OCTOBER TERM, 1993
certiorari to the united states court of appeals for the ninth circuit
No. 93-263. Argued March 1, 1994—Decided May 16, 1994
Following respondent's termination of an agency agreement between the parties, petitioner brought a state-court suit alleging state-law claims. Respondent removed the case to the Federal District Court on diversity grounds and filed state-law counterclaims. The parties subsequently arrived at a settlement agreement and, pursuant to Federal Rule of Civil Procedure 41(a)(1)(ii), executed a Stipulation and Order of Dismissal with Prejudice, which did not refer to the settlement agreement or reserve District Court jurisdiction to enforce it. After the District Judge signed the Stipulation and Order, a dispute arose as to petitioner's obligations under the settlement agreement. Respondent filed a motion to enforce the agreement, which petitioner opposed on the ground, inter alia, that the court lacked subject-matter jurisdiction. The District Court entered an enforcement order, asserting that it had "inherent power" to do so. The Court of Appeals agreed and affirmed.
Held: A federal district court, possessing only that power authorized by
Constitution and statute, lacks jurisdiction over a claim for breach of a contract, part of the consideration for which was dismissal of an earlier federal suit. No federal statute makes that connection (if it constitutionally could) the basis for federal-court jurisdiction over the contract dispute. Moreover, the doctrine of ancillary jurisdiction does not apply, since the facts to be determined with regard to the alleged breach of contract are quite separate from the facts to be determined in the principal suit, and automatic jurisdiction over such contracts is in no way essential to the conduct of federal-court business. Julian v. Central Trust Co., 193 U. S. 93, 113-114, distinguished. If the parties wish to provide for the court's jurisdiction to enforce a dismissal-producing settlement agreement, they can seek to do so. In the event of dismissal pursuant to Federal Rule of Civil Procedure 41(a)(2), the court may, in its discretion, make the parties' compliance with the terms of the settlement agreement (or retention of jurisdiction over the agreement) part of its order. When dismissal occurs pursuant to Rule 41(a)(1)(ii), the district court is empowered (with the consent of the parties) to incorporate the settlement agreement in the order or retain jurisdiction over the settlement contract itself. Absent such action, however, enforce-
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