Belke v. Merrill Lynch, Pierce, Fenner & Smith

Citation518 F. Supp. 602
Decision Date10 July 1981
Docket NumberNo. 77-2837-CIV-JCP.,77-2837-CIV-JCP.
PartiesMargaret K. BELKE, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.; Frank Utermehle; Norbert Fischer; Edward C. Weizer, G. William Rolls and Leigh Rolls, Defendants.
CourtU.S. District Court — Southern District of Florida

COPYRIGHT MATERIAL OMITTED

Lewis Brown, Miami, Fla., for plaintiff.

Bennett Falk, Miami, Fla., John G. Shiley, Coral Gables, Fla., for defendants.

ORDER

PAINE, District Judge.

At the inception of this case plaintiff's complaint sought relief for damages under both Federal Securities Law and state common law. A summary judgment was granted which dismissed all the federal claims leaving only the common law causes of action. The dismissal of the federal claims prompted the filing of two motions which are now before the Court.

I. Motion for summary judgment filed October 5, 1979 by defendants Utermehle, Fischer and Weizer.

These three defendants were served in accordance with 15 U.S.C. § 78aa which permits in Federal Security Act cases the defendants to be served wherever found. Their basic contention is that because there are no remaining federal claims in this case, the Court does not have jurisdiction over them. FRCP 4 limits the territorial jurisdiction of the Court unless there is a statute which allows for an exception. Besides the non-applicability of the statute defendants contend that all acts or transactions which the suit is predicated upon took place in either Pennsylvania or New Jersey and not in Florida, thus the Court does not have the requisite minimum contacts. They cite International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) but that case does not deal with this situation where initially jurisdiction is proper. Plaintiff relies on the doctrine of pendent jurisdiction in arguing against the motion. In actuality, that doctrine is not exactly applicable as this situation falls somewhere between the doctrines of pendent parties and pendent jurisdiction where there has been a dismissal of the federal claims.

The defendants' argument in the jurisdictional sense goes to the Court's power over the defendants once the federal claims which allowed extraterritorial service are dismissed. Normally pendent jurisdiction refers to the adjudication of state claims where the primary jurisdiction of the Court is predicated on federal claims. In this case there is no federal claim to which a state claim could be pendent. The pendent party doctrine refers to the situation where "X" has a federal claim against "Y" and also wants to assert a state claim against "Z" because the claims relate to the same transactions.

United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966) held that the state and federal claim must derive from a common nucleus of operative fact. But if considered without regard to their federal or state character, where a plaintiff's claims are such that he would ordinarily be expected to try them in one proceeding, then assuming substantiality of the federal issues, there is power in federal courts to hear the whole matter. The doctrine of pendent jurisdiction is discretionary with the Court, and is justified by the notions of judicial economy and fairness and convenience to the litigants. This question of power is normally resolved on the pleadings but can remain open during the entire litigation. The Court also said that if the federal claims are dismissed before trial, even though not insubstantial in the jurisdictional sense, the state claims should be dismissed as well. In spite of this there are quite a number of cases where Courts have retained the cases after dismissal of the federal claim.

Aldinger v. Howard, 427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1975) examined the question of whether the doctrine of pendent jurisdiction confers jurisdiction to a party where there is no independent basis of federal jurisdiction. Again it is necessary that the claims stem from a common nucleus of operative fact. Although in this case the Court found pendent party jurisdiction barred by Congress, it did not rule out the possibility in other situations. Aldinger was a civil rights case where the plaintiff sought to bring in the County as a pendent party. It was held that Congress had foreclosed this possibility. In determining whether there can be pendent party jurisdiction in a particular case, the Court first must consider whether the party sought to be joined is otherwise subject to federal jurisdiction. If the party is not subject to federal jurisdiction then the Court must satisfy itself that Article 3 of the Constitution permits such jurisdiction and that Congress has not expressly or by implication precluded it.

By reasoning from a number of other cases this Court finds that Congress has not precluded continuing jurisdiction in this case, making it within the Court's discretion as to whether jurisdiction should be retained.

