United States District Court, D. Connecticut
RULING DECLINING TO REINSTATE STATE LAW CLAIMS
BOND ARTERTON, U.S.D.J.
parties to this action seek clarification as to whether the
Second Circuit's mandate in FTH, LLC v.
Foundation Capital Partners LLC, 920 F.3d 134 (2d
Cir. 2019), reinstates Plaintiffs state law claims against
contends that the Second Circuit, in vacating the entirety of
this Court's summary judgment order in FIH, LLC v.
Foundation Capital Partners LLC, No. 3:15-CV-785 (JBA),
2018 WL 638997, at *16 (D. Conn. Jan. 31, 2018), revived five
Connecticut statutory and common law claims that this Court
had dismissed as part of that ruling. (Pl.'s Mem. of Law
[Doc. # 224] at 1.) Defendants take the opposite position,
arguing that "[i]f the Second Circuit had intended for
this Court to reconsider its supplemental jurisdiction
decision on remand, it could and would have given that
instruction." (Defs.' Joint Mem. of Law [Doc. # 223]
Court will briefly discuss the case's procedural history
as it relates to this issue, but otherwise assumes the
parties' familiarity with the background of this case as
set forth in the Second Circuit's opinion and this
Court's vacated summary judgment order.
January 31, 2018, the Court issued an order granting summary
judgment to Defendants as to Plaintiffs federal claim brought
under § 10(b) of the Securities Exchange Act of 1934. As
part of its ruling, the Court "decline[d] to continue to
exercise supplemental jurisdiction over Plaintiffs remaining
state-law claims," dismissing them for lack of subject
matter jurisdiction. FIH, 2018 WL 638997, at *1. The
Court provided additional reasons for this dismissal, noting
that "the possibility that novel questions of state law
may arise" and that "there is now pending in the
Connecticut State Superior Court a related action ... with
substantial factual overlap." Id. at *16.
subsequently appealed this ruling, identifying four issues
for review in its brief. (See Ex. A to Defs.'
Joint Mem. of Law, Pl.'s Appeal Brief [Doc. # 223-1] at
2.) The first three issues concerned challenges to this
Court's ruling on the federal claim, and the fourth issue
raised an evidentiary challenge. Id. None of the
issues related to Plaintiffs state law claims. The brief only
mentioned the state law claims in a footnote, which stated
that the "court below . . . declined to exercise
jurisdiction over FIH's state law claims-in part due to
'substantial differences in the elements' between the
federal and state law claims." Id. at 15 n.10.
their opposition on appeal, Defendants made three references
to the dismissed state claims, all in the briefs procedural
history section. Most pointedly, Defendants stated that
"FIH does not challenge the dismissal of its state law
claims in its Brief." Brief of Defendants-Appellees at 4
n.5, FIH, LLC, 920 F.3d 134 (2d Cir. 2019) (No.
reply, Plaintiff made no mention of the state law claims. But
in its conclusion, Plaintiff asked the Second Circuit to
"reverse the judgment of the Court below and remand this
action for a trial on the merits," adding that
"[t]his includes the state law claims, which were
dismissed only because of the federal claim dismissal."
Reply Brief of Plaintiff-Appellant at 28, FIH, LLC,
920 F.3d 134 (2d Cir. 2019) (No. 18-357).
April 1, 2019, the Second Circuit issued its ruling on
Plaintiffs appeal. See FIH, LLC, 920 F.3d at 134.
The Second Circuit made only passing reference to the state
law claims in the opinion's background section. There,
the Second Circuit noted that Plaintiff "asserted claims
. . . under ... the Connecticut Securities Act, and
Connecticut common law," id. at 136, but that
the District Court "declined to exercise supplemental
jurisdiction over [these] state-law claims,"
id. at 140. In its analysis, the Second Circuit did
not discuss the state law claims. The Second Circuit then
issued a general madate, "VACAT[ING] the judgment of the
district court granting summary judgment in favor of
appellees, and REMAND [ING] for further proceedings."
Id. at 146.
