Fifth Circuit Rejects Eleventh Circuit Fraudulent Misjoinder Doctrine, Again

Ten years ago, a class of Louisiana medical providers (the “Class”) sued multiple Louisiana Preferred Provider Organizations (the “PPOs”). This fall the case returned to the Fifth Circuit Court of Appeals for the third time after being remanded to federal court then back to state court and federal court again. Of the two remaining defendants one (Med-Comp) had its principal place of business in Louisiana. In order to keep the case in federal court, the other defendant (Homeland) claims Med-Comp had been improperly joined under the fraudulent misjoinder doctrine. 

The Fifth Circuit rejected that argument noting the doctrine has only been adopted in the Eleventh Circuit, see Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353, 1360 (11th Cir. 1996), abrogated on other grounds by Cohen v. Office Depot, Inc., 204 F.3d 1069 (11th Cir. 2000), and a number of district courts

The Fifth Circuit used this case to expound on its reasons for not adopting the improper misjoinder for sustaining jurisdiction, preferring that procedural and joinder rule issues be first resolved in state court as they cannot be addressed in federal court until after the federal court has jurisdiction. In doing so it is clear that removal can be allowed in the Fifth Circuit where there is not complete diversity among parties suing and those being sued.  Importantly that analysis focuses upon the viability of the claims against a non diverse defendant.  The upshot that has seemed to sometimes confound district judges presumes also that on a remand motion and its defense the district court has jurisdiction to determine the viability of claims against the non-diverse defendant, which is not an exception to the removal and jurisdiction statutes. It is as this Court says that fraudulent or artful pleading that obscures the lack of any such claim should not be approved.   

POINT:  practically, in this Circuit it is important to resolve procedural issues before removal or to be as certain as possible before removal that your summary judgment type evidence will conclusively demonstrate that there is zero chance of recovery against the non-diverse defendant. If there is only one small claim that exists the rule in the Fifth Circuit is that the entire case must be remanded.

Here all the result obtained in years and years of litigation was to send the case back to state court. Further as there was a settlement involved in part of the case early on, when that is done, proper consideration needs to be given to the impact on the further proceedings in the event a removal opportunity arises. An ounce of prevention is here, too, worth a pound of cure.

Read the full opinion here: 

The attorneys at Webb Sanders & Williams can assist you or your company in filing your suit in either state or federal court.