Go to state court, go directly to state court, do not pass go, do not collect $200

Ameritox, Ltd. v. Millennium Labs., Inc., No. 14-14281 (11th Cir. Sept. 3, 2015).

This case may stand as a cautionary tale for anyone who litigates in federal court. After three years of intricate litigation between two competitors, a trial, a $15 million plaintiff’s verdict, and an appeal, the Eleventh Circuit holds that the state-law claims in this case—which is to say, almost all of the claims asserted, and all of the claims that were tried—had no business being in federal court in the first place. 

The plaintiff’s federal-question claim was resolved before trial. Only state-law claims remained, and the district court decided to exercise its supplemental jurisdiction to hear those claims. 

The state-law claims asserted that the defendant had violated the unfair-competition laws of nine different states by violating certain provisions of federal Medicare/Medicaid law. Both of the parties and the district court all apparently assumed that violations of those federal statutes could also constitute violations of the state laws. 

On appeal, however, the Eleventh Circuit explains why that legal theory—while not necessarily wrong—was novel and complex. And when a state-law claim over which a district court has supplemental jurisdiction is “novel or complex,” a district court has discretion to dismiss it. Here, the Eleventh Circuit holds, the state-law claims were so novel and complex that the district court abused its discretion by not dismissing them. The judgment for the plaintiff is vacated and the district court is directed to dismiss the state-law claims without prejudice.