Iowa Public Service Co. v. Medicine Bow Coal Co.

• Decision Date: 08 June 1977
• Docket Number: No. 77-1040,77-1040
• Citation: 556 F.2d 400
• Parties: IOWA PUBLIC SERVICE COMPANY, Iowa Southern Utilities Company, Iowa Power and Light Company and Iowa-Illinois Gas and Electric Company, Appellants, v. MEDICINE BOW COAL COMPANY, Dana Coal Company and Hanna Basin Coal Company, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 400

556 F.2d 400

IOWA PUBLIC SERVICE COMPANY, Iowa Southern Utilities Company, Iowa Power and Light Company and Iowa-Illinois Gas and Electric Company, Appellants, v. MEDICINE BOW COAL COMPANY, Dana Coal Company and Hanna Basin Coal Company, Appellees.

No. 77-1040.

United States Court of Appeals Eighth Circuit.

Submitted May 19, 1977.

Decided June 8, 1977.

Anthony J. Stoik, Sioux City, Iowa, for appellants; Marvin J. Klass and Robert D. Mishne, Sioux City, Iowa, on brief.

Thomas C. Walsh, St. Louis, Mo., for appellees; Robert M. Lucy and William F. Tracy II, St. Louis, Mo., on brief.

Before HEANEY, BRIGHT and HENLEY, Circuit Judges.

HENLEY, Circuit Judge.

This case presents an interesting and somewhat unusual problem concerning the jurisdiction of a federal district court with respect to a case removed to it from a state court on the ground of diversity of citizenship. 28 U.S.C. § 1441(a).

Plaintiffs Iowa Public Service Company (IPS), Iowa Southern Utilities Company (Iowa Southern), Iowa Power and Light Company (IPL) and Iowa-Illinois Gas and Electric Company (Iowa-Illinois), appeal from three orders entered in January of the current year by the United States District Court for the Northern District of Iowa (Judge Edward J. McManus), dismissing from the case as plaintiffs Iowa Southern, IPL and Iowa-Illinois, and leaving the case as a controversy between IPS, an Iowa corporation having its principal place of business in Iowa, on the one hand, and the defendants Medicine Bow Coal Company, Dana Coal Company and Hanna Basin Coal Company, all of which for jurisdictional purposes are citizens of states other than Iowa. ¹

In connection with each of the orders that have been mentioned the district court determined, as provided by Fed.R.Civ.P. 54(b), that there was no just reason for delay and directed that the judgments be entered. Appellate jurisdiction is based on 28 U.S.C. § 1291.

While the appeals are from the judgments of the district court dropping from the case all of the plaintiffs except IPS, those judgments are underlaid by an earlier order entered in December, 1976 overruling a motion to remand the case in its entirety to the District Court of Woodbury County Iowa where it was commenced by the plaintiffs and whence it was removed by the defendants. In connection with that earlier order the district court refused to issue a certificate for an interlocutory appeal pursuant to 28 U.S.C. § 1292(b). The same order determined that the motion of the defendants to dismiss the case as to all plaintiffs, except IPS, pursuant to Fed.R.Civ.P. 21, should be granted. In connection with that order the district court filed a memorandum opinion setting out its views on the jurisdictional question before it.

As has been noted, there is no diversity of citizenship between Iowa-Southern and Dana Coal Company. Notwithstanding the absence of complete diversity between all of the plaintiffs, on the one hand, and all of the defendants, on the other hand, the defendants removed the case on the theory that none of the plaintiffs except IPS was a real party in interest, and that the joinder of the other plaintiffs, including Iowa-Southern, was an impermissible device to prevent the removal of the case to the federal court. ²

In support of their motion to remand, the plaintiffs contended that all of them were real parties in interest and that there was absence of complete diversity of citizenship. They also contended that the amount in controversy did not exceed $10,000.00, exclusive of interest and costs.

The district court rejected both of those contentions and refused to remand the case. From that action the later dismissals from the case of all of the plaintiffs save IPS was a natural consequence. It is clear, therefore, that the correctness of the judgments of dismissal based on Rule 21 depends upon the propriety of the earlier action of the district court in overruling the motion to remand since if the district court had no jurisdiction of the case, it had no authority to order dismissals under Rule 21 or any other rule. It should simply have remanded the case to the state court.

