Impleading another defendant under 14(a)

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abenson25
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Impleading another defendant under 14(a)

Postby abenson25 » Mon Nov 01, 2010 4:54 pm

I just want to see if I am understanding correctly. We are currently working on Federal Supplemental Jurisdiction. My professor gives us pages of hypotheticals to work on at the end of eash section. One of the hypotheticals involves a citizen of NY suing a bank in PA, and that bank then impleads a bank manager, also a citizen of PA, under 14(a), stating that the manager raised the plaintiff's interest rate(which is what the original suit is about) in order to embezzle money. That question is whether there is federal jurisdiction over the claim between the bank and the manager. I have been reading, and I know there needs to be diversity(it is stated in the hypo that the $$ amount was met), but I am unsure how diversity works with a third party plaintiff and a third party defendant. Does there need to be diversity in the second claim?(so that in this scenario, there would be no federal jurisdiction since they are from the same state).

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let/them/eat/cake
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Re: Impleading another defendant under 14(a)

Postby let/them/eat/cake » Mon Nov 01, 2010 5:06 pm

abenson25 wrote:I just want to see if I am understanding correctly. We are currently working on Federal Supplemental Jurisdiction. My professor gives us pages of hypotheticals to work on at the end of eash section. One of the hypotheticals involves a citizen of NY suing a bank in PA, and that bank then impleads a bank manager, also a citizen of PA, under 14(a), stating that the manager raised the plaintiff's interest rate(which is what the original suit is about) in order to embezzle money. That question is whether there is federal jurisdiction over the claim between the bank and the manager. I have been reading, and I know there needs to be diversity(it is stated in the hypo that the $$ amount was met), but I am unsure how diversity works with a third party plaintiff and a third party defendant. Does there need to be diversity in the second claim?(so that in this scenario, there would be no federal jurisdiction since they are from the same state).


if i recall correctly, 28 USC 1367(a) grants the federal courts supplemental jurisdiction over 2nd claim in this hypo, and the situation does not fall under the umbrella of 1367(b), which takes certain claims out of federal jurisdiction if those claims would destroy diversity (plaintiff means plaintiff, and defendant means defendant--i.e., just because the defendant bank is impleading the manager, the defendant bank (who is a third-party plaintiff for purposes of the second claim, if i catch ur drift) is still a 'defendant' for purposes of 1367(b).

or something like that, it's been a minute.

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GeePee
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Re: Impleading another defendant under 14(a)

Postby GeePee » Mon Nov 01, 2010 6:36 pm

let/them/eat/cake wrote:
abenson25 wrote:I just want to see if I am understanding correctly. We are currently working on Federal Supplemental Jurisdiction. My professor gives us pages of hypotheticals to work on at the end of eash section. One of the hypotheticals involves a citizen of NY suing a bank in PA, and that bank then impleads a bank manager, also a citizen of PA, under 14(a), stating that the manager raised the plaintiff's interest rate(which is what the original suit is about) in order to embezzle money. That question is whether there is federal jurisdiction over the claim between the bank and the manager. I have been reading, and I know there needs to be diversity(it is stated in the hypo that the $$ amount was met), but I am unsure how diversity works with a third party plaintiff and a third party defendant. Does there need to be diversity in the second claim?(so that in this scenario, there would be no federal jurisdiction since they are from the same state).


if i recall correctly, 28 USC 1367(a) grants the federal courts supplemental jurisdiction over 2nd claim in this hypo, and the situation does not fall under the umbrella of 1367(b), which takes certain claims out of federal jurisdiction if those claims would destroy diversity (plaintiff means plaintiff, and defendant means defendant--i.e., just because the defendant bank is impleading the manager, the defendant bank (who is a third-party plaintiff for purposes of the second claim, if i catch ur drift) is still a 'defendant' for purposes of 1367(b).

or something like that, it's been a minute.


Using the "same case and controversy" method in 1367(a), this seems to be satisfied. We then look to 1367(b).

