Warren E. Burger: We will hear arguments next in Owen Equipment against Kroger. Mr. Sodoro?
Emil F. Sodoro: Mr. Chief Justice and if it pleases the Court, gentlemen. We stand before this Court today on the case of Owen v. Kroger which has basically a single issue to present to you and the issue generally stated is on a State Court claim, can the plaintiff in a civil action in the Federal Court file a direct claim against a third party defendant with whom the plaintiff shares common citizenship or take it as just one step further in this particular case, gentlemen, what we have is a plaintiff who maintains a suit against a defendant who is not in comity with her citizenship, who files a third party complaint and that is our client in this particular case against a third party defendant and then the original defendant is excused from the proceedings on a motion for a summary judgment. It is our contention --
William H. Rehnquist: When you say excused from the proceedings, you mean the original defendant move for summary judgment?
Emil F. Sodoro: He moved for a summary judgment. There was a hearing before district judge Denny. He sustained the motion for a summary judgment and that motion for a summary judgment was in fact appealed by the plaintiff in this case to the Eight Circuit Court which affirmed the judgment sustaining the motion for summary judgment.
Warren E. Burger: So at that stage, you had what parties?
Emil F. Sodoro: At that stage, after that original defendant was excused and I use that word appropriately I think, dismissed perhaps is a better word, Your Honor, dismissed from the suit. What we had was an administratrix of an estate who was a citizen of Iowa who by this time now, had filed a direct claim in the original Federal District Court proceedings against the third party defendant.
Potter Stewart: That was an amended complaint?
Emil F. Sodoro: Yes sir, Your Honor that was on the basis of an amended complaint. So at this juncture, the original defendant is not longer a party to this case and what we have is that the plaintiff at this stage of the proceedings and the defendant for the purposes of diversity of citizenship which is a demand for jurisdiction in the Federal Court were both residents of the same state. Originally, this accident arises out of a complex set of facts and I am sure that you are aware of the facts and I would not belabor them with you. But this is a suit for damages that arises out of a claim for wrongful death that occurred while the plaintiff’s decedent was in the course of his employment. One of the issues or one of the matters that was also involved in this case that made it additionally complex to keep the parties straight, was that fact that when the plaintiff originally filed this suit, the employer of the plaintiff which was also an Iowa resident, the Paxton and Vierling Company was made a party defendant and federal district judge Denny in order to retain the jurisdiction, realigned the parties. That original defendant employer was made a defendant only for the purpose of subrogation of the workman’s compensation claims.
Potter Stewart: To that extent the employer defendant would have had more in common with the plaintiffs than with the defendant?
Emil F. Sodoro: That is right Your Honor and it was for that reason as I say that the trial judge, judge Denny realigned that party and in effect made the Paxton Vierling Company which was an employer, a party claimant for the purpose of retaining jurisdiction of the case and as you say, their interests were in fact aligned.
Thurgood Marshall: That is a new lawsuit then?
Emil F. Sodoro: It was really part of the original lawsuit as was treated in this case. What happened was the parties were simply realigned, Justice Marshall.
Thurgood Marshall: You realigned them because you lost the regular party?
Emil F. Sodoro: That is right. Actually, as the case was originally filed and you have got it exactly, there was no diversity of citizenship that would confer jurisdiction on the Federal District Court because there was no federal question involved and by the admission of the plaintiff in that original complaint, one of the parties was a resident of the same state as was the plaintiff. I am glad that you noticed that. But in any event, this case finally came for trial and the question as to the jurisdiction of the Court and it is our contention that the Federal District Court never had any jurisdiction to hear and decide the case between the petitioner that stands before you today and the respondent for the reason and again very simply stated this is not a complex case, at least as we view it because there was no diversity of citizenship between the respective parties that were involved in the litigation. Judge Denny, the trier of the case and his declaration is in the record, said that felt that this was a case where he had to decide whether it was a matter of pendant or ancillary jurisdiction. Now, we have searched the authorities, every authority possible and it seems that there is not any question that the Federal Courts, once they have the original jurisdiction between a plaintiff and a diverse defendant that that defendant may make a third party defendant who is a resident or a citizen of the same state as the original defendant, no question about that.
Potter Stewart: Same state as the original plaintiff?
Emil F. Sodoro: As the original plaintiff or the original defendant.
Potter Stewart: If the original defendant, there is no problem because presumably the original plaintiff and the original defendant were of diverse citizenship. If the third party defendant is of the same residence as the original defendant, then there is no problem at all. If you are talking about a third party practice, bringing in a defendant who is of the same citizenship as the original plaintiff.
Emil F. Sodoro: Yes, and I see no problem with that.
Potter Stewart: That is permissible, that is established.
Emil F. Sodoro: I see no problem with that, but the problem that arises here, Justice Stewart is in that, the plaintiff in this case was permitted to file a direct claim, do you not see against that third party defendant. Now, we can find no cases in any jurisdictions in the Federal Court that permit such a practice. Let alone find any case particularly where the original defendant is removed or excused or dismissed from the case that permits any such practice. Gentlemen, it would be really I think a waste of your time for me to reiterate and to read to you the portions of our brief. I am sure you are acquainted with that, but it was our feeling and it is our contention today that Judge Denny was mistaken, that this is not a case for determination as to whether or not it is a matter of pendant or ancillary jurisdiction.
John Paul Stevens: Mr. Sodoro, let me just get one thing straight. Is your position dependent all on the fact that the original defendant was dismissed out of the case?
Emil F. Sodoro: In part, but not necessarily. Our principal argument is that the plaintiff could not do what she did here because she was not entitled to do it under federal practice. There was no jurisdiction that would inure to the Federal Court. It is true that that has some bearing and some effect, but here is what it is, Your Honor. The plaintiff ends up suing in the Federal Court a person who is a citizen of the same state as the plaintiff and we submit that there is no authority for that type of jurisdiction.
