Defendant-third-party-plaintiff-appellant Trendi Sportswear, Inc. (“Trendi”) and third-party-defendant-fourth-party-plaintiff-appellant Indu-Craft, Inc. (“Indu-Craft”) appeal from a final judgment entered on March 30, 2000, including an order granting summary judgment entered on September 14, 1998, in the United States District Court for the Southern District of New York (Martin, /.) in favor of fourth-party-defendant-appellee Bank of Baroda (“Baroda”) and dismissing Indu-Craft’s fourth-party complaint with prejudice.
Ultimately, Baroda was granted summary judgment dismissing Indu Craft’s claims in the fourth-party action on the grounds that that action was barred by the doctrine of res judicata. The district court found that Indu Craft’s indemnification claims, asserted in its fourth-party cause of action, could have been, but were not, pursued in its 1987 action against Baroda. Specifically, the district court determined that Indu Craft’s indemnification claims were based on the same transaction that gave rise to the 1987 action, and that Indu Craft’s fourth-party action accordingly was barred.
For the reasons that follow, we vacate the judgment of the district court in part and remand for further proceedings consistent with this opinion.
BACKGROUND
A more detailed account of the factual background underlying this litigation may be found in our previous decisions, see Indu Craft, Inc. v. Bank of Baroda,
I. The Lawsuits
A. The 1987 Action
Indu Craft, a New York corporation with its principal place of business in New York City, imported garments from several Asian countries and sold them to customers in the United States from 1982 to 1987. In order to import these garments, Indu Craft assured payment to its overseas manufacturers by arranging for letters of credit. Manufacturers exported the garments to Indu Craft only after verifying the issuance of these letters of credit. Baroda is a banking corporation organized under the laws of India with its principal place of business in India. It issued the letters of credit that enabled Indu Craft to conduct its importing business.
In February 1983, Baroda granted Indu Craft a $500,000 line of credit for use by Indu Craft in its business operations. This line of credit increased periodically
In November 1986, Chokshi approached Mehta with a business investment opportunity for the benefit of Chokshi’s son, Anil. After evaluating this business opportunity, Mehta decided not to invest and informed Chokshi and Anil of his decision in February 1987. Shortly thereafter, Indu Craft received a letter dated March 30, 1987, from Baroda, informing Indu Craft that its line of credit had been reduced from $2.7 million to $2.3 million, and that its advance limit was reduced from $1.2 million to $1 million. In addition, substantial delays in the issuance of letters of credit occurred, and some of the requested letters of credit were not issued at all. These delays and refusals to issue new letters of credit hurt Indu Craft’s business. Indu Craft’s suppliers lost confidence in Indu Craft’s creditworthiness and either stopped producing goods or delayed shipment of those goods. As a result, Indu Craft eventually ceased operations in November 1987.
On October 15, 1987, Indu Craft commenced a diversity action against Baroda and Chokshi in the United States District Court for the Southern District of New York (the “1987 Action”). The complaint included allegations: (1) that Baroda breached the covenant of good faith and fair dealing implied in the parties’ revolving credit agreement; (2) that Baroda was liable for tortious interference with Indu Craft’s contracts with its overseas manufacturers; and (3) that Baroda and Chok-shi committed a prima facie tort by wrongfully reducing Indu Craft’s line of credit as a result of Mehta’s decision not to participate in Chokshi’s proposed business investment opportunity. Baroda asserted five counterclaims, which included one for recovery of approximately $1.7 million that Indu Craft owed on a promissory note. The case was assigned to the Honorable Kevin J. Duffy.
B. The BOI Action
Trendi is a corporation organized under the laws of New York with its principal place of business in New York City. It is a wholesale importer of garments from India and the Far East for sale in the United States. BOI is a banking corporation incorporated in India with its principal place of business in Bombay, India, and is licensed to do business in New York.
In December 1985, BOI and Trendi entered into an agreement whereby BOI would extend credit facilities in the form of letters of credit and import trust receipts to Trendi in connection with Trendi’s importation of merchandise from India and the Far East into the United States. Initially, credit facilities were established for the maximum amount of $500,000, but BOI would enhance the limits of Trendi’s credit facilities from time to time. In connection with the extension of these credit facilities, Trendi executed a Demand Promissory Note (the “Note”) and a General Security Agreement on December 5, 1985, both in the amount of $500,000.