It has been held that a District Court could entertain pendent state claims once there was jurisdiction under 15 U.S.C. § 78aa. International Controls Corp. v. Vesco, 593 F.2d 166 (2d Cir. 1979). That service was made extra-territorially had no effect on the Court's pendent jurisdiction. Two Fifth Circuit cases have said it was permissible to retain the pendent state claims where the federal securities claim was dismissed. O'Connell v. Economic Regional Analysts, Inc., 499 F.2d 994 (5th Cir. 1971); Brunswick v. Regent, 463 F.2d 1205 (5th Cir. 1972). It should be noted that in neither of these cases was extra-territoriality a problem. And other Fifth Circuit cases seem to allow for some freedom of judicial discretion. For instance, it has been held that it was proper to dismiss where the federal claims were dismissed on summary judgment, but there the plaintiff did not even bother to respond to the defendant's motion. Daniels v. All Steel Equipment, Inc., 590 F.2d 111 (5th Cir. 1979). Reid v. Hughes, 578 F.2d 634 (5th Cir. 1978) held that discretion was not abused in dismissing the pendent claim. There was nothing in the case to suggest that the Court could not have just as well retained jurisdiction over the pendent claim. Thus, the Fifth Circuit does allow discretion with regard to retaining pendent claims after the federal claims are dismissed.

Since the Court certainly had proper pendent jurisdiction before the federal claims were dismissed there is no reason not to retain jurisdiction. At any rate the same issues will have to be tried with regard to Merrill Lynch and G.W. Rolls so it will not be judicially inconvenient to retain jurisdiction. Furthermore, although time barred, the federal claims do not appear to have been frivolous or included for the mere purpose of obtaining extra-territorial service.

The key issue — whether the Court retains its power over the extra-territorial defendants — was not answered by any of the cases. But if it is permissible to hear pendent claims in conjunction with the federal claims that is some indication that Congress has not precluded the pendent party doctrine. See also Boudreaux v. Puckett, 611 F.2d 1028 (5th Cir. 1980). It is this Court's view that although FRCP 4 limits extra-territorial service it does not limit the Court's power or jurisdiction. 15 U.S.C. 78aa expands the plaintiff's ability to perfect service. It has no effect on jurisdiction. The dismissal of the Federal Security claims prevents the defendant from further serving extra-territorial defendants, but those already within the Court's fold are not thereby released. The Court then has discretion with respect to the exercise of jurisdiction. The Court finds that in the interests of fairness and economic utilization of judicial resources, jurisdiction over these defendants will be maintained and the motion for summary judgment should be denied.

II. Application for stay pending arbitration filed November 1, 1979 by defendant Merrill Lynch, Pierce, Fenner & Smith, Inc.

Merrill Lynch and Belke had a customer agreement in force which allowed for arbitration of disputes. Pursuant to 9 U.S.C. § 3 this defendant has requested a stay. Plaintiff argues and the statute says that a stay should not be granted if the applicant for the stay is in...

To continue reading

Request your trial
5 cases
  • Sims v. Clarendon Nat. Ins. Co.
    • United States
    • U.S. District Court — Southern District of Florida
    • September 22, 2004
    ...that would cover the dispute at issue, then a stay pending arbitration should be granted. Belke v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 518 F.Supp. 602, 606 (S.D.Fla.1981), rev'd on other grounds in Belke v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 693 F.2d 1023 (11th 9. The rig......
  • Brown v. Dean Witter Reynolds, Inc.
    • United States
    • U.S. District Court — Southern District of Florida
    • January 22, 1985
    ...fiduciary duty and common-law fraud); Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023, 1027 (11th Cir.1982), rev'g, 518 F.Supp. 602 (S.D.Fla.1981) (various unspecified common law and federal securities claims intertwined); Sawyer v. Raymond, James & Associates, Inc., 642 F.2d ......
  • Belke v. Merrill Lynch, Pierce, Fenner & Smith
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • December 13, 1982
    ...would have been futile, and that Merrill Lynch promptly filed for arbitration when the nonarbitrable claims were dismissed, we reverse. 518 F.Supp. 602. I. Margaret K. Belke (Belke) sued Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) and various other defendants alleging misman......
  • Quinn v. CGR
    • United States
    • U.S. District Court — District of Colorado
    • April 16, 1985
    ...N&D Fashions v. DHJ Industries, 548 F.2d 722 (8th Cir.1977) (waiver can mean active role in lawsuit or laches); Belke v. Merrill, Lynch, 518 F.Supp. 602 (S.D.Fl.1981) (substantial invocation of litigation machinery creates prejudice which is the essence of waiver). The N&D Fashions court, s......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT