Court Opinion

ID: 9468441
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:15:07.174139+00
Date Added: 2024-06-11T17:40:52.424388
License: Public Domain

LASKER, District Judge,
concurring:
I agree with the conclusion that we reverse and remand with directions that the district court amend the 1976 order of dismissal to provide that it is without prejudice to the merits of any claim under state law. I disagree, however, with the reasoning that “the district court had no power to make any order about the merits of the state claim” once it had dismissed the federal claims at the pretrial stage. As a result, I do not believe that a motion under Fed.R. Civ.Pr. 60(b)(4) to vacate the judgment for lack of jurisdiction would have been appropriate in these circumstances. I would hold that when a complaint containing both federal and state claims is dismissed on the pleadings it must be presumed that the district court declined to exercise its discretionary jurisdiction over pendent state law claims, absent clear indications to the contrary. Since there is no clear basis for concluding that the district court intended to dismiss the state law claims on the merits here, McLearn is entitled to relief from the operation of the order under Fed.R. Civ.Pr. 60(b)(6) insofar as the order as it now stands operates unjustly to preclude her from asserting those claims.
Under United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), a federal court’s jurisdictional authority over pendent state law claims does not depend on whether a trial of the operative facts is necessary to resolve the federal claim. To the contrary, the Supreme Court in Gibbs emphasized that, so long as the federal claim has “substance sufficient to confer subject matter jurisdiction on the court,” and the state and federal claims “derive from a common nucleus of operative fact,” “there is power in federal courts to hear the whole.” 383 U.S. at 725, 86 S.Ct. at 1138 (emphasis in original). Since there is no doubt that a federal remedy exists for violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), Rule 10b-5, 17 C.F.R. 6240.-10b-5, and sections 205 and 206 of the Investment Advisers Act of 1940, 15 U.S.C. §§ 80b-5 and 80b-6, it is clear that, under Gibbs, McLearn’s federal claims were of *850sufficient substance to confer subject matter jurisdiction on the trial court and therefore to empower it to determine the pendent state claims. Cf. Nolan v. Meyer, 520 F.2d 1276 (2d Cir. 1975); Hagans v. Lavine, 415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974); Bell v. Hood, 327 U.S. 687, 66 S.Ct. 773, 90 L.Ed. 939 (1946). Moreover, the district court did not dismiss the complaint for lack of subject matter jurisdiction under Fed.R.Civ.Pr. 12(b)(1), but rather for failure to plead fraud with particularity under Fed. R.Civ.Pr. 9(b).
While Gibbs clearly recognizes the jurisdictional power of the federal courts to entertain pendent state claims in these circumstances, it also cautions that this “power need not be exercised in every case in which it is found to exist.” 383 U.S. at 726, 86 S.Ct. at 1139. In the context of its discussion of the discretionary exercise of jurisdiction over pendent claims, the Court stated that “if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well.” 383 U.S. at 726, 86 S.Ct. at 1139 (emphasis added). The point is that jurisdiction exists over the state claims, but should not ordinarily be exercised where the federal claims are dismissed, as here, early in the game. It is the ordinary practice of the district courts to adhere to Gibbs' counsel in this regard; that is, to decline to exercise further jurisdiction over pendent state claims if the federal claims upon which federal jurisdiction is based are dismissed before trial. It appears that the practice has been uniformly approved. See, e. g., CES Publishing Corp. v. St. Regis Publications, Inc., 531 F.2d 11, 14 (2d Cir. 1975); Nolan v. Meyer, 520 F.2d 1276, 1280 (2d Cir. 1975); Kavit v. A. L. Stamm & Co., 491 F.2d 1176, 1179-80 (2d Cir. 1974); Iroquois Industries v. Syracuse China Corp., 417 F.2d 963 (2d Cir. 1969), cert. denied, 399 U.S. 909, 90 S.Ct. 2199, 26 L.Ed.2d 561 (1970). None of these cases, however, questions the jurisdictional power of the federal courts to consider pendent state claims despite pretrial dismissal of the federal claims contained in the complaint.1
Since the district court had the power to dismiss both the federal and the state claims on their merits, I disagree with the proposition that the order dismissing the state claims was void because the district court lacked jurisdiction over them once it dismissed the federal claims. The problem in this case arises not from a lack of power in the district court to consider the pendent state claims on their merits, but because the district court failed to indicate in its order dismissing the complaint whether the pendent state claims were dismissed on their merits or whether the court was declining to exercise its pendent jurisdiction over them. In denying McLearn’s motion to amend the order under Fed.R.Civ.Pr. 60(a), the district court indicated that it was no longer able to recall whether the state claims were considered on their merits or not.
*851It is certainly the preferred practice in cases involving pendent state law claims for the district court to state explicitly whether a dismissal of state law claims is on the merits or whether it is declining to exercise its pendent jurisdiction. Where the district court, on the pleadings, dismisses a complaint containing both state and federal claims and fails to indicate whether the state claims are being dismissed on the merits, however, the most useful operative rule is to presume that the court declined to exercise its discretionary pendent jurisdiction over the state law claims. Such a presumption accords both with the direction of Gibbs and the established practice of our courts, described above. This is true despite the district court’s inability to recollect the basis of the dismissal in the present case.
Because of the ambiguity of the order dismissing the complaint in the present case, it has been construed to bar relief in the New York courts under the doctrine of res judicata. McLearn is thus denied an opportunity to have any court consider her state law claims on the merits. Justice is not served by such a result. The law favors, as a matter of high priority, that disputes be resolved on their merits. See Conley v. Gibson, 355 U.S. 41, 48, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957); Medunic v. Lederer, 533 F.2d 891 (3d Cir. 1976); Pulliam v. Pulliam, 478 F.2d 935 (D.C.Cir.1973). Since it is to be presumed that the district court did not consider her state law claims on the merits, it is appropriate that its order dismissing the complaint indicate that disposition.
To be sure, it would have been preferable for McLearn to have sought relief under Fed.R.Civ.Pr. 59(e) immediately after dismissal, as the dissent contends. It is also true, however, that in light of the practice of our courts to decline pendent jurisdiction in these circumstances, she had no reason to believe that the order was intended to, or would be construed to, dismiss her state claims on the merits. Moreover, the burden of clarity in judgment should be on the court, not the litigants. It would therefore be unfair to hold McLearn to the strict time limits of Fed.R.Civ.Pr. 59(e).
We also agree, for the reasons stated in the dissent, that the district court was correct that its failure to indicate the basis for its dismissal does not constitute a “clerical mistake” under Fed.R.Civ.Pr. 60(a). McLearn is nevertheless entitled to relief under Fed.R.Civ.Pr. 60(b)(6).2 Rule 60(b)(6) “vests power in courts adequate to enable them to vacate judgments whenever such action is appropriate to accomplish justice.” Klapprott v. United States, 335 U.S. 601, 615, 69 S.Ct. 384, 390, 93 L.Ed. 266 (1949). With full view towards the weighty interests served by insuring the finality of judgments of our courts, the present case is an *852exceptional one in which justice can only be served by affording relief from that portion of the judgment which may be construed to dismiss McLearn’s state law claims on their merits. McLearn should not be forced to bear the brunt of the district court’s lack of clarity in its order of dismissal. Moreover, while over five years have passed since the order was entered, the question whether the state claims were dismissed on the merits has been continuously litigated over the course of that period, rendering considerations of finality less weighty. And while McLearn presented her motion for relief from judgment under the rubric of Rule 60(a), the nomenclature is not dispositive for relief under Rule 60(b)(6). See Moore’s Federal Practice f 60.27[1], p. 350. Defendants understood that McLearn’s motion was directed at obtaining relief from the 1976 order, and the issues relevant to a Rule 60(b)(6) determination have all been canvassed in the parties’ papers. Nothing except delay would be gained by requiring further litigation of the issue. Finally, I believe in the unique circumstances of this case that the institution of the motion for relief within a month of the New York Court of Appeals order denying reargument without prejudice if the federal court amends its order was “within a reasonable time” as Rule 60(b) requires.
In sum, McLearn is entitled to relief from that part of the 1976 order which may be construed to dismiss her state law claims on the merits. This relief can best be granted by a remand to the district court with directions to amend its order of dismissal to provide that the state claims are dismissed without prejudice.
I concur that the judgment of the district court should be reversed.

