Washington Hosp. Center Nat. Rehabilitation Hosp. v. Collier

• Decision Date: 05 November 1991
• Docket Number: 90-7192,MD-INDIVIDUAL,MD-IP,No. 90-7191,A,90-7191
• Citation: 947 F.2d 1498
• Parties: WASHINGTON HOSPITAL CENTER NATIONAL REHABILITATION HOSPITAL v. Todd B. COLLIER, Appellant, v.PRACTICE ASSOCIATION, INC., a Maryland Corporation dbappellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1498

947 F.2d 1498

292 U.S.App.D.C. 129

WASHINGTON HOSPITAL CENTER NATIONAL REHABILITATION HOSPITAL v. Todd B. COLLIER, Appellant, v. MD-INDIVIDUAL PRACTICE ASSOCIATION, INC., a Maryland

Corporation dba MD-IPA, Appellee.

No. 90-7191, 90-7192.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 20, 1991.

Decided Nov. 5, 1991.

Appeal from the United States District Court for the District of Columbia (C.A. Nos. 90-01264 and 89-02043).

John R. Dugan, with whom David P. Sutton, Washington, D.C., was on the brief, for appellant.

Christopher M. McMurray, with whom Charles Lee Eisen, Washington, D.C., was on the brief for appellees.

Before WALD, D.H. GINSBURG, and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge D.H. GINSBURG.

D.H. GINSBURG, Circuit Judge:

Todd Collier was rendered quadriplegic while playing touch football. Several months later, Collier's health insurer, appellee M.D. Individual Practice Association (MD-IPA), retroactively denied Collier coverage, claiming that he was not a full-time student, and therefore not an eligible dependent, at the time of his accident. The two hospitals that had treated Collier then sued him for payment. Collier in turn filed a third-party action against MD-IPA alleging breach of its contract to insure and various other counts. The district court granted MD-IPA summary judgment on the issue of coverage and dismissed Collier's other claims, and Collier appealed.

While this appeal was pending, the hospitals and MD-IPA reached a settlement that completely extinguished Collier's liability to the hospitals. That settlement also raised issues concerning our jurisdiction over, and the possible mootness of, Collier's claims against MD-IPA. Today we resolve those issues favorably to Collier's further prosecution of this case and certify to the Maryland Court of Appeals two questions of Maryland law respecting insurance contracts. We shall hold review of Collier's contract claim in abeyance pending that court's authoritative resolution of the state law issues.

I. BACKGROUND

When Collier was injured, he received treatment first at the Washington Hospital Center and later at the National Rehabilitation Center, both located in Washington, D.C. The total cost of his treatment at these two hospitals exceeded $286,000.

Initially Collier's hospital bills were paid by MD-IPA, with whom Collier's mother maintained a health insurance policy. Under that policy, her dependent child between the ages of 19 and 22 was eligible for coverage only if he was a "full-time student" at a recognized college, university, or trade school. Collier turned 19 in May 1987 and during all relevant times was a student at Montgomery College, lived at home, and depended upon his mother for financial support.

Beginning with the spring semester of 1987, the College placed Collier on academic probation and allowed him to register for only six credits. In September 1987 Collier, mistakenly thinking that his probation had ended, tried to register for twelve or more credits for the fall semester. He was again allowed to register for only six credits, and hence was taking that number of credits when he was injured in September 1987.

In April 1988 MD-IPA informed Collier that he was not covered under his mother's policy because at the time of the accident he was not a "full-time student." (At least for purposes of financial aid and academic honors, Montgomery College requires enrollment in twelve or more credits for a student to be classified "full-time.") MD-IPA refused to pay for additional medical expenses and demanded that the hospitals refund the sums it had already paid.

The hospitals then brought diversity actions in the District Court for the District of Columbia against Collier and his mother, both citizens of Maryland, seeking payment for Collier's treatment. Collier answered the hospitals' complaints and filed this third-party action against MD-IPA seeking a declaratory judgment respecting his coverage and recovery of his attorneys' fees.

After limited discovery, the district court, concluding that the term "full-time student" is not ambiguous, granted MD-IPA's motion for summary judgment on Collier's breach of contract count. The district court also granted MD-IPA's motion to dismiss Collier's other claims for failure to state a legally cognizable cause of action pursuant to FED.R.CIV.P. 12(b)(6). The court entered stipulations of judgment against Collier and in favor of the hospitals in a total amount of more than $286,000.

Subsequent to Collier's filing this appeal, MD-IPA and the hospitals reached a settlement that fully satisfied the judgments against Collier.

II. JURISDICTION

Because Collier and MD-IPA are both Maryland citizens, we consider first whether the district court properly exercised jurisdiction over Collier's third-party claims against MD-IPA. We inquire next whether this court has continuing jurisdiction over the parties in light of the settlement they reached after Collier filed this appeal.

