S055865, Opinion — Ram Technical Services, Inc. v. Koresko

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Argued and submitted January 14, decision of Court of Appeals reversed, and
case remanded to Court of Appeals for further proceedings May 29, 2009

RAM TECHNICAL SERVICES, INC.,
an Oregon corporation;
Charles Stalnaker
and Susan Stalnaker,
Petitioners on Review,
v.
John J. KORESKO;
Ram Technical Services
Voluntary Employees' Beneficiary Association;
Regional Employers' Assurance Leagues
Voluntary Employees' Beneficiary Association;
and Pennmont Benefit Services, Inc.,
a Pennsylvania corporation,
Respondents on Review,
and
GREAT SOUTHERN LIFE INSURANCE COMPANY,
a Texas corporation;
The Corben Education Services, Inc.,
an Oregon corporation;
and Thomas W. Crosswhite,
Respondents on Review.
(CC CV04100199; CA A130143; SC S055865)
208 P3d 950

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En Banc

On review from the Court of Appeals .*

Susan D. Marmaduke, Harrang Long Gary Rudnick PC,
Portland, argued the cause and filed the brief on behalf of
petitioners on review. With her on the brief were William F.
Gary, Sharon A. Rudnick, and Jona J. Maukonen.

Lisa E. Lear, Bullivant Houser Bailey PC, Portland, and
Scott Kaplan, Stoel Rives LLP, Portland, argued the cause
and filed the brief for respondents on review John J. Koresko,
Ram Technical Services Voluntary Employees' Beneficiary
Association, Regional Employers' Assurance Leagues
Voluntary Employees' Beneficiary Association, Pennmont
Benefit Services, Inc., and Great Southern Life Insurance
Company. With them on the brief were Robert B. Miller,
Andrew C. Hanan, Conrad, O'Brien, Gellman & Rohn,
Virginia L. Miller, and Anderson Kill & Olick PC.

Eric K. Helmy, The Helmy Law Firm PC, Portland, filed
the brief for respondent on review Thomas W. Crosswhite.

No appearance on behalf of respondent on review The
Corben Education Services, Inc.

KISTLER, J.

The decision of the Court of Appeals is reversed, and the
case is remanded to the Court of Appeals for further
proceedings.

\* Appeal from limited judgment, dated September 22, 2005, Robert Herndon,
Judge, and from a general judgment, dated December 2, 2005, John K. Lowe,
Judge. 215 Or App 449, 171 P3d 374 (2007), clarified and adh'd to on recons, 217 Or
App 463, 177 P3d 10 (2008).

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# KISTLER, J.

Plaintiffs filed an action in federal district court,
alleging claims arising under the Employment Retirement
Income Security Act (ERISA), 29 USC § 1132 et seq. The dis-
trict court dismissed plaintiffs' federal action, and plaintiffs
filed an action in state court, raising parallel state law
claims. The question that this case presents is whether either
claim preclusion or the statute of limitations bars plaintiffs
from pursuing their state law claims in state court. The state
trial court ruled in defendants' favor on both grounds and dis-
missed plaintiffs' action. The Court of Appeals affirmed, rely-
ing on claim preclusion. RAM Technical Services, Inc. v.
Koresko, 215 Or App 449, 171 P3d 374 (2007), adh'd to on
recons, 217 Or App 463, 177 P3d 10 (2008). We allowed plain-
tiffs' petition for review and now reverse the Court of Appeals
decision and remand for further proceedings.

Plaintiffs filed a complaint in the United States
District Court for the District of Oregon, raising claims under
ERISA. Plaintiffs alleged that defendants had fraud-
ulently induced them to enter into an agreement creating
an employee benefit plan and sought, under section
1132(a)(3)(B) of ERISA, either rescission of their agreement
or imposition of a constructive trust on payments that they
had made to defendants.1 Defendants moved to dismiss
plaintiffs' complaint for failure to state a claim for relief
under ERISA, and the district court granted their motion.
The district court reasoned that section 1132(a)(3) does not
provide a basis for obtaining the relief that plaintiffs
sought-rescission of an employee benefit plan. Cf.
Massachusetts Mut. Life Ins. Co. v. Russell, 473 US 134, 146-
48, 105 S Ct 3085, 87 L Ed 2d 96 (1985) (holding that the
cause of action set out in 28 USC section 1132(a)(2) did not
authorize the type of damages that the plaintiffs sought in

1 In their first two claims, plaintiffs alleged that defendant had fraudulently
induced them to purchase insurance products to fund a pension benefit plan. Spe-
cifically, they alleged that defendants had told them that the plan did not require
mandatory annual contributions when it did. Plaintiffs' first two claims differed
only in the relief that they sought. The first claim sought rescission; the second, the
imposition of a constructive trust. Additionally, plaintiffs alleged what they styled
as a claim for relief for prejudgment interest and a claim for relief for attorney fees.
The latter two claims are not relevant to the issues raised here.

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that case). The district court recognized that an action to
rescind an employee benefit plan because of fraud in the
inducement arises, if at all, under state law. The district
court accordingly ruled that plaintiffs' complaint should be
dismissed for failure to state a claim for relief under ERISA.