Again, you said that 1367(b) requires complete diversity. However, since the defendant is impleading under 14(a), there is no chance that diversity can be destroyed in the plaintiff's claim. Look at the language of 1367(b): ". . . the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs under Rule 14, 19, 20 or 24 of FRCP." Since the defendant is making the claim here, there are no worries at all. We're not making anyone a plaintiff through joinder under rule 19, nor is it a class action.

Think about the policy rationale here: if a defendant could destroy diversity jurisdiction at any time by impleading a third party defendant, it would completely override the well-established principle of allowing the plaintiff the freedom to seize the forum in the litigation. Now, the plaintiff could just sue one party and hope that the defendant will implead the other party that the plaintiff intended to sue, but this has serious consequences in the event that the plaintiff would lose against the original defendant but win against the 3rd party defendant if there is no impleader.

I'm basically saying what let/them/eat/cake said above me, but hopefully this fleshes it out a bit more.

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beach_terror
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Re: Impleading another defendant under 14(a)

Postby beach_terror » Mon Nov 01, 2010 7:32 pm

Just to elaborate on the previous posts, the plaintiff cannot sue the impleaded defendants that break 1367(a) jurisdiction. This doesn't apply here, but it's worth mentioning. So if the impleaded defendant was a citizen of NY, the P couldn't sue him because it would defeat diversity jurisdiction [P could here though because it wouldn't break diversity].

The rationale behind that is plaintiffs could get around complete diversity by suing a diverse defendant and leave out the non-diverse defendant, knowing that they would be impleaded. Essentially, the plaintiff has to accept limitations for being in federal court.

Hopefully I have that right.

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GeePee
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Re: Impleading another defendant under 14(a)

Postby GeePee » Mon Nov 01, 2010 8:31 pm

beach_terror wrote:Just to elaborate on the previous posts, the plaintiff cannot sue the impleaded defendants that break 1367(a) jurisdiction. This doesn't apply here, but it's worth mentioning. So if the impleaded defendant was a citizen of NY, the P couldn't sue him because it would defeat diversity jurisdiction [P could here though because it wouldn't break diversity].

The rationale behind that is plaintiffs could get around complete diversity by suing a diverse defendant and leave out the non-diverse defendant, knowing that they would be impleaded. Essentially, the plaintiff has to accept limitations for being in federal court.

Hopefully I have that right.

Right. See Owen Equipment for further explanation.

EDIT: Note that this is only if the original claim relies solely on diversity jurisdiction. If plaintiff was suing the bank under an antitrust statute, for example, then the plaintiff could defeat diversity jurisdiction by amending his complaint to join nondiverse parties, since he has an anchoring claim arising under federal law.

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Nom Sawyer
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Re: Impleading another defendant under 14(a)

Postby Nom Sawyer » Mon Nov 01, 2010 9:11 pm

GeePee wrote:
beach_terror wrote:Just to elaborate on the previous posts, the plaintiff cannot sue the impleaded defendants that break 1367(a) jurisdiction. This doesn't apply here, but it's worth mentioning. So if the impleaded defendant was a citizen of NY, the P couldn't sue him because it would defeat diversity jurisdiction [P could here though because it wouldn't break diversity].

The rationale behind that is plaintiffs could get around complete diversity by suing a diverse defendant and leave out the non-diverse defendant, knowing that they would be impleaded. Essentially, the plaintiff has to accept limitations for being in federal court.

Hopefully I have that right.

Right. See Owen Equipment for further explanation.

EDIT: Note that this is only if the original claim relies solely on diversity jurisdiction. If plaintiff was suing the bank under an antitrust statute, for example, then the plaintiff could defeat diversity jurisdiction by amending his complaint to join nondiverse parties, since he has an anchoring claim arising under federal law.


Hmm... The interesting thing is that plaintiffs can PREVENT diversity jurisdiction by suing multiple parties (and including one from the same jurisdiction) if they really want to remain in State court.

With that in mind though, what occurs though if a plaintiff sues only one defendant (outside his jurisdiction) and doesn't want to bring the non-diverse defendant? I guess there seems to be a murky line between impleading third-party defendants and joinder of another defendant.

