IND. BANKERS ASS'N OF NY v. Marine Midland Bank

• Decision Date: 02 December 1983
• Docket Number: No. CIV-83-1006T.,CIV-83-1006T.
• Citation: 575 F. Supp. 1425
• Parties: INDEPENDENT BANKERS ASSOCIATION OF NEW YORK STATE INC. and The Canandaigua National Bank and Trust Company, Plaintiffs, v. MARINE MIDLAND BANK, N.A. and Wegman's Food Markets, Inc., Defendants.
• Court: U.S. District Court — Western District of New York

575 F. Supp. 1425

INDEPENDENT BANKERS ASSOCIATION OF NEW YORK STATE INC. and The Canandaigua National Bank and Trust Company, Plaintiffs, v. MARINE MIDLAND BANK, N.A. and Wegman's Food Markets, Inc., Defendants.

No. CIV-83-1006T.

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

December 2, 1983.

Greisberger, Zicari, McConville, Cooman & Morin, P.C., Rochester, N.Y. (Kevin S. Cooman, Rochester, N.Y., of counsel), for plaintiffs.

Nixon, Hargrave, Devans & Doyle, Rochester, N.Y., and Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, N.Y. (Michael R. Wolford, Rochester, N.Y., and Paul K. Stecker, Buffalo, N.Y., of counsel), for defendants.

MEMORANDUM DECISION and ORDER

TELESCA, District Judge.

Plaintiffs, the Independent Bankers Association of New York State, Inc. and The Canadaigua National Bank and Trust Company have brought the present action against Marine Midland Bank, N.A. ("Marine Midland"), a federally chartered institution, for alleged violation of Section 36 of the National Banking Act, 12 U.S.C. Section 36, and against Wegman's Food Markets, Inc. ("Wegman's"), the owner of a chain of supermarkets in the western New York area, for alleged violation of Section 131 of the New York Banking Law. Defendant Wegman's now moves pursuant to F.R.Civ.P. 12(b)(1) to dismiss plaintiffs' complaint for lack of subject matter jurisdiction. For the reasons set forth below, Wegman's motion is denied.

FACTUAL BACKGROUND

This action arises out of the operation of an automated teller machine ("A.T.M.") at the Wegman's supermarket in Canandaigua, New York. An A.T.M. is, in essence, a computer terminal located at the supermarket through which a customer can process various transactions with his or her bank. One of the banking institutions which utilizes Wegman's A.T.M. is defendant, Marine Midland.

The complaint alleges that Marine Midland's participation in the A.T.M. arrangement at Wegman's in Canandaigua constitutes "branch banking" as defined in 12 U.S.C. Section 36(f).¹ Because the federal statute in question applies only to national banks, no violation of 12 U.S.C. Section 36 has been or could be alleged against Wegman's. Rather, plaintiffs have brought a second claim against Wegman's alleging a violation of Section 131 of the New York Banking Law, which generally prohibits unauthorized banking in New York.²

The question presented on this motion is whether this Court should exercise pendent jurisdiction over the state law claim against Wegman's, a party not otherwise subject to jurisdiction under the federal claim alleged.

I.

In order to evaluate whether jurisdiction over Wegman's in this case is proper, a two-fold inquiry must be made: (1) whether this Court has the judicial power to decide the state law claim against Wegman's and (2) assuming such power exists, whether this Court should, in the exercise of its discretion, decline plaintiffs' invitation to adjudicate the state law claim. Leather's Best Inc. v. S.S. Mormaclynx, 451 F.2d 800, 809 (2nd Cir.1971). If the judicial power to hear such a pendant party claim does not exist, there is no need to proceed further and Wegman's motion must be granted.

A. Judicial Power to Hear a Pendent Claim

In Osborn v. Bank of the United States, 9 Wheat 738, 6 L.Ed. 204 (1824) Chief Justice Marshal wrote: "When a question to which the judicial power of the union is extended by the Constitution, forms an ingredient of the original cause, it is in the power of Congress to give the circuit courts jurisdiction of that case, although other questions of fact or law may be involved in it." Id. at 823, 6 L.Ed. 204. Although this concept of pendant jurisdiction was born in the early part of the 19th Century, it has proved a troublesome concept to apply. In Hurn v. Oursler, 289 U.S. 238, 53 S.Ct. 586, 77 L.Ed. 1148 (1933), the Supreme Court introduced the "cause of action" test for determining pendant jurisdiction holding that pendant jurisdiction could be exercised over two distinct grounds, one state and one federal, which were presented in support of a single cause of action, but could not do so where the state claim was itself a distinct and separate cause of action. Finally, in United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1976) the court abandoned this "unnecessarily grudging" approach and formulated a new test to determine when a district court possessed the judicial power to exercise jurisdiction over a pendant state claim.

