had not in fact earned interest on plaintiff's security deposit, the Court granted the defendant's motion for summary judgment. See Demitropoulos II, 953 F. Supp. at 985. In that opinion, the Court confirmed the limits of its previous holding by rejecting the plaintiff's fall-back position. The plaintiff had argued that the defendant was still liable under § 1667a because it failed to disclose that it receives an enhanced line of credit from the bank where plaintiff's security deposit is held. Id. As noted previously, the Demitropoulos II Court specifically refused to extend the CLA to create liability for any "hypothetical benefits the account might generate" beyond the payment of interest on a lessee's security deposit. Id.; See also Steinmetz, 963 F. Supp. 1294, 1997 WL 232158 at 12 (dictum). Because Werbrosky and Demitropoulos involve a lessor's failure to disclose the receipt of earned interest, both are distinguishable.
Furthermore, the district courts in both cases focused primarily on the question of whether the UCC imposes a substantive duty on lessors to remit to lessees interest earned on security deposits. See Werbosky, 1996 U.S. Dist. LEXIS 1816, 1996 WL 76133 at 1; Demitropoulos I, 924 F. Supp. at 896-898. In each case, the Court found that such a duty exists under state law, and then concluded, a fortiori, that a breach of this duty necessarily creates liability for a lessor's failure to disclose the receipt of earned interest under the CLA. See Werbrosky, 1996 U.S. Dist. LEXIS 1816, 1996 WL 76133 at 2; Demitropoulos I, 924 F. Supp. at 898-99. The approach taken by the district courts in Werbrosky and Demitropoulos I has been criticized, see Tarnoff, 1997 U.S. Dist. LEXIS 11792, 1997 WL 461059 at 7; Wiskup, 953 F. Supp. at 964, and I have likewise declined to follow that approach here. Because the plain language of § 1667a does not require disclosure of "earnings credits," defendant's motion for summary judgment on plaintiff's CLA claim is granted.
Because defendant is entitled to summary judgment on plaintiff's CLA claim, I must now consider whether to exercise jurisdiction over plaintiff's remaining state-law claims. Although plaintiff's only federal claim has been dismissed, and diversity jurisdiction is likewise unavailable,
the court has the authority to exercise pendent jurisdiction over plaintiff's state-law claims because they 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." 28 U.S.C. § 1367(a) (1994).
However, a district court need not exercise pendent jurisdiction under certain circumstances. One such circumstance arises when the court has "dismissed all claims over which it has original jurisdiction. . . ." 28 U.S.C. § 1367(c)(3) (1994); see also United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966). "Absent exceptional circumstances," a district court should "abstain from exercising pendent jurisdiction when federal claims in a case can be disposed of by summary judgment . . . ." Walker v. Time Life Films, Inc., 784 F.2d 44, 53 (2d Cir.), cert. denied, 476 U.S. 1159, 90 L. Ed. 2d 721, 106 S. Ct. 2278 (1986); Morse v. University of Vermont, 973 F.2d 122, 127 (2d Cir. 1992) ("in the usual case in which all federal-law claims are eliminated before trial, the balance of factors . . . will point toward declining to exercise jurisdiction over the remaining state-law claims.").
Here, the exercise of jurisdiction over plaintiff's state-law claims is discretionary because plaintiff's only federal claim has been dismissed. Considering the short duration of this lawsuit,
that trial of this action is not yet imminent, and the predominance -- as well as novelty -- of the state-law issues, I decline to exercise pendent jurisdiction over these claims. Accordingly, plaintiff's state-law claims are dismissed for lack of subject matter jurisdiction. Plaintiff's motion to certify this lawsuit as a class action is denied as moot.
* * *
For the reasons stated above, defendant's motion for summary judgment is granted as to plaintiff's CLA claim. Plaintiff's motion for partial summary judgment is denied and plaintiff's remaining state-law claims are dismissed for lack of subject matter jurisdiction. Plaintiff's motion to certify this lawsuit as a class action is denied as moot.
Dated: New York, New York
October 21, 1997
Michael B. Mukasey
U.S. District Judge