Sandlin v. Corporate Interiors Inc.

• Citation: 972 F.2d 1212
• Decision Date: 18 August 1992
• Docket Number: 91-1003,Nos. 91-1001,s. 91-1001
• Parties: 59 Fair Empl.Prac.Cas. (BNA) 1126, 59 Empl. Prac. Dec. P 41,701, 23 Fed.R.Serv.3d 943 Glen K. SANDLIN, Plaintiff-Appellant, v. CORPORATE INTERIORS INC.; Svein Reichborn-Kjennerud; Sandra K. Reichborn-Kjennerud; 2601 Blake Street; Colorado National Bank of Denver, N.A.; Interior Services, Inc., Defendants-Appellees. Glen K. Sandlin, Plaintiff-Appellant, v. Corporate Interiors Inc., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1212

972 F.2d 1212

59 Fair Empl.Prac.Cas. (BNA) 1126,

59 Empl. Prac. Dec. P 41,701, 23 Fed.R.Serv.3d 943

Glen K. SANDLIN, Plaintiff-Appellant, v. CORPORATE INTERIORS INC.; Svein Reichborn-Kjennerud;

Sandra K. Reichborn-Kjennerud; 2601 Blake Street;

Colorado National Bank of Denver, N.A.;

Interior Services, Inc.,

Defendants-Appellees.

Glen K. Sandlin, Plaintiff-Appellant, v. Corporate Interiors Inc., Defendant-Appellee.

Nos. 91-1001, 91-1003.

United States Court of Appeals Tenth Circuit.

Aug. 18, 1992.

David L. Smith, Denver, Colo., for plaintiff-appellant.

Kenneth S. Kramer (Isaac H. Kaiser, also of Berenbaum & Weinshienk, Denver, Colo., James W. Hubbell and Christine L. Murphy of Kelly/Haglund/Garnsey & Kahn, Denver, Colo., with him on the briefs), for defendants-appellees.

Before LOGAN and MOORE, Circuit Judges, and ALLEY, District Judge. ^*

LOGAN, Circuit Judge.

In these related appeals we consider a federal district court's postjudgment ancillary jurisdiction to adjudicate claims against newly added nondiverse parties whose prejudgment actions allegedly caused the insolvency of a judgment debtor.

I

Plaintiff Glen K. Sandlin brought suit under the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621-634, against defendant Corporate Interiors Inc. and obtained a $142,226 judgment. Shortly thereafter, plaintiff made a motion to alter or amend the judgment to require reinstatement to his former job or to order front pay in lieu of reinstatement. Plaintiff's motion was denied. ¹

After unsuccessfully trying to enforce his judgment against Corporate Interiors, plaintiff sought recovery through postjudgment proceedings pursuant to Fed.R.Civ.P. 69(a) not only from the judgment debtor, Corporate Interiors, but also third parties Svein Reichborn-Kjennerud, Sandra Reichborn-Kjennerud, 2601 Blake Street (a general partnership), Colorado National Bank of Denver, and Interior Services, Inc. Plaintiff was permitted to conduct extensive discovery, and a magistrate held four days of hearings.

During or after the discovery in the Rule 69 proceedings, plaintiff filed a new complaint in federal district court against the same third parties, demanding a jury trial, alleging state law claims--conspiracy to defraud creditors, fraudulent conveyances, equitable subordination of secured creditor's rights, unauthorized conversion of corporate assets, and the tort of outrageous conduct. That complaint also alleged that some of the defendants were the judgment debtor's alter ego and that defendant Interior Services, Inc. was Corporate Interior's successor corporation. All of these parties are Colorado residents, so there is no diversity jurisdiction; plaintiff predicated the jurisdiction upon the district court's "continuing jurisdiction in Civil Action No. 89-M-727 [the ADEA suit]." Appendix to Opening Brief for Plaintiff-Appellant (No. 91-1001) at 1.

The district court granted defendants' motion to dismiss the new complaint for lack of subject matter jurisdiction. It also withdrew its order of reference of the Rule 69 summary proceedings to the magistrate judge. It ruled against plaintiff on his motion to amend the ADEA judgment to give him reinstatement or front pay and limited further proceedings under Fed.R.Civ.P. 69 to include only allegations of improper postjudgment conduct relating to assets of the judgment debtor. Plaintiff appeals these rulings.

II

First we consider whether the district court abused its discretion in denying plaintiff's motion to alter or amend the judgment to order reinstatement or front pay. See Wulf v. City of Wichita, 883 F.2d 842, 873 (10th Cir.1989) (upholding award of front pay under abuse of discretion standard); Denison v. Swaco Geolograph Co., 941 F.2d 1416, 1426-27 (10th Cir.1991) (front pay is an issue for district court's equitable discretion).

Reinstatement, or front pay when reinstatement is not practical, may be awarded under the ADEA in appropriate circumstances. EEOC v. Prudential Fed. Sav. & Loan Ass'n, 763 F.2d 1166, 1172-73 (10th Cir.), cert. denied, 474 U.S. 946, 106 S.Ct. 312, 88 L.Ed.2d 289 (1985). The district court, in denying reinstatement or front pay, stated: "What is clear from the trial testimony is that Corporate Interiors, Inc. ceased doing business at the beginning of 1990. Accordingly, it is also clear that reinstatement is not feasible and that the plaintiff is not entitled to front pay because his employer ceased doing business." Appendix to Opening Brief for Plaintiff-Appellant (No. 91-1003) at 39. Plaintiff did not dispute the court's finding that Corporate Interiors had ceased doing business, but instead argued that whether defendant had ceased doing business was irrelevant.

