                                                                                                                           Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


10-7-2002

Dickler v. Cigna Prop Cslty Co
Precedential or Non-Precedential: Non-Precedential

Docket No. 01-3534




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"Dickler v. Cigna Prop Cslty Co" (2002). 2002 Decisions. Paper 637.
http://digitalcommons.law.villanova.edu/thirdcircuit_2002/637


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                                                                        NOT PRECEDENTIAL

                             UNITED STATES COURT OF APPEALS
                                  FOR THE THIRD CIRCUIT
                                    __________________

                                           No. 01-3534
                                       __________________

                        STEWART DICKLER; BEECH TREE RUN, INC.;
                        WANTAGH UNION FREE SCHOOL DISTRICT

                                                  v.

                       CIGNA PROPERTY AND CASUALTY COMPANY,

                                                       Beech Tree Run Inc. and
                                                       Judith A. Kates,* Appellants

                                                   *Pursuant to F.R.A.P. 12(c)
                                      ____________________

                           On Appeal from the United States District Court
                               for the Eastern District of Pennsylvania
                                    D. C. Civil No. 90-cv-04288
                            District Judge: Hon. Clarence C. Newcomer
                                      ____________________

                                       Argued: May 23, 2002
                                     _____________________

                  Before: McKEE, STAPLETON and WALLACE* Circuit Judges.

                                  (Opinion Filed: October 4, 2002)

Michael J. Salmanson (argued)
1515 Locust Street
Philadelphia, PA 19102
        Counsel for Appellants Beech Tree Run, Inc. and Judith A. Kates.


       *
          The Honorable J. Clifford Wallace, United States Court of Appeals for the Ninth
Circuit, sitting by designation
Zachary L. Grayson (argued)
Grayson & Goldin
1604 Locust Street, 2nd Floor
Philadelphia, PA 19103
        Counsel for Appellee Friends of Associated Beth Rivka Schools For Girls, Inc.
                                         ____________

                                     OPINION OF THE COURT
                                          ____________

McKEE, Circuit Judge.

        Appellants Beech Tree Run, Inc. and Judith A. Kates, as Executrix of the Estate of

the late Lewis Kates Esq., appeal the District Court’s order of August 16, 2001, in which

that court granted the Motion to Amend Judgment filed by Friends of Beth Rivka Schools

for Girls, Inc. (“Beth Rivka”), thereby vacating the court’s prior order of March 19, 1998

insofar as it applied to Beth Rivka. The court granted the Motion to Amend based upon its

conclusion that Beth Rivka’s presence negated diversity of citizenship.1 The court

concluded that it therefore could not order Beth Rivka’s compliance with the June 24, 1993

“Proceeds Stipulation.” This appeal followed. For the reasons that follow, we will

reverse.2

        1
          Beth Rivka, like plaintiffs, is a New York entity. Defendant Cigna is a Pennsylvania
entity, and defendant Pacific Employers Insurance Company is a California entity.
        2
           We have jurisdiction pursuant to 28 U.S.C. § 1291. The district court had
diversity jurisdiction over the underlying lawsuit pursuant to 28 U.S.C. § 1332.
         Neither Wantagh Union Free School District or CIGNA Property and Casualty
Company participated in this appeal. We also note Machne Israel Inc. has petitioned for a
writ of mandamus concerning the same court order at issue here. See In re: Machne
Israel, Inc., No. 02-1962, argued May 23, 2002. Although this opinion necessarily refers
to Machne Israel in discussing the underlying facts of this case, we express no view here as

                                                    2
                                                      I.

        Inasmuch as we write only for the parties and the District Court, we need not

reiterate the protracted and tortured history of this dispute except insofar as it may assist

our brief discussion of the jurisdictional issue before us, and place our analysis in context.

        This saga originally involved a fairly typical dispute over insurance proceeds

purportedly owed under an insurance policy on real estate in New York. It has festered

into a dispute that the district court aptly characterized as “extremely litigious, angry, and

bitter.” Dickler v. Cigna Property and Cas. Co., 1998 WL 126938, at *1 (E.D. Pa. March

19, 1998). Despite its protracted nature, and the underlying charitable purposes the parties

profess to advance, the prospects for the amicable resolution of this litigation in the

foreseeable future are no brighter than its dim history.

        The insurance phase of this lawsuit was settled nearly a decade ago when, on June

24, 1993, the District Court entered an order entitled “Stipulation Re: Allocation of

Proceeds of Settlement.” Appellants and Machne Israel, Inc. signed that “Proceeds

Stipulation.”

        The Proceeds Stipulation required Machne Israel to build a school within a specified

time frame and provided that Appellants would contribute $2,875.000.00 for this purpose.

The Stipulation provided that Machne Israel would repay the funds to Appellants if the

building was not completed within the specified time frame. In a prior appeal, we held that




to the disposition of the Machne Israel petition which will be decided independently.

                                                      3
the Proceeds Stipulation was the functional equivalent of a consent decree, and we

approved the Stipulation. See Dickler v. CIGNA Property and Casualty Co., Nos. 96-1809

and 96-1935, slip op. at 5 (3d Cir. September 24, 1997).

                                                    II.

        The issue before us is whether the District Court correctly concluded that it lacked

subject matter jurisdiction to enforce the reversion provision of the Proceeds Stipulation

and order Beth Rivka to repay the funds it had received to build the still uncompleted

school. The District Court reached that conclusion with understandable reluctance

inasmuch as it gave Beth Rivka a substantial windfall.