For reversal plaintiffs contend, as they did in the district court, that the dismissed plaintiffs were real parties in interest and were at least proper parties to the action, and that, in any event, the requisite jurisdictional amount was not present in the case. The defendants, naturally, contend to the contrary. ³

The jurisdictional facts of the case are comparatively simple. Plaintiffs are public utilities serving customers in Iowa and perhaps in adjoining states. Prior to July 1, 1974, the plaintiffs entered into a contract of joint venture for the operation of a steam generating plant in Woodbury County, Iowa, for the purpose of producing electric power. IPS was a member of the joint venture and was in charge of the actual operation of the plant. Presumably, electricity produced at the plant would be distributed among the plaintiffs, and the several plaintiffs would share in the cost of operating the plant.

On July 1, 1974 IPS, acting for the joint venture, entered into a long time contract with the defendants for the acquisition of coal to be mined in Wyoming. The coal was to be used for fueling the generating plant in Iowa. IPS was described in the contract as the buyer of the coal, and the coal companies were referred to as the sellers. The contract recited that Medicine Bow Coal Company was a joint venture owned by the other two defendants, but no mention was made in the contract of the fact that IPS was a member of any joint venture made up of power companies or that it was contracting on behalf of any joint venture or any third party. The coal was to be delivered FOB at the mine site.

The contract specified the quantities of coal to be delivered and the initial prices per ton that were to be paid for the coal by IPS. It was provided in substance, however, that if during the life of the contract the market price of coal should fluctuate substantially up or down, the price schedules set out in the contract would be subject to reopening for negotiation, and that should negotiation fail, the matter should be submitted to binding arbitration.

The defendants have contended consistently, and the district court in effect found, that they knew nothing about the joint venture of which IPS was a member, and that at all pertinent times they thought that they were dealing solely with IPS. We will proceed on that premise.

By the early summer of 1976 the coal companies were taking the position that the price schedules of the contract were subject to reopening, and in August of that year they demanded arbitration as provided by the contract.

Plaintiffs filed this suit for declaratory and injunctive relief in the state court in October, 1976. It was alleged that the contract executed by IPS had been on behalf of the joint venture of all four plaintiffs. Plaintiffs prayed for a declaratory judgment to the effect that the price schedules were not subject to reopening at the time and that they were not required to arbitrate, and plaintiffs also sought a temporary and permanent injunction restraining the defendants from taking any further steps to secure arbitration. On October 19, 1976 a temporary injunction was issued by the state court on the ex parte application of plaintiffs. A timely removal petition was filed by the defendants on November 5, 1976.

In the removal petition it was alleged that IPS was the only plaintiff that had executed the contract with the defendants and was the only proper, necessary, or indispensable party plaintiff in the action. With respect to the other plaintiffs, it was alleged "That they have been joined as parties in a fraudulent effort by plaintiffs to deprive defendants of their right to remove the action to federal court. They should be disregarded for the purposes of determining the removability of said action to this Court and should be dropped from said action pursuant to defendants' motion which is filed herewith."

As to jurisdictional amount, the petition alleged that due to increasing coal prices the defendants were entitled to receive from IPS under the contract higher prices amounting to approximately $225,000.00 per month.

Defendants' motion to drop parties was in fact filed contemporaneously with the removal petition, and plaintiffs' motion to remand was filed four days later.

We have no trouble with the district court's determination that the amount in controversy in this case exceeds $10,000.00 exclusive of interest and costs. With respect to contract years beginning after June 30, 1976, the coal companies are obligated to deliver under the contract not less than 600,000 short tons of coal per year. In view of generally rising prices and production costs, it is obvious that whether the amount in controversy is measured from the standpoint of the plaintiffs or whether it is measured from the standpoint of the defendants, the financial consequences of the litigation will be far more than $10,000.00. If plaintiffs prevail, they will save the difference between the contract price and any higher price that may be fixed by the arbitrator; if the defendants prevail they will be entitled to the benefit of that difference. In this period of inflation there is little reason to believe that the arbitrator would adjust the contract price downward in favor of the power companies.

We do not agree with the district court in its conclusion that Iowa Southern, IPL and Iowa-Illinois are not real parties in interest and that federal jurisdiction should be retained notwithstanding the absence of diversity of citizenship between Iowa Southern and Dana Coal Company.

As the district court correctly observed, in a case where there are plural plaintiffs and plural defendants a federal court does not have diversity jurisdiction unless there is diversity between all plaintiffs and all defendants. ...