Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-87-02478/USCOURTS-ca10-87-02478-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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PUBLISH 

UNITED STA'J,'.fi:S COURT OF APPEALS 

TEN1JH CIRCUIT 

KING FISHER MARINE SERVICE, INC., 

a Texas corporation, 

Plaintiff, 

v. 

) 

) 

) 

) 

) 

) 

) 

21ST PHOENIX CORPORATION, f/k/a The Hanson ) 

Development Company, a Delaware corporation, ) 

Defendant-Third-Party-Plaintiff-Appellee, 

v. 

LANGAN ENGINEERING ASSOCIATES, INC., a 

corporation, 

Third-Party-Defendant-Appellant, 

HIGHLANDS INSURANCE COMPANY, a Texas 

corporation, 

Third-party-Defendant. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

JAN 1 0 19SO 

~OBERT L. HOECKER 

Clerk 

No. 87-2478 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. NO. T-5258) 

Kevin M. Fowler (John C. Frieden with him on the brief) of Fr_~.eden 

& Forbes, Topeka, Kansas, for Defendant-Third-Party-PlaihliffAppellee. 

Richard F. Hayse (Anne L. Baker with him on the brief) of Edison,· 

Lewis, Porter & Haynes, Topeka, Kansas, for Third-Party-DefendantAppellant. 

Before LOGAN and BRORBY, Circuit Judges, and ALLEY,* District 

Judge. 

BRORBY, Circuit Judge. ·J;l.. 

,. 

~ ... . •• ·, 

* The Honorable Wayne E. Alley, United States District Judge 

for the Western District of Oklahoma, sitting by designation. 

Appellate Case: 87-2478 Document: 01019297087 Date Filed: 01/10/1990 Page: 1 
Appellant Langan Engineering Associates (Langan), third-party 

defendant below, seeks to set aside a 1979 judgment of the federal 

district court of Kansas on the ground_that the judgment is void 

for lack of subject matter jurisdiction. The district court 

(Rogers, J.) denied Langan's motion for relief under Fed. R. Civ. 

P. 60(b)(4), holding it had ancillary jurisdiction of third-party 

plaintiff Hanson Development Co.'s (Hanson's) claims against 

Langan and did not abuse its discretion in exercising that 

jurisdiction. King Fisher Marine Serv., Inc. v. Hanson Dev. Co., 

717 F. Supp. 727 (D. Ran. 1987). Langan's appeal squarely raises, 

apparently for the first time before this court, the question 

whether a defendant may join with its proper third-party indemnity 

claim other claims it may have against the third-party defendant. 

We hold that under the circumstances of this case it may, and we 

affirm. 

I. STATEMENT OF THE CASE AND FACTS 

This case involves contract claims concerning the 

construction of a shopping center in Wichita, Kansas. The facts 

are set forth at 717 F. Supp. at 728. The original suit was filed 

in state court in 1972 by King Fisher Marine Service (King 

Fisher), a Texas corporation, against Hanson Development Company 

(Hanson is now known as the 21st Phoenix Corporation), a Delaware 

corporation with its principal place of business in New Jersey. 

King Fisher sought, inter alia, money allegedly due it under its 

contract with Hanson for the performance of site fill work and 

additional damages for construction delays. 

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Hanson removed the action to federal court on the grounds of 

diversity and subsequently filed an amended answer, a counterclaim 

for delay damages against King Fisher, and a third-party complaint 

against Langan Engineering Associates (Langan), whom Hanson had 

hired to conduct site evaluation and contract supervision. 

Langan's principal place of business was also New Jersey; thus 

there was no diversity between the third-party litigants. 

Hanson's third-party complaint asserted pass-through claims 

against Langan under Fed. R. Civ. P. 14{a). It also asserted a 

claim for damages in excess of the pass-through claims, which it 

asserted were due to Langan's delays if not to King Fisher's 

delays as alleged in its counterclaim against King Fisher. The 

contract claims between King Fisher and Hanson were settled 

immediately prior to trial. Trial proceeded on Hanson's thirdparty claim, but Langan did not appear. The court considered 

evidence and argument by Hanson and awarded Hanson a judgment of 

more than $155,000.00 on its delay damages claim against Langan. 

Langan did not appeal. Instead, on October 3, 1983, it filed 

a 60(b)(4) motion to set aside the judgment on the ground that it 

had no notice of the trial date or the entry of judgment. The 

federal district court denied the motion, and we affirmed. King 

Fisher Marine Serv., Inc. v. 21st Phoenix Corp., No. 84-1025 (lOth 

Cir. Sept. 11, 1985). Approximately one year later Langan filed 

the instant rule 60(b)(4) motion to vacate the judgment, asserting 

the lack of diversity between it and Hanson and the absence of 

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Appellate Case: 87-2478 Document: 01019297087 Date Filed: 01/10/1990 Page: 3 
ancillary jurisdiction of the delay damages claim under the 

Supreme Court's analysis in Owen Equipment & Erection Co. v. 

Kroger, 437 U.S. 365 (1978). The question of the district court's 

subject matter jurisdiction of the delay damages claim had not 

been litigated previously by the parties nor considered by the 

court. The district court held it had constitutional and 

statutory authority to exercise jurisdiction of Hanson's thirdparty claims against Langan and denied Langan's motion. 717 F. 

Supp. at 730. Langan has appealed. 

II. ANALYSIS 

The 

Appellant 

parties' arguments can 

Langan argues 

between Langan and Hanson 

that, 

and no 

be distilled as follows: 

because there was no diversity 

federal question (the delay 

damages claim was based on state law), ancillary jurisdiction was 

required over the delay damages claim. However, that claim was 

not "logically dependent upon" the original plaintiff's claim 

against defendant Hanson; therefore, under Owen Equipment, 437 

U.S. at 376, the district court lacked jurisdiction to hear the 

claim. Langan further contends its 60(b)(4) motion is a direct 

attack on a judgment that lacked jurisdiction and is therefore 

void; thus, the judgment can be vacated under 60(b)(4). 

Hanson, on the other hand, argues that its delay damages 

claim against Langan is logically related to, or logically 

entwined with, King Fisher's claim against Hanson, over which the 

court did have jurisdiction on the basis of diversity. Because a 

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court has jurisdiction to determine the entire case or controversy 

before it, the district court had ancillary jurisdiction over the 

delay damages claim. As to the 60(b)(4) motion, Hanson argues 

that Langan's challenge of the judgment is barred by res judicata 

or, alternatively, that an erroneous determination and exercise of 

statutory jurisdiction do not render a judgment ''void" for 

purposes of a 60(b)(4) attack. In other words, Hanson contends 

the district court properly exercised jurisdiction, but even if it 

did not, rule 60(b)(4) is not available to challenge the judgment. 

A. Standard of Review 

In reviewing the district court's determination that its 

judgment is not void for lack of subject matter jurisdiction, this 

court reviews de novo. Jones v. Giles, 741 F.2d 245, 247 (9th 

Cir. 1984); V.T.A., Inc. v. Airco, Inc., 597 F.2d 220, 223-24 

nn.7-8 (lOth Cir. 1979). While the district court suggested that 

the standard might be abuse of discretion, 717 F.2d at 729, relief 

is not discretionary if a judgment is void. See V.T.A., Inc. at 

223-24 nn.7-8; 11 C. Wright & A. Miller, Federal Practice and 

Procedure§ 2862, at 197 (1973). The trial court is correct, 

however, that once it has been determined that jurisdiction exists 

we review a court's decision whether to exercise jurisdiction 

under an abuse of discretion standard, United States v. City of 

Twin Falls, 806 F.2d 862, 868 (9th Cir. 1986), cert. denied, 482 

U.S. 914 (1987); Dahlberg v. Becker, 581 F. Supp. 855, 865 

(N.D.N.Y.), aff'd, 748 F.2d 85 (2d Cir. 1984), cert. denied, 470 

u.s. 1084 (1985). See C. Wright & A. Miller, § 1444, at 234-37 

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Appellate Case: 87-2478 Document: 01019297087 Date Filed: 01/10/1990 Page: 5 
(1971), 97-98 nn.l-2 (1989 Supp.). 

