Schwab v. Erie Lackawanna Railroad Co., 18701.

• Decision Date: 02 February 1971
• Docket Number: No. 18701.,18701.
• Citation: 438 F.2d 62
• Parties: Otto T. SCHWAB v. ERIE LACKAWANNA RAILROAD COMPANY, Appellant, and S. J. Groves and Sons Company v. Mildred A. SAUERS, Admx. of the Estate of William Sauers, Deceased, Frank Pulling, and Walmer Trucking Company.
• Court: U.S. Court of Appeals — Third Circuit

438 F.2d 62 (1971)

Otto T. SCHWAB v. ERIE LACKAWANNA RAILROAD COMPANY, Appellant, and S. J. Groves and Sons Company v. Mildred A. SAUERS, Admx. of the Estate of William Sauers, Deceased, Frank Pulling, and Walmer Trucking Company.

No. 18701.

United States Court of Appeals, Third Circuit.

Argued October 29, 1970.

Decided February 2, 1971.

George I. Buckler, Meyer, Darragh, Buckler, Bebenck & Eck, Pittsburgh, Pa., for appellant.

Theodore E. Breault, Egler, McGregor & Reinstadtler, Pittsburgh, Pa., for Walmer Trucking Co.

Richard A. Levick, Knox, Graham, Pearson & McLaughlin, Erie, Pa. (John M. McLaughlin, Erie, Pa., on the brief), for Mildred A. Sauers and others.

Before FORMAN, SEITZ and ALDISERT, Circuit Judges.

OPINION OF THE COURT

ALDISERT, Circuit Judge.

May a defendant who properly impleads third-parties on the ground that they are "or may be liable to him for all or part of the plaintiff's claim against him", Fed.R.Civ.Pro. 14, also include, in the absence of an independent jurisdictional basis, a separate claim for property damages which, although not the subject of the original plaintiff's claim, arose out of the same occurrence? This is the specific question posed by this appeal from the district court's dismissal of the third-party plaintiff's claim against the third-party defendants for damages to its locomotive.

Claiming damages for personal injuries sustained as a result of a train-truck collision at a private crossing in Crawford County, Pennsylvania, plaintiff, a railroader, instituted suit against Erie Lackawanna Railroad Company under the Federal Employers' Liability Act, 45 U.S.C. § 51, and against a second defendant on the theory of common law negligence.¹ Both Erie and its co-defendant proceeded to name as third-party defendants the estate of the truck driver, the owner of the truck, and the company to which the truck allegedly was leased. In addition to its claim for contribution or indemnification under Rule 14, Erie's third-party Complaint included a separate claim for damages to its train in the amount of $5,041. The third-party defendants moved to dismiss the claim for train damage, asserting a lack of diversity of citizenship, the absence of a federal question, and an insufficient amount in controversy. The district court granted the motion to dismiss² and Erie appealed.

Erie did not argue below, and does not contend here, that its separate claim is based on an independent federal jurisdictional ground. Rather, it was, and continues to be, Erie's position that the claim is a "compulsory counterclaim" which is "ancillary to the main cause of action" and which, therefore, may survive in the absence of independent jurisdiction. The flaw in this approach is simply that the claim has been mislabeled. A counterclaim must, by definition, arise "out of the transaction or occurrence that is the subject matter of the opposing party's claim". Fed.R. Civ.Pro. 13(a) (emphasis supplied). Erie's claim against the third-party defendants was not in response to an "opposing party's claim" since none of the "opposing" third-party defendants lodged any claim against Erie.³

That the wrong terminology has been employed, however, is not fatal. Although the district court could have required Erie to replead to correct the error, see Murray v. Haverford Hosp. Corp., 278 F.Supp. 5 (E.D.Pa.1968), it chose instead, following its rejection of the counterclaim theory, to consider what it believed Erie was "really asserting". We will not fault the court for disregarding such technical error. See Falciani v. Philadelphia Transp. Co., 189 F. Supp. 203 (E.D.Pa.1960). Indeed, we too deem it essential that the claim not be improperly characterized, because from a particular characterization may flow peculiar procedural and jurisdictional consequences.

At least one district court case has held that a claim by a third-party plaintiff against a third-party defendant may be labeled a cross-claim pursuant to Fed.R.Civ.Pro. 13(g). Fogel v. United Gas Improvement Co., 32 F.R.D. 202 (E.D.Pa.1963). Rule 13(g) provides in part:

A pleading may state as a crossclaim any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein or relating to any property that is the subject matter of the original action.

