       RECOMMENDED FOR FULL-TEXT PUBLICATION
            Pursuant to Sixth Circuit Rule 206
    ELECTRONIC CITATION: 2000 FED App. 0012P (6th Cir.)
                File Name: 00a0012p.06


UNITED STATES COURT OF APPEALS
              FOR THE SIXTH CIRCUIT
                _________________


                              ;
                               
LEROY CAUDILL and VIERA
                               
CAUDILL,
                               
         Plaintiffs-Appellees,
                               
                                       No. 98-2131

                               
          v.                    >
                               
                               
                               
NORTH AMERICAN MEDIA

                               
CORPORATION, a Delaware
                               
Corporation, LIFESOFT
                               
CORPORATION, a Delaware
Corporation, and PETER J.      
                               
      Defendants-Appellants, 
CHRISTIANO,

                               
CHRISTOPHER J. CHRISTIANO, 
                               
                               
MANUEL S. YATOOMA, and
GARY EBERHARDT,                
                  Defendants, 
                               
                               
                   Garnishee. 
FIDELITY BANK,
                               
                              1

       Appeal from the United States District Court
      for the Eastern District of Michigan at Detroit.
No. 95-75492—Lawrence P. Zatkoff, Chief District Judge.



                            1
2       Caudill, et al. v. North Am.                    No. 98-2131       No. 98-2131                 Caudill, et al. v. North Am.     7
        Media Corp., et al.                                                                                   Media Corp., et al.

                   Argued: August 12, 1999                                however, in conflict with the Third and Eighth Circuits’
                                                                          interpretation of the Supreme Court dispositions wherein
             Decided and Filed: January 10, 2000                          those courts dictate that, “The phrase ‘pursuant to the terms
                                                                          of the Settlement’ fails to incorporate the terms of the
    Before: KRUPANSKY and RYAN, *Circuit Judges;                          Settlement agreement into the order because ‘[a] dismissal
               HULL, District Judge.                                      order’s mere reference to the fact of settlement does not
                                                                          incorporate the settlement agreement in the dismissal order.’”
                      _________________                                   In re Phar-Mor, Inc. Securities Litigation, 172 F.3d 270, 274
                                                                          (3rd Cir. 1999) (quoting Miener v. Missouri Dep’t of Mental
                            COUNSEL                                       Health, 62 F.3d 1126, 1128 (8th Cir. 1995)). This court elects
                                                                          to adopt the Third and Eighth Circuits’ interpretation of
ARGUED: J. Mark Cooney, COLLINS, EINHORN,                                 Kokkonen. Accordingly, absent compliance with the Supreme
FARRELL & ULANOFF, Southfield, Michigan, for                              Court’s mandate in Kokkonen and subsequent interpretations
Appellants. Dennis E. Moffett, Madison Heights, Michigan,                 of that decision, the trial court was without jurisdiction to
for Appellees. ON BRIEF: J. Mark Cooney, Noreen L.                        entertain this case and its decision is vacated, See State Farm
Slank, COLLINS, EINHORN, FARRELL & ULANOFF,                               Mut. Auto. Ins. Co. v. Powell, 87 F.3d 93, 99 (3rd Cir. 1996),
Southfield, Michigan, for Appellants. Dennis E. Moffett,                  and this appeal is dismissed.
Madison Heights, Michigan, for Appellees.
                                                                            It is so ordered.
                      _________________
                          OPINION
                      _________________
  KRUPANSKY, Circuit Judge.              Appellants, North
American Media Corporation, LifeSoft Corporation, and
Peter Christiano, challenge denial of Defendants’ motion for
Judgment Not Withstanding the Verdict pursuant to Fed. R.
Civ. P. 50 and/or a Motion for a New Trial pursuant to Fed.
R. Civ. P. 59 subsequent to a jury award of damages against
them in a diversity action that charged wrongful cancellation
of stock. Appellants also challenge the district court subject
matter jurisdiction.
  Defendant-Appellant LifeSoft Corporation (“LifeSoft”) is
a successor corporation to Co-Defendant-Appellant North