. I do not conclude, as my Brother Lumbard does, that Nolan v. Meyer, supra, supports the proposition that “unless a trial of the operative facts is necessary to resolve claims that the federal court must hear, the federal court has no jurisdiction to take any action with respect to a pendent state law claim.” In Nolan the predicate to pendent jurisdiction under Gibbs of a federal claim with “substance sufficient to confer subject matter jurisdiction on the court” did not exist. As the court stated, “the federal cause of action upon which Nolan relies for § 1331 jurisdiction is so insubstantial that the complaint'was properly dismissed.” 520 F.2d at 1280. The court thus upheld a dismissal for total lack of jurisdiction. Emphasizing the discretionary nature of the exercise of pendent jurisdiction, the court then stated that “we would be inclined to hold that the retention for trial of a pendent state law claim on the basis of a federal question claim already disposed of by a Rule 12(b)(6) motion would be an abuse of discretion absent unusual circumstances ...” 520 F.2d at 1280 (emphasis added). However, even if this statement were relevant to the question of the district court’s power, it is inapplicable here because there is no contention that the district court held the pendent state law claims “for trial”; the discretionary exercise of pendent jurisdiction to dismiss state claims along with federal claims involves a far different calculus of the efficient utilization of judicial resources than the retention of state law claims for trial. See Kavit v. Stamm, supra, at 1180, n.4 (efficient utilization of judicial resources a relevant consideration to the determination whether to exercise pendent jurisdiction).

. Fed.R.Civ.Pr. 60(b) provides:
“(b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud, etc. On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse .party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken. A motion under this subdivision (b) does not affect the finality of a judgment or suspend its operation. This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to grant relief to a defendant not actually personally notified as provided in Title 28, U.S.C. § 1655, or to set aside a judgment for fraud upon the court. Writs of coram nobis, coram vobis, audita querela, and bills of review and bills in the nature of a bill of review, are abolished, and the procedure for obtaining any relief from a judgment shall be by motion as prescribed in these rules or by an independent action."