John Paul Stevens: How is that any different in practical effect between A suing B and B having a cross claim against C and then everything is all done, C pays B and B pays A? Is that not the same as C paying A directly?
Emil F. Sodoro: It has a substantial effect. You have to assume it this way, Your Honor. Let us say that the plaintiff instead of filing only her lawsuit against the defendant would file her lawsuit against both the defendant and the third party defendant.
John Paul Stevens: Then there would be no jurisdiction?
Emil F. Sodoro: There would be no jurisdiction in the Federal Court. All of the cases have that as their holding. You cannot do indirectly, you see what you are not permitted to do by way of jurisdiction directly.
William J. Brennan, Jr.: On the pleadings though initially, this appeared to be a suit by a resident of Iowa against a Nebraskan Corporation, your client, am I right or not?
Emil F. Sodoro: Yes, sir Justice Brennan.
William J. Brennan, Jr.: It was not until the trial was almost over that it was introduced the fact that actually the Nebraskan corporation had its principal place of business in Iowa?
Emil F. Sodoro: On the record, that is generally an exact statement.
William J. Brennan, Jr.: That is what has happened, is it not?
Emil F. Sodoro: Not exactly. That generally is what happened.
William J. Brennan, Jr.: When did the fact that the Nebraska corporation had its principal place of business in Iowa, when was that revealed to the Court?
Emil F. Sodoro: That was revealed when you say to the Court --
William J. Brennan, Jr.: Or to the parties for that matter?
Emil F. Sodoro: To the parties. Please let me answer that one Your Honor. On the 3rd day of June 1974 --
William J. Brennan, Jr.: When did the trial start?
Emil F. Sodoro: The trial commenced Your Honor on the 12th day of January 1976. Here is how it came about so that the parties had knowledge of the location of the principal place of business of this third party defendant, our client, the petitioner here. The deposition was being taken pursuant to request by the plaintiff, not pursuant to notice, but pursuant to production of the witnesses, the attorney for the plaintiff said, I want to see the books and records of the Owen Equipment and Construction Company and I want to take the depositions of the officers and by agreement, that was done at the headquarters of this petitioner on the 3rd day of June 1974 and their headquarters are located in Carter Lake, Iowa.
John Paul Stevens: Carter Lake, Iowa is on the west side of the Missouri river, is it not?
Emil F. Sodoro: Yes it is, Your Honor.
John Paul Stevens: Does it have kind of a nubbin sticking into the city of Omaha?
Emil F. Sodoro: Your description generally is accurate except that it is not a nubbin that is part of the city of Omaha. It is out of the city of Omaha.
John Paul Stevens: Near the airport?
Emil F. Sodoro: Out near the airport, exactly and what you have there is when the states were originally divided by the Missouri river, there was a bend in the river and that bend in the river somehow (Inaudible) to the east and there is a piece of land despite the fact that it is located on the west side of the Missouri river that is really a part of Iowa and that is a very well known fact in our community because the city of Omaha is always complaining that they have to render certain services to the city of Carter Lake, Iowa and real estate taxes and the state income taxes and the state sales tax has to go over to Des Monies over to Iowa.
John Paul Stevens: This is why I was asking whether everybody really did not know what the situation was at all times?
Emil F. Sodoro: I think that is pretty general knowledge because there is a community, there is a city that is known as the city of Carter Lake, Iowa.
John Paul Stevens: You have a city hall there?
Emil F. Sodoro: They have a city hall, they have a mayor and they have city council men.
John Paul Stevens: But I take it apart from this aspect in the background, the fact that it is on the west side of Missouri does not cut any ice in this litigation?
Emil F. Sodoro: Not in the least and particularly with respect to the question of jurisdiction.
William J. Brennan, Jr.: When was it that when you raised this question that there was no jurisdiction. Was that at the trial for the first --
Emil F. Sodoro: Your Honor, our original answer that was filed to the amended complaint as filed by the respondent --
William J. Brennan, Jr.: That was filed when?
Emil F. Sodoro: Your Honor, the plaintiff’s amended complaint was filed directly against Owen on November 9, 1973. There after on November 27, 1973, we filed an answer on behalf of Owen and in that answer admitted that the Owen Erection and Equipment Company was a corporation existing under the laws of the state of Nebraska because that is a fact and then went on to deny generally all of the other allegations of the plaintiff’s amended complaint against Owen. One of the allegations --
William J. Brennan, Jr.: Did you expressly raised the question that (Voice Overlap) principal office in Iowa and therefore there is no jurisdiction.
Emil F. Sodoro: We did not at that time.
William J. Brennan, Jr.: When did you?
Emil F. Sodoro: That was raised on the record. First of all, as I told you on the 3rd of June 1974, when that deposition was taken, those questions and those answers were given in response to interrogation made by the attorney for the plaintiff, but the formal request or the formal filing of a motion to dismiss was not filled and the reason it was not filed is very honestly, we did not give it the adequate consideration that this issue deserved and I submit that to you and tell you that absolutely.
William J. Brennan, Jr.: Meanwhile, the statute of limitations may run in the State Courts?
Emil F. Sodoro: Sir, the statute of limitations is two years in Iowa and the statute of limitations in this case had run on the 18th day of January 1974. Yes, sir.
William H. Rehnquist: Counsel, I gather from the majority in dissenting views in the Court of Appeals that there may be some difference on this point of view. What position do you take? Do you take the view that it is your obligation to call to the attention of the District Court by a motion at some stage, its lack of jurisdiction or that that is something that may be raised by any party or by the Court on its own motion anytime as long as there has been no act of concealment?
Emil F. Sodoro: Absolutely not, Your Honor. I agree with the last portion of your statement. It is my understanding and I have been a lawyer for 27 years that the allegations and the claims that are made by a plaintiff against any party in the proceeding must be proven by that plaintiff. That is the law I think in almost every jurisdiction. The burden of proving the claims that are made by the plaintiff must be made by the plaintiff.
