Commercial Litigation and Arbitration

After § 1404 Transfer, Circuit Reviews Issues Decided by Transferor Court (Circuit Split) — Voluntary Dismissal of Federal Claim Does Not Affect §1367 Jurisdiction — What Is Inadvertent? (Good Quote)

From Anderson v. Aon Corp.,, 2010 U.S. App. LEXIS 15250 (7th Cir. July 26, 2010):

Anderson's lead argument on appeal is that, once he withdrew the RICO claim, federal jurisdiction vanished and 28 U.S.C. § 1447(c) obliged the court to remand. Section 1447(c) says, among other things, that "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." Anderson believes that the RICO claim was the only foundation for subject-matter jurisdiction. True, it was the only basis of original federal jurisdiction. But if there is federal jurisdiction on the date a suit is removed — as there was in this suit — the final resolution of the claim that supported the suit's presence in federal court does not necessitate remand. The district court may retain jurisdiction under 28 U.S.C. § 1367(a), which says that federal courts "have supplemental jurisdiction over all other claims that are so related to claims [within the original jurisdiction] that they form part of the same case or controversy". Anderson's holder claims under California law arise from the same transactions that underlay his RICO claim, so the district court had supplemental jurisdiction. See Carlsbad Technology, Inc. v. HIF Bio, Inc., 129 S. Ct. 1862, 1867, 173 L. Ed. 2d 843 (2009).

The district judge in California reached this conclusion when declining to remand. The district judge in Illinois agreed. The fact that the conclusion was reached first by a judge outside the seventh circuit does not disable us from addressing the subject. We review the judgment of the district judge in Illinois, and the reasons for that judgment (if only reliance on the law of the case) are open to consideration in this circuit. *** Some circuits have taken a different approach and held that review is split between the transferor district's circuit and the transferee district's circuit, see TechnoSteel, LLC v. Beers Construction Co., 271 F.3d 151, 154-56 (4th Cir. 2001) (collecting cases), but that understanding overlooks the vital point *** that the decision to transfer a suit under § 1404(a) is not separately appealable. The only final decision is the one entered by the transferee district, and an appeal from a final decision brings up all interlocutory rulings for appellate resolution. We do not review any decision made by the transferor district, but our review of the final decision includes all issues that affected the judgment. Our jurisdiction is secure, so we must decide whether the district court erred in invoking the supplemental jurisdiction.

Anderson insists that § 1367 applies only when the district judge dismisses the federal claim; because he dismissed his own federal claim, Anderson maintains, § 1367 is irrelevant. That's not what § 1367(a) says, however. It asks whether the state-law claims are part of the same controversy as the federal claims. That relation is what creates supplemental jurisdiction. Anderson observes that § 1367(c)(3) provides that a federal court may decline to exercise this supplemental jurisdiction if "the district court has dismissed all claims over which it has original jurisdiction". He reads this as if it said that supplemental jurisdiction exists only if the district judge (as opposed to the plaintiff) dismisses the claims within original federal jurisdiction. But the supplemental jurisdiction depends on subsection (a), not subsection (c), which covers when the jurisdiction should be exercised rather than whether it exists in the first place. (What's more, Anderson misses the point that the district court dismissed the RICO claim, even though the judge did not; a voluntary dismissal under Fed. R. Civ. P. 41(a) has the effect of a judgment with prejudice when, as here, it is the second suit based on the same transaction. See Rule 41(a)(1)(B) and, e.g., Sullivan v. Conway, 157 F.3d 1092, 1095 (7th Cir. 1998).)

Instead of remanding mechanically under § 1447(c), a district court must decide whether the state-law claims should be resolved in federal court after the federal claims have been dismissed. The district court did not abuse its discretion by concluding that it should tackle the state-law theories in this suit. Anderson has been playing games. He filed suit in 2003 and dismissed it on the verge of a transfer to Illinois. He filed suit again in 2005, adding as defendants two citizens of California whose presence he hoped would prevent removal — and on learning that the RICO claim foiled this plan, Anderson dismissed it with the specious assertion that its inclusion had been "inadvertent." Ill-considered, perhaps, and counterproductive from his perspective, but how a claim prominently pleaded at the outset of a lawsuit could be "inadvertent" is beyond our grasp.

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