IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

No. 91-8194 No. 91-8460 _______________

PARKER & PARSLEY PETROLEUM CO., et al.,

Plaintiffs-Appellees, Cross-Appellants

VERSUS

DRESSER INDUSTRIES, et al.,

Defendants-Appellants, Cross-Appellees,

and

BJ-TITAN SERVICES COMPANY, et al.,

Defendants-Third Party Plaintiffs-Appellants, Cross-Appellees,

VERSUS

GARY LANCASTER, a/k/a Gary "Zeke" Lancaster,

Third Party Defendant-Appellee.

_________________________

Appeals from the United States District Court for the Western District of Texas _________________________ (September 3, 1992)

Before SMITH and EMILIO M. GARZA, Circuit Judges, and RAINEY,* District Judge.

JERRY E. SMITH, Circuit Judge:

* District Judge of the Southern District of Texas, sitting by designa- tion. On behalf of itself and the other interest-holders in 523

West Texas oil wells, Parker & Parsley Petroleum Company ("Parker

& Parsley") filed suit in federal district court against Dresser

Industries, Inc., Titan Services, Inc., BJ Services U.S.A., Inc.,

BJ-Hughes Holding Company, Baker Hughes Production Tools, Inc.,

and Baker Hughes Incorporated (hereinafter collectively

"Dresser"), charging that Dresser defrauded Parker & Parsley by

shorting it on materials used in oil well stimulation procedures.

Parker & Parsley based federal jurisdiction upon violations of

the Racketeer Influenced and Corrupt Organizations Act ("RICO"),

et seq., and appended Texas state claims for

fraud, breach of contract, breach of implied warranty,

negligence, and gross negligence.

The district court dismissed the RICO claims but retained

pendent jurisdiction over the state claims. After a jury trial

on the state claims, the district court entered judgment awarding

$85 million actual and $100 million punitive damages. After a

separate proceeding, the court awarded the plaintiffs attorneys'

fees of approximately $1.8 million. We vacate the judgment and

dismiss for lack of federal jurisdiction.

I.

Parker & Parsley operated a large number of oil wells in

West Texas. Some of the wells were not as productive as the

company wished, so it contracted with Dresser in 1983 and 1984 to

"fracture" the wells to stimulate them. Apparently through the

2 efforts of Dresser's Odessa division manager, Gary "Zeke"

Lancaster, Dresser shorted Parker & Parsley, using less sand and

gel than it had agreed to use for the fracturing, which, Parker

asserted, reduced the amount of oil that eventually could be

extracted.1

In 1985, Dresser's Titan subdivision entered into a

partnership with a BJ-Hughes Holding Co. subsidiary and remained

in the business as BJ-Titan. In 1986 and 1987, Parker & Parsley

awarded its fracturing contracts to BJ-Titan, and the shorting

apparently continued. In 1987, Baker Hughes Incorporated

acquired BJ Holding Co. and later became the corporate parent of

all the BJ-Titan partners. The company fired Lancaster for

embezzling, and it seems that his attorney informed Dresser of

the shorting, which he said had been approved by high executives

of his former employers.

II.

The RICO claim was dismissed about nine months after the

suit was filed and a month before trial was scheduled to begin.

The district court retained jurisdiction over the state law

fraud, contract, and tort claims, but then continued the case for

three months. Dresser appeals the court's retention of pendent

jurisdiction and challenges the award of punitive damages, the

measure of actual damages, and the exclusion of evidence relating

1 On June 23, 1992, Lancaster pleaded guilty to one count of conspiracy to commit mail fraud, in violation of

, and was sentenced to 33 months' imprisonment.

3 to a witness's alleged bias and, in a separate appeal now

consolidated, attorneys' fees.

III.

Parker & Parsley grounded its RICO claims on

(a) and (c). The district court held that Parker & Parsley

had failed to allege a proper RICO enterprise or a cognizable

RICO injury, that the BJ-Titan partners were not "persons" for

purposes of the statute, and that, because Parker & Parsley's

substantive claims had failed, its conspiracy claims should be

dismissed as well. Parker & Parsley cross-appeals, arguing that

its RICO claim should have survived the dismissal motion. We

affirm the dismissal.