After the district court issued its opinion, it entered
an order stating that it "granted [defendants'] motion to dis-
miss plaintiffs' claims due to lack of federal jurisdiction." The
district court entered judgment, and defendants later moved
to clarify the earlier order. In resolving that motion, the dis-
trict court ruled:

"Defendants seek to clarify a Minute Order issued by
this court indicating that plaintiffs' Complaint had been
dismissed for lack of federal jurisdiction. Defendants
emphasize that the court found in its Opinion and Order
dated April 15, 2004, that plaintiffs had failed to state a
claim for which relief could be granted under [ERISA].
Plaintiffs oppose the motion, arguing that the court instead
found that it lacked subject matter jurisdiction over plain-
tiffs' claims because they could not assert a cause of action
under ERISA.

"Defendants' Motion to Correct Record of Order (doc. 82)
is DENIED, with the following clarification. As specified
in the court's written Opinion and Order, plaintiffs'
Complaint was dismissed for failure to state a cognizable
ERISA claim. While the absence of a federal question ren-
dered the court without subject matter [jurisdiction] over
the substance of plaintiffs' allegations, the basis for the dis-
missal of plaintiffs' claims was nonetheless the failure to
state a claim for which relief could be granted. The court's
opinion, of course, is limited to plaintiffs' claims asserted
under ERISA."

Before the district court entered judgment in the
ERISA action, plaintiffs filed an action in state court alleging
parallel state fraud claims and seeking either rescission of
the agreement or the imposition of a constructive trust on the
funds that plaintiffs had paid to defendants. Plaintiffs' state
claims arise out of the same transaction that gave rise to
their ERISA claims, and the factual allegations are virtually
identical. Plaintiffs' state claims differ from their federal
claims primarily in the legal theory (fraud as opposed to

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ERISA) that provides a basis for recovery for defendants'
allegedly wrongful acts.

Defendants moved for summary judgment in the
state action, arguing that claim preclusion and the statute of
limitations provided complete defenses to plaintiffs' claims.
The trial court granted summary judgment on both grounds
and entered judgment in defendants' favor. On appeal, the
Court of Appeals affirmed the trial court's judgment, reason-
ing that claim preclusion barred plaintiffs from asserting, in
the state action, any state law claims that they could have
raised under the doctrine of supplemental jurisdiction in the
federal action. Ram Technical Services, Inc., 215 Or App at
462. The Court of Appeals observed that, in 1990, Congress
had broadened the federal courts' supplemental jurisdiction
to hear pendent state claims. Id. at 460. It concluded that
those "broadened supplemental jurisdiction rules not only
allow plaintiffs to litigate both state and federal issues at
once in federal court, but they also compel plaintiffs to assert
all of their transactionally related claims in a single federal
forum-or risk losing them to claim preclusion." Id. at 461.

This court had quoted a different rule from the
Restatement (Second) of Judgments in Rennie v. Freeway
Transport, 294 Or 319, 326, 656 P2d 919 (1982), as the Court
of Appeals implicitly recognized. See Ram Technical Services,
Inc., 215 Or App at 462 (discussing an earlier Court of
Appeals decision, Ron Tonkin Gran Turismo v. Wakehouse
Motors, 46 Or App 199, 611 P2d 658, rev den, 289 Or 373
(1980), that had followed a tentative draft of the Restatement
(Second) of Judgments). The Restatement recognizes that, as
a general rule, claim preclusion will bar a plaintiff who liti-
gates a federal claim in federal court from relitigating state
claims that the plaintiff could have but did not litigate in the
federal action. See Rennie, 294 Or at 326 (quoting Restatement
(Second) of Judgments § 25 comment e (1982)). However, the
Restatement also recognizes an exception to that general
rule: If the federal court either clearly lacked jurisdiction
over any pendent state law claims or, having jurisdiction,
clearly would have declined to exercise its discretion to hear
those state law claims, then claim preclusion does not bar lit-
igating those claims. Id.

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The Court of Appeals concluded that the 1990 federal
statute had superseded the exception set out in the Restatement;
however, it also addressed the exception. It reasoned that,
even if the exception were still good law, "it is by no means
'clear' here that the federal court would have dismissed a
common-law fraud claim if it had been asserted in the federal
action." Ram Technical Services, Inc., 215 Or App at 462. The
court explained that the "law governing federal supplemen-
tal jurisdiction has undergone significant changes" and "the
expansive exercise of supplemental jurisdiction dictates that
all claims * * * be joined and, at least potentially, be subject
to adjudication in one forum." Id. The court accordingly held
that claim preclusion barred plaintiffs from asserting their
fraud claims in state court. Having held that plaintiffs'
claims were precluded, the Court of Appeals did not reach the
question whether those claims were also time-barred, nor did
it reach various cross-assignments of error that some defen-
dants had raised. Id. at 452 n 2.

We begin with the question of claim preclusion. The
Court of Appeals' resolution of that question turns, as do
defendants' arguments, on the proposition that Congress
expanded the scope of the federal courts' supplemental juris-
diction in 1990 in a way that undercuts the validity of the
exception set out in the Restatement. We begin by discussing
the scope of the federal courts' supplemental jurisdiction,
both before and after the 1990 legislation. We then discuss
this court's decision in Rennie, which considered whether a
plaintiff's failure to raise a state claim in federal court pre-
cluded him from later raising that claim in state court.
Finally, we turn to whether the exception stated in the
Restatement and quoted in Rennie is still valid and, if it is,
how it applies in this case.

