In the

United States Court of Appeals

For the Seventh Circuit ____________

Nos. 05-4006, 05-4010

WILLIAMS ELECTRONICS GAMES, INC., et al.,

Plaintiffs-Appellants,

v.

JAMES M. GARRITY, et al.,

Defendants-Appellees.

____________

Appeals from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 97 C 3743—Mark R. Filip, Judge.

____________

SUBMITTED OCTOBER 10, 2006—DECIDED MARCH 19, 2007

____________

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 components 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 Williams’s protest, decided to relinquish supplemental jurisdiction 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 jurisdiction are set forth in section 1367(c):

(c) The district courts may decline to exercise supplemental 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 supplemental 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 relinquished 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 statute as narrow as 28 U.S.C. § 1367, which is the antithesis

of a comprehensive code that displaces all tacit understandings.

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 economy 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 relinquishing 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 judgemade 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 presumption that if the federal claims drop out before trial, the

district court should relinquish jurisdiction over the statelaw 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 discussion 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 otherwise 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