As stated in Sedima, S.P.R.L. v. Imrex Co.,

(1985), a viable claim under section 1962(c) "requires

(1) conduct (2) of an enterprise (3) through a pattern (4) of

racketeering activity. a viable claim under section 1962(c)

"requires (1) conduct (2) of an enterprise (3) through a pattern

(4) of racketeering activity." Parker & Parsley averred three

potential enterprises. First, it alleged an association-in-fact

composed of the "servicing entity's" field employees who carried

out the shortchanging. Alternatively, it pleaded that each

respective corporate defendant, as the servicing entity, was the

enterprise. Third, it alleged that the BJ-Titan partnership, as

the servicing entity, was the enterprise. The district court

held first that the only bases for the association-in-fact were

4 the employees' relationship with the defendant companies and the

alleged wrongful conduct. The court noted that such an

association must be "an entity separate and apart from the

pattern of activity in which it engages," see Atkinson v.

Anadarko Bank & Trust Co.,

(5th Cir.) (quoting

United States v. Turkette,

(1981)), cert.

denied,

(1987), and that the acts of the members of

the alleged association took place within the course of their

conduct as employees, which basis this court disallowed in Elliot

v. Foufas,

(5th Cir. 1989). The district court

rejected the other possible enterprises because the alleged acts

were "committed" by the "enterprise" in the course of its regular

business and because the RICO "persons" that were alternatively

alleged were not claimed to have committed the predicate acts.

We agree that Parker & Parsley alleged no RICO enterprise

under section 1962(c). The initial averred association-in-fact,

consisting of the shortchanging field employees, either has no

existence as an entity separate and apart from the actual pattern

of racketeering, see, e.g., Old Time Enters. v. International

Coffee Corp.,

(5th Cir. 1989); Delta Truck &

Tractor v. J.I. Case Co.,

(5th Cir. 1988),

cert. denied,

(1989), or is the defendant corporate

entity functioning through its employees in the course of their

employment. See Old Time Enters, See Old Time Enterprises,

; see also Atkinson,

. Because

neither of these can constitute a RICO enterprise, see Elliot,

5

,2 and because a corporation cannot be both the

enterprise and the RICO perpetrator, Bishop v. Corbitt Marine

Ways,

(5th Cir. 1986), this association cannot

be a RICO enterprise.3

The alternative RICO enterprises also fail. The corporate

partners in the servicing entity, or alternatively, BJ-Titan,

committed the predicate acts, if such acts may be attributed to

them, in the course of their regular business. Additionally, as

the district court noted, if the corporations or partnership are

to be held liable as RICO "persons," they must have committed the

predicate acts, but Parker & Parsley, despite the claim in its

brief, has not alleged that the partners did so. See United

States v. Cauble,

(5th Cir. 1983), cert.

denied,

(1984).

The acts of the servicing entity, or the partnership,

cannot, for RICO purposes, be attributed vicariously to the

2 Parker asserts that Elliot stands only for the proposition that a plaintiff cannot simply allege that "some or all" of the RICO defendant's employees constitute an association-in-fact enterprise. This is incorrect. First, the plaintiff's claim in that case was significantly more specific, although conclusionary. Second, our analysis in the case was much broader and, relying principally upon Atkinson, stated that "[t]he fact that officers or employees of a corporation, in the course of their employment, associate to commit predicate acts does not establish an association-in-fact enterprise distinct from the corporation."

. 3 Parker relies upon some Third Circuit cases for the proposition that a group of employees can be an association separate from the corporate defendant. E.g. Brittingham v. Mobil Corp.,

(3d Cir. 1991); Petro-Tech, Inc. v. Western Co.,

(3d Cir. 1987). Brittingham does state that "[i]t is theoretically possible for a corporation to take a separate 'active' role in RICO violations also committed by its employees." At the same time, however, the court held that the Petro-Tech court "clearly did not intend for plaintiffs to circumvent this rule merely by alleging the enterprise as an association-in-fact consisting of the corporation and the individual employees who acted on its behalf."

