United States Court of Appeals 

### FOR THE EIGHTH CIRCUIT

___________ No. 97-3275

___________ Innovative Home Health Care, Inc., * a South Dakota corporation, * * Plaintiff, * * Dennis Meier; Gwen Hougdahl, * * Plaintiffs - Appellees, * * Appeal from the United States
v. * District Court for the * District of South Dakota. P.T.-O.T. Associates of the Black * Hills, a general partnership; * At Home Quality Health Care Co., * a South Dakota corporation, * * Defendants, * * Karl Kirsch; Susan Redden, * * Defendants - Appellants. *

___________ Submitted: March 13, 1998 Filed: April 21, 1998

___________

## TheHonorable Richard G. Kopf, United States District Judge for the District 1 

## of Nebraska, sitting by designation. The Honorable Richard H. Battey, Chief Judge, United States District Court for 2 

## the District of South Dakota.
-2- Before BEAM and HEANEY, Circuit Judges, and KOPF, District Judge. 1

___________ KOPF, District Judge.
Karl Kirsch and Susan Redden, defendants in the proceedings below , appeal from the district court’s amended judgment granting summar y 2 judgment in their favor on all of the plaintiffs’ claims, but dismissing without prejudice the defendants’ counterclaims for indemnification

. Kirs chand Redden argue the district court erred in dismissing thei r ind emnificationcounterclaims by declining to retain supplementa l jurisdiction over the counterclaims in response to the plaintiffs’ “motion for rehe aring or relief from judgment” when the district court ha d previously entered judgment on the indemnification counterclaims in favor of defendants Kirsch and Redden. We affirm.
I. Background

De nnis Meier, Gwen Hougdahl, Kirsch, and Redden were at one tim e shareholders and employees of Innovative Home Health Care, Inc., a South Dakota c orporation. After initiation of an action to dissolve th e corporation, these individuals reached a settlement agreement. Subsequen t to this agreement, Meier, Hougdahl, and Innovati ve Home Health Care, Inc., filed an action again st Kirsch, Redden, a South Dakota corporation, and a general partnership, alleging violations of the Sherman Act, 15 U.S.C. §§ 1 & 2, and the Clayto n Act, 15 U.S.C. §§ 15 & 26, as well as state claims of bre ach of contract and tortious interference with a contractua l relationship. The de fendants filed counterclaims against the plaintiffs, alleging breach of the settlement agreement and seeking indemnification fo r all reasonable costs and expenses incurred in defending the lawsuit based upon the terms of the settlement agreement.

### -3- The district court granted the defendants’ motion for summar y ju dgment on all of the plaintiffs’ claims and on the defendants ’ counte rclaims, and entered judgment accordingly. As to the defendants ’ indem nificationcounterclaims, the district court found that plaintiff s Meier and Hougdahl failed to “combat defendants’ showing” that the express language of the indemnification clause contained in the settlemen t agreement provided for indemnification.

Th e plaintiffs then filed a “motion for rehearing or relief fro m judgment” pursuant to Fed. R. Civ. P. 59(a) and 60(b)(6), arguing that the defendants were not entitled to relief on their indemnificatio n counterclaims because the defendants simply relied on the language of the indemn ificationclause itself in support of their motion for summar y judgment. Under such circumstances, the plaintiffs argued they were not requiredto present any opposing evidentiary matter in response to th e def endants’ motion for summary judgment on the indemnificatio n counterclaims. The plaintiffs also argued that, under South Dakota law, a written contract of indemnity will not be cons trued to indemnify a party agai nst its own misconduct in the absence of a clear and unequivoca l expression of such intent within the four corners of the contract.
In resolving the plaintiffs’ motion for rehearing, the district cou rt noted that, afte r a year of discovery, the facts necessary for resolution of the plaintiffs’ state claims and the defendants ’ counterclaim

for breach of contract had been developed in the adjudication of the antitrust claim and such facts were intertwined with the federal antitrust claim. However, th e court declined to retain jurisdiction over the defendants’ counterclaims for indemnification under 28 U.S.C. § 1367, stating:

Basedon the parties’ recent submissions on th e counterclaims for indemnification, the Court deems it necessary in serving the interests of justice to revisit its prio r decision to retain juris diction under 28 U.S.C. § 1367 . . . . As previously noted in its memorandum opinion, the Court ha s broad discretion to dism iss state law claims and counterclaims over which it has only supplemental jurisdiction if the Court has dismissed all

### -4- claims over which the Court had original jurisdicti on which has occurred in this case.
The district court al so noted that the parties’ submissions regarding the plaintiffs’ motion for rehearing raised “somewha t novel and complex issues of South Dakota law” regarding whether application of the indemnification clause under the facts and circumstances presented by this case violated South Dak ota law and whether the defendants could now also see k indemnification from the plaintiff corporation. The district court stated that d etermination of such issues would require further briefing an d possible discovery.

