Opinion · Court of Appeals for the Fifth Circuit
Smallwood v. Illinois Central Railroad
355 F.3d 357
- Type
- Opinion
- Court
- Court of Appeals for the Fifth Circuit
- Jurisdiction
- Federal
- Date
- 2003-12-19
- Topic
- estate-planning
ON PETITIONS FOR REHEARING EN BANC BY THE COURT: A member of the Court in active service having requested a poll on the petition for rehearing en banc and a majority of the judges in active service having voted in favor of granting a rehearing en banc, IT IS ORDERED that this cause shall be reheard by the court en banc with oral argument on a date hereafter to be fixed. *358The Clerk will specify a briefing schedule for the filing of supplemental briefs.
Citator
Smallwood v. Illinois Central Railroad has been questioned or limited by later authorities: relies on overruled authority: 2 L. Ed. 435 (overruled by Louisville, Cincinnati & Charleston Railway v. Letson, 43 U.S. 497 (1844)). Read them before relying on it. 1 later decision cites it.
- Authority status
- caution
- Cited by
- 1 opinion
United States Court of Appeals
Fifth Circuit
F I L E D
REVISED SEPTEMBER 23, 2004
September 10, 2004
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
No. 02-60782
KELLI SMALLWOOD,
Plaintiff-Appellant,
versus
ILLINOIS CENTRAL RAILROAD COMPANY;
MISSISSIPPI DEPARTMENT OF TRANSPORTATION,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Mississippi
Before KING, Chief Judge, and JOLLY, HIGGINBOTHAM, DAVIS, JONES,
SMITH, WIENER, BARKSDALE, EMILIO M. GARZA, DeMOSS, BENAVIDES,
STEWART, DENNIS, CLEMENT, PRADO, and PICKERING, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Today we decide a narrow but not unimportant question
regarding diversity jurisdiction in federal courts and the
application of the doctrine of “improper joinder.”1 This is the
first time this Court en banc has addressed the issue of improper
1
We adopt the term “improper joinder” as being more consistent with the
statutory language than the term “fraudulent joinder,” which has been used in the
past. Although there is no substantive difference between the two terms,
“improper joinder” is preferred.
joinder, although a number of panels of this Court have previously
addressed it. We hold that, when a nonresident defendant’s showing
that there is no reasonable basis for predicting that state law
would allow recovery against an in-state defendant equally disposes
of all defendants, there is no improper joinder of the in-state
defendant. In such a situation, the entire suit must be remanded
to state court. In this case, it is undisputed that the district
court’s decision that Smallwood’s claims against the in-state
defendant were preempted effectively decided the entire case. On
these facts, we conclude that the district court erred in deciding
the merits of the proffered defense of preemption and in not
remanding the case to the state court from which it was removed.
I
Kelli Smallwood is a Mississippi resident who was injured when
a train struck her car at a railroad crossing in Florence,
Mississippi. The train was operated by Illinois Central, an
Illinois corporation, and the railroad crossing was controlled by
an agency of the Mississippi state government, the Mississippi
Department of Transportation (“MDOT”). At the time of the
accident, the crossing did not have automatic gates; it was
equipped only with warning lights, which had been installed using
federal funds. After the accident, Smallwood filed suit in
Mississippi state court against both Illinois Central and MDOT,
raising claims of negligence. She alleged, in particular, that
MDOT negligently failed to install gates at the crossing despite
2
its knowledge that the crossing was unreasonably dangerous and
extraordinarily hazardous.
Illinois Central removed the case to federal court. Illinois
Central maintained that Smallwood’s claims against MDOT were
preempted by the Federal Railroad Safety Act (“FRSA”).2 Reasoning
that the preemption defense barred Smallwood’s claims against MDOT,
Illinois Central argued that Smallwood had improperly joined MDOT
because, under the FRSA, there was no reasonable possibility of
recovery against MDOT.
The district court accepted Illinois Central’s argument,
dismissed MDOT from the case, and denied Smallwood’s motion to
remand. Applying the “law of the case,” the district court then
granted summary judgment for Illinois Central on the basis that
Smallwood’s claim against the railroad was equally preempted. The
railroad won its case when it persuaded the district court that the
claims against the in-state defendant, MDOT, were preempted.3
A panel of this court concluded that Illinois Central had not
carried its burden of demonstrating that the joinder of MDOT was
2
The Federal Railroad Safety Act prohibits states from enforcing state
laws when the Secretary of Transportation has adopted regulations covering the
same subject. See 49 U.S.C. §§ 20101-20153
.
3
Smallwood raised two closely related claims against MDOT: that MDOT
negligently failed to install gates and that its delay in installing gates was
negligent. The district court rejected both of these claims on the basis of
preemption, concluding that the FRSA preempted all of Smallwood’s claims against
MDOT. See Smallwood v. Illinois Central RR Co., No. 3:01-cv-561BN (S.D. Miss.
Aug. 14, 2002) (Opinion and Order); see also Smallwood v. Illinois Central R.R.
Co., 203 F.Supp.2d 686
(S.D. Miss. 2002). At oral argument, Illinois Central
conceded that resolution of its preemption defense required dismissal of
Smallwood’s case in its entirety.
3
fraudulent, reversed the district court’s dismissal of the case on
its merits, and ordered the case remanded to state court. We voted
to rehear the case en banc.
II
The starting point for analyzing claims of improper joinder
must be the statutes authorizing removal to federal court of cases
filed in state court. The federal removal statute, 28 U.S.C. § 1441
(a), allows for the removal of “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” Subsection (b) specifies that suits arising under federal law are removable without regard to the citizenship of the parties; all other suits are removable “only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.”4 To remove a case based on diversity, the diverse defendant must demonstrate that all of the prerequisites of diversity jurisdiction contained in28 U.S.C. § 1332
are satisfied.
Relatedly, a district court is prohibited by statute from
exercising jurisdiction over a suit in which any party, by
assignment or otherwise, has been improperly or collusively joined
4
28 U.S.C. § 1441
(b) (emphasis added).
4
to manufacture federal diversity jurisdiction.5 As Professor
Wright has noted:
“[T]he Federal courts should not sanction devices
intended to prevent the removal to a Federal court where
one has that right, and should be equally vigilant to
protect the right to proceed in the Federal court as to
permit the state courts, in proper cases, to retain their
own jurisdiction.”6
The doctrine of improper joinder rests on these statutory
underpinnings, which entitle a defendant to remove to a federal
forum unless an in-state defendant has been “properly joined.”
Since the purpose of the improper joinder inquiry is to determine
whether or not the in-state defendant was properly joined, the
focus of the inquiry must be on the joinder, not the merits of the
plaintiff’s case.
Given this focus, we have recognized two ways to establish
improper joinder: “(1) actual fraud in the pleading of
jurisdictional facts, or (2) inability of the plaintiff to
establish a cause of action against the non-diverse party in state
court.”7 Only the second way is before us today, and we explained
in Travis v. Irby8 that the test for fraudulent joinder is whether
5
28 U.S.C. § 1359
. Section 1359 reads in full: “A district court shall
not have jurisdiction of a civil action in which any party, by assignment or
otherwise, has been improperly or collusively made or joined to invoke the
jurisdiction of such court.”
6
14 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3641, at 173 (3d
ed. 1998) (alteration in original) (quoting Wecker v. Nat’l Enameling & Stamping
Co., 204 U.S. 176, 186
(1907)).
7
Travis v. Irby, 326 F.3d 644, 646-47
(5th Cir. 2003).
8
Id. at 648
.
5
the defendant has demonstrated that there is no possibility of
recovery by the plaintiff against an in-state defendant, which
stated differently means that there is no reasonable basis for the
district court to predict that the plaintiff might be able to
recover against an in-state defendant. To reduce possible
confusion, we adopt this phrasing of the required proof and reject
all others, whether the others appear to describe the same standard
or not.9
There has also been some uncertainty over the proper means for
predicting whether a plaintiff has a reasonable basis of recovery
under state law. A court may resolve the issue in one of two ways.
