Lyon v. Whisman

• Decision Date: 19 January 1995
• Docket Number: 94-7283,Nos. 94-7190,s. 94-7190
• Parties: , 129 Lab.Cas. P 33,192, 2 Wage & Hour Cas.2d (BNA) 929 Patricia A. LYON v. James A. WHISMAN; Whisman & Associates, P.A., Appellants. Patricia A. LYON v. James A. WHISMAN; Whisman & Associates, P.A. James A. Whisman, Jr., Whisman & Associates, P.A., Appellants.
• Court: U.S. Court of Appeals — Third Circuit

Page 758

45 F.3d 758

63 USLW 2451, 129 Lab.Cas. P 33,192,

2 Wage & Hour Cas.2d (BNA) 929

Patricia A. LYON v. James A. WHISMAN; Whisman & Associates, P.A., Appellants.

Patricia A. LYON v. James A. WHISMAN; Whisman & Associates, P.A. James A.

Whisman, Jr., Whisman & Associates, P.A., Appellants.

Nos. 94-7190, 94-7283.

United States Court of Appeals Third Circuit.

Argued Nov. 1, 1994.

Decided Jan. 19, 1995.

Barry M. Willoughby (argued) and Bhavana Sontakay, Young, Conaway, Stargatt & Taylor, Wilmington, DE, for appellants.

Fredric J. Gross (argued), Mount Ephraim, NJ, for appellee.

Before GREENBERG and McKEE, Circuit Judges, and POLLAK, District Judge ^*.

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. Introduction

Patricia A. Lyon sued her employer, Whisman & Associates, an accounting firm which is a Delaware corporation, and its president James A. Whisman, in the United States District Court for the District of Delaware, charging that they failed to pay her overtime wages as required by the Fair Labor Standards Act ("FLSA"), 29 U.S.C. Sec. 207(a). As a matter of convenience we will refer to both defendants as Whisman. Lyon's complaint also included Delaware contract and tort claims charging that Whisman failed to pay her a promised bonus on time or in full. At trial Lyon prevailed on all three grounds. Whisman then appealed, challenging only the judgment on the tort claim. We must vacate the judgments on both of the state law claims, however, because the claims did not share a "common nucleus of operative fact" with the FLSA claim, and thus the district court lacked subject matter jurisdiction over them supplemental to its federal question jurisdiction over the FLSA claim. ¹

We set forth the facts and the aspects of the procedural history necessary for resolution of the jurisdictional issue. ² Lyon began working as a bookkeeper for Whisman in January 1988 on an at-will basis for hourly wages. Lyon and Whisman soon became embroiled in a dispute over a bonus that Whisman promised to pay Lyon at the end of 1988; by 1989 Lyon planned to find a new job. Whisman, however, threatened to rescind the bonus if Lyon left its employment. Although Whisman eventually did pay Lyon a bonus, she charges that the payment was late and was for less than the promised amount.

After Lyon left Whisman's employment she filed a three-count complaint alleging that it had

(1) violated the FLSA, 29 U.S.C. Sec. 207(a), by failing to pay overtime wages;

(2) violated Delaware contract law by paying a bonus smaller than promised; and

(3) violated Delaware tort law by threatening to withhold a vested bonus if she left its employ.

The district court had federal question jurisdiction over Lyon's FLSA claim under 28 U.S.C. Sec. 1331, and Lyon asserted that it had "pendent" federal jurisdiction over the state law claims in counts two and three. Neither the district court nor Whisman questioned this assertion of pendent jurisdiction which, in accordance with 28 U.S.C. Sec. 1367, we usually will call supplemental jurisdiction. Since the district court did not have diversity jurisdiction, it could entertain the state-law claims only by exercising supplemental jurisdiction.

At trial Lyon won on all three counts. She recovered $731.20 on the contract claim and $5,000 in compensatory damages and $20,000 in punitive damages on the tort claim. ³ We cannot ascertain what she recovered on the FLSA claim as the docket sheets do not reflect the amount and the parties make no reference to it in their briefs. Whisman appealed only from the judgment on count three, the Delaware law tort claim. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291.

II. Discussion

Although neither the parties nor the district court questioned the court's supplemental jurisdiction over Lyon's state law contract and tort claims, we inquire into that jurisdiction on our own initiative. See Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 1331, 89 L.Ed.2d 501 (1986). Consequently following oral argument we directed the parties to file briefs on this point and they have done so.

A. The Constitutional Test

Congress has authorized district courts to exercise jurisdiction supplemental to their federal question jurisdiction in 28 U.S.C. Sec. 1367, which states:

in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.

