* District Judge of the Southern District of Texas, sitting by designation. IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 91-8194

No. 91-8460

_______________

PARKER & PARSLEY PETROLEUM CO., et al.,

Plaintiffs-Appellees,

Cross-Appellants

VERSUS

DRESSER INDUSTRIES, et al.,

Defendants-Appellants,

Cross-Appellees,

and

BJ-TITAN SERVICES COMPANY, et al.,

Defendants-Third Party

Plaintiffs-Appellants,

Cross-Appellees,

VERSUS

GARY LANCASTER,

a/k/a Gary "Zeke" Lancaster,

Third Party Defendant-Appellee.

_________________________

Appeals from the United States District Court

for the Western District of Texas

_________________________ (September 3, 1992)

Before SMITH and EM ILIO M. GARZA, Circuit Judges, and RAINEY, *

District Judge.

JERRY E. SMITH, Circuit Judge:2

On behalf of itself and the other interest-holders in 523

West Texas oil wells, Parker & Parsley Petroleum Company ("Parker

& Parsley") filed suit in federal district court against Dresser

Industries, Inc., Titan Services, Inc., BJ Services U.S.A., Inc.,

BJ-Hughes Holding Company , Baker Hughes Production Tools, Inc.,

and Baker Hughes Incorporated (hereinafter collectively

"Dresser"), charging that Dresser de frauded Parker & Parsley by

shorting it on materials used in oil well stimulation procedures.

Parker & Parsley based federal jurisdiction upon violations of

the Racketeer Influenced and Corrupt Organizations Act ("RICO "),

18 U.S.C. § 1961 et seq.

, and appended Texas st ate claims for

fraud , breach of contract, breach of implied warranty,

negligence, and gross negligence.

The district court dismissed the RICO claims but ret ained

pendent jurisdiction over the state claims. After a jury trial

on the state claims, the district court entered judgment awarding

$85 million actual and $100 million punitive damages. After a

separate proceeding, the cour t awarded the plaintiffs attorneys'

fees of approximately $1.8 million. We vacate the judgment and

dismiss for lack of federal jurisdiction.

I.

Parker & Parsley operated a large number of oil wells in

West Texas. Some of the wells were not as productive as the

company wished, so it contracted with Dresser in 1983 and 1984 to

"fracture" the wells to stimulate them. Apparently through the1 On June 23, 1992, Lancaster pleaded guilty to one count of c onspiracy

to commit mail fraud, in violation of 18 U.S.C. § 371, and was sentenced to 33

months' imprisonment.

3 effort s of Dresser's Odessa division manager, Gary "Zeke"

Lancaster, Dresser shorted Pa rker & Parsley, using less sand and

gel than it ha d agreed to use for the fracturing, which, Parker

asserted, reduced the amount of o il that eventually could be

extracted. 1

In 1985, Dr esser's Titan subdivision entered into a

partnership with a BJ-Hughes Holding Co. subsidiary and remained

in the business as BJ-Titan. In 1986 and 1987, Parker & Parsley

awarded its fracturing contracts to BJ-Titan, and the shorting

apparently continued. In 1987, Baker Hughes Incorporated

acquired BJ Holding Co. and later became the corporate parent of

all the BJ-Titan partners. The company fired Lancaster for

embezzling, and it seems that his attorney informed Dresser of

the shorting, which he said had been approved by high executives

of his former employers.

II.

The RICO claim was dismissed about ni ne months after the

suit was filed and a month before trial was scheduled to begin.

T he district court retained jurisdiction over the state law

fraud, contract, and tort claims, but then continued the case for

three months. Dresser appeals the court's retention of pendent

jurisdiction and challenges the award of pu nitive damages, the

measure of actual damages, and the exclusion of evidence relating4

to a witness's alleged bias and, in a separate appeal now

consolidated, attorneys' fees.

III.

Parker & Parsley grounded its RICO claims on 18 U.S.C.