The court may conduct a Rule 12(b)(6)-type analysis, looking
initially at the allegations of the complaint to determine whether
the complaint states a claim under state law against the in-state
defendant.10 Ordinarily, if a plaintiff can survive a Rule 12(b)(6)
challenge, there is no improper joinder. That said, there are
cases, hopefully few in number, in which a plaintiff has stated a
claim, but has misstated or omitted discrete facts that would
determine the propriety of joinder. In such cases, the district
9
A “mere theoretical possibility of recovery under local law” will not
preclude a finding of improper joinder. Badon v. RJR Nabisco, Inc., 236 F.3d 282
, 286 n.4. (5th Cir. 2000).
10
See McKee v. Kansas City S. Ry. Co., 358 F.3d 329, 334
(5th Cir. 2004); see also Parks v. New York Times, Co.,308 F.2d 474, 478
(5th Cir. 1962)
(explaining that “there can be no fraudulent joinder unless it be clear that
there can be no recovery under the law of the state on the cause alleged, or on
the facts in view of the law as they exist when the petition to remand is
heard”).
6
court may, in its discretion, pierce the pleadings and conduct a
summary inquiry.11
While the decision regarding the procedure necessary in a
given case must lie within the discretion of the trial court, we
caution that a summary inquiry is appropriate only to identify the
presence of discrete and undisputed facts that would preclude
plaintiff’s recovery against the in-state defendant.12 In this
inquiry the motive or purpose of the joinder of in-state defendants
is not relevant. We emphasize that any piercing of the pleadings
should not entail substantial hearings. Discovery by the parties
should not be allowed except on a tight judicial tether, sharply
tailored to the question at hand, and only after a showing of its
necessity. Attempting to proceed beyond this summary process
carries a heavy risk of moving the court beyond jurisdiction and
into a resolution of the merits, as distinguished from an analysis
of the court’s diversity jurisdiction by a simple and quick
exposure of the chances of the claim against the in-state defendant
alleged to be improperly joined. Indeed, the inability to make the
requisite decision in a summary manner itself points to an
inability of the removing party to carry its burden.
11
Badon, 224 F.3d at 389 n.10.
12
For example, the in-state doctor defendant did not treat the plaintiff
patient, the in-state pharmacist defendant did not fill a prescription for the
plaintiff patient, a party's residence was not as alleged, or any other fact that
easily can be disproved if not true. See Irby, 326 F.3d at 648-49
.
7
III
Illinois Central argues that the district court’s finding of
improper joinder was appropriate because Smallwood’s claims against
MDOT were preempted by federal law. Illinois Central urges,
moreover, that it is irrelevant that the FRSA equally bars claims
against it.
Facing the question for the first time in an en banc
proceeding, we reject the railroad’s contention. To justify
removal on improper joinder grounds, Illinois Central was required
to prove that the joinder of MDOT was improper. Illinois Central,
however, brought no contention going to the propriety of the
joinder. Rather, the basis of its contention that Smallwood could
not recover went, in fact, to the entire case, although it was
first directed to Smallwood’s claims against MDOT. Then, with
jurisdiction secured, and with all the force of the “law of the
case,” this same preemption was directed to the merits of
Smallwood’s claims against the railroad.
A claim of improper joinder by definition is directed toward
the joinder of the in-state party, a simple but easily obscured
concept. The party seeking removal bears a heavy burden of proving
that the joinder of the in-state party was improper.13
Nevertheless, when, on a motion to remand, a showing that compels
a holding that there is no reasonable basis for predicting that
13
See, e.g., Griggs v. State Farm Lloyds, 181 F.3d 694, 701
(5th Cir.
1999).
8
state law would allow the plaintiff to recover against the in-state
defendant necessarily compels the same result for the nonresident
defendant, there is no improper joinder; there is only a lawsuit
lacking in merit. In such cases, it makes little sense to single
out the in-state defendants as “sham” defendants and call their
joinder improper. In such circumstances, the allegation of
improper joinder is actually an attack on the merits of plaintiff’s
case as such – an allegation that, as phrased by the Supreme Court
in Chesapeake & O. R. Co. v. Cockrell, “the plaintiff’s case [is]
ill founded as to all the defendants.”14 In reaching this
conclusion, we are applying our traditional improper joinder
analysis.
In Cockrell, the Supreme Court reviewed an effort by a
railroad to remove a case to federal court on improper joinder
grounds. The railroad argued that the plaintiff’s negligence
charges against the defendants were “each and all ‘false and
untrue’” and that the in-state defendants were added simply to
defeat diversity.15 Emphasizing that “the showing must be such as
compels the conclusion that the joinder is without right and made
in bad faith,” the Court rejected the railroad’s argument.16 The
Court reasoned that although the plaintiff’s petition “may have
14
232 U.S. 146, 153
(1914).
15
Id. at 151
.
16
Id. at 152
.
9
disclosed an absence of good faith on the part of the plaintiff in
bringing the action at all, . . . it did not show a fraudulent
joinder of the engineer and fireman.”17 Since “no negligent act or
omission personal to the railway company was charged,” the improper
joinder allegations directed at the employees “manifestly went to
the merits of the action as an entirety, and not to the joinder;
that is to say, it indicated that the plaintiff's case was ill
founded as to all the defendants.”18
The Supreme Court thus made clear that the burden on the
removing party is to prove that the joinder of the in-state parties
was improper - that is, to show that sham defendants were added to
defeat jurisdiction. A showing that the plaintiff’s case is barred
as to all defendants is not sufficient. When the only proffered
justification for improper joinder is that there is no reasonable
basis for predicting recovery against the in-state defendant, and
that showing is equally dispositive of all defendants rather than
to the in-state defendants alone, the requisite showing has not
been made.
Our insistence that a removing defendant demonstrate that the
joinder was improper does not impair a foreign defendant’s right to
remove. “[T]he Federal courts may and should take such action as
will defeat attempts to wrongfully deprive parties entitled to sue
17
Id. at 153
.
18
Id.
10
in the Federal courts of the protection of their rights in those
tribunals.”19 In every case where a diverse defendant proves that
the plaintiff’s decision to join an in-state party is improper, the
diverse defendant gains access to the federal courts. If, however,
the foreign defendant fails to prove the joinder improper, then
diversity is not complete, the diverse defendant is not entitled to
remove, and remand is mandated.
Illinois Central contends, nonetheless, that our decision
contradicts prior holdings of this circuit which have allowed a
finding of improper joinder based on defenses going to the merits
of the plaintiff’s case, rather than to the joinder.20 Yet we are
not pointed to any decision of this Court where the assertion was
made and rejected. It was asserted here, and our decision today
fits squarely within our improper joinder doctrine and finds strong
support in the Supreme Court’s decision in Cockrell and the
decision of the Third Circuit in Boyer v. Snap-On Tools Corp.21
While we need not deploy the well-pleaded complaint rule, it
is not unimportant that our application of the improper joinder
doctrine here disallows circumvention of the well-pleaded complaint
rule. The railroad could not remove on the basis of federal
19
Alabama Great S. Ry. Co. v. Thompson, 200 U.S. 206, 218
(1906).
20
This argument was not presented to the able district judge. Going as
it does to our subject-matter jurisdiction, we must decide it.
21
913 F.2d 108
(3d Cir. 1990); see also In re New England Mutual Life Ins. Co. Sales Practices Litig.,324 F.Supp.2d 288
(D. Mass. 2004). But cf. Ritchey v. Upjohn Drug Co.,139 F.3d 1313, 1320
(9th Cir. 1998).
11
question jurisdiction because the only federal question appeared as
a defense. Nonetheless, Illinois Central did just that: it removed
on the basis of a defense of federal conflict preemption, urged as
the bar to a reasonable basis for predicting recovery against MDOT,
the in-state defendant. The appropriate application of the
doctrine of improper joinder to this extent leaves intact the well-
pleaded complaint doctrine with all its intended reach.
