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March 8, 1985


The opinion of the court was delivered by: BRIEANT

Brieant, J.

Plaintiff commenced this class action originally in New York State Supreme Court in August, 1984. On September 17, 1984, defendant Connecticut National Bank ("CNB") removed the action to this Court pursuant to 28 U.S.C. § 1441 (a) based on a federal question and diversity. All of the defendants except David Kols have filed cross-claims against one another.

 By motion dated January 9, 1985, which was argued and fully submitted as of January 28, 1985, defendants Southeast Bank ("SEB") and Arrow Airways ("Arrow") move this Court to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted or, in the alternative, to remand the action to the state court.

 Plaintiff's claims arise out of the alleged default by Value Vacations Inc. ("Value") which "stranded" Mr. Neilan and other Passengers who had contracted with Value for charter travel services. According to the complaint and as represented to the Court by counsel at oral argument, Value was in the business of selling travel services as a Public Charter Tour Operator. These services included primarily air transportation for which Value would enter into bulk purchase contracts with air carriers for flights to be performed on certain dates. In this case, Value contracted with Arrow for such flights and then marketed them, directly and through travel agents, to consumers. Mr. Neilan and the customers of Value he seeks to represent as a class allegedly lost their prepayments for charter flights which were never delivered. The complaint alleges that the actions of all of the defendants violated federal regulations governing public charter operations. In addition there are pendent state law claims pleaded, sounding in breach of contract, breach of fiduciary duties, conversion, and violation of New York General Business §§ 349, 350, et seq.

 In order to understand the interrelationship of the named defendants, it i necessary to consider pertinent federal regulations promulgated under the Federal Aviation Act ("FAA"), 49 U.S.C. § 1301 et seq. These regulations in substance require a "tour operator" such as Value to file with the Civil Aeronautics Board ("CAB") a prospectus, a surety bond, and a depository agreement executed by a federally insured bank. 14 C.F.R. §§ 380.25, 380.34 (1984). The regulations also govern the terms of the contract between the tour operator and passengers, and require that the consumer payments be deposited into escrow accounts from which the bank may pay the air carrier only fixed amounts at fixed dates referent to the date of the flight(s). 14 C.F.R. §§ 380.32, 380.34(b)(2), 380.35 (1984). Thus the depository bank or banks assume the duties of escrowee pursuant to complex CAB regulations, our description of which has been greatly abbreviated. According to the FAA, this regulatory scheme was established "in order to protect travelers and shippers by aircraft operated by (charter operators)." 49.U.S.C. § 1371(n)(2).

 Against this background, it appears that CNB and SEB both acted as depository banks pursuant to federal law. Arrow contracted with SEB in order to comply with CAB rules concerning the deposit of customer prepayments to Arrow for air transportation. Value contracted with CNB for the same purpose of compliance. In the Value-CNB agreement (Public Charter Depository Agreement dated February 28, 1983), CNB agreed to disburse finds from its escrow account to Arrow's depository bank, SEB. It is alleged that CNB disbursed funds to SEB for scheduled charter flights that were subsequently cancelled, but that neither SEB nor Arrow has refunded these funds to CNB. CNB currently holds a stake of approximately $600,000.00 which it is willing to refund to the proper plaintiffs. (Hearing Transcript, January 23, 1985, p. 17). Value appears to be insolvent.

 Defendant Northwestern National Insurance Company ("Northwestern") acted as a guarantor or surety of Value's contracts with its customers, issuing a bond in the amount of $200,000.00 as required by the FAA, 49 U.S.C. § 1371(n)(2) and by CAB regulation, 14 C.F.R. § 380.34(b)(1). The importance of the claims against the several defendants becomes clear when the amount of the bond is compared to claimed damages which are in excess of two million dollars.

 Although the disputed liabilities of the defendants other than Northwestern constitute the real grievances pleaded by Neilan for himself and the proposed consumer class, the instant motion to dismiss or remand requires resolution first of jurisdictional issues as to which the claim against Northwestern possesses great significance. The Court must determine whether it has federal subject matter jurisdiction before it entertains a motion based upon Rule 12(b)(6), F.R.Civ.P. for failure to state a claim. If there is no jurisdictional power to hear the case, it would be improvident for the district court to enter final judgment for the defendant on the ground that plaintiff has failed to state a claim only to have it determined upon appeal that plaintiff has stated a claim but that it is a nonfederal cause of action which belongs in state court. See generally, 14 C. Wright & A. Miller, Fed. Prac. & Procedure § 3739 at 757-63 (1976). Furthermore, the removal statute dictates remand rather than dismissal in such a case: "If at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, the district court shall remand the case ...." 28 U.S.C. § 1447(c). Thus the issue before the Court is where there is federal subject matter jurisdiction over any of plaintiff's claims, and more specifically, whether there is pendent or ancillary jurisdiction over nonfederal claims or nonfederal defendants.

