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INDEPENDENT BANKERS ASSN. OF NEW YORK STATE INC. V

December 2, 1983

INDEPENDENT BANKERS ASSOCIATION OF NEW YORK STATE INC. and The Canandaigua National Bank and Trust Company, Plaintiffs,
v.
MARINE MIDLAND BANK, N.A. and Wegman's Food Markets, Inc., Defendants.



The opinion of the court was delivered by: TELESCA

MEMORANDUM DECISION and ORDER

TELESCA, District Judge.

Plaintiffs, the Independent Bankers Association of New York State, Inc. and The Canadaigua National Bank and Trust Company have brought the present action against Marine Midland Bank, N.A. ("Marine Midland"), a federally chartered institution, for alleged violation of Section 36 of the National Banking Act, 12 U.S.C. Section 36, and against Wegman's Food Markets, Inc. ("Wegman's"), the owner of a chain of supermarkets in the western New York areas, for alleged violation of Section 131 of the New York Banking Law. Defendant Wegman's now moves pursuant to F.R.Civ.P. 12(b)(1) to dismiss plaintiffs' complaint for lack of subject matter jurisdiction. For the reasons set forth below, Wegman's motion is denied.

 FACTUAL BACKGROUND

 This action arises out of the operation of an automated teller machine ("A.T.M.") at the Wegman's supermarket in Canandaigua, New York. An A.T.M. is, in essence, a computer terminal located at the supermarket through which a customer can process various transactions with his or her bank. One of the banking institutions which utilizes Wegman's A.T.M. is defendant, Marine Midland.

 The complaint alleges that Marine Midland's participation in the A.T.M. arrangement at Wegman's in Canandaigua constitutes "branch banking" as definded in 12 U.S.C. Section 36(f). *fn1" Because the federal statute in question applies only to national banks, no violation of 12 U.S.C. Section 36 has been or could be alleged against Wegman's. Rather, plaintiffs have brought a second claim against Wegman's alleging a violation of Section 131 of the New York Banking Law, which generally prohibits unauthorized banking in New York. *fn2"

 The question presented on this motion is whether this Court should exercise pendent jurisdiction over the state law claim against Wegman's, a party not otherwise subject to jurisdiction under the federal claim alleged.

 I.

 In order to evaluate whether jurisdiction over Wegman's in this case is proper, a two-fold inquiry must be made: (1) whether this Court has the judicial power to decide the state law claim against Wegman's and (2) assuming such power exists, whether this Court should, in the exercise of its discretion, decline plaintiffs' invitation to adjudicate the state law claim. Leather's Best Inc. v. S. S. Mormaclynx, 451 F.2d 800, 809 (2nd Cir.1971). If the judicial power to hear such a pendant party claim does not exist, there is no need to proceed further and Wegman's motion must be granted.

 A. Judicial Power to Hear a Pendent Claim

 In Osborn v. Bank of the United States, 22 U.S. 738, 9 Wheat 738, 6 L. Ed. 204 (1824) Chief Justice Marshal wrote: "When a question to which the judicial power of the union is extended by the Constitution, forms an ingredient of the original cause, it is in the power of Congress to give the circuit courts jurisdiction of that case, although other questions of fact or law may be involved in it." Id. at 823, 6 L. Ed. 204. Although this concept of pendant jurisdiction was born in the early part of the 19th Century, it has proved a troublesome concept to apply.In Hurn v. Oursler, 289 U.S. 238, 53 S. Ct. 586, 77 L. Ed. 1148 (1933), the Supreme Court introduced the "cause of action" test for determining pendant jurisdiction holding that pendant jurisdiction could be exercised over two distinct grounds, one state and one federal, which were presented in support of a single cause of action, but could not do so where the state claim was itself a distinct and separate cause of action. Finally, in United Mine Workers v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1976) the court abandoned this "unnecessarily grudging" approach and formulated a new test to determine when a district court possessed the judicial power to exercise jurisdiction over a pendant state claim.

 Pendant jurisdiction, in the sense of judicial power, exists whenever there is a claim "arising under [the] Constitution, the laws of the United States, and treaties made or which shall be made, under their authority . . .," U.S. Const. Art. III, Section 2, and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional "case". The Federal claim must have substance sufficient to confer subject matter jurisdiction on the court. . . . The state and federal claims must derive from a common nucleus of operative fact. 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. at 725, 86 S. Ct. at 1138.

 Applying this test to the facts presently before me, I conclude that the Gibbs test of constitutional power to hear the state claim has been satisfied. The "nucleus of operative fact" here concerns the operation of the A.T.M. machine at the Canandaitgua Wegman's store. In order to decide both the state and federal claims, the Court will have to fully explore what transactions are conducted through the A.T.M., who benefits from these transactions and a variety of other common questions of fact. Thus, leaving aside for ...


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