IV
It is urged that this application of the improper joinder
doctrine undermines the purpose of diversity jurisdiction, which is
to protect out-of-state defendants from local bias, the proverbial
“home cooking.” But our holding today is narrow. It applies only
in that limited range of cases where the allegation of improper
joinder rests only on a showing that there is no reasonable basis
for predicting that state law would allow recovery against the in-
state defendant and that showing is equally dispositive of all
defendants.
The doctrine of improper joinder implements our duty to not
allow manipulation of our jurisdiction. We are not persuaded that
we can or should - as we are now urged to do – hold that
Strawbridge v. Curtiss22 does not apply to suits wholly lacking
“merit,” at least as seen by a federal court. That is not a rule
of joinder, but a recrafting of Strawbridge. Until Congress
22
7 U.S. (3 Cranch.) 267 (1806).
12
changes our jurisdiction and allows us to hear cases based on
something less than complete diversity, we cannot act. And make no
mistake, whether to confer diversity jurisdiction in the absence of
complete diversity is a quintessential political decision belonging
to Congress, as congressional efforts to respond to abuses in state
court class action litigation by allowing their removal on minimal
diversity have so recently reminded us.
It is no accident that the first Congress conferred removal
jurisdiction, accommodating competing political interests. Removal
remains a centerpiece of our federalism. The cry of out-of-state
interests seeking to escape local courts and local plaintiffs
seeking to avoid more distant justice is in fact an old and
recurring song. It is a living dynamic, not an historic relic. To
the point, our insistence that diversity removal, powerful as it
is, remain within its congressionally marked traces is demanded by
principles of comity and federalism – that a state court is to be
trusted to handle the suit unless the suit satisfies the removal
requirements.
It is argued that our holding undermines judicial economy by
forcing a federal district court to remand a meritless case to
state court rather than dismiss it outright. This argument,
however, misconstrues the inquiry on removal. When a defendant
removes a case to federal court on a claim of improper joinder, the
district court’s first inquiry is whether the removing party has
carried its heavy burden of proving that the joinder was improper.
13
Indeed, until the removing party does so, the court does not have
the authority to do more; it lacks the jurisdiction to dismiss the
case on its merits. It must remand to the state court.
Illinois Central seeks broader license to escape from state
court, but we are not authorized to grant such a request, as
compelling as it may be. It is the province of Congress to modify
diversity jurisdiction.
V
The judgment of the district court is VACATED and the case is
REMANDED to the district court with instructions to remand for want
of jurisdiction to the state court from which it was removed.
14
E. GRADY JOLLY, Circuit Judge, with whom JONES, SMITH, BARKSDALE,
EMILIO M. GARZA, CLEMENT, and PRADO, Circuit Judges, join,
dissenting:
I respectfully dissent from the majority’s strange compulsion
to amend the traditional rules of fraudulent joinder based on a
seldom cited 1914 fact-specific case.23 This is all the more
strange in the light of the admonition we sounded recently: “[F]or
the simple truth that we stand on the shoulders of those before us,
if for no other reason, we must be hesitant when we act on recent
flashes of “new” insight to the fundamentals of governance”.
Marathon Oil Co. v. Ruhrgas, 145 F.3d 211, 227
(5th Cir. 1998) (en banc), rev’d,526 U.S. 574
(1999) (Higginbotham, J., dissenting).
In my view, the majority, in accepting the plaintiff’s briefing
and “new insights”, misreads the Supreme Court decision, disregards
established precedent, designs a troublesome and unnecessary
“common-defense” rule to amend a long established and fairer rule,
offers meaningless reasoning to support its decision and creates
confusion for the district courts -- all for no other reason, as
far as I can determine, than the satisfaction in finding a “buried
23
It is also odd that the majority has jettisoned the term “fraudulent
joinder”, used by all of our cases for five decades and by the treatises, for the
term “improper” joinder. Apparently the majority has concluded that it better
serves its new way of looking at an established concept. We note, however, that
“fraudulent joinder” was the term used by the Supreme Court in Chesapeake & Ohio
Ry. Co. v. Cockrell, 232 U.S. 146
(1914), which happens to be the source of
authority for the majority’s new rule.
treasure” obscured from our judicial predecessors for almost a
century.24
I
Up until today, our precedent has been rooted, established and
clear, having evolved through the writings of solid and respected
judges over many years. It asks a simple question and, eschewing
personal motives of the plaintiff, applies an objective test to
produce a fair answer: When a diverse defendant removes to federal
court on grounds of fraudulent joinder we only ask, as the majority
opinion acknowledges:
[W]hether the defendant has demonstrated that
there is no possibility of recovery by the
plaintiff against an in-state defendant, which
stated differently means that there is no
reasonable basis for the district court to
predict that the plaintiff might be able to
recover against an in-state defendant.
Smallwood v. Ill. Cent. R.R. Co., __ F.3d __, __, Maj. Op. at 5-6
(5th Cir. 2004) (en banc) (Smallwood III). Our inquiry is designed
to determine the single overarching question of whether the in-
state defendant was joined “solely to deprive the federal courts of
jurisdiction”; if our objective test determines that the plaintiff
cannot recover, then the in-state defendant is deemed fraudulently
24
In fairness to the district court and to the defendants, it should be
noted that “common defense” argument was never raised until new attorneys entered
the case on appeal. Thus, the defendants were deprived of developing any
arguments below to counter the “common defense rule” and the district court has
been denied the opportunity to express itself on the subject. Nevertheless, the
majority proceeds straightforward to accept and adopt this untimely raised
argument, contending that it is permitted to do so, because it is jurisdictional.
See fn 20 maj. Op.
16
joined and his “existence is disregarded for purposes of
determining diversity”. 16 JAMES WM. MOORE ET AL., MOORE’S FEDERAL
PRACTICE § 107.14[2][c][iv][A] (3d ed. 2004); see also Smallwood v.
Ill. Cent. R.R. Co., 342 F.3d 400, 407
(5th Cir. 2003)(Smallwood I), panel reh’g denied,352 F.3d 220
(Smallwood II), reh’g en banc granted,355 F.3d 357
(stating that “the purpose of the fraudulent
joinder doctrine ... is to prevent a plaintiff from naming a
nondiverse party as a defendant solely for the purposes of
depriving the court of jurisdiction”).
The subjective intent of the plaintiff is irrelevant; instead,
our precedent, unequivocally and without exception, has evaluated
claims of fraudulent joinder with a simple, well-understood,
objective two-prong test25 -- that is, until today. See Travis v.
Irby, 326 F.3d 644, 647
(5th Cir. 2003); Ross v. Citifinancial, Inc.,344 F.3d 458, 461
(5th Cir. 2003); Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co.,313 F.3d 305, 311-12
(5th Cir. 2002); Heritage Bank v. Redcom Lab., Inc.,250 F.3d 319, 323
(5th Cir. 2001); Griggs v. State Farm Lloyds,181 F.3d 694, 698-99
(5th Cir. 1999); Rodriguez v. Sabatino,120 F.3d 589, 591
(5th Cir. 1997); Burden v. Gen. Dynamics Corp.,60 F.3d 213, 217
(5th Cir. 1995); Cavallini v. State Farm Mut. Auto Ins. Co.,44 F.3d 256, 259
(5th Cir. 1995); Laughlin v. Prudential Ins. Co.,882 F.2d 187
, 190
25
Under our two-prong test the diverse defendant must establish either
“(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of
the plaintiff to establish a cause of action against the non-diverse party in
state court.” Travis v. Irby, 326 F.3d 644, 647
(5th Cir. 2003). Only the
second prong is before us today.
17
(5th Cir. 1989); Tedder v. F.M.C. Corp., 590 F.2d 115, 117
(5th Cir. 1979); Parks v. New York Times Co.,308 F.2d 474, 478
(5th
Cir. 1962).
