CHASE v. MERSON et al

Filing 113

PROCEDURAL ORDER. Status Report due by 7/19/2019. By JUDGE D. BROCK HORNBY. (clp)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
JOHN F. CHASE,
PLAINTIFF
V.

ARTHUR MERSON,

ET AL.,

DEFENDANTS

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CIVIL NO. 2:18-CV-165-DBH

PROCEDURAL ORDER
This case is becoming procedurally and jurisdictionally complex. I ask
that counsel meet and confer on the issues below (and any others they believe
are pertinent) and that following such a conference, counsel request either a
meeting with the judge on how to proceed or request oral argument.
BACKGROUND
As the lawyers know, the plaintiff initially invoked this court’s jurisdiction
on the basis of a federal question (his RICO claims), 28 U.S.C. § 1331, and
supplemental jurisdiction over a number of state law claims, 28 U.S.C. § 1367.
Two Maine-based defendants, the Cloutiers, moved to dismiss the only
count against them (a state law claim) under Fed. R. Civ. P. 12(b)(6) for failure
to state a claim, and I granted their motion. Feb. 6, 2019 Order (ECF No. 84).
In doing so, I observed that the contract upon which the plaintiff had
unsuccessfully sued them provided for attorney fees to the prevailing party in a
dispute, and I ruled that the Cloutier defendants were entitled to reasonable

attorney fees. Id. at 6-7. I directed that they apply for the fees in accordance
with Local Rule 54.2. My Order was not a final judgment because several other
defendants remained in the lawsuit, and no party made a request under Fed. R.
Civ. P. 54(b) for entry of final judgment as to those two defendants. The Cloutier
defendants promptly applied for fees under Local Rule 54.2, but I denied their
application as premature on the premise that under that rule I should wait until
the time for appeal had run. Apr. 1, 2019 Order (ECF No. 101).
In the meantime, the defendant Patch filed a motion to dismiss on
February 5, 2019 (ECF No. 83). Although his opening paragraph said he sought
dismissal for lack of subject matter jurisdiction, Mot. to Dismiss at 1, in fact he
proceeded to argue that the plaintiff’s federal RICO claims were preempted by
the federal Private Securities Litigation Reform Act (PSLRA), id. at 4-10, or in the
alternative were insufficiently pleaded, id. at 10-15, and that I should decline to
exercise this court’s supplemental jurisdiction under 28 U.S.C. § 1367 on the
remaining state causes of action, id. at 16. He also proceeded to argue that
alternatively I should grant him judgment on the merits as to those claims. Id.
at 16-20.
I issued a Procedural Order on April 2, 2019 (ECF No. 102), inquiring
whether other defendants wished to join in the motion. I said that Patch had
“moved to dismiss the entire case for lack of subject matter jurisdiction” and that
some but not all other defendants had raised the issue of subject matter
jurisdiction in their Answers, but not yet argued it. Id. at 1. I also said that “If
I grant [Patch’s] motion, the case will probably exit federal court (it seems
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unlikely that the supplemental state claims would proceed without the federal
hook).” Id. Thereafter, other defendants joined in Patch’s motion and it was fully
briefed.
On May 21, 2019, I granted dismissal of the RICO claims against Patch,
Roy, Merson, and Endeavor Project Consultants LLC. May 21, 2019 Order at
12. (ECF No. 107). I did not say that this court thereupon lost jurisdiction.
What I said was: “I Grant the motions to dismiss the RICO claims. I reserve
decision on the motions to dismiss the remaining state law claims until I
determine whether the plaintiff can maintain federal jurisdiction based upon
diversity of citizenship,” id. at 3, and I gave the plaintiff a deadline for seeking to
amend his complaint, id. at 12. I did so because the plaintiff had stated that he
was prepared to amend his filings to invoke diversity jurisdiction if I ruled that
his RICO claims were preempted. Id. at 3 n.4; see also Pl.’s Opp’n to Def. Roy’s
Mot. to Dismiss (ECF No. 106). My basis for dismissing the RICO counts was
that one federal law, the PSLRA, had preempted another federal law, RICO (the
plaintiff had not asserted any claim under PLRSA). I did not say that this federal
court lacked subject matter jurisdiction, and I believe it is pretty clear that there
was subject matter jurisdiction and that the decision on whether to dismiss the
supplemental state claims or rule on their merits is committed to the court’s
sound discretion. See Delgado v. Pawtucket Police Dep’t, 668 F.3d 42, 48 (1st
Cir. 2019) (“In a federal-question case, the termination of the foundational
federal claim does not divest the district court of power to exercise supplemental
jurisdiction but, rather, sets the stage for an exercise of the court’s informed
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discretion,” and this is a decision “that we review only for abuse of discretion”)
(internal quotations and citation omitted). But as I had suggested in my April 2
Order, if there is no longer a federal jurisdictional hook, I am likely to use my
discretion to dismiss the state claims without ruling on their merits.
Now the plaintiff has moved to amend his complaint to drop the two Mainebased parties that I previously dismissed and one other Maine-based defendant,
the defendant Roy. Am. Mot. to Amend Compl. (ECF No. 109). As a result, he
says, there is complete diversity of citizenship between the plaintiff and the
defendants consistent with 28 U.S.C. § 1332. Id. at 2. The defendants Patch,
Merson, and Endeavor Project Consultants LLC oppose the motion on a number
of grounds.