William H. Rehnquist: Unless they are admitted in the pleadings.
Emil F. Sodoro: Unless they are admitted in the pleadings and in this case, we filed a general denial as to every claim made by the plaintiff again in our petition against us, or an amended complaint against us except the fact that the corporation, the Owens Equipment and Erecting Company was in fact incorporated under the laws of the state of Nebraska.
Thurgood Marshall: So you admitted everything except the jurisdiction?
Emil F. Sodoro: In effect, that is our position exactly, Your Honor.
Thurgood Marshall: You do not feel that you as a lawyer had any responsibility to tell the Court that it did not have jurisdiction?
Emil F. Sodoro: Let me say this, Your Honor. At the time the answer was filed and I have told you already and I am more than happy to tell you again, this issue did not deserve in our office the type of consideration that it did. It was called to our attention as you will see in the affidavit that is filed in part of the appendix in this case. Let me just for a second back up and explain this matter too. Our office is not the corporate office or the corporate attorneys for the Owen Equipment Company. On the morning that this case was to commence for trial, we were satisfied with our pleading at that time in our answer. We were suspect to the fact that his was an Iowa corporation, but had not developed that theory and had not worked it out. The corporate counsel --
Thurgood Marshall: You did know that they had their main office --
Emil F. Sodoro: We were at that same deposition in June of 1974.
Thurgood Marshall: Did you know where the main office of your client was?
Emil F. Sodoro: Yes, sir we did. We knew that on the 3rd day of June 1974 because we were present Your Honor at the same time the attorneys --
John Paul Stevens: But Mr. Sodoro, did you know that when you filed your answer on October 15, 1973?
Emil F. Sodoro: Not really.
John Paul Stevens: You did not really intend to deny the allegation then?
Emil F. Sodoro: We denied it.
John Paul Stevens: You denied it without investigating the facts?
Emil F. Sodoro: Let me say this to you. The facts, we were suspect of that fact, but not satisfied completely one way or the other, Your Honor.
Thurgood Marshall: Where did your check come from?
John Paul Stevens: You are asking us to construe the answer. Excuse me. It feels the answer as a denial when you say you did not really intend it as a denial?
Emil F. Sodoro: We intended that as a denial because it says that, do you not see? Those are the words spelled out on the answer.
William H. Rehnquist: Certainly, the customary interpretation was a civil procedure does not ordinarily take into contemplation intention with respect to the allegations of the pleading, does it?
Emil F. Sodoro: Rule 8 (b) provides I think generally, Your Honor to the effect that --
William H. Rehnquist: The thing speaks for itself.
Emil F. Sodoro: The thing speaks for itself and you are entitled to admit portions of affirmance and entitled to generally deny the rest of them and that is what we did in this case. But I submit to you along these lines sir and gentlemen that the question of jurisdiction of the Court is something that can be raised at any time. I do not believe that the conduct of the parties, all of the authorities indicate and indicate substantially that you cannot be estopped, that the jurisdiction cannot be created when it did not otherwise exist and it is our position that the jurisdiction did not exist when the plaintiff, the respondent here, filed her claim against us. It is our position that this is not a matter of pendant or ancillary jurisdiction. That facts and circumstances presented here create an exact problem of original jurisdiction between two parties who are residents of the same states.
Potter Stewart: How come the defendant filed a claim against a third party defendant from the same state he is?
Emil F. Sodoro: I am sorry sir what, I did not get you?
Potter Stewart: The defendant in the case may file a third party claim against a third party defendant who is from the same state as he is?
Emil F. Sodoro: Right.
Potter Stewart: That party may file a counter claim?
Emil F. Sodoro: Absolutely.
Potter Stewart: He may also file a claim against the plaintiff?
Emil F. Sodoro: Yes sir. They have authorities for all of that.
Potter Stewart: But your suggestion is the plaintiff could not counter claim against that claim?
Emil F. Sodoro: That the plaintiff can never claim against the third party defendant and I think that the authority --
Potter Stewart: Now, what is your justification for that?
Emil F. Sodoro: Well, Your Honor I --
Potter Stewart: The defendant could never have sued the third party defendant in the federal court?
Emil F. Sodoro: The theory is that the plaintiff selects the forum for the trial and disposition of the plaintiff’s claim. The theory that permits ancillary proceedings by a defendant where you have the original diversity of citizenship between the original two parties, the theory is that this now is ancillary proceeding between the original defendant who becomes the third party plaintiff and the third party defendant. That is the ancillary portion of the proceedings and the Courts have indicated that that is perfectly okay that that falls within the purview of the jurisdictions of the Federal Courts.
Speaker: I know you are saying that, that is what the cases say, but I still do not understand why you think the federal court is more qualified jurisdiction wise to try that claim than a claim by the plaintiff against a third party defendant?
Emil F. Sodoro: Because the plaintiff did not unless there is diversity of citizenship between that plaintiff --
Speaker: There is a third party. It was in between defendant and the third party defendant?
Emil F. Sodoro: But the reason for that is Your Honor is that it goes in conformity with Rule 14 of the Federal rules and procedure. Now, I would like to retain if I might gentlemen just a few minutes left in my argument.
Potter Stewart: Mr. Sodoro just before you sit down there was a mention a few moments ago about this statute of limitations. I note that the dissenting judge in the Court of Appeals in note 42 of his dissenting opinion appearing on appendix page 32 of the petition for certiorari indicates that his belief that this action would not be barred by the Iowa statute of limitations. If the judgment of the Court of Appeals were reversed, now I appreciate that you do not want to take the position here that --
Emil F. Sodoro: Mr. Justice Stewart, I know it is there and I certainly wish to make no comment about it at this time.
Potter Stewart: Right, but there certainly does seem to be a difference in opinion, and therefore, perhaps there is no clear cut answer to it at least that is fair to say?
