The opinion of the court was delivered by: Kaplan, District Judge.
The principal question presented by the pending cross-motions
is whether the Court has subject matter jurisdiction over the
so-called cross-claim filed by third party defendant Bruce
Winston against plaintiff Harry Winston, Inc. ("HWI").
The background of this bitter family dispute is summarized in
the Court's recent opinion on a discovery matter, familiarity
with which is assumed.*fn1 Briefly stated, HWI, which now is
controlled by Ronald Winston, here claims that defendant Kathleen
Kerr, a former officer and employee, betrayed the company by
improperly revealing corporate confidences to Ronald's brother,
Bruce, for use by Bruce in his battles with Ronald and the
company. As Ms. Kerr acted pursuant to an agreement with Bruce
pursuant to which Bruce agreed to pay her up to $1 million for
her troubles, she understandably impleaded Bruce. Bruce in turn
filed a purported cross-claim*fn2 against HWI in which he
alleges, both in his individual capacity and as the beneficial
owner of HWI stock, that HWI's institution and prosecution of
this action is a waste of corporate assets.
HWI has moved to dismiss Bruce's claim for lack of subject
matter jurisdiction and failure to state a claim upon which
relief may be granted. Bruce has cross-moved for leave to amend
his claim, if necessary, to cure alleged pleading defects upon
which HWI's motion relies.
Bruce's claim against HWI alleges no independent basis of
federal subject matter jurisdiction. Indeed, Bruce concedes that
there is none.*fn3 Rather, he contends that the Court has
jurisdiction because his Rule 14(a) claim arises out of the same
transaction and occurrence as the complaint and therefore comes
14(a)*fn4 and, in any case, that it comes within the
supplemental jurisdiction of the Court under Section 1367 of the
Rule 82 provides that the Federal Rules of Civil Procedure
"shall not be construed to extend or limit the jurisdiction of
the United States district courts. . . ."*fn6 Nor could they do
so given the terms of the Rules Enabling Act.*fn7 In
consequence, Bruce's contention that the Court has subject matter
jurisdiction because his claim comes within Rule 14(a) is
The Section 1367 argument is more colorable. Section 1367 in
pertinent part confers supplemental jurisdiction "over all . . .
claims that are so related to claims in the action within . . .
[the court's] original jurisdiction that they form part of the
case or controversy under Article III of the United States
Constitution."*fn8 It then goes on to define circumstances in
which a district court nevertheless may decline to exercise
supplemental jurisdiction.*fn9 The statute therefore
contemplates a two-tiered analysis. The first step is to
determine whether the claim at issue comes within the court's
power. If so, the second step requires determination whether that
power should be exercised.
Section 1367(a), which defines the scope of a district court's
power to decide a claim, simply codifies the preexisting holding
of the Supreme Court in the Gibbs*fn10 case.*fn11 A court
thus has the power to exercise supplemental jurisdiction over
state claims if they derive from "a . . . nucleus of operative
fact" common to the jurisdiction conferring claim and if they
"are such that [the claimant] would ordinarily be expected to try
them all in one judicial proceeding. . . ."*fn12
Bruce's Rule 14(a) claim does not satisfy this standard. HWI's
claim against Kerr is that she faithlessly entered into an
arrangement with Bruce in 1996 pursuant to which she has divulged
trade secrets and confidential information to him ever since.
Bruce's claim against HWI is that its commencement of this action
in 1998 and its subsequent prosecution involve an imprudent use
of corporate assets and was otherwise improper. Thus, while the
actions by Kerr of which HWI complains provided the occasion for
the HWI action that Bruce attacks, the conduct complained of by
HWI and the conduct complained of by Bruce have nothing in
Courts have taken differing views as to the degree of closeness
that must exist between the jurisdiction conferring claim and the
putative supplemental claim in order to come within their
jurisdiction.*fn13 Some have required only a logical
relationship between the two claims, while others hold that both
claims must involve common operative facts.*fn14 Whichever view
is taken, however, Bruce's claim does not get over the hurdle.
There are few if any operative facts common to the two claims.
HWI's claim against Kerr depends upon what information she
revealed to Bruce and whether she breached any duty in doing so.
Bruce's claim against HWI, on the other hand, asserts that HWI's
pursuit of the case against Kerr was imprudent and tainted by
conflicts of interest. It therefore turns on whether the HWI
board was conflicted and whether it acted prudently, given the
information before it when it acted. This last point is
especially important in that it answers Bruce's contention that
both claims arise from a common nucleus because the merits of
HWI's claim against Kerr must be decided in resolving his claim
against HWI. For what ultimately is important with respect to
Bruce's claim against HWI is not whether HWI prevails on its
claim against Kerr, but whether the board acted within the
permissible scope of its discretion in deciding to pursue the
claim in the first place.*fn15 Those are two different
Nor is Bruce materially aided by the looser logical
relationship test employed by some courts. He contends that there
must be a logical relationship between both claims because his
claim against HWI is based on HWI's pursuit of this case against
Kerr. But this facile ...