Federal courts have limited subject matter jurisdic-
tion. They have jurisdiction to hear cases arising under fed-
eral law and cases in which, among other circumstances, the
parties are citizens of different states and the amount in con-
troversy exceeds $75,000. See 28 USC § 1331 (federal ques-
tion jurisdiction); 28 USC § 1332 (diversity jurisdiction).
When a federal court has jurisdiction over a case, it also may
have jurisdiction to hear related claims. For example, a plain-
tiff in federal court may allege that one claim in a case arises

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under federal law, giving the court federal question jurisdic-
tion, and also seek to assert a related state law claim over
which the court would not otherwise have had jurisdiction. In
Mine Workers v. Gibbs, 383 US 715, 816 S Ct 1130, 16 L Ed
2d 218 (1966), the Supreme Court explained when a federal
court will have the power to hear related state law claims:

"The federal claim must have substance sufficient to confer
subject matter jurisdiction on the court. Levering &
Garrigues Co. v. Morrin, 289 U. S. 103 [(1933)]. The state
and federal claims must derive from a common nucleus of
operative fact. But if, considered without regard to their
federal or state character, a plaintiff's claims are such that
he would ordinarily be expected to try them all in one judi-
cial proceeding, then, assuming substantiality of the fed-
eral issues, there is power in federal courts to hear the
whole."

Id. at 725 (emphasis in original).

The Court also recognized in Gibbs that, even when
a federal district court has the power (or pendent jurisdiction,
as it was then called) to hear related state law claims, the
court has discretion to decline to exercise that power. Id. at
726. The Court explained that, as a general matter, "consid-
erations of judicial economy, convenience and fairness to liti-
gants" should inform the exercise of that discretion. Id. The
Court then discussed several recurring situations, one of
which arises when a federal district court dismisses before
trial the federal claims that gave rise to federal question
jurisdiction. The Court stated that, "[c]ertainly, if the federal
claims are dismissed before trial, even though not insubstan-
tial in a jurisdictional sense, the state law claims should be
dismissed as well." Id. Later, the Court explained that its
statement from Gibbs "does not establish a mandatory rule to
be applied inflexibly in all cases." Carnegie-Mellon Univ. v.
Cohill, 484 US 343, 350 n 7, 108 S Ct 614, 98 L Ed 2d 720
(1988). Rather, it identifies the appropriate balance in the
usual case "in which all federal claims are eliminated before
trial." Id.

In 1990, Congress adopted 28 USC section 1367.
Subsection (a) of that statute provides, in part:

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"Except as provided in subsections (b) and (c) * * * , in any
civil action of which the district courts have original juris-
diction, the district courts shall have supplemental jurisdic-
tion over all other claims that are so related to claims in the
action within such original jurisdiction that they form part
of the same case or controversy under Article III of the
United States Constitution."

Subsection (a) codifies, in large part, the holding of Gibbs,
which defined the power of a federal court to exercise supple-
mental jurisdiction over related state claims. See Charles
Alan Wright, Arthur R. Miller, Edward H. Cooper, and
Richard D. Freer, 13D Federal Practice and Procedure
§ 3567.1, 336 (2008) ("Congress intended to codify the result
in United Mine Workers v. Gibbs." (footnote omitted)).2

Subsection (c) of section 1367 recognizes, as Gibbs
did, that federal courts have discretion to decline to exercise
supplemental jurisdiction over pendent state claims. It pro-
vides that "[t]he district courts may decline to exercise sup-
plemental jurisdiction over a claim under subsection (a)" in
one of four specified circumstances. 28 USC § 1367(c).3 One
specified circumstance is when "the district court has dis-
missed all claims over which it has original jurisdiction." 28
USC § 1367(c)(3). In interpreting section 1367(c)(3), the fed-
eral courts have followed the general rule set out in Gibbs
and Carnegie-Mellon; that is, when federal district courts
have dismissed before trial the federal claims that gave rise
to federal question jurisdiction, the courts generally have not
exercised supplemental jurisdiction over any pendent state
claims that a party has alleged. See Wright et al., 13D
Federal Practice and Procedure, § 3567.3, 428-31 (describing

2 In addition to recognizing in Gibbs that federal courts could exercise pendent
jurisdiction over related state law claims, the Supreme Court also had recognized
that federal courts could exercise ancillary jurisdiction over some counterclaims.
See Wright et al., 13D Federal Practice and Procedure § 3567, 318-19 (describing
decisions). The 1990 statute applies to both types of jurisdiction and groups them
under the rubric of supplemental jurisdiction. Id.

3 There has been some debate whether, after the enactment of 28 USC § 1367,
a federal district court's discretion to decline to exercise supplemental jurisdiction
is limited to the four circumstances specified in section 1367(c). See Wright et al.,
13D Federal Practice and Procedure § 3567.3, 401-08. The resolution of that debate
is not relevant to our decision because the federal action in this case falls squarely
within one of the four circumstances that section 1367(c) specifies.

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federal practice). In short, the 1990 legislation did not change
the prior decisions in any way that bears on this case.

With that background in mind, we turn to this
court's decision in Rennie, which considered claim preclusion
before Congress enacted 28 USC section 1367 in 1990. The
plaintiff in Rennie had brought an action in federal district
court under the federal securities laws, tried his federal secu-
rities claims to a jury, and lost. 294 Or at 321-22. He then
pursued state law claims arising out of the same transaction
in state court. Id. In deciding whether claim preclusion
barred the plaintiff's state action, this court began by quoting
the following passage from the Restatement:

" 'A given claim may find support in theories or grounds
arising from both state and federal law. When the plaintiff
brings an action on the claim in a court, either state or fed-
eral, in which there is no jurisdictional obstacle to his
advancing both theories or grounds, but he presents only
one of them, and judgment is entered with respect to it, he
may not maintain a second action in which he tenders the
other theory or ground. If, however, the court in the first
action would clearly not have had jurisdiction to entertain
the omitted theory or ground (or, having jurisdiction, would
clearly have declined to exercise it as a matter of discre-
tion), then a second action in a competent court presenting
the omitted theory or ground should be held not precluded.'"

