## Facts

- Matt T. Kokkonen sued Guardian Life Insurance Company of America in California state court over termination of a general agency agreement, asserting state-law claims.
- Guardian removed the case to federal court based on diversity jurisdiction and asserted state-law counterclaims.
- After closing arguments at trial, the parties reached an oral settlement and recited its substance on the record before the district judge in chambers.
- The parties filed a stipulation and order dismissing all claims and counterclaims with prejudice under Federal Rule of Civil Procedure 41(a)(1)(ii), which the district judge signed.
- The dismissal order did not incorporate the settlement terms or expressly retain jurisdiction to enforce the settlement.
- A post-dismissal dispute arose about Kokkonen’s alleged obligation to return certain files to Guardian.
- Guardian moved in federal district court to enforce the settlement; Kokkonen objected that the court lacked subject-matter jurisdiction.
- The district court enforced the settlement, relying on an asserted “inherent power,” and the Ninth Circuit affirmed on an “inherent supervisory power” theory.

## Issues

1. Whether a federal district court has subject-matter jurisdiction to enforce a settlement agreement after the underlying action has been dismissed with prejudice under Rule 41(a)(1)(ii) when the dismissal order neither incorporates the settlement nor expressly retains jurisdiction.
2. Whether ancillary jurisdiction permits enforcement of the settlement absent an independent basis for federal jurisdiction over the settlement dispute.
3. Whether a federal court’s inherent powers can supply jurisdiction to enforce the settlement agreement.

## Decision

- The Supreme Court unanimously reversed and remanded, holding the district court lacked jurisdiction to enforce the settlement agreement.
- The Court rejected the view that dismissal based on settlement automatically creates federal jurisdiction over later alleged settlement breaches.
- The Court held ancillary jurisdiction did not apply because enforcement would require adjudicating a separate contract dispute not necessary to manage the court’s proceedings or effectuate its decrees.
- The Court held inherent power cannot create subject-matter jurisdiction where none is authorized by the Constitution or statute.

## Legal Principles

- Federal courts are courts of limited jurisdiction; jurisdiction must be authorized by the Constitution and statute, and the party invoking jurisdiction bears the burden of establishing it.
- A settlement agreement is a contract; a later claim for breach is ordinarily a separate controversy requiring its own jurisdictional basis.
- A federal court may enforce a settlement after dismissal only if:
  - there is an independent basis for federal jurisdiction over the enforcement dispute (e.g., diversity or federal question), or
  - the dismissal order incorporates the settlement agreement or expressly retains jurisdiction to enforce it.
- Ancillary jurisdiction is limited to matters that are factually interdependent with the original action or necessary for the court to manage proceedings, vindicate authority, or effectuate decrees; it does not automatically extend to post-dismissal settlement enforcement.
- Inherent judicial powers support case management and enforcement of existing orders, but do not expand subject-matter jurisdiction.

## Conclusion

The Court held that enforcing a settlement after a case is dismissed with prejudice requires an independent jurisdictional basis unless the dismissal order incorporates the settlement or expressly retains jurisdiction; absent those conditions, enforcement belongs in state court or a new federal action with its own jurisdictional grounds.


Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994)