Because we eschew a subjective test, our test does not seek to
determine the “truth” of exactly why the nondiverse defendant was
joined as a defendant in the lawsuit.26 Instead, the many judges
who have preceded us on this court have determined that this test
produces a practical “truth”: that is, it is reasonable and fair
to assume that a lawyer, acting in accordance with the code of
professional responsibility, will not sue someone against whom he
has no reasonable basis of recovery, unless it is for an improper
reason; on the other hand, when a lawyer sues someone against whom
he has a reasonable basis of recovery, it is unlikely that the
joinder was for an improper reason.27 In short, it is always
“improper” -- professionally and ethically -- to join any party to
a suit if there is no basis of recovery, a point that apparently
has no place in the reasoning of the majority.
Moreover, our established test is an efficient test because it
focuses only on the joinder of the nondiverse defendant and does
26
Subjective tests could often require attempts to penetrate the mind of
the plaintiff and turn removal hearings into lengthy proceedings.
27
“Rule 11 imposes a duty on attorneys to certify that they have conducted
a reasonable inquiry and have determined that any papers filed with the court are
well-grounded in fact, legally tenable, and ‘not interposed for any improper
purpose.’” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393
(1990) (quoting
FED. R. CIV. P. 11); See also MODEL RULES OF PROFESSIONAL CONDUCT Rule 3.1 (2002)
(stating that “[a] lawyer shall not bring or defend a proceeding, or assert or
controvert an issue therein, unless there is a basis in law and fact for doing
so that is not frivolous”).
18
not require us to examine the case against the diverse defendant.
The majority’s “common-defense” rule, on the other hand, requires
the district court to go one step further and examine the entirety
of the case.
II
A
According to the majority, however, this traditional analysis
is infected with error, long overlooked by scores of preceding
judges but now revealed: The majority has declared that a New
Legal Truth has been uncovered -- The Common-Defense Theory.
Although the panel’s bold proclamation of the new discovery has
been modulated by the en banc majority, and although the majority
has narrowed the open-ended sweep of the panel, the unfortunate
amendment to our traditional rule remains:
When the nonresident defendant’s showing that
there is no reasonable basis for predicting
that state law would allow recovery against
the in-state defendant equally disposes of all
defendants, there is no improper joinder of
the in-state defendant.
19
Smallwood III, __ F.3d at __, Maj. Op. at 2.28 Under this rule,
even if the diverse defendant completely satisfies our traditional
test and demonstrates that the plaintiff has no reasonable
possibility of establishing a cause of action against the in-state
defendant, the traditional rule is abrogated, and the case is
remanded, irrespective of the plaintiff’s inability to recover in
state court, if the diverse and nondiverse defendants happen to
possess the same defense.
B
The majority’s support for its creation of the common defense
rule is the turn of the century fact-specific Supreme Court case,
Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S. 146
(1914). The
pertinent language -- cherry-picked and shorn of context -- upon
which the majority relies as compelling a common-defense rule,
states:
28
Notwithstanding the objections we have with respect to the majority
opinion, we commend the majority’s efforts to define more precisely the rule’s
narrow application. The majority has restricted the rule to apply only when the
in-state defendant’s defense is identical to the one asserted by the diverse
defendant, which defense automatically and simultaneously disposes of the
plaintiff’s case against the diverse defendant as well. See Smallwood III, __
F.3d at __, Maj. Op. at 2 (stating that the defense must “equally dispose of” the
diverse defendant); id.
at __, Maj. Op. at 8 (stating that the defense must “necessarily compel[]” the same result as to the diverse defendant);id.
at __,
Maj. Op. at 10 (stating that the defense must be “equally dispositive of all
defendants”).
A somewhat more complicated application of the “common defense” rule occurs
when there are two or more defenses available to the non-diverse defendant, only
one of which is “common” to the diverse defendant. In such a case, the federal
court may nevertheless have jurisdiction if, on a motion to remand by the
plaintiff, the removing party asserts and proves only the non-common defense.
Because the defense at issue would not be “common,” the traditional rule (no
reasonable possibility of recovery in the state court against the instate
defendant) would apply – not the “common defense” rule adopted here by the
majority.
20
As no negligent act or omission personal to
the railway company was charged, and its
liability, like that of the two employees,
was, in effect, predicated upon the alleged
negligence of the latter, the showing
manifestly went to the merits of the action as
an entirety, and not to the joinder; that is
to say, it indicated that the plaintiff’s case
was ill founded as to all the defendants.
Plainly, this was not such a showing as to
engender or compel the conclusion that the two
employees were wrongfully brought into a
controversy which did not concern them. As
they admittedly were in charge of the movement
of the train, and their negligence was
apparently the principal matter in dispute,
the plaintiff had the same right, under the
laws of Kentucky, to insist upon their
presence as real defendants as upon that of
the railway company.
Cockrell, 232 U.S. at 153
. As discussed below, however, the
correct reading of Cockrell does not justify, much less compel the
creation of the “common-defense” rule.
Since Cockrell was decided in 1914, the only circuit court
decision that, previous to today, has interpreted it as proclaiming
a “common-defense” exception to the fraudulent joinder rule is the
Third Circuit’s opinion in Boyer v. Snap-On Tools Corp., 913 F.2d 108
(3d Cir. 1990).29 Equally revealing of the novelty of the
majority’s position is that neither WRIGHT & MILLER, FEDERAL PRACTICE AND
PROCEDURE nor MOORE’S FEDERAL PRACTICE -- the two most authoritative
treatises on federal practice -- cites Cockrell as relating to such
29
In Boyer, the Third Circuit relied on the same passage from Cockrell as
mandating a common defense rule. Boyer, 913 F.2d 108
. In fact, in Smallwood I, the panel relied heavily on Boyer’s interpretation of Cockrell and adopted verbatim Boyer’s version of the “common defense” rule. Smallwood I,342 F.3d at 405
.
21
a theory as “common-defense” or, for that matter, even intimates
that such a rule exists.30
C
I turn now to address the majority’s reliance on Cockrell. In
Cockrell the plaintiff sued the Railroad and the in-state engineer
and fireman who operated the train that caused the death of the
intestate. The plaintiff alleged that, although the negligence was
that of the in-state engineer and fireman in the manner that they
operated the train, the railroad -- which committed no independent
act of negligence -- was nevertheless liable for the negligent
conduct of its employees. In short, the entire suit was solely
founded (or “ill-founded”) on the conduct of the in-state
defendants; no argument could be made, as the Court put it, that
the two in-state defendants were joined to a suit in which they did
not belong. Indeed, but for their conduct the railroad would not
have been in the suit; the in-state defendants could not possibly
have been fraudulently joined because their conduct was the only
actionable conduct in the case; there was in essence but one case
and it was against the joined defendants themselves.
30
FEDERAL PRACTICE AND PROCEDURE mentions Cockrell only for the propositions
that (1) “the burden on the party seeking removal on the basis of fraudulent
joinder is a heavy one,” (14B CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND
PROCEDURE: JURISDICTION 3D § 3723 (3d ed. 1998), (2) “[r]esort to the allegations in
the notice of removal also may be necessary to show that one or more parties have
been fraudulently joined to defeat removal,” (14C FEDERAL PRACTICE AND PROCEDURE:
JURISDICTION 3D § 3734 (3d ed. 1998), and (3) “[a]llegations in the notice may be
used to show that parties have been fraudulently joined to defeat removal.” 20
CHARLES ALAN WRIGHT & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE: FEDERAL PRACTICE DESKBOOK
§ 42 (2002). MOORE’S FEDERAL PRACTICE, on the other hand, does not appear to cite
Cockrell at all.
22
With respect to the grounds of fraudulent joinder of the two
employees, the Railroad’s only basis was that the plaintiff’s
allegations against these two in-state defendants were “false and
untrue”. See Cockrell, 232 U.S. at 153
. To be sure, the
Railroad’s claim of fraudulent joinder would have required that a
trial on the merits be conducted in a removal proceeding.
