United States District Court, Southern District of New York
September 20, 1990
UNITED STATES OF AMERICA, PLAINTIFF,
A & N CLEANERS & LAUNDERERS, INC., BEN FORCUCCI, MARINE MIDLAND BANK, N.A., JORDAN W. BERKMAN, JOHN A. PETRILLO, JOSEPH CURTO AND MARIO CURTO, DEFENDANTS. MARINE MIDLAND BANK, N.A., THIRD-PARTY PLAINTIFF, V. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, ST. PAUL MERCURY INSURANCE COMPANY, UTICA MUTUAL INSURANCE COMPANY, THE NORTH RIVER INSURANCE COMPANY, UNITED STATES FIRE INSURANCE COMPANY, THIRD-PARTY DEFENDANTS.
The opinion of the court was delivered by: Sweet, District Judge.
Third-party defendant Utica Mutual Insurance Company
("Utica") has moved to dismiss the third-party claim of
third-party plaintiff Marine Midland Bank, N.A. ("the Bank")
for lack of subject matter jurisdiction.*fn1 Because the claim
falls within the court's pendent party jurisdiction, the motion
The United States filed the underlying complaint on October
16, 1989, seeking recovery under § 107 of the Comprehensive
Environmental Response, Compensation, and Liability Act
("CERCLA"), 42 U.S.C. § 9607 (as amended by the Superfund
Amendments and Reauthorization Act of 1986, Pub.L.No. 99-499,
100 Stat. 1613), for costs incurred to clean up toxic chemicals
allegedly released by the defendant A & N
Cleaners & Launderers, Inc. ("A & N") which are suspected of
having contaminated the groundwater supply for the community of
Brewster, New York.*fn2 The Bank is made a defendant under
CERCLA as the operator of the premises from which the chemicals
were allegedly released.
On February 16, 1990, the Bank, a New York corporation,
brought a third-party action against its insurers, including
Utica, seeking indemnification for any losses suffered in the
primary suit. According to the Bank, third-party defendants
Utica and United States Fire Insurance Company ("U.S. Fire")
are New York corporations, while the other third-party
defendants, St. Paul Fire and Marine Insurance Company, St.
Paul Mercury Insurance Company, and North River Insurance
Company are all citizens of other states.
Utica asserts that there is no independent basis for federal
jurisdiction over the Bank's claim against it, and that any
assertion of ancillary or pendent party jurisdiction must fail
in light of Finley v. United States, 490 U.S. 545, 109 S.Ct.
2003, 104 L.Ed.2d 593 (1989). Therefore, Utica seeks to have
the Bank's claim dismissed for lack of subject matter
It is axiomatic that every cause of action in a federal court
must have a jurisdictional basis. An assertion of federal
jurisdiction must meet both a constitutional and a statutory
standard: the claim must first of all be within the scope of
Article III, and Congress must have exercised its
constitutional authority to confer jurisdiction on the federal
courts. See Owen Equipment & Erection Co. v. Kroger,
437 U.S. 365, 372, 98 S.Ct. 2396, 2401-02, 57 L.Ed.2d 274 (1978).
In the present case, since all of the Banks's third-party
claims are based on state law, there is no federal question
jurisdiction under 28 U.S.C. § 1331. Nor is there diversity
jurisdiction under 28 U.S.C. § 1332, because the Bank and Utica
(and U.S. Fire) are all citizens of New York. The only basis
for federal jurisdiction over these claims is the doctrine of
"pendent party" jurisdiction, as claims which are related to
the underlying CERCLA complaint.
Pendent jurisdiction in general is an exception to the strict
requirement of explicit statutory authorization for federal
jurisdiction. It permits the court to extend its reach beyond
the limits set by Congress, provided that it remains within the
boundaries of Article III.
