Section 1367(a) Common Nucleus Standard Controls Supplemental Jurisdiction Over Intervenor Claims

Introduction

In Hamilton Reserve Bank Ltd. v. Democratic Socialist Republic of Sri Lanka (2d Cir. Apr. 10, 2025), the U.S. Court of Appeals for the Second Circuit resolved a recurring jurisdictional question under the supplemental‐jurisdiction statute, 28 U.S.C. § 1367(a). Hamilton Reserve Bank sued Sri Lanka for breach of contract after Sri Lanka defaulted on roughly $250 million of sovereign bonds. Over a year into that litigation, three private entities—Jesse Guzman, Ultimate Concrete LLC, and Intercoastal Finance Ltd.—sought to intervene to assert separate state‐law claims for conversion and fraud against Hamilton. The district court denied intervention, holding that § 1367(a) governs supplemental jurisdiction over intervenor claims by requiring a “common nucleus of operative fact” with the original claims, and that the intervenors failed to meet it. On appeal, the Second Circuit affirmed, establishing the clear precedent that supplemental jurisdiction over Rule 24 intervention claims is defined exclusively by § 1367(a)’s “common nucleus” test—not by Rule 24(a)(2) alone.

Summary of the Judgment

Parties and Claims: Hamilton Reserve Bank (Plaintiff–Appellee) pursued federal jurisdiction under the Foreign Sovereign Immunities Act (28 U.S.C. § 1330) to recover on Sri Lankan government bonds. Three intervenor‐appellants (Guzman, Ultimate Concrete, Intercoastal Finance) later moved under Federal Rule of Civil Procedure 24(a)(2) to assert state‐law claims for conversion and fraud against Hamilton, alleging that their $50 million deposit was misused to purchase those same bonds.
District Court’s Holding: The court denied intervention, concluding that supplemental jurisdiction over the intervenors’ claims is governed by § 1367(a), which requires a “common nucleus of operative fact” with the original suit. Because the intervenors’ deposit‐banking dispute shared no operative facts with Sri Lanka’s sovereign‐debt default, § 1367(a) barred jurisdiction.
Appellate Decision: The Second Circuit affirmed. It held that:
1. Section 1367(a), not Rule 24, defines the boundaries of supplemental jurisdiction for intervention claims;
2. The “common nucleus of operative fact” test applies equally to intervenors’ claims as to any other state‐law claim under § 1367(a); and
3. The appellants failed that test because their theory (that Hamilton misapplied their deposits to buy bonds) did not substantially overlap with Hamilton’s sovereign‐debt claim against Sri Lanka.

Analysis

Precedents Cited

Finley v. United States (490 U.S. 545, 1989): Held that absent a statutory grant, federal courts lack supplemental jurisdiction over certain non-federal claims. Congress responded with § 1367.
Exxon Mobil Corp. v. Allapattah Services, Inc. (545 U.S. 546, 2005): Instructed that § 1367 must be read according to its text, structure, and purpose, and not simply as codifying prior case law.
Achtman v. Kirby, McInerney & Squire, LLP (464 F.3d 328, 2d Cir. 2006): Adopted the “common nucleus of operative fact” test for all § 1367(a) claims.
Promisel v. First American Artificial Flowers, Inc. (943 F.2d 251, 2d Cir. 1991): Early Second Circuit articulation of the common-nucleus test.
Royal Canin U.S.A., Inc. v. Wullschleger (604 U.S. 22, 2025): Confirmed that § 1367(a) supplemental jurisdiction extends to state‐law claims sharing a common nucleus with a federal claim.
Fed. R. Civ. P. 24(a)(2) & Rule 82: Intervention as of right requires an “interest” in the action, but Rule 82 clarifies that the Federal Rules cannot expand federal jurisdiction.

Legal Reasoning

The Second Circuit’s opinion rests on a straightforward statutory‐text approach:

Jurisdiction Is Limited to Statute: Federal courts are courts of limited jurisdiction. Section 1367(a) is the exclusive source of supplemental jurisdiction over non-federal claims, including interventions.
Common Nucleus Test: Section 1367(a) grants supplemental jurisdiction over “claims that form part of the same case or controversy,” which the Supreme Court and Second Circuit have equated with claims sharing a “common nucleus of operative fact.”
Rule 24 Does Not Expand Jurisdiction: Although Rule 24(a)(2) sets procedural criteria for intervention, Rule 82 confirms that the Federal Rules cannot extend jurisdiction beyond what Congress enacted.
Application to Facts: Hamilton’s sovereign‐debt claim centers on Sri Lanka’s bond default. The intervenors’ claims focus on Hamilton’s alleged misuse of their deposit. The relevant facts—bond negotiations, sovereign moratoriums, deposit transactions, bank compliance inquiries—do not substantially overlap. Hence, § 1367(a) supplemental jurisdiction is lacking.

Impact

This decision has several important consequences:

Clarified Jurisdictional Boundaries: Intervention motions must satisfy both the procedural criteria of Rule 24 and the subject‐matter requirements of § 1367(a). An intervenor cannot bypass the common‐nucleus test merely by invoking Rule 24(a)(2).
Uniform Standard: By reaffirming that § 1367(a) governs all supplemental jurisdiction, the ruling ensures consistency across different types of claims—intervenors, counterclaims, cross-claims, and joinder.
Litigation Strategy: Potential intervenors and their counsel must conduct a careful factual overlap analysis before filing. Disparate factual bases risk immediate dismissal for lack of jurisdiction.
Federal-State Balance: The decision preserves the constitutional and statutory limits on federal judicial power, preventing expansion beyond the Article III “case or controversy” requirement.

Complex Concepts Simplified

Supplemental Jurisdiction (28 U.S.C. § 1367): Federal courts can hear additional non-federal claims that are so factually linked to a properly filed federal or diversity claim that they form a single “case or controversy.”
Common Nucleus of Operative Fact: Two claims share this nucleus if the core facts supporting each largely overlap or one necessarily brings the other into view.
Intervention as of Right (Rule 24(a)(2)): A non-party may intervene if it “claims an interest” in the lawsuit’s subject matter, and that interest could be impaired if the suit proceeds without it.
Rule 82 Limitation: All Federal Rules, including the one on intervention, cannot expand a federal court’s jurisdictional grant—they only regulate procedure.
Foreign Sovereign Immunities Act (28 U.S.C. § 1330): Establishes original federal jurisdiction over non‐jury civil actions against foreign states that lack immunity, as in Hamilton’s suit against Sri Lanka.

Conclusion

Hamilton Reserve Bank v. Sri Lanka settles a key jurisdictional issue: supplemental jurisdiction over intervenors is bounded by the statutory text of 28 U.S.C. § 1367(a) and its “common nucleus of operative fact” test. Procedural rules on intervention cannot override or substitute for that statutory standard. As a result, litigants seeking to intervene must demonstrate not only that they satisfy Rule 24(a)(2) but also that their claims are factually intertwined with the original action. This ruling thus reinforces the limits of federal court jurisdiction and provides a clear roadmap for future intervention motions.