B. Subject Matter Jurisdiction 

The law among the circuits concerning the scope of ancillary 

jurisdiction is in some disagreement, and there is no Tenth 

Circuit case on all fours with the case at bar. It is well 

settled, however, that a court has ancillary jurisdiction of a 

defendant's proper rule 14(a) claim1 against a third-party 

defendant without regard to whether there is an independent basis 

of jurisdiction (e.g., diversity between the third-party 

litigants), so long as the court has jurisdiction of the main 

claim between the original parties. Dery v. Wyer, 265 F.2d 804 

(2d Cir. 1959); 6 C. Wright & A. Miller, Federal Practice and 

Procedure§ 1444, at 223-25 (1971 & 1989 Supp.) (cases cited in 

notes 68-69). See Moor v. County of Alameda, 411 u.s. 693, 715 

(1973). Here, the district court had jurisdiction of King 

Fisher's claims against Hanson based on diversity of citizenship. 

1 Fed. R. Civ. P. 14(a) provides in relevant part: 

(a) When Defendant May Bring in Third Party. At 

any time after commencement of the action a defending 

party, as a third-party plaintiff, may cause a summons 

and complaint to be served upon a person not a party to 

the action who is or may be liable to [him] for all or 

part of the plaintiff's claim against the third-party 

plaintiff. 

(Emphasis added.) Rule 14's provision for impleading parties is 

narrow: the third-party claim must be derivative of the original 

claim. See C. Wright & A. Miller, § 1441~ at 199, 206. Here, 

Hanson's pass-through claim against Langan was a proper rule 14(a) 

claim. It sought indemnification for any liability for damages 

found in favor of King Fisher against Hanson. This claim was not 

decided by the district court because King Fisher's claims against 

Hanson were settled prior to trial. 

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Langan does not contest that the court consequently had 

jurisdiction over Hanson's pass-through, third-party claim against 

it. It disputes only the court's authority to decide Hanson's 

additional claim for delay damages. 

Both parties agree there is no independent basis of 

jurisdiction over Hanson's delay damages claim against Langan. 

Both Hanson and Langan are residents of New Jersey, and the claim 

was based on state law. Thus, the court could properly decide the 

claim only if it falls within its ancillary jurisdiction. 2 

1. Owen Equipment 

The Appellant relies heavily on Owen Equipment & Erection Co. 

v. Kroger, 437 U.S. 365 (1978), which it asserts holds that ''a 

common nucleus of operative fact" is not the only requirement for 

ancillary jurisdiction in a diversity case; in addition, there 

must be a ''logical dependence" between the primary and third-party 

claims. Brief of Appellant at 13, 17 (citing 437 u.s. at 376). 

We believe the Appellant overstates Owen Equipment's holding. It 

overlooks, as have certain courts that have relied on Owen 

Equipment to resolve questions of jurisdiction, the Court's own 

caveat that, "in determining whether jurisdiction over a 

2 Under Fed. R. Civ. P. 18(a) a party asserting a claim 

(original claim, counterclaim, cross-claim, or third-party claim) 

may join as many claims as it has against an opposing party. 

However, the federal rules do not confer jurisdiction on the 

federal courts, Fed. R. Civ. P. 82; hence, a court may decide 

claims joined under rule 18(a) only if independent jurisdiction 

and venue requirements are satisfied. See infra section B.2. of 

the text for a discussion of how certain courts have dealt with 

rule 18(a) in deciding questions of ancillary jurisdiction. 

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Appellate Case: 87-2478 Document: 01019297087 Date Filed: 01/10/1990 Page: 7 
nonfederal claim exists, the context in which the nonfederal claim 

is asserted is crucial." 437 U.S. at 375-76 (emphasis added). It 

also accords undue significance to the Court's use of the term 

"logical dependence" to characterize an ancillary claim. In order 

to ex.plain these conclusions, we begin with a discussion of Owen 

Equipment and its predecessors. 

Mrs. Kroger, the plaintiff in Owen Equipment and an Iowa 

resident, brought a wrongful death action in federal court against 

the Omaha Public Power District (OPPD), a Nebraska corporation, 

whom she alleged caused the electrocution death of her husband by 

its negligent construction and maintenance of a power line. OPPD 

then filed a third-party complaint against Owen Equipment, an Iowa 

corporation and owner of the crane Kroger had been operating at 

the time of his death, alleging that its negligence had caused 

Kroger's death. Subsequently, Mrs. Kroger amended her complaint, 

naming Owen Equipment as an additional defendant. 

The Court held that there was no jurisdiction to hear Mrs. 

Kroger's claim against Owen Equipment. Permitting her to amend 

her complaint in this way would have defeated the requirement of 

complete diversity between plaintiffs and defendants, thus 

allowing her to do what she could not have done initially--bring 

suit against both Owen and OPPD in federal court. The Court 

distinguished United Mine Workers of America v. Gibbs, 383 u.s. 

715 (1966), on which the court of appeals had erroneously relied 

in upholding the district court's exercise of jurisdiction. 

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Gibbs, the Court explained, involved "pendent jurisdiction, which 

concerns the resolution of a plaintiff's federal- and state-law 

claims a~ainst a single defendant in a single action." 437 u.s. 

at 370. Owen Equipment, on the other hand, involved "state-law 

tort claims against two different defendants," apparently raising 

the issue of the existence of ancillary jurisdiction. Id. 3 

3 The confusion in the courts over Owen Equipment stems in part 

from subsequent applications of its holding by the lower courts to 

sets of facts it was not crafted to fit. The first seeds of 

confusion, however, were sown by the Supreme Court itself, when it 

expressed doubt about the precise jurisdictional doctrine at issue 

in Owen Equipment and in its predecessor, Aldinger v. Howard, 427 

U.S. 1 (1975). Somewhat cryptically the Owen Equipment Court 

observed: "No more than in [Aldinger] is it necessary to 

determine here 'whether there are any ''principled" differences 

between pendent and ancillary jurisdiction; or, if there are, what 

effect Gibbs had on such differences.'" 437 U.S. at 370 n.B 

(quoting 427 u.s. at 13). 

Yet in apparent contradiction of its "principled differences" 

comment, the Owen Equipment Court itself distinguished between 

pendent and ancillary jurisdiction in noting the court of appeals' 

misplaced "reli[ance] upon the doctrine of ancillary jurisdiction, 

whose contours it believed were defined .•. in [Gibbs]," when in 

fact "Gibbs •.. involved pendent jurisdiction, which concerns 

the resolution of a plaintiff's federal- and state-law claims 

against a single defendant in one action." 437 U. s. at 370. 

The confusion persists in the Court's most recent reappraisal 

of Owen Equipment: 

We reaffirmed and further refined our approach to 

pendent-party jurisdiction in Owen Equipment . . . . We 

held that the jurisdiction which§ 1332(a)(l) confers 

over a "matter in controversy" between a plaintiff and 

defendant of diverse citizenship cannot be read to 

confer pendent jurisdiction over a different, nondiverse 

defendant, even if the claim involving that other 

defendant meets the Gibbs test. 

Finley v. United States, 109 S. Ct. 2003,. 2007 (1989) (emphasis 

added). (The Gibbs test to -which the Court referred is the 

familiar "common nucleus of operative fact" test used to define 

the contours of a "case" and, hence, a federal court's power to 

hear all claims presented to it.) 

We do not feel compelled to take on the pendent-ancillary 

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.. 

Nevertheless, the Court concluded that the two cases presented 

"two species of the same generic problem: Under what 

circumstances may a federal court hear and decide a state-law 

claim arising between citizens of the same State?" Id. 

The Court found that the court of appeals had misapprehended 

the scope of the Gibbs doctrine. Gibbs held: 

Pendent jurisdiction, in the sense of judicial power, 

exists whenever there is a claim "arising under [the] 

Constitution [and] Laws of the United States ... " and 

the relationship between that claim and the state claim 

permits the conclusion that the entire action before the 

court comprises but one constitutional "case." •.. 

The state and federal claims must derive from a common 

nucleus of operative fact. But if •.• a plaintiff's 

claims are such that he would ordinarily be expected to 

try them all in one judicial proceeding, then, assuming 

substantiality of the federal issues, there is power in 

federal courts to hear the whole. 

383 U.S. at 725, quoted in Owen Equipment, 437 u.s. at 371 

(emphasis in original, citations omitted). 

According to the Owen Equipment Court, "Gibbs delineated the 

constitutional limits of federal judicial power." 437 u.s. at 

371. But Owen Equipment made it clear that determining a court's 

constitutional power to decide a case (the object of the Gibbs 

"common nucleus of operative fact" test) is "merely the first 

jurisdictional dilemma skirted by the Supreme Court in Aldinger 

and Owen Equipment and apparently not since revisited by it. 

Other courts have been similarly disinclined. ~' Danner v. 

Himmelfarb, 858 F.2d 515, 523 (9th Cir. 1988), ("[w]e do not find 

it necessary in this case to decide 'whether there are any 

"principled" differences between pendent and ancillary 

jurisdiction'"), cert. denied, 109 S. Ct. 2067 (1989). 

