments:
        
        • 
          Possibility of inconsistent judgments but not enough of a substantial risk
          
  • 
    Other reason: party autonomy…it was the plaintiff’s decision to bring two separate lawsuits…they chose to allow the opposing parties to point the finger at the empty chair
    

If a person who is required to be joined if feasible cannot be joined, the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed. The factors for the court to consider include:

(1) The extent to which a judgment rendered in the person’s absence might prejudice that person or the existing parties;

(2) The extent to which any prejudice could be lessened or avoided by:

(A) Protective provisions in the judgment;

(B) Shaping the relief; or

(C) Other measures;

(3) Whether a judgment rendered in the person’s absence would be adequate; and

(4) Whether the plaintiff would have an adequate remedy if the action were dismissed for non-joinder.
Helzberg’s Diamond Shops v. Valley West Des Moines Shopping Center

• 
  Helzberg sued Valley West Mall for breach of lease agreement when Valley West allowed Lord’s (another jewelry store) to sign their own lease in the mall
  
• 
  Helzberg wants an injunction against VW to stop its lease with Lord’s
  
• 
  Most likely outcome: court will issue injunction against VW and then Lord’s will sue them saying that they are breaching the lease
  
  • 
    Strong, strong risk of inconsistent judgments…satisfies 19(a)!
    
• 
  Why can’t they just join Lord’s? No PJ over Lord’s
  
• 
  Question for Court: should we proceed without Lord’s? What should we do because we don’t have PJ?
  
• 
  Court says no prejudice without Lord’s
  
  • 
    Prejudice to Helzberg? No
    
  • 
    Prejudice to VW? VW did this to themselves by executing a bad lease with Lord’s…if they are subject to inconsistent judgments, it’s their fault.
    
• 
  Now look at 19(b)…Lord’s is not an indispensible party