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September 10, 1998

PAUL F. POLISHAN, Defendant.

The opinion of the court was delivered by: VANASKIE


 At issue in the above-captioned criminal case is the defendant's motion to compel third parties to fund his defense. Because I find that "ancillary jurisdiction" does not extend to cover defendant's claim that his former employer and its insurance company must pay defense costs as incurred, defendant's motion will be denied. *fn1"


 On October 29, 1996, the government filed a twenty-one count indictment against defendant Paul F. Polishan (Polishan), contending that Polishan, while acting as the chief financial officer of the Leslie Fay Companies, Inc. (Leslie Fay), committed, inter alia, securities and bank fraud. (Dkt. Entry 1.) As a result of its financial troubles, Leslie Fay filed a Chapter 11 bankruptcy case and had a reorganization plan approved on April 21, 1997. (Def's Exhibits (Dkt. Entry 45) Ex. E.)

 Various civil litigations had been instituted against Leslie Fay and Polishan. In the settlement of those civil actions, Leslie Fay's primary insurance carrier, Federal Insurance Company, exhausted its limits of liability. (Reliance's Opp. Letter (Dkt. Entry 51) Ex. C, at 7.) Polishan then requested that Reliance Insurance Company (Reliance), Leslie Fay's initial excess coverage carrier, advance his defense costs in this criminal action. (Id.) After some negotiations, Polishan and Reliance entered into an interim funding agreement through which Reliance agreed to advance defense funds to Polishan, provided that Polishan posted a bond to secure Reliance's funds in the event that it was later determined that Reliance was not liable to advance such funds. (Id.) Polishan was unable to post the required bond and Reliance instituted a declaratory judgment action in the Supreme Court of New York County, State of New York, seeking, inter alia, rescission of the Reliance policy on the ground of misrepresentation. In that state action, Reliance moved for a preliminary injunction to restrain Polishan from requiring Reliance to advance defense funds to Polishan under the interim funding agreement. (Id.) *fn2" On May 7, 1998, the Supreme Court of New York County granted Reliance's motion for a preliminary injunction and ordered that Reliance was not obligated to advance defense costs unless and until Polishan posted the required bond. (Id., Ex. A.) Polishan then appealed this determination to the Appellate Division, First Department. Polishan also sought relief from the preliminary injunction pending resolution of the appeal. This request was denied and Polishan's appeal is currently pending.

 On July 14, 1998, Polishan filed a motion in the above-captioned criminal action, seeking indemnification under the by-laws of Leslie Fay. (Dkt. Entry 43.) In essence, Polishan contends that Leslie Fay is required under its by-laws to advance his defense costs regardless of his ability to post a bond or other undertaking. Although Leslie Fay has been successfully reorganized under an approved Chapter 11 plan, Polishan contends that Leslie Fay's obligation of "advance indemnification" was not affected by the discharge order because that obligation is covered by insurance issued by Reliance. Polishan seeks an order from this Court directing Reliance either to advance Polishan his defense costs according to the terms of its excess policy with Leslie Fay or to reimburse Leslie Fay for its funding of Polishan's defense costs.


 Reliance, of course, is not a party to this criminal proceeding. Polishan argues that this Court has "ancillary jurisdiction" over his request to order Reliance to advance defense costs under its policy with Leslie Fay.

 According to the ill-defined concept of ancillary jurisdiction, "a district court acquires jurisdiction of a case or controversy in its entirety, and, as an incident to the disposition of the matter properly before it, it may decide other matters raised by the case of which it could not take cognizance were they independently presented." 13 Wright, Miller & Cooper, Federal Practice & Procedure § 3523 (1984). Under the Judicial Improvement Act of 1990, Congress combined the common law concepts of pendent jurisdiction and ancillary jurisdiction under the rubric of supplemental jurisdiction. 28 U.S.C. § 1367. *fn3" Section 1367 specifically provides, however, that supplemental jurisdiction exists "in any civil action of which the district courts have original jurisdiction." Id. (emphasis added). There is no mention of the application of supplemental jurisdiction to a criminal case. Given the specific statutory language, Polishan cannot argue that supplemental jurisdiction exists under § 1367 in relation to the alleged breach of Reliance's duty under its insurance policy with Leslie Fay to advance his defense costs. In fact, Polishan concedes that § 1367 does not provide a basis for jurisdiction over his contract claims. (Polishan's Supp. Br. (Dkt. Entry 44) at 5.) *fn4" Instead, Polishan relies upon the common law concept of ancillary jurisdiction.