§ 1962(a) and (c). The district court held that Parker & Parsley

had failed to allege a proper RICO enterprise or a cognizable

RICO injury, that the BJ-Titan partners were not "persons" for

purposes of the statute, and t hat, because Parker & Parsley's

substantive claims had failed, its conspiracy claims should be

dismissed as well. Parker & Parsley cross-appeals, arguing that

its RICO claim should have survived the dismissal motion. We

affirm the dismissal.

As stated in Sedima, S.P.R.L. v. Imrex Co.

, 473 U.S. 479,

496 (1985), a viable claim under section 1962(c) "requires

(1) conduct (2) of an enterprise (3) through a pattern (4) of

racketeering activity. a viable claim under sectio n 1962(c)

"requires (1) conduct (2) of an enterprise (3) through a pattern

(4) of racketeering activity." Parker & Parsley averred three

potential enterprises. First, it alleged an association-in-fact

composed of the "servicing entity's" field employees who carried

out the shortchangi ng. Alternatively, it pleaded that each

respective corpor ate defendant, as the servicing entity, was the

enterprise. Third, it alleged that the BJ-Titan partnership, as

the servicing entity, was the enterprise. The district court

held first that the only bases for the associa tion-in-fact were5

the employees' relationship with the defendant companies and the

alleged wrongful c onduct. The court noted that such an

association must be " an entity separate and apart from the

pattern of activity in which it engages," see A tkinson v.

Anadarko Bank & Trust Co. , 808 F.2d 438, 441 (5th Cir.) ( q uoting

United States v. Turkette

, 452 U.S. 576, 583 (1981)), cert.

denied , 483 U.S. 1032 (1987), and that the acts of the members of

the alleged association took place within the course of their

conduct as employees, which basis this court disallowed in Elliot

v. Foufas , 867 F.2d 877, 881 (5th Cir. 1989). The district court

rejected the other possible enter prises because the alleged acts

were "committed" by the "enterprise" in the course of its regular

busine ss and because the RICO "persons" that were alternatively

alleged were not claimed to have committed the predicate acts.

We agree that Parker & Parsley alleged no RICO enterprise

under section 1962(c) . The initial averred association-in-fact,

c onsisting of the shortchanging field employees, either has no

existence as an entity separate and apart from the actual pattern

of racketeering, see, e.g.

, Old Time Enters. v. International

Coffee Corp.

, 862 F.2d 1213, 1217 (5t h Cir. 1989); D elta Truck &

T ractor v. J.I. Case Co.

, 855 F.2d 241, 243 (5th Cir. 1988),

cert. denied , 489 U.S. 1079 (1989), or is the defendant corporate

entity functioning through its employees in the course of their

employment. S ee Old Time Enters

, S ee Old Time Enter prises , 862

F.2d at 1217; see also Atkinson

, 808 F.2d at 441. Because

neither of these can constitute a RICO enterprise, see Elliot

,2 Parker assert s that E lliot stands only for the proposition that a

plaintiff cannot simply alle ge that "some or all" of the RICO defendant's

em ployees constitute an association-in-fact enterprise. This is incorrect.

First, the plaintiff's claim in that case was significantly more specific,

although conclusionary. Second, our analysis in the case was much broader

and, relying principally upon Atkinson

, stated that "[t]he fact that officers

or employees of a corporation, in the course of their employment, associate to

co mmit predicate acts does not establish an association-in-fact enterprise

distinct from the corporation." 867 F.2d at 881.

3 Parker relies upon some Third Circuit cases for the proposition that a

group of employees can be an association separate from the corporate

defendant. E .g. Brittingham v. Mobil Corp. , 943 F.2d 297 (3d Cir. 1991);

Petro-Tech, Inc. v. Western Co.

, 824 F.2d 1349 (3d Cir. 1987). B ritt ingham

does state that "[i]t is theoret ically possible for a corporation to take a

separate 'active' role in RICO v iolations also committed by its employees."

At the same time, however, the court held that the Petro-Tech court "c learly

did not intend for plaintiffs to circumvent this rule merely by alleging the

e nterprise as an association-in-fact consisting of the corporation and the

individual employees who acted on its behalf." 943 F.2d at 302. A useful

basis for the distinction comes from E lliot

, 867 F.2d at 881: The employees

must not be acting in the usual course of business to constitute part of the

enterprise association separate from the employer.