That the majority misreads Cockrell as calling for
modification of our traditional rules of fraudulent joinder is
demonstrated by how neatly the traditional rules decide the case
for fraudulent joinder presented in Cockrell: We look at the
complaint and first conclude that the complaint clearly states a
claim against the fireman and the engineer for their negligent
conduct, a claim that has a possibility of prevailing under state
law; we next look at the railroad’s claim of fraudulent joinder,
that is, that the negligence claims were “false and untrue”; we
then apply our rule that disputed factual merits will not be tried
in removal proceedings; and we would have remanded. This exercise
demonstrates that the majority has vastly overstated the
implications of Cockrell. In fact, it is only by seizing language
taken out of context and ignoring the sum of this case in all of
its parts -- factual and legal -- that the majority creates its
misguided amendment to our traditional rule.
Still further, however, in virtually all respects the instant
case is distinguishable from Cockrell. First, there is no issue of
vicarious liability here and consequently the “entirety” of the
23
case against Illinois Central is not premised on the liability of
MDOT. Unlike Cockrell, Smallwood seeks to hold Illinois Central
liable for its own act of negligence -- its negligent delay in
installing safety devices. Compare with Cockrell, 232 U.S. at 153
(stating that “no negligent act or omission personal to the railway company was charged”). Consequently, unlike the Railroad in Cockrell whose liability was totally dependent upon the liability of the joined defendants (its employees), Illinois Central’s liability was not predicated on the negligence of MDOT; instead, its liability was independent of MDOT’s liability. Compare with Cockrell (stating that the railroad’s liability “was, in effect, predicated upon the negligence of the [employees]”).Id.
Therefore, the showing of conflict preemption in this case, unlike Cockrell, does not go the merits of the action in its entirety, that is, the defense is not a traverse of the allegations of the entire complaint, as in Cockrell, but only indicates that, as to MDOT, Smallwood’s claims are procedurally barred; stated differently MDOT’s defense does not attack the facts upon which the plaintiff’s case against Illinois Central is founded nor automatically absolve Illinois Central of its own alleged negligence. Compare with Cockrell,232 U.S. at 153
(stating that
“the showing manifestly went to the merits of the action as an
entirety, and not to the joinder, that is to say, it indicated that
the plaintiff’s case was ill founded as to all defendants”
(emphasis added)).
24
In sum, it is only through a strained application based on a
serious misreading that the majority inflates the significance and
relevance of Cockrell, a case that has lain basically dormant for
all of its 90-year life.
III
Not only does the majority’s misreading and misapplication of
Cockrell betray the weakness of its position, the majority fails to
come up with any compelling reasons that might otherwise support
its misadventure.
It argues that its theory is justified, because the focus in
fraudulent joinder cases should be on the joinder of the
non-diverse defendant – not on the merits of the case. This
"focus" argument is a strawman. Of course the focus should be on
the joinder, but on the joinder as a whole. Beyond uttering the
platitudinous axiom that the focus should be on the joinder, the
majority fails to offer any explanation of why the viability of the
cause of action against the joined defendant is not part of that
focus; indeed, only a few lines later, the majority states that the
joinder inquiry is whether the plaintiff can establish a cause of
action against the joined party. But, as with other inconsistent
and contradictory statements in the opinion, the common-defense
rule duels with this professed statement of the governing rule.
The majority may be unwilling to face it, but the plain and
undeniable fact is that only the traditional test focuses
exclusively on the joinder; the common-defense theory requires that
25
the court look beyond the joinder of the nondiverse defendant to
the entirety of the case and determine the defenses of the diverse
defendant as well. If the majority were serious in trumpeting a
test that focuses on the joinder, and not the entire case, it would
adhere to the traditional test.
The majority seems to forget that the overarching purpose of
improper joinder inquiry is to determine if the defendant has been
joined solely to defeat diversity. See JAMES WM. MOORE ET AL., MOORE'S
FEDERAL PRACTICE § 107.14[2][c][iv][A] (3d ed. 2004).31 The weakness
of the majority's argument is that it fails to demonstrate how the
common-defense rule serves the purpose of the improper joinder
inquiry -- that is, to determine whether the defendant has been
joined solely to defeat diversity -- any better than, or as well
as, the traditional test does. Indeed, as we have demonstrated
earlier, the traditional test produces a “practical truth”, where
the common defense theory does not even purport to do so.
The majority argues that even though Illinois Central showed
there could be no recovery against the joined defendant, it failed
to prove that the joinder of MDOT was improper and that Illinois
Central "brought no contention going to the propriety of the
joinder." Smallwood III, __ F.3d at __, Maj. Op. at 8(emphasis
31
The panel opinion expressly agreed with this statement of purpose, as
indeed does the unanimous precedent of our circuit. See Smallwood I, 342 F.3d at 407
. The majority, however, finds this statement of purpose inconvenient to
the arguments it is now making and in a circular fashion says that "the purpose
of the improper joinder inquiry is to determine whether or not the in-state
defendant was properly joined". Smallwood III, __ F.3d at __, Maj. Op. at 5.
It cites no authority for its circular statement of purpose.
26
added). It is difficult to understand how the majority can make
such a serious misstatement, unless it is somehow contending that
Illinois Central had no right to rely upon 40 years of consistent
precedent. Illinois Central relied upon our well-established
precedent and demonstrated to the satisfaction of the district
court -- a result which the majority does not challenge -- that the
plaintiff had no reasonable possibility of recovering against MDOT;
it was clearly improper to sue (and thus "join") MDOT when the
plaintiff had no hope of recovery against MDOT. Furthermore, even
in the light of Cockrell, the defense of MDOT did not go to the
merits of the entire case that the plaintiff had alleged against
Illinois Central; only a procedural defense was raised to bar
Smallwood's claims against MDOT. Thus, it is a serious
misstatement to suggest that Illinois Central "brought no
contention going to the propriety of the joinder" when Illinois
Central demonstrated that the plaintiff's claims against MDOT were
barred; this showing meant, under the law existing until today,
that MDOT was joined solely to defeat diversity jurisdiction. This
argument goes directly to the propriety of the joinder by any
standard and it is incorrect for the majority to assert otherwise.
In an attempt to provide some logic to its argument, the
majority argues that because MDOT’s successful defense also
requires the dismissal of the entire case, the joinder of MDOT is
not improper because the removed case is only a meritless case, not
a fraudulently joined case. The majority connects no further dots
27
to this argument. Left hanging, as its postulate is, it follows
that the majority argues that the lack of merit of a case
determines removability -- which it surely does not. Seizing on a
dichotomy between removable and meritless cases, the majority
simply has not sorted out the confusion of its contention: it
argues that when both defendants possess the same complete defense
the claim is meritless and the case is non-removable; yet, it
surely does not contend that the meritless case is non-removable
when the respective defenses of the diverse and nondiverse
defendants are different, and result in the dismissal of the entire
case. Thus, it is clear that the attempted rationale of equating
a completely meritless case with non-removability is meritless in
itself.
The most baseless argument of the majority is that it is only
"applying our traditional improper joinder analysis." Smallwood
III, __ F.3d at __, Maj. Op. at 9. This statement represents a
retreat into major denial of what it has so plainly done. Indeed,
it is incomprehensible how the majority would expect this statement
to be taken seriously. We have previously string-cited the
numerous cases applying our traditional fraudulent joinder
analysis, none of which -- I repeat, none of which -- has any
element of the common-defense rule that the majority tattoos on our
traditional analysis. Even the majority acknowledges that under
our traditional analysis:
28
the test for fraudulent joinder is whether the
defendant has demonstrated that there is no
possibility of recovery by the plaintiff
against an in-state defendant, which stated
differently means that there is no reasonable
basis for the district court to predict that
the plaintiff might be able to recover against
an in-state defendant.
Smallwood III, __ F.3d at __, Maj. Op. at 5-6. Thus, there is no
question but that, under the majority’s own test, MDOT was
fraudulently joined since the majority does not deny that there is
no possibility of recovering against MDOT. Because it asserts that
it is only following our traditional test, one would expect the
majority to follow its own pronouncement of the traditional
analysis. But no; notwithstanding the unequivocal words the
majority expresses in one part of the opinion, the majority then
contradicts itself and shapes a new rule: even though there is no
reasonable basis for predicting that state law would allow recovery
against MDOT, it is nevertheless properly joined and the case is
not removable, because its defense disposes of the entire case and
renders it a “meritless” case, not a “fraudulently joined” case.
