Opinion ID: 201473
Heading Depth: 2
Heading Rank: 1

Heading: Ancillary Enforcement Jurisdiction

Text: 25 The doctrine of enforcement jurisdiction is a judicial creation, born of the necessity that courts have the power to enforce their judgments. U.S.I. Props. Corp. v. M.D. Constr. Co., 230 F.3d 489, 496 (1st Cir.2000). Without this residual federal jurisdiction ... flowing from [a court's] original jurisdiction over the action, id. at 496, the judicial power would be incomplete and entirely inadequate to the purposes for which it was conferred by the Constitution, Riggs v. Johnson Cty., 73 U.S. (6 Wall.) 166, 187, 18 L.Ed. 768 (1867). However, because enforcement jurisdiction is a creature of necessity, it extends only as far as required to effectuate a judgment. Peacock v. Thomas, 516 U.S. 349, 359, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996). 26 Fafel contends that the district court impermissibly extended its ancillary jurisdiction to enforce a judgment by interpreting and enforcing the terms of the underlying Rule 68 offer and acceptance of judgment, which, he argues, constituted nothing more than a private settlement agreement between non-diverse parties governed solely by state contract law. Under Kokkonen, Fafel maintains, the court's failure to incorporate the terms of the offer of judgment into the formal judgment or to include an express provision retaining jurisdiction deprived it of authority to enforce the provision in the Rule 68 offer purporting to satisfy all claims made and relief sought by the plaintiff against the defendant arising from or related to [Fafel's] April 2000 termination. B. The Kokkonen Decision 27 In Kokkonen, the Supreme Court unanimously held that a district court lacked jurisdiction to enforce the terms of a settlement agreement after the underlying federal court action had been dismissed with prejudice by stipulation of the parties under Rule 41(a)(1)(ii). 511 U.S. at 382, 114 S.Ct. 1673. Although the substance of the oral settlement agreement was recited, on the record, before the District Judge in chambers, id. at 376, 114 S.Ct. 1673, the terms later sought to be enforced, which provided for the return of files to one party, ha[d] nothing to do with the subject-matter of the claim that had originally initiated the litigation in federal court, id. at 380, 114 S.Ct. 1673. 9 Rather, the stipulation of voluntary dismissal of an earlier federal suit was but part of the consideration for the settlement agreement. Id. at 381, 114 S.Ct. 1673. The subsequent action to enforce the unrelated terms of the settlement agreement thus constituted a standard breach of contract suit requir[ing] its own basis for jurisdiction. Id. at 378, 114 S.Ct. 1673. 28 Under certain circumstances, the Court recognized that an independent basis for federal jurisdiction may be supplied by ancillary jurisdiction. The doctrine of ancillary jurisdiction, the Court explained, serves 29 two separate, though sometimes related, purposes: (1) to permit disposition by a single court of claims that are, in varying respects and degrees, factually interdependent; and (2) to enable a court to function successfully, that is, to manage its proceedings, vindicate its authority, and effectuate its decrees. 30 Kokkonen, 511 U.S. at 379-80, 114 S.Ct. 1673 (citations omitted). 10 31 The facts in Kokkonen supported neither rationale. Rather, the Court stressed that [t]he facts to be determined with regard to the claim of breach of the settlement agreement providing for the return of files were quite separate from the facts to be determined in the principal suit, which involved an alleged breach of an entirely different agreement. Id. at 381, 114 S.Ct. 1673. In the context of that case, it would neither be necessary nor even particularly efficient that [the two claims] be adjudicated together. Id. at 380, 114 S.Ct. 1673. Moreover, the only order [in Kokkonen ] was that the suit be dismissed, a disposition that is in no way flouted or imperiled by the alleged breach of the settlement agreement providing for the return of files. Id. The Court also emphasized that the action to enforce the terms of the settlement agreement involved more than just a continuation or renewal of the dismissed suit. Id. at 378, 114 S.Ct. 1673. Finally, the Court stated: 32 The situation would be quite different if the parties' obligation to comply with the terms of the settlement agreement had been made part of the order of dismissal — either by separate provision (such as a provision retaining jurisdiction over the settlement agreement) or by incorporating the terms of the settlement agreement in the order. In that event, a breach of the agreement would be a violation of the order, and ancillary jurisdiction to enforce the agreement would therefore exist. 33 Id. at 381, 114 S.Ct. 1673. 