## 294 Or at 326 (quoting Restatement (Second) of Judgments § 25 comment e).

That passage from the Restatement states a general
rule that, if a federal court could have exercised supplemen-
tal jurisdiction over a related state claim, the failure to raise
the state claim along with the federal claim will bar a party
from later seeking to litigate the state claim in state court.
The Restatement also recognizes an exception to that general
rule: When the federal court either clearly would have lacked
jurisdiction over the related state claim or, having jurisdic-
tion, clearly would have declined to exercise it, then claim
preclusion does not bar the plaintiff from bringing the state
claim in state court. To illustrate the distinction between the
general rule and the exception, the Restatement explains
that, if a party litigates a federal claim to judgment and fails

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to raise a related state claim, claim preclusion will bar that
party from later litigating the state claim. Restatement § 25
comment e, illus 10. However, if "the federal claim, though
substantial, was dismissed in advance of trial," then claim
preclusion will not bar litigating the state claim in state
court. Id.

The facts in Rennie brought that case within the gen-
eral rule. The plaintiff had litigated his federal securities
claim to a jury and lost. This court explained that, in those
circumstances:

"the better rule * * * is that a plaintiff must attempt to have
all claims against a defendant arising out of one transaction
adjudicated in one court in one proceeding, at least insofar
as possible, despite the fact that the various claims may be
based on different sources of law."

Id. at 327. The court was careful, however, to "emphasize"
that its holding did not foreclose applying the exception set
out in the Restatement in an appropriate case. Id. at 327-28.
It explained that the case before it was not one:

"where the federal court, after a proper request, expressly
declined to exercise pendent jurisdiction over the state law
claim. Nor is this a case where, due to the nature of the
claims or the fact that the federal law claim was summarily
dismissed, the federal court would have clearly declined to
exercise pendent jurisdiction."

Id. at 327-28 (emphasis added; citation omitted).

This case presents the issue that this court did not
have occasion to decide in Rennie-whether claim preclusion
applies if the " 'court in the first action would clearly not have
had jurisdiction to entertain the omitted theory or ground (or,
having jurisdiction, would clearly have declined to exercise it
as a matter of discretion).'" Rennie, 294 Or at 326 (quoting
Restatement § 25 comment e). On that point, defendants
endorse the Court of Appeals' reasoning that, even if the
Restatement was correct when it was adopted in 1982,
Congress altered the legal landscape when it codified and
expanded the doctrine of supplemental jurisdiction in 1990.
As we understand defendants' argument, they contend that,
in light of the expansion of supplemental jurisdiction in

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1990, the rule stated in the Restatement is no longer good
law.

In our view, Congress did not expand supplemental
jurisdiction in 1990 in a way that undercuts the Restatement.
As explained above, for the most part, Congress codified the
decision in Gibbs. Specifically, it preserved the federal courts'
discretion to decline to exercise supplemental jurisdiction
over pendent state law claims. Of particular significance for
this case, Congress preserved a district court's discretion to
decline to exercise supplemental jurisdiction when that court
has dismissed before trial the federal claims that gave rise to
its jurisdiction. Far from changing the legal landscape, as
defendants argue, Congress preserved the very point-the
federal courts' discretion to decline to exercise supplemental
jurisdiction-that gave rise to the exception stated in the
Restatement and quoted in Rennie.4

That said, we have never explicitly relied upon the
exception from the Restatement, which states that claim pre-
clusion does not apply when the "court in the first action
would clearly not have had jurisdiction to entertain the omit-
ted theory or ground (or, having jurisdiction, would clearly
have declined to exercise it as a matter of discretion)." As
noted, the facts in Rennie did not require this court to decide
whether to follow that exception. This case presents that
issue, and we see no reason not to follow the Restatement;
that is, we see no reason why claim preclusion should apply
when it is clear that the district court would have declined to
exercise supplemental jurisdiction over any state-law claims
that plaintiffs could have asserted. Barring plaintiffs from
litigating their state law claims in that circumstance does not
advance the principles of judicial economy that underlie the

4 Defendants argue that we should follow what they describe as the "modern"
rule set out in McAmis Industries v. M. Cutter Co., 161 Or App 631, 984 P2d 909,
rev den, 329 Or 553 (1999). Defendants read McAmis for more than it is worth. The
claim preclusion issue arose in McAmis in the same posture that it had in Rennie.
The federal court in McAmis had tried the plaintiff's claim to completion; it had
granted summary judgment in the plaintiff's favor and had awarded the plaintiff
damages. Id. at 634. McAmis was not a case where the federal court dismissed the
plaintiff's complaint before trial, and the court in McAmis did not address, nor did
it purport to address, how claim preclusion would apply in that context. See id. at
637-41 (identifying and analyzing the "critical disagreement" between the parties
as whether the state and federal claims arose out of same transaction).

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doctrine of claim preclusion. Rather, it disserves those prin-
ciples by denying plaintiffs any forum in which to vindicate
their state rights.

