Opinion ID: 3010058
Heading Depth: 1
Heading Rank: 5

Heading: Brockman v.

Text: Merabank, 40 F.3d 1013, 1017 (9th Cir. 1994); see also Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 6 L.Ed. 204 (1824); American National Red Cross v. S.G., 505 U.S. 247, 264, 112 S.Ct. 2465, 2475-6 (1993). The question before us now is whether Congress could extend this jurisdiction to include cases to which the RTC was party, but is no longer, without exceeding the bounds of Article III. The Supreme Court delineated the modern constitutional bounds of pendent jurisdiction in United Mine Workers v. Gibbs, 383 U.S. 715 (1966). In that opinion, the Court considered when federal courts have jurisdiction over state claims which are related to federal claims between the same parties, but over which the federal courts have no independent basis for subject matter jurisdiction. The Court concluded that federal courts have the power to hear a state claim if the federal claim has substance sufficient to confer subject matter jurisdiction on the court, and the state and federal claims derive from a common nucleus of operative facts. 383 U.S. at 725. This question is ordinarily resolved on the pleadings. The decision to exercise this power, on the other hand, remains open, and should be based on considerations of judicial economy, convenience and fairness to the litigants. 383 U.S. at 726-727. Once a court has decided to exercise jurisdiction over the state claim, however, elimination of the federal claim does not deprive the court of the constitutional power to adjudicate the pendent claim. Lentino v. Fringe Emp. Plans, Inc., 611 F.2d 474, 479 (3d Cir. 1979). Can this continuing jurisdiction over a state claim exist when, rather than the federal claim being eliminated, the federal claim itself becomes a state claim? The Supreme Court recently cited to Gibbs in a context analogous to the one with which we are faced. In Gutierrez de Martinez v. Lamagno, __ U.S. __, 115 S.Ct. 2227 (1995) a bare majority of the Court held that under the Federal Employees Liability Reform and Tort Compensation Act (the Westfall Act), the federal courts could review certification by the Attorney General that an employee sued for a wrongful or negligent act was acting within the scope of his or her employment or office at the time of incident. If the Attorney General so certifies, the employee is dismissed from the action, the United States is substituted as the defendant, the case falls within the Federal Tort Claims Act. If the case is not already in federal court, it is then removed from state court by the Attorney General. 115 S.Ct. at 2229, 2235. Once in federal court the certification decision by the Attorney General is reviewable. Article III comes into play in this situation because if the district court concludes that the employee acted outside the scope of employment and thus rejects the certification, the individual defendant must be resubstituted and the United States will no longer be a party. If the parties are not diverse, the federal court could be left with a case without a federal question to support the court's subject matter jurisdiction. Id. at 2236. Under the statute, the Attorney General's certification is conclusive for the purposes of removal, suggesting that even if the certification is rejected by the federal court and the United States is no longer a party, remand is not permissible. Although Lamagno itself did not raise this issue because the parties were diverse, the Court considered whether the statute should be interpreted to avoid this potential constitutional problem. A four justice plurality cited to Gibbs in concluding that any Article III problem was not a grave one. 115 S.Ct. at 2236. At the outset of the litigation, the Court reasoned, there was a significant federal question - whether the employee acted within the scope of his federal employment. Resolving this question, the Court concluded, involved consideration of the facts relevant to the underlying tort claims, thus ‘considerations of judicial economy, convenience and fairness' [citation to Gibbs omitted] make it reasonable and proper for the federal court to proceed beyond the federal question to final judgment once it has invested time and resources. Id. at 2237. Therefore, even if the United States were replaced by a non-diverse party, and there was no other basis for federal jurisdiction, the federal court nonetheless retained jurisdiction over the case without running afoul of Article III. Justice Souter dissented, joined by three other Justices, reasoning in part that requiring a federal court to keep jurisdiction over the case after the United States was no longer a party must at least approach the limit [of ‘arising under' jurisdiction under Article III], if it does not cross the line. Id. at 2239. The certification question could not provide the basis for jurisdiction, according to the dissent, because that question itself was jurisdictional. In part to avoid testing the limits of Article III, the dissent read the statute as prohibiting review of the Attorney General's certification by the district court. In our case there was federal jurisdiction at the outset of the litigation - the presence of the RTC - which does not implicate the concerns of the dissent in Lomagno. Jurisdiction springs not from the question of jurisdiction itself, but from the involvement of the RTC. Moreover, unlike the dissent's reading of the statute at issue in Lomagno, the supplemental jurisdiction statute at issue in this case does not require the district court to keep jurisdiction, it merely permits it to do so. The considerations of judicial economy, convenience and fairness cited by the Lomagno plurality are particularly compelling in this case where the district court has completely resolved the dispute on its merits. Requiring the parties to re-try the case in state court would needlessly duplicate the resources expended by the federal courts. We thus conclude that in such a case, where the jurisdiction-conferring party drops out and the federal court retains jurisdiction over what becomes a state law claim between non-diverse parties, the bounds of Article III have not been crossed. See Garcia v. U.S., 88 F.3d 318, 324 (5th Cir. 1996) (agreeing with Lomagno plurality that even after the United States was dismissed as party, Article III did not prevent federal court from resolving case on the merits); see alsoAliota v. Graham, 984 F.2d 1350 (3d Cir. 1993), cert. denied, 510 U.S. 817 (1994) (holding Attorney General's certification reviewable and that the case could not be remanded if the certification was invalidated and the United States was no longer a party). An analogy to diversity jurisdiction supports our conclusion. In diversity cases a change in domicile that destroys the original basis for federal subject matter jurisdiction does not divest the federal courts of jurisdiction to continue to hear the case. Mullen v. Torrence, 22 U.S. (9 Wheat.) 537 (1824); Clarke v. Mathewson, 37 U.S. (12 Pet.) 164 (1838). We have rejected an iron-clad time of filing rule that federal jurisdiction at the outset of a case is dispositive as to jurisdiction throughout the case. In rejecting the rule as dispositive, however, we do not suggest that jurisdiction at the outset of the case is irrelevant as to whether the district court continued to have jurisdiction after the RTC was dismissed. Indeed it is the initial jurisdiction over the case that provides the constitutional power for the court to continue to hear it. Finally, we note that a contrary conclusion would seriously limit the ability of Congress to provide a federal forum for litigation initiated by federallycreated entities. For example, it would prevent Congress from deciding, after initially putting the case in federal court, that judicial economy required that that court have the discretion to keep the case. Congress would not even have the power to give continuing jurisdiction over the case for reasons related to the interests of the jurisdiction-conferring party. In this case, for example, the RTC may have more difficulty disposing of its assets if the purchaser knows that any litigation concerning those assets must be started anew in state court. Cf. Freeport-McMoran, Inc. v. K.N. Energy, Inc., 498 U.S. 426, 428, 111 S.Ct. 858, 860 (1991) (using this reasoning to support the rule that diversity jurisdiction, once established, is not defeated by the addition of a non-diverse party). We conclude that Article III does not require such a significant limitation on Congress' power to give jurisdiction to the federal courts of cases involving federally-created entities. We now go to the second part of the inquiry. We have determined that Congress had the power to permit this case to continue to be heard in federal court. But is this what Congress intended under 28 U.S.C. § 1367? We turn first to the language of section 1367(a) which provides: (a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder of additional parties. 28 U.S.C. § 1367. Under subsection (c), the district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if-- (1) the claim raises a novel or complex issue of state law, (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction, (3) the district court has dismissed all claims over which it has original jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction. Id. (emphasis supplied). Applying the statute to this case, we have pointed out that original