In the
United States Court of Appeals
For the Seventh Circuit
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Nos. 05-4006, 05-4010
WILLIAMS ELECTRONICS GAMES, INC., et al.,
Plaintiffs-Appellants,
v.
JAMES M. GARRITY, et al.,
Defendants-Appellees.
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Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 97 C 3743—Mark R. Filip, Judge.
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SUBMITTED OCTOBER 10, 2006—DECIDED MARCH 19, 2007
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Before POSNER, RIPPLE, and EVANS, Circuit Judges.
POSNER, Circuit Judge. Williams, the manufacturer of
Mortal Kombat and other video games, brought this suit
for fraud and related misconduct against two of its com-
ponents suppliers (and a salesman for one of them),
charging them with having bribed one of Williams’s buyers
in violation of both federal and state law. The judge
dismissed all the federal claims before or during trial. But
he allowed several state law claims to go to the jury,
which awarded Williams modest damages ($76,000)
against Garrity on one of the claims (fraud) but rejected
2 Nos. 05-4006, 05-4010
the other claims and exonerated all the other defendants.
The judge rejected Williams’s equitable claims.
Williams appealed, and we held that while the judge had
been right to dismiss the federal claims and most of the
state-law claims, Williams was entitled to a new trial
against the components suppliers on the state-law fraud
charge because of error in the instructions, and also that
Williams could seek by way of remedy against those
defenses restitution in lieu of damages. 366 F.3d 569 (7th
Cir. 2004).
The only basis of federal jurisdiction over Williams’s
state-law claims had been the federal supplemental
jurisdiction, 28 U.S.C. § 1367, which allows federal courts
to decide state-law claims that are outside the federal
diversity jurisdiction if they are so closely related to the
plaintiff’s federal-law claims as to be in effect part of the
same case. But on remand the district court, over Wil-
liams’s protest, decided to relinquish supplemental juris-
diction of the remaining state-law fraud claim, and so
dismissed the suit (which had shrunk to that single claim),
of course without prejudice to Williams’s refiling it in
state court. Williams appeals the dismissal.
The criteria for declining to exercise supplemental juris-
diction are set forth in section 1367(c):
(c) The district courts may decline to exercise supple-
mental jurisdiction . . . if—
(1) the claim raises a novel or complex issue of
State law,
(2) the claim substantially predominates over the
claim or claims over which the district court has
original jurisdiction,
Nos. 05-4006, 05-4010 3
(3) the district court has dismissed all claims over
which it has original jurisdiction, or
(4) in exceptional circumstances, there are other
compelling reasons for declining jurisdiction.
Although unremarked by the parties, subsection (c)(3)
expressly authorizes the district judge to dismiss a sup-
plemental claim when the federal claims have dropped out
of the case, without his having to consider the criteria
in subsections (1), (2), or (4). So if (3) is read literally,
Williams’s appeal is frivolous, since the federal claims had
dropped out of the case when the district judge relin-
quished jurisdiction over the one remaining state-law
claim. But it is unlikely that the statute was intended to
grant a district judge unreviewable discretion to relinquish
jurisdiction over a supplemental claim. Discretionary
rulings are reviewable by appellate courts for abuse of
discretion, and statutes generally are interpreted against a
background of settled understandings, especially a stat-
ute as narrow as 28 U.S.C. § 1367, which is the antithesis
of a comprehensive code that displaces all tacit under-
standings.
The supplemental claim in this case has been tried once
in the federal district court and must be tried again, and
it seems inefficient to conduct the second trial of the same
case in a different court under different procedural and
evidentiary rules that might require a reopening of pretrial
discovery or other adjustments to the parties’ pretrial
preparations, thus delaying the outcome of the case and
running up the expense of the litigation. The rationale of
the supplemental jurisdiction is economy in litigation,
and so a relinquishment of it that clearly disserved econ-
omy would be a candidate for reversal.