Prior to the Supreme Court's decision in Finley v. United States, 490 U.S. 545, 109 S.Ct. 2003, 104 L.Ed.2d 593 (1989), it was well settled that a federal court properly exercising jurisdiction in an original action also had "ancillary" jurisdiction over the defendant's third-party claim, regardless of whether there was an independent basis for jurisdiction over that claim. See Dery v. Wyer, 265 F.2d 804 (2d Cir.1959); 6 C. WRIGHT, A. MILLER, & M. KANE, FEDERAL PRACTICE AND PROCEDURE § 1444, at 321-23 & n. 21-22. (1990 & 1991 Supp.); see also Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 375, 98 S.Ct. 2396, 2403, 57 L.Ed.2d 274 (1978); Moor v. County of Alameda, 411 U.S. 693, 714-15, 93 S.Ct. 1785, 1798-99, 36 L.Ed.2d 596 (1973). Thus, as in this case, the original defendant in a diversity suit could implead a non-diverse third-party defendant that was arguably liable to the third-party plaintiff "for all or part of the [original] plaintiff's claim against the third-party plaintiff." FED.R.CIV.P. 14(a); See Long v. District of Columbia, 820 F.2d 409, 417 (D.C.Cir.1987); Horton v. Baldwin, 713 F.Supp. 508 (D.D.C.1989).

In Finley the Supreme Court held that a plaintiff suing in federal court under the Federal Tort Claims Act may not assert against a pendent party a state law claim lacking an independent jurisdictional basis "even if the claim involving that other defendant meets the Gibbs test," 490 U.S. at 551, 109 S.Ct. at 2007 (emphasis in original), i.e., "the federal and nonfederal claims 'derive from a common nucleus of operative fact' and are such that a plaintiff 'would ordinarily be expected to try them in one judicial proceeding.' " Id. at 549, 109 S.Ct. at 2006, quoting United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). At the same time, the Court reaffirmed that "in a narrow class of cases a federal court may assert authority over such a claim [against a nonjurisdictional party] 'ancillary' to jurisdiction otherwise properly vested--for example, when an additional party has a claim upon contested assets within the court's exclusive control ..., or when necessary to give effect to the court's judgment ... [but] not solely on the basis that the Gibbs test has been met." 490 U.S. at 551, 109 S.Ct. at 2008 (citations omitted).

We do not read this passage, with its non-exhaustive illustrations of ancillary jurisdiction, to preclude the third-party claim now before us. The Court in Finley drew heavily upon its prior decision in Kroger, in which it held that a plaintiff in a diversity action may not "assert a claim against a third-party defendant when there is no independent basis for federal jurisdiction over that claim." 437 U.S. at 367, 98 S.Ct. at 2398. In Kroger the Court expressly recognized "that the exercise of ancillary jurisdiction over nonfederal claims has often been upheld in situations involving impleader, cross-claims or counterclaims." Id. at 375, 98 S.Ct. at 2403. Distinguishing the plaintiff's claim in that case from other types of nonfederal claims over which a federal court has ancillary jurisdiction, the Court noted:

A third-party complaint depends at least in part upon the resolution of the primary lawsuit. Its relation to the original complaint is thus not mere factual similarity but logical dependence. [In addition,] ancillary jurisdiction typically involves claims by a defending party haled into court against his will.... A plaintiff cannot complain if ancillary jurisdiction does not encompass all of his possible claims ..., since it is he who has chosen the federal rather than the state forum and must thus accept its limitations.

Id. at 376, 98 S.Ct. at 2404 (citations omitted). As a defendant haled into federal court who then impleads his insurer as a third-party defendant, liable over to him for some or all of the amount for which he is held liable in the original action, Collier is on the jurisdictional side of both the distinctions drawn in Kroger. Accord King Fisher Marine Service, Inc. v. 21st Phoenix Corp., 893 F.2d 1155 (10th Cir.1990); Horton, 713 F.Supp. at 510. See also 28 U.S.C.A. § 1367(a) (West Supp.1991) (prospectively overruling Finley by conferring "supplemental jurisdiction" over all claims "so related to claims in [an] action with[ ] ... original jurisdiction that they form part of the same case or controversy under Article III"). Therefore we hold that the district court properly exercised ancillary jurisdiction over Collier's claim against MD-IPA.

It follows that this court has jurisdiction over Collier's appeal, notwithstanding the insurer's settlement with the hospitals. To hold that jurisdiction can somehow lapse for want of diversity after the original defendant has perfected and properly pursued his third-party claim in federal court would only squander scarce resources--those of the courts as well as those of the...