Revere Copper and Brass Incorporated v. The Aetna Casualty and Surety Company, and Third-Party v. George A. Fuller Company, Inc., Third-Party

426 F.2d 709, 12 A.L.R. Fed. 389, 14 Fed. R. Serv. 2d 12, 1970 U.S. App. LEXIS 9338
CourtCourt of Appeals for the Third Circuit
DecidedMay 8, 1970
Docket28413_1
StatusPublished
Cited by152 cases

This text of 426 F.2d 709 (Revere Copper and Brass Incorporated v. The Aetna Casualty and Surety Company, and Third-Party v. George A. Fuller Company, Inc., Third-Party) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Revere Copper and Brass Incorporated v. The Aetna Casualty and Surety Company, and Third-Party v. George A. Fuller Company, Inc., Third-Party, 426 F.2d 709, 12 A.L.R. Fed. 389, 14 Fed. R. Serv. 2d 12, 1970 U.S. App. LEXIS 9338 (3d Cir. 1970).

Opinion

LEWIS R. MORGAN, Circuit Judge.

This is an interlocutory appeal brought pursuant to Title 28, U.S.C. § 1292(b), from an order of the District Court for the Northern District of Alabama denying a motion by Revere Copper and Brass Incorporated (hereafter Revere) the original plaintiff in the case below, to dismiss for want of jurisdiction a “counterclaim” under Rule 14(a), Federal Rules of Civil Procedure, brought against it by the George A. Fuller Company, Inc. (hereafter Fuller) a third-party defendant. The single issue presented by this appeal is whether a claim by the third-party defendant against the original plaintiff under Rule 14(a), F.R.C.P. 1 must be supported by an independent ground of federal jurisdiction or whether it comes within the ancillary jurisdiction of the federal courts. We affirm.

This action arises out of two construction contracts entered into by Fuller and The Industrial Development Board of the City of Scottsboro, Alabama (hereafter the Industrial Development Board) whereby Fuller agreed to furnish certain materials, equipment and services in connection with the construction of a manufacturing plant to be leased to and operated by Revere for the purpose of producing aluminum and other metal products. The contract recognized that the Industrial Development Board had appointed Revere its agent for all purposes under the contract, except the payment and receipt of money, and that all obligations of Fuller arising under the contracts for the performance of the work would run to and be enforceable by Revere to the same extent and in the same manner as the obligations were enforceable by the Industrial Development Board. Fuller and The Aetna Casualty and Surety Company (hereafter Aetna) executed performance bonds in excess of $14,000,000 obligating Fuller and Aetna to pay to Revere and the Industrial Development Board all costs and damages sustained as a result of Fuller’s failure to well and truly perform its obligations under the construction contracts.

Revere brought the original action against Aetna on the surety bond in federal court, alleging in its complaint that Fuller had breached express and implied warranties and specific contract provisions, had been negligent and had made false representations by failing to “furnish efficient business administration and superintendence with respect to its work and [by failing to] maintain a competent staff at all times at the job site, thus requiring the maintenance of certain salaried employees and the incurring of other expenses” by Revere and for failing “to complete its work within the prescribed time”. Revere seeks to recover $2,045,000. 2

*711 In its answer, Aetna denied the operative allegations in Revere’s complaint and by separate complaint impleaded Fuller as a third-party defendant under Rule 14(a), F.R.C.P., alleging that Fuller had agreed to indemnify Aetna for all losses sustained as a result of Aetna’s suretyship on the performance bonds.

Fuller admitted the allegations of the third-party complaint, but denied the operative allegations in Revere’s complaint and “counterclaimed” against Revere under Rule 14(a) alleging that Revere had breached certain express and implied warranties, had been negligent and guilty of wanton and willful misconduct, and had made certain misrepresentations concerning > the administration of the construction contracts resulting in the failure to complete the construction on time and that Revere has been unjustly enriched by its performance and seeks to recover $1,328,880.

Revere moved to dismiss Fuller’s Rule 14(a) counterclaim on the ground that there was no diversity of citizenship between Revere and Fuller, both being incorporated in the State of Maryland, and that an independent ground of federal jurisdiction is required to support a Rule 14(a) counterclaim. The District Court held Fuller’s counterclaim to be within the ancillary jurisdiction of the federal courts and overruled Revere’s motion.

Although the question of whether a Rule 14(a) counterclaim must be supported by an independent ground of federal jurisdiction has never been raised on the appellate level, there are six reported district court decisions dealing with the question 3 and the problem has been discussed in the treatises and current legal literature. 4 These authorities, however, are divided.

The first case to hold that an independent ground of jurisdiction is necessary before a third-party defendant may assert a claim against the original plaintiff was Morris, Wheeler & Co. v. Rust Engineering Co., supra, n. 3. This ease, which was decided prior to the 1946 amendment to Rule 14 allowing the third-party defendant to assert a claim directly against the original plaintiff, held that such a claim was not cognizable as a Rule 13 counterclaim because the plaintiff had not asserted a claim against the third-party defendant and thus the plaintiff and the third-party defendant were not “opposing parties” as required by Rule 13. The court went on to say, in what seems to be dicta, that the third-party’s claim was independent of the main claim and thus required an independent ground of federal *712 jurisdiction. In Shverha v. Maryland Casualty Co., supra, n. 3, the court followed the lead of Professor Moore 5 and concluded that the third-party defendant must have an independent ground of federal jurisdiction to assert a Rule 14(a) counterclaim against the original plaintiff since the original plaintiff must have an independent ground of federal jurisdiction to assert a direct claim against the third-party defendant. James King & Sons, Inc. v. Indemnity Insurance Company, supra, n. 3, follows Shverha and also relies on Rule 82, F.R. C.P., which provides that “[t]hese rules shall not be construed to extend or limit the jurisdiction of the United States district courts * * *

The first case to hold a Rule 14(a) counterclaim within the ancillary jurisdiction of the federal courts was Bernstein v. N. V. Nederlandsche-Amerikaansche, etc., supra, n. 3, which based its holding on the fact that the claim was one “arising out of the transaction or occurrence that is the subject matter of the plaintiff’s claim against the third-party plaintiff”. Similarly, Heintz & Co. v. Provident Tradesmens Bank and Trust Co., supra, n. 3, held that since a Rule 14(a) counterclaim must arise out of the same transaction or occurrence which gives rise to the main claim, it is within the ancillary jurisdiction of the court, stating:

It is a tenet of long settled antiquity that once a federal court has validly acquired jurisdiction, its jurisdiction extends to all matters “ancillary” to the main cause of action, even though the ancillary matters lack federal jurisdictional requisites. (Citing Moore v. New York Cotton Exchange, 270 U.S. 593, 46 S.Ct. 367, 70 L.Ed. 750 (1926), and Lesnik v. Public Industrials Corporation, 2 Cir., 1944, 144 F.2d 968

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426 F.2d 709, 12 A.L.R. Fed. 389, 14 Fed. R. Serv. 2d 12, 1970 U.S. App. LEXIS 9338, Counsel Stack Legal Research, https://law.counselstack.com/opinion/revere-copper-and-brass-incorporated-v-the-aetna-casualty-and-surety-ca3-1970.