Emil F. Sodoro: Let me say fairly and honestly, I do not know if there is a clear cut answer. I would like to reserve the remainder of my time and I thank you.
Warren E. Burger: Very well. Mr. Schrempp.
Warren C. Schrempp: Mr. Chief Justice and may it please the Court. Our position in this matter is generally simple we hope and that is that we simply contend that the United States District Court had the power to retain and dispose of this case in its waning moments when the for the first time the jurisdiction was attacked and that it was within the discretion of the District Court to retain and dispose of this cause under its ancillary powers and that under the unique facts of this case as maybe readily apparent from a reading of the time table of events in this case, therefore, the United States District Court to have failed to retain and dispose of this litigation which had been pending for four long years in Federal Court would have indeed been an abuse of his discretion in rejecting a final disposition of this claim one day before it was to go to the jury.
Warren E. Burger: At some point in your discussion would you enlighten us about the Iowa saving statute?
Warren C. Schrempp: The Iowa savings statute Your Honor, Mr. Chief Justice is a statute that from my knowledge of Iowa law is as vague and nebulous and its boundaries are as murky as Mr. Justice Blackmun mentioned about the boundaries of Iowa and Nebraska on the west side of Missouri River. I do not know.
William H. Rehnquist: Counsel, if on this day before the case was to go to the jury, the pleadings have been called to judge Denny’s attention and he had construed the petitioners answer to the allegation as to diversity as a denial of your allegations as diversity he said we simply do not have diversity here. Would you say that if he had construed it in that way, he should have been reversed by the Court of Appeals for the 8th Circuit, he said, “I am going to dismiss this case right now for want of jurisdiction.”
Warren C. Schrempp: Yes, Your Honor under the facts and circumstances of this particular case after the four years of litigation I think it would have been on abuse of his discretion at that point even.
William H. Rehnquist: Well, then you really do not regard Federal Courts as courts of limited jurisdiction. You treat this very much as the Court of original jurisdiction in Iowa and Nebraska as general jurisdiction unless someone comes and moves to dismiss?
Warren C. Schrempp: Well, Your Honor; of course Federal Courts are courts of limited jurisdiction. I think that limited jurisdiction though derives in the power of the United States District Court or United States District Judge if you will Mr. Justice Rehnquist, provides in general that this Court may in appropriate circumstances retain a jurisdiction of a case.
William H. Rehnquist: What rule are you referring to?
Warren C. Schrempp: Rule 14. Rule 14 does not in an of itself and I would rather quote words from Gary v. Wire in Second Circuit on that. Rule 14 does not extend jurisdiction. It nearly sanctions an impleading procedure which rests upon the broad conception of a claim as comprising a set of facts giving rise to rights flowing both to and from a defendant. For solution of the incidental jurisdictional problems which often attend utilization of the procedure, the concept of ancillary jurisdiction which long antedated the federal rules may often be gone upon. I do espouse that view Your Honor. I would like to comment on what this case does not concern from the standpoint of equity and fairness. This case does not concern a forum shopping situation. The plaintiff in this case was not in state plaintiff seeking to gain some advantage over an out-of-state plaintiff. The plaintiff in this case was an out-of-state plaintiff coming to the Court of Nebraska. There was no forum shopping, which I think and with respect to the discretion exercise of the Court is worthy of comment. Secondly, there was no advantage gained and secondly and I am drawing particular attention to Aldinger Your Honor, we did not implead a new party. We started out as has been slightly delineated by the counsel with a suit against the Omaha Public Power District. The Omaha Public Power District is a political subdivision. This was the first delay in the case because there is a six months waiting period and without going out of the ramifications of that, we started out against the Omaha Public Power District with a complete diversity of course. Ultimately, then Omaha Public Power District impleaded Owen Erection and Equipment Company, the defendant in this case. This was not a choice of ours. We did not implead a new party. We did not make codefendants of two parties. We took the parties as we found them a party that had been impleaded by the original defendant, the third party plaintiff, that there is no suggestion of anything other than that in this case and I might say further that with respect to one of the traditional lines of reasoning and that is that this gives rise to collusion. I join B so I can really get at C. There is not I submit to this Court one hint or suggestion of any such collusion. To the contrary our battle against the Omaha Public Power District predured and went all the way to the United States Court of Appeals. By the time it had come out of the United States Court of Appeals, the statute of limitations of course had run in Iowa. At that time the statute of limitations ran Iowa which was January of 1974, all three parties were very properly, I think everyone will agree in the jurisdiction of the Federal Court, Kroger, OPPD, Owen. There would be no reason for any filing or dismissal without prejudice. Certainly, we could not dismiss without prejudice. There are all three parties in there and they were all three parties very (Inaudible) in Federal Court. For 18 months after the statute of limitations ran, until there was a final affirmance by the United States Court of Appeals of the summary judgment which the Omaha Public Power District had gained against Kroger.
William H. Rehnquist: But what if Owen had just chosen in its answer to flatly deny that it was a resident and citizen as you alleged it to be so that there was no way of interpreting its pleading other than a denial of diversity jurisdiction, but had done nothing more, would you still say that it was estop?
Warren C. Schrempp: Well, certainly for the 18 months after the statue ran there would have been no impropriety about going ahead because the Omaha Public Power District certainly would not have let Owen out. They joined them in the first place. They were after them and then we were both after them.
William H. Rehnquist: But is it not jurisdiction something that can be raised at any time?
Warren C. Schrempp: Your Honor I believe a jurisdictional question if you say it can be raised at any time my answer is that, no, it cannot be raised at any time. It can be raised normally at any time unless the inequities, the unfairness, the absolute lack of justice of raising it as was done in this case.
William H. Rehnquist: You have got two cases from this Court. Finn v. American Fire and Casualty Company and a General Electric case that I wrote about six or seven years ago that say quite apart from inequities or unfairness question of jurisdiction of the Federal Court can be raised at any time?
