Second Circuit Splits from Tenth in Holding That Supplemental Jurisdiction under 28 U.S.C. § 1367(a) Requires A Separate Analysis from Intervention Under Fed. R. Civ. P. 24(a)(2)

The Second Circuit – in Hamilton Reserve Bank v. Sri Lanka, No. 24-1459-cv (2d Cir. April 10, 2025) – rejects a widely-recognized presumption that “a court necessarily possesses supplemental jurisdiction [under 28 U.S.C. § 1367(a)] over intervention claims when the requirements for intervention as of right under Fed. R. Civ. P. 24(a)(2) are met,” holding that the statute and the rule demand separate analyses.

“Hamilton Reserve Bank, the Appellee in this case, is the beneficial owner of $250,490,000 in Sri Lankan government bonds that matured on July 25, 2022. When Sri Lanka refused to pay on the bonds, Hamilton sued its government in the United States District Court for the Southern District of New York.” A group of depositors controlled by plaintiff-intervenor Jesse Guzman intervened into the action, alleging that the plaintiff bank converted their account by refusing a demand to withdraw funds. “They alleged that they have a property interest in the Sri Lankan bonds because, according to them, Hamilton purchased the bonds using (in part) their deposited funds.”

The district court denied the intervention, holding that the proposed intervenors failed to establish that the court had supplemental jurisdiction over their intervenor complaint. The court “observed that under 28 U.S.C. § 1367(a), a district court may exercise supplemental jurisdiction over claims by would-be intervenors ‘that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy’,” but that “[u]nder that provision . . . only claims that ‘derive from a common nucleus of operative fact’ are susceptible to supplemental jurisdiction’”

“[A]ccording to the district court, Appellants’ ‘claims against Hamilton do not share a common nucleus of operative fact with Hamilton’s claims against Sri Lanka,’ because Hamilton’s claims ‘concern[] a default on sovereign debt and, in connection with the stay of the litigation, an international effort to restructure that debt,’ while Appellants’ ‘claims against Hamilton arise from their deposit of funds with Hamilton and Hamilton’s refusal to repay deposited funds to the account holder.’”

The Second Circuit affirms.

The intervenors principally relied on an argument “that courts in this circuit and others” have generally recognized “‘that a court necessarily possesses supplemental jurisdiction over intervention claims when the requirements for intervention as of right under Fed. R. Civ. P. 24(a)(2) are met.’”

Yet the panel observes that this “assertedly ‘well-established principle’ predates the codification of Section 1367 in 1990 . . . . And nothing in the text, context, or structure of Section 1367 supports Appellants’ proposed approach to intervenor claims here. The text and structure of Section 1367(a) make no distinction between intervenor claims and other non-federal claims: the ‘same case or controversy’ language applies to all claims that require supplemental jurisdiction to be heard in federal court.”

“Moreover, the Federal Rules of Civil Procedure expressly provide that those Rules (of course including Rule 24) ‘do not extend or limit the jurisdiction of the district courts.’ Fed. R. Civ. P. 82. Thus, there is no reason to think that a special standard of supplemental jurisdiction applies solely to intervenor claims under Rule 24(a)(2), distinct from the standard applied under Section 1367(a) to all other claims that, under that statute, are subject to the ‘common nucleus’ standard.”

The panel notes that prior case authority that support the intervenors’ argument are “all either are or rely on pre-1990 case law.” With respect to the decision of a sister circuit, Grace United Methodist Church v. City of Cheyenne, 451 F.3d 643, 673 (10th Cir. 2006), the panel observes that “the Tenth Circuit explicitly assumed that Section 1367 merely codified its existing case law, without tying that assumption in any way to the statutory text.”

The panel then affirms the district court’s holding that there was no supplemental jurisdiction, finding that the claims lacked any common nucleus of facts on the face of the complaint. “The facts necessary to prove Appellants’ claims – and the relationship between those claims and the bonds – are still almost entirely unrelated to the facts relevant to the underlying case. Appellants’ complaint alleges a long list of financial transactions and interactions with Hamilton employees that have nothing to do with the bonds. In fact, only the final two paragraphs of their complaint’s factual recitations even mention the bonds. And the wrongs alleged in the two complaints are entirely different: the essence of Appellants’ claim is that Hamilton refuses to pay its debt to Appellants; the essence of Hamilton’s claim is that Sri Lanka refuses to pay its debt to Hamilton.”