Pendent 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, § 2, and the relationship between that claim
and the state claim permits the conclusion that the
entire action before the court comprises but one
United Mine Workers v. Gibbs, 383 U.S. 715
, 725, 86 S.Ct. 1130,
1138, 16 L.Ed.2d 218 (1966) (emphasis, brackets, and ellipsis
in original). The required relationship exists if the state and
federal claims "derive from a common nucleus of operative
fact." Id. However, the existence of the required relationship
between the claims does not end the inquiry, for
[i]t has consistently been recognized that pendent
jurisdiction is a doctrine of discretion,
not of plaintiff's right. Its justification lies
in considerations of judicial economy, convenience
and fairness to litigants; if these are not
present, a federal court should hesitate to
exercise jurisdiction over state claims. . . .
Id. at 726, 86 S.Ct. at 1139 (footnote omitted).
There are two distinct types of pendent jurisdiction which a
federal court may assert. The more common one is "pendent
claim" jurisdiction — "jurisdiction over non-federal claims
between parties litigating other matters properly before the
court." Finley v. United States, 490 U.S. 545, 109 S.Ct. 2003,
2006, 104 L.Ed.2d 593 (1989). Generally, if a plaintiff with a
pendent claim can meet the Gibbs "common nucleus of operative
fact" standard then the discretionary factors of judicial
economy, convenience, and fairness will also support
consolidated resolution of the claims, and the court will
assert pendent jurisdiction. See, e.g., Hagans v. Lavine,
415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974); Ismail v.
Cohen, 899 F.2d 183 (2d Cir. 1990); State of New York v. Shore
Realty Corp., 759 F.2d 1032 (2d Cir. 1985).
The second type of pendent jurisdiction is "pendent party"
jurisdiction — "jurisdiction over parties not named in any
claim that is independently cognizable by the federal court."
Finley, 109 S.Ct. at 2006. Because this type of jurisdiction
involves bringing new parties into a forum which admittedly
lacks jurisdiction over the claims against them, it is less
certain that it will promote judicial economy, convenience, and
fairness to the litigants. As a result, courts have generally
been more reluctant to assert pendent party jurisdiction than
pendent claim jurisdiction. See, e.g., Aldinger v. Howard,
427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1976); Owen Equipment &
Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d
274 (1978); Finley.
In contrast to the pendent claim situation — in which the
existence of a constitutionally sufficient relationship between
the claims is sufficient to give the court the power over the
claim, Gibbs, 383 U.S. at 725, 86 S.Ct. at 1138 — when faced
with a pendent party situation, the Court "will not assume that
the full constitutional power has been congressionally
authorized, and will not read jurisdictional statutes broadly."
Finley, 109 S.Ct. at 2007. "Before it can conclude that
[pendent party] jurisdiction exists, a federal court must
satisfy itself not only that Article III permits it, but that
Congress in the statutes conferring jurisdiction has not
expressly or by implication negated its existence." Aldinger,
427 U.S. at 18, 96 S.Ct. at 2422. See also Kroger, 437 U.S. at
377, 98 S.Ct. at 2404-05.
Thus, following Finley, a court analyzing a pendent party
situation must consider: (1) whether the claims satisfy the
Gibbs "common nucleus" test; (2) whether the statute conferring
federal jurisdiction for the primary claim "expressly or by
implication" prevents the exercise of jurisdiction over the
pendent claim; and (3) whether the considerations of judicial
economy, convenience, and fairness to the litigants favor
having the court decide all of the claims together. See also
640 Broadway Renaissance Co. v. Cuomo, 714 F. Supp. 686, 690
(S.D.N.Y. 1989) (under Finley, three-tiered analysis must be
applied to determine pendent party jurisdiction).
A. Constitutional Authority
In the present case, the CERCLA claim against the Bank and
the Bank's claims for indemnification "derive from a common
nucleus of operative fact," as Gibbs requires. 383 U.S. at 725,
86 S.Ct. at 1138. The question of the insurers' duty to
indemnify the Bank is related to the issue of the Bank's
underlying liability, even though it also involves issues of
interpretation and application of the contracts of insurance.
Impleader of insurers by means of a third party complaint is an
accepted and approved form of third party practice in this
circuit. See, e.g., Dery v. Wyer, 265 F.2d 804
(2d Cir. 1959).
