Opinion
1974
ANCILLARY JURISDICTION OF FEDERAL COURTS OF PERSONS WHOSE INTEREST MAY BE IMPAIRED IF NOT JOINED by GEORGE B. FRASER
Boyd Professor of Law, University of Oklahoma.
Rule 24(a)(2) of the Federal Rules of Civil Procedure provides that "when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest" he may intervene as a matter of right. However, the applicable jurisdictional requirements are not so easily stated because various tests are found in the cases.
Wright, The Law of Federal Courts 333 (2d ed. 1970). When an intervenor is claiming an interest in property, he may be claiming it adversely to both parties. Formulabs, Inc. v. Hartley Pen Co., 318 F.2d 485 (9th Cir. 1963). In such cases, it is improper to align him with either the plaintiff or the defendant. Where jurisdiction of the action is based on diversity, his citizenship is different from at least one of the original parties so that minimal diversity exists. Cf., State Farm Fire Casualty Co. v. Tashire, 386 U.S. 523, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967). An indispensable party is aligned as a plaintiff or a defendant according to his interest. Kentucky Nat. Gas Corp. v. Duggins, 165 F.2d 1011 (6th Cir. 1948).
Some cases state that no independent basis of jurisdiction is needed where a person can intervene as a matter of right under Rule 24(a) but that a person must satisfy the jurisdictional requirements where he seeks to intervene under Rule 24(b). However, the Federal Rules cannot change the jurisdiction of the federal courts. Therefore, it is more appropriate to state that the same test is used to determine when a person can intervene as a matter of right under Rule 24(a)(2) and when ancillary jurisdiction exists. The United States Supreme Court said that "These same considerations of judicial economy and fairness to all the parties lie behind the doctrine of ancillary jurisdiction * * * and the doctrine that an intervenor of right may assert a crossclaim without independent jurisdictional grounds, * * *" Also, a similar statement was made by a court of appeals in a case involving compulsory counterclaims. It said:
Consolo v. Federal Maritime Comm., 383 U.S. 607, 617 n. 14, 86 S.Ct. 1018, 1025 n. 14, 16 L.Ed.2d 131 (1966).
It is stated frequently that the determination of ancillary jurisdiction of a counterclaim in a federal court must turn on whether the counterclaim is compulsory within the meaning of Rule 13(a). Such a statement of the law relating to ancillary jurisdiction of counterclaims is not intended to suggest that Rule 13(a) extends the jurisdiction of the federal courts to entertain counterclaims for the Federal Rules of Civil Procedure cannot expand the jurisdiction of the United States courts. What is meant is that the issue of the existence of ancillary jurisdiction and the issue as to whether a counterclaim is compulsory are to be answered by the same test. It is not a coincidence that the same considerations that determine whether a counterclaim is compulsory decide also whether the court has ancillary jurisdiction to adjudicate it. The tests are the same because Rule 13(a) and the doctrine of ancillary jurisdiction are designed to abolish the same evil, viz., piecemeal litigation in the federal courts.
Great Lakes Rubber Corp. v. Herbert Cooper Co., Inc., 286 F.2d 631, 633 (3rd Cir. 1961). See Wright Miller, 7A Federal Prac. Proc. 597 (1972).