This clearly is a departure from the traditional test for
fraudulent joinder and the majority’s denial of what it has done
demonstrates its ultimate lack of confidence in its novel theory.
In sum, the arguments that the majority makes to shore up its
misreading of Cockrell deflate under any careful examination and
29
make unavoidable the conclusion that the majority has been beguiled
by Smallwood's dare to this court to be modern -- 1914 style.32
IV
With fullest respect, I dissent because the majority, for no
sound legal reason that I can determine, has taken upon itself to
amend our established rules for determining diversity jurisdiction,
while admonishing that such amendments should be left to Congress.
It has done so in strange ways. It has relied on a Supreme Court
case that has been dormant to the world for close to a century and
has no relation to the facts here. The majority acknowledges our
traditional rule as controlling. It then amends the rule by adding
a "but if" clause. It then denies that it has done what it has
just done. It offers meaningless ad hoc arguments that skirmish
with its earlier pronouncements. It then sounds alarms that
32
We do note that the majority opinion contains what we consider to be
several irrelevancies, which we suppose are inserted as rhetoric to bolster its
effort to sell the “common-defense” rule: to-wit, the reference to Strawbridge
v. Curtiss and the well-pleaded complaint rule among others, which have nothing
to do with the case.
Of more importance, the majority, with no call to do so, addresses
procedure and discovery issues that arise in remand proceedings. This writing
is fairly unremarkable except that it appears to be written to underscore one
side of our precedent. It certainly has no precedential effect. These remarks
are pure dicta because no one has made an issue of this subject at any point in
these proceedings. It certainly has no relevance to deciding this case. The
further insignificance of this writing is demonstrated by the majority’s failure
to cite any authority, notwithstanding the fact that we have a long list of
precedents addressing the appropriateness of discovery in removal proceedings.
See Badon v. RJR Nabisco, Inc., 224 F.3d 382
, 389, 393-94 (5th Cir. 2000); Fields v. Pool Offshore, Inc.,182 F.3d 353, 356-57
(5th Cir. 1999); Burden v. General Dynamics Corp.,60 F.3d 213
, 217 & n.18 (5th Cir. 1995); Cavallini v. State Farm Mut. Auto Ins. Co.,44 F.3d 256, 263
(5th Cir. 1995); Burchett v. Cargill, Inc.,48 F.3d 173, 175-76
(5th Cir. 1995); Jernigan v. Ashland Oil Inc.,989 F.2d 812
, 815-16 (5th Cir. 1994); LeJeune v. Shell Oil Co.,950 F.2d 267, 271
(5th Cir. 1992); Carriere v. Sears Roebuck & Co.,893 F.2d 98, 100
(5th Cir. 1990); Keating v. Shell Chemical Co.,610 F.2d 328, 333
(5th Cir. 1980). It is this authority
that has precedential value.
30
Strawbridge v. Curtiss is under attack -- a gratuitous and phantom
irrelevancy to the matter before us. It decries a closet attack on
the well-pleaded complaint rule that seems to be a decoy. All of
this, and yet there is no explanation why our traditional rule does
not work better to serve the purpose of the fraudulent joinder
inquiry: To determine whether the in-state defendant was joined
"solely to deprive the federal courts of jurisdiction."
Even though I am baffled why the majority would produce this
aberrant writing, it is nevertheless with collegial respect that I
dissent.33
33
Judge Clement’s dissent is insightful and states a principle that is not
only consistent with our traditional rule, but is the embodiment of that rule:
In removal proceedings, it is not for the district courts to decide a contested
and undecided legal issue when the court must choose between two arguments, each
with plausible merit. In such a situation, it cannot be said that there is no
reasonable possibility of recovery in state court. The joinder, therefore, is
not improper, irrespective of what the district court may think is the correct
answer. Yet, the majority ignores her writing, never addressing whether this
case might be decided and remanded under Judge Clement’s approach, which could
render its common defense theory unnecessary for a remand of this case.
Judge Smith’s dissent raises credible issues that demonstrate the confusing
jurisdictional and collateral estoppel possibilities that the majority opinion
creates, and then refuses to address. For example, because the majority’s
explanation for distinguishing between the traditional rule and the common
defense rule is that the entire case is a meritless case – not a fraudulently
joined case – it would appear that it is necessary, under the common defense
rule, to determine the merits of the common defense in order to determine if it
is a “meritless case.” And, although the common defense analysis may ultimately
determine that the federal court has no jurisdiction to entertain the case, the
federal court surely would have had jurisdiction to determine its own
jurisdiction, and the finding of a meritless case would have been made when the
federal court was acting within its jurisdiction. As such, the federal court
decision may, on remand to the state court, constitute a binding finding in the
state case.
The majority would act more responsibly by confronting and attempting to
resolve the confusion that arises from its aberrant and troublesome decision.
Its silence is truly regrettable and will be costly to the administration of
justice.
31
JERRY E. SMITH, Circuit Judge, with whom JONES and BARKSDALE, Circuit
Judges, join, dissenting:
“Courts must be particularly circumspect in reconsidering de-
cisions interpreting statutes.” Bhandari v. First Nat’l Bank of
Commerce, 829 F.2d 1343, 1353
(5th Cir. 1987) (en banc) (Higgin- botham, J., concurring), vacated,492 U.S. 901
(1989). “As an in-
ferior court we must not allow our version of a ‘correct’ result to
deceive us into semantic games of reformulation and hair splitting
in order to escape the force of a fairly resolved issue.” Id. at
1352 (Higginbotham, J., concurring). Contrary to this well-estab-
lished tenet of stare decisis, however, the majority, in an opinion
by Judge Higginbotham that reflects lowest-common-denominator rea-
soning, has unnecessarily created a mess in this circuit’s removal
jurisprudence. Most significantly, in an offering worthy of the
Oracle at Delphi, the majority, in an exercise of judicial
activism, has made a quagmire out of what had been an orderly and
fair process for determining fraudulent joinder.
In so doing, and by dusting off a forgotten decision of the
Supreme Court, the majority has introduced needless friction and
conflict into the federal-state rubric for determining the proper
forum for civil diversity actions. And finally, in a remarkable
showing of euphemistic chutzpah, the majority has renamed “fraudu-
lent joinder” as “improper joinder,” upsetting decades of nomen-
32
clature without apparent reason. Agreeing with every word of Judge
Jolly’s compelling dissent, I add a few comments.
I.
A.
The majority insists that “the focus of the inquiry must be on
the joinder, not the merits of the plaintiff’s case.” As Judge
Jolly cogently shows, however, it is the majority’s new-fangled
common-defense theory that expands inquiry into the merits by, as
Judge Jolly puts it, “requir[ing] that the court look beyond the
joinder of the nondiverse defendant to the entirety of the case and
determine the defenses of the diverse defendant as well.”
The majority pretends that it avoids inquiry into the merits
when making the determination of fraudulent-joinder-now-to-be-
called-improper-joinder. The fatal flaw in this exercise is that
under the majority’s construction, it is impossible to decide
fraudulent-joinder-now-to-be-called-improper-joinder without making
decisions on the merits.
Because the district court has jurisdiction to decide its own
jurisdiction, that court has not only the capacity but the duty, in
deciding the issue of fraudulent-joinder-now-to-be-called-improper-
joinder, to address any merits questions that are made necessary by
the majority’s scheme. The decision on any such merits issue then
logically becomes a holding, because it is necessary to the result
33
(i.e., remand) and therefore (again, logically) should be binding
on the state court to which the action is returned.
If the majority were to respond (which it will not, see
infra), it undoubtedly would counter that it is not deciding the
merits at allSSindeed, that it is prohibited from doing so, be-
cause, given that the ultimate result is that it is without jur-
isdiction over the merits, its power to decide is limited to deter-
mining its own jurisdiction. In the majority’s words, “[a]ttempt-
ing to proceed beyond [a] summary process carries a heavy risk of
moving the court beyond jurisdiction and into a resolution of the
merits.”
