OWEN EQUIPMENT & ERECTION CO. V. KROGER
United States Supreme Court
437 U.S. 365 (1978)
Mr. Justice Stewart delivered the opinion of the Court [two justices dissented].
In an action in which federal jurisdiction is based on diversity of citizenship, may the
plaintiff assert a claim against a third-party defendant when there is no independent basis for
federal jurisdiction over that claim? The Court of Appeals for the Eighth Circuit held in this case
that such a claim is within the ancillary jurisdiction of the federal courts. We granted certiorari,
because this decision conflicts with several recent decisions of other Courts of Appeals.
I
On January 18, 1972, James Kroger was electrocuted when the boom of a steel crane next
to which he was walking came too close to a high-tension electric power line. The respondent
(his widow, who is the administratrix of his estate) filed a wrongful-death action in the United
States District Court for the District of Nebraska against the Omaha Public Power District
(OPPD). Her complaint alleged that OPPD’s negligent construction, maintenance, and operation
of the power line had caused Kroger’s death. Federal jurisdiction was based on diversity of
citizenship, since the respondent was a citizen of Iowa and OPPD was a Nebraska corporation.
OPPD then filed a third-party complaint pursuant to Fed.Rule Civ.Proc. 14(a)2 against the
petitioner, Owen Equipment and Erection Co. (Owen), alleging that the crane was owned and
operated by Owen, and that Owen’s negligence had been the proximate cause of Kroger’s death.
OPPD later moved for summary judgment on the respondent’s complaint against it. While this
motion was pending, the respondent was granted leave to file an amended complaint naming
Owen as an additional defendant [in plaintiff’s action]. Thereafter, the District Court granted [the
original D] OPPD’s motion for summary judgment in an unreported opinion. The case thus went
to trial between the respondent [Kroger] and the petitioner [Owen] alone.
The respondent’s amended complaint alleged that Owen was “a Nebraska corporation
with its principal place of business in Nebraska.” Owen’s answer admitted that it was “a
corporation organized and existing under the laws of the State of Nebraska,” and denied every
other allegation of the complaint. On the third day of trial, however, it was disclosed that the
petitioner’s principal place of business was in Iowa, not Nebraska, and that the petitioner and the
respondent were thus both citizens of Iowa. The petitioner then moved to dismiss the complaint
for lack of jurisdiction. The District Court reserved decision on the motion, and the jury
thereafter returned a verdict in favor of the respondent. In an unreported opinion issued after the
trial, the District Court denied the petitioner’s motion to dismiss the complaint.
The judgment was affirmed on appeal. The Court of Appeals held that under this Court’s
decision in Mine Workers v. Gibbs, the District Court had jurisdictional power, in its discretion,
to adjudicate the respondent’s claim against the petitioner because that claim arose from the
“core of ‘operative facts' giving rise to both [respondent's] claim against OPPD and OPPD's
claim against Owen.” It further held that the District Court had properly exercised its discretion
in proceeding to decide the case even after summary judgment had been granted to OPPD,
because the petitioner had concealed its Iowa citizenship from the respondent. …
Rule 14(a) provides in relevant part: “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 plaintiff’s claim against him. [The original D sues the new D, hoping
to shift all or part of the blame to the new D—should the P prevail against the original D in the trial’s initial phase.]
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It is undisputed that there was no independent basis of federal jurisdiction over the
respondent’s state-law tort action against the petitioner, since both are citizens of Iowa. And
although Fed.Rule Civ.Proc. 14(a) permits a plaintiff to assert a claim against a third-party
defendant, it does not purport to say whether or not such a claim requires an independent basis of
federal jurisdiction. Indeed, it could not determine that question, since it is axiomatic that the
Federal Rules of Civil Procedure do not create or withdraw federal jurisdiction.