To be sure, the rule that the Court of Appeals
adopted and that defendants urge us to adopt avoids having
state courts decide, in retrospect, how a federal court would
have exercised its discretion if a plaintiff had sought to liti-
gate his or her state claims under the doctrine of supplemen-
tal jurisdiction. But state courts are fully capable of making
that determination. As noted in Rennie and the Restatement,
the exception to claim preclusion applies only when a federal
court, having jurisdiction, clearly would have declined to
exercise it. If it is not clear that the federal court, having
jurisdiction, would have declined to exercise it, then claim
preclusion will bar any state law claim that a plaintiff could
have but did not raise initially in federal court.5

Having concluded that the Restatement states the
correct rule, we still must decide whether the district court
would have had jurisdiction over plaintiffs' state law claims
or, having jurisdiction, clearly would have declined to exer-
cise it. On the first issue, plaintiffs note that the federal dis-
trict court ruled that it lacked subject matter jurisdiction
over plaintiffs' ERISA claims. They contend that that ruling
is correct and that it necessarily follows that the district court
also would have lacked supplemental jurisdiction over any
pendent state law claims. Defendants respond that the dis-
trict court dismissed plaintiffs' ERISA claims because plain-
tiffs had failed to state a claim for which relief could be
granted. Defendants argue that, under established federal
case law, the failure to state a claim leads to a dismissal on
the merits, not a dismissal for lack of jurisdiction. In defen-
dants' view, the district court erred in ruling that it lacked
subject matter jurisdiction over plaintiffs' ERISA claim. It
follows, defendants contend, that the district court also had
supplemental jurisdiction over plaintiffs' state law claims.

5 Although we decline to adopt the broad rule that defendants urge, we note
that, when a plaintiff chooses to file in federal court, prudent counsel ordinarily
will bring all federal and pendent state claims in that federal forum. Doing so
removes any question whether the federal court would have declined to exercise its
supplemental jurisdiction to hear the pendent state claims.

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The United States Supreme Court has long recog-
nized that, with two exceptions, a federal court has federal
question jurisdiction when the complaint alleges that a claim
arises under federal law but fails to state a claim for which
relief may be granted. Bell v. Hood, 327 US 678, 682, 66 S Ct
773, 90 L Ed 939 (1946). The two exceptions to that rule are
"[1] 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 [2] where such a
claim is wholly insubstantial and frivolous." Id. at 682-83;
accord Arbaugh v. Y & H Corp., 546 US 500, 513 & n 10, 126
S Ct 1235, 163 L Ed 2d 1097 (2006). Only in those two
instances may a federal court dismiss a complaint that fails
to state a claim for relief for lack of jurisdiction. Arbaugh, 546
US at 513 n 10.

In this case, the district court did not rule that plain-
tiffs' claims came within either of the two exceptions noted in
Bell, and defendants may well be correct that the district
court erred in stating that it lacked subject matter jurisdic-
tion over plaintiffs' ERISA claims. A potential difficulty for
defendants, however, is that the district court ruled in its
minute order and reaffirmed in its order resolving defen-
dants' motion to clarify that it did not have jurisdiction over
plaintiffs' ERISA claims. That jurisdictional ruling, even if
erroneous, may be binding on defendants as a matter of issue
preclusion. See Durfee v. Duke, 375 US 106, 111, 84 S Ct 242,
11 L Ed 2d 186 (1963) (holding that questions of subject mat-
ter jurisdiction are entitled to preclusive effect and thus full
faith and credit where "those questions have been fully and
fairly litigated and finally decided in the court which ren-
dered the original judgment"). If issue preclusion requires us
to assume that the district court lacked subject matter juris-
diction over plaintiffs' ERISA claims, then it necessarily fol-
lows that the district court also would have lacked supple-
mental jurisdiction to hear any pendent state claims, and
claim preclusion would not bar plaintiffs' state court action.

However, we need not decide whether the question of
subject matter jurisdiction was "fully and fairly litigated and
finally decided" when defendants moved to clarify
the district court's minute order. See Durfee, 375 US at 111

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(stating that standard). Even if it were not and even if we
assume that the district court had subject matter jurisdiction
over plaintiffs' ERISA claims and thus had the power to exer-
cise supplemental jurisdiction over any pendent state law
claims, the record leaves no doubt that the district court
would have declined to exercise supplemental jurisdiction
over any state law claims that plaintiffs might have asserted.
As noted, the United States Supreme Court explained in
Gibbs that, "if the federal claims are dismissed before trial,
even though not insubstantial in a jurisdictional sense, the
state claims should be dismissed as well." 383 US at 726.
Although Gibbs did not state an inflexible rule, it did identify
the appropriate balance in the usual case "in which all
federal-law claims are eliminated before trial." Carnegie-
Mellon Univ., 484 US at 350 n 7. Nothing in this record sug-
gests that plaintiffs' federal action was not the usual case.
Indeed, the district court dismissed plaintiffs' ERISA claims
at the first stage of the litigation in response to defendants'
FRCP 12(b)(6) motions.

Moreover, the district court understood that, as a
result of its ruling on defendants' motions to dismiss, it
lacked subject matter jurisdiction over plaintiffs' ERISA
claims. Even if that understanding were incorrect, as defen-
dants argue, we have no doubt that the district court would
not have proceeded to exercise supplemental jurisdiction
over any pendent state law claims if, as it concluded, it lacked
subject matter jurisdiction over plaintiffs' ERISA claims.
Because the record demonstrates that the district court
would not have exercised supplemental jurisdiction over
plaintiffs' state law claims, we conclude that claim preclusion
does not bar plaintiffs from pursuing those claims in state
court.