Warren C. Schrempp: Your Honor I was going to discuss, I felt and this is very difficult to stand before a Court who wrote the opinion and stand before the author of that opinion and tell him what I think he meant.
William H. Rehnquist: Here is your opportunity to do so.
Warren C. Schrempp: I felt that you are very discerning and wonderfully narrowly limited decision in Aldinger would be an indication to attorneys that this is not an absolutely inflexible rule.
William H. Rehnquist: It was about Aldinger. I was talking about the General Electric Case.
Thurgood Marshall: I will give you one on the Second Circuit. We are doing the argument that is fair enough that they only had $10,000.00 involved and it was thrown out because the statute says in excess of $10,000.00?
Warren C. Schrempp: Yes, that would be on the amount of jurisdiction Your Honor.
Thurgood Marshall: It was jurisdiction, the word we are talking about. The same thing jurisdiction, so jurisdiction can be raised in any time?
Warren C. Schrempp: Your Honor, I --
Thurgood Marshall: Well, I agree with this you cannot raise jurisdiction (Inaudible).
Warren C. Schrempp: I would like to compare this to the justice at this situation was. Let us assume, if I may --
Thurgood Marshall: Let us take this case here. You were wrong in your allegations were you not, in saying that this was a resident of one state where he really was a resident of another State? You were wrong.
Warren C. Schrempp: As matter of truth and fact Mr. Justice Marshall, we were not, but that was raised and encountered to an affidavit.
William J. Brennan, Jr.: Anyway your allegation was that Owen was a corporation of Nebraska, the corporation of Nebraska that was your allegation, was it not?
Warren C. Schrempp: Yes.
William J. Brennan, Jr.: Yes, and that on the face of the pleadings that suggested a resident of Iowa suing a resident of Nebraska, is it not?
Warren C. Schrempp: Well of course Your Honor?
William J. Brennan, Jr.: Well, of course it is.
Warren E. Burger: And that was admitted, was it not, in the answer?
Warren C. Schrempp: Yes Your Honor.
Warren E. Burger: You do not suggest that in itself makes jurisdiction or you standing alone?
Warren C. Schrempp: Not completely.
Warren E. Burger: You were about to approach the question of ancillary or pendant type jurisdiction, would you care to pursue that?
Warren C. Schrempp: I feel of course there is a parallel between ancillary and pendant jurisdiction and I like to think of this with respect to with your question Mr. Chief Justice and your question Mr. Justice Marshall with respect to what would have happened had this issue never been raised. What would have happened let us say had we not had summary judgment granted against us by the trial court and ultimately affirmed by the Court of Appeals? What would have happened to had the trial commenced with Owen, OPPD and Kroger all properly before the Court? The case goes to the jury. The case goes to the jury now against all three. No impropriety. The jury then returns a verdict letting OPPD out and a verdict solely against Owen. What happens now if this be a rule of justice? Is Owen then out after the jury has rendered the verdict having left OPPD out. I think it is a parallel situation and it points up the injustice of a flexible rule.
John Paul Stevens: Do you not have to do differentiate between a verdict against Owen on the third party complaint brought by the Power District and the verdict against Owen on the amended complaint, but directly by Kroger against Owen? Would both issues would be submitted to the jury?
Warren C. Schrempp: Yes, Mr. Justice Stevens. In my hypothetical situation here, the jury is submitted the case with respect to our claim against OPPD. Now, that does not arise out of the same elements of negligence. Our claim against OPPD was based on the fact that we claimed that they had strung their high tension wires.
John Paul Stevens: Improperly, I suppose.
Warren C. Schrempp: They came out in a summary judgment so that that may be clear instead we sold that whole system to Paxton-Vierling Company. We sold the whole system to them. We felt that there was enough control left and we felt that stringing their high tension wires, they are insulated by air and space which means that they are bare wires. We felt that we had a case against them and then during the discovery we develop the case also against Owen Equipment Company on the grounds that their cranes were improperly --
John Paul Stevens: In other words there were two quite separate claims against Owen. One directly by your client and secondly by Omaha Power District against them indirectly, is it not that right?
Warren C. Schrempp: Yes based on --
John Paul Stevens: And once Omaha Power was out of the case then the third party complaint necessarily fell too, did it not?
Warren C. Schrempp: Not on the circumstances we feel, no Your Honor.
John Paul Stevens: Well, how could they be liable by way of a third party complaint if the third plaintiff had prevailed, had been found not liable at all?
Warren C. Schrempp: Do you mean my hypothetical case here?
John Paul Stevens: Yes.
Warren C. Schrempp: Alright. The jury could have found that the Omaha Public Power District was not negligent in the construction and maintenance of the wires that the Jury could have found that the Owen Erection and Equipment Company was negligent in the operation of scrutiny.
John Paul Stevens: But that would not justify a recovery on the third party complaint because a third party complaint is brought by Omaha Power against Owen and if Omaha Public Power had no liability and had no injury and nothing to recover over at the third party complaint, did they?
Warren C. Schrempp: Omaha Public Power District might have failed on its third party complaint, but I feel that we were --
John Paul Stevens: Then you recover only directly against Owen just as though you never sued Omaha Power at all?
Warren C. Schrempp: No, because we could not have sued Owen directly originally, but it was a proper and clear under rule 14 by Omaha Public Power District and then --
John Paul Stevens: But only in so far as it related to Omaha Powers claim over against Owen. The impleader did justify it unless I understand you, did not justify. You are asserting an independent claim of negligence on behalf of Kroger against Owen, do you?
Warren C. Schrempp: Basically, the Omaha public power district alleged that Owen was negligent, and therefore, made them a third party defendant.
John Paul Stevens: And then you filed a separate pleading in which you made such allegations?
Warren C. Schrempp: Yes.
John Paul Stevens: And the question is whether that pleading is one that the Federal Court can entertain?