 The concept of ancillary jurisdiction has been extended to criminal proceedings, most notably when a party seeks the return of property seized by the government in connection with a pending criminal case. See, e.g., Thompson v. Covington, 47 F.3d 974, 975 (8th Cir. 1995); United States v. Frank, 763 F.2d 551, 553 (3d Cir. 1985); United States v. Hubbard, 208 U.S. App. D.C. 399, 650 F.2d 293, 307 (D.C. Cir. 1980) ("We think this concept of ancillary jurisdiction is flexible enough to accommodate claims relating to seized property, even when made by strangers to the criminal case."); see also Fed. R. Crim. P. 41(e) ("A person aggrieved by an unlawful search and seizure or by the deprivation of property may move the district court for the district in which the property was seized for the return of the property on the ground that such person is entitled to the lawful possession of the property."). The use of ancillary jurisdiction in a criminal proceeding to determine ownership of property that is in the possession of a district court is not surprising. See, e.g., United States v. Arnaiz, 842 F.2d 217, 223 (9th Cir. 1988) (Schroeder, J., dissenting) ("Ancillary jurisdiction historically focused on the relationship of defendants' and intervenors' nonfederal claims to property in the possession of the federal court."); cf. Ambromovage v. United Mine Workers of Am., 726 F.2d 972, 989 n.48 (3d Cir. 1984) ("Ancillary jurisdiction is derived from the notion that, once a federal court acquires jurisdiction over property, all claimants to the property must be able to litigate their claims in that federal court.").

 In Arnaiz, a surety moved for exoneration of its bond under 18 U.S.C. § 3149 and Federal Rule of Criminal Procedure 46(f). 842 F.2d at 219. *fn5" The court ordered the surety to return the collateral for the bond ($ 12,000) to the defendant. The defendant then moved to recover the premium on the bond. Id. at 218. Because the collateral was constructively in the court's possession, i.e., pledged by the bail bond company, the court determined that "the return of the collateral . . . was so inextricably linked with the exoneration order that it must be considered within the district court's jurisdiction pursuant to 18 U.S.C. § 3149 and Rule 46(f)." Id. at 221. On the other hand, the court determined that it lacked ancillary jurisdiction over the parties' contractual dispute concerning the premium. As the court explained, "the dispute here is over the premium, which is not in the court's possession or control, but rather is in the possession and control of [the surety]. In contrast, the collateral is at least constructively within the court's possession or control." Id. at 221 n.6. Arnaiz illustrates the requisite connection between a res and the pending criminal case to establish ancillary jurisdiction over a dispute pertaining to the res.

 Because the dispute focuses on the property in the control of the court, ancillary jurisdiction is permitted to allow the court to properly dispose of the property. In this case, this traditional basis for the existence of ancillary jurisdiction in a criminal case -- control over disputed property -- is not present.

 Polishan nonetheless insists that there is ancillary jurisdiction over his claims that Leslie Fay is obligated by its by-laws to advance his defense funds and that Reliance is obligated under its policy to indemnify Leslie Fay for these funds. In asserting the existence of ancillary jurisdiction over his breach of contract claims, Polishan relies on the salutary purposes underlying this court-made extension of the federal courts' limited subject matter jurisdiction.

 These purposes include (a) enabling the court "to dispose of cases before it in a fair manner," Novinger v. E.I. Dupont de Nemours & Co., 809 F.2d 212, 217 (3d Cir.), cert. denied, 481 U.S. 1069 (1987), (b) eliminating multiple piecemeal actions, 13 Wright, Miller & Cooper, Federal Practice & Procedure § 3523, (c) avoiding undue expense and inconvenience to the parties, Cluett, Peabody & Co. v. CPC Acquisition Co., 863 F.2d 251, 255 (2d Cir. 1988), and (d) protecting officers of the court in fee disputes. Id. These aims are furthered when, for example, a court is called upon to decide a fee dispute arising in the course of the underlying litigation. In Novinger, the trial court, while ordering production of a discharged attorney's file over which the discharged lawyer had asserted an attorney's retaining lien, reserved the authority to determine the discharged lawyer's fee at the conclusion of the case. The Third Circuit affirmed the exercise of ancillary jurisdiction, explaining that "if the federal forum were powerless either to order ...

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