RWJ Management Co. v. BP Products North America, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
No. 11-1268
RWJ M ANAGEMENT C OMPANY,
INCORPORATED , et al.,
Plaintiffs-Appellees,
v.
BP P RODUCTS N ORTH A MERICA,
INCORPORATED , et al.,
Defendants-Appellants.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 09 C 6141—Rebecca R. Pallmeyer, Judge.
A RGUED S EPTEMBER 8, 2011—D ECIDED F EBRUARY 16, 2012
Before E ASTERBROOK, Chief Judge, and B AUER and
S YKES, Circuit Judges.
S YKES, Circuit Judge. This appeal arises out of conten-
tious commercial litigation between BP Products North
America (“BP”) and two owner-operators of BP-franchise
gasoline and convenience stores in the greater Chicago
area. Begun as two separate actions in Cook County
2 No. 11-1268
Circuit Court, the cases were consolidated because
they alleged identical claims under state franchise law
stemming from BP’s transition from company-owned
stores to a franchise system. The litigation has been
plagued by frequent changes in the claims for relief.
When the franchise owners added a claim under the
federal Petroleum Marketing Practices Act (“PMPA”),
BP promptly removed the case to federal court. Exten-
sive discovery followed, and in a fourth amended com-
plaint, the franchise owners added a claim based on
the Robinson-Patman Act.
By the eve of trial, however, all the federal claims
were withdrawn, leaving only claims under Illinois
law and one under Indiana law. With the federal claims
gone, the district judge relinquished supplemental juris-
diction and remanded the case to Illinois state court.
See 28 U.S.C. § 1367(c)(3). BP appealed, arguing that
the case should have remained in federal court because
the judge had sunk significant time into the case and
was familiar with its history and facts, and because
trial was to begin in just a few days.
We affirm. When federal claims drop out of the case,
leaving only state-law claims, the district court has
broad discretion to decide whether to keep the case or
relinquish supplemental jurisdiction over the state-
law claims. A general presumption in favor of relinquish-
ment applies and is particularly strong where, as here,
the state-law claims are complex and raise unsettled
legal issues. In certain limited circumstances, a sub-
stantial investment of the federal court’s time may over-
No. 11-1268 3
come the presumption, although we defer to the district
court’s judgment about when that threshold has been
crossed. Here, the judge weighed the relevant factors
and decided that the time she had spent on the case,
though substantial, was not sufficiently related to the
substance of the state-law claims to justify keeping
the case in federal court. This was not an abuse of discre-
tion.
I. Background
Starting in 2006, BP began converting many of its
company-operated gas and convenience stores into
franchisee-operated stores. From 2006 to 2008, companies
controlled by Robert W. Juckniess, d/b/a RWJ Manage-
ment Company, Inc. (“the RWJ plaintiffs”), purchased
nine gas-station sites in the greater-Chicago area and one
in northern Indiana; companies controlled by Nrupesh
Desai (“the Desai plaintiffs”) purchased seven sites in
Chicago. As part of each deal, the companies entered
into long-term contracts with BP for BP-supplied fuel
and the use of BP’s brand name and marks.
In July 2009 the RWJ plaintiffs sued BP in Illinois state
court alleging violations of the Illinois Franchise Dis-
closure Act. That same month the Desai plaintiffs filed
suit making the same allegations, and the cases were
consolidated in Cook County Circuit Court. When the
plaintiffs sought leave to file an amended complaint
alleging violations of the PMPA, BP removed the con-
solidated cases to federal court.
4 No. 11-1268
Discovery ensued, but did not proceed smoothly.
During the next 15 months, the district court held 35
hearings, issued 45 orders, and considered 70 motions.
The parties compiled 21 volumes of discovery material.
Along the way the judge held that the Desai plaintiffs
had violated discovery rules and several court orders,
but withheld judgment on the specific sanction. In a
series of amended complaints, the plaintiffs shifted
their claims for relief, adding a discriminatory-pricing
claim under the Robinson-Patman Act and dropping
their PMPA claim. A two-week trial on both the state
and federal claims was scheduled to begin on January 18,
2011. Most of the claims would be tried to the court;
the plaintiffs failed to preserve their jury-trial right on
all but a single claim under Indiana franchise law re-
garding the station in northern Indiana.
At a pretrial hearing on January 7, 2011, the plaintiffs
informed the court that they would not be pursuing
their Robinson-Patman Act claim after all. The judge
dismissed that claim. On January 12 the judge issued a
short, tentative order regarding the parties’ summary-
judgment motions, reserving a final ruling until trial. At
a hearing that same day, the judge observed that all
the federal claims had fallen out of the case and noted
the presumption in favor of relinquishing jurisdiction
over the remaining claims to state court. The judge
asked the parties if there was any reason to keep the
case in federal court. BP urged the judge to retain the
case, given the unique knowledge of the facts and legal
issues she had acquired based on her year-long custody
of the matter.