Other courts state that if an intervenor is an indispensable party, such as where his presence is essential to a determination of the pending action, he must independently satisfy the jurisdictional requirements because he should have been joined originally as a party to the action. However, if he is only a necessary party, he is within the ancillary jurisdiction of the court. In Wichita Railroad Light Co. v. Public Utilities Commission the Supreme Court stated that "Much less is jurisdiction defeated by the intervention, by leave of the court, of a party whose presence is not essential to a decision of the controversy between the original parties." But, because of the difficulty of determining whether a person is an indispensable or a necessary party, this test is unsatisfactory. Moreover, the usefulness of these labels has become questionable since Federal Rule 19 was amended in 1966. Therefore, rather than use labels, many courts consider the interest that will be protected by allowing intervention. Thus, if the presence of the intervenor is essential to a settlement of the dispute between the original parties to the action, the intervenor must satisfy the jurisdictional requirements. On the other hand, if the presence of the intervenor is not necessary to enable the court to settle the pending action but intervention is allowed so that he may protect his own interests in property or in the controversy that is the subject of the action, the intervenor is within the ancillary jurisdiction of the court because to prevent him from intervening may constitute a denial of due process. In Phelps v. Oaks a person was allowed to intervene as a defendant to protect his interest in property although he was a citizen of the same state as the plaintiff. The Court said that "if the Zeidlers were permitted to [intervene and] defend, it was for their own interest, and not because they were either necessary or indispensable parties to the proceeding in which the plaintiffs were the actors."
E. g., Miller v. Miller, 406 F.2d 590 (10th Cir. 1969) (not indispensable party); Chance v. County Board of School Trustees, 332 F.2d 971 (7th Cir. 1964) (indispensable party); Virginia Electric Power Co. v. Carolina Peanut Co., 186 F.2d 816 (4th Cir. 1951) (not indispensable party). See Moore's Federal Practice § 24.18[3], p. 24-771 (1969).
260 U.S. 48, 54, 43 S.Ct. 51, 53, 67 L.Ed. 124 (1922).
Johnson v. Middleton, 175 F.2d 535 (7th Cir. 1949); Drillers Engine Supply, Inc. v. Burckhalter, 327 F.Supp. 648 (W.D.Okla. 1971).
117 U.S. 236, 239, 6 S.Ct. 714, 716, 29 L.Ed. 888 (1886).
The scope of intervention under Rule 24(a)(2) may have been expanded by the 1966 amendment, but the intervenor is still within the ancillary jurisdiction of the court because his right to intervene is still limited to situations where he has an interest in the subject of the action so that he may be adversely affected if intervention is not permitted.
Hardy-Latham v. Wellons, 415 F.2d 674 (4th Cir. 1968).
If a person who could intervene to protect his own interest fails to intervene, may he be brought into the action by either the court or a party to the action? Federal Rule 19(a)(2), as amended in 1966, states that a person should be joined as a party if "he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest." The Advisory Committee's Note to the 1966 version of Rule 24 states that "intervention of right is here seen to be a kind of counterpart to Rule 19(a)(2)(i) on joinder of persons needed for a just adjudication: * * *" Also, "The amendment provides that an applicant is entitled to intervene in an action when his position is comparable to that of a person under Rule 19(a)(2)(i), as amended, unless his interest is already adequately represented in the action by existing parties." Thus, a person who could but fails to intervene under Rule 24(a)(2) can be made a party to the action against his will under Rule 19(a)(2)(i). However, the jurisdictional requirements must also be satisfied. Would such a person be within the ancillary jurisdiction of the court so that he could be joined although the requisite diversity or amount is lacking?
Accord, Atlantis Development Corp. v. United States, 379 F.2d 818, 825 (5th Cir. 1967).
The scope of ancillary jurisdiction is not clear, but the doctrine is designed to abolish the evil of piecemeal litigation of claims that involve the same factual and legal issues and arise out of the same basic controversy. One court stated that "The doctrine of dependent or ancillary jurisdiction is not capable of exact definition. * * * It springs from the equitable doctrine that a court with jurisdiction of a case may consider therein subject matter over which it would have no independent jurisdiction whenever such matter must be considered in order to do full justice." The word "ancillary" as applied to jurisdiction should be used in a conclusory sense. If it is determined that a claim is part of the transaction that is the basis of the pending action and that its joinder will further the administration of justice, it is appropriate to say that it comes within the ancillary jurisdiction of the court.