Defendants advance an alternative argument. They
argue that, even if claim preclusion is not a bar, plaintiffs'
state action is untimely. On that issue, the parties agree that
the timeliness of plaintiffs' state action turns on ORS 12.220,
which extends the statute of limitations when an action is
dismissed. Specifically, the parties agree that, if ORS 12.220
applies, plaintiffs' state action is timely but that, if it does not
apply, plaintiffs' state action is time barred. We turn to that
issue.

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ORS 12.220(1) provides, in part:

"Notwithstanding ORS 12.020, if an action is filed with
a court within the time allowed by statute, and the action is
involuntarily dismissed without prejudice on any ground
not adjudicating the merits of the action * * * , the plaintiff
may commence a new action based on the same claim or
claims against a defendant in the original action if the
defendant had actual notice of the filing of the original
action not later than 60 days after the action was filed."

ORS 12.220(2) provides that, if ORS 12.220(1) applies, a
party has 180 days after the judgment in the first action is
entered in which to file a new action.6 In this case, the ques-
tion whether ORS 12.220(1) applies reduces to two issues:
(1) whether plaintiffs' federal action was "dismissed * * * on
any ground not adjudicating the merits of the action" and
(2) if it were, whether plaintiffs' state action is "based on the
same claim or claims."7

Plaintiffs argue that the key to understanding why
their claims come within the terms of ORS 12.220 lies in the
federal district court's reasoning. That court held that the
relief that plaintiffs sought-rescission of an employee bene-
fit plan because of fraud in the inducement-is not available
under ERISA. It followed, the district court reasoned, that
plaintiffs' claim arose, if at all, under state law. Starting from
the premise that they mistakenly filed a state fraud claim as

6 The legislature amended ORS 12.220 in 2003, after plaintiffs filed their
action in federal district court but before that court entered judgment in defen-
dants' favor. Before 2003, ORS 12.220 (2001) provided, in part:

"if an action is commenced within the time proscribed therefor and the action
is dismissed upon the trial thereof, or upon appeal, after the time limited for
bringing a new action, the plaintiff * * * may commence a new action upon such
cause of action within one year after the dismissal or reversal on appeal."

In arguing whether ORS 12.220 applies, the parties assume, as do we, that we
should look to the current version of ORS 12.220. Moreover, the difference turns
out to be immaterial. As explained below, the legislature amended ORS 12.220 in
2003 to bring the words of ORS 12.220 (2001) in line with this court's decisions
interpreting it, and both versions of the statute lead to the same answer in this
case.

7 Defendants do not dispute that plaintiffs' federal action was timely filed, nor
do they dispute that the federal court dismissed plaintiffs' action involuntarily
without prejudice. Finally, defendants do not dispute that plaintiffs commenced
their state action within 180 days after the federal district court entered judgment.
The dispute centers instead on the two phrases quoted above.

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an ERISA claim, plaintiffs contend that the district court did
not "adjudicat[e] the merits" of the state law fraud claim that
they pled in federal court. It also follows from that premise,
they argue, that they are alleging the same fraud claim in
state court that they incorrectly attempted to bring as an
ERISA claim in federal court.

Defendants respond that the district court adjudi-
cated the merits of plaintiffs' federal action when it ruled that
their complaint failed to state a claim for relief under ERISA.
They reason that, "[u]nder the governing federal law, dis-
missal of a claim for failure to state a claim constitutes a deci-
sion on the merits" and that federal law controls whether the
district court's dismissal of plaintiffs' federal action is an
"adjudicati[on of] the merits" for the purposes of ORS 12.220.
Additionally, defendants argue that, because the elements of
an ERISA claim differ from the elements of a fraud claim, the
fraud claim that plaintiffs have alleged in state court is not
the "same claim" that they alleged in federal court.8

We begin with the question whether plaintiffs' fed-
eral action was "dismissed * * * on any ground not adjudicat-
ing the merits." ORS 12.220(1). We note, as an initial matter,
that defendants' reliance on federal law is misplaced. The
question whether the federal court "adjudicat[ed] the merits"
of plaintiffs' action for the purposes of ORS 12.220 presents a
question of state law. The federal cases on which defendants
rely (Bell and its progeny) address when the failure to state a
claim for relief under federal law will result in the lack of fed-
eral jurisdiction. Those federal cases do not purport to iden-
tify the line that the Oregon legislature drew in enacting
ORS 12.220; that is, the federal cases do not purport to decide
which dismissals constitute an "adjudicati[on of] the merits"
that will preclude a party from seeking an extended limita-
tions period under ORS 12.220. The answer to that question
lies in an examination of the text, context, and, if appropri-
ate, the legislative history of ORS 12.220.

8 The parties assume, and we agree, that the phrase "if an action is filed with a
court" in ORS 12.220 includes actions filed in a federal court. Not only is the phrase
"a court" broad enough to include federal as well as state courts, but this court had
held that the prior version of ORS 12.220 applied to an action filed initially in fed-
eral court. Hatley v. Truck Insurance Exchange, 261 Or 606, 494 P2d 426, 495 P2d
1196 (1972).

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The phrase "dismissed * * * on any ground not adju-
dicating the merits of the action" describes a category of dis-
positions. In many cases, the question whether a dismissal
adjudicates the merits will be fairly straightforward. For
example, a dismissal for lack of subject matter jurisdiction
does not adjudicate the merits of an action while a directed
verdict does. Compare Hatley v. Truck Insurance Exchange,
261 Or 606, 613, 494 P2d 426, 495 P2d 1196 (1972) (holding
that ORS 12.220 (2001) applied when the first action was dis-
missed for lack of subject matter jurisdiction), with White v.
Pacific Tel. & Tel. Co., 168 Or 371, 375, 123 P2d 193 (1942)
(holding that ORS 12.220 (2001) did not apply when the first
action went to trial and a directed verdict was entered in
favor of the defendants).