Overlooked in this reasoning is that it is at times not only
desirable but necessary for a court to examine at least a portion
of the merits as a precursor to deciding jurisdiction. “[A] feder-
al court always has jurisdiction to determine its own jurisdiction.
In order to make that determination, it was necessary for the
[court of appeals] to address the merits.” United States v. Ruiz,
536 U.S. 622, 628
(2002).
B.
The problem with imposing a rule by which the district court
must “address the merits” is that the state court that receives the
remand will need to decide what to do with that decision. In the
instant case, the majority blesses “a summary inquiry . . . to
identify the presence of discrete and undisputed facts that would
34
preclude plaintiff’s recovery against the in-state defendant.”
Where such preclusion is found, it “necessarily compels the same
result for the nonresident defendant, [so] there is no improper
joinder; there is only a lawsuit lacking in merit.” In other
words, as the majority further explains, “the allegation of
improper joinder is actually an attack on the merits of plaintiff’s
case . . . .”
The majority makes no effort to examine the consequences of
its own explanation. The majority imposes a process whereby the
federal district court is required to decide merits issues, even to
the point of declaring that the lawsuit is entirely “lacking in
merit.” One would think that once a court of competent jurisdic-
tion has made such a “decision” that a case is wholly without
merit, that case is at an end, and no other courtSSstate or
federalSSmay reexamine it.
What, then, under the majority’s formulation, is the state
court supposed to do on remand? One option would be for the state
court to dismiss the case ministerially and without making further
inquiry into the correctness of the federal district court’s deci-
sion.34 But that would be a process of unnecessary formalism and,
in any event, is not what the majority apparently contemplates.
34
See, e.g., FDIC v. Meyerland Co. (In re Meyerland Co.), 960 F.2d 512
, 520 (5th Cir. 1992) (en banc) (requiring court that receives an action
to take it as it finds it and enter prescribed judgment without making
independent evaluation of the merits).
35
The majority gives no hint that the state court will be in any
way bound by the federal district court’s pronouncement that, as a
matter of merits and substance, the lawsuit is wholly lacking in
merit. Very much to the contrary, under today’s logic the state
court will be free to disagree, to resurrect the case, and ulti-
mately to award the plaintiff relief against the in-state and out-
of-state defendants as well. In other words, the state court will
be free to ignore whatever merits conclusions the federal court has
reached.
II.
The majority thus unnecessarily and unwittingly creates fric-
tion between state and federal jurisdictions. The majority’s new
paradigm eviscerates what the majority venerates as the “principles
of comity and federalism.” By thinly-veiled implication, the
majority declares that the federal court is incompetent to make a
binding pronouncement on the merits issues as to which the majority
insists that same federal court is obliged to reach non-binding
conclusions.
This contrivance is at war with the collegial state-federal
relations that the majority pretends to honor. The majority’s
novel plan invites parties to take one tack in federal court and
another once remand has been achieved. The majority’s reasoning
invites disparate interpretations of the same issues of law by
state and federal forums. It promotes manipulation and complica-
36
tion of a process that, until now, has been stable, predictable,
and fair.
III.
By redesignating “fraudulent joinder” as “improper joinder,”
the majority has shown its agility in innovative nomenclature.
What should the majority call its new breed of merits decisions
that are not binding holdings? Perhaps they are “musings,” or
“asides” or “ruminations,” or “advisory opinions” or dicta, or even
“preliminary predictions”SSsomething less than a holding but more
than an idle thought. They are, in any event, a breed apart. They
are rulings the majority says are necessary to the decision on
fraudulent-joinder-now-to-be-called-improper-joinder, but, once
these rulings or ruminations are issued, they disappear into the
ether, after remand, as if they had never even been expressed.
They are simultaneously indispensable and expendable, at once both
necessary and superfluous.
IV.
The majority’s newly-concocted “common-defense” rule, raised
by plaintiff for the first time on appeal, will cause resourceful
defense counsel, in the vigorous defense of their clients’ inter-
ests, to alter the way in which they plead defenses. The filing of
defenses will be timed not in a way designed to ensure “the just,
speedy, and inexpensive determination of [removed] action[s],” FED.
37
R. CIV. P. 1, but instead in such a manner as to avoid imposition
of the majority’s common-defense mechanism. Defenses will be de-
scribed and fashioned so that they cannot be deemed to apply to
diverse and non-diverse defendants alike. Such manipulation and
contrivance, exacerbating the prospect of varying state-federal
adjudications I have described above, can only undermine respect
for the courts.
V.
Entirely overlooked in the majority’s analysis is any concern
for “the traditional values of stare decisis.” Bhandari v. First
Nat’l Bank of Commerce, 829 F.2d 1343, 1352
(5th Cir. 1987) (en banc) (Higginbotham, J., concurring), vacated,492 U.S. 901
(1989). This principle is especially important where, as here, we are in- terpreting statutes instead of the Constitution. “Courts must be particularly circumspect in reconsidering decisions interpreting statutes.” Id. at 1353 (Higginbotham, J., concurring). “[I]f only a question of statutory construction were involved, we would not be prepared to abandon a doctrine so widely applied throughout nearly a century.” Erie R.R. v. Tompkins,304 U.S. 64, 77-78
(1938)
(Brandeis, J.).
“[A]ny detours from the straight path of stare decisis in our
past have occurred for articulable reasons, and only when the Court
has felt obliged to bring its opinions into agreement with experi-
38
ence and with facts newly ascertained.” Vasquez v. Hillery, 474 U.S. 254, 266
(1986) (internal quotation and citation omitted).
Here, the majority offers absolutely no reason why there is a prob-
lem, much less one that so badly needs to be fixed that it can
trample stare decisis to achieve a questionable and bizarre result.
We should not break with a well-established rule of law unless
it is “outdated, ill-founded, unworkable, or otherwise vulnerable
to serious reconsideration.” Id.
“[T]here is a point at which the orderly accommodations of law-making and law-interpreting demands that we resist reconsideration because Congress may well have ac- quiesced in prior statutory interpretations.” Bhandari,829 F.2d at 1352
(Higginbotham, J., concurring). Here, there is not only no
good reason to enact a change, there is no reason at all, except
the majority’s ipse dixit.
It would be bad enough that the majority effects a sea change
in the heretofore orderly world of removal jurisprudence. It is
worse still that the majority makes no attempt to offer compelling
reason for its revolution. It appears, in fact, that the majority
can identify no reason, for it provides no answerSSnot even a
wordSSin response to the cogent points made by Judge Jolly in dis-
sent, to Judge Clement’s resourceful concurrence, or to the issues
I have raised. The majority’s silence harms the collegial judicial
process by leaving the reader to wonder whether the majority has
even examined the objections that have been raised or, instead, is
39
intransigent because of fear of losing its majority status. It
would be far better for the two sides to join issue, despite their
differences, in the interest of frankly fleshing out these impor-
tant questions. Perhaps the majority merely has no answer to the
deficiencies in its reasoning that the dissents have identified.
VI.
In sum, the majority is wrong for many reasons, not the least
of which is that its pronouncement that a “defense [that] disposes
of the entire case and renders it a ‘meritless case’” logically
should, if true, completely end the litigation, not prolong it in
another forum. The proper answer, instead, is that we can easily
avoid the potential state-federal conflict, not to mention the
inefficiency imposed by the majority’s new scheme, which, as Judge
Jolly notes, will require mini-trials that turn simple proceedings
into ordeals.
As Judge Jolly lucidly explains, “the [majority’s] common-
defense theory requires that the court look beyond the joinder of
the nondiverse defendant to the entirely of the case and determine
the defenses of the diverse defendant as well. If the majority
were serious in trumpeting a test that focuses on the joinder, and
not the entire case, it would adhere to the traditional test.”
That traditional test avoids all the pitfalls I have explained, and
we are left with no explanation of why the majority is so deter-
40
mined to abandon it. Because our settled jurisprudence on fraudu-
lent joinder should be left alone, I respectfully dissent.
