Aloha Dog and Cat Hospital, PC et al v. Standard Retirement Services Inc.

Filing 73

ORDER: Adopting Findings and Recommendation 69 : Denying Defendant's Motion to Dismiss Plaintiff's Breach of Contract Claim for Lack of Subject Matter Jurisdiction 63 Signed on 6/20/2011 by Judge Ancer L. Haggerty. (sd)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION

ALOHA DOG AND CAT HOSPITAL,
P.C., et al.,
Plaintiff,
v.

Civil No. 08-927-PK
ORDER

STANDARD RETIREMENT
SERVICES, INC.,
Defendant.

HAGGERTY, District Judge:
Magistrate Judge Papak issued a second Findings and Recommendation [69] in this
action. The Magistrate Judge recommended denying defendants' motion [63] to dismiss
plaintiff's breach of contract claim for lack of subject matter jurisdiction.
Defendant has filed objections to this Findings and Recommendation. When a party
objects to any portion of the Magistrate Judge's Findings and Recommendation, the district court
must make a de novo determination of that portion of the Magistrate's report. 28 U.S.C. §
636(b)(1)(B); McDonnell Douglas Corp. v. Commodore Bus. Mach., Inc., 656 F.2d 1309, 1313
(9th Cir. 1981).

ORDER -- 1

The court has given the file of this case a de novo review, carefully evaluating the
Magistrate Judge's Findings and Recommendations, defendant's objections, and the record of the
case. The Findings and Recommendation is well-reasoned, without error, and is adopted in its
entirety.
ANALYSIS
The Magistrate Judge has issued two substantive Findings and Recommendations in this
matter, and the parties and this court are familiar with the facts and issues presented. As
reviewed previously, plaintiffs consist of Dr. Douglas Gribskov and his veterinary hospital Aloha
Dog & Cat Hospital, P.C. (collectively, plaintiffs). Plaintiffs sued defendant Standard
Retirement Services, Inc. (defendant) for breach of contract and for breach of fiduciary duty
under the Employee Retirement and Investment Security Act (ERISA). Defendant is the
successor entity to Cascade Pension Services, and – more recently – Invesmart, which had been
retained to provide third-party administrative services for plaintiffs' retirement plans for
employees.
Summary judgment was granted to defendant on the federal ERISA claim in late 2010.
Defendant subsequently has moved to dismiss plaintiff's breach of contract claim on grounds that
subject matter jurisdiction is lacking.
As the Magistrate Judge reviewed thoroughly, the exercise of supplemental jurisdiction –
as is applicable here – is discretionary. Findings and Recommendation at 3. The doctrine of
supplemental jurisdiction "is a doctrine of discretion, not of plaintiff's right." United Mine
Workers of America v. Gibbs, 383 U.S. 715, 726 (1966). Under 28 U.S.C. § 1367(c)(3), a district
court may decline to exercise supplemental jurisdiction over a state law claim if "the district
court has dismissed all claims over which it has original jurisdiction . . . ." 28 U.S.C. §

ORDER -- 2

1367(c)(3); see also Acri v. Varian Assocs., Inc., 114 F.3d 999, 1000 (9th Cir. 1997) ("[A]
federal district court with power to hear state law claims has discretion to keep, or decline to
keep, them under the conditions set out in § 1367(c)"). Under that statute, district courts may
also decline to exercise supplemental jurisdiction over a claim if the claim raises a novel or
complex issue of state law, if the claim substantially predominates over the claims that the
district court had original jurisdiction, or if exceptional circumstances or compelling reasons
exist for declining jurisdiction. 28 U.S.C. § 1367(c). The Supreme Court has opined that a
court's discretion to exercise supplemental jurisdiction "lies in considerations of judicial
economy, convenience and fairness to litigants." Gibbs, 383 U.S. at 715; see also Imagineering,
Inc. v. Kiewit Pac. Co., 976 F.2d 1303, 1309 (9th Cir. 1992).
Here, the Magistrate Judge concluded that "supplemental jurisdiction clearly exists for the
breach of contract claim" and that "the values of economy, convenience, faimess and comity
support exercising supplemental jurisdiction" that claim. Findings and Recommendation at 4-5.
The Magistrate Judge acknowledged that the breach of contract claim already has been "analyzed
at some length," and that dismissal "would likely result in an inefficient replication of pleading
and discovery in state court, which would also delay proceedings." Id. at 5.
Defendant objects, asserting that "case law suggests that the default position for the
federal judge is to decline to exercise supplemental jurisdiction unless he or she can articulate
reasons why the action does not fall within the 'usual case' in which dismissal is appropriate."
Objections at 9 (quotation and citation omitted). Despite acknowledging that the exercise of
supplemental jurisdiction is discretionary, defendant argues that in cases in which all federal
claims have been disposed of, retaining jurisdiction is generally viewed as unwarranted. Id. at 34 (citations omitted).

