Limits in Diversity Cases

Limits in Diversity Cases

Section 1367(a) grants supplemental jurisdiction over claims that form part of the same case or controversy as a claim within the court's original jurisdiction, including claims that involve the joinder or intervention of additional parties.¹ Subsection (b) then takes part of that grant back. When a civil action's original jurisdiction rests solely on 28 U.S.C. § 1332, the district courts have no supplemental jurisdiction over two groups of claims: claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, and claims by persons proposed to be joined as plaintiffs under Rule 19 or seeking to intervene as plaintiffs under Rule 24. Each bar applies only when exercising supplemental jurisdiction over the claim would be inconsistent with the jurisdictional requirements of § 1332.² A claim can therefore satisfy the general grant and still be excluded.

Subsection (b) exists to protect complete diversity. The joinder rules give a plaintiff many ways to bring new parties into a federal case after it starts, and subsection (a) reaches claims that involve those parties. A plaintiff who could not sue a nondiverse defendant at the outset could therefore name only the diverse defendants, wait for the nondiverse one to enter by joinder or intervention, and assert a supplemental claim against it. The House Report describes that maneuver as the evil the subsection targets and says the net effect of subsection (b) is to implement the principal rationale of Owen Equipment & Erection Co. v. Kroger.³ The drafters catalogued the joinder devices that would permit such an end run, and their basic mandate was to codify the limits on ancillary jurisdiction that Kroger suggested.⁴

The subsections below follow the order in which a problem presents itself. First comes the gate that decides whether subsection (b) applies at all. Then come the two groups of barred claims, the closing clause that ties each bar to § 1332, and last the claims the subsection leaves alone. At every step the question is who asserts the claim and how that person entered the case.

When the Diversity Limits Apply

Subsection (b) opens with a phrase that decides whether it applies at all: it operates only “[i]n any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title.”⁵ That phrase works as a gate in front of every specific bar. Satisfying § 1367(a) is necessary but not always sufficient, so a court that has found a claim within the general grant must still ask whether the action is founded solely on diversity.⁶ When the gate is closed, subsection (b) drops out, and the claim faces only the general grant and the court's discretion to decline jurisdiction under subsection (c).⁷

The gate restates a division that courts drew before Congress wrote the statute. If the claims that first entered federal court rest at least in part on § 1331 or another independent basis, a related claim is pendent. If they rest solely on diversity, a related claim is ancillary.⁸ Courts took pendent jurisdiction more readily and restricted ancillary jurisdiction, and § 1367 keeps that preference by confining subsection (b) to the ancillary setting.⁹ The old vocabulary therefore predicts the analysis. A pendent claim goes straight to the general grant and the discretionary grounds, while an ancillary claim must also clear subsection (b).

The gate sits where it does because subsection (b) protects the requirements of § 1332, and those requirements are the only ticket an action founded solely on diversity holds. A plaintiff in such an action who could not sue a nondiverse defendant at the outset might sue the diverse defendants first and bring the nondiverse one in later through the joinder rules and subsection (a). Subsection (b) closes that route.¹⁰ When a claim arises under federal law, the court's power over the action rests on that claim, and diversity is not what holds the case in federal court. A related state-law claim against a same-state defendant then threatens no diversity requirement, and the court has discretion to exercise supplemental jurisdiction over properly joined plaintiffs or defendants and their related pendent state-law claims.¹¹

A stem that adds a same-state defendant on a related state claim invites the question whether subsection (b) blocks it, and the answer begins with the source of original jurisdiction for the action as a whole. Suppose a plaintiff sues under Title VII, which arises under § 1331, and adds a state-law wrongful discharge claim that independently satisfies § 1332. The original claims do not rest solely on diversity, so every additional claim or counterclaim is pendent and subsection (b) does not apply.¹²

The only fact that moved the answer between those scenes is where the original jurisdiction came from. The usual error runs in both directions: treating a nondiverse added party as fatal in a federal-question case, and assuming that an action resting solely on diversity allows no supplemental claims at all. The gate decides only whether subsection (b) must be consulted. The bars themselves reach particular claims by plaintiffs, and the next three subsections take them up.

