## Facts

- African-American consumers financed Ford vehicle purchases through Ford Motor Credit Company’s indirect auto-financing program.
- Ford Credit set a base interest rate largely using objective criteria but permitted dealers to increase (“mark up”) the rate using subjective criteria.
- Plaintiffs alleged the markup practice resulted in higher rates for African-American borrowers than for similarly situated white borrowers.
- Plaintiffs sued under the Equal Credit Opportunity Act (ECOA), seeking to represent a nationwide class.
- Ford Credit filed counterclaims against three named plaintiffs for alleged defaults on their retail installment contracts and asserted conditional counterclaims against putative class members who might be shown to have defaulted.

## Issues

1. Whether 28 U.S.C. § 1367(a) authorizes supplemental jurisdiction over permissive counterclaims that are not compulsory under Rule 13(a), so long as they are part of the same Article III case or controversy.
2. Whether the district court properly declined to exercise supplemental jurisdiction under § 1367(c) at the outset, before ruling on class certification.

## Decision

- The Second Circuit vacated the dismissal of Ford Credit’s counterclaims and remanded.
- The court held supplemental jurisdiction under § 1367 may be available for permissive counterclaims if they are sufficiently related to form part of the same Article III case or controversy.
- The court held the district court’s discretionary decision to decline supplemental jurisdiction under § 1367(c) was premature without first deciding class certification.
- The court directed that class certification be addressed first, then the district court should decide whether to exercise or decline supplemental jurisdiction in light of the certified action’s structure and related fairness concerns.

## Legal Principles

- Section 1367(a) can extend supplemental jurisdiction to some permissive counterclaims; Rule 13’s compulsory/permissive classification does not categorically control § 1367(a).
- The § 1367(a) inquiry turns on whether the additional claim is so related to the claims within original federal jurisdiction that they form part of the same Article III case or controversy.
- A district court’s discretionary decision under § 1367(c) should be informed by judicial economy, convenience, fairness, and comity.
- In class actions, the class-certification ruling may materially affect the § 1367(c) analysis, including whether individualized counterclaims would be manageable or unfair and whether they could deter enforcement of federal anti-discrimination credit laws.

## Conclusion

The Second Circuit ruled that supplemental jurisdiction may reach permissive loan-default counterclaims connected to an ECOA discrimination suit, but held that any discretionary refusal of jurisdiction under § 1367(c) should await a class-certification decision; it therefore vacated the counterclaim dismissal and remanded.


Jones v. Ford Motor Credit Co., 358 F.3d 205 (2d Cir. 2004)