Great Lakes Rubber Corp. v. Herbert Cooper Co., Inc., 286 F.2d 631 (3rd Cir. 1960). See Consolo v. Federal Maritime Comm., 383 U.S. 607, 617 n. 14, 86 S.Ct. 1018, 1025 n. 14, 16 L.Ed.2d 131 (1966). Cf., United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966); Moore v. New York Cotton Exchange, 270 U.S. 593, 46 S.Ct. 367, 70 L.Ed. 750 (1926).
Walmac Co. v. Isaacs, 220 F.2d 108, 113 (1st Cir. 1955). See Fraser, Ancillary Jurisdiction and the Joinder of Claims in the Federal Courts, 33 F.R.D. 27, 45-46 (1963).
If a person can intervene to protect his own interest where diversity is lacking, it would appear that the court or an original party to the action could make the absent person a party in spite of the lack of diversity. This would avoid piecemeal litigation of the dispute and would further the efficient administration of justice. Joinder should not depend on who initiates the joinder proceeding, the absentee or a party to the action. As one writer stated, for jurisdiction to depend on who seeks the absentee's joinder would be anomalous. Moreover, to hold that an absentee can intervene if he so desires but that he cannot be made a party to an action against his will if diversity is lacking would encourage collusion between him and one of the original parties.
Kennedy, Let's All Join In: Intervention Under Federal Rule 24, 57 Ky. L.J. 329, 362 (1969). "It appears then that the jurisdictional result turns on whether the entry is initiated by one of the original parties under Rule 19, or by the absent party under Rule 24. The distinction seems difficult to rationalize * * *" Id. at 363.
In Codagnone v. Perrin, 351 F.Supp. 1126 (D.R.I. 1972), the court dismissed the action because the defendant's husband was an indispensable party but his joinder destroyed diversity. The absentee came under Rule 19(a)(2)(i).
Instead of depending on who initiates the joinder proceeding, jurisdiction should depend on the absentee's relationship to the action and the interest that would be protected by his joinder. Thus, where an absentee has an interest in the subject of an action that may be impaired in his absence, ancillary jurisdiction should exist whether the absentee seeks to intervene or whether he is brought into the action by the court or by a party to an action. On the other hand, ancillary jurisdiction should not be available where a person should be joined if feasible because "in his absence complete relief cannot be accorded among those already parties", as provided by Rule 19(a)(1), or because his absence may subject a party to the action to a "substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest", as provided by Rule 19(a)(2)(ii).
At the present time a defendant can implead a non-diverse third-party defendant for contribution or indemnity. Therefore, joining a person as a party to an action where there is a substantial risk that the defendant may incur double or multiple obligations by reason of the absentee's interest, although the absentee does not satisfy the jurisdictional requirements, does not constitute a substantial enlargement of the ancillary jurisdiction of the court. In both instances the new party is brought in for the benefit of the defendant.
The Federal Rules of Civil Procedure neither prevent nor permit the joinder of a new party where the jurisdictional requirements are not satisfied because they cannot "extend or limit the jurisdiction" of the district courts. Rule 19 provides for the joinder of a person "whose joinder will not deprive the court of jurisdiction over the subject matter of the action", but this statement does not indicate when the joinder of a non-diverse person deprives the court of jurisdiction or when a non-diverse person is within the ancillary jurisdiction of the court. Before its amendment in 1966, Rule 13(h) provided that "When the presence of parties other than those to the original action is required for the granting of complete relief in the determination of a counterclaim or cross-claim, the court shall order them to be brought in as defendants as provided in these rules, if jurisdiction of them can be obtained and their joinder will not deprive the court of jurisdiction of the action." (Emphasis added). The courts have held that this provision did not prevent a defendant from joining a new person as a party to a compulsory counterclaim although the new party was not of diverse citizenship and was not indispensable to a determination of the counterclaim. The new party was held to be within the court's ancillary jurisdiction, although he was only jointly and severally liable on the counterclaim, because the counterclaim was compulsory. In United Artists Corporation v. Masterpiece Productions, Inc., the court held that the joinder of non-diverse parties who are only jointly and severally liable on a counterclaim is proper because "The presence of these defendants is necessary to a complete adjudication of the issues involved in this litigation, which should not be retried at another time in another forum." Also, a new party who is brought into an action on a cross-claim is within the ancillary jurisdiction of the court because cross-claims arise out of the transaction or occurrence that is the subject matter of the action. Therefore they are analogous to a compulsory counterclaim although a defendant is not required to plead a cross-claim.