Nevertheless, we must attempt to determine what guidelines the 

Court has established in the Gibbs-Aldinger-Owen Equipment line of 

cases with respect to our power to decide the case at bar. 

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Appellate Case: 87-2478 Document: 01019297087 Date Filed: 01/10/1990 Page: 10 
hurdle" in deciding whether jurisdiction exists. 437 U.S. at 372. 

Owen Equipment further established that 

there must be an examination of the posture [or context] 

in which the nonfederal claim is asserted and of the 

specific statute that confers jurisdiction over the 

federal claim, in order to determine whether "Congress 

in [that statute] has .... expressly or by implication 

negated" the exercise of jurisdiction over the 

particular nonfederal claim. 

437 U.S. at 373 (quoting Aldinger v. Howard, 427 U.S. at 18); see 

also 437 u.s. at 376. Thus, the Constitution confers on federal 

courts the power to decide all claims deriving from a common 

nucleus of operative fact, but Congress may restrict the exercise 

of that power in certain circumstances. 

Here, there is no dispute that Hanson's delay damages claim 

against Langan arises out of the same nucleus of operative facts 

as do King Fisher's claims against Hanson, that is, completion of 

the fill work for the Wichita shopping center project. The 

district court thus held and we agree that the court possessed the 

constitutional power to hear the additional delay damages claim. 

717 F. Supp. at 730; Brief of Appellant at 15. Langan does not 

deny that cons~itutional power existed, but it claims that the 

secondary jurisdictional tests set forth in Owen Equipment--the 

"posture of the case and the statutory grarit of jurisdiction" 

(here, the diversity statute, 28 u.s.c. § 1332}--preclude 

jurisdiction over the delay damages claim. Brief of Appellant at 

15-16, 28-29 (citing 437 u.s. at 373). 

The "posture" in which the nonfederal claim in Owen Equipment 

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was raised was that of an added state law claim by the original 

plaintiff 

defendant. 

in a 

The 

diversity 

Court held 

case against a 

that, because 

second, nondiverse 

the plaintiff had 

voluntarily chosen the federal forum, she could not complain if 

the limited jurisdiction of the federal courts precluded her from 

bringing a separate, state-law claim. A state court could have 

heard all of her claims. 437 U.S. at 376. The Court contrasted 

this situation with that of a typical ancillary claim, 

specifically the impleader by a defendant of a third-party 

defendant: "[A]ncillary jurisdiction typically involves claims by 

a defending party haled into court against hi& will .... '' Id. 

Here we are presented with the latter situation--a defending 

party, Hanson, "haled into court" involuntarily. True, Hanson 

could have brought all its claims in state court, and it did 

"choose" the federal forum by exercising its right as a defendant 

to remove King Fisher's original state action. But we do not 

believe these facts place this case on a par with Owen Equipment, 

such that it requires dismissal of Hanson's delay damages claim. 

For one thing, we agree with the district court that its exercise 

of jurisdiction over all Hanson's claims against Langan promoted 

Hanson's statutory removal rights "by not forcing Hanson to choose 

between defending against [King Fisher's] claims in state court 

and bringing closely related claims against Langan." 717 F. Supp. 

at 729. A defendant is not first required to demonstrate that its 

case would be prejudiced in state court, as the Appellant appears 

to suggest. See Brief of Appellant at 24-25. Furthermore, this 

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case does not pose the danger with which the Owen court was 

concerned--the potential for a plaintiff to defeat the requirement 

of complete diversity by suing only diverse defendants and waiting 

for them to implead nondiverse defendants. 437 U.S. at 374 & 

n.l7; see also 717 F. Supp. at 730. 

The Court recently observed in Finley v. United States, 109 

S. Ct. 2003, 2007-08 (1989), that the "most significant element of 

'posture' or of 'context' in [this] case •.. is precisely that 

the added claims involve added parties over whom no independent 

basis of jurisdiction exists." (Citations omitted.) The same 

concern was at the heart of Owen Equipment, but it is not 

implicated here. Here, Langan was not ''added" as a party by the 

assertion of the delay damages claim, but by impleader under rule 

14(a}. As previously noted, a court has ancillary jurisdiction of 

a defendant's proper rule l4(a} claim against a third-party 

defendant without regard to whether there is an independent basis 

of jurisdiction, so long as the court has jurisdiction of the main 

claim between the original parties. 6 C. Wright & A. Miller, 

Federal Practice and Procedure § 1444, at 223-25 (1971 & 1989 

Supp.} (cases cited in notes 68-69}. In fact, the Court in Owen 

Equipment noted that "the exercise of ancillary jurisdiction . 

has often been upheld in situations involving impleader." 437 

U.S. at 375. The precise issue here is, not whether Langan was 

properly added as a party, but whether, once properly joined as a 

party, the delay damages claim was properly asserted against it. 

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Owen Equipment explained why a claim impleading a third party 

has been considered ancillary: "A third-party complaint depends 

at least in part upon the resolution of the primary lawsuit. Its 

relation to the original complaint is thus not mere factual 

similarity but logical dependence." 437 U.S. at 376 (citation 

omitted). The Court contrasted such a claim with the attempted 

state law claim against the nondiverse defendant in Owen. 

latter, the Court found, "was entirely separate from 

plaintiff's] original claim against the [diverse defendant], 

the [nondiverse defendant's] liability to her depended not at 

upon whether or not [the diverse defendant] was also liable. 

The 

[the 

since 

all 

Far 

from being an ancillary and dependent claim, it was a new and 

independent one." 437 u.s. at 376. 

Appellant has interpreted the foregoing language as requiring 

"logical dependence" in order to find ancillary jurisdiction of a 

claim sought to be added. A number of courts are in apparent 

agreement with that assessment. See, ~' National Union Fire 

Ins. Co. of Pittsburgh, Pa. v. Continental Ill. Corp., 661 F. 

Supp. 964, 969 (N.D. Ill. 1987); May's Family Centers, Inc. v. 

Goodman's, Inc., 104 F.R.D. 112, 115 (N.D. Ill. 1985); Dahlberg v. 

Becker, 581 F. Supp. 855, 865 (N.D.N.Y.) aff'd, 748 F.2d 85 (2d 

Cir. 1984) cert. denied, 470 U.S. 1084 (1985). Cf. GusT. Handge 

& Son Painting Co. v. Douglass State Bank, 543 F. Supp. 374, 379-

80 (D. Kan. 1982). It should be recognized, however, that the 

Court in Owen Equipment was not stating a prerequisite of 

ancillary jurisdiction, but a common feature of third-party 

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indemnity claims (i.e., that the third-party defendant's liability 

to the third-party plaintiff "depends at least in part" on whether 

the third-party plaintiff is first found liable to the plaintiff 

in the original action). 437 u.s. at 376. The Owen Equipment 

Court's reference to Moore v. New York Cotton Exch., 270 U.S. 593, 

610 (1925), is instructive in this regard. 

In support of its "logical dependence" characterization, the 

Court cited the test established in Moore for determining a 

"transaction'' in the context of a compulsory counterclaim. 4 

"'Transaction,'" the Moore Court held, "is a word of flexible 

meaning. It may comprehend a series of many occurrences, 

depending not so much upon the immediateness of their connection 

as upon their logical relationship." 270 u.s. at 610 (emphasis 

added). Moore involved a suit by the Odd-Lot Cotton Exchange (by 

its president Moore) seeking, inter alia, a decree that the New 

York Cotton Exchange was a monopoly and enjoining it from refusing 

to supply members of the Odd-Lot Exchange with price quotations. 

The New York Exchange counterclaimed for an injunction against the 

Odd-Lot's practice of "purloining" the price quotations. The 

Moore Court found that the New York Exchange's refusal to supply 

price quotations to the plaintiff was 

one of the links in the chain which constitutes the 

transaction upon which appellant here bases its cause of 

action. It is an important part of the transaction 

constituting the subject-matter of the counterclaim. It 

4 A compulsory counterclaim is one "'arising out of the 

transaction which is the subject matter of the suit,' [and which] 

must be pleaded," the Court explained. 270 U.S. at 609 (quoting 

equity rule 30). 

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Id. 

is one circumstance without which neither party would 

have found it necessary to seek relief. . . . That [the 

facts alleged by the parties] are not precisely 

identical, or that the counterclaim embraces additional 

allegations ••• does not matter ••.. 

So close is the connection between the caae sought 

to be stated in the [complaint] and that set up in the 

counterclaim, that it only needs the failure of the 

former to establish the foundation for the latter; but 

the relief afforded by the dismissal of the [complaint] 

is not complete without [providing the relief sought by 

the counterclaim]. 