    *
     The Honorable Thomas G. Hull, United States District Judge for the
Eastern District of Tennessee, sitting by designation.
6      Caudill, et al. v. North Am.                No. 98-2131     No. 98-2131                        Caudill, et al. v. North Am.      3
       Media Corp., et al.                                                                                    Media Corp., et al.

neither by a separate provision “retaining jurisdiction” over      American Media Corporation (“North American Media”).
the settlement agreement, nor by “incorporating” the terms of      Defendant-Appellant Peter Christiano, along with Defendant
the settlement agreement in the order. See Kokkonen, 511           Christopher Christiano and Defendant Manuel Yatooma, were
U.S. at 381. Had the district court done so, “a breach of the      officers and directors of North American Media. Plaintiff-
agreement would be a violation of the order, and ancillary         Appellee LeRoy Caudill is a former President of North
jurisdiction to enforce the agreement would therefore exist.”      American Media. During his term as North American
Kokkonen, 511 U.S. at 381, and the “enforcement of the             Media’s president, LeRoy and his wife Viera Caudill jointly
settlement is for state courts, unless there is some independent   acquired 1,400,000 shares of North American Media stock.
basis for federal jurisdiction.” Kokkonen, 511 U.S. at 383.        Prior to the instant case, on July 15, 1991, Peter Christiano,
The Court commented that                                           Christopher Christiano and Manuel Yatooma commenced a
                                                                   derivative shareholders action on behalf of themselves and
    the only order here was that the suit be dismissed, a          North American Media in the United States District Court for
    disposition that is in no way flouted or imperiled by the      the Eastern District of Michigan against LeRoy Caudill, North
    alleged breach of the settlement agreement. The                American Media, and other defendants, charging federal wire
    situation would be quite different if the parties’             and securities fraud, federal civil RICO violations, together
    obligation to comply with the terms of the settlement          with state law charges of, misrepresentation, conspiracy to
    agreement had been made part of the order of                   defraud, and breach of fiduciary duty in violation of
    dismissal–either by separate provision (such as a              Michigan’s Blue Sky Law (The 1991 Derivative Action). On
    provision “retaining jurisdiction” over the settlement         May 5, 1992, The 1991 Derivative Action was settled and
    agreement) or by incorporating the terms of the                dismissed “pursuant   to the terms of the parties’ … settlement
    settlement agreement in the order. In that event, a breach     agreement.”1
    of the agreement would be a violation of the order, and
    ancillary jurisdiction to enforce the agreement would             On September 18, 1995, LeRoy and Viera Caudill filed the
    therefore exist. That, however, was not the case here.         instant action in the United States District Court for the
    The judge’s mere awareness and approval of the terms of        Eastern District of Michigan against Defendant-Appellant
    the settlement agreement do not suffice to make them           North American Media, Defendant-Appellant Peter
    part of his order.                                             Christiano, Defendant Christopher Christiano, Defendant
                                                                   Manuel Yatooma, Defendant-Appellant LifeSoft Corporation,
Kokkonen, 511 U.S. at 380-81.                                      and Defendant Gary Eberhardt, the President of LifeSoft,
                                                                   alleging that North American Media wrongfully canceled the
  The trial court distinguished Kokkonen from the case here
on appeal noting that the Kokkonen dismissal did “not so
much as refer to the settlement agreement,” Kokkonen, 511             1
U.S. at 377, while the dismissal order in The 1991 Derivative             The district court dismissal order read in full:
Action specifically stated that “Pursuant to the terms of the
parties’ Oct. 1, 1991 settlement agreement, the Court hereby               In the presence of and with the assistance of counsel, the
                                                                      parties placed a settlement agreement on the record before the
dismisses this case” which language satisfied the Supreme             Hon. Bernard Friedman on October 1, 1991. Pursuant to the
Court dictates of Kokkonen and supported the trial courts’            terms of the parties’ October 1, 1991 settlement agreement, the
ancillary jurisdiction. The trial court’s distinction is,             Court hereby DISMISSES this case.
                                                                           IT IS SO ORDERED.
4     Caudill, et al. v. North Am.                 No. 98-2131      No. 98-2131                 Caudill, et al. v. North Am.     5
      Media Corp., et al.                                                                               Media Corp., et al.

