Opinion ID: 2994681
Heading Depth: 3
Heading Rank: 1

Heading: Assumption of Jurisdiction

Text: Class counsel contends that there was no basis for removing the Krislov suit to federal court and that, therefore, the district court should have remanded the case back to state court. Ordinarily, a case filed in state court can be removed to federal court only if the case falls within the original jurisdiction of the federal district courts. 28 U.S.C. sec. 1441. Because it is based entirely on state law and involves non-diverse parties, however, the Krislov suit does not come within the original jurisdiction of the federal district courts. The district court nevertheless concluded that removal was proper under the doctrine of ancillary jurisdiction since the lawsuit involved claims relating to an alleged breach of the settlement agreement resolving the Montgomery case and the court had expressly retained jurisdiction to enforce the terms of that settlement agreement when it entered a final judgment in the Montgomery case. Precedent in this circuit firmly establishes that the doctrine of ancillary jurisdiction confers federal jurisdiction over a case otherwise outside federal jurisdiction in which the plaintiff seeks to enforce a settlement agreement, as long as the district court incorporated the agreement into its final order or retained jurisdiction to enforce the terms of the agreement. Ford v. Neese, 119 F.3d 560, 562 (7th Cir. 1997); In re VMS Sec. Litig., 103 F.3d 1317, 1321-22 (7th Cir. 1996); Lucille v. City of Chicago, 31 F.3d 546, 548 (7th Cir. 1994); McCall-Bey v. Franzen, 777 F.2d 1178, 1188 (7th Cir. 1985); see also Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381-82 (1994). Thus, where a party to a settlement agreement approved by a federal court brings a new suit in federal court alleging a breach of the agreement, federal jurisdiction exists over the suit, provided the federal court incorporated the agreement into its final order or reserved jurisdiction to enforce the agreement. See, e.g., Ford, 119 F.3d at 562; McCall- Bey, 777 F.2d at 1188-90. What is less firmly established is when a case filed in state court that nevertheless comes within a federal court’s ancillary jurisdiction may be removed. Our court addressed this issue in In re VMS Securities Litigation, 103 F.3d 1317 (7th Cir. 1996), which considered whether a pair of district courts had properly removed and enjoined a state law class action alleging fraud and misrepresentation relating to the settlement of a pair of prior class action lawsuits approved by those two district courts. The court first determined that the two district courts possessed ancillary jurisdiction over the state law actions at issue. Id. at 1321- 23. The court then turned to whether the district courts had the authority to remove the state law actions from state court. Relying on authority from the Second Circuit, specifically In re Agent Orange Product Liability Litigation, 996 F.2d 1425, 1431-32 (2d Cir. 1993), the court concluded that the All Writs Act, 28 U.S.C. sec. 1651, which provides that federal courts may issue orders necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law, granted the district courts the necessary authority. 103 F.3d at 1323-24. The court explained, however, that the All Writs Act does not permit removal in every case. Id. at 1324. Again relying on the Second Circuit’s decision in In re Agent Orange, the court suggested that only the presence of exceptional circumstances threatening the integrity of a court’s rulings in complex litigation would justify removal under the All Writs Act.\4 Id. Reading In re VMS Securities together with this circuit’s law on ancillary jurisdiction, two different standards for exercising ancillary jurisdiction emerge. In a suit otherwise outside federal jurisdiction brought in federal court, a district court may assume jurisdiction over the suit if it satisfies the ordinary requirements for ancillary jurisdiction. In a suit otherwise outside federal jurisdiction brought in state court, a district court may assume jurisdiction over the suit if it satisfies the ordinary requirements for ancillary jurisdiction and exceptional circumstances threatening the integrity of its prior rulings are present./5 Strictly speaking, the Krislov suit does not involve the sort of extraordinary circumstances described in In re VMS Securities. Any threat it presents to the integrity of the district court’s rulings in the Montgomery case is minimal, involving ordinary collateral estoppel and res judicata issues. Pacheco de Perez v. AT&T Co., 139 F.3d 1368, 1380 (11th Cir. 1998) (holding that such a threat would not supply exceptional circumstances); In re Agent Orange, 996 F.2d at 1431 (suggesting the same). And, the Montgomery case was not particularly complex litigation--it was a relatively straight-forward class action. Still, the Krislov suit is not an ordinary action to enforce a term of a settlement agreement involving a dispute regarding whether a party has reneged on its post-judgment obligations through some out-of-court action or failure to act. Rather, the Krislov suit involves a dispute over whether the Krislov defendants reneged on their pre-judgment obligations by obtaining a ruling (they promised not to seek) from the district court. The district court is uniquely positioned to resolve this sort of dispute. It involves events that occurred before the court and revolves, in part, around the impetus for one of the district court’s rulings. Moreover, it would be awkward, to say the least, for a state court to pass on certain issues raised by this case, such as what prompted the district court to rule in the way it did. In our view, the unusual nature of the Krislov suit--involving the alleged procurement of a court ruling through a breach of a pre-judgment settlement obligation--does present a set of circumstances that make it appropriate for a federal court to remove a case from state court in aid of its jurisdiction. Therefore, although it does not involve the sort of extraordinary circumstances described in In re VMS Securities, we conclude that the Krislov suit does involve a set of extraordinary circumstances that justifies removal under the All Writs Act. Accordingly, the district court properly assumed jurisdiction over the Krislov suit and did not err in refusing to remand the case to state court.