From Finley to the Statute

From Finley to the Statute

Gibbs marked how far Article III lets a federal court reach for related claims, but it did not say whether Congress had authorized courts to go that far. The Supreme Court's next decisions, Aldinger, Kroger, and finally Finley v. United States, answered that constitutional power was not enough: a federal court also needed statutory authority to hear the related claim.¹ Congress supplied that authority in 1990 by enacting § 1367. Following the cases that led to the statute shows what each of its subsections is for.

The Court did not abandon Gibbs's generous reading of the jurisdictional statutes; it fenced that reading in. Other features of the statutes received no comparable treatment. The Court has consistently read § 1332 to require complete diversity, so a single plaintiff from the same state as a single defendant deprives the district court of original diversity jurisdiction over the entire action.² Finley drew the sharpest line. It left Gibbs's approach in place for additional claims involving the same parties, but it declined to extend that approach to additional parties. In the context of parties, in contrast to claims, the Court said, "we will not assume that the full constitutional power has been congressionally authorized, and will not read jurisdictional statutes broadly."³

Owen Equipment & Erection Co. v. Kroger shows the limit at work in a diversity case. Kroger sued Omaha Power in federal court on the basis of diversity, seeking damages for the death of her husband in a workplace accident. Omaha Power filed a third-party complaint against Owen Erection, contending that Owen was responsible for part of any award, and Kroger then amended her complaint to add a claim of her own against Owen. Diversity was lacking as to Owen, so Kroger argued for ancillary jurisdiction, a form of supplemental jurisdiction.⁴ The Court refused. Extending ancillary jurisdiction to her claim would have been inconsistent with the long-standing reading of § 1332 as requiring complete diversity between the plaintiff and all defending parties. Kroger could not have sued Omaha Power and Owen together at the outset, and she could not do the same thing indirectly once Owen was brought in as a third-party defendant.⁵

Finley applied the same insistence where the plaintiff held a federal claim. The plaintiff sued the United States under the Federal Tort Claims Act (FTCA) and joined two additional defendants, asserting state-law tort claims that derived from the same common nucleus of operative fact, a plane crash in San Diego.⁶ Even so, the Court ruled that the district court could not exercise pendent-party jurisdiction, meaning jurisdiction over a related claim against an additional party, over the two state-law defendants.⁷

Finley was the harder case for the plaintiff. Kroger could have filed everything in state court. The Finley plaintiff had no such option, because the FTCA's exclusive jurisdictional grant deprived the state courts of power to hear the claim against the United States.⁸ Without pendent-party jurisdiction, she had to split the case into two proceedings, one in federal court and one in state court. Pendent claim jurisdiction exists to spare a plaintiff with a federal claim exactly that burden. The Court held that the burden was not a reason to ignore the statutory limits on federal subject matter jurisdiction.⁹

By 1989, then, the Court later summarized, the jurisdictional statutes worked in three steps:¹⁰

1. Section 1332(a) required complete diversity. Without it, the district court lacked original jurisdiction over every claim in the action.
2. If the court had original jurisdiction over at least one claim, the statutes implicitly authorized supplemental jurisdiction over all other claims between the same parties that arose from the same Article III case or controversy.
3. Even when the court had original jurisdiction over claims between particular parties, the statutes did not authorize supplemental jurisdiction over additional claims involving other parties.

Finley established the third proposition, and the third is the one Congress set out to change. The Judicial Improvements Act of 1990 enacted § 1367, the provision that now controls.¹¹ Subsection (a) gives the district courts, in any civil action of which they have original jurisdiction, supplemental jurisdiction over all other claims so related that they form part of the same case or controversy under Article III, and the grant expressly includes claims that involve the joinder or intervention of additional parties.¹² That grant is very broad, reaching in most situations to the outer bounds of the constitutional case. Its last sentence reverses Finley and Aldinger, because the pendent-party claims rejected there would now be upheld.¹³

The legislative history describes the aim as authorizing jurisdiction in a case like Finley while essentially restoring the pre-Finley understandings of the authorization for and limits on other forms of supplemental jurisdiction.¹⁴ Restoring is not the same as codifying. Everyone agrees that § 1367 overturned the result in Finley, but the Supreme Court has found no warrant for assuming that the statute did no more than overrule Finley and otherwise codify the existing law.¹⁵

The statute keeps the line the cases drew between plaintiffs who hold a federal claim and plaintiffs who do not. In federal question cases, § 1367(a) broadly authorizes supplemental jurisdiction over additional claims, including claims against additional parties.¹⁶ Suppose Borrow, an Ohio resident, sues Finco, an Ohio lender, in federal court under a federal consumer-credit statute. She adds a $20,000 state-law claim against Dealer, an Ohio car dealer, arising from the same loan transaction. Borrow and Dealer are not diverse, and $20,000 falls below the $75,000 amount in controversy. Under Finley, the claim against Dealer would fail for want of a statute. Under § 1367(a), it proceeds: the federal claim anchors the action, and the state claim against the new party arises out of the same basic transaction.¹⁷

Change the facts, and Kroger returns. Suppose Borrow sues Finco, a Texas lender, on state-law claims only, invoking diversity. Finco impleads Dealer under Rule 14, and Borrow then asserts a state-law claim against Dealer, who is not diverse from her. Section 1367(b) bars the claim: the action rests solely on § 1332, the claim is a plaintiff's claim against a person made a party under Rule 14, and hearing it would be inconsistent with § 1332's jurisdictional requirements.¹⁸ The provision implements the principal rationale of Kroger. It stops a plaintiff from naming only defendants whose joinder satisfies § 1332 and later adding claims against other defendants who were joined on a supplemental basis.¹⁹

The split rests on what each plaintiff has chosen. A plaintiff with a federal claim has a right to a federal forum and would otherwise have to divide the dispute between two court systems.²⁰ A plaintiff who picks the federal forum for a state-law claim can file every related claim against every related party in state court. Efficiency favors letting her bring everything in federal court, but that interest runs against the policy of avoiding the federalization of state law.²¹

The statute leaves Gibbs's constitutional test where it was, because Congress cannot change by statute which claims Article III permits a court to hear. Every supplemental-jurisdiction problem therefore still has three parts, and a claim must clear each of them.²²

Success at one step does not cure failure at another. A claim that satisfies Article III still needs a statute, which was the lesson of Finley, and a claim that satisfies both can still be declined at the third step.