6 867 F.2d at 8 81, 2 and because a corporation cannot be both the

enterprise and the RICO perpetrator, Bishop v. Corbitt Marine

Ways

, 802 F.2d 122, 123 (5th Cir. 1986), this association cannot

be a RICO enterprise. 3

T he alternative RICO enterprises also fail. The corporate

partners in the servicing entity, o r alternatively, BJ-Titan,

committed the predicate acts, if such acts may be attributed to

them, in the course of their regular business. Additionally, as

the district court noted, if the corporations or partnership are

to be held liable as RICO "persons," they must have committed the

predicate acts, but Parker & Parsley, despite the claim in its

b rief, has not alleged that the partners did so. S ee United

States v. Cauble

, 706 F.2d 1322, 1332-33 (5th Cir. 1983), cert.

denied , 465 U.S. 1005 (1984).

The acts of the ser vicing entity, or the partnership,

cannot, f or RICO purposes, be attributed vicariously to the7

individual partners. See Schofield v. First Commodity Corp. , 793

F.2d 28, 32 (1st Cir. 1986). Having determined that the claims

were properly dismissed for failure to state a RICO enterprise,

we need not address Parker & Parsley' s other arguments regarding

the section 1962(c) claims.

Heretofore we have not explicitly applied the foregoing

analysis to a section 1962(a) claim, but we need not do so now in

order to affirm, for the district court also dismissed Parker &

Parsley's section 1962(a) claims for failure to allege a RICO

injury. We see no reason to disturb this ruling. Section

1964(c) states, "Any person injured in his business or property

by re ason of a violation of section 1962 of this chapter may sue

therefor

. . . and shall recover threefold the damages he

sustains." Section 1962(a) provides,

It shall be unlawful for any person who has received

any income derived, directly or i ndirectly, from a

pattern of racketeering activity or through collection

of an unlawful debt . . . to use or invest, directly or

indirectly, any part of such income, or the proceeds of

suc h income, in acquisition of any interest in, or the

e stablishment or operation of, any enterprise which i s

eng aged in, or the activities of which affect,

interstate or foreign commerce.

As the district court noted, it is obvious from the

complaint and the RICO case statement that the only damages

Parker & Parsley is attempting to recover are those caused by

inadequate fracturing jobs, not from any investment of income

derived from the alleged s horting. As all but one of the4 D anielson v. Burnside-Ott Aviation Training Ctr.

, 941 F.2d 1220, 1229

(D.C. Cir . 1991); Craighead v. E.F. Hutton & Co. , 899 F.2d 485, 494 (6th Cir.

1990); Ouknine v . MacFarlane , 897 F.2d 75, 82-83 (2d Cir. 1990); R ose v.

Bartle

, 8 71 F.2d 331, 357-58 (3d Cir. 1989); G rider v. Texas Oil & Gas Co.

, 868 F.2d 1147, 1150-51 (10th Cir.), cert. denied , 493 U.S. 820 (1989). Contra

Busby v. Crown Supply , 897 F.2d 833, 837-38 (4th Cir. 1990).

5 What was formerly called "pendent jurisdiction" is now included within

the term "supplemental jurisdiction." S ee Samaad v. City of Dallas

, 940 F.2d

925, 928 n.2 (5th Cir. 1991).

8 circuits that have considered the issue have held, 4 the causal

language of section 1964(c) r equires that the compensable injury

stem from the violation of the RICO section in question, so any

injury under section 1962(a) must flow from the use or investment

of racketeering income. Parker & Parsley's injury does not stem

from the investment of the income from racketeering activity;

therefore, it h as pleaded no cause of action under section

1962(a), and the district court pro perly dismissed the RICO

claims.

IV.

A.