Moore thus sheds light on the Owen Equipment Court's 

statement concerning the frequent, proper exercise of ancillary 

jurisdiction in cases involving impleader, counterclaims, and 

cross-claims. 437 u.s. at 375. Considered in this context, 

"logical dependence" takes on significance, not as an absolute 

requirement, but as evidence of the interrelatedness of the claims 

as components of the same transaction or series of transaction. 

Analogizing the case at bar to the second paragraph quoted from 

Moore above, if Hanson was liable to King Fisher for damages 

resulting from the delay in completing the fill, but the delay was 

caused by Langan and also resulted in damages to Hanson, then 

relief to Hanson would not be complete without providing it the 

relief sought in its additional delay damages claim. 

That Owen Equipment did not intend to establish a rigid test 

for the exercise of ancillary jurisdiction is best evidenced by 

the Court's own concluding statement: 

It is not unreasonable to assume that, in generally 

requiring diversity, Congress did not intend to confine 

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the jurisdiction of federal courts so inflexibly that 

they are unable to protect legal rights or effectively 

to resolve an entire, logically entwined lawsuit. Those 

practical needs are the basis of the doctrine of 

ancillary jurisdiction. 

437 U.S. at 377 (emphasis added). The district cour.t in the case 

at bar was persuaded by this reasoning. It acknowledged that 

"other claims [presumably the delay damages claim] were made which 

were not logically dependent on the main action, although they 

were logically related." 717 F. Supp. at 730. But the court 

believed that a logical relationship, without ''dependence," is 

sufficient to confer subject matter jurisdiction because it 

permits "the resolution of 'an entire, log ical.ly entwined 

lawsuit.'" Id. Other courts have reached similar conclusions. 

~' Travelers Ins. Co. v. First Nat'l Bankof Shreveport, 675 

F. 2d 633, 638 (5th Cir. 1982) ("key is 'logical 

relationship'")~ Cumberland Village Hous. Assocs. v. Inhabitants 

of Cumberland, 609 F. Supp. 1481, 1486 (D. Me. 1985) (sufficient 

that claims, although "not necessarily logically dependent," were 

"tightly intertwined"). Cf. United States v. City of Twin Falls, 

Id., 806 F.2d 862, 867-68 (9th Cir. 1986) cert. denied, 482 U.S. 

914 (1987) ("[T]here is a close factual and logical nexus between 

the pendent claims added under Rule 18(a) and the original claim. 

Therefore, pendent jurisdiction supports these claims.")~5 Lykins 

v. Pointer Inc., 725 F.2d 645, 648 n.2 (11th Cir. 1984) (lack of 

logical dependence between claims did not defeat ancillary 

jurisdiction because statute held not to preclude procedural 

posture of claim)~ Eagerton v. Valuations, Inc., 698 F.2d 1115, 

5 See discussion of United States v. Twin Falls below. 

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1118-20 (11th Cir. 1983) (in 

court did not refer at 

di~cussing ancillary jurisdiction, 

all to Owen Equipment's "logical 

dependence" test); Federal Deposit Ins. Corp. v. Otero, 598 F.2d 

627, 633 (lst Cir. 1979) (court stated: "We doubt that this 

tangential relationship would support the pendent jurisdiction 

enumerated in [Owen]," and "there is serious doubt" that rule 18 

can be used "to join a claim against the third party which is not 

related to plaintiff's claim," but did not reach issue of what 

degree of relatedness would be sufficient). 

We agree with the district court and the foregoing cases. We 

decline to find, as Appellant Langan apparently suggests, that 

"logical dependence" as used in Owen Equipment requires something 

more or different than the logical connection between claims 

comprising "an entire, logically entwined lawsuit." 

But even if a logical 

sufficient, the Appellant 

relationship without dependence is 

further denies there is any logical 

connection between Hanson's delay damages claim against Langan and 

any claim asserted by King Fisher. Brief of Appellant at 21-23. 

The district court found, however, that the additional claim 

asserted by Hanson "come[s) from a nucleus of facts common to the 

other claims in the lawsuit" and is ''logically related to the main 

action." 717 F. Supp. at 729, 730. We must accept the district 

court's appraisal of the facts unless clearly erroneous. Equal 

Employment Opportunity Cornrn'n v. General Lines, Inc., 865 F.2d 

1555, 1558 (lOth Cir. 1989). Both King Fisher and Hanson asserted 

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claims for delay damages. Because Langan was designated Hanson's 

representative under the construction contract and all work by 

King Fisher was subject to the approval of Langan, arguably any 

delays by Langan would give rise to damages to both Hanson and 

King Fisher. See Brief of Appellant at 2. So viewed, Hanson's 

claim against Langan for damages due to delay would clearly seem 

to be, as the district court found, logically related to King 

Fisher's claim. It could not reasonably be characterized as 

"independent" or "entirely separate." Owen Equipment, 437 U.S. at 

376.6 The Appellant's argument to this effect is without merit. 

We have determined the district court had the constitutional 

power to hear Hanson's delay damages claim and that the "posture" 

of the claim did not preclude jurisdiction. We next undertake the 

final consideration mandated by Aldinger and Owen Equipment--

whether Congress has "'expressly or by implication negated' the 

exercise of jurisdiction over the particular nonfederal claim." 

437 U.S. at 373 (quoting 427 U.S. at 18). We begin with a brief 

look at three cases in which the Court has found evidence of such 

congressional intent. 

In both Owen Equipment and Aldinger the Court determined that 

Congress by statute had foreclosed the exercise of federal 

jurisdiction. In Owen Equipment the Court held that the diversity 

6 Appellee suggests that jurisdiction can be supported on the 

basis of 28 U.S.C. § l44l(c), which applies to the removal to 

federal court of cases that involve separate and independent 

claims. Section l44l(c), however, is inapplicable to this action. 

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statute, 28 U.S.C. § 1332(a)(l), precluded the extension of 

ancillary jurisdiction to a plaintiff's cause of action against a 

citizen of the same state. 437 u.s. at 377. Aldinger involved 

federal civil rights claims under 28 U.S.C. §§ 1343(3) and 1983, 

and state claims under Washington law by a discharged county 

employee against the county, certain county officers, and the 

county commissioners. The Court held that, in light of the 

exception of counties from persons subject to suit under § 1983 

and, by reference, under § 1343, 427 U.S. at 16-17, the 

jurisdiction of the federal courts did not extend to joinder of 

counties for purposes of asserting state law claims not within the 

court's diversity jurisdiction. The Court concluded that 

"Congress has by implication declined to extend federal 

jurisdiction over a party such as Spokane County." Id. at 19. 

More recently, in Finley v. United States, 109 S. Ct. 2003, 2008 

(1989), the Court held that the Federal Tort Claims Act, 28 U.S.C. 

§ 1346(b), which confers jurisdiction over "civil actions on 

claims against the United States," precludes federal jurisdiction 

of related claims against defendants other than the United States 

without an independent basis of jurisdiction. 7 

The relevant statute in this case, as in Owen Equipment, is 

the diversity statute. We note at the outset, however, that the 

Court's conclusion in Owen Equipment concerning the exercise of 

7 In support of this conclusion, the Court also noted that the 

relation between the petitioner's added claims and the original 

complaint was one of "mere factual similarity." 109 S. Ct. at 

2008 (citing Owen Equipment, 437 u.s. at 376). 

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jurisdiction in those circumstances does not dictate our 

conclusion here. In our view, Congress has neither impliedly nor 

expressly negated the exercise of jurisdiction over Hanson's added 

third-party claim. First, the fact-specific approach established 

by the Court in Aldinger and subsequently followed in Owen 

Equipment defeats any argument that Owen Equipment compels a 

particular outcome in this case. Indeed, after holding that 

federal (pendent or ancillary) jurisdiction did not encompass the 

claims against the county in Aldinger, the Court cautioned that 

"[o]ther statutory grants and other alignments of parties and 

claims might call ·for a different result." 427 U.S. at 18 

(emphasis added); cf. Federal Deposit Ins. Corp. v. Otero, 598 

F.2d 627, 632 (lst Cir. 1979) (and cases cited therein). 8 The 

8 The Aldinger Court found it "quite unnecessary to formulate 

any general, all-encompassing jurisdictional rule," 427 u.s. at 

13, noting that "the question of pendent-party jurisdiction is 

'subtle and complex,'" and that "it would be as unwise as it would 

be unnecessary to lay down any sweeping pronouncement upon the 

existence or exercise of such jurisdiction." Id. at 18. With 

respect to its decision not to formulate an all-inclusive rule, 

the Court offered the following comment: 

Given the complexities of the many manifestations of 

federal jurisdiction, together with the countless 

factual permutations possible under the Federal Rules, 

there is little profit in attempting to decide, for 

example, whether there are any "principled" differences 

between pendent and ancillary jurisdiction; or, if there 

are, what effect Gibbs had on such differences. 