In affirming the District Court’s judgment, the Court of Appeals relied upon the doctrine
of ancillary jurisdiction, whose contours it believed were defined by this Court’s holding in Mine
Workers v. Gibbs. The Gibbs case differed from this one in that it involved pendent jurisdiction,
which concerns the resolution of a plaintiff’s federal- and state-law claims against a single
defendant in one action. By contrast, in this case there was no claim based upon substantive
federal law, but rather [only] state-law tort claims against two different defendants. Nonetheless,
the Court of Appeals was correct in perceiving that Gibbs and this case are two species of the
same generic problem: Under what circumstances may a federal court hear and decide a statelaw claim arising between citizens of the same State? But we believe that the Court of Appeals
failed to understand the scope of the doctrine of the Gibbs case.
...
But even if it be assumed that the District Court in the present case had constitutional power to
decide the respondent’s lawsuit against the petitioner, it does not follow that the decision of the
Court of Appeals was correct. Constitutional power is merely the first hurdle that must be
overcome in determining that a federal court has jurisdiction over a particular controversy. For
the jurisdiction of the federal courts is limited not only by the provisions of Art. III of the
Constitution, but also by Acts of Congress.
[11] [¶] The … cases thus make clear that a finding that federal and nonfederal claims
arise from a “common nucleus of operative fact,” the test of Gibbs, does not end the inquiry into
whether a federal court has power to hear the nonfederal claims along with the federal ones.
Beyond this constitutional minimum, there must be an examination of the posture in which the
nonfederal claim is asserted and of the specific statute that confers jurisdiction over the federal
claim, in order to determine whether “Congress in [that statute] has ... expressly or by
implication negated” the exercise of jurisdiction over the particular nonfederal claim. Aldinger.
III
The relevant statute in this case, 28 U.S.C. § 1332(a)(1), confers upon federal courts
jurisdiction over “civil actions where the matter in controversy ... is between ... citizens of
different States.” This statute and its predecessors have consistently been held to require
complete diversity of citizenship. That is, diversity jurisdiction does not exist unless each
defendant is a citizen of a different State from each plaintiff. Over the years Congress has
repeatedly re-enacted or amended the statute conferring diversity jurisdiction, leaving intact this
rule of complete diversity. Whatever may have been the original purposes of diversity-ofcitizenship jurisdiction, this subsequent history clearly demonstrates a congressional mandate
that diversity jurisdiction is not to be available when any plaintiff is a citizen of the same State as
any defendant.
As used in this opinion, the term “nonfederal claim” means one as to which there is no independent basis
for federal jurisdiction. Conversely, a “federal claim” means one as to which an independent basis for federal
jurisdiction exists. …………………………………………………………………………………………………….
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[16] [¶] Thus it is clear that the respondent could not originally have brought suit in
federal court naming Owen and OPPD as codefendants, since citizens of Iowa would have been
on both sides of the litigation. Yet the identical lawsuit resulted when she amended her
complaint. Complete diversity was destroyed just as surely as if she had sued Owen initially. In
either situation, in the plain language of the statute, the “matter in controversy” could not be
“between ... citizens of different States.”
. . . …………………………………………….
It is not unreasonable to assume that, in generally requiring complete diversity, Congress
did not intend to confine the jurisdiction of federal courts so inflexibly that they are unable to
protect legal rights or effectively to resolve an entire, logically entwined lawsuit. Those practical
needs are the basis of the doctrine of ancillary jurisdiction. But neither the convenience of
litigants nor considerations of judicial economy can suffice to justify extension of the doctrine of
ancillary jurisdiction to a plaintiff’s cause of action against a citizen of the same State in a
diversity case. Congress has established the basic rule that diversity jurisdiction exists under 28
U.S.C. § 1332 only when there is complete diversity of citizenship. “The policy of the statute
calls for its strict construction.” To allow the requirement of complete diversity to be
circumvented as it was in this case would simply flout the congressional command.21
Accordingly, the judgment of the Court of Appeals is reversed.
It is so ordered.