Further support for this conclusion comes from the Federal
Rule of Civil Procedure themselves. Under Rule 14(a), a
defendant may implead "a person not a party to the action who
is or may be liable to the third-party plaintiff for all or
part of the plaintiff's claim against the third-party
plaintiff." Of course, under Rule 82, the rules "shall not be
construed to extend or limit the jurisdiction of the United
States district courts." The fact that Rule 14(a) contemplates
impleader of an indemnitor does not permit the Bank to evade
the Gibbs constitutional standard. Nevertheless, 14(a)
indicates that the drafters of the Rules considered the issues
of indemnification and insurance to be sufficiently related to
the underlying issues of liability that they should be tried as
part of the same case.
B. Statutory Authority
Once the Gibbs standard has been met, the next step is to
consider the federal statute which grants jurisdiction in the
underlying action. Jurisdiction over CERCLA cases is conferred
on the federal courts by § 113(b): "Except as provided in
subsections (a) and (h) of this section, the United States
district courts shall have exclusive original jurisdiction over
all controversies arising under this chapter, without regard to
the citizenship of the parties or the amount in controversy."
42 U.S.C. § 9613(b). Because there is no express negation of
pendent party jurisdiction, the crucial question is whether a
grant of jurisdiction over "all controversies arising under"
CERCLA operates as an implied negation of jurisdiction over
non-CERCLA claims against parties not involved in any of the
In Aldinger, the Supreme Court held that the relevant
consideration was whether "Congress has addressed itself to the
party as to whom jurisdiction pendent to the principal claim is
sought." 427 U.S. at 16, 96 S.Ct. at 2421 (emphasis in
original). The Court held that the jurisdiction-conferring
clause of 28 U.S.C. § 1343, which covered "any civil action
authorized by law to be commenced," implied that pendent party
jurisdiction was not available, because non-federal causes of
action against new parties were not "authorized by" federal
law. Id. at 17, 96 S.Ct. at 2421-22. Following similar
reasoning, the Kroger Court held that because the federal
diversity statute, 28 U.S.C. § 1332, clearly defined the scope
of federal jurisdiction by reference to the parties involved,
the statute could not support jurisdiction over claims
involving non-diverse parties. Kroger, 437 U.S. at 373-77, 98
S.Ct. at 2402-05.
Most recently, in Finley, the Court once again confirmed that
the particular jurisdiction-conferring language is of primary
importance, holding that the Federal Torts Claims Act ("FTCA")
could not support pendent party jurisdiction, because the
statute defined jurisdiction by reference to the parties
The FTCA, [28 U.S.C.] § 1364(b), confers
jurisdiction over "civil actions on claims against
the United States." It does not say "civil actions
on claims that include requested relief against the
United States," nor "civil actions in which there
is a claim against the United States" —
formulations one might expect if the presence of a
claim against the United States constituted merely
a minimum jurisdictional requirement, rather than a
definition of the permissible scope of FTCA
Finley, 109 S.Ct. at 2008.*fn4
Since Finley, the Second Circuit has had occasion to consider
the problem of pendent party jurisdiction in Roco Carriers,
Ltd. v. M/V Nurnberg Express, 899 F.2d 1292 (2d Cir. 1990). The
plaintiff brought an admiralty suit to recover for loss of
cargo and sought to join a claim against the trucking company
which had transported the cargo to the dock. Because the second
action was based solely on state law, jurisdiction
was based on pendent party jurisdiction.*fn5 Jurisdiction for
the admiralty claim was based on 28 U.S.C. § 1333(1), which
confers jurisdiction over "[a]ny civil case of admiralty or
After discussing post-Finley cases from other circuits in
which pendent party jurisdiction was rejected under the Federal
Employers' Liability Act ("FELA"), 45 U.S.C. § 51, 56,*fn6
and the Employee Retirement Income Security Act ("ERISA"),
29 U.S.C. § 1132(e),*fn7 and was upheld under the Foreign
Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1330,*fn8 the
court noted that the admiralty language "does not contain a
limitation as to a certain category of parties, as does the
FTCA and the FELA. Nor does it contain a limitation as to a
certain category of claims. Rather, it creates jurisdiction
over an admiralty `case.'" Roco, 899 F.2d at 1296.*fn9
In considering the CERCLA jurisdiction language at issue
here, § 9613(b), the grant of jurisdiction over "controversies
arising under" CERCLA, is more like the grant of admiralty
jurisdiction over any "case" in admiralty than it is to the
party-oriented jurisdiction language of the FTCA or FELA.
