The opinion of the court was delivered by: CONSTANCE BAKER MOTLEY
MEMORANDUM OPINION ON PLAINTIFF'S MOTION FOR A REMAND
Plaintiffs commenced this action on May 29, 1992 in the Supreme Court of the State of New York, New York County. Plaintiffs' original complaint seeks damages for accountant's malpractice, negligent misrepresentation, breach of fiduciary duty, breach of contract, fraud and violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. On June 8, 1992, defendants filed a notice of removal in the United States District Court for the Southern District of New York pursuant to 28 U.S.C. § 1441(a) on the ground that this court has original jurisdiction over the action because it includes a claim for violation of the RICO statute and alleges predicate acts involving violations of federal securities law and mail fraud.
It is well settled that a federal district court has discretion under the doctrine of pendant jurisdiction to remand pendant state-law claims to state court if it would be inappropriate for the district court to retain jurisdiction over the case. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 108 S. Ct. 614, 98 L. Ed. 2d 720 (1988). The Supreme Court's decision in Cohill is directly applicable to the present motion. In that case, the plaintiffs had brought an action in state court alleging several state-law claims and a single federal-law claim. The defendants had removed the case to federal court pursuant to 28 U.S.C. § 1441(a), which allows a defendant to remove an action that falls within the original jurisdiction of the federal courts. The plaintiffs subsequently amended the complaint to delete the claim under federal law which had been the basis for removal. The Supreme Court held that the district court had acted properly in granting the plaintiff's motion to remand the case to the state court in which the plaintiffs had initially filed the action.
In reaching this conclusion, the Court first traced the roots of the modern doctrine of pendant jurisdiction, beginning with Mine Workers v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966), which both clarified and broadened the scope of pendant jurisdiction. Gibbs held that a federal court has jurisdiction over state-law claims whenever the federal- and state-law claims "derive from a common nucleus of operative fact" and are "such that [a plaintiff] would ordinarily be expected to try them all in one judicial proceeding." Gibbs, 383 U.S. at 725, 86 S. Ct. 1130, 16 L. Ed. 2d 218. The Cohill Court noted that Gibbs emphasized that the exercise of pendant jurisdiction was discretionary, and that a district court should consider factors such as the values of judicial economy, convenience, fairness, and comity in considering whether to exercise pendant jurisdiction. Cohill, 484 U.S. at 350, 108 S. Ct. 614, 98 L. Ed. 2d 720. When the balance of these factors counsel against the exercise of pendant jurisdiction, the Court continued, offering as an example a case in which the federal-law claims have dropped out of the lawsuit in the early stages of litigation, Gibbs authorizes federal courts to decline jurisdiction by dismissing the case without prejudice. Id. Applying Gibbs to the case before it, the Court framed the question in Cohill as whether the district court, having properly concluded that pendant jurisdiction was not appropriate, could relinquish jurisdiction over the case by remanding it to state court instead of dismissing the case without prejudice. The Court answered this question in the affirmative, concluding that any other answer would undermine the values of fairness, economy, convenience and comity that are central to the flexible doctrine of pendant jurisdiction espoused by the Court in Gibbs.
The Cohill Court proceeded to enumerate a number of circumstances which would support a remand rather than a dismissal once the district court decides not to exercise pendant jurisdiction over the case. One such factor is that the statute of limitations on the plaintiff's state-law claims would operate as a time bar if the lawsuit were dismissed. Id. at 352, 108 S. Ct. 614, 98 L. Ed. 2d 720. In addition, the Court directed district courts to remand cases that are not properly within the court's pendant jurisdiction whenever the values of economy, convenience, fairness and comity are best promoted by a remand. Id. at 353, 108 S. Ct. 614, 98 L. Ed. 2d 720.
Second, defendants argue that the amended complaint continues to plead facts which would support a federal-law claim, specifically, a claim under federal securities law, 15 U.S.C. § 78(j) and Rule 10b-5. Defendants acknowledge that the amended complaint does not specifically mention any claims arising under federal securities law, and that the state court would not have jurisdiction to hear such a claim. However, defendants contend that a federal securities claim is alleged in the amended complaint and that this court can and should hear it. Plaintiffs characterize defendants' discernment of such a claim as a tortured reading of the complaint which does not withstand scrutiny. Plaintiffs further represent that the amended complaint does not allege any claims cognizable under federal law. This court agrees. The mere allegation that defendants disseminated false and misleading documents relating to the purchase of limited partnership interests, coupled with the allegation that two of the plaintiffs are non-New York residents, does not sufficiently plead a violation of federal securities laws under 15 U.S.C. § 78(j) and Rule 10b-5. See, e.g., Anspach v. Bestline Products, Inc., 382 F. Supp. 1083 (N.D. Ca. 1974) (an action alleging a violation of 15 U.S.C. § 78j(b) and Rule 10b-5 must allege with adequate specificity that an instrumentality of interstate commerce was used).
Third, defendants take the position that this case is related to a matter pending in United States District Court for the Southern District of New York before the Honorable Robert W. Sweet, Alberti et al. v. Trupin et al., 90 Civ. 3475 (RWS), and should be consolidated with that case to avoid piecemeal litigation. Plaintiffs dispute this contention, arguing that the litigation before Judge Sweet concerns an entirely different transaction involving no common facts, transactions or occurrences. Plaintiffs also note that Alberti was filed in 1990 and discovery proceedings in that case are now fully underway. Were there any merit to defendants' contention of relatedness, the proper course would have been for defendants to have disclosed their contention of relatedness at the time they removed the action to federal court. See Rule 15 of the Rules for the Division of Business Among District Judges, United States District Courts for the Southern and Eastern Districts of New York (November, 1991). The determination of relatedness would then be made by the judge presiding over the previously filed case. Id. Any contention of relatedness therefore is not properly before this court and is not relevant to the court's determination of plaintiffs' motion for a remand.
Defendants' final argument against remanding the case is that the state-law issues presented in the amended complaint are neither novel nor complex, and could be resolved by this court without encroaching upon principles of comity and state autonomy. However, the mere fact that the state-law issues presented to a federal court have been previously resolved in the state courts is not sufficient to justify the exercise of pendant jurisdiction when it would otherwise be inappropriate. Gibbs concluded that pendant jurisdiction should typically be declined where the federal-law claims drop out of the case prior to the time that the case goes to trial. Gibbs, 383 U.S. at 726-27, 86 S. Ct. 1130, 16 L. Ed. 2d 218. In the present case, the complaint was amended to omit all federal-law claims before the parties engaged in any discovery and before any responsive pleading was filed. With no federal-law claims remaining at this early point in the litigation, the court declines to exercise pendant jurisdiction over the state-law claims in the amended complaint.
For the foregoing reasons, this action is remanded to the Supreme Court of the State of New York, New York County.