 The removal petition asserts that this Court has original jurisdiction under 28 U.S.C. §§ 1331 and 1332. Reliance upon § 1331 raises the problem, discussed below, of whether the FAA confers a private right of action for plaintiff on the facts pleaded. Section 1332 might have supported removal since the plaintiff and all of the defendants appear to be diverse, but the ten thousand dollar requirement is absent. Although the complaint seeks over ten thousand dollars in damages, these damages represent an aggregate of the proposed class injuries; Mr. Neilan's damages amount to only a few hundred dollars. Under the rule of Zahn v. International Paper Co. 414 U.S. 291, 38 L. Ed. 2d 511, 94 S. Ct. 505 (1983), this does not satisfy the jurisdictional amount for diversity suits.

 There does exist one clear jurisdictional grant applicable to this case. Section 1352 of Title 28 provides that "[t]he district courts shall have original jurisdiction, concurrent with State courts, of any action on a bond executed under any law of the United States, except matters within the jurisdiction of the Court of International Trade under section 1582 of this title." As plaintiff is suing on the required statutory bond issued by Northwestern to Value, a bond which states that it "shall inure to the benefit of any and all charter participants to whom [Value] may be held legally liable," plaintiff's "Third Cause of Action" could have been filed originally in federal court. Since 28 U.S.C. § 1352 would have provided original federal subject matter jurisdiction, removal would be proper under 28 U.S.C. § 1441(a). the problem with relying on § 1352 is that it embraces one federal claim against only three of the named defendants, Value, Northwestern, and Kols d/b/a Value. A suit on the bond does not relate automatically to defendants SEB, CNB and Arrow. Therefore we face the issue of whether plaintiff, having federal subject matter jurisdiction over Northwestern, Value and Kols pursuant to § 1352, can also assert nonfederal arising out of related events against nonfederal parties in one federal court action by means of ancillary or pendent party jurisdiction.

 When and how a federal judicial forum can entertain state law claims which are pendent or ancillary to a federal claim presents an intricate query. Add to this the question of whether the principles governing pendent jurisdiction extend to "confer jurisdiction over a party as to whom on independent basis of federal jurisdiction exists" and you have a "subtle and complex question with far-reaching implications." Aldinger v. Howard, 427. U.S. 1, 2-3 (1976).

 Before the Supreme Court's decision in Aldinger, the law in this Circuit held clearly that a district court had the power to hear a state claim against a party not liable on the federal claim, provided that the "common nucleus" test of United Mineworkers v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966), was satisfied. See generally Leather's Best v. S.S. Mormaclynx, 451 F.2d 800 (2d Cir. 1971); Astor-Honor, Inc. v. Grosset & Dunlap, Inc., 441 F.2d 627 (1971); and Uniroyal, Inc. v. Heller, 65 F.R.D. 83 (S.D.N.Y. 1974). In Leather's Best the Court of Appeals held that a plaintiff properly in federal court by virtue of admiralty jurisdiction could litigate a factually related state tort claim against an additional defendant pier operator or warehouseman who was named only with respect to the state claim. This conclusion rested on the identical nature of the facts underlying the state and federal claims, what the Gibbs Court had referred to in a now familiar phrase, "common nucleus of operative fact." 451 F.2d at 809-811. The Leather's Best opinion also reasoned by analogy from the federal court's ancillary jurisdiction to hear compulsory counterclaims and third-party claims pursuant to Rules 13(a) and 14(a), F.R.Civ.P., id. at 809-11. because no purpose would be served for a district court to dismiss a nonfederal defendant if that same party thereafter could be impleaded properly under Rule 14.

 However, in Aldinger v. Howard, supra, the Supreme Court cast considerable doubt on the rule of the Second Circuit. Aldinger held that in the context of a Title 42 § 1983 civil rights action, no pendent or ancillary jurisdiction exists as to a defendant who would not otherwise be a party in federal court to the federal question claim. Conceding that the principles governing pendent jurisdiction and ancillary jurisdiction had been, in effect, bridged by the Court's decision in Moore v. N.Y. Cotton Exchange, 270 U.S. 593, 70 L. Ed. 750, 46 S. Ct. 367 (1926), together with adoption of the kind of "transactional" test enunciated in Gibbs, the Aldinger Court nevertheless declined to exercise the kind of pendent or ancillary party jurisdiction that previously had developed in the lower courts.

 The opinion in Aldinger asserts two separate reasons for refusing to permit pendent party jurisdiction in the case before it. First, the court stated that the addition of a nonfederal party claim "would run counter to the well established principle that federal courts, as opposed to state trial courts of agents jurisdiction, are courts of limited jurisdiction marked out by Congress." 427 U.S. at 15. Distinguishing the ...

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