The distr ict court refused to surrender jurisdiction over

the pendent 5 state claims, noting that the suit had been filed

more than nine months earlier, since which time it had survived a

"serious attack upon the propriety of venue ," "rigorous

deposition schedules," "ungodly amounts of discovery documents,"

and a hearing on discovery disputes. The court stated that

d ismissal would be a tremendous financial drain to all the

parties as well as a waste of judicial resources; it thus

concluded that "the equities weigh heavil y in favor of6 Citing Will iamson v. Tucker , 645 F.2d 404 (5th Cir. May 1981), c ert.

denied

, 454 U.S. 897 (1981), Dresser argues that the R ICO claim was so

insubstantial that it never provided any ground for federal jurisdiction, so

we n e ed not even consider the exercise of pendent jurisdiction. We disagree.

As the Supreme Court has stated,

Jurisdiction

. . . is not defeated . . . by the possibility that

th e averments might fail to state a cause of action on which

petitioners could actually recover. For it is well settled that

the failure to state a proper cause of action calls for a judgment

on the merits and not for a dismissal for want of jurisdiction.

Whether the complaint states a cause of action on which relief

could be granted is a question of law and just a s questions of

fact it must be decided after and not before the Court has assumed

jurisdiction over the controversy

. . . . The previously carved

out exceptions are that a suit may sometimes be dismissed for want

of jurisd iction where the alleged claim under the Constitution or

federal statutes clearly appears to be immateri al and made solely

for the purpose of obtaining jurisdiction, or where such a claim

is wholly insubstantial and frivolous.

Bell v. Hood , 327 U.S. 678, 682-83 (1946) (cited in W illiamson

, 645 F .2d at

415).

We have held that the Hood standard is met only where the pl aintiff's

claim "has no plausible foundation" or is clearly foreclosed by a prior

Supreme Court decision. W illiamson

, 645 F.2d at 416 (citing Bell v. H ealthMor, Inc.

, 549 F.2d 342, 344-45 (5th Cir. 1977)). In light of our preceding

discussion, we cannot say that Parker & Parsley's complaint, particularly as

to § 1962 (a), meets that onerous standard. S ee Employers Ins. v. Suwanee

River Spa Lines , 866 F.2d 752, 759 (5th Cir. 1989).

9 maintenance of the case." Dresser argues that the court erred in

exercising its pendent jurisdiction. 6

B.

We revi ew the decision to retain jurisdiction over the

pendent state claims for abuse of discretion. R osado v. Wyman

,

397 U.S. 397, 401 (1970); L a Porte Constr. Co. v. Bayshore Nat'l

Bank , 805 F.2d 1254, 1257 (5th Cir. 1986). The Supreme Court

explained the ext ent of pendent jurisdiction in U nited Mine

Workers v. Gibbs

, 383 U.S. 715, 726 (1966), noting that the

justification for pendent jurisdiction

lies in considerations of judicial economy, convenience

and fairness to litigants ; if these are not present a

federal court should hesitate to exercise jurisdiction

over state claims, even though bound to apply state law10

to them. Needless decisions of state law should be

avoided both as a matter of comity and to promote

j ustice between the parties, by procuring for them a

surer-footed re ading of applicable law. Certainly, if

the federal cl a ims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the

state claims should be dismissed as well. [Footnotes

and citations omitted.]

The Court has not treated Gibbs as establishing a brightline rule for pendent jurisdiction but has called for a more

fle xible analysis, balancing the values of economy, convenience,

fairness, federalism, and comity. S ee

, e

. g.

, Carnegie-Mellon

Univ. v. Cohill

, 484 U.S. 343, 350 & n.7 (1988) (citing R osado

,

397 U.S. at 403-0 5). The C arnegie-Mellon Court did state,

though, that when the single federal-law clai m is eliminated at

an "early stage" of the litigation, the district court has "a

powerful reason to choose not to continue to exercise

jurisdiction." Id. at 351. Our general rule is to dismiss state

claims when the federal claims to which they are pendent are

dismissed. Wong v. Stripling , 881 F.2d 200, 204 (5th Cir. 1989).

C.

Dresser argues that the federal claim was dismissed at a

"pr eliminary stage" in the proceedings and that the district

court failed to a rticulate specific considerations of judicial

economy, convenience, and fairness tha t would support pendent

jurisdiction, perhaps because there were none. Thus, Dresser

contends that when the RICO claims were dismissed, there had been

no "substantial commitment of judicial resources to the

nonfederal claims," W.R. Grace & Co. v. Continental Casualty Co.

