The opinion of the court was delivered by: VANARTSDALEN
VanARTSDALEN, District Judge
Plaintiff's action has its genesis in defendant Alfonso R. Lombardi's (A. R. Lombardi) alleged embezzlement of large sums of money from his former employer spanning a twenty year period. Plaintiff, Chas. Kurz Company (Kurz), filed the present action against a number of defendants, charging certain of them with a violation of the civil penalties' provision of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, and charging the remaining defendants with various state statutory and common-law violations. Jurisdiction is predicated upon the RICO statute itself for the federal claims and "the doctrines of pendent and ancillary jurisdiction" for the state law claims. Defendants Kali Corporation (Kali) and William L. and Ruth A. Hoskins (the Hoskins) are charged with having violated state law solely. Defendants Kali and the Hoskins have moved alternatively to dismiss the complaint or for summary judgment. The Rule 12(b)(1) motion to dismiss for lack of jurisdiction will be granted as to the moving defendants.
The following factual background can be gleaned from plaintiff's complaint. A. R. Lombardi commenced employment on or about January 31, 1955 with Kurz. He held various positions in the company, including Vice President and Chief Financial Officer, until his termination on November 15, 1982. During his employment A. R. Lombardi had access to and was responsible for the preparation, supervision and maintenance of the financial books, records and accounts of plaintiff and was responsible for conducting financial operations and bank transactions for and on behalf of plaintiff. During the course of his employment A. R. Lombardi allegedly converted large sums of the company's funds for his own use, and used his position as a company financial officer to cover-up the scheme. Incredible as it may seem, the embezzlement was not uncovered until November 15, 1982 when he admitted to various Kurz officials that he had been converting company funds for a period in excess of twenty years.
According to the complaint, A. R. Lombardi was using the stolen monies to invest, together with his wife Constance M. Lombardi (C. Lombardi), his son Stephen Lombardi (S. Lombardi) and others, in certain business ventures. Several of these ventures involved cabaret-type establishments and music promotion companies. Most, if not all, of the ventures failed.
Following the confession and subsequent resignation of A. R. Lombardi in November, 1982, Kurz conducted an extensive audit to determine the magnitude of the fraud. As is usual in such situations, litigation also shortly followed. Besides the present action, there were two actions instituted in the Court of Common Pleas, Philadelphia County; one criminal and the other civil.
Plaintiff's complaint sets forth five separate "causes of action"; the most important of these being the third cause of action, which asserts the only basis of federal jurisdiction. The third cause of action is brought under RICO against defendants A. R. Lombardi, C. Lombardi, S. Lombardi, four corporations, a partnership and an alleged enterprise. The first, second, fourth and fifth causes of action allege claims for common law fraud, trover and conversion; the Pennsylvania RICO statute, 18 Pa. Cons. Stat. Ann. § 911 (Purdon 1973 & Supp. 1983); and the Uniform Fraudulent Conveyance Act (UFCA), Pa. Stat. Ann. tit. 39, §§ 351-363 (Purdon 1954), respectively. Jurisdiction for these purely state law counts is asserted under the doctrine of ancillary and pendent jurisdiction. Complaint, para. 1. Moving defendants Kali and the Hoskins are named in the fifth cause of action, under the UFCA, solely.
It is axiomatic that a court's first order of business is to determine if it has jurisdiction to entertain an action. This principle is so fundamental that the court may consider jurisdiction at any time by suggestion of the parties or sua sponte. See Fed. R. Civ. P. 12(h)(3). The moving defendants have asserted that there is no basis for jurisdiction as to them. I agree.
For purposes of the present motion, I will assume, without deciding, that plaintiff has stated a valid RICO claim against the defendants named in Count III. That quickly brings us to the crux of the matter -- must or should this court exercise pendent or pendent party
jurisdiction over the moving defendants against whom there is no independent basis of federal jurisdiction?
The present motion raises a difficult issue occurring with increasing frequency in the federal courts, whether a plaintiff in federal court pursuant to a valid federal cause of action against one defendant, may append onto that federal cause of action a state law claim against a different defendant as to whom there is no independent basis of federal jurisdiction? As my colleague, Judge Giles, recently noted in a well-written opinion considering this issue, I must "decide whether the doctrine of pendent jurisdiction extends to a 'pendent party. '"
In light of the extensive treatment this issue has received in the case law and commentary, I will focus upon the two seminal Supreme Court opinions.
In United Mine Workers v. Gibbs, 383 U.S. 715, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966), the Court squarely addressed the issue of pendent jurisdiction for the first time since the enactment of the Federal Rules in 1938. In Gibbs, the court noted that:
Pendent jurisdiction, in the sense of judicial power, exists whenever there is a claim "arising under [the] Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their authority . . .," U.S. Const., Art. III § 2, and the relationship between that claim and the state claim permits the ...