11 In the absence of an independent basis for federal jurisdiction or one of the additional measures required to retain ancillary jurisdiction, the Court concluded, enforcement of the settlement agreement is for state courts. Id. at 382, 114 S.Ct. 1673. C. Applying Kokkonen 34 Fafel argues that the Rule 68 judgment in this case was obtained merely as an incident to a purely private settlement agreement between non-diverse parties: In this case, the parties settled the case via an offer of judgment. As a result, he argues, like the order of dismissal entered in Kokkonen, entry of the Rule 68 judgment was simply part of the consideration for a private contract comprising the terms of the offer. 35 To be sure, [t]he plain purpose of Rule 68 is to encourage settlement and avoid litigation. Marek v. Chesny, 473 U.S. 1, 5, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985). To that end, Rule 68 creates a significant disincentive for a party to reject an offer of judgment in favor of proceeding to trial by imposing the risk of being charged with costs incurred after the making of the offer if the judgment finally obtained by the offeree is not more favorable than the offer. Fed.R.Civ.P. 68. However, entry of judgment pursuant to Rule 68 operates as more than mere consideration for the underlying offer and acceptance of judgment. The unique features of Rule 68 render [a] Rule 68 judgment ... a consent judgment of a particular kind. Mallory v. Eyrich, 922 F.2d 1273, 1280 (6th Cir.1991). 36 In order to trigger entry of judgment under Rule 68, one party must first file the offer and notice of acceptance together with proof of service thereof. Fed.R.Civ.P. 68. Upon filing, the clerk of court shall enter judgment. Id.; see Ramming v. Natural Gas Pipeline Co., 390 F.3d 366, 370 (5th Cir.2004) (A Rule 68 Offer of Judgment is usually considered self-executing.). In the event that an offeree rejects an offer of judgment made in compliance with Rule 68, the court may be called upon to enforce the rule's cost-shifting provision, thus imbuing the decision to reject a fair offer of judgment with meaningful consequences. See, e.g., Webb v. James, 147 F.3d 617, 621 (7th Cir.1998) (Unlike an ordinary contract offer, `a Rule 68 offer imposes certain consequences that can be costly for the plaintiff who declines the offer.') (citation omitted). In order to enforce the cost-shifting provision, moreover, a court necessarily must evaluate the terms of the rejected offer in order to compare it against the value of any judgment finally obtained by the offeree and thereby determine whether the offeree is liable for costs incurred after making of the offer. Fed.R.Civ.P. 68. 12 See, e.g., Tai Van Le v. Univ. of Pa., 321 F.3d 403, 407-09 (3d Cir.2003) (district court properly compared final judgment obtained by plaintiff against offer tendered by defendants). 37 If an offer of judgment is accepted and judgment entered, a court may still be called upon (as was the district court in this case) to decide a motion brought under Fed.R.Civ.P. 60(b) to vacate the Rule 68 judgment. See, e.g., Webb, 147 F.3d at 622 ([T]he proper procedural device for relief from a Rule 68 judgment is the same as for any other judgment: Rule 60.) (citing Richardson v. Nat'l R.R. Passenger Corp., 49 F.3d 760, 765 (D.C.Cir.1995)). Again, in doing so, a court may have to interpret the terms of the underlying offer of judgment in order to determine whether relief from judgment is warranted. 38 Finally, when a district court is called upon to enforce a Rule 68 judgment, it may examine the parties' intent regarding the effect of that judgment, as manifested by the offer and acceptance of judgment filed with the court. In the absence of terms specifying the money or property or other effect to which judgment [is] to be taken against the defending party, Fed.R.Civ.P. 68, a Rule 68 judgment has no meaningful content; the terms of an accepted offer of judgment are thus part and parcel of a Rule 68 judgment. As a result, a Rule 68 judgment necessarily incorporates the terms of the underlying offer, with or without the additional measures prescribed in Kokkonen for a settlement agreement providing for dismissal of claims under Rule 41. 13 39 Here, in evaluating DiPaola's motion to enforce the Rule 68 judgment by enjoining Fafel's pursuit of his claims in state court, the district court examined the terms of the Rule 68 offer of judgment to determine the scope and effect of a judgment it already had jurisdiction to enforce. Moreover, in protecting its Rule 68 judgment, the district court prudently confined its exercise of ancillary jurisdiction to the scope of the offer of judgment. It thus enjoined Fafel, in precisely the same terms as the offer of judgment Fafel accepted, from taking any action to seek relief or make claims against defendant arising from or related to the April 2000 termination of the plaintiff from his employment in the Middlesex Sheriff's Department. 14 Far from engaging in a clear usurpation of power, Lubben, 453 F.2d at 649, the district court justifiably concluded that it had ancillary jurisdiction to enforce its Rule 68 judgment. Accordingly, the injunction it issued was not void for lack of subject-matter jurisdiction, and it properly rejected the magistrate judge's recommendation to the contrary. 40 Affirmed.