Opinion ID: 3010125
Heading Depth: 2
Heading Rank: 5

Heading: Manchester's Counterclaims

Text: Manchester offers one reason for dismissal not relied on by the district court: that the Partnership is an indispensable party to Manchester's counterclaims but that joinder would destroy subject matter jurisdiction over the counterclaims because Manchester and the Partnership share citizenship in New Jersey. If Manchester cannot pursue its counterclaims without participation of the Partnership and the Partnership must be excluded from the litigation, Manchester would have a strong argument for dismissal. The third factor of Rule 19(b) -- whether a judgment rendered in the person's absence will be adequate -- considers the extent to which exclusion of an interested person would leave significant matters unadjudicated. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 111 (1968) (We read the Rule's third criterion . . . to refer to this public stake in settling disputes by wholes, whenever possible . . . .). However, as we shall presently explain, the Partnership can be joined as to Manchester's counterclaims, without destroying subject matter jurisdiction. Complete diversity is required only when federal court jurisdiction is exercised under the federal diversity jurisdiction statute, 28 U.S.C. § 1332. See State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 530-31 (1967). Under the Constitution, diversity jurisdiction requires only minimal diversity among the parties, i.e., at least one defendant and one plaintiff need be citizens of different states. Id. Here the district court has statutory authority to exercise jurisdiction over Manchester's counterclaims under the supplemental jurisdiction statute, 28 U.S.C. § 1367. 28 U.S.C. § 1367 provides that, in general, if the district court has jurisdiction over one claim, it can maintain jurisdiction over claims that lack an independent basis of jurisdiction if those claims are so related to claims within the court's jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. The rule applies even to claims asserted by or against additional parties. Id. Although the statute places certain limits on a court's ability to exercise supplemental jurisdiction over claims by or against non-diverse additional parties when the basis for the original claim is diversity jurisdiction, those limits only apply when the additional claims are brought by plaintiffs. See Development Finance Corp. v. Alpha Housing & Health Care, Inc., 54 F.3d 156, 160-61 (3d Cir. 1995). Indeed, we have specifically held that in a diversity action, the district court may exercise supplemental jurisdiction over a defendant's counterclaim against non-diverse parties joined as third-party defendants to the counterclaims. See In re Texas Eastern Transmission Corp. PCB Contamination Insurance Coverage Litig., 15 F.3d 1230, 1236-38 (3d Cir.), cert. denied sub nom. Texas Eastern Corp. v. Fidelity & Cas. Ins. Co., 115 S. Ct. 291 (1994). Thus, the only remaining question is whether Manchester's counterclaims are so closely related to [the HB entities' claims] that they form part of the same case or controversy under Article III of the United States Constitution. Claims are part of the same case or controversy if they share significant factual elements. See Sinclair v. Soniform, Inc., 935 F.2d 599, 603 (3d Cir. 1991) (Claims are part of the same constitutional case if they derive from a common nucleus of operative fact . . . .) (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966)); White v. County of Newberry, 985 F.2d 168, 172 (4th Cir. 1993) (The claims need only revolve around a central fact pattern.). Manchester's counterclaims rely on essentially the same facts as does its defense to the HB Entities' claims. Manchester's primary defense is that HB General's final capital call was ineffective because the Partnership could not commence construction as scheduled and thus that Manchester appropriately exercised its redemption option before the capital call was due. Manchester's counterclaims are that the Partnership, along with the HB entities and Vanderbilt Development Corporation (a Vermont corporation with its principal place of business in Vermont), breached the Partnership Agreement and the covenant of good faith and fair dealing due to its failure to recognize Manchester's right to redemption and its attempted conversion of Manchester's partnership interest into that of a subordinated creditor. Both the defense and the counterclaims require proof that construction was not commenced as scheduled; that, under the Partnership Agreement, Manchester had the right to exercise the redemption option; and that Manchester did exercise the redemption option. Manchester's counterclaims are thus within the supplemental jurisdiction of the district court. In sum, joinder of the Partnership on the counterclaims will not destroy subject matter jurisdiction over the counterclaims even though Manchester and the Partnership share citizenship in New Jersey.