Dickler v. Cigna Property & Casualty Co.

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
10-7-2002
Dickler v. Cigna Prop Cslty Co
Precedential or Non-Precedential: Non-Precedential
Docket No. 01-3534
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2002
Recommended Citation
"Dickler v. Cigna Prop Cslty Co" (2002). 2002 Decisions. Paper 637.
http://digitalcommons.law.villanova.edu/thirdcircuit_2002/637
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2002 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________________
No. 01-3534
__________________
STEWART DICKLER; BEECH TREE RUN, INC.;
WANTAGH UNION FREE SCHOOL DISTRICT
v.
CIGNA PROPERTY AND CASUALTY COMPANY,
Beech Tree Run Inc. and
Judith A. Kates,* Appellants
*Pursuant to F.R.A.P. 12(c)
____________________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
D. C. Civil No. 90-cv-04288
District Judge: Hon. Clarence C. Newcomer
____________________
Argued: May 23, 2002
_____________________
Before: McKEE, STAPLETON and WALLACE* Circuit Judges.
(Opinion Filed: October 4, 2002)
Michael J. Salmanson (argued)
1515 Locust Street
Philadelphia, PA 19102
Counsel for Appellants Beech Tree Run, Inc. and Judith A. Kates.
*
The Honorable J. Clifford Wallace, United States Court of Appeals for the Ninth
Circuit, sitting by designation
Zachary L. Grayson (argued)
Grayson & Goldin
1604 Locust Street, 2nd Floor
Philadelphia, PA 19103
Counsel for Appellee Friends of Associated Beth Rivka Schools For Girls, Inc.
____________
OPINION OF THE COURT
____________
McKEE, Circuit Judge.
Appellants Beech Tree Run, Inc. and Judith A. Kates, as Executrix of the Estate of
the late Lewis Kates Esq., appeal the District Court’s order of August 16, 2001, in which
that court granted the Motion to Amend Judgment filed by Friends of Beth Rivka Schools
for Girls, Inc. (“Beth Rivka”), thereby vacating the court’s prior order of March 19, 1998
insofar as it applied to Beth Rivka. The court granted the Motion to Amend based upon its
conclusion that Beth Rivka’s presence negated diversity of citizenship.1 The court
concluded that it therefore could not order Beth Rivka’s compliance with the June 24, 1993
“Proceeds Stipulation.” This appeal followed. For the reasons that follow, we will
reverse.2
1
Beth Rivka, like plaintiffs, is a New York entity. Defendant Cigna is a Pennsylvania
entity, and defendant Pacific Employers Insurance Company is a California entity.
2
We have jurisdiction pursuant to 28 U.S.C. § 1291. The district court had
diversity jurisdiction over the underlying lawsuit pursuant to 28 U.S.C. § 1332.
Neither Wantagh Union Free School District or CIGNA Property and Casualty
Company participated in this appeal. We also note Machne Israel Inc. has petitioned for a
writ of mandamus concerning the same court order at issue here. See In re: Machne
Israel, Inc., No. 02-1962, argued May 23, 2002. Although this opinion necessarily refers
to Machne Israel in discussing the underlying facts of this case, we express no view here as
2
I.
Inasmuch as we write only for the parties and the District Court, we need not
reiterate the protracted and tortured history of this dispute except insofar as it may assist
our brief discussion of the jurisdictional issue before us, and place our analysis in context.
This saga originally involved a fairly typical dispute over insurance proceeds
purportedly owed under an insurance policy on real estate in New York. It has festered
into a dispute that the district court aptly characterized as “extremely litigious, angry, and
bitter.” Dickler v. Cigna Property and Cas. Co., 1998 WL 126938, at *1 (E.D. Pa. March
19, 1998). Despite its protracted nature, and the underlying charitable purposes the parties
profess to advance, the prospects for the amicable resolution of this litigation in the
foreseeable future are no brighter than its dim history.
The insurance phase of this lawsuit was settled nearly a decade ago when, on June
24, 1993, the District Court entered an order entitled “Stipulation Re: Allocation of
Proceeds of Settlement.” Appellants and Machne Israel, Inc. signed that “Proceeds
Stipulation.”
The Proceeds Stipulation required Machne Israel to build a school within a specified
time frame and provided that Appellants would contribute $2,875.000.00 for this purpose.
The Stipulation provided that Machne Israel would repay the funds to Appellants if the
building was not completed within the specified time frame. In a prior appeal, we held that
to the disposition of the Machne Israel petition which will be decided independently.
3
the Proceeds Stipulation was the functional equivalent of a consent decree, and we
approved the Stipulation. See Dickler v. CIGNA Property and Casualty Co., Nos. 96-1809
and 96-1935, slip op. at 5 (3d Cir. September 24, 1997).
II.
The issue before us is whether the District Court correctly concluded that it lacked
subject matter jurisdiction to enforce the reversion provision of the Proceeds Stipulation
and order Beth Rivka to repay the funds it had received to build the still uncompleted
school. The District Court reached that conclusion with understandable reluctance
inasmuch as it gave Beth Rivka a substantial windfall.