Notes and Questions:
1. In Exxon Mobil Corporation v. Allapattah Services, 545 U.S. 546 (2005), the United
States Supreme Court finally answered a question that has long-divided lower federal courts–not
to mention the Supreme Court, in this 5-4, three-opinion case.
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16
Notably, Congress enacted § 1332 as part of the Judicial Code of 1948, shortly after Rule 14 was
amended in 1946. When the Rule was amended, the Advisory Committee noted that “in any case where the plaintiff
could not have joined the third party originally 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 subsequent re-enactment without relevant change of the
diversity statute may thus be seen as evidence of congressional approval of that “majority view.”
21
Our holding is that the District Court lacked power to entertain the respondent’s lawsuit against the
petitioner. Thus, the asserted inequity in the respondent’s alleged concealment of its citizenship is irrelevant. Federal
judicial power does not depend upon “prior action or consent of the parties.”
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In 1991, about 10,000 Exxon dealers filed a diversity-based class-action suit against the
Exxon Corporation. They alleged a scheme by Exxon, whereby they were overcharged for fuel
purchased from Exxon. Some dealers claimed over $75,000, but most did not. In the
consolidated case, a 9-year-old girl sued Star-Kist in a diversity action, seeking damages for
unusually severe injuries she received when she sliced her finger on a tuna can. Her family
joined in the suit, seeking damages for emotional distress and certain medical expenses. The
daughter had damages in excess of $75,000, but none of her three family members could claim
that amount.
Part II. A of the opinion began with the statement that “The district courts of the United
States ... are “courts of limited jurisdiction. They possess only that power authorized by
Constitution and statute.” As you now know: (a) Federal Question and Diversity Jurisdiction are
mentioned in the Constitution’s Art. III §2 grant of judicial power to the federal courts; and (b) a
federal statute (e.g., §1397) is invalid if there is no constitutional source from which it can draw.
There is no mention, or even the slightest hint, regarding an intent to empower the courts to
exercise supplemental jurisdiction. Isn’t supplemental subject matter jurisdiction thus
unconstitutional?
2. The Court went on to say that:
once a court has original jurisdiction over some claims in the action, it may exercise
supplemental jurisdiction over additional claims that are part of the same case or
controversy. [¶] The leading modern case for this principle is Mine Workers v. Gibbs. In
Gibbs, the plaintiff alleged the defendant’s conduct violated both federal and state law. ...
[W]ith respect to plaintiff-specific jurisdictional requirements, the Court held in Clark v.
Paul Gray, Inc. (1939), that every plaintiff must separately satisfy the amount-incontroversy requirement. ... The Court reaffirmed this rule, in the context of a class action
brought invoking § 1332(a) diversity jurisdiction, in Zahn v. International Paper Co.
(1973). [¶] The single question before us, therefore, is whether a diversity case in which
the claims of some plaintiffs satisfy the amount-in-controversy requirement, but the
claims of others plaintiffs do not, presents a “civil action of which the district courts have
original jurisdiction.”
We now conclude the answer must be yes. When the ... complaint contains at least
one claim that satisfies the amount-in-controversy requirement, and there are no other
relevant jurisdictional defects, the district court, beyond all question, has original
jurisdiction over that claim.
Emphasis was added in the above paragraph to ask this question: if the lower courts were
split—as was the Allapattah Supreme Court itself (5-4, with 3 opinions)—is the phrase “beyond
all question” accurate? This is one of those “teaching moments” whereby one can grasp the
authenticity of Ben Franklin’s adage: “Believe none of what you hear, and only half of what you
see” and perhaps none of what you read, including the professor’s case notes .
3. Allapattah did not change the “Thou shalt not aggregate” principle. None of the parties
in either consolidated case purported to aggregate their individual claims. They successfully
overcame that principle, however, via Allapattah’s application of supplemental jurisdiction,
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resulting in others being able to piggy-back on a claim that does meet the minimum amount in
controversy requirement for diversity cases—whether class actions, or not.
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