INTRODUCTION :: In United Mine Workers v. Gibbs, the Supreme Court rejected the narrow “cause of action” test announced in Hurn v. Oursler for what was then termed pendent-claim jurisdiction in favor of a broader “common nucleus of operative fact” standard. In subsequent cases, the Court in dicta implied, without deciding, that the same standard might govern other extensions of federal court jurisdiction to non-diverse state law claims incident to federal question or diversity claims falling within Article III of the U.S. Constitution in the related but distinct contexts of “pendent party” and “ancillary” jurisdiction. Meanwhile, cases in the lower courts tended to equate the Gibbs standard with the “same transaction or occurrence” joinder standard that pervades the Federal Rules of Civil Procedure.
The 1990 supplemental-jurisdiction statute included these three previously distinct doctrines under a single rubric, termed “supplemental jurisdiction.” The statute extends supplemental jurisdiction, in all joinder contexts, to non-jurisdictional state law claims that “are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy” under Article III.
The House Report accompanying the 1990 statute shows that the drafters of the statute assumed that the “same case or controversy” language of the statute would be interpreted in consonance with the standard for pendent jurisdiction established by Gibbs. Gibbs itself appeared to equate its “common nucleus of operative fact” standard for pendent-claim jurisdiction with the scope of Article III. The Court stated:
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 . . . ,” and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional “case.” The federal claim must have substance sufficient to confer subject matter jurisdiction on the court. The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff’s claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in the federal courts to hear the whole.
Nevertheless, Gibbs did not inherently present the constitutional issue of how broadly statutory- or rules-based joinder provisions might reach to encompass non- diverse state law claims within the same Article III “case” or “controversy” as claims falling independently within federal subject matter jurisdiction. Instead, Gibbs can be viewed as nothing more than an interpretation of the statutes conferring original federal court jurisdiction or a federal common-law decision defining the scope of supplemental jurisdiction that federal courts may exercise absent explicit congressional authorization.
The enactment of the 1990 supplemental-jurisdiction statute-in which Congress expressly authorized the federal courts to exercise supplemental jurisdiction to the full extent permitted by Article III-directly posed the previously unanswered question whether the Gibbs “common nucleus” standard was indeed constitutionally based, or instead failed to exhaust the full constitutional scope of federal subject matter jurisdiction over non-diverse state law claims joined with claims falling within the limited categories of federal subject matter jurisdiction enumerated in Article III. Put another way, the statute signaled the demise of Gibbs as the central focus of supplemental-jurisdiction analysis and instead mandates direct consideration of the requirements of the Constitution itself. Following the statute’s enactment, however, the main areas of controversy did not focus on this bedrock issue but rather on puzzling omissions and inconsistencies that inhered in the statute’s exclusion of certain types of claims in diversity actions. The Supreme Court recently resolved some of the statutory ambiguities with its decision in Exxon Mobil Corp. v. Allapattah Services, Inc. Nonetheless many other issues remain unresolved, and neither Allapattah nor any other decision of the Supreme Court has directly addressed the constitutional issue just described.
In recent years, however, decisions in the courts of appeals and renewed scholarly commentary have turned to the constitutional issue arising from the enactment of the supplemental-jurisdiction statute. The immediate occasion for this development has been the long-standing question whether supplemental jurisdiction over permissive counterclaims asserted under Rule 13(b) of the Federal Rules of Civil Procedure may exist even though, by definition, those claims do not arise out of the “same transaction or occurrence” as the plaintiff’s original claim. The long-prevailing understanding-with some discordant notes-was that such claims, because of the absence of a sufficient transactional relationship with the plaintiff’s claim, fell outside the supplemental jurisdiction of the court and required an independent basis for jurisdiction. An exception to this general understanding was recognized where the permissive counterclaims were asserted only defensively by way of set-off and not as a basis for affirmative recovery. Despite this history, several recent decisions have concluded, in the wake of the supplemental-jurisdiction statute, that the “same transaction” requirement of the Federal Rules of Civil Procedure is not determinative and have approved the assertion of supplemental jurisdiction over permissive counterclaims.
These decisions have relied in part on the views of various commentators who, over the years, have suggested that the Gibbs formulation has no constitutional foundation and that the scope of the Article III “case” or “controversy” is as broad as Congress and the rules drafters might choose to make it-so long as at least one claim in the action falls within the scope of Article III. Although aware of this view, the federal courts have yet to endorse it. Rather they have suggested, as an intermediate position, that the “same transaction” standard for the joinder of parties and claims that pervades the Federal Rules of Civil Procedure does not establish the limits of the constitutional case: the Constitution requires only a “loose factual connection” between jurisdictional and non-jurisdictional claims. Under this view, so long as a “loose factual connection” exists, supplemental jurisdiction over a permissive counterclaim that does not arise from the same transaction or occurrence as the plaintiff’s main claim is proper under the 1990 statute, even if affirmative relief is sought.
November 2014, Vol. 66, No. 6
Lily Kahng, The Taxation of Intellectual Capital