. A useful basis for the distinction comes from Elliot,

: The employees must not be acting in the usual course of business to constitute part of the enterprise association separate from the employer.

6 individual partners. See Schofield v. First Commodity Corp.,

(1st Cir. 1986). Having determined that the claims

were properly dismissed for failure to state a RICO enterprise,

we need not address Parker & Parsley's other arguments regarding

the section 1962(c) claims.

Heretofore we have not explicitly applied the foregoing

analysis to a section 1962(a) claim, but we need not do so now in

order to affirm, for the district court also dismissed Parker &

Parsley's section 1962(a) claims for failure to allege a RICO

injury. We see no reason to disturb this ruling. Section

1964(c) states, "Any person injured in his business or property

by reason of a violation of section 1962 of this chapter may sue

therefor . . . and shall recover threefold the damages he

sustains." Section 1962(a) provides,

It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt . . . to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.

As the district court noted, it is obvious from the

complaint and the RICO case statement that the only damages

Parker & Parsley is attempting to recover are those caused by

inadequate fracturing jobs, not from any investment of income

derived from the alleged shorting. As all but one of the

7 circuits that have considered the issue have held,4 the causal

language of section 1964(c) requires that the compensable injury

stem from the violation of the RICO section in question, so any

injury under section 1962(a) must flow from the use or investment

of racketeering income. Parker & Parsley's injury does not stem

from the investment of the income from racketeering activity;

therefore, it has pleaded no cause of action under section

1962(a), and the district court properly dismissed the RICO

claims.

IV.

A.

The district court refused to surrender jurisdiction over

the pendent5 state claims, noting that the suit had been filed

more than nine months earlier, since which time it had survived a

"serious attack upon the propriety of venue," "rigorous

deposition schedules," "ungodly amounts of discovery documents,"

and a hearing on discovery disputes. The court stated that

dismissal would be a tremendous financial drain to all the

parties as well as a waste of judicial resources; it thus

concluded that "the equities weigh heavily in favor of

4 Danielson v. Burnside-Ott Aviation Training Ctr.,

(D.C. Cir. 1991); Craighead v. E.F. Hutton & Co.,

(6th Cir. 1990); Ouknine v. MacFarlane,

, 82-83 (2d Cir. 1990); Rose v. Bartle,

(3d Cir. 1989); Grider v. Texas Oil & Gas Co.,

, 1150-51 (10th Cir.), cert. denied,

(1989). Contra Busby v. Crown Supply,

(4th Cir. 1990). 5 What was formerly called "pendent jurisdiction" is now included within the term "supplemental jurisdiction." See Samaad v. City of Dallas,

, 928 n.2 (5th Cir. 1991).

8 maintenance of the case." Dresser argues that the court erred in

exercising its pendent jurisdiction.6

B.

We review the decision to retain jurisdiction over the

pendent state claims for abuse of discretion. Rosado v. Wyman,

(1970); La Porte Constr. Co. v. Bayshore Nat'l

Bank,

(5th Cir. 1986). The Supreme Court

explained the extent of pendent jurisdiction in United Mine

Workers v. Gibbs,

(1966), noting that the

justification for pendent jurisdiction

lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims, even though bound to apply state law

6 Citing Williamson v. Tucker,

(5th Cir. May 1981), cert. denied,

(1981), Dresser argues that the RICO claim was so insubstantial that it never provided any ground for federal jurisdiction, so we need not even consider the exercise of pendent jurisdiction. We disagree. As the Supreme Court has stated, Jurisdiction . . . is not defeated . . . by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover. For it is well settled that the failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction. Whether the complaint states a cause of action on which relief could be granted is a question of law and just as questions of fact it must be decided after and not before the Court has assumed jurisdiction over the controversy . . . . The previously carved out exceptions are that a suit may sometimes be dismissed for want of jurisdiction where the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction, or where such a claim is wholly insubstantial and frivolous. Bell v. Hood,

(1946) (cited in Williamson,

). We have held that the Hood standard is met only where the plaintiff's claim "has no plausible foundation" or is clearly foreclosed by a prior Supreme Court decision. Williamson,

(citing Bell v. Health- Mor, Inc.,

(5th Cir. 1977)). In light of our preceding discussion, we cannot say that Parker & Parsley's complaint, particularly as to § 1962(a), meets that onerous standard. See Employers Ins. v. Suwanee River Spa Lines,

, 759 (5th Cir. 1989).

