UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
DISTRICT OF COLUMBIA FOR THE USE OF DULLES PLUMBING GROUP, INC., et al.,
Plaintiffs,
v.
SELECTIVE INSURANCE COMPANY OF AMERICA, Civil Action No. 19-1824 (RDM) Defendant / Third-Party Plaintiff,
MOSELEY CONSTRUCTION GROUP INC., et al.,
Third-Party Defendant.
MEMORANDUM OPINION
This straightforward commercial dispute raises a novel issue of federal jurisdiction.
Plaintiff Dulles Plumbing Group, Inc. (“Dulles”) worked as a subcontractor on a construction
project in the District of Columbia. Dulles did not receive full payment for that work. To
recover the money owed, Dulles sued Selective Insurance Company of America (“Selective”),
which acted as a surety on the project, in the Superior Court for the District of Columbia.
Selective removed the case to this Court based on diversity of citizenship—Selective is
incorporated and has its principal place of business in New Jersey, while Dulles is incorporated
and has its principal place of business in Virginia. Selective then filed a third-party complaint
against Moseley Construction Group, Inc. (“Moseley”), the general contractor that hired Dulles
1 to work on the project. Like Dulles, Moseley is incorporated and has its principal place of
business in Virginia; it was diverse, however, for purposes of Selective’s third-party complaint.
The parties eventually entered into a three-way settlement agreement that called for Moseley to
pay Dulles $175,000, but Moseley initially failed to pay the agreed-upon sum. After Dulles filed
a motion to enforce the settlement agreement, however, Moseley paid the amount owed. The
only remaining dispute before the Court is Dulles’s claim for attorneys’ fees and interest against
Moseley. Because Dulles and Moseley are both based in Virginia, the Court would not have
diversity jurisdiction over a state-law action between those two parties. The question is whether
the Court may nevertheless exercise supplemental jurisdiction to enforce the settlement
agreement between Dulles and Moseley. For the following reasons, the Court concludes that it
may not. Dulles’s motion to enforce must therefore be DENIED.
I. BACKGROUND
This case arises from a public construction project in the District of Columbia. Dkt. 1-1
at 4 (Compl. ¶ 4). As a general contractor on the project, Moseley executed a payment bond
with Selective, as surety, to “secure Moseley’s payment obligations to its subcontractors” on the
project. Id. at 4 (Compl. ¶ 5). Under that agreement, “Selective obligated itself to pay the
amounts that Moseley owes to its subcontractors on the [p]roject if Moseley itself refuses or is
unable to pay.” Id. at 5. On October 5, 2017, Moseley hired Dulles as a subcontractor to
perform certain work on the project. Id. at 5 (Compl. ¶ 6). Dulles completed its work on
October 12, 2018. Id. (Compl. ¶ 7). After “Mosely failed and refused to pay Dulles” an alleged
outstanding balance of $212,482, Dulles sued Selective in the Superior Court of the District of
Columbia on June 7, 2019, asserting that Selective was “liable to Dulles for unpaid monies . . . in
connection with the [p]roject.” Id. at 6 (Compl. ¶¶ 14–15).
2 On June 21, 2019, Selective removed the case to this Court, invoking diversity
jurisdiction. Dkt. 1 at 1–2 (citing 28 U.S.C. § 1441). Dulles is a Virginia corporation; Selective
is a New Jersey corporation. Id. at. 2. Selective filed its answer on July 8, 2019. Dkt. 10. A
week later, Selective filed a third-party complaint against Moseley, as permitted by Federal Rule
of Civil Procedure 14. Dkt. 12 (3d Party Compl.). On the basis of an indemnity agreement
between Moseley and Selective, Selective alleged that, “in the event that [it was] found liable to
the Plaintiffs for any of the claims asserted against it” in Dulles’s complaint, then Moseley is
“obligated to reimburse and indemnify Selective for that loss, and for all costs and expenses,
including interest, attorneys’ fees and consultant’s fees, Selective incurs in connection with” the
case. Id. at 3–4 (3d Party Compl. ¶ 14). Selective further alleged that its third-party claim fell
within the Court’s diversity jurisdiction, because it is a New Jersey corporation and Moseley is a
Virginia corporation. Id. at 2 (3d Party Compl. ¶ 5).