427 U.S. at 13; see also 437 U.S. at 370 n.8. 

The Court adhered to this case-specific approach in Owen 

Equipment, placing heavy emphasis on the particular context--rn 

which the nonfederal claim there was raised. 437 u.s. at 375-76 

(citing 427 U.S. at 14). The Court decided only that a plaintiff 

in the circumstances of the petitioner could not assert against a 

nondiverse defendant in federal court a state-law claim that was 

"entirely separate" from her primary claim against the original 

defendant (over which the court had jurisdiction on the basis of 

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Court considered it a "better approach to determine what 

Gibbs [the authority relied on by the appellant] did and did not 

decide, and to identify what we deem are important differences 

between the jurisdiction sustained in Gibbs and that asserted 

here." Id. at 13. Similarly, we must determine the important 

differences between the jurisdiction asserted in Owen Equipment 

and that asserted here and heretofore unaddressed by this circuit. 

Second, in determining whether the "complete diversity" 

required by the statute, see 437 U.S. at 373 n.l3 and cases cited 

therein, precludes a federal court from hearing Hanson's delay 

damages claim, we must keep in mind the Owen Equipment Court's 

prudent observation that , "_i_n __ g.._e_n_e_r_a_l_l~y.__ __ r_e_q.._u_J._· _r _i_n ...... g'--_c_o_m .... p_l_e_t_e_ 

diversity, Congress did not intend to confine the jurisdiction of 

federal courts so inflexibly that they are unable to protect legal 

rights or effectively to resolve an entire, logically entwined 

lawsuit." 437 u.s. at 377 (emphasis added). 

Considered in light of Finley, the statutory (or 

congressional intent) analysis and the "posture'' considerations 

mandated by Aldinger and Owen Equipment tend to overlap in the 

circumstances of this case.9 As we have already explained, 

diversity). 437 U.S. at 376. 

9 As discussed above, Finley, 109 S. Ct. at 2007-08, held that 

the "most significant element of 'posture' or of 'context' in the 

present case . . . is precisely that the added claims involve 

added parties over whom no independent basis of jurisdiction 

exists" (citations omitted). As already explained, that is not 

our case here. Langan was in federal court by virtue of the 

court's proper exercise of its ancillary jurisdiction of Hanson's 

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impleader of a nondiverse third-party defendant is a commonly 

accepted practice, generally conceded to come within the compass 

of a federal court's ancillary jurisdiction. We question how the 

purposes of requiring diversity of citizenship can be thwarted, 

once an "exception" has been made to allow the impleader of a 

nondiverse defendant, by allowing an additional, related claim 

against that party. In other words, if the diversity statute has 

not "expressly or by implication negated the exercise of 

jurisdiction" over the rule 14(a) claim, how can it be said to 

have done so with respect to additional, related claims? This is 

not tb say that once in federal court a defendant should be 

subject to any claim another party may have against him. Proper 

application of the Gibbs "common nucleus of operative fact" test 

will prevent that abuse. But we search the Supreme Court's 

opinion in Owen Equipment in vain for a rationale for extending 

ancillary jurisdiction to the pass-through claim and not to other, 

logically related claims. 

We find Aldinger in accord with this view. The Court was 

considering whether a county could be joined in a 28 u.s.c. § 1983 

action for the purposes of asserting related state law claims 

against it, when the county could not be sued directly under the 

federal statute and there was no other basis of federal 

jurisdiction (e.g., diversity). It found that "[t]wo observations 

suffice for the disposition of the type of case before us." 427 

u.s. at 18. In addition to the significance of congressional 

rule 14(a) claim. 

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intent, the Court noted: "If the new party sought to be joined is 

not otherwise subject to federal jurisdiction, there is a more 

serious obstacle to the exercise of pendent jurisdiction than if 

parties already before the court are required to litigate a statelaw claim." Id. The case before us fits the latter category; 

Langan was "already before the court," properly impleaded under 

the court's ancillary jurisdiction and rule 14(a). 

Following the Court's lead in Aldinger and Owen Equipment, we 

have identified ''what we deem are important differences," 427 U.S. 

at 13, between those cases and this one--the posture in which the 

nonfederal claim was raised here (by a defendant and third-party 

plaintiff), and the fact that the defending party (Langan) was 

already before the court, properly impleaded under rule 14(a). 

These differences suggest that the exercise of jurisdiction in 

this case was proper. 

We acknowledge that "neither the convenience of litigants nor 

considerations of judicial economy" are alone sufficient ''to 

justify extension of the doctrine of ancillary jurisdiction" to a 

plaintiff's state-law cause of action against a nondiverse 

defendant. Owen Equipment, 437 U.S. at 377. But in this case, 

these and other relevant prudential considerations only bolster 

our conclusion. "Both as a matter of policy and of logic," Schwab 

v. Erie Lackawanna R.R. Co., 438 F.2d 62, 68 (3d Cir. 1971), 

Hanson should be allowed to assert its additional claim against 

Langan. As the district court held, judicial economy and 

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convenience were served by considering all the claims together, 

and the Appellant has asserted no prejudice or unfairness in the 

court's exercise of jurisdiction. Moreover, as stated earlier, 

exercising jurisdiction promoted Hanson's statutory removal 

rights. 717 F. Supp at 729. 

2. Third-Party Claim Case Law 

Having examined our facts in light of the holdings of 

Aldinger and Owen Equipment, we next turn to the case law and 

commentators to ascertain how other courts have resolved 

jurisdictional issues like the one presented here. The standard 

treatises accord with our conclusion that the district court's 

exercise of jurisdiction was proper. Wright and Miller assert 

that, "[i]f the additional claim arises out of the same 

transaction or occurrence as the claim for liability over [i.e., 

the pass-through claim], the additional claim should be treated as 

ancillary for purposes of subject matter jurisdiction and venue." 

6 Federal Practice and Procedure § 1452, at 118 (1989 Supp.). 

Similarly, Professor Moore writes: "The concept of ancillary 

jurisdiction also properly justifies taking jurisdiction over an 

additionally joined claim of the third-party plaintiff against the 

third-party defendant, provided the additionally joined claim is 

sufficiently related to the original claim to be deemed 

ancillary." 3 J. Moore, w. Taggart & J. Wicker, Moore's Federal 

Practice~ 14.26, at 14-112 (1989). Although the case law of the 

circuits is mixed, we believe the better reasoned decisions also 

support the result we reach today. We briefly review these cases, 

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limiting our survey (in light of the Supreme Court's emphasis on 

the context in which a nonfederal claim is raised) to diversity 

cases involving third-party claims. 

The case most often cited for the proposition that exercise 

of jurisdiction in'these circumstances is authorized is Schwab v. 

Erie Lackawanna R.R. Co., 438 F.2d 62 (3d Cir. 1971). In Schwab 

(a pre-Owen Equipment case), a railroad employee injured in a 

collision between a train and a truck brought an FELA action 

against the railroad, which in turn impleaded the owner of the 

truck and the estate of the driver. In its third-party complaint, 

the railroad also asserted a claim against the nondiverse thirdparty defendants for damages to the locomotive in an amount less 

than the jurisdictional minimum. The Third Circuit relied on 

civil procedure rules 14 and 18(a) and the concept of ancillary 

jurisdiction, which it held was "broad enough_ to encompass this 

claim." 438 F.2d at 69; accord Brooks v. Hickman, 101 F.R.D. 19, 

20 (W.O. Pa. 1984). 

The Third Circuit drew from several authorities in reaching 

this conclusion. First, the court quoted Professor Wright's 

comments on the occasion of the 1966 amendment to rule 18(a): 

My hope would be that in determining [jurisdiction 

over additional third-party claims] the court would look 

to the factual relation between the third-party claim 

and the independent claim of the defendant .... 

[I]f the factual relationship is as close as in the 

example •.. where the claim ... arises out of the 

very transaction which is the subject of the third-party 

claim, then it seems to me that within the existing 

knowledge about ancillary jurisdiction, [a court] ought 

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to be able to [assert jurisdiction over the claim]. 

