The federal courts are courts of limited jurisdiction. They possess only that power authorized by the Constitution and statute, which is not to be expanded by judicial decree. It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction.
After petitioner sued respondent in a state court, respondent removed the case to a federal district court on the basis of diversity. Thereafter, the parties agreed to settle all claims and moved to dismiss the complaint and cross-complaint pursuant to Fed. R. Civ. P. 41(a)(1)(ii). In the dismissal order, the district judge did not reference the settlement agreement or reserve jurisdiction to enforce it. A disagreement between the parties ensued and the respondent moved for the district court to enforce the settlement agreement, which the petitioner opposed on the ground that said court lacked subject matter jurisdiction. The district court entered an enforcement order asserting its inherent power to do so. The Court of Appeals affirmed.
Whether the federal district court has jurisdiction to enforce a breach of contract claim involving an agreement to settle an earlier suit.
The court reversed a judgment ruling that after dismissal of an action pursuant to a settlement agreement, a district court had jurisdiction to decide an enforcement motion under its inherent supervisory power. The court held that respondent could not subsequently seek to enforce the settlement agreement in the federal district court, and that enforcement of the settlement agreement was for the state courts. Specifically, the alleged breach of an agreement that produced the dismissal of an earlier federal suit was no basis for federal court jurisdiction over the agreement in dispute. Further, the assertion of ancillary jurisdiction was not warranted where the dismissal order was in no way flouted or imperiled by the alleged breach of the settlement agreement.