Plaintiffs' Claims Against Added Parties

Once the gate is open, the first bar governs a plaintiff's claims against a particular kind of party. In an action founded solely on § 1332, the district courts have no supplemental jurisdiction over claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24 when exercising it would be inconsistent with the requirements of § 1332.¹⁴ Those four rules are the routes by which new parties enter a lawsuit after it has begun: impleader of a third-party defendant under Rule 14, required joinder under Rule 19, permissive joinder of additional defendants under Rule 20, and intervention under Rule 24. The drafters catalogued these routes because each could let a plaintiff circumvent complete diversity, and the bar withholds supplemental jurisdiction wherever it would allow that end run.¹⁵

Kroger supplies the paradigm. The case gives the reasoning and the statute gives the rule, so a problem that fits its facts is decided under the text of § 1367(b). Mrs. Kroger sued Omaha Public Power District (OPPD) on a proper diversity claim. OPPD impleaded Owen under Rule 14, and Mrs. Kroger then asserted a claim directly against Owen, which Rule 14(a)(3) allows a plaintiff to do when the claim arises out of the transaction or occurrence underlying her claim against the third-party plaintiff.¹⁶ The Rules supplied permission, but permission to join a claim cannot supply subject-matter jurisdiction.¹⁷ The Court held that extending ancillary jurisdiction to the claim would be inconsistent with the long-standing requirement of complete diversity between the plaintiff and all defending parties. Mrs. Kroger could not have sued OPPD and Owen together originally, and she could not do indirectly what the statute forbade her to do directly.¹⁸

The close tie between her claim and the main action could not save it. The Court feared that plaintiffs might withhold their claims against nondiverse defendants, wait for the predictable third-party complaint, and then assert claims against the impleaded party in derogation of the complete diversity requirement.¹⁹ It recognized that judicial efficiency would be best served by resolving everything in one proceeding, but it noted that the state courts were available to hear the whole case.²⁰ A complete-diversity rule that turned on the order in which the plaintiff named defendants would protect nothing, because any plaintiff could satisfy it by naming the diverse defendants first and letting a defendant's own impleader supply the rest.

The statute speaks of claims by plaintiffs because the temptation to evade complete diversity arises only on that side of the case. A plaintiff picks the court and the defendants, and state court was open for suing everyone together, so holding the plaintiff to § 1332 takes nothing the plaintiff was entitled to keep. A defendant picks nothing. Kroger observed that ancillary jurisdiction typically involves claims by a defending party “haled into court against his will,” and the Court seemingly approved ancillary jurisdiction over cross-claims, third-party impleader claims, and counterclaims.²¹ The working rule of thumb follows: in a diversity-only action, supplemental jurisdiction serves the party in a defensive posture, while a plaintiff who adds claims or parties generally must find another basis. If a defendant impleads X, supplemental jurisdiction covers the defendant's suit against X and any claim by X against the plaintiff, but a plaintiff's claim against X is outside it, so the plaintiff and X must be diverse and the claim must meet the amount in controversy.²²

The bar lists Rule 20 beside Rule 14 for the same reason. A Kansas patient with claims against a Missouri surgeon and three Kansas surgeons, all arising from one heart operation, cannot sue all four in federal court on diversity, because the Kansas defendants destroy complete diversity. The patient can, however, sue the Missouri surgeon alone under § 1332 and then join the Kansas surgeons under Rule 20, since the claims share a nucleus of fact. Without subsection (b), § 1367(a) would admit those claims and gut the complete-diversity rule.²³ Subsection (b) denies supplemental jurisdiction over the original plaintiff's claims against defendants joined under Rule 20, just as it does for defendants impleaded under Rule 14.²⁴

Two features of that scene produce the result together: the action rests only on diversity, and the supplier shares the hiker's citizenship. A Colorado supplier, sued for more than $75,000, would be diverse from the hiker, so the claim would stand on § 1332 by itself and need no help from § 1367.²⁵ A federal statutory claim as the hiker's original claim would take the action out of the diversity-only category. Subsection (b) would then drop out, and the claim against the Texas supplier would face only subsection (a) and the court's discretion to decline jurisdiction.²⁶ The usual exam error is to stop at relatedness and admit the claim because it arises from the same accident, when the question that decides it is who asserts the claim and what holds the action in federal court.

