Sheet Metal Workers International Association Local No. 38 Vacation Fund v…

Background

The plaintiffs asserted claims against Novak Francella, LLC under the Employee Retirement Income Security Act of 1974 and state law. In an earlier bench ruling, the court granted summary judgment to the defendant on the plaintiffs’ breach-of-fiduciary-duty claim under that federal statute. That was the only claim over which the court had original jurisdiction.

The court had believed that diversity jurisdiction supported the remaining state-law claims. It later learned from the parties’ proposed joint final pretrial order that a member of the defendant limited liability company was a New York citizen, as were the plaintiffs. Because a limited liability company has the citizenship of its members for diversity purposes, the court concluded that diversity jurisdiction was unavailable.

Jurisdiction and Claims

The court considered whether to exercise supplemental jurisdiction, meaning authority to hear state-law claims connected to a federal claim, after resolving the federal claim. Under 28 U.S.C. § 1367(c)(3), a court may decline supplemental jurisdiction when it has dismissed all claims over which it had original jurisdiction.

The court concluded that the factors favored declining jurisdiction. The plaintiffs’ central complaint concerned whether the defendant, acting as the plaintiffs’ accounting firm, failed to meet professional standards. The court found that the challenged conduct was not covered by the Employee Retirement Income Security Act and that the case did not implicate other identified federal interests or policies. A federal trial would require applying state substantive law. The court also noted that it had handled only one set of motions, the parties had just begun trial preparations, no firm trial date had been set, and the plaintiffs could refile in state court.

Disposition

The court stated that this was the usual situation in which a federal court should decline supplemental jurisdiction. It therefore declined to exercise supplemental jurisdiction over the remaining state-law claims.

The court explained that the same analysis should have applied when it previously ruled on summary judgment. Because it had mistakenly believed diversity jurisdiction existed, it had previously dismissed the claims for breach of contract, fraudulent misrepresentation, and silent fraud with prejudice. The court vacated that earlier dismissal with prejudice. It then dismissed those three claims, along with the claims for professional malpractice and negligent misrepresentation, without prejudice.

The court directed the Clerk of Court to close the case. The opinion does not state that the earlier summary judgment ruling on the federal breach-of-fiduciary-duty claim was vacated.