At some point in 1987, Indu Craft contracted with Trendi to supply Trendi with garments for shipment to the United States.
On September 8, 1989, BOI commenced a diversity action in the United States District Court for the Southern District of New York against Trendi (the “BOI Action”), alleging two claims for relief: first, BOI sought payment on the Note in the amount of $500,000, plus interest; and second, BOI demanded recovery in the amount of $1,844,895.19, plus interest, for Trendi’s default on other credit facilities extended by BOI. The case was assigned to the Honorable John S. Martin, Jr.
After filing its Answer on May 4, 1990,
Subsequently, Indu Craft filed a fourth-party complaint against Baroda on June 21, 1990. All four counts in that complaint sought indemnity damages against Baroda if Indu Craft was adjudged liable to Tren-di. Specifically, Count I sought indemnity damages as a result of Baroda’s tortious interference with the contract in which “Baroda wrongfully, maliciously, without justification and/or in bad faith curtailed, limited, abridged and/or terminated certain credit privileges which Indu Craft had established over a period of years with Baroda and upon the continuation of which Indu Craft justifiably relied in placing orders with overseas manufacturers for goods ordered from Indu Craft by Trendi and of which ... Baroda had actual or constructive knowledge.” Count II sought indemnity damages for Baroda’s breach of its contract with Indu Craft. Count III sought indemnity damages if Indu Craft was adjudged liable to Trendi for lost profits. Count IV sought indemnity if Indu Craft was adjudged liable to Trendi for loss of its business reputation and goodwill as a direct and proximate result of Baroda’s conduct.
II. Subsequent Proceedings
A. Baroda’s Motion to Dismiss, Stay, or Strike the Fourth-Party Complaint
On August 10, 1990, Baroda moved to dismiss or stay the fourth-party complaint
In response, Indu Craft, on September 17, 1990, cross-moved to sever the fourth party action and to consolidate it with the pending 1987 Action. In support of its motion to sever and consolidate, Indu Craft asserted that while the “liability aspects of the fourth-party claims ... are essentially identical to those in the [1987 Action], the damages claimed [in the fourth-party action] are entirely distinct from those it has previously claimed against Baroda in the [1987 Action].” In addition, Indu Craft asserted that the third-party claims asserted by Trendi could not “possibly be adjudicated in the [1987 Action] absent the consolidation ... sought by Indu Craft.”
Judge Martin heard oral argument on these motions on October 5, 1990. He thereafter stayed the fourth-party action pending resolution of the 1987 Action. He explained that, in the event of an adverse decision by Judge Duffy in the 1987 Action, Indu Craft would be “gone” in the BOI Action. However, Judge Martin did not address Baroda’s motion to dismiss or to strike the fourth-party complaint. In addition, with respect to Indu Craft’s motion to sever and consolidate its fourth-party action, Judge Martin referred Indu Craft to Judge Duffy, stating that “[y]ou should be telling [Judge Duffy] that he should take these [Trendi] damages into consideration in his case.”
B. Summary Judgment for BOI
On October 31, 1990, BOI moved for summary judgment against Trendi on the claims stated in the BOI Action. Judge Martin granted summary judgment in favor of BOI, see Bank of India,
C. Indu Craft Moves to Join Trendi in the 1987 Action
Shortly thereafter, on December 10, 1990, Indu Craft moved pursuant to Federal Rule of Civil Procedure 19(a) to join Trendi as a necessary party-plaintiff in the 1987 Action on the grounds that complete relief could not be afforded without such joinder.
D. Baroda Moves In Limine To Bar Indu Craft From Introducing Evidence of Trendi Damages in the 1987 Action
Before the start of the trial in the 1987 Action, Baroda, on July 8, 1992, moved in limine to exclude Indu Craft from introducing any evidence of Trendi damages at trial. Baroda argued that evidence of Trendi damages in the 1987 Action jury trial was inappropriate principally because Trendi was not a party to the 1987 Action and “[i]t is axiomatic that only a party to an action can recover damages.” Magistrate Judge Bernikow granted Baroda’s motion and disallowed evidence of Trendi damages in part because Trendi was not a party to the 1987 Action. However, the magistrate judge did grant Indu Craft the right to present evidence of Trendi damages on rebuttal in the event that Baroda attempted to establish that Indu Craft did not suffer any damages because some of its orders were filled by Trendi. Baroda never introduced any such evidence.