No. 11-1268 5
On January 13 the judge relinquished jurisdiction and
remanded the case to state court. The judge relied on
the presumption favoring remand and noted that her
pretrial rulings in the case were not primarily focused on
substantive legal issues relating to the state-law claims.
BP appealed.
II. Discussion
The supplemental-jurisdiction statute provides that
the district court “may decline to exercise supplemental
jurisdiction” over state-law claims if the court “has dis-
missed all claims over which it has original jurisdiction.”
28 U.S.C. § 1367(c)(3). Because the choice is committed
to the district court’s judgment, we review only for an
abuse of discretion. Williams Elecs. Games, Inc. v. Garrity,
479 F.3d 904, 906 (7th Cir. 2007).
Although the decision is discretionary, “[w]hen all
federal claims in a suit in federal court are dismissed
before trial, the presumption is that the court will relin-
quish federal jurisdiction over any supplemental state-
law claims.” Al’s Serv. Ctr. v. BP Prods. N. Am., Inc.,
599 F.3d 720, 727 (7th Cir. 2010). The presumption is
rebuttable, “but it should not be lightly abandoned, as it
is based on a legitimate and substantial concern with
minimizing federal intrusion into areas of purely state
law.” Khan v. State Oil Co., 93 F.3d 1358, 1366 (7th
Cir. 1996); see also Huffman v. Hains, 865 F.2d 920, 923
(7th Cir. 1989) (“[R]espect for the state’s interest in ap-
plying its own law, along with the state court’s greater
6 No. 11-1268
expertise in applying state law, become paramount con-
cerns.”).
We have identified certain circumstances that may
displace the presumption, namely:
(1) the statute of limitations has run on the pendent
claim, precluding the filing of a separate suit in
state court; (2) substantial judicial resources have
already been committed, so that sending the case to
another court will cause a substantial duplication
of effort; or (3) when it is absolutely clear how the
pendent claims can be decided.
Sharp Elecs. Corp. v. Metro. Life Ins. Co., 578 F.3d 505, 514-15
(7th Cir. 2009) (internal quotation marks omitted). The
district court’s evaluation of these case-specific factors
is entitled to substantial deference; we will reverse a
district court’s decision to relinquish supplemental juris-
diction “ ‘only in extraordinary circumstances.’ ” Contreras
v. Suncast Corp., 237 F.3d 756, 766 (7th Cir. 2001) (quoting
Disher v. Info. Res., Inc., 873 F.2d 136, 140 (7th Cir. 1989));
see also Kennedy v. Schoenberg, Fisher & Newman, Ltd.,
140 F.3d 716, 728 (7th Cir. 1998) (A district court’s deci-
sion to relinquish supplemental jurisdiction is “almost
unreviewable.”).
This case focuses entirely on considerations of judicial
economy and potential duplication of judicial effort. BP
contends that the district court invested so much time
superintending this litigation that the presumption in
favor of relinquishment has been overcome. The district
court is the best judge of that; our review examines only
whether the court made “a considered determination
No. 11-1268 7
of whether it should hear the claims.” Miller v. Herman,
600 F.3d 727, 738 (7th Cir. 2010). Here, the judge con-
sidered the relevant factors and determined that her
work on the case was not so enmeshed in substantive
issues of state law that the presumption in favor of
remand should be set aside. That decision makes
sense—especially where, as here, the claims remaining
in the case include complex common-law business torts
and claims for violation of state statutory franchise law.
BP relies heavily on Miller Aviation v. Milwaukee County
Board of Supervisors, 273 F.3d 722 (7th Cir. 2001), in which
we reversed a district court’s decision to relinquish sup-
plemental state-law claims to state court for reasons
of judicial efficiency:
The judicial resources expended by the district court
in this case are considerable. The district court spent
more than five years overseeing this multifaceted
litigation. During this time, the district court consid-
ered 22 motions, held 9 hearings, and issued 19 orders,
including the 71-page decision presently before us
on appeal. Additionally, the district court’s orders
demonstrate a mastery of the minutiae of airport
administration, aviation commerce, as well as the
inner workings of the various decision-making pro-
cesses within Milwaukee County’s government. For
these reasons, we conclude that a remand of the
remaining supplemental claims would require a
“duplication of effort” by the state court that under-
mines the very purpose of supplemental jurisdic-
tion—judicial efficiency.
Id. at 732.