(ECF Nos. 111, 112).

The dismissed Cloutier defendants have

expressed concern that whatever happens does not prejudice their claim against
the plaintiff for attorney fees. Opp’n to Mot. to Amend Compl. at 2-3 (ECF No.
110).
I believe the following items/issues need clarification:
1.

Have I ruled yet that this court has no jurisdiction? Is that even a

possible ruling given the original pleading of RICO claims and 28 U.S.C. § 1367
making supplemental jurisdiction over state claims discretionary? See Delgado
v. Pawtucket Police Dep’t, supra.
2.

The Supreme Court says that a plaintiff can drop a defendant under

Fed. R. Civ. P. 21 to cure a diversity problem, see Newman-Green, Inc. v. AlfonzoLarrain, 490 U.S. 826, 832 (1989) (“it is well settled that Rule 21 invests district
courts with authority to allow a dispensable nondiverse party to be dropped at
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any time . . .”). But that power seems to be limited to defendants who are not
indispensable. Is Roy dispensable or indispensable? In the plaintiff’s motion he
sometimes refers to Roy as “indispensable.” Am. Mot. to Amend Compl. at 1, 2.
He has also said that Roy is not indispensable. Id. at 5. The former references
may be typographical errors; if not, or if Roy is actually indispensable, the
plaintiff may not be able to drop the defendant Roy and achieve complete
diversity.
3.

The defendant Patch points out that in the proposed amended

complaint the plaintiff alleges residence of the parties but not citizenship, and
that residence alone is insufficient for diversity of citizenship jurisdiction.
4.

For the diversity jurisdictional question, what is the status now of

the Cloutier defendants? I dismissed them some months ago, but no party asked
for entry of final judgment, so theoretically the plaintiff still has a right to appeal
their dismissal at the appropriate time. Plus, what is the effect of their pending
request for attorney fees? Can those two issues be resolved to avoid any potential
defect in diversity jurisdiction?
5.

The defendant Patch has suggested that the cleanest route is the

filing of a new lawsuit in either federal or state court. That has some appeal to
potentially avoid these hanging procedural issues. But the plaintiff points out
the substantial difficulty, delay, and expense he had in initially achieving service
of process on the defendants. Now that the defendants are represented in this
court, is it possible for service to be accepted by their lawyers?

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I believe it would be to the benefit of all concerned to resolve these
technical jurisdictional issues (if they are resolvable) sooner rather than later.
Counsel shall report back to the court by July 19, 2019.
SO ORDERED.
DATED THIS 27TH DAY OF JUNE, 2019
/S/D. BROCK HORNBY
D. BROCK HORNBY
UNITED STATES DISTRICT JUDGE

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