Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978), is a United States Supreme Court decision addressing the limits of federal diversity jurisdiction and the scope of ancillary jurisdiction. The Court’s ruling clarified that a plaintiff may not rely on ancillary jurisdiction to bring a claim against a third-party defendant who destroys complete diversity, even when that third-party defendant was brought into the lawsuit through impleader.
The case remains a leading authority on the rule that diversity jurisdiction requires complete diversity between every plaintiff and every defendant, and that plaintiffs cannot circumvent this requirement by using ancillary or supplemental jurisdiction to pursue additional claims.
Facts of Owen Equipment & Erection Co. v. Kroger
In Owen Equipment & Erection Co. v. Kroger, the plaintiff, Mrs. Kroger, was a citizen of Iowa. She filed a wrongful death lawsuit in the United States District Court for the District of Nebraska against the Omaha Public Power District (OPPD), which was a citizen of Nebraska. The basis of federal jurisdiction was diversity of citizenship under 28 U.S.C. § 1332.
Mrs. Kroger’s husband had been electrocuted while walking beside a crane whose boom came too close to a power line. The power line was owned by OPPD, and the crane was owned and operated by Owen Equipment & Erection Co. OPPD responded by filing a third-party complaint against Owen, alleging that Owen was responsible for the accident because it operated the crane.
Mrs. Kroger then amended her complaint to name Owen directly as an additional defendant. In her amended complaint, she described Owen as a Nebraska corporation with its principal place of business in Nebraska.
However, while Owen was incorporated in Nebraska, its principal place of business was actually located in Carter Lake, Iowa. Under federal diversity rules, a corporation is a citizen of both its state of incorporation and its principal place of business. Therefore, Owen was a citizen of Iowa.
Because Mrs. Kroger was also a citizen of Iowa, the amendment destroyed complete diversity between the parties.
Procedural History
In Owen Equipment & Erection Co. v. Kroger, Owen moved to dismiss the amended claim for lack of federal subject matter jurisdiction, arguing that diversity was incomplete once the plaintiff sued an Iowa citizen.
The district court reserved ruling on the motion and allowed the case to proceed to trial. After the jury returned a verdict in favor of Mrs. Kroger, the district court denied the motion to dismiss in an unreported decision. The court concluded that the claim against Owen could be supported under ancillary jurisdiction because it arose from the same set of events as the original complaint against OPPD.
The United States Court of Appeals for the Eighth Circuit affirmed the district court’s ruling, relying largely on the Supreme Court’s earlier decision in United Mine Workers v. Gibbs. The court reasoned that since the claims formed a “common nucleus of operative fact,” ancillary jurisdiction was proper, even if complete diversity was lacking between the plaintiff and Owen.
The Supreme Court granted certiorari to resolve the question.
Issue
Whether a federal court may hear a plaintiff’s claim against a third-party defendant when the claim lacks an independent basis for federal jurisdiction, in a case where original jurisdiction is based solely on diversity of citizenship.
Owen Equipment & Erection Co. v. Kroger Judgment
The Supreme Court held no. A federal court does not have ancillary jurisdiction over a plaintiff’s claim against a third-party defendant when that claim destroys complete diversity and lacks its own basis for federal jurisdiction.
The Court reversed the judgment of the Court of Appeals.
Reasoning (Majority Opinion)
Justice Potter Stewart wrote the majority opinion. The Court began by emphasizing that § 1332(a)(1) confers diversity jurisdiction only when there is complete diversity, and this requirement has always been strictly applied. Once Mrs. Kroger amended her complaint to assert a claim directly against Owen, complete diversity was lost, because both she and Owen were Iowa citizens.
The Court rejected the argument that ancillary jurisdiction could save the claim. Although federal courts can use ancillary jurisdiction to hear certain related claims, the Court held that there are limits—particularly in diversity cases.
The majority opinion explained that ancillary jurisdiction cannot be applied merely because two claims share a “common nucleus of operative fact.” That principle from Gibbs applies only to pendent jurisdiction in federal question cases, not to diversity cases where Congress has strictly required complete diversity.
The Court emphasized two important limits:
The non-federal claim must be dependent on the original claim.
A federal court may hear non-federal claims only when they are truly “ancillary”—that is, subordinate or dependent on the main claim. The Court found that Mrs. Kroger’s claim against Owen was not dependent on the claim against OPPD. Owen’s liability did not depend on whether OPPD was liable, and vice versa. Therefore, the claim was not ancillary within the meaning of the doctrine.
Plaintiffs are treated differently from defendants.
The Court explained that defendants who are involuntarily brought into federal court may be permitted to assert related claims under ancillary jurisdiction without destroying diversity. However, plaintiffs are not given this flexibility because they voluntarily choose the forum. A plaintiff cannot use impleader as a tool to bring a non-diverse defendant into federal court indirectly.
Because Mrs. Kroger voluntarily amended her complaint to add a claim against Owen, and because this amendment destroyed complete diversity, the federal court lacked subject matter jurisdiction.
Dissent
Justice White, joined by Justice Brennan, dissented. The dissent argued that the majority was too rigid in its reading of § 1332 and that it overlooked practical considerations such as judicial economy, convenience, and fairness. Justice White would have permitted the federal court to hear all claims that arose from the same nucleus of operative facts as the original complaint, even if complete diversity was not preserved.
The dissent believed that complete diversity should be required only between the plaintiff and the defendants originally chosen by the plaintiff. Once the defendant impleads a third party, the plaintiff should be allowed to assert related claims against that party in the interest of efficient litigation.
Conclusion
In Owen Equipment & Erection Co. v. Kroger, the Supreme Court drew a sharp line around the limits of ancillary jurisdiction in diversity cases. The Court ruled that plaintiffs cannot rely on ancillary jurisdiction to pursue claims against third-party defendants who share citizenship with them, because doing so would undermine the complete diversity requirement of 28 U.S.C. § 1332. The decision remains a key precedent for understanding federal jurisdiction, the structure of multiparty litigation, and the limits of supplemental or ancillary claims.