9 to them. Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law. Certainly, if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well. [Footnotes and citations omitted.]

The Court has not treated Gibbs as establishing a bright-

line rule for pendent jurisdiction but has called for a more

flexible analysis, balancing the values of economy, convenience,

fairness, federalism, and comity. See, e.g., Carnegie-Mellon

Univ. v. Cohill,

, 350 & n.7 (1988) (citing Rosado,

). The Carnegie-Mellon Court did state,

though, that when the single federal-law claim is eliminated at

an "early stage" of the litigation, the district court has "a

powerful reason to choose not to continue to exercise

jurisdiction." Id. at 351. Our general rule is to dismiss state

claims when the federal claims to which they are pendent are

dismissed. Wong v. Stripling,

(5th Cir. 1989).

C.

Dresser argues that the federal claim was dismissed at a

"preliminary stage" in the proceedings and that the district

court failed to articulate specific considerations of judicial

economy, convenience, and fairness that would support pendent

jurisdiction, perhaps because there were none. Thus, Dresser

contends that when the RICO claims were dismissed, there had been

no "substantial commitment of judicial resources to the

nonfederal claims," W.R. Grace & Co. v. Continental Casualty Co.,

10

(5th Cir. 1990), as the court had conducted

only one hearing, other proceedings having been held before a

magistrate judge.

Parker & Parsley responds that the court did not abuse its

discretion in maintaining jurisdiction over the state-law claims.

It stresses our deference to the discretion of the district

court, see

, and argues that weighing the equities and

factors set out in Carnegie-Mellon should lead us to affirm.

D.

The instant case is distinguishable from the cases each

party finds dispositive. Parker & Parsley argues that we should

follow Hudak v. Economic Research Analysts, Economic Research

Analysts ,

(5th Cir. 1974), cert. denied,

(1975), in which the district court tried the state

claims with the federal claims in a seemingly appropriate use of

pendent jurisdiction. When we found that the limitations period

had run on the federal claim, in which the district court tried

the state claims with the federal claims, in a seemingly

appropriate use of pendent jurisdiction. When we found that the

limitation period had run on the federal claim, so that the claim

should have been dismissed at the beginning of the litigation, we

held that to dismiss the state claim would not serve the

interests of judicial economy, convenience, and fairness. Id.

Hudak is not controlling here, however. In the instant case

the court knew that it had no federal question before it before

11 trial began, while in Hudak the court conducted a trial as though

the federal claim were before it. It makes no sense, for

purposes of judicial economy, convenience, or comity, to "punish"

a district court for abusing discretion it does not know it has;

given the apparent vitality of the federal claim, the Hudak court

properly retained jurisdiction.7

Dresser asserts that this case is indistinguishable from La

Porte Construction, where we stated that when a litigant's

federal cause of action has been dismissed at a preliminary

stage, we must remand with instructions to dismiss the state

claims for lack of subject matter jurisdiction.

. La Porte Construction is persuasive but does not control

our decision, either; it predated Carnegie-Mellon and did not

establish a rule that where federal claims are dismissed before

trial, the pendent state claims must be treated similarly.

Rather, we stated that where the federal claim was dismissed

at an "early stage" of the proceedings (which we did not define),

so that there had been no commitment of federal judicial

resources, dismissal would not prejudice the litigants (namely,

the non-moving defendants), who had not devoted much effort to

7 Parker & Parsley also directs our attention to Newport Ltd. v. Sears, Roebuck & Co.,

(5th Cir. 1991), cert. denied,

(1992), holding that a district court had abused its discretion when it declined to exercise its pendent jurisdiction over state-law claims after it had dismissed a RICO claim. Newport is distinguishable, though, on all of the Carnegie-Mellon factors. In Newport, the district court dismissed the state claims on the eve of trial, after the case had consumed hundreds of hours of the court's time during over four years of litigation, and after the preparation of a pretrial order exceeding 200 pages, as well as 14 motions to compel and for protective orders, three protective orders, and a confidentiality designation. Additionally, we noted that the remaining matters were pedestrian questions of state law, issues that the federal court could readily and routinely resolve. Id. at 307-08.

