The opinion of the court was delivered by: Spatt, District Judge.
May the Court assert pendent-party jurisdiction over a
defendant in a diversity action when the amount in controversy
on the claim asserted against that defendant is concededly
below the requisite jurisdictional amount?
For the reasons that follow, this Court is of the view that
it may not.
The following facts are derived from the plaintiffs' amended
Plaintiff C.D.S. Diversified, Inc. ("CDS"), is a New York
corporation having its principal place of business in the State
of New York. The defendant Ticor Title Insurance Company
("Ticor"), is organized under the laws of California, and
maintains its principal place of business in Arizona.
Concededly, there is complete diversity of citizenship among
all of the parties.
On February 9, 1987, CDS entered into a sale/leaseback
agreement with the defendant FFCA/IIP 1985 Property Company
("FFCA")*fn1 in connection with property located at 957 Marcy
Avenue, Brooklyn, New York, operated as a Burger King
restaurant. The agreement provided that FFCA was to purchase
all real property and equipment and, in turn, lease it back to
CDS for a period of eight to twenty years.
As a condition of entering into this sale/leaseback
arrangement, CDS was required to obtain a rent insurance policy
with the defendant United Guaranty Insurance Company ("United
Guaranty"), to insure rental payments to FFCA for a period of
ten years. In addition, CDS was required to post an $80,000
letter of credit as a further guaranty of rent. Finally, CDS
was required to deposit approximately $36,000*fn2 in escrow
with Ticor for renovation and/or repair expenses.
Ticor acted as the title insurer as well as escrow agent for
the sale/leaseback transaction.
CDS satisfied these conditions, except admittedly failed to
pay the September 1988 rental payment of $12,135.42 owed to
FFCA. As a result, FFCA terminated the lease for non-payment.
Although FFCA did not collect the rent under the insurance
policy with United Guaranty, it did collect on the letter of
credit from Guardian Bank. In addition, Ticor released the
$36,000 that was held in escrow to FFCA.
The plaintiffs commenced this action in August 1989 against
FFCA, Ticor and United Guaranty,*fn3 alleging seven causes of
action, including wrongful termination of the lease,
conversion, fraud and breach of contract. Federal jurisdiction
is predicated on diversity of citizenship (see Amended
Complaint at p. 1; see also 28 U.S.C. § 1332).
The plaintiffs' seventh cause of action is against Ticor for
allegedly converting the plaintiffs' $36,000 which was held in
escrow (see Amended Complaint ¶¶ 77-85). The plaintiffs also
allege that Ticor conspired with FFCA in converting this
amount. This is the only cause of action alleged against Ticor.
Defendant Ticor now moves pursuant to Fed.R.Civ.P. 12(b)(1)
to dismiss for lack of subject matter jurisdiction, since the
amount in controversy does not exceed the ...