Pendant 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, Section 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". The Federal claim must have substance sufficient to confer subject matter jurisdiction on the court .... The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff's claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole.

Id. at 725, 86 S.Ct. at 1138.

Applying this test to the facts presently before me, I conclude that the Gibbs test of constitutional power to hear the state claim has been satisfied. The "nucleus of operative fact" here concerns the operation of the A.T.M. machine at the Canandaigua Wegman's store. In order to decide both the state and federal claims, the Court will have to fully explore what transactions are conducted through the A.T.M., who benefits from these transactions and a variety of other common questions of fact. Thus, leaving aside for the moment the question of the pendant-party, I conclude that the entire action before this Court comprises one constitutional "case".

B. Power to Subject a Pendant Party Claim to Federal Jurisdiction

Beyond those issues addressed in Gibbs, this case involves the additional "subtle and complex question ... of whether the doctrine of pendant jurisdiction extends to confer jurisdiction over a party as to whom no independent basis of federal jurisdiction exists".³ After Gibbs, the Second Circuit, in two separate decisions, held that where the Gibbs test of constitutional power under Article III was met, the absence of federal jurisdiction over one of the parties to the state claim did not deprive the court of pendant jurisdiction over that claim. See Astor-Honor, Inc. v. Grosset & Dunlap, Inc., 441 F.2d 627 (2nd Cir.1971); Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800 (2nd Cir.1971). To hold otherwise, Judge Friendly wrote in Astor-Honor, "would be an unjustifiable waste of judicial and professional time—indeed, a travesty on sound judicial administration ...". 441 F.2d 629, 630; See also, Schulman v. Huck Finn Inc., 472 F.2d 864, 866 (8th Cir.1973).

In Aldinger v. Howard, 427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1976) the Supreme Court had an opportunity to extensively address the issue of pendant-party jurisdiction. In that case, the plaintiff brought a federal civil rights claim against certain county officials and joined with it a state law claim against the county, asking the court to exercise pendant jurisdiction over the latter. The Supreme Court held that the district court could not exercise jurisdiction over the state law claim. The court, however, declined to address the constitutional issue, but instead decided the case as a matter of statutory construction.

The basis of the district court's jurisdiction in Aldinger was 28 U.S.C. Section 1343 and 42 U.S.C. Section 1983 which at that time, prior to Monell v. New York City Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978), was construed to prohibit suits against municipalities. Thus, the court in Aldinger reasoned, whether or not the district court had the constitutional power to hear the claim, the jurisdiction conferring statute could not be read to allow the court to exercise pendent jurisdiction over a party specifically excluded by Congress from Section 1983 liability. The court noted, however, that different circumstances may bring a different result and concluded:

Two observations suffice for the disposition of the type of case before us. If the new party sought to be joined is not otherwise subject to federal jurisdiction, there is a more serious obstacle to the exercise of pendant jurisdiction than if parties already before the court are required to litigate a state-law claim. Before it can be concluded that such 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.

Id. 427 U.S. at 18, 96 S.Ct. at 2422.

Since Aldinger, several lower courts have held that a federal court lacks the Constitutional power to exercise pendant jurisdiction over a party not otherwise subject to the jurisdiction of the court. See Shields v. Consolidated Rail Corporation, 530 F.Supp. 400 (S.D.N.Y.1981); Lincoln Manufacturing Co., Inc. v. Stern, 515 F.Supp. 21 (N.D.Ill.1981).

However, Aldinger, has neither expressly nor by implication overruled what I think is the better view expressed by the Second Circuit in Astor-Honor and Leathers Best, and which has been adopted by three of the other circuits since Aldinger, that under the right circumstances, a federal court does indeed have the power under Article III to exercise pendant party jurisdiction. See North Dakota v. Merchants National Bank and Trust Company, 634 F.2d 368 (8th Cir.1980); Boudreaux v. Puckett, 611 F.2d 1028 (5th Cir.1980); Transok Pipeline Co. v. Darks, 565 F.2d 1150 (10th Cir.1977), cert....