King Fisher Marine Service, Inc. v. 21st Phoenix Corp.

Citation893 F.2d 1155
Decision Date10 January 1990
Docket NumberNo. 87-2478,87-2478
PartiesKING FISHER MARINE SERVICE, INC., a Texas corporation, Plaintiff, v. 21st PHOENIX CORPORATION, f/k/a The Hanson Development Company, a Delaware corporation, Defendant-Third-Party-Plaintiff-Appellee, v. LANGAN ENGINEERING ASSOCIATES, INC., a corporation, Third-Party-Defendant-Appellant, Highlands Insurance Company, a Texas corporation, Third-Party-Defendant.
CourtU.S. Court of Appeals — Tenth Circuit

Kevin M. Fowler (John C. Frieden, with him on the brief) of Frieden & Forbes, Topeka, Kan., for defendant-third-party-plaintiff-appellee.

Richard F. Hayse (Anne L. Baker, with him on the brief) of Edison, Lewis, Porter & Haynes, Topeka, Kan., for third-party-defendant-appellant.

Before LOGAN and BRORBY, Circuit Judges, and ALLEY, * District Judge.

BRORBY, Circuit Judge.

Appellant Langan Engineering Associates (Langan), third-party defendant below, seeks to set aside a 1979 judgment of the federal district court of Kansas on the ground that the judgment is void for lack of subject matter jurisdiction. The district court (Rogers, J.) denied Langan's motion for relief under Fed.R.Civ.P. 60(b)(4), holding it had ancillary jurisdiction of third-party plaintiff Hanson Development Co.'s (Hanson's) claims against Langan and did not abuse its discretion in exercising that jurisdiction. King Fisher Marine Serv., Inc. v. Hanson Dev. Co., 717 F.Supp. 727 (D.Kan.1987). Langan's appeal squarely raises, apparently for the first time before this court, the question whether a defendant may join with its proper third-party indemnity claim other claims it may have against the third-party defendant. We hold that under the circumstances of this case it may, and we affirm.

I. STATEMENT OF THE CASE AND FACTS

This case involves contract claims concerning the construction of a shopping center in Wichita, Kansas. The facts are set forth at 717 F.Supp. at 728. The original suit was filed in state court in 1972 by King Fisher Marine Service (King Fisher), a Texas corporation, against Hanson Development Company (Hanson is now known as the 21st Phoenix Corporation), a Delaware corporation with its principal place of business in New Jersey. King Fisher sought, inter alia, money allegedly due it under its contract with Hanson for the performance of site fill work and additional damages for construction delays.

Hanson removed the action to federal court on the grounds of diversity and subsequently filed an amended answer, a counterclaim for delay damages against King Fisher, and a third-party complaint against Langan Engineering Associates (Langan), whom Hanson had hired to conduct site evaluation and contract supervision. Langan's principal place of business was also New Jersey; thus there was no diversity between the third-party litigants. Hanson's third-party complaint asserted pass-through claims against Langan under Fed.R.Civ.P. 14(a). It also asserted a claim for damages in excess of the pass-through claims, which it asserted were due to Langan's delays if not to King Fisher's delays as alleged in its counterclaim against King Fisher. The contract claims between King Fisher and Hanson were settled immediately prior to trial. Trial proceeded on Hanson's third-party claim, but Langan did not appear. The court considered evidence and argument by Hanson and awarded Hanson a judgment of more than $155,000.00 on its delay damages claim against Langan.

Langan did not appeal. Instead, on October 3, 1983, it filed a rule 60(b)(4) motion to set aside the judgment on the ground that it had no notice of the trial date or the entry of judgment. The federal district court denied the motion, and we affirmed. King Fisher Marine Serv., Inc. v. 21st Phoenix Corp., No. 84-1025 (10th Cir. Sept. 11, 1985). Approximately one year later Langan filed the instant rule 60(b)(4) motion to vacate the judgment, asserting the lack of diversity between it and Hanson and the absence of ancillary jurisdiction of the delay damages claim under the Supreme Court's analysis in Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). The question of the district court's subject matter jurisdiction of the delay damages claim had not been litigated previously by the parties nor considered by the court. The district court held it had constitutional and statutory authority to exercise jurisdiction of Hanson's third-party claims against Langan and denied Langan's motion. 717 F.Supp. at 730. Langan has appealed.

II. ANALYSIS

The parties' arguments can be distilled as follows: Appellant Langan argues that, because there was no diversity between Langan and Hanson and no federal question (the delay damages claim was based on state law), ancillary jurisdiction was required over the delay damages claim. However, that claim was not "logically dependent upon" the original plaintiff's claim against defendant Hanson; therefore, under Owen Equipment, 437 U.S. at 376, 98 S.Ct. at 2403, the district court lacked jurisdiction to hear the claim. Langan further contends its rule 60(b)(4) motion is a direct attack on a judgment that lacked jurisdiction and is therefore void; thus, the judgment can be vacated under rule 60(b)(4).