438 F.2d at 69 (quoting 42 F.R.D. at 560-61). The court also 

relied on the reasoning of a leading treatise: 

If the additional claim arises out of the same 

transaction or occurrence as the claim for liability 

over--and thus, by hypothesis as the original claim of 

plaintiff against defendant--it would seem, by analogy 

to principles settled in other areas, that the 

additional claim too should be treated as ancillary for 

purposes of jurisdiction and venue. 

438 F.2d at 69-70 (quoting Barron & Holtzoff, lA Federal Practice 

and Procedure§ 426, at 43-44 (Supp. 1969)). Finally, the court 

described a similar approach taken by another commentator: 

If a defendant asserts a claim against a thirdparty defendant for contribution or indemnity, the 

defendant should be able to join with this claim a claim 

for damages for injuries which he received in the same 

transaction or occurrence. Since the third-party 

defendant is properly in the action, the original 

defendant should be able to plead all claims that arise 

out of the same transaction or occurrence in order to 

prevent several suits between the same parties on the 

same facts. Fraser, "Ancillary Jurisdiction and the 

Joinder of Claims in the Federal Court." 

438 F.2d at 70 (quoting 33 F.R.D. 27, 39-40 (1963)). 

The court found compelling the analogy to a compulsory 

counterclaim (which it believed ·was the object of Barron's & 

Holtzhoff's reference to "principles settled in other areas"), 

given that the railroad's claim for damages "arises out of the 

same set of facts as the claim for liability-over, and since the 

third-party defendants could assert against [the railroad] a claim 

arising out of the transaction or occurrence which is the subject 

of the third-party claim." 438 F.2d at 71. 

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The Appellant here argues that the reasoning of Schwab was 

later discredited by Owen Equipment. Brief of Appellant at 31. 

According to the Appellant, Schwab failed to consider the second 

test established by Owen Equipment--logical dependence. We have 

already concluded that the Appellant overstates the holding of 

Owen Equipment and makes an unwarranted distinction between 

logical dependence and logical relationship. We also credit the 

Schwab court for acknowledging it was "furrowing new ground" in 

its interpretation of rules l4(a) and 18 and that a district 

court's discretion concerning the disposition of multiple claims 

in a single action was not unlimited. Presaging Owen Equipment 

and Aldinger, it observed that a court cannot enlarge its 

discretion "simply by characterizing a claim as 'pendent' and 

invoking the broad language of [Gibbs] which arose in a different 

context and involved additional considerations." 438 F.2d at 71. 

The Third Circuit distinguished Gibbs from Schwab as we have 

distinguished Owen Equipment and Aldinger from this case: There, 

as here, ancillary jurisdiction had already attached by virtue of 

impleader. 438 F.2d at 71 n.2o.l0 

10 The Ninth Circuit later·approved the result in Schwab but 

faulted the Third Circuit's suggestion that a third-party claim 

may come within the ancillary jurisdiction of the court because it 

is ancillary to another ancillary claim. United States ex rel. 

Payne v. United Pacific Ins. Co., 472 F.2d 792, 795 & n.9 (9th 

Cir.), cert. denied, 411 U.S. 982 (1973) (referring to the 

statement in Schwab that "[f]or the purposes of jurisdiction ... 

we believe that Erie's separate claim should survive, whether its 

claim be characterized as ancillary to the main claim or ancillary 

to the third-party claim which itself is ancillary to the original 

claim against the railroad," 438 F.2d at 70 (footnote omitted)). 

The Fifth Circuit, however, in Nishimatsu Construction Co. v. 

Houston Nat'l Bank, 515 F.2d 1200 (1975), appeared to agree with 

the disputed suggestion in Schwab. The court held that the added 

third-party claim "[fell] outside the pale of ancillary 

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.. 

The standard treatises continue to rely on Schwab after Owen 

Equipment for the general proposition that the ancillary 

jurisdiction of the federal courts encompasses a state-law claim 

arising out of the same transaction or occurrence as a third-party 

impleader claim. See, ~' A. Wright & C. Miller, § 1452, at 118 

(1989 Supp.). Moreover, Appellee Hanson argues persuasively that 

Schwab and similar cases are consistent with the general 

principles of ancillary jurisdiction recognized in the Tenth 

Circuit. Brief of Appellee at 15; see, ~' Jenkins v. 

Weinsheink, 670 F.2d 915, 918 (lOth Cir. 1982) (ancillary 

jurisdiction rests on the premise that a federal court acquires 

jurisdiction of a case or controversy in its entirety); United 

States v. Major Oil Corp., 583 F.2d 1152, 1160-61 (lOth Cir. 

1978); United States v. Acord, 209 F.2d 709, 712 (lOth Cir.) 

(regarding ancillary jurisdiction over third-party claims), cert. 

denied, 347 U.S. 975 (1954). Thus, we do not believe Owen 

Equipment undermined the sound reasoning of Schwab. 

The Fifth Circuit is basically in step with the Third. It 

views an added third-party claim as ancillary if it "'bears a 

logical relationship to the aggregate core of operative facts 

which constitutes the main claim over which the court has an 

independent basis of federal jurisdiction.'" Nishimatsu Constr. 

Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1205 (5th Cir. 1975) 

jurisdiction" because it "lack[ed] the 

relationship either to the main claim or to the 

claim." 515 F.2d at 1205 (emphasis added). 

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requisite logical 

bank's impleader 

Appellate Case: 87-2478 Document: 01019297087 Date Filed: 01/10/1990 Page: 29 
.· 

(quoting Revere Copper & Brass, Inc. v. Aetna Casualty & Surety 

Co., 426 F.2d 709, 714 (5th Cir. 1970)). It defines "logical 

relationship" as: 

"aris[ing] out of the same aggregate of operative facts 

as the original claim in two senses: (l) that the same 

aggregate of operative facts serves as the basis of both 

claims; or (2) that the aggregate core of facts upon 

which the original claim rests activates additional 

legal rights in a party defendant that would otherwise 

remain dormant." 

515 F.2d at 1205 (quoting Revere Copper, 426 F.2d at 715). The 

Fifth Circuit suggests, as did the Third Circuit in Schwab, that 

ancillary jurisdiction of the additional claim may rest on the 

logical relationship of that claim to either the main claim or the 

(already ancillary) impleader claim. 515 F.2d at 1205. 

The Fourth Circuit, in an opinion that predated Schwab and 

the amendment of rule 18(a), adopted a stance consistent with that 

later assumed by the Third Circuit. See Noland Co. v. Graver Tank 

& Mfg. Co., 301 F.2d 43 (4th Cir. 1962). The circumstances of 

Noland are not on all fours with this case; 11 nevertheless, we 

11 Lack of diversity was not a problem in Noland, but the amount 

in controversy appeared to be less than the jurisdictional 

minimum. The court did not address that issue, however, and a 

subsequent Fourth Circuit district court opinion, Gebhardt v. 

Edgar, 251 F. Supp. 678 (W.D. Pa. 1966), declined to follow 

Noland, holding there was no independent basis of jurisdiction for 

the third-party plaintiff's claim for damages for his own injuries 

against the nondiverse third-party defendant. We find the 

analysis in Schwab more persuasive. We also note that the court 

in Gebhardt relied partly on an earlier version of Barron & 

Holtzoff, the treatise quoted in Schwab, in which the authors 

concluded there was "no authorization'' for a third-party plaintiff 

to join other claims he may have against the third-party 

defendant. 251 F. Supp. at 681. The court apparently overlooked 

the fact that in the later edition of the treatise cited in Schwab 

(written after the amendment of rule 18), the authors concluded 

that, "by analogy to principles settled in other areas,'' the 

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.. 

find the court's reasoning useful because of the similarity of the 

contract disputes. The third-party plaintiff in Noland sought not 

only indemnification to the extent of any recovery awarded the 

plaintiff against it, but also a recovery for its own loss of 

anticipated profit. In holding that the district court had 

jurisdiction of the lost profits claim, the Fourth Circuit panel 

explained: 

[T]he profit issue is not, in any way, complicated; 

• • . a determination thereof would not have been unduly 

burdensome to any party litigant; ... the litigation 

would not have been appreciably prolonged by such 

determination. • . • [Th]e facts supporting Noland's 

ancillary claim for loss of anticipated profit are 

substantially the same as those developed in the trial 

of the primary questions .... 

One of the primary objectives of third-party procedure 

is to avoid circuity and multiplicity of actions. 

