In a federal action where a distributor and a wholesaler are involved, neither is completely diverse from the other, and the counterclaim arises from the same common nucleus of operative fact as the underlying action. The court should:

• A. Dismiss because there is no complete diversity between distributor and wholesaler
• B. Allow the counterclaim to proceed under supplemental jurisdiction
• C. Dismiss because there is no federal question
• D. Allow only if the plaintiff consents to a nondiverse counterclaim

Answer: (B)

Supplemental jurisdiction lets a federal court hear related counterclaims that share a common nucleus of operative fact with the federal claim in the case, even if those counterclaims wouldn’t independently satisfy federal jurisdiction. The key is that the counterclaim arises from the same core facts as the underlying action, so itForm part of the same case or controversy. Here, the counterclaim is rooted in the same facts as the federal action, so the court can exercise supplemental jurisdiction under 28 U.S.C. § 1367(a). The fact that the distributor and wholesaler are not completely diverse from each other doesn’t bar this, because the federal court already has original jurisdiction over the action, and supplemental jurisdiction extends to related state-law claims arising from the same facts. If the case were solely based on diversity, there would be additional limits (per § 1367(b)), but the scenario points to a proper basis for allowing the counterclaim to proceed.