Cohen v. Postal Holdings, LLC
2017 U.S. App. LEXIS 19846
| 2d Cir. | 2017Background
- The Cohens sued Postal Holdings in Connecticut state court for private nuisance and negligence based on the condition of property (28 Catoonah St.) adjoining their home. Postal Holdings owned the lots and had leased them to USPS.
- Postal Holdings filed a third-party complaint against USPS asserting common-law and contractual indemnification under the Lease between Postal Holdings and USPS (lease gives USPS maintenance control and requires USPS to indemnify Postal Holdings).
- USPS removed under 28 U.S.C. § 1442 and moved to dismiss the third-party claims for lack of subject-matter jurisdiction, arguing the Contract Disputes Act (CDA) grants exclusive jurisdiction to the Court of Federal Claims over such contract claims.
- The district court dismissed the third-party complaint under Rule 12(b)(1) for lack of jurisdiction but retained and then decided the Cohens’ state-law claims, granting summary judgment for Postal Holdings.
- The Second Circuit affirmed dismissal of the third-party claims under the CDA, held the Lease and indemnity claims fall within the CDA, and ruled the district court lacked supplemental jurisdiction over the remaining state-law claims; it vacated the summary judgment and remanded the state claims to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court had jurisdiction over Postal Holdings’ third-party contract claims given the Postal Reorganization Act (PRA) | PRA waives sovereign immunity and grants district courts jurisdiction over suits by/against USPS, so district court can hear the indemnity claims | CDA provides exclusive jurisdiction in the Court of Federal Claims for contract disputes with the United States, displacing the PRA's general grant for contract claims | CDA controls; district court lacked jurisdiction over Postal Holdings’ contract-based third-party claims and dismissal under Rule 12(b)(1) was correct |
| Whether the Lease is excluded from the CDA’s “real property in being” exception (i.e., whether CDA covers the Lease) | Lease of real property should fall outside CDA if characterized as acquiring existing real property | Following Forman, leases create a new government interest and therefore fall within CDA coverage | Lease is governed by the CDA (CDA applies to leaseholds created by contract) |
| Whether Postal Holdings’ indemnification claims are essentially contract claims (thus subject to CDA) or tort claims (outside CDA) | Indemnity claim is common-law/tort-based and not a contract dispute | Indemnity rights and requested relief arise from the Lease and are contractual in essence | Claims (common-law indemnity and contractual indemnity) are essentially contract-based and fall within the CDA |
| Effect of dismissal under Rule 12(b)(1) on supplemental jurisdiction over related state-law claims | (Cohens) District court may retain supplemental jurisdiction over state claims after dismissing federal/third-party claims | USPS/majority: dismissal of all federal claims for lack of subject-matter jurisdiction bars exercise of supplemental jurisdiction; remand required | When federal claims are properly dismissed for lack of subject-matter jurisdiction under Rule 12(b)(1), the district court cannot retain supplemental jurisdiction; state claims must be remanded |
Key Cases Cited
- Bender v. Williamsport Area Sch. Dist., 475 U.S. 534 (discusses appellate courts’ obligation to assure lower-court jurisdiction)
- Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182 (2d Cir. 1996) (distinguishes 12(b)(1) and 12(b)(6) dismissals for purposes of supplemental jurisdiction)
- Anselma Crossing, L.P. v. United States Postal Serv., 637 F.3d 238 (3d Cir. 2011) (CDA precludes district-court jurisdiction over USPS contract claims despite PRA)
- Forman v. United States, 767 F.2d 875 (Fed. Cir. 1985) (leaseholds create new government interests and fall within CDA)
- Up State Fed. Credit Union v. Walker, 198 F.3d 372 (2d Cir. 1999) (tests whether a claim is essentially contractual and thus within CDA)
- U.S. Postal Serv. v. Flamingo Indus., 540 U.S. 736 (discusses USPS’s sovereign status and PRA's sue-and-be-sued clause)
- Valencia ex rel. Franco v. Lee, 316 F.3d 299 (2d Cir. 2003) (discretion to retain supplemental jurisdiction after 12(b)(6) dismissal)