12 defending the claim. Thus, dismissal was required, particularly

in light of the Gibbs Court's caution against unnecessary

decisions of state law. Accordingly, we must weigh the equities

as laid out in Gibbs and Carnegie-Mellon.

V.

As the Supreme Court noted in Carnegie-Mellon, under Gibbs a

court "should consider and weigh in each case, and at every stage

of the litigation, the values of judicial economy, convenience,

fairness, and comity" to decide whether to exercise pendent

jurisdiction.

. The Court further stated that

"in the usual case in which all federal-law claims are eliminated

before trial, the balance of factors to be considered under the

pendent jurisdiction doctrine SQ judicial economy, convenience,

fairness, and comity SQ will point toward declining to exercise

jurisdiction over the remaining state-law claims."

at 350

n.7.

No single factor )) such as whether the case is in an "early

stage" or involves novel issues of state law )) is dispositive.

Rather, we look to all the factors under the specific

circumstances of a given case. Having done so here, we conclude

that this matter justified no departure from the usual rule that

dismissal was required.

13 A.

Obviously, to retry in state court a matter that already has

been tried in the federal courts would not in itself serve

judicial economy. But that is not the issue; a court cannot

obtain jurisdiction over a case merely by trying it; otherwise,

its decision to retain jurisdiction would be, effectively,

unreviewable. Thus we must look at the case as of the filing of

the motion to dismiss and not with the benefit of hindsight.

At the stage of the proceedings when the motion was filed,

judicial economy would have been better served by dismissal. It

is true that some substantial development had occurred in this

case, which was pending before a district judge with a reputation

for moving cases promptly to trial. For example, a number of

discovery matters had been presented to, and decided by, the

magistrate judge. Nonetheless, the proceedings were at a

relatively early stage compared to those in, e.g., Newport. The

case had been pending for only nine months, not four years; trial

was scheduled soon but was still a few weeks away; and discovery

had not been completed. In short, the parties were not ready for

trial.

Second, only one week before Dresser filed its motion to

dismiss, Parker & Parsley filed a second amended complaint that

markedly revised its theories of recovery. That complaint added

new theories as to damages, including an assertion that they

should be measured by the reduction in the market value of the

damaged wells; added claims involving acidizing treatments for

14 wells; and requested that the district court "pierce the

corporate veils" of several of the defendants. The second

amended complaint also appended an allegation that a defendant

shorted other customers besides Parker & Parsley, added two bases

for liability stemming from the relationship of the defendants

and Lancaster, and changed the number of wells included in the

underlying dispute by roughly ten percent.

The filing of a pleading that so substantially changed

important aspects of the case meant that the case was at an

earlier stage than the parties and the court previously might

have thought, for the new theories needed development before

trial. We also note that by filing the second amended complaint,

Parker & Parsley brought this problem upon itself.

Third, although the magistrate judge had been active in

overseeing discovery and other related matters, there is no

indication that the district judge had substantial familiarity

with the merits of the case when the motion to dismiss was filed.

For example, the judge had conducted only one hearing on the

case, a June 8 status conference. In any event, the amount of

judicial resources that the case has consumed is most important

for our analysis as an indication of the familiarity of the forum

with the case and its ability to resolve the dispute efficiently.

See Shaffer v. Board of School Directors,

(3d

Cir. 1984). Here, the trial court was not so intimately involved

in, and familiar with, the case that proceeding further in

federal court would have prevented redundancy and would have

15 conserved substantial judicial resources. Nor would it serve

judicial economy to reward a plaintiff by allowing it into

federal court when it pleads a baseless RICO suit.

B.

Dismissal would not have caused undue inconvenience to the

litigants. The district court emphasized the "tremendous

financial drain" to the parties, but we do not find that

convincing. Little new legal research would be necessary, as the

surviving claims were governed by state law, in either forum, and

any additional factual research would have had to be conducted

anyway. See Financial Gen. Bankshares v. Metzger,

(D.C. Cir. 1982).