In Sinclair v. Soniform, Inc., 935 F.2d 599, 603 (3d Cir.1991), we treated section 1367 as codifying the jurisdictional standard established in United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). A leading treatise concurs: "[Section 1367] incorporates the constitutional analysis of the Gibbs case." 13B Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure Sec. 3567.1 (supp. 1994), citing, inter alia, Soniform. ⁴ Gibbs laid down three requirements for supplemental jurisdiction. First, "[t]he federal claim must have substance sufficient to confer subject matter jurisdiction on the court." Gibbs, 383 U.S. at 725, 86 S.Ct. at 1138. Lyon's FLSA claim satisfies this standard.

The other two requirements before federal courts may exercise supplemental jurisdiction to hear state law claims are:

The state and federal claims must derive from a common nucleus of operative facts. 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. Despite the ambiguity of the language connecting the "nexus" requirement with the "one proceeding" standard, all judicial authority finds that they are cumulative: state claims must satisfy both before a district court may exercise supplemental jurisdiction. 13B Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure Sec. 3567.1 (1984 & supp. 1994), citing Almenares v. Wyman, 453 F.2d 1075, 1083 (2d Cir.1971), cert. denied, 405 U.S. 944, 92 S.Ct. 962, 30 L.Ed.2d 815 (1972); Beverly Hills Nat. Bank & Trust Co. v. Compania De Navegacione Almirante S.A., 437 F.2d 301, 306 (9th Cir.), cert. denied, 402 U.S. 996, 91 S.Ct. 2173, 29 L.Ed.2d 161 (1971). Because we find that there was an insufficient factual nexus between the federal and state claims to establish a common nucleus of operative facts, we will not consider the "one proceeding" arm of Gibbs.

B. The Case-Specific Nature of the Inquiry

The test for a "common nucleus of operative facts" is not self-evident. Indeed, "[i]n trying to set out standards for supplemental jurisdiction and to apply them consistently, we observe that, like unhappy families, no two cases of supplemental jurisdiction are exactly alike." Nanavati v. Burdette Tomlin Memorial Hosp., 857 F.2d 96, 105 (3d Cir.1988), cert. denied, 489 U.S. 1078, 109 S.Ct. 1528, 103 L.Ed.2d 834 (1989).

We can illustrate the fact-sensitive nature of supplemental jurisdiction determinations by contrasting our treatment of state defamation claims in Nanavati with our treatment of similar claims in PAAC v. Rizzo, 502 F.2d 306 (3d Cir.1974), cert. denied, 419 U.S. 1108, 95 S.Ct. 780, 42 L.Ed.2d 804 (1975). In Nanavati, we found that the district court had the power to adjudicate a slander claim asserted by an antitrust defendant, noting that "a critical background fact (the enmity between the two physicians) is common to all claims." Nanavati, 857 F.2d at 105. We concluded that the alleged slanders naturally would become part of the antitrust trial since the slander victim might use the slanderer's allegedly wrongful behavior to justify the victim's conduct which the other party contended was actionable under the antitrust laws. Id. at 105-06. In PAAC, however, we ruled that the district court lacked jurisdiction over a state defamation claim in a suit brought under the Economic Opportunity Act charging the defendant with unlawfully interfering with the agency established under that law. In PAAC we recited the operative language of Gibbs and found that the state claims were not related sufficiently to the federal claim to permit the exercise of pendent jurisdiction.

The line that separates Nanavati and PAAC is Article III of the Constitution. Both cases fall near the line; one is on one side, the other is on the other side. In most instances the question whether Article III is satisfied is not that close. For example, when the same acts violate parallel federal and state laws, the common nucleus of operative facts is obvious and federal courts routinely exercise supplemental jurisdiction over the state law claims. See, e.g., Pueblo Int'l, Inc. v. De Cardona, 725 F.2d 823, 826 (1st Cir.1984) (finding jurisdiction over claims under Puerto Rico constitution, civil rights laws, and antitrust laws where federal jurisdiction was established under parallel laws, observing that "[t]he facts necessary to prove a violation of one are practically the same as those needed to prove a violation of the other").

Thus, district courts will exercise supplemental jurisdiction if the federal and state claims "are merely alternative theories of recovery based on the same acts," Lentino v. Fringe Employee Plans, Inc., 611 F.2d 474, 479 (3d Cir.1979). In Lentino, for instance, we recognized that there was federal jurisdiction over a state legal malpractice claim joined with an ERISA claim because the alleged malpractice involved precisely the same acts that the plaintiffs charged constituted a breach of fiduciary duties under ERISA. In White v. County of Newberry, 985 F.2d 168 (4th Cir.1993), landowners sued the county for ...