8 No. 11-1268
The district court thought that Miller Aviation was
distinguishable, and we agree. On the one hand, there’s
no question that these proceedings have been pro-
tracted. The district court held 35 hearings, considered
70 motions, and issued 45 orders, which on a numerical
basis exceeds the district court’s work in Miller Aviation.
On the other hand, only one of the district court’s
rulings was substantive. In her order relinquishing juris-
diction, the judge noted that she had issued only a 10-
page tentative ruling on the motions for summary judg-
ment, whereas in Miller Aviation, the district judge had
written “an exhaustive 71-page memorandum and order.”
Id. at 726. And this case has been in federal court just over
fifteen months; in Miller Aviation the federal litigation
consumed five years.
Evaluating considerations of judicial efficiency and
duplication of judicial effort is not just a matter of toting
up months or motions or the page counts of judicial
orders. Rather, concerns about judicial economy have
their greatest force when significant federal judicial
resources have already been expended to decide the
state claims, or when there is no doubt about how
those claims should be decided. Dargis v. Sheahan, 526
F.3d 981, 990-91 (7th Cir. 2008); Wright v. Associated Ins.
Cos. Inc., 29 F.3d 1244, 1251 (7th Cir. 1994).
Here, the extensive pretrial activity was largely attribut-
able to discovery disputes, not the merits of the state-
law claims. In Miller Aviation, by contrast, the state and
federal claims were substantively entangled. And the
resolution of the state claims in this case is far from clear.
No. 11-1268 9
This litigation has seen five amended complaints and
raises challenges under Illinois statutory and common
law to the entire franchising system of a major company.
Moreover, the Illinois franchise-law claims in particular
are not the subject of a well-developed body of prece-
dent. We have said that where the relevant state law is
unsettled, the presumption in favor of relinquishment
is particularly strong. See Hansen v. Bd. of Trs., 551 F.3d
599, 608-09 (7th Cir. 2008); Coe v. Cnty. of Cook, 162 F.3d
491, 496 (7th Cir. 1998).
BP raises two additional factors specific to this case that
it claims weigh heavily in favor of keeping the case in
federal court. First, because one of the RWJ gas stations
is located in northern Indiana, remanding to state court
means that an Illinois judge will be required to apply
Indiana law. Second, BP notes that the district court
did not completely resolve the issue of discovery sanc-
tions; an Illinois judge will have to decide this federal
procedural question as well.1 These factors, though rele-
1
The supplemental jurisdiction statute permits the district
court to decline to exercise jurisdiction over supplemental
“claims.” 28 U.S.C. § 1367(a). Perhaps the district court might
have retained jurisdiction for the limited purpose of concluding
the discovery-sanctions issue while relinquishing jurisdiction
over the state-law claims. We need not address the matter
here. It appears the judge overlooked the fact that she had not
fully resolved the discovery-sanctions issue. This omission
does not persuade us that the decision to remand was an
abuse of discretion.
10 No. 11-1268
vant, do not convince us that the district court abused
its discretion. The Illinois courts are fully capable of
applying Indiana law and resolving the outstanding
issue of which discovery sanctions are appropriate.
Now that the federal claims are gone, the center of gravity
in the case has shifted to Illinois franchise and tort law;
these are issues ideally decided by an Illinois judge ap-
plying Illinois law.
Finally, BP complains that the case was remanded
to state court just two business days before the two-
week trial was scheduled to commence. As the dis-
trict court held in its written order, however, that fact
is insufficient to overcome the presumption in favor
of remand. We have upheld district court orders relin-
quishing supplemental claims “just before trial after five
years of discovery.” Olive Can Co., Inc. v. Martin, 906
F.2d 1147, 1153 (7th Cir. 1990) (emphasis added); see
also Myers v. Cnty. of Lake, Ind., 30 F.3d 847, 848 (7th
Cir. 1994) (“[D]ismissal of the federal claim on the eve
of trial is not by itself sufficient to justify resolving
the remaining claims in federal court.” (citing Olive
Can Co., 906 F.2d at 1153)). The fact that the trial was
near is not enough to displace the presumption in favor
of remand.
In short, we find no abuse of discretion. While BP
claims “the case should remain in federal court be-
cause the district judge was familiar with both the
facts and the law of the case and the parties have un-
dertaken discovery, these considerations are not
adequate to make us ‘second-guess’ the district court’s
No. 11-1268 11
decision to relinquish jurisdiction.” 2 Kennedy, 140 F.3d
at 728.
A FFIRMED.
2
BP moved for leave to supplement the record with certain
materials filed in state court following remand—in particular,
the Desai plaintiffs’ proposed sixth amended complaint pur-
porting to add a federal civil-rights claim. The state-court
docket reflects that this amendment has been denied. We
deny the motion to supplement the record.
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