After the Court stayed the case so the parties could negotiate a settlement, Minute Order
(July 26, 2019), the parties executed a written settlement agreement “intended to resolve all of
the payment-related disputes” in the case on September 19, 2020, Dkt. 30 at 2. As part of the
agreement, Moseley promised to pay Dulles $175,000, within one business day of Dulles
providing certain paperwork. Dkt. 31-2 at 2. The settlement also provided that if a party needed
to bring legal action to enforce the agreement, then “the substantially prevailing Party shall be
entitled to an award of reasonable attorneys’ fees and costs.” Id. at 8.
Dulles alleges that it produced the required paperwork on Friday, September 20, 2019,
making Moseley’s $175,000 payment due on or before Monday, September 23, 2019. Dkt. 31-5
at 3. But according to Dulles, Moseley refused to pay unless Dulles tendered a letter warrantying
its work on the project, a condition not included in the settlement agreement. Id. The Court held
3 a hearing on the alleged breach on November 7, 2019, at which Moseley admitted that payment
was being conditioned on the warranty letter. Hrg. Tr. (Rough at 12–13). But Moseley asserted
that another entity involved in the construction project, Fifth Street Partners, controlled the funds
and was insisting on the letter. Id. Moseley also argued that the Court lacked jurisdiction to
enforce the settlement. Id. at 7–10. Dulles responded that the Court had inherent authority to do
so. Id. at 16.
Following the hearing, Dulles filed a motion to enforce the settlement agreement, seeking
the principal owed of $175,000, attorneys’ fees as provided in the settlement agreement, and
“sanctions” against Moseley, presumably in the form of interest, as permitted by D.C. law. Dkt.
31 at 2; Dkt. 31-5 at 1. Moseley opposed the motion, arguing that the Court lacked diversity
jurisdiction over claims by Dulles (a Virginia company) against Moseley (a Virginia company)
based on the settlement agreement. Dkt. 32 at 11–13. Moseley also argued that it had not
breached the settlement agreement. Id. at 18–21. Selective filed a brief as well, siding with
Dulles on the jurisdictional question and requesting that the Court enforce the settlement against
Moseley. Dkt. 33.
Months later, Dulles filed a notice alerting the Court that Moseley had paid the principal
sum of $175,000, but that Moseley had “not paid [Dulles’s] attorney’s fees . . . or any interest on
the settlement amount.” Dkt. 35 at 2. Selective also filed a notice, explaining that because
Dulles had “been paid in full for its work,” Selective had “no further obligation to Dulles.” Dkt.
36 at 2. Selective therefore requested that the Court dismiss Dulles’s claims against Selective.
Id. Selective further argued that any additional damages that Dulles might seek against Moseley
have “no bearing on Selective.” Id. In a follow-up notice, Dulles acknowledged that following
Moseley’s payment of the principal, “Selective has no further liability under its bond” and
4 Dulles’s claims against Selective “may be dismissed with prejudice.” Dkt. 37 at 2. Finally,
Moseley filed a post-payment notice as well, arguing that its payment of the principal rendered
moot any attempt by Selective to enforce the settlement agreement. Dkt. 38 at 3–5.
Briefing is now complete, and Dulles’s motion to enforce is ripe for decision.
II. LEGAL STANDARD
Federal courts are courts of limited subject-matter jurisdiction and “possess only that
power authorized by [the] Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 377 (1994). Given “the nature and limits of the judicial power of the United
States,” the Court must assess its jurisdiction “as a threshold matter” and may not decide the
merits of a case without first addressing the issue of jurisdiction. Steel Co. v. Citizens for a
Better Env’t, 523 U.S. 83, 94–95 (1998) (quoting Mansfield, C. & L.M.R. Co. v. Swain, 111 U.S.
