Opinion
CIVIL ACTION NO. 2:01-cv-06624-LDD
September 26, 2003
MEMORANDUM ORDER
AND NOW, this 26th day of September, 2003, upon consideration of the Motion for Summary Judgment filed on February 19, 2003 by Cimnet, Inc. and John Richardson ("Defendants") (Docket Entry No. 13), the Memorandum of Law in Opposition to Defendant's Motion for Summary Judgment filed on March 20, 2003 by Greenwood Partners, L.P. ("Plaintiff) (Docket Entry No. 18) and the Reply Memorandum in Further Support of The Motion for Summary Judgment filed on March 31, 2003 by Defendants (Docket Entry No. 19), it is hereby ORDERED that Count III of Plaintiff s Complaint is DISMISSED, the Motion for Summary Judgment is hereby considered a Motion to Dismiss and is GRANTED for lack of supplemental jurisdiction, and all other counts of the Complaint are DISMISSED without prejudice for the reasons that follow.
I. STANDARD OF REVIEW
In order to prevail on a summary judgment motion, the moving party must show from the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any" that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). When ruling on a motion for summary judgment, we must determine whether the evidence, viewed in the light most favorable to the non-moving party, demonstrates that there are no genuine issues of material fact and that defendants are entitled to judgment as a matter of law. Colgan v. Fisher Scientific Co., 935 F.2d 1407, 1413 (3d Cir.) (en banc), cert. denied. 502 U.S. 941, 112 So. Ct. 379, 116 L.Ed.2d 330 (1991). We will treat the Defendant's motion as a motion to dismiss for lack of supplemental jurisdiction rather than for summary judgment. We make this distinction because a grant of summary judgment is a judgment on the merits of a case whereas a jurisdictional inquiry is not related to the merits. Facha v. Cisneros, 914 F. Supp. 1142, 1146 (E.D. Pa. 1996)citing Kulick v. Pocono Downs Racing Ass'n. Inc., 816 F.2d 895, 898 n. 6 (3d Cir. 1987).
The concept of pendent jurisdiction, as explained by the Supreme Court in United Mine Workers v. Gibbs. 383 U.S. 715 (1966), allowed a court to hear non-federal claims over which it did not have diversity jurisdiction provided those claims shared a "common nucleus of operative fact" with the claims that supported the court's original jurisdiction. But this extension of jurisdiction was permitted only when it would promote "judicial economy, convenience and fairness to litigants." Gibbs. U.S. at 726. In Sinclair v. Soniform. Inc., 935 F.2d 599, 603 (3d Cir. 1991), the Third Circuit treated 28 U.S.C.A. § 1367(a) (1993) as codifying the jurisdictional standard established in Gibbs. Section 1367(a) provides:
Except as provided in subsections (b) and (c) . . . in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.28 U.S.C.A. § 1367(a) (1993). Even if the federal claim over which the district court has original jurisdiction is meritorious, a party waives that claim by failing to argue it in the district court. Williams v. Chrysler Corp., 163 F.3d 183, 188 (3d Cir. 1998) citing Harris v. City of Philadelphia. 35 F.3d 840, 845 (3d Cir. 1994). Once the federal claim is waived or dismissed, under 28 U.S.C. § 1367(c)(3), a district court may decline to exercise supplemental jurisdiction over the surviving state law claims if "the district court has dismissed all claims over which it has original jurisdiction." Figueroa v. Buccaneer Hotel Inc., 188 F.3d 172, 181 (3d Cir. 1999).
