The Louisiana Supreme Court ruled that because the federal court had pendant jurisdiction over the state law claims arising out of the same transaction as the federal claims, the plaintiff is barred res judicata from bringing additional state law claims in state court. Reeder was defrauded in a pyramid scheme and sued in federal court under federal securities laws. His state claims were dismissed for a failure to state a claim in federal court, and he sued in state court to attempt to recover on the dismissed claims. Because the Federal court had jurisdiction to here the state claims, the dismissal acted as a ruling on the merits, preventing further litigation.

The case and case summary can also be viewed online at: http://www.mlmlegal.com/legal-cases/Reed_v_Palmer.php