Court Opinion

ID: 9496446
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:26:58.64969+00
Date Added: 2024-06-11T17:57:35.180090
License: Public Domain

PROST, Circuit Judge,
dissenting.
The majority opinion concludes, after “[ajpplying precedent,” that “the district court has subject matter jurisdiction of the question of whether TotalAxcess is liable for th[e] payment” of a settlement fee agreed to between Cygnus and Justice. Opinion at 1376. I respectfully dissent from this ruling because, in my view, it does not comport with precedent. Rather, I believe that the district court correctly dismissed Cygnus’s complaint against To-talAxcess for lack of jurisdiction.
After discussing Kokkonen v. Guardian Life Insurance Company of America, 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994), and Peacock v. Thomas, 516 U.S. 349, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996), the majority concludes that the district court has ancillary jurisdiction over Cygnus’s complaint. Neither case, however, found that jurisdiction was appropriate, and, in fact, no case cited in the majority *1377opinion found ancillary jurisdiction based on facts similar to those at issue here. In my opinion, the precedent cited by the majority compels the conclusion that jurisdiction is not appropriate over Cygnus’s complaint.
The facts of Kokkonen make it inapplicable to this case. In Kokkonen, Guardian Life Insurance (“Guardian”) and Kokko-nen agreed to settle various claims arising out of Guardian’s termination of Kokko-nen’s general agency agreement. After the district court had dismissed the action as settled, a dispute arose over the return of certain files. The parties were unable to resolve their differences and Guardian moved the district court for enforcement of the settlement agreement; Kokkonen opposed the motion for lack of subject matter jurisdiction. Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673. Kokkonen thus decided the issue of whether the district court had jurisdiction to enforce a settlement between the identical parties to a prior lawsuit. It does not address whether a district court has jurisdiction over a newly filed action against a new party, as in the case before us.
Moreover, neither the holding nor the rationale of Kokkonen provides a basis for finding jurisdiction over Cygnus’s new complaint. The Supreme Court held in Kokkonen that jurisdiction to enforce the settlement agreement against Kokkonen did not exist-the opposite result reached by the majority in this case. According to the Court’s rationale for this holding, the asserted power to enforce a settlement agreement “is quite remote from what courts require in order to perform their functions.” Id. at 380, 114 S.Ct. 1673. Critical to this conclusion was the fact that the terms of the settlement agreement were not incorporated into the order of dismissal. Id. at 380-81, 114 S.Ct. 1673. If they had been so incorporated, “a breach of the [settlement] agreement would be a violation of the order, and ancillary jurisdiction to enforce the agreement would therefore exist.” Id. at 381, 114 S.Ct. 1673. Absent such incorporation, however, “enforcement of the settlement agreement is for state courts, unless there is some independent basis for federal jurisdiction.” Id. at 382, 114 S.Ct. 1673.
In the present case, the district court entered judgment by consent against Justice in the amount of $50,000. Other than the consent judgment document, the record contains no settlement agreement or court order incorporating the terms of the settlement. Thus, under Kokkonen, to the extent the district court has any kind of enforcement jurisdiction, it is only to enforce the terms of the consent judgment against the parties to that judgment. Kokkonen does not go so far as to justify extending that jurisdiction to reach a newly filed complaint against a new party.
Likewise, Peacock v. Thomas compels the conclusion that the district court does not have jurisdiction to enforce the settlement agreement against Cygnus. Peacock, another case where the Court found no jurisdiction, stated that ancillary jurisdiction to enforce a settlement does not extend “beyond attempts to execute, or to guarantee eventual executability of a federal judgment.” 516 U.S. at 358,116 S.Ct. 862. According to the Court, it has “never authorized the exercise of ancillary jurisdiction in a subsequent lawsuit to impose an obligation to pay an existing federal judgment on a person not already liable for the judgment.” Id. Peacock cautioned that there can be no ancillary jurisdiction over “a new action based on theories of relief that did not exist, and could not have existed at the time the court entered judgment” in the underlying action. Id. at 359, 116 S.Ct. 862.
*1378The majority tries to distinguish Peacock on the basis that “Cygnus is raising no new theories of liability, but seeking jurisdiction to enforce the stipulated judgment against the merged successor to Justice as of the time of the judgment.” Opinion at 1376. I disagree. Cygnus’s complaint does raise a new theory: successor liability of a third party. Whether TotalAxcess is Justice’s successor involves no facts and no law common to the original lawsuit, which charged Justice with patent infringement. Cygnus’s complaint against TotalAxcess instead requires the development of facts related to the assets and liabilities acquired by TotalAxcess, as well as the application of state corporate law principles, not the federal patent laws.
My understanding of Peacock, and how its principles should apply in this case, comports with how other circuits have dealt with this issue. In the Tenth Circuit, “[wjhen a party asserts a postjudgment claim against a nonparty not arising out of the operative facts that produced the original judgment, an independent basis for federal jurisdiction must exist.” Sandlin v. Corp. Interior Inc., 972 F.2d 1212, 1216 (10th Cir.1992) (finding no postjudgment ancillary jurisdiction over newly added parties). The First Circuit has likewise concluded that there is no ancillary jurisdiction over a postjudgment proceeding “where that postjudgment proceeding presents a new substantive theory to establish liability directly on the part of a new party,” unless there is some independent basis for federal jurisdiction, because “such a claim is no longer a mere continuation of the original action.” U.S.I. Props. Corp. v. M.D. Constr. Co., 230 F.3d 489, 498 (1st Cir.2000) (finding no jurisdiction over a new party alleged to be the alter ego of a judgment debtor). Finally, the Ninth Circuit (the regional circuit from which this case originated) has concluded that Peacock “held that, absent an independent basis for federal jurisdiction, a new defendant may not be joined in a supplementary proceeding to pierce the corporate veil.” Thomas, Head & Greisen Employees Trust v. Buster, 95 F.3d 1449, 1454 (9th Cir.1996) (finding ancillary jurisdiction on the limited basis of an alleged fraudulent conveyance, an issue specifically not addressed by Peacock).
In this case, there is no independent basis for federal jurisdiction over Cygnus’s new complaint. This complaint, generously interpreted to be an attempt to enforce the consent judgment between Cygnus and Justice, seeks to establish the liability of a new party for that judgment. New facts must be litigated and new law applied to determine if TotalAxcess is indeed a successor to Justice and accountable for Justice’s liability under the judgment. Cygnus is therefore doing much more than trying to continue the original suit against Justice: it has created a new suit against TotalAxcess. Jurisdiction over this new suit lies only in state court absent an independent basis for federal jurisdiction, as the district court correctly found. Alternatively, had Cygnus desired to stay before the district court, it could have followed the provisions of Federal Rule of Civil Procedure 69, which empowered the district court under California state law to amend the judgment to add an additional judgment debtor. See In re Levander, 180 F.3d 1114, 1120-21 (9th Cir.1999). At the time of this appeal, Cygnus had not properly moved for relief under Rule 69.4 The availability of this rule’s relatively simple procedure, however, serves to highlight the impropriety of the arduous method *1379Cygnus instead chose to follow. I cannot agree with the majority’s conclusion that Cygnus’s chosen methodology is proper. Instead, I believe that the scope of ancillary jurisdiction granted by the majority extends well beyond that permitted by any precedent and is directly contrary to the Supreme Court’s ruling in Peacock. I therefore respectfully dissent.

. At the district court’s invitation, Cygnus filed a motion under Rule 69, but failed entirely to support it with any evidence sufficient to establish grounds for amending the judgment. Thus, the district court denied the motion without prejudice.