,11

896 F.2d 865, 872 (5th Cir. 1990), as the court had conducted

o nly one hearing, other proceedings having been held before a

magistrate judge.

Parker & Parsley responds that the court did not abuse its

discretion in maintaining jurisdiction over the state-law claims.

It stresses our deference to the discretion of the district

court, see id. at 870, and argues that weighing the equities and

factors set out in Carnegie-Mellon should lead us to affirm.

D.

The instant case is distinguishable fr om the cases each

party finds dispositive. Parker & Parsley argues that we should

fol l ow Hudak v. Economic Research Analysts

, Economic Research

Analysts

, 49 9 F.2d 996, 1001 (5th Cir. 1974), c ert. denied

, 419

U.S. 1122 (1975), in which the district court tried the state

claims with the federal claims in a seemingly appropriate use of

pendent jurisdiction. When we found that the limitations period

ha d run on the federal claim, in which the district court tried

the state claims with the federal claims, in a seemingly

appropriate use of pendent jurisdiction. When we found that the

limitation period had run on the federal claim, so that the claim

should have been dismissed at the beginning of the litigation, we

held that to dismiss the state claim would not serve the

interests of judicial economy, convenience, and fairness. Id.

Hudak is not controlling here, however. In the instant case

the court knew that it had no federal question before it before7 Parker & Parsley also directs our attention to Newport Ltd. v. Sears,

Roebuck & Co.

, 941 F.2d 302 (5 th Cir. 1991), c ert. denied

, 112 S. Ct. 1175

(1992), holding that a district court had abused its discretion when it

declined to exercise its pendent jurisdiction over state-law claims after it

had dismissed a RICO claim. Newport is distinguishable, though, on all of the

Carnegie-Mellon factors. In N ewport

, the district court dismissed the state

claims on the eve of trial, after the case had consumed hundreds of hours of

the court's time during over four years of litigation, and after the

preparation of a pretrial order exceeding 200 pages, as well as 14 motions to

compel and for protective orders, three protective orders, and a

confidentiality designation. Additionally, we noted that the remaining

matters were pedestrian questions of state law, issues that the fede ral court

could readily and routinely resolve. Id. at 307-08.

12 trial began, while in Hudak the court conducted a trial as though

the federal claim were before it. It makes no sense, for

purposes of judicial economy, convenience, or comity, to "punish"

a district court for abusing discreti on it does not know it has;

given the apparent vitality of the federal claim, the Hudak court

properly retained jurisdiction. 7

D resser asserts that this case is indistinguishable f rom L a

P orte Construction

, where we stated that when a litigant' s

federal cause of action has been dismissed at a preliminary

stage, we must remand with instru ctions to dismiss the state

claims for lack of subject matter jurisdiction. 805 F.2d at

1257. L a Porte Construction is persuasive but does not control

our decision, either; it predated Carnegie-Mellon and did not

establish a rule that where federal claims are dismissed before

trial, the pendent state claims must be treated similarly.

Rather, we stated that where the federal claim was dismissed

at an "early stage" of the proceedings (which we did not define),

so that there had been no commitment of federal judicial

resources, dismissal would not prejudic e the litigants (namely,

the non-moving defendants), who had not devoted much effort to13

defending the claim. Thus, dismissal was required, particularly

in light of the Gibbs Court's caution against unnecessary

decisions of state law. Accordingly, we must weigh the equities

as laid out in Gibbs and Carnegie-Mellon

.

V.

As the Supreme Court noted in Carnegie-Mellon , under Gibbs a

court "should consider and weigh in each case, and at every stage

of the litigation, the values of judicial econo my, convenience,

fairness, and comity" to decide whether to exercise pendent

jurisdiction. 484 U.S. at 350. The Court further stated that

"in the usual case in which all federal-law claims are eliminated

before trial, the balance of factors to be considered under the

pendent jurisdiction doctrine SQ judicial e conomy, convenience,

fairness, and com ity S Q will point toward declining to exercise

jurisdiction over the remaining state-law claims." I d. at 350

n.7.