We agree with the district court that reinstatement is not possible and front pay is inappropriate if a defendant company has ceased doing business. The purpose of the equitable remedies under the ADEA is to make a plaintiff whole--to put the plaintiff, as nearly as possible, into the position he or she would have been in absent the discriminatory conduct. Gibson v. Mohawk Rubber Co., 695 F.2d 1093, 1097 (8th Cir.1982); see also Prudential Fed., 763 F.2d at 1173 (under proper circumstances front pay "furthers the remedial purposes of the ADEA by assuring that the aggrieved party is returned as nearly as possible to the economic situation he would have enjoyed but for the defendant's illegal conduct"). Thus, any award of front pay is limited by the estimated remaining tenure plaintiff would have enjoyed with his company absent the discriminatory conduct. When the defendant company has ceased to do business before judgment, plaintiff necessarily would have been discharged with the rest of the work force; thus, reinstatement was impossible and front pay inappropriate. See Gibson, 695 F.2d at 1097 ("aggrieved persons are not entitled to recover damages for the period beyond which they would have been terminated for a nondiscriminatory reason"). We affirm the district court's denial of the motion to alter or amend the judgment.

III

A

The district court dismissed the separate complaint and limited the Rule 69(a) proceedings because it believed it lacked subject matter jurisdiction to consider plaintiff's claims. That determination involves a question of law and is reviewed de novo. City of Chanute, Kansas v. Williams Natural Gas Co., 955 F.2d 641, 658 (10th Cir.1992).

The focus of these appeals is the scope of a federal court's ancillary jurisdiction, ² in aid of its judgment and not merely the scope of Fed.R.Civ.P. 69. ³ Rule 69 creates a procedural mechanism for exercising postjudgment enforcement when ancillary jurisdiction exists, see Argento v. Village of Melrose Park, 838 F.2d 1483, 1487 (7th Cir.1988), but cannot extend the scope of that jurisdiction. See Fed.R.Civ.P. 82; Blackburn Truck Lines Inc. v. Francis, 723 F.2d 730, 732 (9th Cir.1984); see also Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 370, 98 S.Ct. 2396, 2400, 57 L.Ed.2d 274 (1978) ("it is axiomatic that the Federal Rules of Civil Procedure do not create or withdraw federal jurisdiction").

Ancillary jurisdiction is an "ill-defined concept," 6 Charles A. Wright et al., Federal Practice & Procedure § 1444, at 316 (2d ed. 1990), that permits jurisdiction over certain cross-claims, counter-claims and third-party claims that are related to the principal case but do not enjoy a separate basis for subject matter jurisdiction. Ancillary jurisdiction is

based on the premise that a district court acquires jurisdiction over a case or controversy in its entirety and, as an incident to the disposition of a dispute that is properly before it, may exercise jurisdiction to decide other matters raised by the case over which it would not have jurisdiction were they independently presented.

Id. at 316-17.

Within a federal court's ancillary jurisdiction is the power to conduct proceedings necessary to protect and give effect to its judgments. ⁴ See, e.g., Finley v. United States, 490 U.S. 545, 551, 109 S.Ct. 2003, 2007, 104 L.Ed.2d 593 (1989); 7 James Wm. Moore et al., Federal Practice p 69.03, at 69-14 (2d ed. 1991). "That a federal court of equity has jurisdiction of a bill ancillary to an original case or proceeding in the same court, whether at law or in equity, to secure or preserve the fruits and advantages of a judgment or decree rendered therein, is well settled," Local Loan Co. v. Hunt, 292 U.S. 234, 239, 54 S.Ct. 695, 697, 78 L.Ed. 1230 (1934); otherwise, "[t]he judicial power would be incomplete, and entirely inadequate to the purposes for which it was intended," Bank of the United States v. Halstead, 23 U.S. (10 Wheat.) 51, 53, 6 L.Ed. 264 (1825). Our problem is to determine the scope of this type of ancillary jurisdiction sufficiently to resolve the instant appeals.

B

Garnishment actions against a third party holding property of a judgment debtor have always been held to be within the ancillary "enforcement" jurisdiction of the federal court, at least if the garnishee admits the debt. E.g., Skevofilax v. Quigley, 810 F.2d 378, 384-85 (3d Cir.) (en banc), cert. denied, 481 U.S. 1029, 107 S.Ct. 1956, 95 L.Ed.2d 528 (1987); id. at 390-91 (Stapleton, J., dissenting); Manway Constr. Co. v. Housing Auth. of Hartford, 711 F.2d 501, 504 & n. 2 (2d Cir.1983); see also Sheet Metal Workers Health & Welfare Trust v. Big D Service Co., 876 F.2d 852 (10th Cir.1989). But see Berry v. McLemore, 795 F.2d 452, 455 (5th Cir.1986) (declaring a writ of garnishment against strangers to court's judgment an action separate and independent of that resulting in judgment debt). The courts are not in total agreement, however, when the proceeding involves an alleged indemnity agreement between the judgment debtor and an employer or insurer. Compare Argento, 838 F.2d at 1488 and Skevofilax, 810 F.2d at 384 with Berry, 795 F.2d at 455-56.

Apart from garnishments and agreements to indemnify, the cases are largely consistent....