Warren C. Schrempp: Yes, it is the old A against B, B against C, is there a question of can C counter claim against A, comments of Mr. Justice White, I believe pointed that up and A cannot proceed against C. I do not think that is so.
John Paul Stevens: Either a case is holding that A can proceed directly against C?
Warren C. Schrempp: Yes, Your Honor.
John Paul Stevens: What are those cases?
Speaker: That is a case in the Court of Appeals.
John Paul Stevens: Prior to this case.
Warren C. Schrempp: Your Honor when I say cases I felt that perhaps the word law and when I say law. I felt perhaps I was referring to awe of the legal writers, Moore, Wright & A. Miller everyone. Cases holding that, yes Your Honor. Cases that were persuasive in Nebraska. The opinion of the honorable Robert Van Pelt in two cases. The cases if you want to see, it is in the brief. Robert Van Pelt in Nebraska had held that exactly in two District Court cases, two District Court cases. Robert Van Pelt, his Honor in Nebraska was a highly regarded judge. They are District Court opinions. I think we have a difficulty in connection with case law in this in that in most cases, in most cases, the statute of limitations has not run and if a District Court rules against the existence of the third party claim that would rather than go through let us say expense, uncertainty of an appeal that many District Court cases are allowed to remain one way or the other because the State Court remedy is still available. In other words, rather than take the chance of simply file in State Court. I think that even in Kenrose which is the case that is urged most vigorously by the petitioner, even in Kenrose, there is some possible interpretation of the perhaps reluctance to abide by a hard and fast prohibitory rule. In that particular instance in Kenrose, the Court did say, Kenrose was in 1971, in September of 1975, the Fourth Circuit again had the idea of the situation where they approached this particular problem. They said this. They said in Kenrose v. Fred Whitaker, we broadly held that there must be an independent basis of jurisdiction of a claim by the plaintiff against a third party defendant. Then in the footnote, they said after Kenrose was decided and they cited another section of the case previously decided and then they say this, were we inclined and they are talking about these harsh prohibitory rule, were we inclined under any other context to reconsider the absolute rule of Kenrose, we would not find it appropriate to do so here. In other words, what we are contending, basically and simply is this, that the presence of rule without exception, of an absolute prohibitory rule under the circumstances of this particular case would be unjust and equitable.
William H. Rehnquist: Judge Sobeloff’s opinion in Kenrose was absolute and prohibitory only in the sense that it said, if you are going to go into the Federal Court which is the Court of limited jurisdiction, you are going to have to bear the burdens as well as the benefits, you have available to you, your State Court of general jurisdiction which you would not suffer those from and that is your alternative?
Warren C. Schrempp: In that particular case, I believe the facts were slightly dissimilar Your Honor.
William H. Rehnquist: Did judge Sobeloff not say in Kenrose that the plaintiffs could have gone into the State Court without having all of the problems that were now raised because of pendant and ancillary jurisdiction?
Warren C. Schrempp: Yes, and he said the State Court remedy was then available to the plaintiff and the plaintiff State Court remedy in Kenrose I assume was available and no statute was run upon and it was decided --
William H. Rehnquist: Your State Court remedy was available the day you filed in Federal Court, was it not?
Warren C. Schrempp: The day we filed in Federal Court?
William H. Rehnquist: Yes.
Warren C. Schrempp: I believe that if in our situation with Owen being in there as proper, we could not have filed. In other words, if we have filed in State Court, after Owen, after OPPD and pleaded Owen, and then we filed an action in State Court against Owen, I feel that Owen we were all properly in Federal Court, under not only our local rule.
William H. Rehnquist: But you still have not said, could you have filed as of the date you filed your original lawsuit in State Court against Owen and could you have filled as of the date you filed your amended complaint against Owen?
Warren C. Schrempp: I believe we could have filed it as of the date we filed our amended complaint Your Honor.
William H. Rehnquist: And certainly, you could have filed as of the date --
Warren C. Schrempp: The timetable is fairly complicated. I think it makes it clear. In other words, in January 1974, the Iowa statute of limitations ran. On that particular date, all three parties were properly in Federal Court and there is no one who would quarrel with that, all three parties were properly in Federal Court.
John Paul Stevens: Well, they were properly in Federal Court, but was it proper in that case for A to be suing C?
Warren C. Schrempp: Yes, Your Honor, we contend that it was. For the same reason that Mr. Justice White mentioned that C could have sued A and it would be highly unjust if they could not sue C. We feel that that remedy and our position is as follows.
John Paul Stevens: I am trying to remember it. I know the brief explains it. Why did you not sue C in the first place?
Warren C. Schrempp: Why did not we sue C in the first place because we did not even know about C in the first place?
John Paul Stevens: They are a lessee of the employer, was that it?
Warren C. Schrempp: No. The situation was this, Mr. Justice Stevens. We sued because we felt that the power lines had killed our client’s husband.
Speaker: What about jurisdiction? (Inaudible)
Warren C. Schrempp: I am talking about A against B now. Our client against Power District, our client in Iowa. Power District, Nebraska. So we brought our action properly there. Does that answer your question or did your question go beyond that?
Speaker: Why did you not sue Owen in the first place?
Warren C. Schrempp: Why did you not sue Owen in the first place?
John Paul Stevens: The State Court if you were worried about federal jurisdiction, why did you sue them right away?
Warren C. Schrempp: Because the evidence against Owen, in other words, the defectiveness of their claims seems like that was developed later. We felt that the primary, the first theory of suit that we had was that those wires should not have been allowed there in the presence of moving cranes. The crane was owned by Owen Erection and Equipment Company. It was operated, however, by an employee of Paxton Vierling. Paxton Vierling was also the employer of our client?
John Paul Stevens: You are afraid it is a workman’s compensation problem?
Warren C. Schrempp: Of course. It turned out that that situation was not true at all because under the Borrowed Servant Rule of Iowa, it was not under workman’s compensation. I explained it as well as I could.