No single factor )) such as whether the case is in an "early

stage" or involves novel issues of stat e law )) is dispositive.

Rather, we look to all the factors under the specific

circumsta nces of a given case. Having done so here, we conclude

that this matter justified no departure from the usual rule that

dismissal was required.14 A.

Obviously, to retry in state court a matter that already has

been tried in the federal courts would not in itself serve

judicial economy. But that is not the issue; a court cannot

obtain jurisdiction over a case merely by trying it; otherwise,

its decision to retain jurisdiction would be, effectively,

unreviewable. Thus we must look at the case as of the filing of

the motion to dismiss and not with the benefit of hindsight.

At the stage of the proceedings when the motion was filed,

judicial economy would have been better served by dismissal. It

is true that some substantial development had occurred in this

case, which was pending before a district judge with a reputation

for moving cases promptly to trial. For example, a number of

discovery mat ters had been presented to, and decided by, the

magistrate judge. Nonetheless, the proceedings were at a

relatively early stage compared to those in, e.g., Newport

. T he

case had been pending for only nine months, not four years; trial

was scheduled soon but was st ill a few weeks away; and discovery

had not been completed. In short, the parties were not ready for

trial.

S econd, only one week before Dresser filed its motion to

dismiss, Parker & Parsle y filed a second amended complaint that

markedly revised its theories of recovery. That complaint added

new theories as to damages, including an assertion th at they

should be measured by the reduction in the market value o f the

damaged wells; added claims invol ving acidizing treatments for15

wells; and reques ted that the district court "pierce the

corporate veils" of several of the de fendants. The second

amended complaint also appe nded an allegation that a defendant

shorted other customers besides Parker & Parsley, added two bases

for liability stemming from the relations hip of the defendants

and Lancaster, and changed the number of wells included in the

underlying dispute by roughly ten percent.

The filing of a pleading that so subs tantially changed

important aspects of the case meant that the case was at an

earlier stage than the parties and the court previously might

have thought, for the new theories needed development before

trial. We also note that by filing the second amended complaint,

Parker & Parsley brought this problem upon itself.

Third, a lthough the magistrate judge had been active in

overseeing discovery and ot her related matters, there is no

indication that the distr ict judge had substantial familiarity

with the merits of the case when the motion to dismiss was filed.

For example, the judge had conducted only one hearing on the

case, a June 8 status conference. In any event, the amount of

judicial reso urces that the case has consumed is most important

for our analysis as an indication of the familiarity of the forum

with the case and its ability to resolve the dispute efficiently.

See Shaffer v. Board of School Directors

, 730 F.2d 910, 912 ( 3 d

Cir. 1984). Here, the trial court was not so intimately involved

in, and familiar with, the case that proceeding further in

federal court would have prevented redundancy and would have16

conserved substantial judicial resources. Nor would it serve

judicial economy to reward a plaintif f by allowing it into

federal court when it pleads a baseless RICO suit.

B.

Dismissal would not have caused undue inconvenience to the

litigants. The district court emphasized the "tremendous

financial drain" to the parties, but we do not find that

convincing. Little new legal research would be necessary, as the

surviving claims were governed by state law, in either forum, and

any additional factual research would have had to be conducted

anyway. S ee Financial Gen. Bankshares v. Metzger

, 680 F.2d 768,

774 (D.C. Cir. 1982).

Additionally, the most expensive element of the trial

preparation, discovery, was largely usable in the state

proceeding, as we discuss below. Moreover, while in some cases

the likelihood that backlogged state courts could not resolve the

dispute promptly might be a factor weig hing against dismissal,

the record reflects no such factor here.

C.

The fairness factor concerns the prejudice to the part ies

that would arise from dismissal, and it too weighs in favor of

dismissal. Parker & Parsley argues that it would be prejudiced

by having to start over in state court, fear ing that it would

have to relitigate all the procedural motions that already had17

been ruled upon. It also argues that it might have a statute of

limitations problem, because Texas Civ. Prac. & Rem. Code

§ 16.064(b) does not block a limitations defense if federal

claims were "ma d e with intentional disregard of proper

jurisdiction." Thus, Parker & Parsley might have to oppose

Dresser's claim that it intentional ly filed suit in the wrong

court and if it fails, it would lose the right to litig ate its

claims altogether.