379, 382 (1884)). The plaintiff bears the burden of establishing jurisdiction. Kokkonen, 511
U.S. at 377. It is axiomatic that “subject matter jurisdiction may not be waived” and that “no
action of the parties can confer subject-matter jurisdiction upon a federal court.” NetworkIP,
LLC v. F.C.C., 548 F.3d 116, 120 (D.C. Cir. 2008) (internal quotations and citations omitted).
The Court’s diversity jurisdiction extends to “all civil actions where the matter in
controversy exceeds the sum or value of $75,000” and the dispute is between “citizens of
different States.” 28 U.S.C. § 1332(a). Although Article III reaches further, 28 U.S.C. § 1332
requires complete diversity, which means that diversity jurisdiction extends to only those cases
in which no plaintiff is a citizen of the same state as any defendant. See Owen Equip. & Erection
Co. v. Kroger, 437 U.S. 365, 373–74 (1978). Diversity jurisdiction therefore “is lacking if there
are any litigants from the same state on opposing sides.” Saadeh v. Farouki, 107 F.3d 52, 55
(D.C. Cir. 1997) (internal quotation marks and citation omitted).
5 Although the Court must have a statutory basis for exercising jurisdiction, “it is well
established—in certain classes of cases—that, once a court has original jurisdiction over some
claims in the action, it may exercise supplemental jurisdiction over additional claims that are part
of the same case or controversy.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546,
552 (2005) (citing Mine Workers v. Gibbs, 383 U.S. 715 (1966)). The scope of supplemental
jurisdiction is itself cabined by statute. Federal courts have supplemental jurisdiction when
additional claims are so related to the claims over which the Court has original jurisdiction that
they “form part of the same case or controversy under Article III of the United States
Constitution.” 28 U.S.C. § 1367(a). Claims over which the Court may properly exercise
supplemental jurisdiction include those “that involve the joinder or intervention of additional
parties.” Id. But when jurisdiction is premised solely on diversity of citizenship, the Court does
not have supplemental jurisdiction over “claims by plaintiffs against persons made parties under
Rule 14 . . . of the Federal Rules of Civil Procedure . . . when exercising supplemental
jurisdiction over such claims would be inconsistent with the jurisdictional requirements of” the
diversity-jurisdiction statute, 28 U.S.C. § 1332. Id. § 1367(b).
III. ANALYSIS
Plainly, the initial suit by Dulles against Selective and the third-party claim by Selective
against Moseley fall within the Court’s diversity jurisdiction. Equally clear is that the Court
could not have exercised diversity jurisdiction over a freestanding lawsuit between Dulles and
Moseley, both of which are Virginia corporations. The question then is whether the Court may
invoke its supplemental jurisdiction to enforce a settlement agreement, signed by all three
parties, in favor of plaintiff Dulles against third-party defendant Moseley. This is apparently an
6 issue of first impression in this Circuit. For the following reasons, the Court concludes that it
does not have subject-matter jurisdiction over Dulles’s claim for attorneys’ fees and interest.
The parties devote much of their briefing to the threshold issue of whether a federal court
with jurisdiction over a lawsuit can ever retain jurisdiction to enforce a contract settlement in that
case. Dulles argues in support of its motion to enforce that “[i]t is well established that federal
district courts have the authority to enforce settlement agreements entered into by litigants in
cases pending before them.” Dkt. 31-5 at 4 (quoting Samra v. Shaheen Bus. & Inv. Grp., Inc.,
355 F. Supp. 2d 483, 493 (D.D.C. 2005)). Moseley responds that “federal courts lack inherent or
ancillary jurisdiction to enforce settlement agreements even if the subject of the settlement was a
federal lawsuit,” because “a motion to enforce a settlement agreement is a separate contract
dispute requiring an independent basis for jurisdiction.” Dkt. 32 at 15–16 (citing Kokkonen, 511
U.S. at 378–79). Dulles and Selective reply that courts lose jurisdiction to enforce settlement
agreements only after dismissal; so long as the suit remains pending, courts have ancillary
jurisdiction to enforce settlements. Dkt. 33 at 2–3; Dkt. 34 at 2.