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Re: Impleading another defendant under 14(a)

Postby GeePee » Mon Nov 01, 2010 10:03 pm

Nom Sawyer wrote:
GeePee wrote:
beach_terror wrote:Just to elaborate on the previous posts, the plaintiff cannot sue the impleaded defendants that break 1367(a) jurisdiction. This doesn't apply here, but it's worth mentioning. So if the impleaded defendant was a citizen of NY, the P couldn't sue him because it would defeat diversity jurisdiction [P could here though because it wouldn't break diversity].

The rationale behind that is plaintiffs could get around complete diversity by suing a diverse defendant and leave out the non-diverse defendant, knowing that they would be impleaded. Essentially, the plaintiff has to accept limitations for being in federal court.

Hopefully I have that right.

Right. See Owen Equipment for further explanation.

EDIT: Note that this is only if the original claim relies solely on diversity jurisdiction. If plaintiff was suing the bank under an antitrust statute, for example, then the plaintiff could defeat diversity jurisdiction by amending his complaint to join nondiverse parties, since he has an anchoring claim arising under federal law.


Hmm... The interesting thing is that plaintiffs can PREVENT diversity jurisdiction by suing multiple parties (and including one from the same jurisdiction) if they really want to remain in State court.

With that in mind though, what occurs though if a plaintiff sues only one defendant (outside his jurisdiction) and doesn't want to bring the non-diverse defendant? I guess there seems to be a murky line between impleading third-party defendants and joinder of another defendant.


If the defendant believes that he could win in federal court against the diverse party while losing in both defendants' forum states against nondiverse defendants, then he can choose to forgo suing the nondiverse party to preserve diversity. It's a trade-off: on one hand, plaintiff has a lowering chance of finding a liable party when he limits the parties he sues, but on the other hand he gets the benefit of favorable law. Further, even if the defendant impleads the third party, the plaintiff cannot amend his complaint to add that party without destroying diversity. Essentially then, the only thing the impleader does is divide the amount for which the diverse party is liable between all defendants, capped by the liability of the party being directly sued.

Although this goes against forum shopping, which anyone who's studied Erie can tell you is on courts' minds to a fault, we allow it because of that disincentivizing trade-off.

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let/them/eat/cake
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Re: Impleading another defendant under 14(a)

Postby let/them/eat/cake » Mon Nov 01, 2010 11:05 pm

Nom Sawyer wrote:
GeePee wrote:
beach_terror wrote:Just to elaborate on the previous posts, the plaintiff cannot sue the impleaded defendants that break 1367(a) jurisdiction. This doesn't apply here, but it's worth mentioning. So if the impleaded defendant was a citizen of NY, the P couldn't sue him because it would defeat diversity jurisdiction [P could here though because it wouldn't break diversity].

The rationale behind that is plaintiffs could get around complete diversity by suing a diverse defendant and leave out the non-diverse defendant, knowing that they would be impleaded. Essentially, the plaintiff has to accept limitations for being in federal court.

Hopefully I have that right.

Right. See Owen Equipment for further explanation.

EDIT: Note that this is only if the original claim relies solely on diversity jurisdiction. If plaintiff was suing the bank under an antitrust statute, for example, then the plaintiff could defeat diversity jurisdiction by amending his complaint to join nondiverse parties, since he has an anchoring claim arising under federal law.


Hmm... The interesting thing is that plaintiffs can PREVENT diversity jurisdiction by suing multiple parties (and including one from the same jurisdiction) if they really want to remain in State court.

With that in mind though, what occurs though if a plaintiff sues only one defendant (outside his jurisdiction) and doesn't want to bring the non-diverse defendant? I guess there seems to be a murky line between impleading third-party defendants and joinder of another defendant.


can't recall the case but i think if the party is joined for the sole purpose of defeating diversity (like the party is merely nominal or really not party to the controversy) then the court can see through it and realign the parties as necessary (i think this came up in the MLB case? it's known as fraudulent joinder and i'm pretty sure there's statutory authority in 28 USC something or other, codifying the caselaw about this topic).

