Fraudulent Joinder and Misjoinder – Practice Points for Defendants

It is no secret that manufacturers and sellers of products prefer to litigate product liability claims in the federal courts rather than in their state counterparts. The reasons for this preference include a perceived higher-quality of judges, more intense scrutiny of “junk science,” more conservative jurors, and a more predictable schedule. In addition, many defendants wish to avail themselves of the advantages of the multidistrict litigation protocols available only in federal proceedings. For the same reasons, plaintiff’s lawyers in product liability cases are just as anxious to litigate them in the state courts, where political influence can sometimes alter the playing field. One does not have to look past newspaper headlines to see that the forum can affect the outcome. See Jef Feeley “J&J, Bayer ordered to pay $28 million in first Xarelto loss”, Boston Globe, Dec. 6, 2017 (detailing how a state court jury held a manufacturer liable for $1.8 million in actual damages and $26 million in punitive damages after several defense verdicts in federal court).

Federal courts are courts of limited jurisdiction, but they are authorized by statute to consider cases brought by citizens of one state against the other, provided that a monetary threshold of $75,000.00 is met. One maneuver used by plaintiffs’ lawyers to ensure that cases brought in state courts remain there is to add claims against local individuals or entities. In many instances, the plaintiff does not seriously intend to pursue those claims. However, this prevents an out-of-state manufacturer from transferring the case to federal court, a process known as removal, on the basis of “diversity of citizenship.”

Consider the following examples. Plaintiff A claims to have been injured while using a product manufactured by an entity located in another state. Plaintiff A sues in her local state court and adds bogus claims against the neighborhood retailer where she purchased the product. Plaintiff B claims to have been injured by a drug manufactured in another state. In addition to suing the manufacturer, Plaintiff B adds a malpractice claim against his physician, who prescribed the drug. In both of these examples, the primary defendant, and the one most anxious to have the case litigated in the federal court, is the out-of-state manufacturer.

Plaintiff A has arguably stymied removal by fraudulent joinder of the retailer, even though she has no interest in pursuing the claim against the local retailer, who may be well-liked in the community. Fraudulent joinder occurs when plaintiffs add claims against local defendants either (1) without a reasonable possibility in law or fact of recovery on those claims or (2) when the plaintiff has “no real intention in good faith to prosecute the action against the defendant or seek a joint judgment.” Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990).

Plaintiff B tried to avoid federal court by means of fraudulent misjoinder. While Plaintiff B may indeed have meritorious claims against the physician, those claims require proof of dramatically different factual and legal elements such as the existence of a physician/patient relationship and whether standards of medical care have been breached. Fraudulent misjoinder occurs when a plaintiff sues an out-of-state defendant in state court and joins a local defendant to defeat diversity jurisdiction even though the claims have no common legal or factual question to justify the joinder. Lafalier v. State Farm Fire & Cas. Co., 391 Fed. Appx. 732, 739 (10th Cir. 2010).

Several jurisdictions have embraced and interpreted the doctrines of fraudulent joinder and fraudulent misjoinder. The law in Massachusetts on both doctrines is still developing, but the limited case law gives some guidance to defendants seeking to escape state court.

When defendants argue that there is no basis for a claim against the resident defendants, defendants are not married to the facts as pleaded in the complaint. A court may consider material outside the complaint when evaluating the question of fraudulent joinder. See In re Fresenius Granuflo/Naturalyte Dialysate Products Liab. Litig., 76 F. Supp. 3d 321, 332-33 (D. Mass. 2015). Massachusetts courts permit discovery on this limited issue, giving defendants the opportunity to bring in more facts to show the deficiencies of the claims against the local defendants. See id.

A substantial record is needed to show fraudulent joinder based on a plaintiff’s lack of intent to prosecute an action against local defendants. When faced with this argument, courts look to factors such as a plaintiff’s failure to compel discovery from the local defendants or the plaintiff’s failure to join newly identified local parties once they are identified. See Smoyer v. Care One, LLC, No.16-1696, 2017 WL 575070, at *4 (W.D. Pa. Jan. 23, 2017); Little v. Doe, No. 09-5183, 2010 WL 3812364, at *6 (D.N.J. Sept. 28, 2010). Massachusetts courts have shown some openness to this argument, but to date no court has been presented with a sufficient record to justify removal. See Flavin v. Lorillard Tobacco Co., No. 15-11796, 2015 WL 3603883, at *2 (D. Mass. June 8, 2015).

Massachusetts lacks any meaningful interpretation of the fraudulent misjoinder doctrine. In other jurisdictions, the more egregiously unrelated the joined claims are, the more likely a court is to determine that a misjoinder is fraudulent and therefore permit the out-of-state defendant to litigate in the federal court. See e.g., In re Diet Drugs, No. 98–20478, 1999 WL 554584, at *3 (E.D. Pa. July 16, 1999) (“egregious” misjoinder constitutes fraudulent misjoinder but “mere misjoinder” does not). In the most in-depth fraudulent misjoinder decision in Massachusetts, a federal district court declined to adopt the fraudulent misjoinder doctrine because of the lack of First Circuit precedent and the doctrine’s mixed acceptance in other circuits. See Cambridge Place Inv. Mgmt., Inc. v. Morgan Stanley & Co., Inc., 813 F. Supp. 2d 242, 246 (D. Mass. 2011). This decision has not been cited as controlling except on the point that the application of fraudulent misjoinder involves “complicated questions of law.” In re: Zofran (Ondansetron) Products Liab. Litig., No.15-13760, 2016 WL 2349105, at *2 (D. Mass. May 4, 2016) (deciding the motion to remand on personal jurisdiction grounds without addressing subject matter jurisdiction question).

Defense counsel must bear all of the foregoing in mind when considering any new filing. The immediate task is to identify the diversity-destroying defendants and the precise nature of the claims against these persons or entities. The next questions are whether those claims are viable under the law of the particular state, whether a record has been or can be developed to show a plaintiff’s lack of intent to prosecute local defendants, or whether there is justification to join the claims against local and out-of-state defendants. The answers to these questions may create a basis to remove the case to the federal court with the benefits to the defense that accompanies such a move.

ERIN K. HIGGINS

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THOMAS E. PEISCH

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DANIEL R. FISHMAN

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2018-03-21T22:13:39+00:00 March 9th, 2018|Categories: Daniel Fishman, Erin K. Higgins, Thomas E. Peisch|0 Comments

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