John Paul Stevens: It is in your brief. You stumbled into it through discovery really is what I am off to.
Warren C. Schrempp: Yes.
William J. Brennan, Jr.: When did you first learn that Owen had its principal office in Iowa?
Warren C. Schrempp: On the third day of trial, Your Honor.
William J. Brennan, Jr.: That was ’76'
Warren C. Schrempp: That was 1976.
William J. Brennan, Jr.: Your adversary suggests that you had taken some depositions that acquainted you a couple of years early with the fact that Owen indeed had a chief office?
Warren C. Schrempp: What my adversary refers to is the fact that a deposition was taken in the offices of the Paxton Vierling Company in which they say, you should have known. They themselves say --
William J. Brennan, Jr.: You should have known what?
Warren C. Schrempp: You should have known that this was an Iowa resident.
William J. Brennan, Jr.: Which, Owen?
Warren C. Schrempp: Owen, yes. Then they filed an affidavit after the Court of Appeals opinion in which they say that for the first time, they knew on the third day of trial when the local counsel, in other words, the corporate counsel for the company called their attention to it.
William J. Brennan, Jr.: They being your adversary?
Warren C. Schrempp: Pardon?
William J. Brennan, Jr.: Your adversary filed an affidavit after the Court of Appeals judgment, stating what?
Warren C. Schrempp: Stating that they became aware of the fact that their principal place of business only on the third day of the trial and we in our brief objected to that and I object to it here because of the fact that it was an ex parte affidavit filed after the Court of Appeals opinion in this case and it was not subject to cross examination. If it had been subject to cross examination, it would certainly have fallen because the charter of the company names its principal place of business as being in the state of Nebraska which I have attached as an appendix in the same manner that they attached their affidavit as an appendix. Their affidavit was an affidavit of one attorney for the defendant in favor of another attorney for the defendant. My affidavit was from the Secretary of State of the state of Nebraska.
William J. Brennan, Jr.: Are you telling us that everything you knew or had reason to know indicated that its principal place of business, its corporate office is in the state of Nebraska?
Warren C. Schrempp: Yes, both in the records of the state of Nebraska and records of the state of Iowa and had this matter been raised earlier, this would have been producible for the record at that time. Even with respect to the records of the state of Iowa where they applied for permission to do business in the state of Iowa, their principal place of business and if counsel urges this, this is a certificate from the state of Iowa, from the Secretary of State of the state of Iowa in which they applied to do business in the state of Iowa, in the germane times to this case and say in effect, their principal place of business did not stay in Nebraska and they are apply for permission and authority from the state of Iowa to do business in that state.
Thurgood Marshall: (Inaudible)
Warren C. Schrempp: I know where the principal place of business is Your Honor. Pardon.
Thurgood Marshall: All that shows an affidavit. Is that the same thing?
Warren C. Schrempp: In the record, everyone at trial time because it was a sudden thing. I would say that this case was given birth to in a spirit of judicial economy, I personally and I am a small office, and I have two other attorneys, both young attorneys, almost students, I was personally engaged in state trial. At that particular time, the word came from the United States District Court, we are going to start the Owen case because it is one of the oldest cases on the docket. It was because it had been up the Court of Appeals and back. I said, I cannot walk out of a State Court case. I called the judge. His bailiff said no, it is the oldest case on the docket. Send somebody else down. I did. I had to. You may look on federal judges from hearing, but we look at them as godlike and when they say come down and try the case and if you cannot do it, send somebody from your office. I had one choice. I sent my young lawyer down. Perhaps in the heat of battle and I am certainly not disparaging in any way shape or form from his efforts. In the heat of battle, perhaps --
Thurgood Marshall: I do not see anything wrong when you take the certificate of the Nebraska government which shows the office as being in Nebraska. I do not see why you have to go farther? You rely on the state document.
Warren C. Schrempp: They were at that time of trial, they were under the records of Nebraska, they were on the records of Iowa.
Warren E. Burger: That certificate that you were just holding in your hand --
Warren C. Schrempp: I know it is not in the record, Your Honor.
Warren E. Burger: That is what I was asking, it is not in the original files, the record in this case?
Warren C. Schrempp: No, I after very frankly just on April 7 of 1978, I thought to myself --
William J. Brennan, Jr.: I take it is a public document, is it?
Warren C. Schrempp: Yes, it is a public document.
Warren E. Burger: Could we judicially notice it?
Warren C. Schrempp: It is a public document. I do not know. It is a public document of the state of Iowa, office of the Secretary of State.
Warren E. Burger: When was the contrary affidavit filed after the Court of Appeals opinion you say?
Warren C. Schrempp: The contrary affidavit after the Court of Appeals opinion was filed. It was subscribed to about the 29th of June. The date of the Court of Appeals opinion preceded that by a substantial length of time and our affidavit, the Secretary of State of the state of Nebraska was filed as a counter affidavit to that. The date of the opinion was June 21, 1977. The day of the opinion of the Court of Appeals of the Eight Circuit was June 21, 1977. The date of the affidavit was as I mentioned after that time.
Warren E. Burger: June 29.
Warren C. Schrempp: Yes and then we included in our brief a copy of the affidavit for the Secretary of State of the state of Nebraska which says the principal place of business is in Nebraska and also available would have been a Secretary of State’s certification of the State of Iowa that they applied to do business in the state of Iowa and naming the principal place of business as Omaha, Nebraska, 30 something Farm Street.
John Paul Stevens: But Mr. Schrempp, did you rely on that document at any time prior to the end of the trial
Warren C. Schrempp: No, Your Honor.
John Paul Stevens: You did not know about it, did you?
Warren C. Schrempp: No, we did not. That was one of the unfairness and the disadvantages of having the thing blasted at my young associate in the middle of a trial that concerned not only one issue, but several very complicated issues. We took the word of the Secretary of the Owen Corporation.
John Paul Stevens: Rather than the official record, but you did not check the official record?