Court now considers whether the Second Circuit's mandate
encompasses the state law claims. "In following a
mandate, the lower court must carry out its duty to give the
mandate 'full effect.'" In re Coudert Bros.
LLP, 809 F.3d 94, 98 (2d Cir. 2015). "Where the
appellate court has decided a question of law, the lower
court on remand lacks discretion to decide that question to
the contrary." Kerman v. City of New York, 374
F.3d 93, 110 (2d Cir. 2004). "To determine whether an
issue remains open for reconsideration on remand, the trial
court should look to both the specific dictates of the remand
order as well as the broader 'spirit of the
mandate.'" United States v. Ben Zvi, 242
F.3d 89, 95 (2d Cir. 2001). "[I]f the disposition of an
issue is 'necessarily implied' by [an appellate]
decision, a mandate may also foreclose such an issue from
being considered by the lower court." Coudert,
809 F.3d at 99. "But the mandate is controlling only
'as to matters within its compass.' ... When the
mandate leaves issues open, the lower court may dispose of
the case on grounds not dealt with by the remanding appellate
court." Id. at 98 (internal citation omitted).
Here, the basic question is whether the reinstatement of the
state law claims was "necessarily implied" by the
Second Circuit's remand.
Court will begin its analysis by examining the summary
judgment order's decision as to the underlying issue of
dismissal. In this order, this Court multiple reasons for
dismissing the state law claims under 28 U.S.C. § 1367.
First, it found that dismissal was proper because "no
federal claims remain to be tried in this case."
FIH, LLC, 2018 WL 638997, at *16. Second, the Court
observed that "novel questions of state law" could
arise in this case. Id. Third, it noted "there
is now pending in the Connecticut State Superior Court a
related action . .. with substantial factual overlap with
this matter." Id. For all of these reasons,
this Court concluded that "judicial economy,
convenience, fairness, and comity would best be served by
declining to exercise supplemental jurisdiction over the
remaining state law claims and permitting Plaintiff to refile
those claims in state court, where the related matter remains
Second Circuit did not analyze any portion of this ruling on
the dismissal of the state law claims, nor did the parties
discuss the state law claims in any meaningful way in their
appellate briefs. Aside from a fleeting reference to the
state law claims in the context of the case's procedural
history, the Second Circuit's opinion was otherwise
silent on their dismissal. As such, this Court cannot
conclude that the Second Circuit "explicitly or
implicitly decided" any issue related to the state law
claims on appeal. Kerman, 374 F.3d at 109 (internal
quotation marks omitted).
arguing otherwise, Plaintiff contends that the situation here
is akin to the one presented in Coudert, where the
Second Circuit "reversed a lower court's ruling that
a claim that was previously reversed and remanded could be
dismissed yet again based on an 'alternative holding'
that the claim had been waive[d].'" (Pl.'s Mem.
of Law at 3 (citing Coudert, 809 F.3d at 102).)
Coudert is clearly distinguishable. There, a
bankruptcy court had disallowed a claim as time-barred under
New York choice-of-law rules. The claimant moved for
reconsideration, "arguing that the bankruptcy court had
erroneously applied the Erie doctrine by not
treating the bankruptcy court as the transferee court for the
Connecticut action." Coudert, 809 F.3d at 97.
The bankruptcy court then disallowed the claim again-this
time on the alternative ground that "'transferee
court' argument ha[d] been raised for the first time on
the motion for reconsideration." Id. The
claimant successfully appealed to the Second Circuit, which
"vacated the denial of [claimant's] motion for
reconsideration and agreed with... [the] 'transferee
court' reconsideration argument." Id. On
remand, the bankruptcy court nonetheless adhered to its
"alternative basis for denying reconsideration,"
and again denied relief on the grounds that claimant's
"'transferee court' argument was a new
argument" presented for the first time on
reconsideration. The Second Circuit once again reversed,
concluding that the bankruptcy court had flouted the spirit
of the mandate, which "instructed the bankruptcy court
'to apply ... [different] choice of law ...