Hanson, on the other hand, argues that its delay damages claim against Langan is logically related to, or logically entwined with, King Fisher's claim against Hanson over which the court did have jurisdiction on the basis of diversity. Because a court has jurisdiction to determine the entire case or controversy before it, the district court had ancillary jurisdiction over the delay damages claim. As to the rule 60(b)(4) motion, Hanson argues that Langan's challenge of the judgment is barred by res judicata or, alternatively, that an erroneous determination and exercise of statutory jurisdiction do not render a judgment "void" for purposes of a rule 60(b)(4) attack. In other words, Hanson contends the district court properly exercised jurisdiction, but even if it did not, rule 60(b)(4) is not available to challenge the judgment.

A. Standard of Review

In reviewing the district court's determination that its judgment is not void for lack of subject matter jurisdiction, this court reviews de novo. Jones v. Giles, 741 F.2d 245, 247 (9th Cir.1984); V.T.A., Inc. v. Airco, Inc., 597 F.2d 220, 223-24 nn. 7-8 (10th Cir.1979). While the district court suggested that the standard might be abuse of discretion, 717 F.Supp. at 729, relief is not discretionary if a judgment is void. See V.T.A., Inc. at 223-24 nn. 7-8; 11 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2862, at 197 (1973). The trial court is correct, however, that once it has been determined that jurisdiction exists we review a court's decision whether to exercise jurisdiction under an abuse of discretion standard, United States v. City of Twin Falls, 806 F.2d 862, 868 (9th Cir.1986), cert. denied, 482 U.S. 914, 107 S.Ct. 3185, 96 L.Ed.2d 674 (1987); Dahlberg v. Becker, 581 F.Supp. 855, 865 (N.D.N.Y.), aff'd, 748 F.2d 85 (2d Cir.1984), cert. denied, 470 U.S. 1084, 105 S.Ct. 1845, 85 L.Ed.2d 144 (1985). See C. Wright & A. Miller, Sec. 1444, at 234-37 (1971), 97-98 nn. 1-2 (1989 Supp.).

B. Subject Matter Jurisdiction

The law among the circuits concerning the scope of ancillary jurisdiction is in some disagreement, and there is no Tenth Circuit case on all fours with the case at bar. It is well settled, however, that a court has ancillary jurisdiction of a defendant's proper rule 14(a) claim 1 against a third-party defendant without regard to whether there is an independent basis of jurisdiction (e.g., diversity between the third-party litigants), so long as the court has jurisdiction of the main claim between the original parties. Dery v. Wyer, 265 F.2d 804 (2d Cir.1959); 6 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1444, at 223-25 (1971 & 1989 Supp.) (cases cited in notes 68-69). See Moor v. County of Alameda, 411 U.S. 693, 715, 93 S.Ct. 1785, 1798, 36 L.Ed.2d 596 (1973). Here, the district court had jurisdiction of King Fisher's claims against Hanson based on diversity of citizenship. Langan does not contest that the court consequently had jurisdiction over Hanson's pass-through, third-party claim against it. It disputes only the court's authority to decide Hanson's additional claim for delay damages.

Both parties agree there is no independent basis of jurisdiction over Hanson's delay damages claim against Langan. Both Hanson and Langan are residents of New Jersey, and the claim was based on state law. Thus, the court could properly decide the claim only if it falls within its ancillary jurisdiction. 2

1. Owen Equipment

The Appellant relies heavily on Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978), which it asserts holds that "a common nucleus of operative fact" is not the only requirement for ancillary jurisdiction in a diversity case; in addition, there must be a "logical dependence" between the primary and third-party claims. Brief of Appellant at 13, 17 (citing 437 U.S. at 376, 98 S.Ct. at 2403). We believe the Appellant overstates Owen Equipment 's holding. It overlooks, as have certain courts that have relied on Owen Equipment to resolve questions of jurisdiction, the Court's own caveat that, "in determining whether jurisdiction over a nonfederal claim exists, the context in which the nonfederal claim is asserted is crucial." 437 U.S. at 375-76, 98 S.Ct. at 2403-04 (emphasis added). It also accords undue significance to the Court's use of the term "logical dependence" to characterize an ancillary claim. In order to explain these conclusions, we begin with a discussion of Owen Equipment and its predecessors.

Mrs. Kroger, the plaintiff in Owen Equipment and an Iowa resident, brought a wrongful death action in federal court against the Omaha Public Power District (OPPD), a Nebraska corporation, whom she alleged caused the electrocution...

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