I also recall though, i think, that this inquiry--into whether parties are real parties to the controversy or merely being included to defeat diversity jx--will only occur on one side of the coin (like the courts will only care if it's the defendants or plaintiffs doing it); i can't remember which--i think it's only that plaintiffs can't fraudulently join a non-diverse 'throw-away' defendant solely in order to defeat diversity. there is a case about somehow some defendant's doing something like this and the court declined to pierce the pleadings or some shit. idk. that's as much as i can get out off the top of my head, someone else will have to fill in the gaps.

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Cupidity
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Re: Impleading another defendant under 14(a)

Postby Cupidity » Mon Nov 01, 2010 11:13 pm

]

If Bank impleads Manager then the case still has federal jurisdiction because it is supplemental to the claim between Bank and original plaintiff. 1367's exceptions for 14, 19, 20, 24

Bank manager may sue the original plaintiff. If, however, Original Plaintiff counterclaims against the bank manager, diversity is destroyed.

Because counterclaiming against the bank manager would destroy diversity, the compulsory counterclaim rule is waived and the Original Plaintiff may bring his counterclaim against Manager in state court, though Manager is suing Plaintiff in Federal Court.


The other answers stipulated that the OP could counterclaim against manager if Bank impleads him, this is false.

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GeePee
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Re: Impleading another defendant under 14(a)

Postby GeePee » Mon Nov 01, 2010 11:19 pm

let/them/eat/cake wrote:
Nom Sawyer wrote:
GeePee wrote:
beach_terror wrote:Just to elaborate on the previous posts, the plaintiff cannot sue the impleaded defendants that break 1367(a) jurisdiction. This doesn't apply here, but it's worth mentioning. So if the impleaded defendant was a citizen of NY, the P couldn't sue him because it would defeat diversity jurisdiction [P could here though because it wouldn't break diversity].

The rationale behind that is plaintiffs could get around complete diversity by suing a diverse defendant and leave out the non-diverse defendant, knowing that they would be impleaded. Essentially, the plaintiff has to accept limitations for being in federal court.

Hopefully I have that right.

Right. See Owen Equipment for further explanation.

EDIT: Note that this is only if the original claim relies solely on diversity jurisdiction. If plaintiff was suing the bank under an antitrust statute, for example, then the plaintiff could defeat diversity jurisdiction by amending his complaint to join nondiverse parties, since he has an anchoring claim arising under federal law.


Hmm... The interesting thing is that plaintiffs can PREVENT diversity jurisdiction by suing multiple parties (and including one from the same jurisdiction) if they really want to remain in State court.

With that in mind though, what occurs though if a plaintiff sues only one defendant (outside his jurisdiction) and doesn't want to bring the non-diverse defendant? I guess there seems to be a murky line between impleading third-party defendants and joinder of another defendant.


can't recall the case but i think if the party is joined for the sole purpose of defeating diversity (like the party is merely nominal or really not party to the controversy) then the court can see through it and realign the parties as necessary (i think this came up in the MLB case? it's known as fraudulent joinder and i'm pretty sure there's statutory authority in 28 USC something or other, codifying the caselaw about this topic).

I also recall though, i think, that this inquiry--into whether parties are real parties to the controversy or merely being included to defeat diversity jx--will only occur on one side of the coin (like the courts will only care if it's the defendants or plaintiffs doing it); i can't remember which--i think it's only that plaintiffs can't fraudulently join a non-diverse 'throw-away' defendant solely in order to defeat diversity. there is a case about somehow some defendant's doing something like this and the court declined to pierce the pleadings or some shit. idk. that's as much as i can get out off the top of my head, someone else will have to fill in the gaps.

That's correct. Defendants can third party sue whomever they please, because it won't matter without action from the plaintiff.

Cupidity wrote:
If Bank impleads Manager then the case still has federal jurisdiction because it is supplemental to the claim between Bank and original plaintiff. 1367's exceptions for 14, 19, 20, 24

Bank manager may sue the original plaintiff. If, however, Original Plaintiff counterclaims against the bank manager, diversity is destroyed.

Because counterclaiming against the bank manager would destroy diversity, the compulsory counterclaim rule is waived and the Original Plaintiff may bring his counterclaim against Manager in state court, though Manager is suing Plaintiff in Federal Court.