Caudills’ shares in North American Media, in violation of the       district court’s subject matter jurisdiction de novo. Hilliard
agreement settling The 1991 Derivative Action. The Caudills         v. United States Postal Serv., 814 F.2d 325, 326 (6th Cir.
sought declaratory relief, damages, and an order to reissue the     1989). Article III, Section 1 of the United States Constitution
stock to them.                                                      prescribes that “the judicial Power of the United States, shall
                                                                    be vested in one supreme Court, and in such inferior Courts
  The complaint invoked federal diversity jurisdiction              as the Congress may from time to time ordain and establish.”
pursuant to 28 U.S.C. § 1332, while alleging that all of the        Pursuant to 28 U.S.C. § 1332 Congress extended the federal
plaintiffs and all of the defendants were Michigan residents        judicial authority granted pursuant to 28 U.S.C. § 1331 to
and that the LifeSoft had its primary place of business in          civil actions involving citizens of different states. Section
Michigan.                                                           1332's congressionally conferred diversity jurisdiction has
                                                                    been interpreted to demand complete diversity, that is, that no
   On February 9, 1998, prior to trial, Defendant Yatooma           party share citizenship with any opposing party. See Safeco
filed a motion to dismiss Caudill’s complaint for lack of           Ins. Co. of America v. City of Whitehouse, 36 F.3d 540, 545
subject matter diversity jurisdiction. See Safeco Ins. Co. of       (6th Cir. 1994); and Strawbridge v. Curtiss, 7 U.S. (3 Cranch)
America v. City of Whitehouse, 36 F.3d 540, 545 (6th Cir.           267, 2 L. Ed. 435 (1806). The complaint here on appeal,
1994). On March 13, 1998, relying upon the precedent                facially reflects a lack of complete diversity between the
announced in Kokkonen v. Guardian Life Insurance Company            adversaries.
of America, 511 U.S. 375 (1994), wherein the Supreme Court
defined the scope of ancillary jurisdiction granted to United          Ancillary jurisdiction as defined by the Supreme Court in
States district courts, the trial court concluded that its          Kokkonen was designed (1) to permit a court to dispose of
jurisdiction over the instant controversy was ancillary to its      factually independent claims and/or (2) to enable a court to
jurisdiction in The 1991 Derivative Action, denied the              manage its proceedings, vindicate its authority, and effectuate
defendants’ motion to dismiss the complaint and proceeded           its decrees. Kokkonen v. Guardian Life Ins. Co. of America,
to conduct a jury trial on the merits of the issues joined by the   511 U.S. 375, 379-80 (1994). The trial court in the instant
pleadings in Caudills’ action.                                      case misconceived that ancillary jurisdiction derived from its
                                                                    earlier jurisdiction in The 1991 Derivative Action. The facts
   Subsequent to trial, on May 15, 1998, a jury awarded the         underlying the derivative shareholders action upon which the
Caudills $832,275 from North American Media, $832,275               trial judge relied for ancillary jurisdiction are, upon
from LifeSoft, and $335,450 from Peter Christiano. No               examination, unrelated to Caudill’s claim for wrongful
damages were awarded against Christopher Christiano or              cancellation of stock which was predicated upon facts and
Manuel Yatooma who are not parties to this appeal.                  circumstances that occurred subsequent to and independent of
Defendants North American, LifeSoft, and Peter Christiano           the wire and securities fraud which supported the
filed a timely notice of appeal, challenging, inter alia, the       shareholders derivative litigation.
subject matter jurisdiction of the district court.
                                                                      As in Kokkonen, the jurisdiction “asked for here is quite
  “The first and fundamental question presented by every            removed from what courts require to perform their functions.”
case brought to the federal courts is whether it has jurisdiction   See Kokkonen, 511 U.S. at 380. In Kokkonen the parties
to hear a case….” Douglas v. E.G. Baldwin & Associates,             obligation to comply with the terms of the settlement
150 F.3d 604, 607 (6th Cir. 1998). This forum reviews a             agreement was not “made part” of the order of dismissal,