III. The Jury Verdict and Dismissal of the Fourth-Party Action
A jury trial in the 1987 Action took place from July 13, 1992 to August 12, 1992. The jury awarded Indu Craft $3.25 million and decided against Baroda on its counterclaim for $1.7 million. The magistrate judge then vacated the jury’s verdict in favor of Indu Craft and denied Baroda’s motion for judgment as a matter of law on its counterclaim in an order dated December 17, 1993. We reinstated that verdict on February 3, 1995, with instructions to offset the award by the amount of the counterclaim. See Indu Craft,
On December 2, 1997, pursuant to Indu Craft’s letter request, Judge Martin lifted the stay that he had previously ordered on October 5, 1990. Thereafter, Baroda moved for summary judgment on January 21, 1998, arguing that the judgment in the 1987 Action was res judicata as to Indu Craft’s fourth-party complaint filed in the BOI Action. In an opinion and order entered September 14, 1998, Judge Martin granted Baroda’s motion because Indu Craft’s alleged indemnity claims could have and should have been litigated in the 1987 Action because the claims “arose from the same transaction-[Baroda’s] wrongful reduction or cancellation of Indu Craft’s credit line.” Bank of India,
Furthermore, Judge Martin rejected Indu Craft’s assertion that Baroda must be estopped from asserting res judicata because: (1) although Baroda opposed Indu Craft’s motion to sever and consolidate the fourth-party claims with the 1987 Action, Baroda also asserted that the fourth-party action should be dismissed because it was properly part of the 1987 Action, see id. at *3; and (2) although Baroda successfully precluded Indu Craft from presenting evidence of Trendi damages in the 1987 Action, Indu Craft never argued that the purpose of introducing that evidence was to show that Baroda was liable to Indu Craft for the amount of damages that Indu Craft was obligated to pay Trendi, and therefore Baroda had no opportunity to oppose the argument, see id.
IV. The Appeal
Indu Craft initially filed a notice of appeal from Judge Martin’s September 14, 1998 order on October 13, 1998, but withdrew that notice because final judgment had not been entered in the BOI Action. In October 1998, the only portion of the BOI Action awaiting resolution was the third-party action between Trendi and Indu Craft. As stated earlier, Trendi was adjudged liable to BOI as a result of Judge Martin’s order granting summary judgment in favor of BOI in the amount of $2,244,895.19. Indu Craft had been awarded final judgment against Baroda in the 1987 Action in the sum of $2,519,822.29 on October 19, 1995. Indu Craft filed for bankruptcy on July 25, 1997, after Baroda made payment in full to the clerk of the court in an interest bearing account rather than paying Indu Craft directly.
As a result, Trendi pursued recovery from Indu Craft in the United States Bankruptcy Court for the Southern District of New York. On July 12, 1999, the bankruptcy court (Gallet, Bankr.J.) entered a final judgment in favor of Trendi in the amount of $21,101,348.47, the exact amount Trendi sought in its third-party complaint. Indu Craft did not appeal that judgment. Final judgment was entered in the BOI Action on March 30, 2000.
On April 24, 2000, Indu Craft appealed from the judgment entered March 30, 2000, including the order for summary judgment entered September 14, 1998 dismissing Indu Craft’s fourth-party complaint. On May 1, 2000, Trendi filed a separate notice of appeal from the same judgment, including the same order for summary judgment. On June 28, 2000, Baroda moved to dismiss Trendi’s appeal on the ground that Trendi lacked standing to appeal the order in the fourth-party action. On July 6, 2000, Baroda moved to strike Trendi’s appellate brief. Trendi cross-moved to consolidate both appeals.
