Supplemental jurisdiction over claims by plaintiffs in diversity cases: making sense of 28 U.S.C. section 1367(b).

• Date: 01 June 1995
• Author: Gold, Darren J.
• Published date: 01 June 1995
• Author: Gold, Darren J.

INTRODUCTION

As courts of limited jurisdiction, the federal courts may only exercise subject matter jurisdiction over claims for which both constitutional and congressional authorization exist.(1) Constitutional authority for the exercise of jurisdiction(2) is found in Article III, Section 2, which enumerates the categories of cases and controversies to which federal judicial power extends.(3) The two most common constitutional categories of jurisdiction are federal question jurisdiction, which grants federal courts jurisdiction over claims "arising under" the Constitution, federal laws and treaties, and diversity jurisdiction, which grants federal courts jurisdiction to hear claims between citizens of different states. Congress has authorized the exercise of federal question jurisdiction by enacting 28 U.S.C. [sections] 1331, which grants federal courts the power to exercise jurisdiction over "all civil actions arising under the Constitution, laws or treaties of the United States,"(4) and diversity jurisdiction by enacting 28 U.S.C. [sections] 1332, which grants federal courts jurisdiction over all civil actions between citizens of different states in which the amount in controversy exceeds $50,000.(5)

Although both the Constitution and section 1332 provide for diversity jurisdiction--jurisdiction over claims between citizens of different states--section 1332's grant of diversity jurisdiction has been interpreted more narrowly. Article III authorizes federal courts to exercise jurisdiction where there is only minimal diversity --where at least one plaintiff and one defendant are citizens of different states.(6) On the other hand, section 1332 has been interpreted to require complete diversity--no plaintiff may be a citizen of the same state as any defendant.(7)

Because disputes often give rise to multiple legal claims, a party will often have a claim that is factually related to a claim within the jurisdiction of the federal courts, but that has no independent basis of federal jurisdiction. If the federal courts were prohibited from exercising jurisdiction over such a claim, a plaintiff with a valid federal claim and a factually related nonfederal claim(8) would face three unsatisfactory alternatives. First, the plaintiff could split the action, litigating the federal claim in federal court and the nonfederal claim in state court. This alternative would result in additional expense, a waste of judicial resources, and problems of collateral estoppel and res judicata.(9) Second, the plaintiff could forgo the nonfederal claim and proceed only on the federal claim in federal court. This option is obviously unappealing to a plaintiff with a meritorious nonfederal claim. Finally, the plaintiff could choose to litigate both the federal and nonfederal claims in state court. This alternative deprives the litigant of a federal forum, and, perhaps more importantly, is unavailable to a litigant with a federal claim for which federal jurisdiction is exclusive.(10)

The inability of federal courts to exercise jurisdiction over related nonfederal claims would create similar disadvantages for defendants in federal actions.(11) Without such jurisdiction, a defendant forced to litigate in federal court would be unable to assert closely related counterclaims, cross-claims, and third-party claims that have no independent basis of federal jurisdiction. Like plaintiffs with related nonfederal claims, defendants forced to litigate their nonfederal claims in state court would incur greater expense and face the possibility of inconsistent verdicts.(12)

In response to these concerns, federal courts developed the doctrines of pendent and ancillary jurisdiction. Pendent jurisdiction allowed a plaintiff with a federal question claim and a related(13) nonfederal claim to assert both claims in the original complaint in federal court. Ancillary jurisdiction authorized the exercise of jurisdiction over related nonfederal claims after the commencement of the lawsuit regardless of whether the plaintiff's original federal claim was based on a federal question or on diversity.

While there are obvious benefits to the exercise of pendent and ancillary jurisdiction, unlimited exercise of ancillary jurisdiction over claims by plaintiffs in diversity cases would eviscerate section 1332's requirement of complete diversity. For example, a plaintiff with a state law claim against both a diverse defendant and a nondiverse defendant would be able to bring a diversity suit only against the diverse defendant in federal court, and then wait for the nondiverse defendant to be added(14) under the court's ancillary jurisdiction. Similarly, a diverse plaintiff and a nondiverse plaintiff would be able to evade the complete diversity requirement by having only the diverse plaintiff initiate the lawsuit and waiting for the nondiverse plaintiff to be joined or to intervene under the court's ancillary jurisdiction. Accordingly, courts have refused to exercise ancillary jurisdiction in diversity cases over related nonfederal claims by plaintiffs against nondiverse third parties when doing so would allow plaintiffs to circumvent the complete diversity requirement.(15)

