Amco Construction Company v. Mississippi State Building Commission
1979 U.S. App. LEXIS 11782, 602 F.2d 730, 28 Fed. R. Serv. 2d 36 (1979)
Rule of Law:
Ancillary jurisdiction over a cross-claim between non-diverse parties is proper only when the cross-claim bears a "logical relationship" to the aggregate core of operative facts of the original claim, meaning it arises out of the same facts or activates additional legal rights related to those facts.
Facts:
- The Mississippi State Building Commission (Commission) contracted with Amco Construction Company, Inc. (Amco) for utility, paving, and other construction work at a state park.
- Amco provided a performance and payment bond with the Commission as obligee and Houston General Insurance Company (Houston General) as surety.
- Amco entered subcontract agreements with Stiglet, Inc., Holcomb Asphalt Company, Inc., and American Tennis Courts, Inc. for specific portions of the project.
- In October 1975, Amco abandoned the contract work, prompting Houston General, as surety, to undertake completion and call upon subcontractors.
- The Commission contended that Houston General's work did not conform to plans and specifications and subsequently completed the project using other contractors, with park facilities opening in January 1976.
- Amco alleged that the plans and specifications furnished by the Commission were defective, that the Commission failed to issue required change orders for unforeseen conditions, and that the Commission breached an implied warranty not to hinder or interfere with Amco's performance.
- Amco claimed these alleged breaches resulted in substantial financial losses and its eventual insolvency.
Procedural Posture:
- In December 1977, Stiglet, Inc. (a Mississippi corporation) filed the original complaint against Houston General Insurance Company (a Texas corporation) in the Circuit Court of Jackson County, Mississippi, claiming payment under a performance and payment bond.
- The cause was removed to the United States District Court for the Southern District of Mississippi based on diversity of citizenship.
- Holcomb Asphalt Company, Inc. intervened and filed an action against Houston General, also claiming nonpayment.
- Houston General filed third-party claims against the project engineer, the Mississippi State Building Commission, and Amco Construction Company, Inc., alleging entitlement to indemnification.
- Amco Construction Company, Inc. filed a cross-claim against the Mississippi State Building Commission and the project engineer, alleging breach of contract by the Commission.
- The Mississippi State Building Commission denied Amco's claims and counterclaimed for liquidated damages and additional completion costs.
- All other parties and claims were dismissed, except for Amco's cross-claim against the Commission.
- The United States District Court dismissed Amco's cross-claim for lack of jurisdiction.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a federal court have ancillary jurisdiction over a cross-claim between two non-diverse third-party defendants when that cross-claim (Amco's breach of contract against the Commission) does not arise out of the same aggregate core of operative facts as the original diversity claim (subcontractor's suit against surety on a bond)?
Opinions:
Majority - James C. Hill
No, a federal court does not have ancillary jurisdiction over Amco's cross-claim against the Commission because the cross-claim lacked a sufficient relationship with the original claim. The court affirmed the District Court's dismissal, holding that while Fed.R.Civ.P. 13(g) permits cross-claims, the Federal Rules of Civil Procedure do not create or withdraw federal jurisdiction, as established in Owen Equipment and Erection Co. v. Kroger. Ancillary jurisdiction requires a "tight nexus" with a subject matter properly in federal court, as articulated in Warren G. Kleban Engineering Corp. v. Caldwell. Citing Revere Copper & Brass Inc. v. Aetna Cas. & Surety Co., the court clarified that a claim is ancillary only if it bears a "logical relationship to the aggregate core of operative facts which constitutes the main claim over which the court has an independent basis of federal jurisdiction." The court found that Amco's cross-claim for breach of contract against the Commission (alleging defective plans and hindrance of performance) did not arise from the same transaction as the original claim (a subcontractor's suit against a surety on a bond). It was not an integral part of the main claim, required distinct fact-finding, and would not have been necessary to protect the integrity or disposition of the original claim. The court concluded that Amco's cross-claim was a "cause of action wholly independent and separate," and that notions of waiver or estoppel (due to the delay in dismissal) could not confer jurisdiction where it otherwise did not exist.
Analysis:
This case significantly clarifies the boundaries of ancillary jurisdiction, particularly regarding cross-claims under Fed.R.Civ.P. 13(g). It reinforces that Rule 13(g) is a pleading rule, not a jurisdictional grant, and that federal jurisdiction must be affirmatively established. The decision emphasizes the stringent application of the "logical relationship" test, preventing parties from using an existing federal lawsuit as a vehicle to litigate unrelated state-law claims, even if those claims arise between co-parties in the same litigation. This ruling serves to maintain the proper balance between federal and state judicial power by limiting federal courts to disputes truly connected to their original jurisdictional basis and preventing the expansion of federal jurisdiction through procedural convenience.
