Appeal from judgment in United States District Court for the District of Connecticut, T. F. Gilroy Daly, J., endorsing magistrate's finding that "hold harmless" clause in labor contract is void as contrary to federal civil rights policy. Judgment affirmed.
Feinberg, Chief Judge, Oakes, Circuit Judge and Conner, District Judge.*fn*
The Board of Education of Stamford, Connecticut (the Board) appeals from a judgment of the United States District Court for the District of Connecticut, T. F. Gilroy Daly, J., which denied the Board's motion for summary judgment on its cross-claims for indemnity against two labor unions, Stamford Education Association (SEA) and Stamford Federation of Teachers (SFT), and granted the cross-motions of the unions for summary judgment on the ground that the "hold harmless" clause of the labor contract between the parties is invalid as "patently contrary to federal civil rights policy." For reasons stated below, we affirm the judgment of the district court.
This appeal has a muddled procedural history. In the summer of 1975, the Board entered into a two-year collective bargaining agreement (the Agreement) with the SEA, a labor union representing public school teachers in Stamford, establishing teachers' wages and benefits. In December 1975, SFT replaced SEA as the bargaining agent for the Stamford public school teachers and assumed the terms of the Agreement. One of the articles of the Agreement contained a pay schedule which apparently placed female coaches of extra-curricular sports at an economic disadvantage compared to their male counterparts. The same article of the Agreement provided that "the SEA agrees to hold the Board harmless for any and all judgments, costs, and fees involved in defending any claim against the Board based on any claimed sex discrimination."*fn1
In September 1977, after exhausting administrative remedies, Lynn Ryan and four other female coaches covered by the pay schedule, and their successor union, SFT, brought the present suit in federal district court alleging that the pay schedule discriminated on the basis of sex. They requested as relief, among other things, a declaratory judgment and an award of back pay as liquidated damages. Plaintiffs invoked various federal statutes as the basis of their suit, including Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and the Equal Pay Act, 29 U.S.C. §§ 206(d) (1)-(2).*fn2 The defendants in the suit included the Board, and its members, and SEA and its officers. Subsequently, SFT was realigned as a party defendant.
Early in 1978, the Board cross-claimed against both SEA and SFT on the basis of the "hold harmless" clause, seeking judgment against the two unions in the amount of any judgment there might be against the Board. The Board, SEA and SFT all moved for summary judgment on the issue of liability under the "hold harmless" clause. In June 1980, United States Magistrate Arthur H. Latimer ruled that the "hold harmless" clause violated federal civil rights policy, and denied the Board's motion for summary judgment on its cross-claim while granting the corresponding SEA and SFT motions for summary judgment. Judge Daly adopted the magistrate's ruling by endorsement dated July 9, 1980.
Over a year later, in July 1981, the judge approved a stipulation of settlement between the Board and the individual school teacher plaintiffs, and a consent judgment on plaintiffs' claims was entered. The Board then moved for entry of final judgment on all the claims in the case, and filed a protective appeal to this court. However, Judge Daly denied the Board's motion since he believed that the filing of the notice of appeal to this court rendered the motion "moot." In December 1981, we ordered the case remanded to the district court "for entry of an appropriate order." In January 1982, the judge entered the order described at the outset of this opinion; the Board thereafter again filed a notice of appeal. With the case now properly before us, we affirm the judgment of the district court, and hold that the "hold harmless" clause is void as against public policy.
While this appeal was pending for the second time, we asked the parties for supplementary letter briefs on the question whether the district court continued to have jurisdiction over the contractual cross-claims for indemnity, after the main federal claim of the plaintiffs had been settled before trial. Despite our initial concern on this issue, we now are convinced that the district court did continue to have ancillary, or incidental, jurisdiction over the cross-claims. See generally Note, A Closer Look at Pendent and Ancillary Jurisdiction: Toward a Theory of Incidental Jurisdiction, 95 Harv. L. Rev. 1935 (1982). Federal jurisdiction to hear a case like this must satisfy a two-prong test. First, there must be power to hear the state claim, which depends on whether it arises out of "a common nucleus of operative facts" as the main federal claim. Second, is then within the federal court's sound discretion as to whether the policies of "judicial economy, convenience, and fairness to litigants" are furthered by the assumption of jurisdiction. See United Mine Workers v. Gibbs, 383 U.S. 715, 725-26, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966).
We believe that the Board's cross-claim against the unions for indemnity meets both tests. The cross-claim does, in fact, arise out of the same common nucleus of operative facts as the collective bargaining agreement -- a portion of which formed the basis of the main sex discrimination claim -- so that the case "would ordinarily be expected . . . [to be tried] in one judicial proceeding." United Mine Workers v. Gibbs, supra, 383 U.S. at 725. We also believe that the policies bearing on the court's exercise of discretion to hear the indemnity claim are served by the retention of federal jurisdiction in this case. Both the parties and the district judge have already devoted a substantial amount of time to the issue of the legality of the "hold harmless" clause. It would neither be wise judicial administration nor fair to the parties to dismiss the indemnification claim now and force the parties to begin litigation of the cross-claim all over again in state court.*fn3 Moreover, there is a strong federal interest in the prevention of employment discrimination by reason of sex, see, e.g., Title VII, supra -- an interest which is affected by contractual provisions which seek to adjust liability for discrimination. Finally, it is beyond dispute that the district court had jurisdiction over the incidental cross-claim when the magistrate and district judge found the "hold harmless" clause to be void, since the plaintiffs' main claims were then still before the district court. It is true that at the time there was no appealable order disposing of the cross-claim and that a final, appealable order was not entered until a year later. Nevertheless, it would be a hypertechnical construction of the doctrine of incidental jurisdiction to conclude that the district court had jurisdiction over the cross-claim when it decided the issue now before us, but lost it before the Board had an appropriate opportunity to appeal. We conclude, therefore, that the district court properly exercised jurisdiction over the cross-claim when it entered the final judgment from which the Board appeals.
III. The "Hold Harmless" Clause
We now turn to the legality of the "hold harmless" clause. The sole issue before us on the merits is whether the "hold harmless" clause contained in the collective bargaining agreement is void as against public policy. Both Magistrate Latimer and Judge Daly found the clause ...