The other answers stipulated that the OP could counterclaim against manager if Bank impleads him, this is false.


Uhh....

GeePee wrote:If the defendant believes that he could win in federal court against the diverse party while losing in both defendants' forum states against nondiverse defendants, then he can choose to forgo suing the nondiverse party to preserve diversity. It's a trade-off: on one hand, plaintiff has a lowering chance of finding a liable party when he limits the parties he sues, but on the other hand he gets the benefit of favorable law. Further, even if the defendant impleads the third party, the plaintiff cannot amend his complaint to add that party without destroying diversity. Essentially then, the only thing the impleader does is divide the amount for which the diverse party is liable between all defendants, capped by the liability of the party being directly sued.

Although this goes against forum shopping, which anyone who's studied Erie can tell you is on courts' minds to a fault, we allow it because of that disincentivizing trade-off.


EDIT: Nick of time stealth-edit by Cupidity

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Cupidity
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Re: Impleading another defendant under 14(a)

Postby Cupidity » Mon Nov 01, 2010 11:21 pm

I stopped reading once I saw an incorrect answer. I'm helping the guy out, don't expect me to read 8 massive posts.

Edit: Yeah, I did see yours after I submitted it.

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Nom Sawyer
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Re: Impleading another defendant under 14(a)

Postby Nom Sawyer » Mon Nov 01, 2010 11:22 pm

GeePee wrote:
If the defendant believes that he could win in federal court against the diverse party while losing in both defendants' forum states against nondiverse defendants, then he can choose to forgo suing the nondiverse party to preserve diversity. It's a trade-off: on one hand, plaintiff has a lowering chance of finding a liable party when he limits the parties he sues, but on the other hand he gets the benefit of favorable law. Further, even if the defendant impleads the third party, the plaintiff cannot amend his complaint to add that party without destroying diversity. Essentially then, the only thing the impleader does is divide the amount for which the diverse party is liable between all defendants, capped by the liability of the party being directly sued.

Although this goes against forum shopping, which anyone who's studied Erie can tell you is on courts' minds to a fault, we allow it because of that disincentivizing trade-off.


Yeah, the basic rule against joinder for a 3rd party defendant seems to prevent this, its just the plaintiff could always sue the diverse party in Federal court and separately file a case against the non-diverse party in State court... then if the two parties cross implead each other you'd have overcome both the diversity limitation and the limit on liability... of course the court does have discretionary authority over whether to allow these impleadings.

Edit: I guess this just arises from the inherent tension between the broad joinder/ impleader rules and the strict diversity jurisdictional requirements... it still wouldn't exactly mirror suing both parties in Federal court, but it'd almost be simpler to allow that anyways.
Last edited by Nom Sawyer on Mon Nov 01, 2010 11:35 pm, edited 1 time in total.

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Cupidity
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Re: Impleading another defendant under 14(a)

Postby Cupidity » Mon Nov 01, 2010 11:23 pm

Dude forget fishing through the library for dusty old exams, I'm just going to answer/read answers to hypos on TLS.

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let/them/eat/cake
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Re: Impleading another defendant under 14(a)

Postby let/them/eat/cake » Mon Nov 01, 2010 11:26 pm

Cupidity wrote:I stopped reading once I saw an incorrect answer. I'm helping the guy out, don't expect me to read 8 massive posts.

Edit: Yeah, I did see yours after I submitted it.


ur not helping anyone out by duplicating information already given, and misusing the word stipulate in an attempt to be authoritative. HTH.

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Nom Sawyer
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Re: Impleading another defendant under 14(a)

Postby Nom Sawyer » Mon Nov 01, 2010 11:48 pm

let/them/eat/cake wrote:
Nom Sawyer wrote:
Hmm... The interesting thing is that plaintiffs can PREVENT diversity jurisdiction by suing multiple parties (and including one from the same jurisdiction) if they really want to remain in State court.

