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Development Finance Corp. v. Alpha Housing & Health Care

filed: April 26, 1995.

DEVELOPMENT FINANCE CORPORATION; THE NATIONAL HOUSING AND HEALTH CARE TRUST, INC., APPELLEES
v.
ALPHA HOUSING & HEALTH CARE, INC., APPELLEE V. JOHN SOWER; WILBUR DOVE, THIRD PARTY DEFENDANTS. SYLVAN ASSOCIATES, INC., APPELLANT



ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA. (D.C. No. 94-cv-00627).

Before: Hutchinson, Alito, and Sarokin, Circuit Judges.

Author: Sarokin

Opinion OF THE COURT

SAROKIN, Circuit Judge :

Sylvan Associates, Inc. ("Sylvan" or "applicant"), the sole member of defendant Alpha Housing & Health Care, Inc. ("Alpha"), a nonprofit corporation, appeals from the denial of its motion to intervene as a third-party plaintiff in an action for breach of contract. Sylvan wishes to argue that the contracts between plaintiffs and defendant were ultra vires, a claim that defendant itself is prohibited from raising under Pennsylvania law.

I.

Plaintiff Development Finance Corp. ("DEFCO") entered into a contract to assist defendant in arranging financing for the acquisition of nursing home facilities. After defendant purchased two facilities, it entered into a contract with plaintiff The National Housing and Health Care Trust, Inc. ("National Housing") whereby National Housing would assist in the management of the nursing homes. DEFCO and defendant subsequently executed another contract providing for revised terms of payment for DEFCO's services. DEFCO and National Housing now sue for defendant's alleged breach of the agreements. Federal jurisdiction for the original claims is based on the diversity of citizenship between plaintiffs and defendant, pursuant to 28 U.S.C. § 1332.

Sylvan first moved to intervene as of right as a defendant, in order to assert as a defense that the agreements between plaintiffs and defendant were ultra vires. The district court denied the motion, Appendix ("App.") at 63, and Sylvan did not appeal.

Recasting its argument, Sylvan again moved to intervene as of right, this time as a third-party plaintiff, in an effort to enjoin performance of defendant's contracts with plaintiffs pursuant to 15 Pa.C.S. § 5503(a)(1). The action asked the district court to grant plaintiffs only "such compensation as may be equitable," as the Pennsylvania statute provides. The district court denied the motion without a written decision. App. at 111. Sylvan filed a timely notice of appeal, and we have jurisdiction under 28 U.S.C. § 1291 because the denial of a motion to intervene as of right is a final, appealable order. United States v. Alcan Aluminum, Inc., 25 F.3d 1174, 1179 (3d Cir. 1994).

II.

We review the denial of a motion to intervene as of right for abuse of discretion. Alcan Aluminum, 25 F.3d at 1179; Brody v. Spang, 957 F.2d 1108, 1115 (3d Cir. 1992). However, we will reverse "only if we find the district court 'has applied an improper legal standard or reached a decision we are confident is incorrect.'" Alcan Aluminum, 25 F.3d at 1179 (quoting Brody, 957 F.2d at 1115).

We must begin with a jurisdictional issue. As the party asserting jurisdiction, Sylvan bears the burden of showing that its claims are properly before the district court. Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1045 (3d Cir.), cert. denied, 114 S. Ct. 440 (1993).

Sylvan and Alpha are both incorporated under the laws of Pennsylvania. It is axiomatic that the federal judiciary's diversity jurisdiction depends on complete diversity between all plaintiffs and all defendants. See 28 U.S.C. § 1332; Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L. Ed. 435 (1806); Singh v. Daimler-Benz AG, 9 F.3d 303, 305 (3d Cir. 1993). Sylvan concedes that there is no diversity of citizenship between itself and Alpha; both are Pennsylvania corporations. Intervenor's Brief at 20.

Sylvan contends that the district court has supplemental jurisdiction over its claim pursuant to 28 U.S.C. § 1367(a), the recent codification of common law "pendent" and "ancillary" jurisdiction. Section 1367(a) provides

Except as provided in subsections (b) and (c) . . . in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other 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 of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.

28 U.S.C.A. § 1367(a) (1993).

A. § 1367(b)

Subsection (b)'s limitation on the general grant of supplemental jurisdiction raises the most ...


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