MIAMI BUSINESS LITIGATION: DIFFICULTIES WITH FEDERAL SUBJECT MATTER JURISDICTION

Maintaining a lawsuit in federal court is not always easy because the court must ensure it has subject matter jurisdiction over each claim at every stage of the litigation. A court can dismiss a lawsuit at any time if subject matter jurisdiction is not present. Even at the appellate stage after trial is concluded. Molinos Valle Del Cibao, C. por A. v. Lama, 633 F.3d 1330 (11th Cir. 2011) (questioning whether the district court had subject matter jurisdiction to enter its ruling at the appellate stage). The Miami business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

There are generally three methods a federal court can maintain subject matter jurisdiction in the business litigation context. The first is federal question jurisdiction. Federal courts have subject matter jurisdiction over lawsuits “arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. The second method is diversity jurisdiction. Federal courts have subject matter jurisdiction when “the matter in controversy exceeds the sum or value of $75,000” and the litigants are citizens of different states. 28 U.S.C. § 1332. The third method is supplemental jurisdiction. Federal courts have subject matter over matters they do not otherwise possess subject matter to hear if those matters “are so related to claims in the action within [the court’s]… original jurisdiction that they form part of the same case or controversy.” 28 U.S.C. § 1367. Supplemental jurisdiction cloaks claims with subject matter jurisdiction even if they do not meet the requirements of federal question jurisdiction or diversity jurisdiction. Therefore, Supplemental jurisdiction will only apply when the claim “arise[s] out of a common nucleus of operative fact with a substantial federal claim.” Parker v. Scrap Metal Processors, Inc., 468 F.3d 733 (11th Cir. 2006).

Federal courts do not have discretion to exercise federal question jurisdiction or diversity jurisdiction. They must exercise their jurisdiction and preside over the lawsuit if the requisite factors are satisfied. However, federal courts do have discretion to exercise their supplemental jurisdiction in certain circumstances. Federal courts “may decline to exercise supplemental jurisdiction” if:

• the claim raises a novel or complex issue of State law,
• the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,
• the district court has dismissed all claims over which it has original jurisdiction, or
• in exceptional circumstances, there are other compelling reasons for declining jurisdiction.

28 U.S.C. § 1367. Based on these factors, courts should refrain from exercising their discretion to refuse supplemental subject matter jurisdiction over routine claims and remedies. Myers v. Richland County, 288 F.Supp.2d 1013 (D.N.D. 2003)(holding that breach of contract, defamation, and intentional infliction of emotional distress claims did not raise novel or complex issues of state law); Parker v. Scrap Metal Processors, Inc., 468 F.3d 733 (11th Cir. 2006) (suggesting that a court can refuse to preside over a lawsuit with ordinary state law claims when the remedies are novel or complex). Conversely, courts may refuse to exercise supplemental subject matter jurisdiction when the claim lacking subject matter jurisdiction predominates over the claim possessing subject matter jurisdiction. Parker, 468 F.3d 733. In addition, exceptional circumstances may compel a court to decline supplemental subject matter jurisdiction. These instances are evaluated based on several factors including judicial economy, convenience, fairness to the parties, and whether all claims would be expected to be tried together. United Mine Workers of Am. v. Gibbs, 383 U.S. 715 (1966).

As you can see, it can be difficult to maintain a federal lawsuit throughout the duration of the entire proceeding. Litigants should keep in mind the nature and basis of their claims and the citizenship of each party involved to ensure a lawsuit lodged in the federal court system can remain there.

The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.