II. FACTUAL AND PROCEDURAL HISTORY
Plaintiff is a registered broker-dealer and financial consultant. (Docket Entry No. 1 at 2). Defendant is a Delaware corporation, with its principal place of business in Pennsylvania, that develops, markets, and distributes software that assists manufacturing companies in automating the manufacturing process. (Docket Entry No. 1 at 2, Docket Entry No. 3 at 1) Defendant John Richardson is the chief executive officer ("CEO") of Cimnet. (Docket Entry No. 1 at 2, Docket Entry No. 3 at 1) In the Complaint, Plaintiff raised a federal question arising out of an alleged violation of the Securities Exchange Act of 1934, 15 U.S.C. § 78j and the rules of the U.S. Securities Exchange Commission, 17 C.F.R. § 240.10b-5. (Docket Entry No. 1) Plaintiff alleged that the Defendants made untrue statements of material fact and/or failed to disclose material facts in connection with the issuance of rights to purchase securities of Cimnet. Plaintiff also asserted two state law claims of breach of contract and unjust enrichment. Plaintiff maintained that it entered into certain agreements to provide consulting services to Defendants in exchange for investment options, cash, and securities and that Defendant breached said agreements. Defendants moved for summary judgment on February 2, 2003 (Docket Entry No. 13) and Plaintiff submitted its opposition to the motion for summary judgment on March 30, 2003. (Docket Entry No. 18) Defendants replied in further support of their motion on March 31, 2003. (Docket Entry No. 19)
III. DISCUSSION
A. Withdrawal of Claim for Securities Fraud Constitutes a Waiver
In opposing the Defendant's motion for summary judgment, Plaintiff withdrew from the Court's consideration the only claim over which original jurisdiction existed. (Docket Entry No. 18 at 20). In so doing, Plaintiff failed to adequately brief the federal securities fraud claim and consequently waived that claim. Where a party makes no more than a single mention of a claim, the claim is consequently waived. National R.R. Passenger Corp. v. Pennsylvania Public Utility Com'n. 342 F.3d 242, (3d Cir 2003) (holding that where a party failed to adequately brief an issue, it consequently waived that claim) citing Reynolds v. Wagner. 128 F.3d 166, 178 (3d Cir. 1997) (holding that a single conclusory statement in a brief without more results in waiver of the argument). See Warren G. v. Cumberland County Sch. Dist. 190 F.3d 80, 84 (3d Cir. 1999) (issue waived if not raised in party's opening brief). See also Kohler v. Inter-Tel Tech., 244 F.3d 1167, 1171 (9th Cir. 2001) ("An issue is waived unless a party raises it in its opening brief); Doe v. District of Columbia. 93 F.3d 861, 871 (D.C. Cir. 1996) (same). Even if the claim is meritorious, a party waives that claim by failing to argue it in the district court. Williams v. Chrysler Corp., 163 F.3d 183, 188 (C.A. 3 (Del. 1998) citing Harris v. City of Philadelphia. 35 F.3d 840, 845 (3d Cir. 1994). See D'Angio v. Borough of Nescopeck 34 F. Supp.2d 256 (M.D. Pa., 1999) (deciding that the plaintiffs failure to address particular claim in his brief in opposition to defendants' motion to dismiss amounted to waiver of that claim). In the instant case, a single mention of Plaintiff's only federal claim appears in a footnote at the conclusion of the brief opposing Defendant's motion for summary judgment. It reads: "Plaintiff respectfully withdraws its claim for securities fraud under 15 U.S.C. § 78j and the Security Exchange Commission Rules." (Docket Entry No. 18 at 20) (Docket Entry No. 19 at 2). This statement unambiguously confirms that Plaintiff not only wishes to waive this claim, but also intends to affirmatively remove it from the Court's consideration. As such, the Court is not bound to consider its merits. Count III of the Complaint is accordingly dismissed.
B. Supplemental Jurisdiction Over Pendent State Law Claims
The federal question being duly dismissed, only the state law claims of breach of contract and unjust enrichment remain. This Court has supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367(a). Section 1367(a) codifies the jurisdictional standard established in Gibbs. 383 U.S. 715 (1966). Sinclair. 935 F.2d 599, 603 (3d Cir. 1991). Gibbs laid down three requirements for supplemental jurisdiction.
The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff's claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantially of the federal issues, there is power in the federal courts to hear the whole.Gibbs. 383 U.S. at 725. While the language linking the "nexus" requirement with the "one proceeding" standard leaves some ambiguity, it seems that state claims must satisfy both before a district court may exercise supplemental jurisdiction. Lyon v. Whisman. 45 F.3d 758, 760 (3d Cir. 1995) citing 13B Charles A. Wright, Arthur R. Miller Edward H. Cooper, Federal Practice Procedure § 3567.1 (1984 supp. 1994); Almenares v. Wymaa 453 F.2d 1075, 1083 (2d Cir. 1971),cert. denied. 405 U.S. 944 (1972); Beverly Hills Nat. Bank Trust Co. v. Compania De Naveeacione Almirante S.A., 437 F.2d 301, 306 (9th Cir.), cert. denied. 402 U.S. 996 (1971). Because Plaintiff's securities fraud claim has been dismissed, the question of whether there exists a common nucleus of operative facts is moot. That both the nexus and the one proceeding requirements must be satisfied before an exercise of supplemental jurisdiction suggests that jurisdiction should not be exercised over the breach of contract and unjust enrichment claims.
