ON REMAND FROM THE SUPREME COURT OF THE UNITED STATES
Before: GIBBONS, WEIS and SLOVITER, Circuit Judges
This is a remand proceeding to consider the proper disposition of a pendent state claims following a determintion that federal securities law jurisdiction is lacking. A Pennsylvania statute provides that a federal court within the state may transfer erroneously filed cases to the state courts. We invoke that statute and direct that the pendent claims arising under Pennsylvania law be transferred to the state courts rather than be dismissed.
This action began when Samuel and Alice Weaver sued Marine Bank in federal court, alleging that the Bank violated § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and the Pennsylvania Securities Act, PA. STAT. ANN. tit. 70 § 1-501. In addition, charges of common law fraud were included.
The district court originally entered summary judgment for the defendant, finding no cause of action under the federal securities laws. Since that basis for federal jurisdiction was absent and there was no diversity, the district judge dismissed the pendent state law claims. A divided panel of this court reversed the grant of summmary judgment, 637 F.2d 157 (3d Cir. 1981). The Supreme Court in turn reversed this court's judgment, finding that the case did not involve a "security" within the scope of the federal statutes. 455 U.S. 551, 102 S. Ct. 1220, 71 L. Ed. 2d 409, 50 U.S.L.W. 4285 (1982). Because it has been determined that plaintiffs did not have a federal cause of action, it now becomes necessary to address the state law claims that were initially dismissed by the district court.
The plaintiffs allege generally that they were defrauded by Marine Bank when it persuaded them to post their certificate of deposit as collateral for the obligations of a third party. The Weavers contend that the bank's activities contravened the state's Securities Act, which is governed by a one-year statute of limitations, PA. STAT. ANN. tit. 70 § 1-101-704 (Purdon). In addition, they asserted claims under common law fraud theories to which either a two-year, 42 PA. CONS. STAT. ANN. § 5524 (Purdon), or a six-year, id. at § 5527, statute of limitations period applies.
The suit in federal court was filed on May 4, 1979, and on July 20, 1979, three separate writs of summons were filed in the Court of Common Pleas of Erie County, Pennsylvania. These summonses, however, were not served on the defendant until March 1982, after the statute had expired -- at least as to the state Securities Act count. We need not recite the details of the state litigation insofar as the limitations issue is concerned. It is enough to say that the bank has asserted that it will vigorously press its defense there that the claims are barred by the statute of limitations. Since the issue in that litigation is purely one of Pennsylvania law to be decided by that state's tribunals, we have no authority to pass on the question.
The relevant factor from our standpoint is that there is a possibility that the plaintiffs' cause of action presently in the state court may be barred by the statute of limitations. If so, then the only opportunity for the plaintiffs to litigate the merits of their claims lies in the pendent state law counts in the federal litigation.
A federal court may entertain state law counts arising out of a "common nucleus of operative fact" on which a federal cause of action is based, even though jurisdiction would not otherwise be present. United Mine Workers v. Gibbs, 383 U.S. 715, 725, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966). In the case at hand, however, it has now been determined that there is no federal cause of action.
In Tully v. Mott Supermarkets, Inc., 540 F.2d 187 (3d Cir. 1976), we said that if the federal count is subject to dismissal on a motion for summary judgment, then the district court should "ordinarily refrain from exercising jurisdiction [over the state law claims] in the absence of extraordinary circumstances." Id. at 196 (citation omitted). This is because the primary justification for exercising pendent jurisdiction is missing if the substantial federal claim to which the state counts could be appended is no longer viable. In its absence then, the state claims should be dismissed. In Tully, we observed that the time already invested in litigating the state cause of action is an insufficient reason to sustain the exercise of pendent jurisdiction.
Under the circumstances of the case at hand, Tully would not support the federal court's retention of the remaining state claims. Yet, the prospect of the plaintiffs losing the opportunity to pursue their state cause of action because they erred in their interpretation of the Federal Securities Act is not a satisfying one. This is particularly true when the federal question -- obviously one of substance -- was not finally decided until it reached the Supreme Court.
It is fortunate for the plaintiffs, however, that Pennsylvania's Judicial Code has provided for just such a situation as exists here. When a matter is brought in a court which does not have jurisdiction, the Code permits the case to be transferred to the proper court of the Commonwealth. That provision is specifically made applicable to "any matter transferred or remanded by any United States court for a district embracing any part" of the Commonwealth. 42 PA. CONS. STAT. § 5103(b) (Purdon).*fn1 The transfer is effected by filing a certified transcript of the final judgment of the United States court and the related pleadings in the appropriate forum. Then the matter "shall be treated as if originally filed in the transferee ...