Subject-Matter Jurisdiction and Sufficiency of Evidence

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7^th Circuit Court of Appeals

Case Name: Ketan Patel v. Mahendra Wagha, et al.

Case No: 16-2905

Officials: POSNER, EASTERBROOK, and MANION, Circuit Judges

Focus: Subject-Matter Jurisdiction and Sufficiency of Evidence

A jury concluded that Wagha and Portfolio (collectively “the Dealers”) had broken their promise to invest the money conservatively, and its verdict awarded Patel $136,000 for breach of contract plus a further $64,000 for securities fraud, for a total of $200,000. The district court remitted the $64,000 award, ruling that Patel has not shown loss causation, but entered judgment on the $136,000 award. 2016 U.S. Dist. LEXIS 74983 (N.D. Ill. June 8, 2016). The Dealers have appealed; Patel has not.

The Dealers contend that, as soon as the district court resolved the only claim arising under federal law, it lost subject-matter jurisdiction and had to dismiss the state-law claim too. (The litigants are not of diverse citizenship.) That’s wrong. District judges can use the supplemental jurisdiction, 28 U.S.C. §1367, to resolve state-law claims even after all federal claims have been dismissed. The state and federal claims were tried together; it was entirely appropriate to enter judgment on the state-law claim under §1367.  On the merits of Patel’s contract claim, the Dealers’ principal argument is that the evidence used to show Patel’s investment goals is incompatible with the contracts he signed when opening his account.

That it should be necessary to hold a trial to find out what Patel said to Wagha surprises us. Broker-dealers routinely record these conversations, not only to ensure that they carry out clients’ wishes but also to protect themselves in the event recollections diverge. Portfolio Diversification Group did not record these exchanges, however, so the only way to resolve the disagreement was to put the matter to a jury, which found in Patel’s favor. The judgment is supported by ample evidence and therefore is affirmed.

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.