By Mandate issued on September 27, 2000, another panel of this court ordered that Trendi’s appeal be dismissed because Trendi lacked standing to appeal in this case. Subsequently, Trendi’s counsel wrote to this court asking that we “set aside” the “Order dismissing Trendi’s appeal and [withdraw] the Mandate of September 27, 2000,” so that Trendi may be heard in the instant appeal. Baroda responded by letter dated November 9, 2000, asking that we not consider Trendi’s request because Trendi did not seek leave of
DISCUSSION
I. Subject Matter Jurisdiction
Baroda argues on appeal that we lack subject matter jurisdiction to hear this appeal because Rule 14 of the Federal Rules of Civil Procedure cannot confer subject matter jurisdiction on this Court. Baroda asserts that Rule 14 is only a procedural device and thus that there must be an independent basis for subject matter jurisdiction over the fourth-party action. Baroda first asserts that we lack subject matter jurisdiction over the fourth-party cause of action because we lack subject matter jurisdiction over the third-party cause of action, and without a third-party action, there can be no subject matter jurisdiction over the fourth-party action.
Questions of subject matter jurisdiction are legal questions that we review de novo. See Lyndonville Sav. Bank & Trust Co. v. Lussier,
“Ancillary and pendent jurisdiction refer to the power of a federal court, once it acquires jurisdiction over a case and controversy properly before it, to adjudicate other claims sufficiently closely related to the main claim even though there is no independent basis for subject matter jurisdiction over the related claims.” Baylis v. Marriott Corp.,
It is well-settled that a third-party action for indemnification comes within a
Following the Supreme Court’s ruling in Finley, there was some uncertainty as to the continued viability of established practices in regard to third-party ancillary jurisdiction because of sweeping language found in dicta in that opinion. See, e.g., 6 Charles Alan Wright, Arthur R. Miller, and Mary Kay Kane § 1444 at pp. 328-29 (citing cases). However, our decision in Associated Dry Goods Corp. v. Towers Financial Corp.,
Baroda also argues that the fourth-party cause of action is not a proper impleader action in that the fourth-party claims are not dependent on or derivative of the outcome of Trendi’s breach of contract claims against Indu Craft in the third-party action or BOI’s breach of contract claims against Trendi in the main action. As explained more fully below, Baroda’s argument in this regard invites this Court to assess the propriety, and ultimately the merits, of Indu Craft’s third-party im-pleader action in the context of a challenge to subject matter jurisdiction. We decline the invitation.
Generally, Rule 14(a) permits a defending party to implead another “who is or may be liable to the third-party plaintiff for all or part of the plaintiffs claim against the third-party plaintiff.” Fed
However, whether a court has subject matter jurisdiction over a third-party or in this case, a fourth-party cause of action, is distinct from an assessment of the propriety and merits of an impleader action. See, e.g., Telecom International,
Here, Indu Craft’s fourth-party cause of action seeks to pass on to Baroda any liability that it may have to Trendi. Baroda’s challenge to the fourth-party action in this appeal asserts that Indu Craft’s fourth-party complaint is not dependent on or derivative of the third-party action or the main action. More specifically, Baroda avers that the holding of the court in the third-party action does not render Baroda liable to Trendi or render it hable to BOI, and therefore that the fourth-party action is not proper. However, this argument goes to the propriety and merits of Indu Craft’s fourth-party action and is not relevant to the issue of subject matter jurisdiction. Because we have already concluded that the requirements for subject matter jurisdiction have been satisfied as to the third-party and fourth-party actions, we need not address the propriety of Indu Craft’s impleader action in the instant appeal to assess whether we have subject matter jurisdiction over Indu Craft’s fourth-party action. Whether impleader under Rule 14(a) was properly invoked by Indu Craft in the fourth-party action is a matter to be determined in the discretion of the district court. See, e.g., Kenneth Leventhal & Co. v. Joyner Wholesale Co.,
II. Res Judicata
We review de novo a district court’s application of the principles of res judicata. See Boguslavsky v. South Richmond Securities, Inc.,
The district court concluded that Indu Craft was barred from bringing its fourth-party action to recover for damages arising out of its liability to Trendi (ie., Trendi damages) because it could have brought that claim as part of the 1987 Action. Indu Craft asserts on appeal that even if Indu Craft were required to litigate its liability to Trendi in the 1987 Action, it was unable to do so despite its repeated efforts. Accordingly, Indu Craft argues that “under no circumstances can it be said that Indu Craft had a full and fair opportunity to litigate its liability to Trendi in any court.” We agree.