This case presents a closer question, however. In this
case, plaintiffs brought an action under ERISA to rescind an
employee benefit plan because of fraud in the inducement.
The district court dismissed their action because their com-
plaint did not state a claim under ERISA; their claim arose, if
at all, under state law. Viewed from one perspective, the dis-
trict court's ruling adjudicated the merits of the ERISA claim
that plaintiffs sought to allege. Viewed from another perspec-
tive, the district court did not adjudicate the merits of the
state claim that plaintiffs actually alleged. Rather, the dis-
trict court ruled that the state law claim that plaintiffs in fact
alleged did not provide an independent basis for federal
jurisdiction.

The text of ORS 12.220, standing alone, does not pro-
vide clear guidance in deciding which perspective is consis-
tent with the legislature's intent, and we turn to the statute's
context. See Stevens v. Czerniak, 336 Or 392, 401, 84 P3d 140
(2004) (considering text and context at the first level of
analysis). Context includes " 'the preexisting common law
and the statutory framework within which the law was
enacted.'" Id. (quoting Denton and Denton, 326 Or 236, 241,
951 P2d 693 (1998)). In this case, the earlier version of ORS
12.220 and the cases interpreting it provide more guidance.
As noted, ORS 12.220 (2001) provided that, if an "action is
dismissed upon the trial thereof, or upon appeal, after the
time limited for bringing a new action, the plaintiff * * * may

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commence a new action upon such cause of action within one
year after the dismissal or reversal on appeal."

In interpreting ORS 12.220 (2001), this court
explained that the phrase "dismissed upon the trial thereof"
did not mean as much as it might appear to say. Rather, it
meant:

"dismissed without a trial upon the merits, such as in a case
when judgment of nonsuit is given, or when an action is dis-
missed for want of prosecution or for want of jurisdiction,
and the like, and it has no application to a judgment
entered after a trial upon the merits."

White, 168 Or at 375. The court reasoned that, if it inter-
preted the phrase "dismissed upon the trial thereof" to
include a "judgment entered after a trial upon the merits,"
then that interpretation "would result in the entire destruc-
tion of the rule of res adjudicata and permit the plaintiff to
litigate the same cause of action as against the same parties
without end." Id .; see Tikka v. Martin, 271 Or 287, 292-93,
532 P2d 18 (1975) (following White).9 The court also observed
that the word "dismissed," as it was used in ORS 12.220
(2001), "signifies a final ending of the action, not a final judg-
ment on the controversy, but an ending of that particular pro-
ceeding." White, 168 Or at 376. The court thus interpreted
the phrase "dismissed upon the trial thereof" in ORS 12.220
(2001) as applying only to dismissals that did not preclude
another action on the same claim or claims.10

9 It may not have been necessary for the court in White to look to the purposes
underlying claim preclusion to interpret the scope of a statute extending the limi-
tations period. The two doctrines serve different purposes, and claim preclusion
independently would provide a complete defense even if ORS 12.220 (2001) pro-
vided an extended statute of limitations. The court, however, linked the two doc-
trines in White, later decisions have followed that aspect of White, and the 2003 leg-
islature's use of the phrase "not adjudicating the merits of an action" appears to
derive from White's reasoning.

10 Later decisions refined some aspects of White and held that ORS 12.220
(2001) did not apply when an action was dismissed for want of prosecution or when
a plaintiff took a voluntary nonsuit before trial. See Fuller v. Safeway Stores, 258
Or 131, 133-34, 481 P2d 616 (1971) (dismissal for want of prosecution); Haworth v.
Ruckman, 249 Or 28, 29-30, 436 P2d 733 (1968) (voluntary nonsuit before trial). In
Hatley, this court explained that the holding in Fuller reflected policy considera-
tions while the holding in Haworth derived from considerations unique to nonsuits.
261 Or at 613 n 1.

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That context sheds light on the text of ORS 12.220 in
two respects. First, the legislature continued to use the word
"dismissed" when it amended ORS 12.220 in 2003, implying
that ORS 12.220, as amended, applies to dispositions that
resolve an action but do not have a final or preclusive effect.
See White, 168 Or at 376 (explaining the meaning of dis-
missed). Second, when the legislature provided in 2003 that
ORS 12.220 applies to an action "dismissed ** * on any
ground not adjudicating the merits," the wording harkens
back to the rule from White that ORS 12.220 (2001) did not
apply to a "judgment entered after a trial upon the merits"-
the line that the court drew in White to prevent extending the
statute of limitations to actions barred by claim preclusion.
168 Or at 375. That context implies that the current wording
of ORS 12.220 applies, as ORS 12.220 (2001) did, only to dis-
missals that do not result in claim preclusion.

We also consider the legislative history of the 2003
amendments to ORS 12.220. See State v. Gaines, 346 Or 160,
172, 206 P3d 1042 (2009) ("Legislative history may be used to
confirm seemingly plain meaning and even to illuminate it
\* \* *. "). The Oregon Law Commission proposed amendments
to ORS 12.220 in 2003, and Professor Maury Holland testi-
fied before the legislature on behalf of the Commission.
Holland explained that one of the problems with ORS 12.220
(2001) was that it "does not say what it means" and that
one of the purposes of the proposed amendments was to bring
the wording of the statute in line with the decisions inter-
preting it. Testimony, Senate Judiciary Committee, HB
2284, May 12, 2003, Ex E (statement of Maury Holland).

