Nerman v. Alexander Grant & Co.

683 F. Supp. 1293, 1988 U.S. Dist. LEXIS 2668, 1988 WL 39110
CourtDistrict Court, W.D. Missouri
DecidedFebruary 24, 1988
DocketNo. 84-1008-CV-W-9
StatusPublished
Cited by2 cases

This text of 683 F. Supp. 1293 (Nerman v. Alexander Grant & Co.) is published on Counsel Stack Legal Research, covering District Court, W.D. Missouri primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nerman v. Alexander Grant & Co., 683 F. Supp. 1293, 1988 U.S. Dist. LEXIS 2668, 1988 WL 39110 (W.D. Mo. 1988).

Opinion

ORDER GRANTING DEFENDANTS’ MOTION FOR RECONSIDERATION OF SEPTEMBER 24, 1987, ORDER, MODIFYING SEPTEMBER 24, 1987, ORDER AND DIRECTING PARTIES TO FILE SUPPLEMENTAL BRIEFS

BARTLETT, District Judge.

On September 24, 1984, plaintiffs filed a complaint against defendants Alexander Grant & Company (Grant) and ten of its partners alleging violations of federal and state laws. After plaintiffs filed a second amended complaint, defendants moved for summary judgment.

On September 24, 1987, I granted defendants’ motion and dismissed the complaint in its entirety. See 671 F.Supp. 649. The federal claims were dismissed on the merits. Id. at 652-64. The state claims were dismissed for lack of subject matter jurisdiction. Id. at 664.

On December 10,1987, defendants filed a motion requesting a) reconsideration of the dismissal of the state claims for lack of subject matter jurisdiction; and b) dismissal of the state claims on the merits. For the reasons stated below, defendants’ motion to reconsider the dismissal of the state claims for lack of jurisdiction will be granted. Defendants’ motion to dismiss the state claims on the merits will be the subject of a separate order.

Background

In Counts I and II of the second amended complaint, plaintiffs asserted claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962 and § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and the Securities Exchange Commission’s Rule 10b-5,17 C.F.R. § 240.10b-5. In Counts III through IX of the complaint, plaintiffs alleged violations of the Missouri Securities Act (Mo. [1294]*1294Rev.Stat. § 409.411), the Missouri Merchandising Practices Act (Mo.Rev.Stat. § 407.020), breach of fiduciary duties, fraudulent misrepresentations, negligence, civil conspiracy and prima facie tort. Jurisdiction over the state claims was based on the doctrine of pendent jurisdiction.

After plaintiffs filed a second amended complaint, defendants moved for summary judgment on the entire complaint. Defendants argued that the RICO claim should be dismissed because plaintiffs failed to satisfy RICO’s “pattern of racketeering activity” requirement. Defendants also argued that the federal securities claims and the pendent state claims should be dismissed because of the statute of limitations.

On September 24, 1987, I granted defendants’ motion for summary judgment on the entire second amended complaint. 671 F.Supp. 649. I dismissed the RICO claim because plaintiffs failed to establish that Grant had engaged in a “pattern of racketeering activity,” an essential element of RICO. Id. at 652-54. I dismissed the federal securities claims because the applicable statute of limitations had expired before plaintiffs filed their original complaint. Id. at 654-63. I dismissed the state law claims for lack of subject matter jurisdiction:

‘The power to exercise pendent jurisdiction is grounded upon the existence of federal subject matter jurisdiction over some claim in the cause of action.’ Kuhn v. National Ass’n of Letter Carriers, Branch 5, 570 F.2d 757, 759 (8th Cir.1978). Because summary judgment will be granted in defendants’ favor on the federal claims contained in Counts I and II, no basis remains for federal subject matter jurisdiction over the state claims asserted in plaintiffs’ second amended complaint. Therefore, counts III through IX must be dismissed for lack of subject matter jurisdiction.

Id. at 664.

In their motion for reconsideration, defendants contend that even though the federal claims were dismissed, I was not compelled to dismiss the state claims for lack of subject matter jurisdiction. Defendants argue that dismissal of the federal claims does not negate the court’s “power” to adjudicate the state claims. Therefore, whether the state claims should be dismissed is discretionary. Defendants claim that judicial economy, convenience and fairness to the litigants suggest “strongly” that the state claims should not be dismissed on jurisdictional grounds.

Plaintiffs seek to pursue the state claims in state court. Therefore, plaintiffs argue that even if dismissal of the federal claims did not compel dismissal of the state claims for lack of jurisdiction, comity and fairness to the litigants justify their dismissal.

Discussion

Pendent jurisdiction is a “judge-made doctrine of expediency and efficiency derived from the general Art. Ill language conferring power to hear all ‘cases’ arising under federal law or between diverse parties.” Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 120, 104 S.Ct. 900, 918-19 (1984). Pendent jurisdiction should be exercised only when 1) the court has “power” to hear a claim; and 2) it is appropriate, under the circumstances of the case, for the court to exercise its discretion to consider the claim. United Mine Workers of America v. Gibbs, 383 U.S. 715, 725-27, 86 S.Ct. 1130, 1138-39, 16 L.Ed.2d 218 (1966).

Judicial “power” to hear a pendent claim requires the existence of a “substantial” federal claim sufficient to confer subject matter jurisdiction on the court. Gibbs, 383 U.S. at 725, 86 S.Ct. at 1138. Additionally, the state and federal claims must derive from a “common nucleus of operative fact.” Id.

Plaintiffs do not argue and I do not find that the federal claims were not “substantial.” Therefore, the federal claims were sufficient to confer subject matter jurisdiction on the court. Additionally, the federal and state claims derive from a common nucleus of operative fact. Accordingly, even though the federal claims were dismissed before trial, this court has the “power” to hear the state claims. See Rheuport v. Ferguson, 819 F.2d 1459, 1467 [1295]*1295n. 13 (8th Cir.1987) (“where a plaintiff pleads a substantial federal claim, the federal courts may retain jurisdiction over pendent state claims even if the federal claim is dismissed, dropped, or otherwise fails at or before trial ... ”).

However, the existence of “power” to hear pendent state claims does not require that it be exercised:

[Pjendent jurisdiction is a doctrine of discretion, not of plaintiffs right. Its justification lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims_ Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law.

Gibbs, 383 U.S. at 726, 86 S.Ct. at 1139 (footnotes omitted).

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Cite This Page — Counsel Stack

Bluebook (online)
683 F. Supp. 1293, 1988 U.S. Dist. LEXIS 2668, 1988 WL 39110, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nerman-v-alexander-grant-co-mowd-1988.