301 F.2d at 49-50. 

The most recent (and novel) attempt by a circuit court to 

resolve the issue we face today is that of the Ninth Circuit in 

United States v. City of Twin Falls, Id., 806 F.2d 862 (1986), 

cert. denied, 482 u.s. 914 (1987). The factual situation 

generally resembles ours: Twin Falls was sued by the 

Environmental Protection Agency for violating federal water 

pollution control statutes. The City impleaded Envirotech 

Corporation and others responsible for the design and installation 

of the city water treatment plant (the alleged source of the 

additional claims should also be considered ancillary. 438 F.2d 

at 69 (quoting lA Barron & Holtzoff, Federal Practice and 

Procedure§ 426, at 43-44 (Supp. 1969)). 

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.· 

violations). The City also asserted additional claims for damages 

arising from the need to repair or replace the treatment plant 

caused by Envirotech's negligence and breach of warranties. The 

City and Envirotech were diverse; however, there were other thirdparty defendants defeating diversity. 806 F.2d at 866. 

Envirotech appealed the trial court's ruling that it had 

ancillary jurisdiction of the City's third-party claims, arguing 

that the claims were pendent party claims and that because of the 

lack of complete diversity there was no independent basis of 

federal subject matter jurisdiction. Id. The City argued that 

once the court properly exercised its ancillary jurisdiction with 

respect to the City's rule 14(a) claim, it also possessed pendent 

jurisdiction of the City's additional damage claims under rule 

18(a). Id. 

The Twin Falls court held that pendent jurisdiction supported 

the City's 

addressed the 

contract and 

difficulty 

relying instead on a 

tort claims. 

posed by the 

new adaptation 

The court never directly 

absence of diversity, 

of the Ninth Circuit 

definition of "pendent claim," i.e., "state claims which arise 

from the same 'nucleus of operative facts' as that of a federal 

claim and which are joined in the same complaint with the 

federally cognizable claim by the original plaintiffs against the 

original defendants." 806 F.2d at 867 (quoting Blake v. Pallan, 

554 F.2d 947, 956-57 n.ll (9th Cir. 1977)). After establishing 

that the City's indemnity claim was ancillary to the "federally 

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cognizable claim" (EPA's claim against the City), the court 

proceeded with its novel analysis: 

Viewing the City as the "original plaintiff" in its 

third-party action against Envirotech as the "original 

defendant," the City's contract and warranty claims are 

state claims arising from the same nucleus of operative 

facts as the indemnity claim, and thus are pendent to 

its ancillary claim. 

806 F.2d at 867. 12 Without discussion, the court cited Schwab and 

Noland as according with its conclusion that pendent jurisdiction 

supported the additional third-party claims. 

The Twin Falls court distinguished United States ex rel. 

Payne v. United Pacific Insurance Co., 472 F.2d 792 (9th Cir.), 

cert. denied, 411 U.S. 982 (1973) (hereinafter Payne), where it 

had held the additional claims asserted by the third-party 

12 The Ninth Circuit's upholding of ancillary jurisdiction in 

Twin Falls has been questioned by a panel of the Seventh Circuit 

for what that court termed Twin Falls's inexact analogy to 

compulsory counterclaim. Hartford Accident & Indem. Co. v. 

Sullivan, 846 F.2d 377, 381 (7th Cir. 1988), cert. denied, 109 S. 

Ct. 2428 (1989). (The Sullivan court also questioned the results 

in Mayer Paving & Asphalt Co. v. General Dynamics Corp., 486 F.2d 

763, 772 (7th Cir. 1973), cert. denied, 414 U.S. 1146 (1974) and 

Revere Copper, 426 F.2d at 716, on the same ground.) The Sullivan 

court observed that the filing of a compulsory counterclaim "is in 

a sense involuntary" because a defendant who fails to plead such a 

. claim may be barred from bringing it in a separate state action, 

846 F.2d at 381, while "impleader clearly is voluntary," id. at 

382. The court concluded instead that analogy to permiSsive 

counterclaim was proper, at least under the circumstances of 

Sullivan. Id. 

The Sullivan court's view of ancillary jurisdiction is 

narrow. It declined even to concede the ancillarity of an 

impleader claim, holding that whether the claim arises from the 

same transaction or occurrence as th~~ain claim "is the proper 

test to use in determining which Rule 14(a) claims are within the 

federal courts' ancillary jurisdiction if the doctrine is narrowly 

construed in the impleader setting, as we think it should be." 

Id. 

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.. plaintiff were not supported by ancillary jurisdiction. The 

third-party plaintiff in Payne, a surety sued by a subcontractor 

(Payne) who was not paid by his contractor for his work, impleaded 

the contractor and also joined other claims against the contractor 

on performance bonds involving other projects (projects not 

involving Payne, the original plaintiff). The Ninth Circuit held 

that, unlike in Schwab, there was 

no close nexus between the third-party claim and the 

original suit by Payne. . Regardless of the success 

or failure of Payne's suit, United's claim against [the 

third-party defendants] would persist entirely 

independently. The fact that the third-party claim 

arose from the same general background does not suffice 

as a nexus. 

472 F.2d at 795. 1 3 

While we agree with the results in Twin Falls and Payne, we 

find the Ninth Circuit's "original plaintiff" approach in Twin 

Falls unnecessary and more puzzling than helpful. 14 It is our 

13 Curiously, the Payne court also failed to address the absence 

of diversity between the third-party litigants. After observing 

that the result in Schwab was, on its facts, "undoubtedly 

correct," the court proceeded to stress the strong relationship 

between the principal and disputed claims in that case. But the 

court ignored the Schwab court's discussion of the no-diversity 

jurisdictional hurdle. 472 F.2d at 795. 

14 Indeed, the Ninth Circuit contributed to the confusion in a 

subsequent opinion. In a case involving questions of ancillary 

and pendent jurisdiction in the context of cross-claims and 

joinder of parties under Fed. R. Civ. P. 13(h), the court stated 

that Twin Falls had treated the "third-party complaint under Fed. 

R. Civ. P. 14(a) as an 'original' complaint for purposes of 

ancillary jurisdiction." Danner v. Himmelfarb, 858 F.2d 515, 522 

(9th Cir. 1988). This is not technically correct. The Twin Falls 

court did treat the third-party complaint as an "original'' 

complaint (or at least the third-party plaintiff as an "original" 

plaintiff), but it distinguished between the defendant's thirdparty indemnity claim under rule 14(a), over which it held there 

was ancillary jurisdiction, and the defendant's additional damages 

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.· > • 

impression the Ninth Circuit would have reached the same result in 

Twin Falls had it followed the Third Circuit's (more traditional) 

approach in Schwab. We do not subscribe to the "original 

plaintiff" analogy, nor do we believe that analytical technique is 

necessary to the resolution of the jurisdictional issue in these 

cases. The foregoing cases from other circuits and the following 

district court opinions corroborate that conclusion. 

Two district courts within this circuit have reached the 

conclusion we reach today on the basis of similar facts. In 

United of Omaha Life Ins. Co. v. Reed, 649 F. Supp 837, 842 (D. 

Kan. 1986), United sought a declaration of its liability under a 

policy issued to defendant Reed. Reed counterclaimed, seeking 

payment under its policy, and also filed a third-party complaint 

against the insurance company's agent, asserting similar claims as 

well as additional claims for damages. There was no diversity 

claims joined under rule 18(a), which it ruled were supported by 

pendent jurisdiction. 

In our view further obfuscating matters, the Danner court 

addressed the jurisdictional questions raised by the case via two 

analytical theories. Under the first, which adhered to 

traditional, if abstract, definitions of pendent claims and 

ancillary jurisdiction, the court held that the cross-claims fell 

within the district court's ancillary jurisdiction. 858 F.2d at 

521. Its second approach, modeled on Twin Falls, viewed the 

cross-claimant "as the plaintiff for purposes of the separate 

trial on his cross-claim," thus rendering it "possible . . . to 

treat [the] cross-claims and joinder of additional parties solely 

as a matter of pendent jurisdiction." 858 F.2d at 522. The court 

reached the same result in each analysis and concluded, as has the 

Supreme Court, that it was unnecessary in this case "to decide 

'whether there are any "principled" differences between pendent 

and ancillary jurisdiction.'" 858 F.2d at 523 (quoting Owen 

Equipment, 437 u.s. at 370 n.8)). we are baffled by the Danner 

panel's approach and conclude it does not advance the goal of 

defining the countours of ancillary jurisdiction. 

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' . 

between Reed and the agent, and the agent moved for dismissal of 

the third-party complaint on grounds that, inter alia, the court 

lacked subject matter jurisdiction. 1 5 

With respect to the propriety of the additional third-party 

claims asserted by Reed, the court reasoned: 

The general rule is that once a court has 

determined that a proper third party claim has been 

asserted, it should allow joinder [under Fed. R. Civ. P. 