Holland also submitted the Commission's report on
the proposed amendments to ORS 12.220 to the legislature.
The report mirrors, in large part, the reasoning in White. The
report explains that

"[t]he basic premise of a saving statute is that if an action is
dismissed without prejudice on some ground not adjudicat-
ing its substantive merits and thus not giving rise to claim
preclusion, the plaintiff should be entitled to reinstitute the
same claim or claims against the same defendant or defen-
dants in a new action."

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Oregon Law Commission Report, Senate Judiciary Committee,
HB 2284, May 12, 2003, Ex D at 2. Later, the report states
that ORS 12.220, as amended, "is intended to apply in any
case where dismissal without prejudice of the original action
is on a procedural ground not adjudicating the merits." Id. at
3.11 No one testified in opposition to the bill, and the House
and Senate Judiciary Committees voted to submit the bill to
their respective houses without further discussion and with a
"do pass" recommendation.

The witness's explanation of the bill is consistent
with conclusion that we draw from statute's context. The
phrase "dismissed * * * on any ground not adjudicating the
merits" reaffirms the basic principle recognized in White and
later cases: the statute applies only to dismissals that do not
result in claim preclusion. To be sure, the legislative history
does not address the specific problem that this case pres-
ents-whether ORS 12.220 applies when a plaintiff in a fed-
eral court action alleges that a claim arises under federal law
when the claim arises, if at all, only under state law. As
noted, in those situations, the federal court order dismissing
the action adjudicates the federal claim that the plaintiff
sought to plead but not the state claim that the plaintiff in
fact pled. However, the principle that White recognized and
that ORS 12.220, as amended, incorporates provides an
answer to that problem; that is, if claim preclusion does not
bar the plaintiff from bringing the state claim in state court,
then the federal court's dismissal did not "adjudicat[e] the
merits" of the state claim that the plaintiffs incorrectly
brought as a federal claim in federal court.

In this case, we have concluded that the federal dis-
trict court would have declined to exercise supplemental
jurisdiction over plaintiffs' state law claims if plaintiffs had
raised them in federal court. Two propositions follow from
that holding. First, claim preclusion does not bar plaintiffs
from pursuing those same state claims in state court. Second,
this is not a case in which the district court's ruling on plain-
tiffs' ERISA claim adjudicated the merits of their state fraud

11 As we understand the legislative history, it refers to dismissals based on pro-
cedural grounds as a shorthand way of referring to rulings dismissing a case that
do not result in claim preclusion.

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claims. This case is, instead, precisely the type of case to
which ORS 12.220 was intended to apply.

Defendants raise a second issue regarding ORS
12.220. They argue that plaintiffs' state action is not "based
on the same claim or claims" as their federal action. See ORS
12.220 (stating that requirement). The word "claim" is a term
of art, and a legal dictionary defines a "claim" as "[t]he aggre-
gate of operative facts giving rise to a right enforceable by a
court." Black's Law Dictionary 264 (2004); see Dean v. Exotic
Veneers, Inc., 271 Or 188, 193, 531 P2d 266 (1975) (stating
that, for the purposes of claim preclusion, a claim is "'an
aggregate of operative facts giving rise to a right or rights
termed "right" or "rights of action" which will be enforced by
the courts' " (quoting Clark on Code Pleading 472-78 (2d ed
1947))); Elliott v. Mosgrove, 162 Or 507, 545, 552, 91 P2d 852,
93 P2d 1070 (1939) (endorsing similar definition of a claim
for relief for the purposes of determining whether trial court
erred in permitting an amendment to the complaint).12 In
this case, plaintiffs pled the same aggregate set of operative
facts in both state and federal court. It is true, as defendants
argue, that plaintiffs alleged in federal court that those facts
gave rise to a claim under ERISA while they alleged in state
court that those facts give rise to a fraud claim. However, as
the federal district court recognized, the problem with plain-
tiffs' ERISA claim was that they had alleged, at most, a state
law claim for fraud in federal court.

Here, defendants were on notice in the federal action
of the nature of plaintiffs' claims, and we conclude that, in the
context of ORS 12.220, plaintiffs' state action is based on the
"same claim" that plaintiffs pled in the federal action. See
Oregon Law Commission Report, Senate Judiciary Committee,
HB 2284, May 12, 2003, Ex D at 2-3 ("[I]f a defendant had
actual notice of the original, dismissed action, ** * that
notice fulfills the basic purpose of limitations periods by
alerting the defendant that a given claim is, or claims are,
being asserted against that defendant * * *. "). Because the

12 In both Dean and Elliott, this court recognized that the definition of a claim
for relief, which they termed a cause of action, will vary depending on the context
in which that phrase is used. See Dean, 271 Or at 192 (describing the phrase as a
"slippery" one that varies with its context); Elliott, 162 Or at 544 (quoting a federal
decision for the same proposition).

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extended statute of limitations in ORS 12.220 applies, plain-
tiffs' state action is timely.

Accordingly, we reverse the Court of Appeals deci-
sion upholding the trial court's judgment dismissing plain-
tiffs' action. Because, as noted, some defendants have raised
cross-assignments of error that the Court of Appeals did not
reach, we remand this case to the Court of Appeals so that it
can consider those cross-assignments of error.

The decision of the Court of Appeal is reversed, and
the case is remanded to the Court of Appeals for further
proceedings.