Warren C. Schrempp: No, it came up that fast.
Warren E. Burger: Do you have anything further, Mr. Sodoro?
Emil F. Sodoro: I do indeed Your Honor.
Warren E. Burger: Do you think we could not take judicial notice of the certificate that we have been discussing? Is it part of the official records of the state of Nebraska?
Emil F. Sodoro: Of course not. It is not in the record in this case. Not at all.
Warren E. Burger: If were in the record, we would not be talking about judicial notice. We judicially notice what is not in the record.
Emil F. Sodoro: I do not think that is possible sir. But after you hear me in this regard, you will find that there is no reason for that. First of all, let me say this, there is a judicial finding by Judge Denny in the record in this case which is to the effect that this petitioner before this Court today is in fact an Iowa resident. Bear in mind gentlemen that there are two places that a corporation can exist for purposes of jurisdiction under the law which grants jurisdiction to the Federal Court. One place of course is the place that it is domiciled, where the articles of incorporation are filed. No question about that, but the Congress of the United States have declared by law that an additional place of corporate existence is where that corporation has its principal place of business. In an order to clear the record absolutely complete for you, Mr. Justice Brennan particularly with regard to your question to Mr. Schrempp, I do not believe that the answer to that question was accurate with respect to the record and I would like to straighten the record out for you. In that regard, the allegation made by the respondent here against the petitioner was this --
William H. Rehnquist: Will you tell us where you are reading from?
Emil F. Sodoro: I know it by heart, but I do not know if I can find it.
William J. Brennan, Jr.: But we do not.
Emil F. Sodoro: Would you please look at the appendix, page number 23, amended complaint at the bottom of the page gentlemen under paragraph II, the recitation made by this plaintiff in her direct claim now against the defendant is that the defendant, Omaha Public Power District, a public corporation is a public corporation organized and existing under the laws of the state of Nebraska in having its principal place of business in Omaha, Douglas County, Nebraska; that the defendant, Owen Equipment and Erection Company is a corporation with its principal place of business in Nebraska. Now, our answer demanded strict proof you see of this allegation. Strict proof that in order for the Federal Court to have jurisdiction over the defendant, then it became necessary upon this plaintiff to prove in the case where we end up being the direct defendant to prove that we were in fact a Nebraska Corporation and that our principal place of business was in Nebraska.
William H. Rehnquist: Turning to page 28 of the appendix on paragraph I of your answer, you say you admit that Owen Equipment and Erection Company is a corporation organized and existing under the laws of the state of Nebraska.
Emil F. Sodoro: Right and that is all. We do not admit in that answer that they have as their principal place of business you see Omaha, Nebraska and therefore our demand comes now for the strict proof. The only proof presented at the trial in connection with the resident or the citizenship of the defendant, Owen, the only proof was the proof from the officers of the Owen Equipment Company which was that their principal place of business was in Iowa and judge Denny therefore made a judicial finding that they --
William J. Brennan, Jr.: Where is that?
Emil F. Sodoro: Pardon Sir?
William J. Brennan, Jr.: Where is judge Denny’s finding?
Emil F. Sodoro: I do not know if I can find it for you but it is also recited in the opinion of the Eighth Circuit. As a matter of fact, we have cited in our reply brief some of the words from the record as recited by judge Denny and on page 6, he says this, the Court, I do not think they ever admitted anything and he is referring now to the defendant, Owens, I do not think they ever admitted anything. The proof here before this Court today by the secretary of the Owen Equipment and Erection Company, their principal place of business was in Carter Lake, Iowa. That was the only proof in the trial of the case, gentlemen. The Trial Court in its memorandum is filed which is also part of the record found this. “Plaintiff, an Iowa citizen alleged that jurisdiction was based upon 28 U.S.C 1332 that the defendant is incorporated in the state of Nebraska and he has his principal place of business there. It is now uncontroverted, however, that defendant’s principal place of business is in the state of Iowa. Hence, an independent basis of jurisdiction does not exist.
William H. Rehnquist: It is not sufficient under these federal statutes and if the plaintiff is a resident of Iowa, the defendant corporation is incorporated in Iowa, but has its principal place of business, incorporated in Nebraska, but has its principal place of business in Iowa?
Emil F. Sodoro: Then for the purposes of the federal jurisdiction statute, both those parties are residents of the same state?
William H. Rehnquist: So there is no diversity.
Emil F. Sodoro: So there is no diversity of citizenship and all of the decisions are to that effect. In answer to one of your earlier questions, Mr. Justice White, you asked me why is it not then that a plaintiff could sue a third party defendant if a third party defendant under the decisions could sue the original plaintiff.
Byron R. White: And if the third party defendant is from the same state as the plaintiff?
Emil F. Sodoro: Yes. The reason for that is that a careful reading of the Kenrose v. Fred Whitaker case and what we consider a very astute opinion by the circuit judge sets that out exactly and precisely as being a violation of the jurisdictional requirements set forth by Congress on the Federal Courts.
Byron R. White: You are saying again, he cannot but why?
Emil F. Sodoro: I am telling you that that is that decision and as a lawyer, I would like to think that we follow those decisions. You say why is because the Federal Court Your Honor is a Court of very limited jurisdiction and that was such an important matter that the framers and the writers of our Constitution in Article 3, it makes that recitation and I think that the history of the decisions by the Federal Courts.
Byron R. White: But why may the third party defendant sue the plaintiff even though he is from the same state as the plaintiff?
Emil F. Sodoro: It appears that the rationale or at least the rationale I get from the examination of the cases is, the plaintiff has selected the forum and although has not made a direct claim against the third party defendant that the third party defendant because he is brought into the case in which he had no participation concerning the institution then, has that right as a matter of defense of his claim against the original defendant to counterclaim against the plaintiff. Gentlemen, I think I am out of time. I wish to thank you very much for your courtesy.
Warren E. Burger: Thank you, gentlemen. The case is submitted.