The statute's word is “plaintiffs,” and courts apply it as written. A plaintiff who faces a counterclaim and impleads a third party under Rule 14(b) occupies a defensive position in substance, yet the text denies supplemental jurisdiction over that plaintiff's claim against the impleaded party. The last subsection of this unit returns to that quirk after it has set out the claims the bar leaves alone.

Claims by Added Plaintiffs

The second bar looks at the plaintiff's side of the caption. In a civil action founded solely on § 1332, the district courts have no supplemental jurisdiction over claims “by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules,” when exercising it “would be inconsistent with the jurisdictional requirements of section 1332.”²⁸ The first bar limits what an existing plaintiff may assert against newcomers who enter on the defending side. This bar limits what the newcomers themselves may assert when they arrive as plaintiffs. Rule 19 brings in a person whose participation the case requires, and Rule 24 lets an outsider enter a suit that others began.²⁹

In a diversity-only action, the order of arrival could otherwise decide whether complete diversity means anything. Complete diversity requires that no plaintiff share citizenship with any defendant, so a group of plaintiffs that includes a citizen of the defendant's state cannot sue together at the outset. Suppose three plaintiffs, each seeking $100,000, bring a defamation suit against one Missouri defendant. The first plaintiff is a Kansas citizen and the other two are Missouri citizens. The three cannot sue together under § 1332, but the Kansas plaintiff can sue alone. Without subsection (b), the Missouri plaintiffs could then intervene under Rule 24 and take jurisdiction under § 1367(a), which reaches claims involving the intervention of additional parties, and the complete-diversity rule would become a virtual nullity.³⁰ Subsection (b) closes the route by withholding supplemental jurisdiction over the intervenors' claims.³¹

The bar treats its two doors alike, and the reason lies in how the evasion works. A nondiverse person pulled in as a required plaintiff under Rule 19 damages complete diversity as much as one who walks in under Rule 24, so the statute does not ask who started the joinder. Nor does its text separate intervention of right from permissive intervention. Before the 1990 statute, the usual rule required independent jurisdictional grounds for permissive intervention under Rule 24(b) but not for intervention of right.³² The statutory text draws no such line. The question under it is whether the intervenor's claim, however strong the right to intervene, would be inconsistent with complete diversity.

The gap between permission and power is where exam writers set the trap. Rule 24 answers whether a person may enter a lawsuit, and § 1367(b) answers whether the court has jurisdiction over the claim that person brings. A problem has to clear both.

That scene has permission without power. Rule 24(b) supplies the permission, but Congress withheld supplemental jurisdiction over claims by persons seeking to intervene as plaintiffs when that would be inconsistent with § 1332, and admitting Spruance would produce exactly that inconsistency.³³ The result matches the rationale of Kroger, which the House Report says subsection (b) implements.³⁴

The bar disappears when the anchor changes. An intervenor who joins an action anchored by a federal-question claim and asserts a related state-law claim is not stopped by subsection (b), because the action is not founded solely on diversity and the claim faces only the general grant in subsection (a).³⁵ The closing clause also leaves room for a person who can satisfy § 1332 alone. A plaintiff who is diverse from the defendant and seeks more than $75,000 can rely on the diversity statute itself, so the bar has nothing to withhold.³⁶ The next subsection returns to that clause.

One feature of the text drives the next major case. The first bar lists Rules 14, 19, 20, and 24, but this second bar lists only Rules 19 and 24, and plaintiffs who join voluntarily under Rule 20 do not appear. Read literally, subsection (b) bars a plaintiff who must be joined but not one who chooses to join. The Supreme Court acknowledged a lower court's view that the omission may have been an “unintentional drafting gap,” but it held that fixing the gap is up to Congress rather than the courts, and that the omission “may seem odd, but it is not absurd.”³⁷ In Exxon Mobil Corp. v. Allapattah Services, Inc., the Court held that § 1367 authorizes a federal court in a diversity action to exercise supplemental jurisdiction over the claims of additional plaintiffs who do not meet the minimum amount in controversy, provided at least one named plaintiff satisfies it.³⁸ The holding rests on original jurisdiction over the action: when the complaint contains at least one claim that meets the amount and there are no other relevant jurisdictional defects, the court has original jurisdiction over that claim, and the presence of other claims is of no moment.³⁹ Complete diversity still controls, because a single plaintiff from the same state as a single defendant deprives the court of original jurisdiction over the entire action.⁴⁰ A later section takes up the decision. For now, avoid treating every added plaintiff as barred, since the text reaches only Rule 19 and Rule 24 plaintiffs.