Were we to take the view that Erie's claim for train damage is a cross-claim, and assuming that it is sufficiently related to the original action,⁴ we would experience no difficulty in ruling that the claim is ancillary to the main claim and, as such, requires no independent jurisdictional basis. As stated in 1 Moore's Federal Practice ¶ 0.90 3:

When a federal court has jurisdiction over the main cause of action, it also has jurisdiction over any proceedings ancillary to that action, regardless of the money involved, the citizenship of the parties, or the existence of a federal question in the ancillary suit. * * *

* * * * * *

Since cross-claims, compulsory counterclaims, and third party claims arise out of the main cause of action, they are ancillary to that action, and if there is federal jurisdiction over the main action, there is jurisdiction over these ancillary claims. * * *

(Footnotes omitted.)

This principle has been recognized by other commentators⁵ and appears to be well settled in the courts.⁶

In Fogel, supra, 32 F.R.D. at 204, the court dealt with the argument that cross-claims under Rule 13(g) cannot apply as between third-party litigants since they are not "co-parties" within the meaning of the Rule.

This contention is incorrect. "Co" is a prefix which "signifies in general with, together, in conjunction, jointly." (Webster\'s Unabridged Dictionary, 2nd ed.). Even though the third-party defendant\'s position in the case is somewhat different from the positions of the original defendants, it is a co-party within the meaning of Rule 13(g).

(Emphasis by the court.)

A contrary result was reached, however, in a more recent case, also in the Eastern District of Pennsylvania, in which defendants attempted to style third-party claims as cross-claims. In Murray v. Haverford Hosp. Corp., supra, 278 F.Supp. at 6-7, the court reasoned: "We believe that Rule 13(g) was intended to regulate cross-claims between `co-parties' and contemplated that such cross-claims should be asserted against parties having like status, such as co-defendants." (Footnote omitted.) See also Frommeyer v. L. & R. Constr. Co., 139 F.Supp. 579, 586 (D.N.J.1956)

It is this latter conclusion that we find to be persuasive. It seems untenable to us to characterize third-party litigants as co-parties since their actual and only relationship to each other throughout the action is that of plaintiff and defendant. While co-parties — those sharing "like status" initially — become opposing parties on the cross-claim, third-party litigants become adverse upon service of the third-party complaint.⁷ Thus they are opposing parties prior to the assertion of the additional claim by the third-party plaintiff, and, indeed, retain that status throughout the case.

This relationship is highlighted by the impact of the 1948 amendment to Rule 14. Prior to the amendment, a third-party could be impleaded not only if, as the rule now provides, he was thought to be liable to the defendant, see note 10, infra, but also on the ground that he was directly liable to the plaintiff.⁸ Under this earlier version of the rule, it is arguable that a third-party defendant impleaded on the ground of direct liability to the original plaintiff would occupy the same status as the original defendant. Under such circumstances, the third-party litigants would be assuming the same legal stance vis-a-vis the plaintiff and would conceivably qualify as co-parties. Rule 14(a) now, of course, limits the impleaded party to one "who is or may be liable to the original defendant for all or part of the plaintiff's claim against him," and, in so doing, establishes third-party litigants as opposing parties.

The drafters of the Federal Rules were not simply acting as a collective Linnaeus of the law, engaging in classifications for their own sake. Although it is true that "labels have no substantive bearing on the content of a claim",⁹ the classification of a claim as a cross-claim will have a very real jurisdictional bearing. See Moore's Federal Practice, ¶ 0.90 3, supra. Moreover, the denomination of a claim will determine the procedures available for asserting the claim.¹⁰ And even though recovery under Rule 13(g) may proceed on the same basis as recovery under Rule 14,¹¹ Rule 13(g) unequivocally requires that cross-claims be asserted between "co-parties." Because Erie, as third-party plaintiff, and the third-party defendants are opposing parties rather than co-parties, no claim between them may be characterized as a cross-claim.

The jurisdictional validity of Erie's claim for liability-over has not been questioned and appears not to be in doubt. Dery v. Wyer, 265 F.2d 804 (2 Cir. 1959). A claim which is cognizable under Rule 14 is ancillary to, and thus jurisdictionally dependent upon, the jurisdiction of the original plaintiff's main claim.¹² It is arguable that Erie's separate claim for locomotive damage may be treated as a third-party claim under Rule 14.

Noland Co. v. Graver Tank & Mfg. Co., 301 F.2d 43 (4 Cir. 1962) arose as an action by a general contractor against its subcontractor for the difference between the actual cost of a water tank and the subcontractor's original bid price on a tank that was not delivered. The subcontractor impleaded its supplier for the amount of its liability to the general contractor, and added a claim for the profit it had anticipated on the supplier's bid price on the tank. The court framed the "basic question" as "whether under Rule 14 * * * a third-party plaintiff can recover from a third-party defendant a sum greater than that sued...