We do not agree. The proscription problem is limited, as

Parker & Parsley's claim would not be time-barred. Section

16.064(a) pro vides that the statute of limitations is tolled

while a case is pending in a court that lacks jurisdiction.

Althou gh section 16.064(b) says that the tolling does not apply

if the plaintiff filed its initial suit "with intentional

disregard of prop er jurisdiction," that should not be a problem

here.

Parker & Parsley asserts that it will be prejudice d because

it will have to prove that it was not guilty of such intentional

disregard. First, however, that claim is speculative. Second,

and more significantly, the plain language of the statute puts

the burden of proof on the party asserting the intentional

disregard, not on Parker & Parsley. Third, given the widespread

abuse of civil RICO, it does not seem unreasonable to require

t hat a party risk losing its state claims if it insis ts upon

bringing a groundless RICO claim.

P arker & Parsley also asserts that it will be prejudi ced18

bec ause it will have wasted some of its discovery, as the Texas

Rules of Civil Procedure provide only for the use of depositions

in later-filed state court proceeding, not for the blanket

admissibility of all discovery. S ee Tex. R. Civ. P. 207(b).

Thus, the defendants would have the opportunity to re-contest the

procedural motion s and discovery rulings. the defendants would

have the opportunity to recontest the procedural motions and

discovery rulings.

This argument is not compelling. Not all discovery is

admissible, anyway. The point is that the parties would not have

t o repeat the effort and expense of the discovery process. See

Waste Sys. v. Clean Land Air Water Corp. , 683 F.2d 927, 931 (5th

Cir. 1982) (fact that discovery could be used in state court

proceeding we ighs in favor of dismissal of case from federal

court). See also Financial Gen. Bankshares , 680 F.2d at 774. In

any event, the state court is a "surer-footed" arbiter of the

relevance of pieces of evidence for state law claims. See Gibbs

,

383 U.S. at 726.

Moreover, we do not expect the relitigation of other matters

to pose undue hardship. The defendants can hardly contest

jurisdiction, and we do not see other obstacles to resolution of

the case in the state court, save those that ought to be there,

as we discuss next.

D.

Finally, although it appears that the district court did8 See Shaffer , 730 F.2d at 913 (after federal claim dismissed, district

court abused its discretion in retaining jurisdiction over state claims, where

claims presented issue of first impression, notwith s tanding inconvenience and

expense to plaintiffs).

9 The framers of the Constitution did not contemplate that a federal

trial court could assume jurisdiction over exclusively state-law claims in the

absence of diversity jurisdicti on. Alexander Hamilton, for example, states

that the judicial power of the United States ought to extend only

1st, to all those which arise out of the laws of the United

States, passed in pursuance of their just and co nstitutional

powers of legi slation; 2nd, to all those which concern the

execution of the provisions expressly contained in the articles of

Union; 3rd, to all tho se in which the United States are a party;

4th, to all those which inv olve the PEACE of the CONFEDERACY,

whether they relate to the interco urse between the United States

and foreign nations or to that between the States themselves; 5th,

19 not consider the matter, dismissa l would serve the important

interests of federalism and comity. 8 The federal courts are

courts of limi ted jurisdiction, A ldinger v. Howard

, 427 U.S. 1,

1 4-15 (1976), and often are not as well equipped for

determina tions of state law as are state courts. Aside from the

state courts' superior familiarity with their respective

jurisdictions' law, the federal courts' construction of state law

can be "uncertain and ephemeral." Pennhurst State School & Hosp.

v. Halderman

, 465 U.S. 89, 122 n.32 (1984). "[F]ederal courts

are not the authorized expositors of state law; there is no

mechanism by which their errors in such matters can be corrected

on ap peal by state courts." Herbert Wechsler, F ederal

Jurisdiction and the Revision of the Judicial Code

, 13 Law &

Contemp. Prob. 216, 232 (1948) (cited in Gi bbs , 383 U.S. at 726

n.15, and quoted in Financial Gen. Bankshares

, 680 F.2d at 776).