ORDER -- 3

Defendant's objections are overruled. Defendant's arguments amount to an attempt to
abridge the scope of the discretion to exercise supplemental jurisdiction that this court plainly
enjoys. The Ninth Circuit in Acri spoke directly to this:
a federal district court with power to hear state law claims has discretion to keep,
or decline to keep, them under the conditions set out in § 1367(c) – as it has
always had under United Mine Workers v. Gibbs, 383 U.S. 715 (1966). That state
law claims "should" be dismissed if federal claims are dismissed before trial, as
Gibbs instructs, has never meant that they must be dismissed. Carnegie-Mellon
Univ. v. Cohill, 484 U.S. 343, 350 n.7 (1988). Even more clearly under the
statutory scheme, while courts "shall" have supplemental jurisdiction under §
1367(a), they "may" decline to exercise it under § 1367(c). Thus, while a district
court must be sure that it has federal jurisdiction under § 1367(a), once it is
satisfied that the power to resolve state law claims exists, the court is not required
to make a § 1367(c) analysis unless asked to do so by a party.
Acri, 114 F.3d at 1000 (some citations omitted; emphasis in original).
The Acri court relied upon the well-established discretion to "keep, or decline to keep"
state law claims in determining that a court was never required to undertake a § 1367(c) analysis
sua sponte. Defendant's efforts to limit the discretion to "keep" only those state law claims that
arise in "unusual" cases are rejected.
The Acri court also emphasized "that actually exercising discretion and deciding whether
to decline, or to retain, supplemental jurisdiction over state law claims when any factor in
subdivision (c) is implicated is a responsibility that district courts are duty-bound to take
seriously." Id. at 1001. The Magistrate Judge in this case bore that responsibility in compelling
fashion. As the Findings and Recommendation recognized, this court's thorough familiarity with
the facts of this case, and with the contours of plaintiffs' breach of contract claim specifically,
bolsters the values of economy, convenience, and fairness. Findings and Recommendation at 5.
As the Findings and Recommendation also recognized, dismissal would likely trigger inefficient
replication of pleading and trial preparation in state court. Id.

ORDER -- 4

The Magistrate Judge's careful analysis of the balance of applicable factors was fully
informed by the values of economy, convenience, fairness, and comity recognized by the
Supreme Court. Gibbs, 383 U.S. at 715. This deliberative analysis was both proper and
convincing. Defendant's objections present an interpretation of precedential and statutory
authorities that ultimately amounts to an improper restriction of the court's opportunity to
exercise discretionary supplemental jurisdiction to "unusual" cases. Accordingly, those
objections are overruled.
CONCLUSION
The Findings and Recommendation and the record has been scrutinized under de novo
review by this court. The Findings and Recommendation [69] in this action is adopted.
Defendant's motion [63] to dismiss plaintiff's breach of contract claim for lack of subject matter
jurisdiction is denied.
IT IS SO ORDERED.
Dated this 20th day of June, 2011.

/s/ Ancer L. Haggerty
Ancer L. Haggerty
United States District Judge

ORDER -- 5