Guaranteed Systems, Inc. v. American National Can Co.

Note which court issued this holding: the U.S. District Court for the Middle District of North Carolina. The federal court’s jurisdiction here is based solely on diversity. As you will read, Guaranteed Systems interprets § 1367(b) to mean that federal courts cannot exercise supplemental jurisdiction over claims against nondiverse parties that the plaintiff impleads in response to a counterclaim. (Note: “Plaintiff” in § 1367(b) signifies the party that initiated the lawsuit or those who later intervened as plaintiffs. A defendant who counterclaims is not  "Plaintiff" within the meaning of § 1367(b).) In other words, imagine a defendant removes a case to federal court, then counterclaims against the plaintiff, and the plaintiff impleads a new party not diverse from the plaintiff, let’s say to reimburse it (the plaintiff) for damages it might have to pay the defendant. The court would not have supplemental jurisdiction over this impleader, because to do so otherwise would ostensibly violate § 1332. Does this rule make sense? What are the public policy or analytical justifications for this rule? What are the practical consequences that follow?

Finally, what if Guaranteed Systems had sued American National Can Co. in Delaware state court, rather than North Carolina state court? Note that under the rules of personal jurisdiction, which you will learn in class days 5-7, Guaranteed Systems could have initiated the case in Delaware. Would the result be different? How?