See United Gas Pipe Line Co. v. Ideal Cement Co.

, 369 U.S. 134,

135 (1962) (per curiam) (state court defines authoritative

meaning of state law). 9to all those which originate on the high seas, and are of

admiralty or maritime jurisdiction; and lastly, to all those in

which the State tribunals cannot be supposed to be impartial and

unbiased.

The Federalist No. 80, at 475 (Alexander Hamilton) (Clinton Rossiter ed.,

1961).

1 0 During the proceedings addressing the motion for attorneys' fees, even Parker & Parsley stressed the complexity and difficulty of the case.

1 1 We note that the Texa s Supreme Court did not decide C rim Truck until

January 22, 1992, well after the trial in the instant case had ended.

20 In the instant case, the interests of feder alism and comity

point strongl y toward dismissal. All of the remaining legal

issues of the case, of course, are of state law, and as the

district court later acknowledged, they are difficult ones. 10

Among the most significant issues that arose from the

complaint are, first, whether the claim sounds in contract, for

which punitive damages were not available in Texas, s ee

Bellefonte Underwriters Ins. Co. v. Brown

, 704 S.W.2d 742, 745

(Tex. 1986), or is a tort clai m for fraud, for which punitive

damages may be awarded. Although Texas courts base their analysis

of the distinction upon the nature of the injury, Jim Walter

Homes v. Reed

, 711 S.W.2d 617, 6 18 (Tex. 1986), and the conduct

of the defendant, Spoljaric v. Percival Tours

, 708 S.W.2d 432,

434 (Tex. 1986), the state courts have not given us plain

gui d ance. The Texas rule that where a party enters into a

contract with no inte ntion of performing, that misrepresentation

may give rise to a tort acti on, see Crim Truck & Tractor Co. v.

Navistar Int'l Transp. Corp.

, 823 S.W.2d 591, 597 (Tex. 1992),

does not tell u s how to address claims that may turn out to be

fraud in performance. 111 2 We express no opinion as to the merits of the district court's

decisions. Nor do we imply that a court may not make such determinations of

state law, when state legal issues are properly before it, as such is the

essence of, for example, diversity jurisdiction. We merely stress that the

interests of comity and federalism are better served when federal courts avoid

unnecessary determinations of state law.

21 Second, as the defendants noted in their motion to strike

the second amended complaint, Parker & Parsley was proposing a

measure of market value that seems non-standard, at best. Under

Texas law, the usual measure of damag es is the difference in the

reasonable cash market value of an oil well, "a s equipped,

immediately before and immediately after" the damaging event.

Atex Pipe & Suppl y v. Sesco Prod. Co. , 736 S.W.2d 914, 917 (Tex.

App. )) Tyler 1987, writ denied).

Pa rker & Parsley's methodology, as put forward by its

expert, was a method of calculation based upon a different set of

dates. Although we note that where the normal method of

calculating damages would result in an unjust outcome, a court

may vary the method, B.A. Mortg. Co. v. McCullough

, 590 S.W.2d

955, 957 (Tex. Civ. App. )) Fort Worth 197 9, no writ), comity

would be better served if the federal court avoided making such

exceptions.

The measure-of-damages diffic ulty was to re-occur. As the

district court recognized, the measure-of-market-value damages

that it ultimately sent to the jury constituted an exception to

the Texas gen eral rule, as it compared the market value of each

well (as that well would have been if properly serviced) with its

value t o a buyer who knew only that it had been improperly

fractured. 1222 VII.

After considering and weighing all the factors pr esent in

this case, we thus conclude that the district court, with the

admirable intention of moving its docket, abused it s discretion

in retaining jurisdiction over the state law claims after it had

dismissed the federal RICO claims. Because we find that,

consequently, the court had no jurisdiction, we cannot reach any

of the oth er issues raised on appeal. The judgment is VACATED,

and a judgment of dismissal is hereby RENDERED.