Dulles and Selective have the better of this argument. Binding D.C. Circuit precedent
holds that Kokkonen bars enforcement of a settlement agreement only after the Court has
dismissed the underlying case. See T St. Dev. LLC v. Dereje & Dereje, 586 F.3d 6, 9–10 (D.C.
Cir. 2009) (noting that “nothing in Kokkonen precludes district courts from enforcing settlements
that occur during litigation”). When “a party seeks to enforce a settlement while the underlying
suit remains pending, then the district court has jurisdiction to enforce the related settlement.”
Id. at 11. Here, the case remains pending, and the Court therefore retains jurisdiction over the
settlement agreement. The cases that Moseley cites dealing with jurisdiction to enforce
settlement agreements after dismissal are inapposite.
7 But in both Kokkonen and T Street the settlement agreements at issue were between
parties who at one time were adversaries in a case within a district court’s jurisdiction. Those
cases thus demonstrate that the Court would have jurisdiction to enforce the settlement
agreement as it relates to claims between Dulles and Selective or between Selective and
Moseley. That is because Dulles and Selective—and Selective and Moseley—were diverse
parties for purposes of 28 U.S.C. § 1332. The question remains, however, whether the Court has
jurisdiction to enforce the settlement agreement between Dulles and Moseley, even though the
Court does not have, and never had, diversity jurisdiction over any case or controversy between
those two parties.
Moseley raises two arguments for why the Court lacks jurisdiction over Dulles’s motion
to enforce the settlement agreement. First, Moseley argues that Dulles’s claims under the
settlement agreement do not arise from the same “transaction or occurrence” as Dulles’s claims
against Selective under the surety agreement. Dkt. 32 at 9–11; see Fed. R. Civ. P. 14(a)(3) (“The
plaintiff may assert against the third-party defendant any claim arising out of the transaction or
occurrence that is the subject matter of the plaintiff’s claim against the third-party plaintiff.”)
(emphasis added). Second, and more substantially, Moseley argues that in diversity cases,
claims by a plaintiff against a third-party defendant require an independent jurisdictional basis.
Dkt. 32 at 11–14; see 28 U.S.C. § 1367(b).
Dulles counters that it is not bringing a new claim against Moseley at all, so no
independent basis for jurisdiction is necessary. Dkt. 31-5 at 4 (“[Dulles] is not trying to plead a
new claim against Moseley; it merely seeks to move the Court to action involving two parties
properly joined to this action.”). Along the same lines, Dulles argues that because Selective
supported its effort to enforce the settlement agreement, the Court’s jurisdiction over the third-
8 party complaint is sufficient to order payment from Moseley to Dulles. Dkt. 34 at 1–2.
Alternatively, Dulles contends that the Court may properly exercise ancillary jurisdiction to
enforce the settlement agreement in light of the Court’s authority to “‘function successfully, that
is, to manage its proceedings.’” Dkt. 34 at 3–4 (quoting T Street, 586 F.3d at 10).
With respect to Moseley’s first argument, the Court is persuaded that the parties’ dispute
over the settlement agreement arises from the same transaction as Dulles’s complaint against
Selective, as well as Selective’s complaint against Moseley. As the D.C. Circuit has recognized
in the related context of compulsory counterclaims, “[t]ransaction is a word of flexible meaning”
that “may comprehend a series of many occurrences.” Columbia Plaza Corp. v. Sec. Nat’l Bank,
525 F.2d 620, 625 (D.C. Cir. 1975) (quoting Moore v. N.Y. Cotton Exch., 270 U.S. 593, 610
(1926)). Courts look for a “logical relationship” between the claims, construing transaction
“generously to avoid the unnecessary expense inherent in multiplicious litigation.” Id. Here, all
the claims in the case arise from Dulles’s unpaid work on the construction project. Dulles’s
claim for payment against Selective, Selective’s claim for indemnification against Moseley, and
Dulles’s efforts to enforce the settlement agreement against Moseley are logically and factually
entwined and therefore constitute a single transaction for purposes of Rule 14 and 28 U.S.C.
