Guaranteed Sys. v. Am. Nat'l Can Co.

842 F. Supp. 855 (M.D.N.C. 1994)



Federal courts may exercise original jurisdiction pursuant to 28 U.S.C.S. § 1331 over cases involving a federal question or pursuant to 28 U.S.C.S. § 1332 (the diversity statute) over cases involving citizens of different states, that is, those cases in which the parties are diverse. They may also exercise supplemental jurisdiction pursuant to 28 U.S.C.S. § 1367 over all other claims that form part of the same case or controversy as the action within their original jurisdiction, unless that action is within their jurisdiction solely on the basis of the diversity statute. If that action is within their jurisdiction solely on the basis of diversity, federal courts may not exercise supplemental jurisdiction over certain claims, including claims by plaintiffs against persons made parties under Fed. R. Civ. P. 14, when so doing would be inconsistent with the jurisdictional requirements of 28 U.S.C.S. § 1332, for instance, when the plaintiff and the other party are non-diverse.


Plaintiff contractor was a North Carolina corporation and the defendant can company was a Delaware corporation. Plaintiff brought an action against defendant for failure to pay for construction work.  The work at issue occurred in Georgia. Defendant removed the action to federal court based on diversity jurisdiction and counterclaimed against the contractor. The contractor filed a third-party action against a sub-contractor for indemnity and contribution. The sub-contractor filed a motion to dismiss the third-party action for lack of supplemental jurisdiction. The court granted the motion.


Can the court exercise supplemental jurisdiction over the third-party state law claim between Plaintiff and Third-Party Defendant?




The court found that because its jurisdiction over the original action was founded solely on diversity, the Judicial Improvements Act of 1990 prohibited the court from exercising supplemental jurisdiction over the contractor's claim against the sub-contractor, who was made a party pursuant to Rule 14 of the Federal Rules of CIvil Procedure. The contractor is clearly a plaintiff in a diversity suit asserting a claim against a non-diverse third-party defendant made a party under Rule 14.

Click here to view the full text case and earn your Daily Research Points.