Nowhere does § 9613(b) speak of the particular claims which are
to be allowed in federal actions, nor does it specifically
address the parties involved in the claims. Cf. Bruce v.
Martin, 724 F. Supp. 124, 130 (S.D.N.Y. 1989) (suggesting that
Finley forecloses pendent party jurisdiction only under
statutes which confer jurisdiction over claims against
particular parties). Therefore, following Finley and Roco,
pendent party jurisdiction is available under CERCLA. See also
New Jersey Department of Environmental Protection v. Gloucester
Environmental Management Services, Inc., 719 F. Supp. 325
(D.N.J. 1989) (also finding pendent party jurisdiction under
Further support for the conclusion that CERCLA does not
implicitly foreclose pendent party jurisdiction comes from the
statute itself. Section 9613(f)(1) provides that
[a]ny person may seek contribution from any other
person who is liable under section 9607(a) of this
title, during or following any civil action under
section 9606 or under section 9607(a) of this
title. Such claims shall be brought in accordance
with this section and the Federal Rules of Civil
Procedure, and shall be governed by federal law.
42 U.S.C. § 9613(f)(1). Utica correctly points out that this
section does not apply to the present claim, because Utica is
not itself "liable under section 9607(a)" (see n. 2, supra).
Nevertheless, the affirmative grant of jurisdiction over
certain types of indemnification claims does not, as Utica
argues, indicate a congressional intention to limit
jurisdiction over third-parties (Third-Party Defendant's Brief
at 11). Rather, this section is designed to merely to clarify
the court's power over third-party claims. Section 113(f) was
added to CERCLA by the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"), Pub.L. No. 99-499, 100 Stat. 1613 (1986).
As the legislative history makes clear, "[Section 113(f)]
confirms a Federal right of contribution or indemnification for
persons alleged or held to be liable under [CERCLA]. . . . This
provision allows all
counterclaims, cross-claims, and third-party actions to be
dealt with in a single action if the court is so inclined."
H.R.Rep. No. 253, 99th Cong., 1st.Sess., pt. 1, at 79-80
(1985), reprinted in 1986 U.S.Code Cong. & Admin. News 2835,
Far from suggesting that Congress meant by
implication to preclude pendent party jurisdiction under
CERCLA, this history strongly supports the conclusion that such
jurisdiction should be allowed.
The final step in the analysis is to determine whether the
Gibbs discretionary factors favor the exercise of pendent party
jurisdiction. Gibbs, 383 U.S. at 726, 86 S.Ct. at 1139; see
also 640 Broadway Renaissance, 714 F. Supp. at 690; Bruce v.
Martin, 724 F. Supp. at 130 (S.D.N.Y. 1989). Because diversity
jurisdiction exists over the Bank's claims against three of its
insurers, those claims will proceed in the federal forum
regardless of whether the claim against Utica is dismissed. In
this situation, allowing the Bank to litigate all of its
third-party claims in one proceeding will not adversely affect
judicial economy, and will promote convenience and fairness to
all of the litigants.
Applying the three-step test enunciated by the Supreme Court
to the question of whether pendent party jurisdiction exists
over the Bank's third-party claim against Utica, the answer is
affirmative. The claim arises from a nucleus of operative fact
common to the underlying CERCLA claim. Furthermore, the
jurisdiction-conferring language in CERCLA does not expressly
or impliedly negate this court's assertion of pendent party
jurisdiction. Finally, discretionary factors weigh in favor of
accepting jurisdiction over the claim so that all of the Bank's
insurance claims may be tried in a single proceeding. Utica's
motion for dismissal because of lack of subject matter is
It is so ordered.