## Facts

- A municipal authority in Pennsylvania contracted with a Pennsylvania general contractor to perform sewer-construction work.
- An Ohio subcontractor furnished labor and materials under a subcontract with the general contractor and completed its work but alleged it was not fully paid.
- The subcontractor filed a federal diversity action against the general contractor, the general contractor’s surety, and the municipal authority seeking unpaid amounts.
- The municipal authority denied liability, asserting lack of contractual privity with the subcontractor under Pennsylvania law.
- The general contractor and surety asserted counterclaims against the subcontractor and filed a cross-claim against the municipal authority arising from the same construction projects.
- The municipal authority counterclaimed against the general contractor for alleged defective work.
- On the first day of trial, the district court dismissed the subcontractor’s claim against the municipal authority on state-law privity grounds and then dismissed the general contractor’s cross-claim against the municipal authority for lack of an independent basis of federal jurisdiction.
- While the appeal was pending, the general contractor pursued the same claim in state court and obtained the relief sought in the federal cross-claim.

## Issues

1. Whether a federal court with diversity jurisdiction over the main action retains ancillary jurisdiction over a properly filed Rule 13(g) cross-claim against a nondiverse codefendant after the plaintiff’s claim against that codefendant is dismissed on the merits (rather than for lack of subject-matter jurisdiction).
2. Whether the appeal of the cross-claim’s dismissal should be resolved when intervening state-court proceedings have already granted the cross-claimant the relief sought.

## Decision

- The Third Circuit agreed that the district court’s jurisdictional rationale for dismissing the Rule 13(g) cross-claim was incorrect because ancillary jurisdiction, once properly attached, is not defeated by a later merits dismissal of the plaintiff’s related claim.
- The court affirmed the dismissal order because the cross-claim dispute was moot: the cross-claimant had already obtained the requested relief in state court, leaving no live controversy for federal adjudication.

## Legal Principles

- A cross-claim properly asserted under Federal Rule of Civil Procedure 13(g) and arising from the same transaction or occurrence as the main action may be supported by ancillary jurisdiction without an independent diversity basis.
- When the plaintiff’s claim against the cross-claim defendant is dismissed on non-jurisdictional grounds, that dismissal does not retroactively eliminate ancillary jurisdiction over an already-permitted Rule 13(g) cross-claim.
- If the plaintiff’s claim is dismissed for lack of subject-matter jurisdiction, ancillary jurisdiction over related claims cannot stand because there is no jurisdictional foundation.
- An appellate court may affirm a lower court’s dismissal when intervening events render the dispute moot, even if the lower court’s reasoning was erroneous.

## Conclusion

The Third Circuit concluded that ancillary jurisdiction over a Rule 13(g) cross-claim is not lost merely because the plaintiff’s claim against the cross-claim defendant is dismissed on the merits, but it affirmed the cross-claim’s dismissal because subsequent state-court relief mooted the federal controversy.


Fairview Park Excavating Co. v. Al Monzo Constr. Co., 560 F.2d 1122 (3d Cir. 1977)