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HYMAN-MICHAELS CO. v. SWISS BANK CORP.

August 13, 1980

HYMAN-MICHAELS COMPANY, AN ILLINOIS CORPORATION, PLAINTIFF,
v.
SWISS BANK CORPORATION, A SWISS CORPORATION, DEFENDANT AND THIRD PARTY PLAINTIFF, V. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, A NATIONAL BANKING ASSOCIATION, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Roszkowski, District Judge.

ORDER

Before the court is the motion of Continental Illinois National Bank and Trust Company of Chicago ("Continental"), third party defendant, to dismiss the counterclaim filed by plaintiff, Hyman-Michaels against Continental and, upon that dismissal, to withdraw the counterclaim filed by Continental against Hyman-Michaels. For the reasons herein stated, this court denies Continental's motion.

The principal question facing this court is whether the Supreme Court's decision in Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978) applies to the instant case so as to deprive this court of jurisdiction over the third party defendant, Continental.

As might be expected, Continental contends that Owen requires that this court dismiss the third party defendant while Hyman-Michaels, plaintiff, contends that Owen does not mandate this result.

This court's jurisdiction over both the main action and the third party action is invoked pursuant to diversity jurisdiction. 28 U.S.C. § 1332(a)(1).

28 U.S.C. § 1332(a)(1) confers upon federal courts jurisdiction over "civil actions where the matter in controversy exceeds the sum or value of $10,000 . . . and is between . . . citizens of different states." As the Supreme Court noted in Owen, this statute and its predecessors have consistently been held to require complete diversity of citizenship. 98 S.Ct. at 2403 and fn. 13.

Continental's present motion to dismiss is founded on its contention that because plaintiff, Hyman-Michaels, and third-party defendant, Continental, are both citizens of Illinois for purposes of diversity jurisdiction, the complete diversity requirement is not met and, therefore, under Owens this court lacks jurisdiction over the third-party defendant.

The instant case is not, on its facts, identical to Owen v. Kroger. Consequently, this court is required to decide whether Owen is meant to extend to the circumstances in this case.

In Owen, plaintiff, an Iowa citizen brought suit in federal court against defendant, the Omaha Public Power District (OPPD), a Nebraska corporation under diversity jurisdiction. Thereafter, defendant, OPPD, filed a third party complaint pursuant to Fed.R.Civ.P. 14(a) against Owen Equipment and Erection Company (Owen), a Nebraska corporation with its principal place of business in Iowa. Subsequently, plaintiff Kroger filed an amended complaint naming Owen as an additional defendant.

It was the filing of this amended complaint, in which the Iowa plaintiff brought in as a co-defendant, a corporation with its principal place of business in Iowa, which was found to defeat the complete diversity requirement of 28 U.S.C. § 1332(a)(1). The Court in Owen held that, where complete diversity was lacking between all the plaintiffs and all the defendants and no other independent basis for federal jurisdiction existed, the doctrine of ancillary jurisdiction did not vest the federal court with jurisdiction. To hold otherwise, reasoned the Court, would defeat the statutory requirement of complete diversity.

    Thus it is clear that the respondent could not
  originally have brought suit in federal court naming
  Owen and OPPD as codefendants, since citizens of Iowa
  would have been on both sides of the litigation. Yet
  the identical lawsuit resulted when she amended her
  complaint. Complete diversity was destroyed just as
  surely as if she had sued Owen initially. In either
  situation, in the plain language of the statute, the
  "matter in controversy" could not be "between . . .
  citizens of different states."
    It is a fundamental precept that federal courts are
  courts of limited jurisdiction. The limits upon
  federal jurisdiction, whether imposed by the
  Constitution or by Congress, must be neither
  disregarded nor evaded. Yet . . . a plaintiff could
  defeat the statutory requirement of complete
  diversity by the simple expedient of suing only those
  defendants who were of diverse citizenship and
  waiting for them to implead nondiverse defendants.

98 S.Ct. at 2403.

In the present case, the plaintiff, Hyman-Michaels, an Illinois corporation brought suit in federal court against defendant Swiss Bank, a Switzerland corporation, under diversity jurisdiction. Thereafter, Swiss Bank filed a third-party complaint pursuant to Fed.R.Civ.P. 14(a) ...


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