§ 1367.
Dulles’s contention that the Court already had all the jurisdiction it needed to enforce the
settlement agreement might have worked for the payment of the principal amount of $175,000.
The settlement agreement conditioned both the dismissal of Dulles’s lawsuit against Selective
and the mutual release of claims between Dulles and Selective on the settlement payment from
Moseley to Dulles. Dkt. 31-2 at 3–4. Selective therefore had a strong interest in Moseley
making that principal payment, and the Court’s jurisdiction over Selective’s third-party suit
9 against Moseley might well have been sufficient to enforce the payment of principal from
Moseley to Dulles. But Moseley paid Dulles the principal balance of $175,000 as of January 6,
2020. Dkt. 38 at 3. As a result, all that remains in dispute is Dulles’s claim for attorneys’ fees
and interest, and all parties agree that Selective has no stake in that claim. Dkt. 36 at 2; Dkt. 37
at 2; Dkt. 38 at 3–5. The Court therefore cannot rely on its jurisdiction over Selective’s third-
party complaint against Moseley to award attorneys’ fees or interest to Dulles. That relief
requires a separate jurisdictional basis.
That brings the Court to the parties’ remaining arguments and the ultimate issue in this
case—whether the Court has supplemental jurisdiction over Dulles’s claim against Moseley
under the settlement agreement. The Supreme Court has held that federal courts sitting in
diversity do not have ancillary jurisdiction to hear a claim by a plaintiff against a third-party
defendant from the same state. Owen Equip., 437 U.S. at 377. In Owen Equipment, an Iowa
citizen whose husband was fatally electrocuted when “a steel crane next to which he was
walking came too close to a high-tension electric power line” filed a wrongful death action
against a Nebraska electric utility. Id. at 367. The utility filed a third-party complaint against the
crane company. Id. at 367–68. The plaintiff then amended her complaint to name the crane
company as a defendant, and the district court granted summary judgment to the electric utility.
Id. at 368. The case thus went to trial between the plaintiff and the third-party defendant crane
company. Id. But although the crane company had identified itself as a Nebraska Corporation,
evidence at trial revealed that its principal place of business was really in Iowa—the apparent
confusion owing to the way in which the Missouri River does (and does not) mark the border
between the two states. Id. at 368–69 & n.5. The crane company then moved to dismiss for lack
of diversity jurisdiction. Id. at 369. Although the Supreme Court recognized that federal courts
10 may sometimes exercise ancillary jurisdiction to “resolve an entire, logically entwined lawsuit,”
it held that such ancillary jurisdiction could not be used to defeat the complete diversity
requirement of 28 U.S.C. § 1332. Id. at 377. If plaintiffs were permitted to invoke ancillary
jurisdiction to bring claims against non-diverse third-party defendants, “[c]omplete diversity
[would be] destroyed just as surely” as if the plaintiff had sued the non-diverse party in the first
instance. Id. at 374. The Court therefore concluded that “neither the convenience of litigants nor
considerations of judicial economy can suffice to justify extension of the doctrine of ancillary
jurisdiction to a plaintiff’s cause of action against a citizen of the same State in a diversity case.”
Id. at 377.
In enacting 28 U.S.C. § 1367, Congress sought to simplify and to expand federal courts’
supplemental jurisdiction (encompassing what courts had called both ancillary and pendant
jurisdiction) and, in so doing, overrode certain Supreme Court precedent constraining the scope
of supplemental jurisdiction. See Allapattah, 545 U.S. at 557–58. But rather than override Owen
Equipment, Congress codified its result: “In any civil action of which the district courts have
original jurisdiction founded solely on [diversity], the district courts shall not have supplemental
jurisdiction . . . over claims by plaintiffs against persons made parties under Rule 14 . . . .” 28
U.S.C. § 1367(b). It is Rule 14 that permits third-party suits like the one between Selective and
Moseley in this case.