18(a)] of any other claims the third party plaintiff may 

have against the third-party . defendant. . . . [T]he 

requirement of subject matter jurisdiction ... is met 

if the additional claim arises out of the same 

transaction or occurrence as the initial claim for 

liability. 

649 F. Supp. at 842 (citing 6 C. Wright & A. Miller, Federal 

Practice and Procedure§ 1452, at 95 (Supp. 1986)); Executive Fin. 

Servs. v. Heart Chec, Inc., 95 F.R.D. 383, 384 (D. Colo. 1982). 

See also Seitter v. Schoenfeld, 678 F. Supp. 831, 838 (D. Kan. 

1988) (citing 3 J. Moore, W. Taggart & J. Wicker, Moore's Federal 

Practice ~ 14.03(3) (2d ed. 1987) ("concept of ancillary 

15 To reach the issue of the propriety of the additional claims, 

the court made two preliminary determinations. First, adopting 

the reasoning of Professors Wright, Miller, and Moore (quoted 

earlier in the text of our opinion), the court found that it had 

ancillary jurisdiction of the insured's third-party pass-through 

claim, despite the absence of diversity. The court ruled that 

Owen Equipment was inapposite because it "held only that, in an 

action based on diversity of citizenship, an independent basis for 

federal jurisdiction must exist in order for the [original] 

plaintiff to assert a claim against the third party defendant." 

649 F. Supp. at 840 (emphasis in original). Next, the court 

rejected the agent's contention that the third-party claim was not 

proper under rule l4(a) because it sought monetary damages while 

the initial suit was for a declaratory judgment. The court held 

that the third-party complaint was proper, given the substantial 

similarity of the facts relevant to both claims and that exercise 

of jurisdiction would promote judicial economy and not be unfair 

to the third-party defendant. 649 F. Supp. at 841-42. 

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jurisdiction also properly justifies taking jurisdiction over an 

additionally joined claim of the third party plaintiff against the 

third party defendant, provided the additionally joined claim is 

sufficiently related to the original claim 

ancillary"}. 16 

to be deemed 

The Kansas district court ruled that jurisdiction of Reed's 

"additional or alternative claim for misrepresentation" against 

the agent was proper, in that "this added claim arises out of the 

same transaction, i.e., the insurance policy and negotiations 

concerning the policy." 649 F. Supp. at 842. For reasons not 

relevant here the court held that other claims asserted by Reed 

would be dismissed. 

In accord with Reed is the opinion of the district court for 

Colorado in Heart Chec, 95 F.R.D. at 384. The defendants in Heart 

Chec were sued for breach of a lease. They filed a third-party 

complaint against their lawyers who prepared the lease agreement, 

seeking to recover any amount for which they might be held liable 

to the plaintiff, as well as additional compensatory and punitive 

damages. All of the third-party litigants were residents of 

16 Seitter is not particularly helpful to our analysis, however. 

There, once the Kansas district court determined the third-party 

defendant had been properly impleaded under rule l4(a), it held 

the third-party plaintiff's independent claims for breach of 

contract, breach of warranty, and misrepresentation were within 

its ancillary jurisdiction. 678 F. Supp. at 837-38. The court 

apparently did not test the relation of those independent claims 

to the third-party plaintiff's indemnity claim or to the claim in 

the original action. It also was not clear from the opinion 

whether the third-party litigants were diverse. 

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• 

Colorado. 

Judge Weinshienk stated the test for determining whether a 

court has ancillary jurisdiction of an additional third-party 

claim as "whether the claim involves the same core of facts as the 

original claim, and whether both arise out of the same 

transaction." 95 F.R.D. at 384 (citing Schwab, 438 F.2d at 68-71, 

and Payne, 472 F.2d 792). The court easily found that all claims 

arose from a common transaction, the lease agreement. It further 

concluded that the purposes of ancillary jurisdiction--"'to 

prevent the relitigation in other courts of the same issues ... 

and to promote the economical and expeditious administration of 

justice by avoiding a multiplicity of suits"--would be 

accomplished by permitting the defendants to litigate their claims 

in one suit. 95 F.R.D. at 384 (quoting Payne, 472 F.2d at 794). 

Accordingly, the court held that the additional damages claims 

were ancillary to the principal claim. 

We hold that the weight of authority and the better-reasoned 

cases support our conclusion that the district court's ancillary 

jurisdiction encompassed all of Hanson's third-party claims. 

Having exercised its ancillary jurisdiction over Hanson's proper 

rule 14(a) indemnity claim against Langan, it was within the 

court's power and its discretion also to hear and decide Hanson's 

delay damages claim against Langan, given that that claim arose 

from the same transaction or occurrence as the principal claim by 

King Fisher against Hanson. This result, true to the 

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constitutional and statutory limits on the federal courts' 

jurisdiction, is also consistent with the notions of judicial 

economy and common sense from which the judge-made doctrine of 

ancillary jurisdiction took root. To confine the district court's 

jurisdiction here so as to exclude the added third-party claim 

would be to thwart the court's ability "effectively to resolve an 

entire, logically entwined lawsuit." Owen Equipment, 437 U.S. at 

377. We have found no evidence that Congress intended such a 

constraint. 

C. District Court's Discretion to Decide Third-Party Claims 

Having determined that the district court had jurisdiction of 

Hanson's third-party claims against Langan in the first instance, 

it is next necessary to consider whether the subsequent settlement 

of King Fisher's claim against Hanson deprived the court of 

jurisdiction of the ancillary claims. The district court held it 

did not lose its power to decide the third~party claims after the 

plaintiff's cause of action was settled. 717 F. Supp. at 729. 

Moreover, in light of the facts that Langan had made no claim of 

unfairness and the time already spent on the case, the trial court 

believed it did not abuse its discretion in retaining the thirdparty claims. Id. (citing Cenco, Inc. v. Seidman & Seidman, 686 

F.2d 449 (7th Cir.) cert. denied, 459 U.S. 880 (1982); Transok 

Pipeline Co. v. Darks, 565 F.2d 1150 (lOth Cir. 1977) cert. 

denied, 435 U.S. 1006 (1978). 

We agree with the district court, finding the weight of 

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'" 

authority is that,- "if jurisdictional prerequisites are satisfied 

when the suit is begun, subsequent events will not work an ouster 

of jurisdiction." Dery v. Wyer, 265 F.2d 804, 808 (2d Cir. 1959); 

see 3 Moore's Federal Practice,, 14.26, at 14-113 (2d ed. 1989). 

But see Danner v. Himmelfarb, 858 F.2d 515, 523 (9th Cir. 1988) 

("it is our practice to dismiss state law claims once the federal 

claim has been resolved"). "(A] rule that ancillary jurisdiction 

of a third-party claim terminates on a determination of the main 

claim. [would] seriously impair the utility of the Rule, breed 

confusion and generate many sterile jurisdictional disputes." 265 

F.2d at 809 (quoted in Moore's Federal Practice ,, 14.26, at 14-

114). The principle applies as well when the main claim has been 

settled, as was the case here, or dismissed on its merits. See, 

~, Nishimatsu, 515 F.2d at 1204-05, 1204 n.2; Pennsylvania R.R. 

Co. v. Erie Ave. Warehouse Co., 302 F.2d 843, 846 (3d Cir. 1962). 

As the Second Circuit observed in Dery, to hold otherwise would 

have the undesirable result of discouraging settlements. 265 F.2d 

at 808. 

Because ancillary jurisdiction is a "doctrine of discretion," 

Danner, 858 F.2d at 523; cf. United Mine Workers of America v. 

Gibbs, 383 u.s. 715, 726 (1966), it is axiomatic that it was 

within the district court's discretion to retain or dismiss 

Hanson's third-party claims after the settlement of the main 

claims. The factors relevant to that decision have been 

summarized elsewhere. See, ~, Dery, 265 F.2d at 808-09; Twin 

Falls, 806 F.2d at 868; c. Wright & A. Miller, § 1444, at 234-37 

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~1971), 97-98 nn.l-2 (1989 Supp.). We find that the interests of 

''judicial economy, convenience, and fairness," Gibbs, 383 U.S. at 

726, were served here by the district court's exercise of 

jurisdiction. We note also Hanson's state claims may have been 

time-barred if the district court had dismissed them following 

settlement of the principal claims. Under these circumstances, we 

hold the district court was within its discretion in hearing and 

deciding the contested third-party claim. 

Because we find that the district court properly exercised 

jurisdiction of the contested claim, we deny the relief requested 

under Fed. R. Civ. P. 60(b)(4). The judgment of the district 

court is AFFIRMED. 

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