With that in mind though, what occurs though if a plaintiff sues only one defendant (outside his jurisdiction) and doesn't want to bring the non-diverse defendant? I guess there seems to be a murky line between impleading third-party defendants and joinder of another defendant.


can't recall the case but i think if the party is joined for the sole purpose of defeating diversity (like the party is merely nominal or really not party to the controversy) then the court can see through it and realign the parties as necessary (i think this came up in the MLB case? it's known as fraudulent joinder and i'm pretty sure there's statutory authority in 28 USC something or other, codifying the caselaw about this topic).

I also recall though, i think, that this inquiry--into whether parties are real parties to the controversy or merely being included to defeat diversity jx--will only occur on one side of the coin (like the courts will only care if it's the defendants or plaintiffs doing it); i can't remember which--i think it's only that plaintiffs can't fraudulently join a non-diverse 'throw-away' defendant solely in order to defeat diversity. there is a case about somehow some defendant's doing something like this and the court declined to pierce the pleadings or some shit. idk. that's as much as i can get out off the top of my head, someone else will have to fill in the gaps.


Yeah it can't be a nominal party, but in the case you were referring to it was decided that there wasn't a proper claim against the two in-state ones that were joined over the course of the case, and then it was removed to Federal court afterwards... as long as the party is sufficiently related, it completely prevents Federal diversity as long as the plaintiff wishes to include them.

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calicocat
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Re: Impleading another defendant under 14(a)

Postby calicocat » Tue Nov 02, 2010 1:02 am

let/them/eat/cake wrote:
Cupidity wrote:I stopped reading once I saw an incorrect answer. I'm helping the guy out, don't expect me to read 8 massive posts.

Edit: Yeah, I did see yours after I submitted it.


ur not helping anyone out by duplicating information already given, and misusing the word stipulate in an attempt to be authoritative. HTH.

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beach_terror
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Re: Impleading another defendant under 14(a)

Postby beach_terror » Tue Nov 02, 2010 8:59 am

What the hell happened in here overnight? Suing the impleaded defendant doesn't destroy diversity in this instance.

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Re: Impleading another defendant under 14(a)

Postby GeePee » Tue Nov 02, 2010 10:05 am

beach_terror wrote:What the hell happened in here overnight? Suing the impleaded defendant doesn't destroy diversity in this instance.

We moved away from the hypo, to clarify for the OP when things would actually fall apart (that may not have been clear).

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Re: Impleading another defendant under 14(a)

Postby beach_terror » Tue Nov 02, 2010 10:06 am

beach_terror wrote:Just to elaborate on the previous posts, the plaintiff cannot sue the impleaded defendants that break 1367(a) jurisdiction. This doesn't apply here, but it's worth mentioning. So if the impleaded defendant was a citizen of NY, the P couldn't sue him because it would defeat diversity jurisdiction [P could here though because it wouldn't break diversity].

The rationale behind that is plaintiffs could get around complete diversity by suing a diverse defendant and leave out the non-diverse defendant, knowing that they would be impleaded. Essentially, the plaintiff has to accept limitations for being in federal court.

Hopefully I have that right.


Seems like that's what you were going back and forth about?

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let/them/eat/cake
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Re: Impleading another defendant under 14(a)

Postby let/them/eat/cake » Tue Nov 02, 2010 10:26 am

beach_terror wrote:
beach_terror wrote:Just to elaborate on the previous posts, the plaintiff cannot sue the impleaded defendants that break 1367(a) jurisdiction. This doesn't apply here, but it's worth mentioning. So if the impleaded defendant was a citizen of NY, the P couldn't sue him because it would defeat diversity jurisdiction [P could here though because it wouldn't break diversity].

The rationale behind that is plaintiffs could get around complete diversity by suing a diverse defendant and leave out the non-diverse defendant, knowing that they would be impleaded. Essentially, the plaintiff has to accept limitations for being in federal court.

Hopefully I have that right.


Seems like that's what you were going back and forth about?



more this:

Hmm... The interesting thing is that plaintiffs can PREVENT diversity jurisdiction by suing multiple parties (and including one from the same jurisdiction) if they really want to remain in State court.


which we discussed at enough length to point OP in the right direction at least. but yeah there was some sniping, as is the usual on TLS.




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