In 1990, Congress codified the doctrines of pendent and ancillary jurisdiction at 28 U.S.C. [sections] 1367(16) under the new name of "supplemental jurisdiction."(17) Subsection (a) of section 1367 authorizes federal courts to exercise supplemental jurisdiction over any nonfederal claim that is so related to a federal claim that the claims "form part of the same case or controversy."(18) However, consistent with prior practice, subsection (b) restricts the exercise of supplemental jurisdiction in diversity cases over claims by plaintiffs against nondiverse parties. Specifically, subsection (b) prohibits the exercise of supplemental jurisdiction in diversity cases(19) over claims by plaintiffs against nondiverse persons made parties under Rules 14, 19, 20, or 24, and over claims by nondiverse plaintiffs who are joined under Rule 19 or who intervene under Rule 24 "when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332."(20)

Despite Congress's intent to preserve prior case law, all courts appear to have interpreted the statute to bar completely the exercise of supplemental jurisdiction over those claims by plaintiffs included in subsection (b).(21) This reading has confirmed the fears of commentators that the statute might be interpreted to eliminate the previously recognized authority of courts to exercise supplemental jurisdiction in diversity cases over certain claims by plaintiffs, such as defensive claims and claims by or against nondiverse intervenors as of right.(22) Some commentators, however, have suggested that the final phrase of subsection (b) provides courts with sufficient statutory leeway to avoid these harsh results,(23) but they have failed to explain why the statute should be read in this manner.

This Note examines the language and legislative history of section 1367(b) and proposes a uniform test for determining the circumstances in which subsection (b) authorizes the exercise of supplemental jurisdiction. Part I of this Note explains the doctrines of pendent and ancillary jurisdiction and examines how the Supreme Court's decision in Finley v. United States(24) called these doctrines into question. Part II examines the language and legislative history of section 1367 and concludes that the statute only prohibits the exercise of supplemental jurisdiction over claims by plaintiffs in diversity cases when doing so would permit plaintiffs to circumvent the complete diversity requirement. Part III proposes a bright-line rule to prevent plaintiffs from evading the complete diversity requirement: Courts should be prohibited from exercising supplemental jurisdiction over claims by plaintiffs in diversity cases that, but for the lack of complete diversity, could have been included in the original complaint.

1. THE EVOLUTION OF SUPPLEMENTAL JURISDICTION

   The federal courts developed the doctrines of pendent and ancillary jurisdiction to promote the efficient disposition of increasingly complex lawsuits and to avoid piecemeal litigation. Section 1367 was enacted to codify these doctrines.(25) Thus, in order to provide the background necessary to understand the supplemental jurisdiction statute, this Part reviews the doctrines of pendent and ancillary jurisdiction. Section I.A briefly explains the doctrines of pendent and ancillary jurisdiction. Section I.B examines how the unlimited exercise of ancillary jurisdiction in diversity cases would permit plaintiffs to circumvent section 1332's complete diversity requirement and how courts dealt with this problem prior to section 1367. Finally, section I.C discusses Finley v. United States(26) and the resulting need for Congress to authorize the exercise of pendent and ancillary jurisdiction.

   1. The Doctrines of Pendent and Ancillary Jurisdiction

      The common law doctrines of pendent and ancillary jurisdiction served the same essential function and operated similarly.(27) But despite their similarity, pendent and ancillary jurisdiction developed separately(28) and traditionally have been treated as two distinct concepts.(29)

      The doctrine of pendent jurisdiction has traditionally been divided into two parts: pendent claim jurisdiction and pendent party jurisdiction.(30) Under pendent claim jurisdiction, a plaintiff with a federal question claim could include a closely related state law claim against the same defendant in the original federal complaint.(31) For example, a plaintiff who brought an action in federal court for a violation of the federal antitrust laws could also assert a related state law claim for unfair trade practices against the same defendant. Pendent party jurisdiction, on the other hand, expanded the scope of pendent jurisdiction by allowing a...