Civ Pro 2 Notes 9/16/04


No class Friday September 24th, and no class Wednesday October 13th.


More on Owen Equipment & Erection Co. v. Kroger


We have jurisdictional problems!  A plaintiff may assert any claim against a third-party defendant that arises under the same transaction or occurrence.  After summary judgment, the power company has dropped out, and all that’s left is the claim against Owen.  But there is testimony that Owen actually has its principal place of business in Iowa!  Diversity is smershed!  We have Iowa on both sides of the “v”.  What do we do?  Isn’t this just a Zielinski issue?  The court in that case considered it “deemed admitted” that the defendant owned and operated the forklift in question.  Why can’t we do that here?  The lower courts try to stick it to Owen due to deficiencies in their pleading and strategy.  The Rules tell us that subject matter jurisdiction can be raised as an issue at any time, including at trial.  How do we balance a Rule that says this is a favored defense against the charge that Owen was trying to be manipulative and mislead the other party until the statute of limitations had run?


What should the court do in this situation?  On the one hand, the federal courts are courts of limited jurisdiction.  If the court doesn’t have subject matter jurisdiction over the case, theoretically the court has no power over the defendant.  It’s all a matter of whether the court will give substance to that rule of law or try to ease out of it.  The Supreme Court views it as a diversity issue.  But recall the source of diversity jurisdiction: Article III gives the federal courts power to try cases “between citizens of different States”.  It doesn’t say anything about complete diversity.  Statutory jurisdiction comes from 28 U.S.C. § 1332, which has the same language.  But decisions like Strawbridge give us the rule of complete diversity, where we interpret the statute to mean that you can’t have a party on one side who is from the same state as the other.  Justice Stewart says that this is different from the Rule 14 issue in that here we have a non-federal claim asserted by the plaintiff that could have all been brought in state court.  When you use impleader, you may not have other options because you weren’t the master of the complaint.


All of this answer that we get from Owen v. Kroger is later codified by the supplemental jurisdiction statute: 28 U.S.C. § 1367.  It’s difficult.  The general rule is that there is supplemental jurisdiction over claims and parties that are part of the same case or controversy in a constitutional sense.  This includes joinder of additional parties.  That’s an efficiency rule.  What makes the statute difficult is that this is the general grant of power that is then restricted as to certain types of claims brought in certain types of ways.  Subsection (b) takes away certain types of jurisdiction.  You can’t get supplemental jurisdiction when jurisdiction is based only on 28 U.S.C. § 1332 (diversity jurisdiction) and when you’re trying to join up people (in certain ways, like Rule 14, 19, 20, and 24) who would destroy complete diversity.  So (a) says that you have supplemental jurisdiction over claims and parties, but (b) says that if you don’t have diversity, you don’t have supplemental jurisdiction, as long as you’re within certain categories.


So the intent of Congress was to codify the result of Owen v. Kroger.  How did they do?  In Owen, all the claims arise from the same case or controversy.  We could have three different cases if we wanted to, but it’s more efficient to put them all together.  What about OPPD’s claim against Owen?  The statute generally says that we’ll grant jurisdiction for anything that comes from the same case or controversy, but it’s a diversity case, and you don’t have supplemental jurisdiction over claims made by plaintiffs against third parties.  But this is a claim by a defendant, so there’s no problem!  What if Kroger had a federal question claim she could raise against Owen, like a federal statute about the operation of cranes?  Could she bring that claim?  § 1367 says this isn’t based solely on § 1332, so it’s good!


What if Owen sues Kroger for vandalizing the crane?  The defendant can certainly plead that claim, and § 1367(b) wouldn’t get in the way because it’s not the plaintiff’s claim.  It’s a claim by a third-party defendant against a plaintiff, which doesn’t fall into any of the § 1367(b) excluded categories.  Therefore, it must be okay!  If that’s okay, can Kroger then bring the wrongful death claim?  Is it a compulsory counterclaim?  Check out the statute.  Yeazell says that Kroger is now acting as a defendant, but Fairman says that the statute doesn’t allow this.  Kroger is still a plaintiff!  It looks like the wrongful death claim is still a claim made by a plaintiff against a person made a party under Rule 14.  This is one of the big problems of the statute: plaintiffs’ defensive claims barred by § 1367(b).  It doesn’t make any sense for them to be precluded, because the plaintiff was acting as if it were a defendant.


Say we have a plaintiff from Ohio with a state negligence claim against a Texan.  Let’s say the plaintiff uses Rule 20(a) to join another co-plaintiff from Texas who then turns around and asserts another state negligence claim against the Texas defendant.  This can’t be possible!  This is the absolute subversion of complete diversity.  The original lawsuit is okay, then you add someone later who will mess up complete diversity.  But, according to § 1367, this is allowed!  This is a claim made by a party joined under the Rules against the defendant!  Weird!  It’s not a claim by a plaintiff against a person made a party under Rule 20.  It’s a claim by a plaintiff against a defendant!  Had the drafters of the statute thought about it, they would have included this situation.  This is the so-called “gaping hole”!  No court has ever allowed this to go forward.  It has always been rejected on the ground that it’s so gross a violation of the concept of complete diversity that no matter how clear the statute seems on its face, decisions like Strawbridge don’t allow it.  There are concerns about this, though.


The Rule of Zahn


This rule says that in a diversity class action, every member of the class must exceed the amount in controversy ($75,000+).  It will be hard to put together diversity class action unless they’re major mass torts.  The problem is that the statute doesn’t say anything about Rule 23.  The way it’s constructed, you would only need one person to meet the $75,000 requirement, and then you could just bring in everyone else as supplemental.  The legislative history of the statute actually says that they want to preserve the rule of Zahn.  But the statute doesn’t say this!  The Fourth, Fifth, Seventh, Ninth, and Eleventh Circuits have said Zahn is no longer good law after § 1367.  The First, Third, Eighth and Tenth Circuits say Zahn is still good.  The Sixth Circuit sided with the Circuits that say it’s not good law.  Fairman blames the sloppy statute drafters!


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