In view of Rule 82, this clause should be omitted because it is meaningless.
E. g., H. L. Peterson Co. v. Applewhite, 383 F.2d 430 (5th Cir. 1967).
221 F.2d 213, 217 (2d Cir. 1955). See Note, 9 Okla. L. Rev. 437 (1956).
Watson v. Apex Railway Products Co., 56 F.R.D. 1 (N.D.Ga. 1972).
A similar result is reached under Federal Rule 14 which permits a defendant to implead a third-party defendant who is liable to the original defendant for part or all of what he may have to pay the plaintiff. The cases hold that impleader is allowed although the citizenship of the third-party defendant is the same as that of the original defendant.
E. g., LASA Per L'Industria Del Marmo Soc. Per Azioni v. Alexander, 414 F.2d 143 (6th Cir. 1969); Pennsylvania R. R. v. Erie Avenue Warehouse Co., 302 F.2d 843 (3rd Cir. 1962). After the joinder of the third-party defendant, the court should have the power to litigate all claims that arise out of the transaction that is the subject of the action between all parties to the action. E. g., Schwab v. Erie Lackawanna Rd., 438 F.2d 62 (3rd Cir. 1971); Revere Copper Brass Inc. v. Aetna Cas. Sur. Co., 426 F.2d 709 (5th Cir. 1970) (claim by third-party defendant against plaintiff); Bonath v. Aetna Freight Lines, Inc., 33 F.R.D. 260 (W.D.Pa. 1963) (claim by plaintiff against third-party defendant). However, a defendant cannot implead a person to recover only his own damages although they arose out of the occurrence that is the basis of the plaintiff's claim even though there is diversity. See United States v. Joe Grasso Son, Inc., 380 F.2d 749 (5th Cir. 1967). This limitation is imposed by the Federal Rules; it is not a jurisdictional requirement.
Some federal courts have held that a person whose interest in the subject of the action may as a practical matter be impaired in his absence cannot be made a party to the action if his joinder would defeat diversity. The Supreme Court of the United States has never squarely ruled on this issue, but in Provident Tradesmens Bank Trust Co. v. Patterson the Court stated that the absentee could not be made a defendant without destroying diversity although it indicated that the absentee could have intervened.
E. g., Codagnone v. Perrin, 351 F.Supp. 1126 (D.R.I. 1972). In Glens Falls Ins. Co. v. Cook Brothers, Inc., 23 F.R.D. 269 (S.D.Ind. 1959), an insurance company that had paid the insured part of his loss sued the tortfeasor for the amount paid. The court denied the defendant's motion to join the insured as a party to the action. Then, the court permitted the insured to intervene although it was a citizen of the same state as the defendant-tortfeasor. The language of the option suggests that the defendant's motion was denied because the insured was not an indispensable party rather than because of the lack of diversity. Id at 272. Moreover, the case was decided before the amendments of 1966 made Rule 19(a)(2)(i) so similar to Rule 24(a)(2). Most cases involve absentees whose joinder is prescribed by Rule 19(a)(1) or 19(a)(2)(ii). E. g., Haas v. Jefferson Nat. Bank, 442 F.2d 394 (5th Cir. 1971).
390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968).
Id. at 108, 88 S.Ct. at 733.
Id. at 114, 88 S.Ct. at 740.