The Inconsistency Clause

Both bars in § 1367(b) close with a qualifying clause that limits how far they reach: they operate only “when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.”⁴² “Such claims” points back to the two groups the statute has just listed. Membership in one of those groups is necessary for a bar to apply but not sufficient, because the clause adds a second condition that asks what hearing the particular claim would do to the diversity statute. The requirements it protects are complete diversity and the jurisdictional amount.⁴³ A later section on Allapattah returns to how the amount requirement operates inside the clause, so complete diversity is the requirement to hold in mind here.

The clause makes sense once you recall what the bars prevent. Complete diversity depends on who stands on each side of the action, and the joinder rules plus § 1367(a) would let a plaintiff admit a nondiverse party after filing, escaping the rule by choosing the order in which parties arrive.⁴⁴ Subsection (b) has done its work once a claim would bring in someone who defeats diversity. When the claim brings in no such person, nothing is being evaded. A flat prohibition would send a plaintiff holding a perfectly good diversity claim into a second lawsuit to protect a requirement the claim already meets. The clause avoids that cost by turning each bar into a test of the claim's jurisdictional footing. The Federal Rules still decide who may be joined, and § 1367(b) decides only whether supplemental jurisdiction can support the resulting claim.

A stem that has a plaintiff assert a claim against an added defendant in a diversity-only action invites a quick conclusion that subsection (b) bars it, and the clause is the reason that conclusion is sometimes wrong. The question to ask is what hearing the claim would do to § 1332.

A California plaintiff who joins an Oregon defendant on a state-law claim for more than $75,000 stands on the other side of the clause. Supplemental jurisdiction is unavailable for that claim, yet the plaintiff does not need it, because the claim satisfies § 1332 on its own.⁴⁵ The Oregon defendant is diverse from the California plaintiff and the amount exceeds $75,000, so hearing the claim threatens neither requirement the bar protects. In both scenes a plaintiff asserts a claim against an added defendant in a diversity-only action. The fact that moved the answer is whether the added party shares the plaintiff's citizenship.

The bar closes only one route into federal court. A student who sees that a claim falls within a listed group and stops has answered the question about supplemental jurisdiction while skipping the question about original jurisdiction, which is where the California plaintiff's claim succeeds. A claim stands on its own under § 1332 only if complete diversity holds across the whole action, so an added defendant who shares citizenship with any plaintiff cannot be reached this way. A claim that falls within a listed group and lacks an independent basis has no route left, and the court dismisses that claim while the rest of the action goes forward.

Claims Not Barred

The bars in § 1367(b) work as a list, so a claim that does not appear on the list is not barred by the subsection. In a civil action founded solely on diversity, the district courts lack supplemental jurisdiction over claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24, and over claims by persons proposed to be joined as plaintiffs under Rule 19 or seeking to intervene as plaintiffs under Rule 24.⁴⁷ Every entry on that list describes a claim asserted from the plaintiff's side of the caption, so claims asserted from the defending side fall outside it. Defendant counterclaims, third-party actions, and cross-claims among defendants do not run afoul of subsection (b).⁴⁸ Escaping the bar does not admit a claim automatically, because the claim must still clear the general grant of § 1367(a) by forming part of the same case or controversy as the anchor claim.⁴⁹

The affirmative list of defensive claims makes sorting easier. Each of these enters a diversity-only action on supplemental jurisdiction when it also satisfies § 1367(a):⁵⁰

• a defendant's counterclaim against the plaintiff;
• a cross-claim by one defendant against a co-defendant;
• an impleader claim by a third-party plaintiff against a third-party defendant; and
• any claim by a third-party plaintiff or a third-party defendant against anyone else.