Additionally, the most expensive element of the trial

preparation, discovery, was largely usable in the state

proceeding, as we discuss below. Moreover, while in some cases

the likelihood that backlogged state courts could not resolve the

dispute promptly might be a factor weighing against dismissal,

the record reflects no such factor here.

C.

The fairness factor concerns the prejudice to the parties

that would arise from dismissal, and it too weighs in favor of

dismissal. Parker & Parsley argues that it would be prejudiced

by having to start over in state court, fearing that it would

have to relitigate all the procedural motions that already had

16 been ruled upon. It also argues that it might have a statute of

limitations problem, because Texas Civ. Prac. & Rem. Code

§ 16.064(b) does not block a limitations defense if federal

claims were "made with intentional disregard of proper

jurisdiction." Thus, Parker & Parsley might have to oppose

Dresser's claim that it intentionally filed suit in the wrong

court and if it fails, it would lose the right to litigate its

claims altogether.

We do not agree. The proscription problem is limited, as

Parker & Parsley's claim would not be time-barred. Section

16.064(a) provides that the statute of limitations is tolled

while a case is pending in a court that lacks jurisdiction.

Although section 16.064(b) says that the tolling does not apply

if the plaintiff filed its initial suit "with intentional

disregard of proper jurisdiction," that should not be a problem

here.

Parker & Parsley asserts that it will be prejudiced because

it will have to prove that it was not guilty of such intentional

disregard. First, however, that claim is speculative. Second,

and more significantly, the plain language of the statute puts

the burden of proof on the party asserting the intentional

disregard, not on Parker & Parsley. Third, given the widespread

abuse of civil RICO, it does not seem unreasonable to require

that a party risk losing its state claims if it insists upon

bringing a groundless RICO claim.

Parker & Parsley also asserts that it will be prejudiced

17 because it will have wasted some of its discovery, as the Texas

Rules of Civil Procedure provide only for the use of depositions

in later-filed state court proceeding, not for the blanket

admissibility of all discovery. See Tex. R. Civ. P. 207(b).

Thus, the defendants would have the opportunity to re-contest the

procedural motions and discovery rulings. the defendants would

have the opportunity to recontest the procedural motions and

discovery rulings.

This argument is not compelling. Not all discovery is

admissible, anyway. The point is that the parties would not have

to repeat the effort and expense of the discovery process. See

Waste Sys. v. Clean Land Air Water Corp.,

, 931 (5th

Cir. 1982) (fact that discovery could be used in state court

proceeding weighs in favor of dismissal of case from federal

court). See also Financial Gen. Bankshares,

. In

any event, the state court is a "surer-footed" arbiter of the

relevance of pieces of evidence for state law claims. See Gibbs,

.

Moreover, we do not expect the relitigation of other matters

to pose undue hardship. The defendants can hardly contest

jurisdiction, and we do not see other obstacles to resolution of

the case in the state court, save those that ought to be there,

as we discuss next.

D.

Finally, although it appears that the district court did

18 not consider the matter, dismissal would serve the important

interests of federalism and comity.8 The federal courts are

courts of limited jurisdiction, Aldinger v. Howard,

(1976), and often are not as well equipped for

determinations of state law as are state courts. Aside from the

state courts' superior familiarity with their respective

jurisdictions' law, the federal courts' construction of state law

can be "uncertain and ephemeral." Pennhurst State School & Hosp.

v. Halderman,

, 122 n.32 (1984). "[F]ederal courts

are not the authorized expositors of state law; there is no

mechanism by which their errors in such matters can be corrected

on appeal by state courts." Herbert Wechsler, Federal

Jurisdiction and the Revision of the Judicial Code, 13 Law &

Contemp. Prob. 216, 232 (1948) (cited in Gibbs,

n.15, and quoted in Financial Gen. Bankshares,

).

