## Facts

- MCI Telecommunications Corporation sued The Logan Group, Inc. and Communication Specialties, Inc. (CSI) for unpaid telephone services.
- The defendants counterclaimed, alleging billing errors and that MCI improperly withheld amounts connected to CSI’s separate “900 Service.”
- Fidelity Funding (NC), Inc. moved to intervene, alleging it was assigned certain CSI “900 Service” accounts receivable and that it notified MCI of the assignment.
- Fidelity alleged that before purchasing a receivable it obtained verification from MCI that the account was owed and would be paid, but MCI later refused payment, asserting an offset based on a different debtor’s alleged obligation to MCI.
- The court allowed Fidelity to intervene (unopposed) on permissive grounds due to overlapping factual questions.
- Fidelity’s pleadings asserted state-law claims (fraud, breach of contract, promissory estoppel, equitable estoppel) while invoking federal-question jurisdiction.
- Complete diversity was absent because both Fidelity and MCI were Delaware corporations.
- The court required Fidelity to identify a valid jurisdictional basis for its intervenor claims.

## Issues

1. Whether the court had subject-matter jurisdiction over Fidelity’s intervenor claims when the claims were state-law causes of action and there was no diversity between Fidelity and MCI.
2. Whether supplemental jurisdiction under 28 U.S.C. § 1367 permitted Fidelity, as an intervenor, to litigate its state-law dispute against MCI in the existing federal case.
3. Whether intervention under Federal Rule of Civil Procedure 24 could allow Fidelity’s claims to proceed despite the absence of an independent jurisdictional basis.

## Decision

- The court held it lacked subject-matter jurisdiction over Fidelity’s intervenor claims.
- The court rejected federal-question jurisdiction because Fidelity alleged only state-law claims that did not arise under federal law.
- The court found diversity jurisdiction unavailable because Fidelity and MCI shared Delaware citizenship.
- The court concluded supplemental jurisdiction did not authorize Fidelity’s claims in these circumstances.
- Fidelity’s intervenor claims were dismissed for lack of subject-matter jurisdiction, without resolving the underlying dispute between MCI and the original defendants.

## Legal Principles

- Federal courts must dismiss claims when subject-matter jurisdiction is lacking, even if jurisdictional defects are identified after intervention is permitted.
- Federal-question jurisdiction under 28 U.S.C. § 1331 depends on claims arising under federal law; factual association with a federally regulated industry does not, by itself, create a federal question.
- Diversity jurisdiction under 28 U.S.C. § 1332 requires complete diversity between opposing parties; shared state of incorporation defeats diversity.
- Supplemental jurisdiction under 28 U.S.C. § 1367 requires a valid basis of original jurisdiction and does not automatically permit an intervenor to litigate a separate state-law controversy between nondiverse parties.
- Intervention under Rule 24 is procedural and cannot create subject-matter jurisdiction where none exists.

## Conclusion

The court dismissed the intervenor’s state-law claims against MCI because the intervenor lacked federal-question and diversity jurisdiction, and supplemental jurisdiction did not permit the intervenor to use the existing federal action to litigate a separate nondiverse dispute.


MCI Telecomms. Corp. v. Logan Grp., Inc., 848 F. Supp. 86 (N.D. Tex. 1994)