United States Court of Appeals for the Second Circuit · Civil Procedure
Civil ProcedureRequired JoinderRule 19Supplemental JurisdictionDiversity JurisdictionRule 19necessary partyindispensable party
Facts
Viacom, successor to G & W and Paramount, sued Kearney for breach of indemnity and related obligations arising from environmental cleanup responsibilities at Taylor Forge's facilities. Kearney filed counterclaims against Viacom and third-party complaints against Conolog and CDM; Conolog then filed a fourth-party complaint against Taylor Forge, which answered and thus became a fourth-party defendant in the federal action. Taylor Forge did not assert any claims in the federal case, although Kearney and Taylor Forge had reinstated in New Jersey state court a complaint against Viacom asserting the same 22 claims reflected in Kearney's federal counterclaims. The district court dismissed under Rule 19 because it believed Taylor Forge had to join those claims and that its joinder as a Delaware corporation would destroy diversity with Viacom.
Issue
Whether the district court erred in dismissing the action under Rule 19 on the theory that Taylor Forge was an indispensable party whose participation in claims against Viacom would destroy diversity jurisdiction. More specifically, whether Taylor Forge, already present as a fourth-party defendant, could assert claims against Viacom under supplemental jurisdiction without defeating diversity.
Rule
A court applying Rule 19 must first determine whether a party is necessary under Rule 19(a), and only if joinder is not feasible must it determine under Rule 19(b) whether the party is indispensable. In a diversity case, 28 U.S.C. § 1367(b) bars supplemental jurisdiction over certain claims by plaintiffs, but does not bar supplemental jurisdiction over related claims by defendants or third- or fourth-party defendants against the original plaintiff; thus a nondiverse fourth-party defendant may assert downsloping claims against the plaintiff if those claims form part of the same case or controversy and the court does not decline jurisdiction under § 1367(c).
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Lakefront Holdings, a Nevada corporation with its principal place of business in Illinois, sued Owen Price, a citizen of Texas, in federal court in Chicago based solely on diversity. Price filed a third-party complaint against Arbor Soil Services, and Arbor then impleaded North Basin Metals, a Colorado corporation with its principal place of business in Illinois; North Basin answered as a fourth-party defendant but filed no claims. Price argues the case must be dismissed because North Basin must assert related claims against Lakefront to protect its interests, and those claims would destroy diversity because North Basin and Lakefront are both Illinois citizens for diversity purposes.
How should the federal court rule on the motion to dismiss?
Explanation. The majority held that Rule 19 dismissal is improper where the supposedly necessary party is already present in the action as a fourth-party defendant and can file any needed claims against the original plaintiff under supplemental jurisdiction. In a diversity case, § 1367(b) restricts certain claims by plaintiffs, not downsloping claims by defendants or fourth-party defendants against the original plaintiff. If the claims are part of the same case or controversy and no § 1367(c) reason warrants declining jurisdiction, feasibility exists and dismissal under Rule 19 is an abuse of discretion. (Derived from Viacom International, Inc. v. Kearney (n.d.).)