In the Patterson case plaintiff's decedent and two other persons were killed when an automobile that was owned by Dutcher and driven by Cionci collided with a truck. Dutcher had a liability insurance policy with an upper limit of $100,000 for all claims arising out of one accident. In an action against Cionci's estate, plaintiff obtained a judgment for $50,000. Then, plaintiff brought the present action in a federal court against Cionci's estate and Dutcher's insurance company for a declaration that Cionci's use of the automobile was with Dutcher's permission so that the accident came within the terms of his policy. Dutcher, who was a citizen of the same state as the plaintiff, was not made a party to the action, and no objection to his absence was raised in the trial court. Judgment was rendered for the plaintiff, but the court of appeals dismissed the action on the ground that Dutcher was an indispensable party whose joinder would destroy diversity.
The Supreme Court assumed that "Dutcher falls within the category of persons who, under § (a), should be `joined if feasible'", but the issue of his joinder was raised for the first time in the court of appeals. Therefore, the Supreme Court had to determine what relief should be given in the pending action; it did not have to decide if the joinder of Dutcher would have affected the trial court's jurisdiction. The Court held that the interests of the litigants and the public would best be served by preserving the judgment so long as Dutcher's rights could be protected. Even if Dutcher's joinder would not have defeated diversity, either because his citizenship was diverse from that of all other parties or because he would have been within the ancillary jurisdiction of the court, the Supreme Court would have reached the same result. Because of the time and expense that was spent in trying the action and because Dutcher's interest could be protected, the Court would not have remanded the case for a new trial, but it would have preserved the judgment of the trial court. Thus, the statement that Dutcher's joinder would defeat diversity appears to be dictum.
Id. at 108, 88 S.Ct. 737.
Shields v. Barrow does not hold that a person who should be brought into an action to protect his own interests is not within the ancillary jurisdiction of the court because the absent parties in that case were needed to enable the court to give complete relief to the original parties to the action. Thus, their joinder would have been required by Rule 19(a)(1) rather than by 19(a)(2)(i).
17 How. (58 U.S.) 130, 15 L.Ed. 158 (1855).
An intervenor cannot object to the venue of an action. Assuming that jurisdiction exists, may a person who could have intervened to protect his interest in the subject of the action object to venue if he is brought into the action under Rule 19(a)(2)(i) by the court or by a party? It could be urged that he should have the same right to object to venue that a defendant would have, and a defendant may object to venue although jurisdiction exists. However, the cases generally hold that where jurisdiction is ancillary, venue is also ancillary. For instance, a third-party defendant cannot object to venue. This is a desirable rule. If a party's interest in the subject of the action is such that he is deemed to be within the ancillary jurisdiction of the court to avoid piecemeal litigation of the controversy, to permit him to object to the venue of the action would frustrate the whole purpose of ancillary jurisdiction because, if the objection were upheld, several suits would be necessary. Rule 19(a) provides that a party may object when venue is improper, but it does not indicate when venue is improper. Also, this provision does not prevent venue from being ancillary because, as indicated, the Federal Rules cannot change the venue of actions. However, the new party can object to the service of process.
Trans World Airlines, Inc. v. C. A. B., 339 F.2d 56 (2d Cir. 1964). This should be the rule even where the intervenor should have been an original party.
Cf., Brandt v. Olson, 179 F.Supp. 363 (D.Iowa 1959) (impleader). See Wright, Law of Federal Courts 336-337 (2d ed. 1970).
United States v. Acord, 209 F.2d 709 (10th Cir. 1954); McGonigle v. Penn-Central Trans. Co., 49 F.R.D. 58 (D.Md. 1969). Moreover, a third-party defendant cannot object that venue of the original action is improper although the original defendant could have objected. Carlisle v. S. C. Loveland Co., Inc., 77 F.Supp. 51 (E.D.Pa. 1948), appeal dismissed, 175 F.2d 418 (3rd Cir. 1949).
In Pauley v. Pauley, 58 F.R.D. 386 (D.Md. 1972), a nonresident was found to be a person who should be joined if feasible to protect his interests, but he could not be served with process. Therefore, the action was transferred to the district court in his state so that he could be joined.