The district court then amended its prior judgment by dismissing the de fendants’ counterclaims for indemnification without prejudice

. Defendants Kirsch and Redden appeal the amended judgment.

II. Standard of Review
Although the plaintiffs brought thei r motion for rehearing or relief fromjud gment pursuant to Fed. R. Civ. P. 59(a) and 60(b)(6), th e plaintiffs properly concede the motion was actually an improperly styled Fed. R. Civ. P. 59(e) motion. Norman v. Arkansas Dep’t of Educ. , 79 F.3d 748, 750 ( 8th Cir. 1996) (any motion questioning the correctness of a judgment is functionally a Fed. R. Civ. P. 59(e) motion, regardless of how the motio n is styled); BBCA, Inc. v. United States , 954 F.2d 1429, 143 2 (8thCir.) (motion seeking substantive change in judgment was Rule 59(e) motion; substance, rather than form, of motion controls), cert. denied , 50 6 U.S. 866 (1992).

“‘Adistrict court has broad discretion in determining whether t o grant a [Fed. R. Civ. P. 59(e)] motion to alter or amend judgment, and thi s court wi ll not reverse absent a clear abuse of discretion.’” Globa l Network Techs., Inc. v. Regional Airport Auth. , 122 F.3d 661, 665 (8th Cir

. 1997) (quoting Hagerman v. Yukon Energy Corp. ,

### -5-

839 F.2 d 407, 413 (8th Cir.), cert. denied , 488 U.S. 820 (1988)). “‘An abuse of discretion will only be found if the district court’s judgment wa s base don clearly erroneous factual findings or erroneous lega l conclusions.’” Perki ns v. U S West Communications , ___ F.3d ___, 1998 WL 91424, at *3 (8th Cir. Mar. 5, 1998) (quoting Mathenia v. Delo , 99 F.3 d 1476, 1480 (8th Cir. 1996), cert. denied , 117 S. Ct. 2518 (1997)).

III. Discussion

Federa l Rule of Civil Procedure 59(e) was adopted to clarify a district c ourt’s power to correct its own mistakes in the time perio d immediatelyfollowing entry of judgment. Norman , 79 F.3d at 750 (citing White v. New Hampshire Dep’t of Employment Sec. , 455 U.S. 445 (1982))

. Rule 59(e) motions serve a limited function of correcting “‘manifest error s of law or fact or to present newly discovered evidence.’” Hagerman , 839 F.2d at 414 (quoting Rothwell Cotton Co. v. Rose nthal & Co. , 827 F.2d 246, 251 (7th Cir.), as amended , 835 F.2d 710 (7th Cir. 1987)). Such motions cannot be used to introduce new evidence, tender new legal theories, o r raise arguments which could have been offered or raised prior to entry of judgment. Id. A cas e in which a timely Rule 59(e) motion has been filed lacks finality becaus e the motion tolls the time limitation for appeal in order to provide the trial court with jurisdiction to resolve the motion. This “tolling process” encourages “both correctness and finality.” Jackso n v. Scho emehl , 788 F.2d 1296, 1298 (8th Cir. 1986). See also Sanders v

. Clemco Indus. , 862 F.2d 161,170 (8th Cir. 1988); 11 Charles Alan Wright et al., Federal Practice and Procedure § 2821, at 220-21 (2d ed. 1995).
Relying on Villegas v. Princeton Farms, Inc. , 893 F.2d 919 (7th Cir. 1990), defendants Kirsch and Redden argue the district court erred i n enterin g final judgment in their favor on the indemnificatio n counte rclaims, and then vacating that decision by dismissing th e counterclaims without prejudice upon consideration of the Fed. R. Civ. P. 59(e) motion filed by plaintiffs Meier and Hougdahl.

### -6- In Vil legas , the district court granted the defendant’s motion t o dis miss pursuant to Fed. R. Civ. P. 12(b)(6) because state law did no t recogn ize the cause of action brought by the plaintiff, and entere d jud gment accordingly. The district court then granted the plaintiff’ s motio nto vacate the judgment and voluntarily dismiss the case withou t prejudice, inviting the plaintiff to refile his action in st ate court. The Cou rt of Appeals reversed the latter order, finding “a clear abuse o f discre tion to decide the merits of the legal issue while hearing the case under diversity jurisdiction and then later redirect the parties to state court.” Id. at 923. The Villegas court stated that vacatio n of a judgment is authorized by Fed. R. Civ. P. 59(e), but “[i]n this case, . . . th e district judge cited no errors orchanges of heart regarding the merits of the le gal arguments, but instead decided to send the case to the Illinois courts as the preferred forum.” Id. at 924.
Villegas is readily distinguishable from the case before us because the district judge in this case expressly cited “errors or c hanges of heart regarding the merits of the legal arguments” related to the indemnification counte rclaims and the merits of its prior decision to retain jurisdiction over t hose counterclaims pursuant to 28 U.S.C. § 1367. Specifically, the complexity of the state law issues involved in resolving the counterclaims, combin ed with the fact that the court had previously dismissed all claims
over which it had original jurisdiction, led the court to reconsider it s decision to retain supplemental j urisdiction--a proper use of Fed. R. Civ. P. 59(e) under Villegas and under the manifest-error-of-law standard i n this circuit.