Few courts have had occasion to apply the rule of Owen Equipment and 28 U.S.C.
§ 1367(b) in the context of enforcing a settlement agreement, but the Eighth Circuit has decided
one case on point. See Alumax Mill Prods., Inc. v. Cong. Fin. Corp., 912 F.2d 996, 999, 1005
(8th Cir. 1990). The case arose from the collapse of Northern Aluminum Co. (“Northern”), a
Minnesota aluminum fabrication company, which set off a complex web of federal litigation. Id.
11 at 998–99. In one lawsuit, Alumax, one of Northern’s suppliers, sued Northern’s financier,
Congress Financial, and one of Northern’s accounting firms, Hodroff. Id. at 1000–01. Hodroff
then filed a third-party complaint against another accounting firm, McGladrey, and Alumax
amended its complaint to name McGladrey as well, even though Alumax and McGladrey were
both citizens of Illinois. Id. at 1001–03. Alumax then reached a settlement agreement with both
accounting firms, Hodroff and McGladrey, and Congress Financial appealed to challenge the
settlement. Id. at 1001.
On appeal, the Eighth Circuit held that although the district court had jurisdiction over
the portion of the settlement agreement between diverse parties Alumax and Hodroff, it did not
have jurisdiction over the part of the settlement agreement between the non-diverse parties,
Alumax and McGladrey. Id. at 1004–05; see also id. at 1005 (“The fact that Alumax’s
nonfederal claims against McGladrey, the third-party defendant and a citizen of the same state as
Alumax, arise out of the same common nucleus of operative facts as the claims for which there
are independent bases for federal jurisdiction cannot justify the extension of ancillary jurisdiction
over a nonfederal claim against an additional, non-diverse defendant.”). The Eighth Circuit thus
remanded the case to the district court to dismiss the plaintiff’s claims against the third-party
defendant for lack of jurisdiction. Id. at 1012.
Although the Eighth Circuit reached this decision before Congress enacted 28 U.S.C.
§ 1367, the court’s reasoning is persuasive and applies equally today. Following that logic, the
Court holds that it lacks subject-matter jurisdiction to enforcement the settlement agreement
between Dulles and Moseley. Nothing in that agreement permits the Court to deviate from the
clear rule that Owen Equipment and 28 U.S.C. § 1367(b) establish. The Court is therefore
12 prohibited from exercising jurisdiction over a claim asserted by a plaintiff against a non-diverse
third-party defendant in a diversity case.
In the face of this binding authority, Dulles’s references to the general purposes of
ancillary jurisdiction are unavailing. The Supreme Court in Owen Equipment considered those
same benefits of ancillary jurisdiction and still held that the district court lacked jurisdiction.
Owen Equip., 437 U.S. at 377. Whatever the scope of the Court’s power to “manage its
proceedings, vindicate its authority, and effectuate its decrees,” see Dkt. 34 at 3 (citing
Kokkonen, 511 U.S. at 380), Congress and the Supreme Court have mandated that such power
does not extend to ruling on Dulles’s motion for attorneys’ fees and interest under its settlement
with Moseley.
CONCLUSION
For the foregoing reasons, the Court will DENY Dulles’s motion to enforce the
settlement agreement as against Moseley; will DISMISS Dulles’s complaint against Selective
(which is the subject of the parties’ settlement) with prejudice; and will DISMISS Selective’s
third-party complaint against Moseley (which Selective plans to pursue in a separate suit)
without prejudice. As explained above, no separate claims by Dulles against Moseley were ever
presented to the Court, so there is no action between those parties to dismiss. In any event,
dismissals for lack of jurisdiction are generally without prejudice. See Fed. R. Civ. P. 41(b).
13 This decision therefore should pose no obstacle to Dulles’s bringing an action against Moseley in
Superior Court, should Dulles choose to do so.
A separate order will issue.
/s/ Randolph D. Moss RANDOLPH D. MOSS United States District Judge
Dated: October 7, 2020