41
EDITH BROWN CLEMENT, Circuit Judge, Dissenting, Concurring in Judgment only:
For the reasons cited in Judge Jolly’s dissent, I respectfully dissent from Part III of the
majority opinion. Cockrell does not intimate the common-defense rule that the majority sets forth.
Nevertheless, despite the majority’s faulty common-defense rationale, the majority is correct in
concluding that ICR do es not prevail on its fraudulent-joinder claim. ICR fails to show that it is
unreasonable to construe FRSA as not applying to Smallwood’s state-law claim of negligence against
MDOT. ICR attempts to prove fraudulent joinder by showing an “inability of the plaintiff to
establish a cause of action against the non-diverse party in state court.” See Travis v. Irby, 326 F.3d 644, 647
(5th Cir. 2003). ICR argues that Smallwood is unable to establish a cause of action against MDOT because under FRSA, the affirmative defense of preemption applies to Smallwood’s claim of negligence in delaying installation of warning devices. To support its preemption claim, ICR cites decisions in other circuits that suggest that where federal funds were used to install railroad crossing devices, FRSA preempts claims of negligence in the delay of installation. See Bock v. St. Louis Ry. Co.,181 F.3d 920
, 923-24 (8th Cir. 1999); Armijo v. Atchinson, Topeka & Santa Fe Ry. Co.,87 F.3d 1188, 1192
(10th Cir. 1996)).
Smallwood argues that FRSA does not preempt her negligence claim against MDOT. She
first points out that this Circuit has not yet ruled on whether FRSA preempts claims of negligence in
the delay of installation. Smallwood next points out that in applying the preemption doctrine under
FRSA, this Court has stated that it “follow[s] the Supreme Court in eschewing broad categories such
as ‘railroad safety,’ focusing instead on the specific subject matter contained in the federal
regulation.” See Frank v. Delta Airlines Inc., 314 F.3d 195, 200
(5th Cir. 2002) (internal quotations
omitted). This Court has further stated that “‘FRSA preemption is even more disfavored than
42
preemption generally.’” United Transp. Union v. Foster, 205 F.3d 851, 860
(5th Cir. 2000) (quoting Rushing v. Kansas City S. Ry. Co.,185 F.3d 496, 515
(5th Cir.1999)). Against this backdrop of Fifth Circuit precedent, Smallwood observes that the portion of FRSA that ICR cites as preemptive does not actually set forth guidelines regarding the time within which warning devices must be installed.35 Lastly, Smallwood directs this Court to a federal district court decision that completely supports her position, Powers v. CSX Transportation Inc.,97 F. Supp. 2d 1297
(S.D. Ala. 2000). There, the federal district court held that FRSA does not preempt state-law claims of negligence in the delay of installing warning devices.Id. at 1305-09
. The court opined that preemption of the state-law claim
would be contrary to the purpose of FRSA, reasoning:
[I]f [FRSA] were construed to preempt negligent delay claims, railroads could
indefinitely delay installation of additional warning devices approved by [a federal
agency] with—as in this case—catastrophic effects on the very people Congress
intended to protect. . . . [T]he Court cannot fathom any set of circumstances under
which such a result could be consonant with Congress’ purpose to “promote safety
. . . and to reduce railroad-related accidents.”
Id.
at 1305-06 (quoting49 U.S.C. § 20101
). According to Powers, FRSA does not substantially subsume the subject matter of timely installation.Id.
Smallwood thus cites persuasive legal
authority, in an area of law that this Circuit has not yet decided, to support her argument that federal
preemption does not apply.
In the context of fraudulent joinder, this Court has not opined how courts should construe a
federal affirmative defense to a state-law claim where the federal law is not clearly defined. This
Court has, however, addressed the standard for construing unclear state law. Beginning with Bobby
35
FRSA does address a timeline for an accelerated project, but such a
project is not at issue here. See 23 C.F.R. § 646.218
.
43
Jones Garden Apartments, Inc. v. Suleski, 391 F.2d 172, 176
(5th Cir. 1968), this Court stated the
standard as follows:
[T]he question is whether there is arguably a reasonable basis for predicting that the
state law might impose liability on the facts involved. If that possibility exists, a good
faith assertion of such an expectancy in a state court is not a sham, is not colorable
and is not fraudulent in fact or in law.
Recently, in Travis v. Irby, this Court thoroughly discussed the issue and concluded that a defendant
must demonstrate the absence of a “reasonable basis for predicting that the state law might impose
liability on the facts involved . . . .” 326 F.3d 644, 647-48
(5th Cir. 2003) (quoting Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co.,313 F.3d 305, 312
(5th Cir. 2002)); accord Griggs v. State Farm Lloyds,181 F.3d 694, 699
(5th Cir. 1999) (“[W]e must determine whether there is any
reasonable basis for predicting that [the plaintiff] might be able to establish [the defendant’s] liability
on the pleaded claims in state court.”). The principle underlying this Court’s construction of
uncertain state law is, in the words of the majority, to discover “whether the defendant has
demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant . .
. .” Smallwood v. Ill. Cent. R.R. Co., __ F.3d __, __, Maj. Op. at 6 (5th Cir. 2004).
This principle—that a defendant must demonstrate that there is no possibility of recovery by
the plaintiff—suggests that courts should construe an unclear federal affirmative defense to a state-
law claim in the plaintiff’s favor, just as the principle requires courts to construe state law in favor
of the plaintiff. To prevail on a fraudulent-joinder claim, then, a defendant must show that no
reasonable basis exists for construing a federal affirmative defense as not applying. By showing that
the affirmative defense must apply, a defendant will have shown that the “joinder is without right and
made in bad faith.” See Cockrell, 232 U.S. at 152
. In contrast, where the affirmative defense can
44
reasonably be interpreted as not applying, the defendant has not shown that the joinder was made in
bad faith. Thus, a joinder does not appear to be “made in bad faith” if there is at least a non-frivolous,
reasonable basis for construing the federal affirmative defense so that it does not apply to the state-
law cause of action.
This rule implies that where an issue of whether a federal affirmative defense applies is res
nova, and there is a non-frivolous, reasonable basis for construing the federal affirmative defense as
not applying, a defendant cannot show fraudulent joinder. Under those circumstances, the resolution
of that res nova issue is improper. Although a federal court can decide such a res nova federal
question when it is properly before the court, the court should refrain from deciding it in the
fraudulent-joinder context if a reasonable, non-frivolous basis exists for interpreting the issue in favor
of the plaintiff: the reasonable basis is sufficient to determine the ultimate jurisdictional question of
fraudulent joinder.
Applying this principle to the instant case reveals that ICR must show that a non-frivolous,
reasonable basis does not exist for construing FRSA as not preempting Smallwood’s state-law claim
of negligence in the delay of installation. As stated above, ICR attempts to satisfy this burden by
citing persuasive authority from the Eighth and Tenth Circuits, Bock and Armijo, which hold that
FRSA preempts that claim. In the face of this authority, it is unquestionable that ICR has raised a
strong argument for construing FRSA as applying. But the strength of ICR’s argument falls short
of showing that it is unreasonable to construe FRSA as not applying. Given that (1) this Court
construes narrowly the doctrine of federal preemption (especially with respect to FRSA), (2) FRSA
does not specify a time period for installing warning devices, and most importantly, (3) persuasive
45
authority has held that FRSA does not preempt the same state-law claim, a non-frivolous, reasonable
basis does exist for Smallwood’s assertion that FRSA does not preempt her state-law claim.
It should be emphasized that this conclusion does not imply that FRSA does not preempt
Smallwood’s negligence claim. The fraudulent-joinder context of the preemption issue before this
Court only requires that this Court determine whether Smallwood argued in bad faith that FRSA does
not apply. Because a non-frivolous, reasonable basis exists supporting Smallwood’s argument, the
district court should not have reached that preemption issue to determine jurisdiction. ICR has not
shown fraudulent joinder. Remand is appropriate.
46