US v. A & N Cleaners & Launderers, Inc.

• Decision Date: 20 September 1990
• Docket Number: No. 89 Civ. 6865 (RWS).,89 Civ. 6865 (RWS).
• Citation: 747 F. Supp. 1014
• Court: U.S. District Court — Southern District of New York
• Parties: UNITED STATES of America, Plaintiff, v. A & N CLEANERS & LAUNDERERS, INC., Ben Forcucci, Marine Midland Bank, N.A., Jordan W. Berkman, John A. Petrillo, Joseph Curto and Mario Curto, Defendants. MARINE MIDLAND BANK, N.A., Third-Party Plaintiff, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, St. Paul Mercury Insurance Company, Utica Mutual Insurance Company, The North River Insurance Company, United States Fire Insurance Company, Third-Party Defendants.

747 F. Supp. 1014

UNITED STATES of America, Plaintiff, v. A & N CLEANERS & LAUNDERERS, INC., Ben Forcucci, Marine Midland Bank, N.A., Jordan W. Berkman, John A. Petrillo, Joseph Curto and Mario Curto, Defendants.

MARINE MIDLAND BANK, N.A., Third-Party Plaintiff, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, St. Paul Mercury Insurance Company, Utica Mutual Insurance Company, The North River Insurance Company, United States Fire Insurance Company, Third-Party Defendants.

No. 89 Civ. 6865 (RWS).

United States District Court, S.D. New York.

September 20, 1990.

Phillips, Lytle, Hitchcock, Blaine & Huber (Robert E. Glanville, of counsel), Buffalo, N.Y., for third-party plaintiff Marine Midland Bank, N.A.

James S. Rowen, New York City, for third-party defendant Utica Mutual Ins. Co.

OPINION

SWEET, District Judge.

Third-party defendant Utica Mutual Insurance Company ("Utica") has moved to dismiss the third-party claim of third-party plaintiff Marine Midland Bank, N.A. ("the Bank") for lack of subject matter jurisdiction.¹ Because the claim falls within the court's pendent party jurisdiction, the motion is denied.

The Facts

The United States filed the underlying complaint on October 16, 1989, seeking recovery under § 107 of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9607 (as amended by the Superfund Amendments and Reauthorization Act of 1986, Pub.L.No. 99-499, 100 Stat. 1613), for costs incurred to clean up toxic chemicals allegedly released by the defendant A & N Cleaners & Launderers, Inc. ("A & N") which are suspected of having contaminated the groundwater supply for the community of Brewster, New York.² The Bank is made a defendant under CERCLA as the operator of the premises from which the chemicals were allegedly released.

On February 16, 1990, the Bank, a New York corporation, brought a third-party action against its insurers, including Utica, seeking indemnification for any losses suffered in the primary suit. According to the Bank, third-party defendants Utica and United States Fire Insurance Company ("U.S. Fire") are New York corporations, while the other third-party defendants, St. Paul Fire and Marine Insurance Company, St. Paul Mercury Insurance Company, and North River Insurance Company are all citizens of other states.

Utica asserts that there is no independent basis for federal jurisdiction over the Bank's claim against it, and that any assertion of ancillary or pendent party jurisdiction must fail in light of Finley v. United States, 490 U.S. 545, 109 S.Ct. 2003, 104 L.Ed.2d 593 (1989). Therefore, Utica seeks to have the Bank's claim dismissed for lack of subject matter jurisdiction.³

Discussion

It is axiomatic that every cause of action in a federal court must have a jurisdictional basis. An assertion of federal jurisdiction must meet both a constitutional and a statutory standard: the claim must first of all be within the scope of Article III, and Congress must have exercised its constitutional authority to confer jurisdiction on the federal courts. See Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 372, 98 S.Ct. 2396, 2401-02, 57 L.Ed.2d 274 (1978).

In the present case, since all of the Banks's third-party claims are based on state law, there is no federal question jurisdiction under 28 U.S.C. § 1331. Nor is there diversity jurisdiction under 28 U.S.C. § 1332, because the Bank and Utica (and U.S. Fire) are all citizens of New York. The only basis for federal jurisdiction over these claims is the doctrine of "pendent party" jurisdiction, as claims which are related to the underlying CERCLA complaint.

Pendent jurisdiction in general is an exception to the strict requirement of explicit statutory authorization for federal jurisdiction. It permits the court to extend its reach beyond the limits set by Congress, provided that it remains within the boundaries of Article III.

Pendent jurisdiction, in the sense of judicial power, exists whenever there is a claim "arising under the Constitution, the Laws of the United States, and Treaties made or which shall be made, under their Authority ...," U.S. Const., Art. III, § 2, and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional "case."