“Under the doctrine of res judicata, or claim preclusion, [a] final adjudication on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” St. Pierre v. Dyer,
In the instant case, Indu Craft cannot be precluded under the doctrine of res judica-ta from litigating its claim for Trendi damages because it was never afforded the full and fair opportunity to do so in the 1987 Action and therefore never “could have raised” that claim. See, e.g., St. Pierre,
Baroda nevertheless argues that res ju-dicata bars Indu Craft’s fourth-party claims because those claims are virtually identical to its claims in the 1987 Action, and could have been brought there. Baroda asserts that Bin Saud v. Bank of New York,
Accordingly, we disagree with the district court that Indu Craft’s fourth-party cause of action was barred under the doctrine of res judicata because we find that Indu Craft was never afforded an opportunity to litigate its claim for Trendi damages in the 1987 Action, and therefore could not have possibly brought that claim in the 1987 Action. We have considered Baroda’s other arguments and find them to be without merit.
CONCLUSION
In accordance with the foregoing, the judgment of the district court is vacated to the extent that it provides for summary judgment in favor of Baroda in the fourth-party action, and the case is remanded for further proceedings consistent with this opinion.
Notes
. A September 27, 2000 Mandate of another panel of this court dismissed Trendi's appeal, and as a result, Trendi is no longer a party to this appeal.
. BOI and Baroda are sister banks. Both are owned, operated, and controlled by the government of India.
. During the relevant times in this case, both Trendi and Indu Craft were owned by Mehta, and Indu Craft’s only customer during the relevant period of time was Trendi. According to Mehta, Trendi was Indu Craft’s "selling arm.”
. Although BOI’s complaint was filed in September 1989, the complaint was served through the Secretary of State and sent to the wrong address. Trendi did not discover the existence of BOI’s suit against it until January 1990, despite its involvement in negotiations with BOI for new credit facilities.
. At the time Indu Craft filed its fourth-party complaint, Indu Craft’s complaint against Baroda in the 1987 Action had been dismissed. On September 1, 1989, Baroda had moved for partial summary judgment against Indu Craft on its three causes of action on the grounds that Indu Craft had failed to set forth any evidence of damages. On December 15, 1989, Judge Duffy agreed with Baroda and granted partial summary judgment in favor of Baroda (which he later vacated) thereby dismissing Indu Craft’s claims in the 1987 Action. However, Baroda's counterclaims were not the subject of that motion and accordingly remained viable.
. Previously, on April 5, 1990, Baroda had brought a motion for summary judgment on two of its five counterclaims in the 1987 Action and for dismissal of its other three. Indu Craft also had cross-moved to reinstate its claims that Judge Duffy had previously dismissed. All three of these motions remained before Judge Duffy in addition to Indu Craft’s motion to join Trendi.
. Baroda’s motion for summary judgment on its counterclaims was denied.
. On June 17, 1996, Baroda had moved to make payment of the proceeds of the judgment in the 1987 Action into the court registry rather than to Indu Craft directly because of a pending interpleader action. Baroda made that payment to the clerk of the court in full satisfaction of the judgment in the 1987 Action on July 31, 1996. Indu Craft, in its brief, alleges that Baroda commenced the in-terpleader action to avoid direct payment to Indu Craft, and that Indu Craft’s bankruptcy was the ultimate result.
. As an initial matter, we decline to set aside an order of another panel of this Court that dismissed Trendi’s appeal on the grounds that it lacked standing to appeal. Accordingly, we only address the merits of Indu Craft’s appeal. We also note that we need not consider the merits of Trendi’s appeal in any event because its notice of appeal was filed more than 30 days after entry of final judgment in the BOI Action. See Fed.R.App.P. 4(a)(1); see also Browder v. Director, Dept. of Corrections,
. The current rule relating to supplemental jurisdiction, 28 U.S.C. § 1367, is inapplicable because it only applies to actions commenced "on or after the date of enactment of this Act” which was December 1, 1990. See 28 U.S.C. § 1367 Practice Commentary Effective Date; see also International Paving Sys., Inc. v. Van-Tulco, Inc.,
. Prior to our decision in Associated Dry Goods, some district courts in this circuit declined to exercise ancillary jurisdiction over impleaded third-party defendants based on their interpretation of Finley. See, e.g., O & K Trojan, Inc. v. Municipal & Contractors Equipment Corp.,
. The issue, first presented to the district court in a motion made in 1990, remains unresolved.