Subsection (b) removes the mirror-image group: a plaintiff's claim against a third-party defendant, a plaintiff's claim against a person joined under Rule 19, a plaintiff's claims against multiple defendants joined under Rule 20, and claims by would-be intervenors who want to enter on the plaintiff's side.⁵¹ The two groups compress into a rule of thumb: in a diversity-only action, supplemental jurisdiction helps the party in a defensive posture. It reaches additional claims by defendants, including third-party plaintiffs and third-party defendants, and it does not reach additional claims asserted by plaintiffs.⁵² The shorthand summarizes the statute without replacing it, and the last paragraphs of this subsection show where the two come apart.

The line falls between the two sides of the caption for two reasons. The first concerns choice. A plaintiff selects the court and the defendants, and could have sued every related party in state court, so a plaintiff who adds a nondiverse party after filing accomplishes indirectly what complete diversity forbids directly. A defendant made no such selection, and Kroger said that ancillary jurisdiction typically involves claims by a defending party “haled into court against his will.”⁵³ The second concerns cost. If the federal courthouse were closed to a defendant's claim against someone who shares or bears the liability, the defendant would have to litigate that claim in a second suit over the same events, with duplicate witnesses and the risk of inconsistent findings. The defensive claim adds little burden because the Rules tie it to the original dispute: a cross-claim, for example, must arise out of the same transaction or occurrence as the main claim.⁵⁴

A collision case shows the unbarred side at work. Suppose a New York plaintiff sues Blake and Wordsworth, both Ohio citizens, in diversity, and Blake asserts a cross-claim against Wordsworth for Blake's own injuries in the same collision. Blake and Wordsworth are co-citizens and the claim rests on state law, so it has no basis of its own. It arises from the same accident as the proper diversity claim, and § 1367(a) supplies the statutory authority to hear it.⁵⁵ Section 1367(a) authorizes claims by parties other than the plaintiff, such as cross-claims and counterclaims, that arise out of the same nucleus of operative facts as the proper federal claim.⁵⁶ Subsection (b) does not take that authority away, because a defendant asserts the cross-claim.

The same sorting applies to the claim that Rule 14(a)(2)(D) permits a third-party defendant to assert against the plaintiff, which must arise out of the transaction that is the subject of the plaintiff's claim against the third-party plaintiff.⁵⁷ A party in a defending position brings that claim, so it stays outside the bar.⁵⁸

The defensive-posture shorthand has one exception, and it comes from the statute's words and not from its purpose. Rule 14(b) lets a plaintiff against whom a counterclaim has been asserted implead a new party to the same extent a defendant could.⁵⁹ Take a dispute shaped like Price v. CTB, Inc., where a chicken farmer sued several defendants, including the contractor who built his chicken house, over a defective structure.⁶⁰ Suppose the contractor counterclaims for unpaid bills and the farmer impleads a bank that failed to fund a promised line of credit, with less than $75,000 at stake. Had the contractor asserted that claim against the bank, supplemental jurisdiction would apply. Subsection (b), however, withholds jurisdiction over claims by plaintiffs against persons made parties under Rule 14, and read literally it denies jurisdiction over the farmer's claim even though the farmer defends the counterclaim.⁶¹ The text sorts claims by the label on the claimant and not by practical situation.

The anomaly is sharpest when the third party has itself claimed against the plaintiff. A claim that arises out of the transaction or occurrence that is the subject matter of the opposing party's claim is a compulsory counterclaim under Rule 13(a), so the plaintiff may have to plead a claim that the bare words of subsection (b) put beyond the court's reach.⁶² The closing clause is where the argument for a different reading begins. In Gibson v. Chrysler Corp., 261 F.3d 927, 938 (9th Cir. 2001), the Ninth Circuit observed that without the last phrase, subsection (b) would except from supplemental jurisdiction a claim asserted by the plaintiff against the third-party defendant when that claim is a compulsory counterclaim to the third-party defendant's claim against the plaintiff, and it said that “it would be both unfair and inefficient to forbid the plaintiff's compulsory counterclaim to that claim.”⁶³

State the quirk narrowly on an exam. The literal text bars a plaintiff's Rule 14 claim even when the plaintiff is defending a counterclaim, and the closing clause supplies the argument for the opposite result in the compulsory-counterclaim setting. The quirk does not widen the bar. Claims asserted by defendants remain outside it. The usual error is to deny jurisdiction over a defendant's impleader claim or cross-claim because the added party shares the defendant's citizenship, when the questions that decide the problem are who asserts the claim and whether it shares the main claim's facts.