4 Nos. 05-4006, 05-4010
Wright v. Associated Ins. Cos., 29 F.3d 1244, 1251-52 (7th
Cir. 1994), identifies three situations in which jurisdiction
over supplemental claims should be retained even though
the federal claims have dropped out: where the statute of
limitations would bar the refiling of the supplemental
claims in state court (in fact section 1367(d) explicitly tolls
the statute of limitations for 30 days after dismissal of a
supplemental claim, to allow the plaintiff to refile the
claim in state court without being time-barred; see Edwards
v. Okaloosa County, 5 F.3d 1431, 1443 n. 1 (11th Cir. 1993)
(per curiam)); where substantial federal judicial resources
have already been expended on the resolution of the
supplemental claims; and where it is obvious how the
claims should be decided. See also Miller Aviation v.
Milwaukee County Board of Supervisors, 273 F.3d 722, 731-32
(7th Cir. 2001); Timm v. Mead Corp., 32 F.3d 273, 277 (7th
Cir. 1994); Motorola Credit Corp. v. Uzan, 388 F.3d 39, 55-56
(2d Cir. 2004); Anglemyer v. Hamilton County Hospital, 58
F.3d 533, 541 (10th Cir. 1995); Growth Horizons, Inc. v.
Delaware County, 983 F.2d 1277, 1284-85 (3d Cir. 1993); cf.
Semple v. City of Moundsville, 195 F.3d 708, 714 (4th Cir.
1999).
The second of these factors favors retention in this case,
as we have already explained, but not the other two; and
the second factor is attenuated by the fact that the case
was assigned to a different district judge on remand. The
judge identified several issues of unsettled state law that
may decide the outcome of Williams’s state-law claim,
and this we know is an independent ground for relin-
quishing supplemental jurisdiction. 28 U.S.C. § 1367(c)(1).
The fact that the federal claims are all gone is a further
reason for relinquishment, § 1367(c)(3), as we know,
though the judge did not mention it.
Nos. 05-4006, 05-4010 5
We are troubled, however, by the judge’s invocation of a
“presumption” in favor of relinquishing supplemental
jurisdiction. A bit of history is helpful in understanding
the presumption—and delimiting its scope. Section 1367,
enacted in 1990, codifies, though with some changes, see,
e.g., ExxonMobil Corp. v. Allapattah Services, Inc., 125 S. Ct.
2611 (2005)—none affecting this case, however—the judge-
made doctrines of pendent and ancillary jurisdiction.
Brazinski v. Amoco Petroleum Additives Co., 6 F.3d 1176, 1181-
82 (7th Cir. 1993). The former refers to the situation in
which a state-law claim is appended to the federal claim
or claims that confer original jurisdiction on the federal
courts, id.—and that is this case. The pendent-jurisdiction
case law established, and section 1367, we held in Brazinski,
did not disturb, 6 F.3d at 1182, the sensible presump-
tion that if the federal claims drop out before trial, the
district court should relinquish jurisdiction over the state-
law claims. E.g., Groce v. Eli Lilly & Co., 193 F.3d 496,
501 (7th Cir. 1999). Substantial judicial and party resources
will probably not have been expended on the litigation,
and so the economies from retaining jurisdiction over the
state-law claims will be slight.
That is in general rather than in every case, however, see,
e.g., CropLife America, Inc. v. City of Madison, 432 F.3d 732,
733-34 (7th Cir. 2005); Timm v. Mead Corp., supra, 32 F.3d at
277; Brazinski v. Amoco Petroleum Additives Co., supra,
6 F.3d at 1182, which is why it’s a presumption and not a
rule. But even the presumption is inapplicable to this
case. For while some of the federal claims (the Sherman
Act claim and some of the RICO claims) did fall out of the
case before trial, other RICO claims were tried, along
with some of the state-law claims, though they were
dismissed mid-way in the trial on the defendants’ motion
for directed verdict.
6 Nos. 05-4006, 05-4010
But it is clear from the district judge’s detailed dis-
cussion that he would have reached the same result on
proper grounds without reference to the presumption,
instead relying on section 1367(c)(1) (“the claim raises a
novel or complex issue of State law”—in fact, issues).
Therefore his exercise of discretion, which was other-
wise reasonable, was not fatally contaminated by the
reference. The dismissal of the suit is therefore
AFFIRMED.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—3-19-07