Section 1367 provides for the mandatory exercise of supplementa l jurisdiction as follows:

Exc ept as provided in subsections (b) and (c) or a s ex presslyprovided otherwise by Federal statute, in any civi l action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction ove r all other claims that are so related to claims in the actio n within such original jurisdiction that they form part of the

### -7- same case or controversy under Artic le III of the United States Constitution. Such supplemental jurisdiction shall includ e cl aims that involve the joinder or intervention of additiona l parties.

28 U.S.C. § 1367(a) (1993). Subsection (c) provides exceptions to th e abo ve mandatory command, granting district courts discretion to rejec t supplemental jurisdiction if:

(1) the claim raises a novel or complex issue of Stat e law, (2) the claim substantially predominates over the c laim or claims over which the district court has original jurisdiction, (3) the district court has dismissed all claims ove r which it has original jurisdiction, or (4) in exceptional circumstances, there are othe r compelling reasons for declining jurisdiction.

28 U.S.C. § 1367(c). This subsection “plainly allows the district cour t to reject jurisdiction over suppl emental claims only in the four instances described therein.” McLaurin v. Prater , 30 F.3d 982, 985 (8th Cir. 1994).

While the district court’s power to exercise jurisdiction under the “same case or controversy” requirement in 28 U.S.C. § 1367(a) is on e ordinarily resolved on the pleadings, the court’s decision t o exercise that jurisdiction “is one which remains open throughout the litig ation.” United Mine Work ers v. Gibbs , 383 U.S. 715, 727 (1966) (discussion of penden t jurisdiction and discretionary power of federal trial court to refuse t o hear state law claims, now codified by 28 U.S.C. § 1367).
Assuming the defendants’ state law indemnificati on counterclaims were sufficiently related to the plain tiffs’ jurisdictionally sufficient claims suchthat all claims could fairly be characterized as part of the “sam e case or co ntroversy” pursuant to 28 U.S.C. § 1367(a), the district cour t had the discretion to decline to retain jurisdiction under sectio n 136 7(c)(3) (dismissal of all claims over which it had origina l jurisdiction)

### -8-

and 1367(c)(1) (complex issue of state law) at any time in the litigation. Further, because the timely filing of the Rule 59(e) motion tolled th e appe al time in order to provide the district court with jurisdiction t o resolve the motion, the district court’s decision to relinquis h supple mental jurisdiction was made before the case was “final” for appeal purposes.
Defendants Kirsch and Redden contend the distric t court’s reversal of its de cision to retain supplemental jurisdiction violates the law-of-thecase doctrine. However, none of the cases on which Kirsch and Redden rely involve a district court’s decision to relinquish supplement al jurisdiction pursuant to 28 U.S.C. § 1367 in t he context of resolving a Fed. R. Civ. P. 59(e) motion. LaShawn A. v. Barry , 87 F.3d 1389 (D.C. Cir. 1996); Starks
v. R ent-A-Center , 58 F.3d 358 (8th Cir. 1995); Lovett v. General Motor s Corp. , 97 5 F.2d 518 (8th Cir. 1992), cert. denied , 510 U.S. 1113 (1994)

. In any ev ent, a court has the power to revisit its prior decisions whe n “the initial decision was ‘clearly erroneous and would work a manifes t injust ice.’” Starks , 58 F.3d at 364 (quoting Christianson v. Colt Indus. Operat ing Corp. , 486 U.S. 800, 817 (1988)). As determined above, this is such a case.

IV. Conclusion

Upon further reflection and research regarding the defendants ’ ind emnificationcounterclaims prompted by the plaintiffs’ Rule 59(e ) motion, the district court discovered that it had erred in g ranting summary judgme nt for the defendants on those counterclaims because complex issues of state law needed to be addressed through additional discovery an d br iefing before resolution of the indemnification counterclaims wa s possib le. Thus, the district court sought to correct its error of law by relinq uishing supplemental jurisdiction under 28 U.S.C. § 1367(c) fo r rea sons expressly permitted therein--a complex issue of state law an d dis missal of all claims over which the district court had origina l jurisdiction. Therefore, we cannot say the district court clearly

### -9-

abusedits discretion in granting the plaintiffs’ motion pursuant to Fed. R. Civ . P. 59(e) and dismissing the indemnification counterclaims without prejudice.

Affirmed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.