Furthermore, the discretion to exercise supplemental jurisdiction remains with the district court. "Pendent jurisdiction is not a plaintiff's right, but a matter of district court discretion, and may be declined for a range of valid reasons that are codified in Section 1367(c)." City of Chicago v. International College of Surgeons. 522 U.S. 156, 171, (1997), quoting Gibbs 383 U.S. 715 (1966). Section 1367(c) counsels against the exercise of jurisdiction when "the claim raises a novel or complex issue of state law," and when "the [state] claim substantially predominates over the [federal] claims. . . ." 28 U.S.C.A. § 1367(a) (1993). The court should, however, exercise supplemental jurisdiction in a way that "best serves the principles of economy, convenience, fairness and comity." City of Chicago v. International College of Surgeons. 522 U.S. at 173 (quotingCarnegie-Mellon Univ. v. Cohill. 484 U.S. 343, 350 (1988). In this case, because Plaintiff withdrew the federal claim, the breach of contract and unjust enrichment claims predominate by default. More specifically, Plaintiff devotes the entirety of its brief to the breach of contract claim. This conclusion is further supported by the submission of affidavits, draft documents, and correspondence between the parties, all offered primarily in support of the state law claims. (Docket Entry No. 18, Exhibits 1-7). None of the submissions suggest that the securities fraud claim carried substantial weight, let alone predominate. Because § 1367(c) ensures that the statute of limitations is tolled to preserve the rights of litigants to effective relief in state court in the event a federal court declines to exercise its supplemental jurisdiction, the principles of economy, convenience, fairness and comity are not ill-served here. 28 U.S.C.A. § 1367(c). Therefore, this Court declines to exercise supplemental jurisdiction.
Where dismissal of the federal claim for lack of subject matter jurisdiction deprives the court of supplemental jurisdiction because it eliminates the constitutional case or controversy, dismissal of the federal claim for other reasons allows the court the to dismiss the supplemental claims at its discretion under subsection 1367(c)(3). McLaughlin, The Federal Supplemenal Jurisdiction Statutes — A Constitutional and Statutory Analysis. 24 Ariz. St. L.J. 849 (1992).
C. 28 U.S.C.A. § 1367(c) Permits A Court To Dismiss the State Claims Where The Federal Claim Has Been Dismissed or Withdrawn
Furthermore, a district court may decline to exercise supplemental jurisdiction if it has dismissed all claims over which it has original jurisdiction. In this case, because the matter in controversy arises, in part, out of an alleged violation of 15 U.S.C. § 78j and 17 C.F.R. § 240.10b-5, original jurisdiction exists for the securities fraud claim pursuant to 28 U.S.C. § 1331. Section 1367 states that the federal courts "shall have supplemental jurisdiction" over claims which are "part of the same case or controversy" as a claim over which the court exercises original jurisdiction. 28 U.S.C.A. § 1367(a). Subsection (c), however, provides that a district court may, in its discretion, decline to exercise jurisdiction if any of four conditions are met; one of these conditions is if "the district court has dismissed all claims over which it has original jurisdiction." Growth Horizons. Inc. v. Delaware County. Pa., 983 F.2d 1277, 1285 (3d Cir. 1993) citing § 1367(c); see Campbell v. Kelly. 2003 WL 21660024, 4 (E.D. Pa. 2003) (dismissing federal claims and pendant state law claims for false arrest, false imprisonment, obstruction of justice, negligence, gross negligence, and assault and battery pursuant to 28 U.S.C.A. § 1367(c)(3)) citing Regalbuto v. City of Phila., 937 F. Supp. 374, 380 (E.D. Pa. 1995), cert. denied. 519 U.S. 982 (1996); Gibbs. 383 U.S. 715 ("If the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well."). In making its determination, the district court should take into account generally accepted principles of "judicial economy, convenience, and fairness to the litigants." Id. citing Gibbs. 383 U.S. at 726. As noted above, this Court dismisses the securities fraud claim over which it has original jurisdiction and declines to exercise supplemental jurisdiction over the remaining state law claim. In Hedges v. Musco. 204 F.3d 109, 122 (3d Cir. 2000) the district court, having dismissed all of plaintiffs' § 1983 claims and finding no extraordinary circumstances, refused to exercise supplemental jurisdiction over the plaintiffs' state-law claims. In contrast, in Growth Horizons, the Third Circuit observed that because a trial on the merits had already occurred, the district court might exercise jurisdiction because dismissal of the dependent claims for want of supplemental jurisdiction should "hinge on the moment . . . when the dismissal of the touchstone claim takes place." Growth Horizons. 983 F.2d at 1285. To dispense with the supplemental jurisdiction issue belatedly would be unfair. Id., See Queen City Pizza. Inc. v. Domino's Pizza. Inc. 124 F.3d 430 (3d Cir. 1997) ("Because all federal claims were correctly dismissed and dismissal of the remaining contract claims would not be unfair to the litigants or result in waste of judicial resources, we see no abuse of discretion."). Here, no extraordinary circumstances exist that would compel the exercise of supplemental jurisdiction nor would dismissal constitute unfairness to the parties. On the contrary, the interest of fairness to the litigants, this Court dismisses the federal securities fraud claim and the state contract claims simultaneously. IV. CONCLUSION
Based on the foregoing reasons, Count IE of Plaintiff s Complaint is DISMISSED (Docket Entry No. 1), the Motion for Summary Judgment is hereby considered a Motion to Dismiss and is GRANTED for lack of supplemental jurisdiction (Docket Entry No. 13), and all other counts of the Complaint are DISMISSED without prejudice.