United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966) (emphasis, brackets, and ellipsis in original). The required relationship exists if the state and federal claims "derive from a common nucleus of operative fact." Id. However, the existence of the required relationship between the claims does not end the inquiry, for

it has consistently been recognized that pendent jurisdiction is a doctrine of discretion, not of plaintiff's right. Its justification lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present, a federal court should hesitate to exercise jurisdiction over state claims....

Id. at 726, 86 S.Ct. at 1139 (footnote omitted).

There are two distinct types of pendent jurisdiction which a federal court may assert. The more common one is "pendent claim" jurisdiction — "jurisdiction over non-federal claims between parties litigating other matters properly before the court." Finley v. United States, 490 U.S. 545, 109 S.Ct. 2003, 2006, 104 L.Ed.2d 593 (1989). Generally, if a plaintiff with a pendent claim can meet the Gibbs "common nucleus of operative fact" standard then the discretionary factors of judicial economy, convenience, and fairness will also support consolidated resolution of the claims, and the court will assert pendent jurisdiction. See, e.g., Hagans v. Lavine, 415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974); Ismail v. Cohen, 899 F.2d 183 (2d Cir.1990); State of New York v. Shore Realty Corp., 759 F.2d 1032 (2d Cir.1985).

The second type of pendent jurisdiction is "pendent party" jurisdiction — "jurisdiction over parties not named in any claim that is independently cognizable by the federal court." Finley, 109 S.Ct. at 2006. Because this type of jurisdiction involves bringing new parties into a forum which admittedly lacks jurisdiction over the claims against them, it is less certain that it will promote judicial economy, convenience, and fairness to the litigants. As a result, courts have generally been more reluctant to assert pendent party jurisdiction than pendent claim jurisdiction. See, e.g., Aldinger v. Howard, 427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1976); Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978); Finley.

In contrast to the pendent claim situation — in which the existence of a constitutionally sufficient relationship between the claims is sufficient to give the court the power over the claim, Gibbs, 383 U.S. at 725, 86 S.Ct. at 1138 — when faced with a pendent party situation, the Court "will not assume that the full constitutional power has been congressionally authorized, and will not read jurisdictional statutes broadly." Finley, 109 S.Ct. at 2007. "Before it can conclude that pendent party jurisdiction exists, a federal court must satisfy itself not only that Article III permits it, but that Congress in the statutes conferring jurisdiction has not expressly or by implication negated its existence." Aldinger, 427 U.S. at 18, 96 S.Ct. at 2422. See also Kroger, 437 U.S. at 377, 98 S.Ct. at 2404-05.

Thus, following Finley, a court analyzing a pendent party situation must consider: (1) whether the claims satisfy the Gibbs "common nucleus" test; (2) whether the statute conferring federal jurisdiction for the primary claim "expressly or by implication" prevents the exercise of jurisdiction over the pendent claim; and (3) whether the considerations of judicial economy, convenience, and fairness to the litigants favor having the court decide all of the claims together. See also 640 Broadway Renaissance Co. v. Cuomo, 714 F.Supp. 686, 690 (S.D.N.Y.1989) (under Finley, three-tiered analysis must be applied to determine pendent party jurisdiction).

A. Constitutional Authority

In the present case, the CERCLA claim against the Bank and the Bank's claims for indemnification "derive from a common nucleus of operative fact," as Gibbs requires. 383 U.S. at 725, 86 S.Ct. at 1138. The question of the insurers' duty to indemnify the Bank is related to the issue of the Bank's underlying liability, even though it also involves issues of interpretation and application of the contracts of insurance. Impleader of insurers by means of a third party complaint is an accepted and approved form of third party practice in this circuit. See, e.g., Dery v. Wyer, 265 F.2d 804 (2d Cir.1959).

Further support for this conclusion comes from the Federal Rule of Civil Procedure themselves. Under Rule 14(a), a defendant may implead "a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff." Of course, under Rule 82, the rules "shall not be construed to extend or limit the jurisdiction of the United States district courts." The fact that Rule 14(a) contemplates impleader of an indemnitor does not permit the Bank to evade the Gibbs constitutional standard. Nevertheless, 14(a) indicates that the drafters of the Rules considered the issues of indemnification and insurance to be sufficiently related to the underlying issues of liability that they should be tried as part of the same case.

B. Statutory Authority

Once the Gibbs standard has been met, the next step is to consider the federal statute which grants jurisdiction in the underlying action. Jurisdiction over CERCLA cases is conferred on the federal courts by § 113(b): "Except as provided in subsections (a) and (h) of this section, the United States district courts shall have exclusive original jurisdiction over all controversies arising under this...