See United Gas Pipe Line Co. v. Ideal Cement Co.,

(1962) (per curiam) (state court defines authoritative

meaning of state law).9

8 See Shaffer,

(after federal claim dismissed, district court abused its discretion in retaining jurisdiction over state claims, where claims presented issue of first impression, notwithstanding inconvenience and expense to plaintiffs). 9 The framers of the Constitution did not contemplate that a federal trial court could assume jurisdiction over exclusively state-law claims in the absence of diversity jurisdiction. Alexander Hamilton, for example, states that the judicial power of the United States ought to extend only 1st, to all those which arise out of the laws of the United States, passed in pursuance of their just and constitutional powers of legislation; 2nd, to all those which concern the execution of the provisions expressly contained in the articles of Union; 3rd, to all those in which the United States are a party; 4th, to all those which involve the PEACE of the CONFEDERACY, whether they relate to the intercourse between the United States and foreign nations or to that between the States themselves; 5th,

19 In the instant case, the interests of federalism and comity

point strongly toward dismissal. All of the remaining legal

issues of the case, of course, are of state law, and as the

district court later acknowledged, they are difficult ones.10

Among the most significant issues that arose from the

complaint are, first, whether the claim sounds in contract, for

which punitive damages were not available in Texas, see

Bellefonte Underwriters Ins. Co. v. Brown,

(Tex. 1986), or is a tort claim for fraud, for which punitive

damages may be awarded. Although Texas courts base their analysis

of the distinction upon the nature of the injury, Jim Walter

Homes v. Reed,

(Tex. 1986), and the conduct

of the defendant, Spoljaric v. Percival Tours,

(Tex. 1986), the state courts have not given us plain

guidance. The Texas rule that where a party enters into a

contract with no intention of performing, that misrepresentation

may give rise to a tort action, see Crim Truck & Tractor Co. v.

Navistar Int'l Transp. Corp.,

(Tex. 1992),

does not tell us how to address claims that may turn out to be

fraud in performance.11

to all those which originate on the high seas, and are of admiralty or maritime jurisdiction; and lastly, to all those in which the State tribunals cannot be supposed to be impartial and unbiased. The Federalist No. 80, at 475 (Alexander Hamilton) (Clinton Rossiter ed., 1961). 10 During the proceedings addressing the motion for attorneys' fees, even Parker & Parsley stressed the complexity and difficulty of the case. 11 We note that the Texas Supreme Court did not decide Crim Truck until January 22, 1992, well after the trial in the instant case had ended.

20 Second, as the defendants noted in their motion to strike

the second amended complaint, Parker & Parsley was proposing a

measure of market value that seems non-standard, at best. Under

Texas law, the usual measure of damages is the difference in the

reasonable cash market value of an oil well, "as equipped,

immediately before and immediately after" the damaging event.

Atex Pipe & Supply v. Sesco Prod. Co.,

(Tex.

App. )) Tyler 1987, writ denied).

Parker & Parsley's methodology, as put forward by its

expert, was a method of calculation based upon a different set of

dates. Although we note that where the normal method of

calculating damages would result in an unjust outcome, a court

may vary the method, B.A. Mortg. Co. v. McCullough,

(Tex. Civ. App. )) Fort Worth 1979, no writ), comity

would be better served if the federal court avoided making such

exceptions.

The measure-of-damages difficulty was to re-occur. As the

district court recognized, the measure-of-market-value damages

that it ultimately sent to the jury constituted an exception to

the Texas general rule, as it compared the market value of each

well (as that well would have been if properly serviced) with its

value to a buyer who knew only that it had been improperly

fractured.12

12 We express no opinion as to the merits of the district court's decisions. Nor do we imply that a court may not make such determinations of state law, when state legal issues are properly before it, as such is the essence of, for example, diversity jurisdiction. We merely stress that the interests of comity and federalism are better served when federal courts avoid unnecessary determinations of state law.

21 VII.

After considering and weighing all the factors present in

this case, we thus conclude that the district court, with the

admirable intention of moving its docket, abused its discretion

in retaining jurisdiction over the state law claims after it had

dismissed the federal RICO claims. Because we find that,

consequently, the court had no jurisdiction, we cannot reach any

of the other issues raised on appeal. The judgment is VACATED,

and a judgment of dismissal is hereby RENDERED.

22