Can a federal court exercise supplemental jurisdiction over a plaintiff's claim against a third-party defendant in a diversity action absent an independent basis for federal jurisdiction?

James Kroger suffered a fatal electrocution when a steel crane made contact with a high-tension power line. His widow, Mrs. Kroger, initiated a wrongful death lawsuit against Omaha Public Power District (OPPD) in federal court, invoking diversity jurisdiction. OPPD subsequently filed a third-party complaint against Owen Equipment & Erection Co. (Owen). Mrs. Kroger then amended her complaint to include Owen as a defendant. The court granted summary judgment in favor of OPPD, leaving only Mrs. Kroger's claim against Owen to proceed to trial.

On the third day of the trial, it was revealed that Owen's principal place of business was located in Iowa, which was also Mrs. Kroger's state of residence. This discovery effectively eliminated the complete diversity between the parties that had initially established federal court jurisdiction over the case.

Mrs. Kroger initially filed suit against OPPD in federal district court. OPPD then impleaded Owen as a third-party defendant. Subsequently, Mrs. Kroger amended her complaint to include Owen as a defendant. The district court granted summary judgment in favor of OPPD. During the trial between Mrs. Kroger and Owen, it was discovered that both parties were citizens of Iowa. Owen moved to dismiss the case for lack of jurisdiction, but the district court denied this motion. The Court of Appeals affirmed the district court's decision, holding that the district court had ancillary jurisdiction over Mrs. Kroger's claim against Owen. Due to conflicts with decisions from other Courts of Appeals, the Supreme Court granted certiorari to review the case.

(Stewart, J.)

No. Supplemental jurisdiction cannot be exercised over a plaintiff's claim against a third-party defendant in a diversity action without an independent basis for federal jurisdiction. The complete diversity requirement mandated by Congress in 28 U.S.C. § 1332(a) is a fundamental limitation on federal court jurisdiction that cannot be circumvented through ancillary jurisdiction doctrines. This principle stems from the strict construction of statutory limits on federal jurisdiction. Unlike compulsory counterclaims or impleader, where ancillary jurisdiction may apply, a plaintiff's voluntary assertion of a new claim against an additional party requires its own jurisdictional basis. The distinction lies in the plaintiff's choice to expand the scope of the litigation beyond the original parties. Allowing such claims without an independent jurisdictional basis would impermissibly expand federal court jurisdiction beyond congressional intent. The complete diversity requirement serves as a crucial check on federal court power, ensuring that state courts remain the primary forum for resolving disputes between citizens of the same state. This interpretation aligns with the longstanding principle that federal courts are courts of limited jurisdiction, possessing only the power authorized by the Constitution and statute. To permit supplemental jurisdiction in this context would erode the boundaries between state and federal judicial systems, potentially flooding federal courts with state law claims. The integrity of the federal judicial system and respect for state court jurisdiction necessitate adherence to these jurisdictional limitations, even when considerations of judicial economy might suggest otherwise.

Dissent (White, J.) Ancillary jurisdiction should extend to the plaintiff's claim against the third-party defendant. Considerations of judicial economy, convenience, and fairness support recognizing ancillary jurisdiction in this context. Doing so would not improperly circumvent the diversity requirement. The majority's strict interpretation of the complete diversity rule unnecessarily limits the court's ability to efficiently resolve related claims in a single proceeding. This approach fails to account for the practical realities of complex litigation and may lead to duplicative proceedings in state and federal courts.