Law School Case Brief
Zohar CDO 2003-1, Ltd. v. Patriarch Partners, LLC - 286 F. Supp. 3d 634 (S.D.N.Y. 2017)
Under 28 U.S.C.S. § 1367(a), district courts have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under U.S. Const. art. III. Claims form a part of the same case or controversy if they derive from a common nucleus of operative fact. Where § 1367(a) is satisfied, the discretion to decline supplemental jurisdiction is available only if founded upon an enumerated category of § 1367(c). Where at least one of the § 1367(c)factors is applicable, a court should also determine whether exercising supplemental jurisdiction would promote economy, convenience, fairness, and comity. In the usual case where all federal-law claims are eliminated before trial, the balance of factors to be considered will point toward declining to exercise jurisdiction over the remaining state-law claims.
Zohar filed a dozen claims against Defendants predicated on a massive racketeering conspiracy involving the investment and management of Zohar's assets. The remedies that Zohar sought include compensatory damages, declaratory relief, an accounting, restitution, and treble damages under the Racketeering Influenced and Corrupt Organizations (RICO) Act. Defendants sought dismissal for failure to state a claim under Rule 12(b)(6) and lack of subject matter jurisdiction under Rule 12(b)(1).
Should the Court grant the motion to dismiss?
The court granted the motion to dismiss. It held that also the RICO claim alleged conduct such as issuing false reports that did not fall within the bar of Private Securities Litigation Reform Act § 107, as construed to incorporate the connection requirement of Securities Exchange Act § 10(b), the complaint's allegations relating to theft of equity interests and distributions had sufficient connection with securities transactions to be fatal to the RICO claim. Likewise, supplemental jurisdiction pursuant to 28 U.S.C.S. § 1367(c)(3) was declined because the case was in the early stages of litigation, the remaining state-law claims were better suited to state court, and no unfairness would result.
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