As the District Court correctly noted, “Federal courts are courts of limited
jurisdiction. They possess only that power authorized by Constitution and statute, which is
not to be expanded by judicial decree.” Kokkonen v. Guardian Life Ins. Co. of America,
511 U.S. 375, 377 (1994) (citations omitted). Within that jurisdiction, however, the
district courts have inherent power to modify and enforce compliance with properly
entered consent decrees. See Holland v. New Jersey Dept. of Corrections, 246 F.3d 267,
277 (3d Cir. 2001); see also Spallone v. United States; 493 U.S. 265, 276 (1990); United
States v. United Shoe Mach. Corp., 391 U.S. 244, 248-49 (1968).
Here, the District Court entered an order stating that the Proceeds Stipulation was
“approved and shall be enforceable as a Final Order.” App. at 42 (emphasis added). That
order was therefore structured so that “a breach of the agreement would be a violation of
the order, and ancillary jurisdiction to enforce the agreement would therefore exist.”
4
Kokkonen, 511 U.S. at 381. Thus, the District Court incorporated language “retaining
jurisdiction” into the consent decree. See id.
However, Beth Rivka seeks to escape the court’s ability to enforce the settlement by
arguing that the court lacked subject matter jurisdiction to enforce the Stipulation against it
given its common residency with plaintiffs. Beth Rivka’s argument is identical to one we
rejected in Lasky v. Continental Products Corp., 804 F.2d 250, 254 (3d Cir. 1986).3
There, we held that the district court’s authority to grant a Rule 60(b) motion to allocate
funds under a consent decree was ancillary to its authority to approve the decree, and the
court’s jurisdiction was therefore not destroyed by the nondiversity of the party seeking the
modification. We stated:
The power of a court to enter a consent decree emanates from
its authority to adjudicate the rights of the parties in the first
instance. The authority thereafter to modify the consent
decree similarly derives directly from the court's initial
exercise of jurisdiction over the dispute. Put otherwise, a
court has inherent power to modify a consent decree that it
initially had the power to approve. Thus, jurisdiction over
appellant's motion to allocate is not contingent upon the
diversity of the parties seeking modification of the consent
decree. Rather, the district court's power to consider the
motion at all is based on the consent decree itself which was
properly entered pursuant to the court's diversity jurisdiction.
Lasky, 804 F.2d at 254 (citations omitted).
Here, it is clear that the court had the initial authority to approve the Proceeds
3
Ironically, we began our discussion in Lasky as follows: ‘This unfortunate appeal is
again before us for resolution due to the parties’ inability to reach a prompt settlement of
their dispute.” 804 F.2d at 251-2. We could say the same here.
5
Stipulation, and we affirmed the district court in a prior appeal. Accordingly, Beth Rivka’s
residency is irrelevant.
Furthermore, though conceded on appeal, we hold that the District Court could
properly exercise in personam jurisdiction over Beth Rivka and thereby enforce the
reversion in the Proceeds Stipulation. At oral argument counsel for Beth Rivka conceded
that it willingly subjected itself to the authority of the District Court, and it could hardly
argue otherwise. Though not a “party,” it has fully involved itself in this litigation. Beth
Rivka has even taken an appeal from prior orders of the district court, and argued those
orders before this court. It has never sought to limit its appearance to contest the court’s in
personam jurisdiction over it. Accordingly, the District Court clearly had in personam
jurisdiction over Beth Rivka, and its order of March 19, 1998 was ancillary to the subject
matter jurisdiction it had when it approved the Proceeds Settlement.
III.
Therefore, we will reverse the order of August 16, 2001, and remand the matter to
the District Court so that it may entertain the application pending before it.
__________________
TO THE CLERK:
Please file the preceding not precedential opinion.
/s/Theodore A. McKee
6
Circuit Judge
WALLACE, Senior Circuit Judge, concurring:
I concur with the majority opinion, but write separately to clarify that our ancillary
jurisdiction is limited to the district court’s ability to enforce the consent decree against
Beth Rivka. See Lasky v. Continental Products Corp., 804 F.2d 250, 254 (3d Cir. 1986).
Although the district court held that Beth Rivka was not a party to the consent decree, the
district court has the power to enforce the decree against Beth Rivka. Previously, the
district court found that Appellants formally assigned to Beth Rivka their right in all
proceeds which were or became due from the insurer in Appellants’ action then pending
against the insurer. Dickler v. Cigna, No. 90-4288, 1996 WL 437048, at 1* (E.D. Pa. Aug.
2, 1996). It was these proceeds that were distributed by the consent decree. Beth Rivka is
thus bound by the consent decree, though it is not a party. Golden State Bottling Co. v.
NLRB, 414 U.S. 168, 179 (1973); Behrens v. Skelly, 173 F.2d 715, 718-19 (3d Cir. 1949)
(applying New York law); United States v. Premises Known as 2930 Greenleaf Street,
Allentown, PA, 920 F. Supp. 639, 645-46 (E.D. Pa. 1996) (applying Pennsylvania law); 18A
CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE §
4462 (2d ed. 2002).
7