Vaughn v. Cohen, 3:23-cv-06142

Background

The case began in state court but was removed to federal court after the United States (Internal Revenue Service) was named a third-party defendant, due to federal tax liens and related jurisdictional statutes.
The federal court had original jurisdiction over federal tax and officer questions, as well as supplemental jurisdiction over related state law claims.
A settlement was reached between Loren Cohen and the United States, resolving all federal claims, which the court then dismissed, leaving only state law claims in dispute.
PC Collections withdrew its declaratory relief claim against the United States, and all federal claims were dismissed, meaning no federal issues remained in the suit.
The parties jointly stipulated that, post-settlement and dismissal of federal claims, the case should be remanded to state court, as only state law claims remained.
The court agreed and ordered the remand, excusing the parties from all federal trial and pretrial dates.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the federal court retains subject matter jurisdiction after all federal claims have been settled and dismissed	Vaughn argued supplemental jurisdiction over state law claims fades when federal questions are resolved and federal claims are withdrawn	Cohen and other parties concurred, supporting remand since no live federal controversy remained	The court found no federal jurisdiction remained and ordered remand to state court
Whether withdrawal/settlement of all federal claims necessitates remand of the remaining state law issues	Vaughn cited recent Supreme Court precedent and the voluntary nature of federal claim withdrawal	Defendants stipulated to remand in line with precedent and mutual agreement	The court held state law claims must be remanded when no federal issues remain
Impact of the Royal Canin precedent regarding jurisdictional loss upon withdrawal of federal claims before trial	Plaintiff pointed to Royal Canin for the principle that withdrawal of federal questions eliminates jurisdiction	Defendants agreed Royal Canin applied or, alternatively, that discretion under other cases supports remand	The court accepted this as controlling or, in the alternative, guided by general principles, and remanded
Whether compelling reasons exist to keep the case in federal court after dismissal of all federal claims	No compelling reason presented; state law should be handled by state courts	No argument that federal court should retain the case; parties supported remand	Court found no reason to retain and remanded the case without further federal involvement

Key Cases Cited

United Mine Workers v. Gibbs, 383 U.S. 715 (explains discretion to retain or decline supplemental jurisdiction over state law claims after federal claims are dismissed)
Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343 (supports remanding state claims to state court after dismissal of federal claims)
Royal Canin U.S.A., Inc. v. Wullschleger, 604 U.S. 22 (clarifies that voluntary withdrawal of federal law claims extinguishes federal jurisdiction and requires remand)