        As the District Court correctly noted, “Federal courts are courts of limited

jurisdiction. They possess only that power authorized by Constitution and statute, which is

not to be expanded by judicial decree.” Kokkonen v. Guardian Life Ins. Co. of America,

511 U.S. 375, 377 (1994) (citations omitted). Within that jurisdiction, however, the

district courts have inherent power to modify and enforce compliance with properly

entered consent decrees. See Holland v. New Jersey Dept. of Corrections, 246 F.3d 267,

277 (3d Cir. 2001); see also Spallone v. United States; 493 U.S. 265, 276 (1990); United

States v. United Shoe Mach. Corp., 391 U.S. 244, 248-49 (1968).

        Here, the District Court entered an order stating that the Proceeds Stipulation was

“approved and shall be enforceable as a Final Order.” App. at 42 (emphasis added). That

order was therefore structured so that “a breach of the agreement would be a violation of

the order, and ancillary jurisdiction to enforce the agreement would therefore exist.”

                                                     4
Kokkonen, 511 U.S. at 381. Thus, the District Court incorporated language “retaining

jurisdiction” into the consent decree. See id.

        However, Beth Rivka seeks to escape the court’s ability to enforce the settlement by

arguing that the court lacked subject matter jurisdiction to enforce the Stipulation against it

given its common residency with plaintiffs. Beth Rivka’s argument is identical to one we

rejected in Lasky v. Continental Products Corp., 804 F.2d 250, 254 (3d Cir. 1986).3

There, we held that the district court’s authority to grant a Rule 60(b) motion to allocate

funds under a consent decree was ancillary to its authority to approve the decree, and the

court’s jurisdiction was therefore not destroyed by the nondiversity of the party seeking the

modification. We stated:

                The power of a court to enter a consent decree emanates from
                its authority to adjudicate the rights of the parties in the first
                instance. The authority thereafter to modify the consent
                decree similarly derives directly from the court's initial
                exercise of jurisdiction over the dispute. Put otherwise, a
                court has inherent power to modify a consent decree that it
                initially had the power to approve. Thus, jurisdiction over
                appellant's motion to allocate is not contingent upon the
                diversity of the parties seeking modification of the consent
                decree. Rather, the district court's power to consider the
                motion at all is based on the consent decree itself which was
                properly entered pursuant to the court's diversity jurisdiction.

Lasky, 804 F.2d at 254 (citations omitted).

        Here, it is clear that the court had the initial authority to approve the Proceeds


        3
          Ironically, we began our discussion in Lasky as follows: ‘This unfortunate appeal is
again before us for resolution due to the parties’ inability to reach a prompt settlement of
their dispute.” 804 F.2d at 251-2. We could say the same here.

                                                      5
Stipulation, and we affirmed the district court in a prior appeal. Accordingly, Beth Rivka’s

residency is irrelevant.

        Furthermore, though conceded on appeal, we hold that the District Court could

properly exercise in personam jurisdiction over Beth Rivka and thereby enforce the

reversion in the Proceeds Stipulation. At oral argument counsel for Beth Rivka conceded

that it willingly subjected itself to the authority of the District Court, and it could hardly

argue otherwise. Though not a “party,” it has fully involved itself in this litigation. Beth

Rivka has even taken an appeal from prior orders of the district court, and argued those

orders before this court. It has never sought to limit its appearance to contest the court’s in

personam jurisdiction over it. Accordingly, the District Court clearly had in personam

jurisdiction over Beth Rivka, and its order of March 19, 1998 was ancillary to the subject

matter jurisdiction it had when it approved the Proceeds Settlement.

                                                       III.

        Therefore, we will reverse the order of August 16, 2001, and remand the matter to

the District Court so that it may entertain the application pending before it.




__________________

TO THE CLERK:

        Please file the preceding not precedential opinion.




                                                              /s/Theodore A. McKee

                                                        6
                                                            Circuit Judge


WALLACE, Senior Circuit Judge, concurring:
    I concur with the majority opinion, but write separately to clarify that our ancillary

jurisdiction is limited to the district court’s ability to enforce the consent decree against

Beth Rivka. See Lasky v. Continental Products Corp., 804 F.2d 250, 254 (3d Cir. 1986).

Although the district court held that Beth Rivka was not a party to the consent decree, the

district court has the power to enforce the decree against Beth Rivka. Previously, the

district court found that Appellants formally assigned to Beth Rivka their right in all

proceeds which were or became due from the insurer in Appellants’ action then pending

against the insurer. Dickler v. Cigna, No. 90-4288, 1996 WL 437048, at 1* (E.D. Pa. Aug.

2, 1996). It was these proceeds that were distributed by the consent decree. Beth Rivka is

thus bound by the consent decree, though it is not a party. Golden State Bottling Co. v.

NLRB, 414 U.S. 168, 179 (1973); Behrens v. Skelly, 173 F.2d 715, 718-19 (3d Cir. 1949)

(applying New York law); United States v. Premises Known as 2930 Greenleaf Street,

Allentown, PA, 920 F.Supp. 639, 645-46 (E.D. Pa. 1996) (applying Pennsylvania law); 18A

CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE §

4462 (2d ed. 2002).




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