385 F.3d 568 | 5th Cir. | 2004
Lead Opinion
Today we decide a narrow but not unimportant question regarding diversity jurisdiction in federal courts and the application of the doctrine of “improper joinder.”
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
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”).
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.
A panel of this court concluded that Illinois Central had not carried its burden of demonstrating that the joinder of MDOT was 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 eases 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.”
*573 “[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 plaintiffs case.
Given this focus, we have recognized two ways to establish improper join-der: “(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.”
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.
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 plaintiffs recovery against the in
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 bane 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.
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 plaintiffs negligence charges against the
The Supreme Court thus made clear that the burden on the removing party is to prove that the joinder of the instate parties was improper—that is, to show that sham defendants were added to defeat jurisdiction. A showing that the plaintiffs 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 dis-positive 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 in the Federal courts of the protection of their rights in those tribunals.”
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 plaintiffs case, rather than to the joinder.
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
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 instate 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. Curtiss
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 eongressionally 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. 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
. 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.
. 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.
. 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 Small-wood’s case in its entirety.
. 28 U.S.C. § 1441(b) (emphasis added).
. 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.”
. 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, 27 S.Ct. 184, 51 L.Ed. 430 (1907)).
. Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir.2003).
. Id. at 648.
. 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).
. See McKee v. Kansas City S. Ry. Co., 358 F.3d 329, 334 (5th Cir.2004); see also Parles 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”).
. Badon, 224 F.3d at 389 n. 10.
. 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.
. See, e.g., Griggs v. State Farm Lloyds, 181 F.3d 694, 701 (5th Cir.1999).
. 232 U.S. 146, 153, 34 S.Ct. 278, 58 L.Ed. 544 (1914).
. Id. at 151, 34 S.Ct. 278.
. Id. at 152, 34 S.Ct. 278.
. Id. at 153, 34 S.Ct. 278.
. Id.
. Alabama Great S. Ry. Co. v. Thompson, 200 U.S. 206, 218, 26 S.Ct. 161, 50 L.Ed. 441 (1906).
. This argument was not presented to the able district judge. Going as it does to our subject-matter jurisdiction, we must decide it.
. 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).
. 7 U.S. (3 Cranch.) 267, 2 L.Ed. 435 (1806).
Dissenting Opinion
with whom EDITH H. JONES, JERRY E. SMITH, RHESA HAWKINS BARKSDALE, EMILIO M. GARZA, EDITH BROWN 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 ease.
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:
[Wjhether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an instate 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., 385 F.3d 568, 573, Maj. Op. at 573 (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
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 test
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.
Moreover, our established test is an efficient test because it focuses only on the joinder of the nondiverse defendant and does 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.
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.
Smallwood III, 385 F.3d at 571, Maj. Op. at 571.
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, 34 S.Ct. 278, 58 L.Ed. 544 (1914). The pertinent language — cherry-picked and shorn of context — upon which the majority relies as compelling a common-defense rule, states:
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 plaintiffs 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*580 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, 34 S.Ct. 278. 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).
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 instate defendants; no argument could be made, as the Court put it, that the two instate 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 ease and it was against the joined defendants themselves.
With respect to the grounds of fraudulent joinder of the two employees, the Railroad’s only basis was that the plaintiffs allegations against these two in-state defendants were “false and untrue”. See Cockrell, 232 U.S. at 153, 34 S.Ct. 278. 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
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 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, 34 S.Ct. 278 (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 plaintiffs case against Illinois Central is founded nor automatically absolve Illinois Central of its own alleged negligence. Compare with Cockrell, 232 U.S. at 153, 34 S.Ct. 278 (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 plaintiffs case was ill founded as to all defendants” (emphasis added)).
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
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 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. Mooee et al, MooRe’s FedERAL PRACTICE § 107.14[2][c][iv][A] (3d ed.2004).
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, 385 F.3d at 574, Maj. Op. at 574 (emphasis 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 .plaintiffs 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
The most baseless argument of the majority is that it is only “applying our traditional improper joinder analysis.” Smallwood III, 385 F.3d at 574, Maj. Op. at 574. 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:
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 instate defendant.
Smallwood III, 385 F.3d at 573, Maj. Op. at 573. 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 rale: 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 make unavoidable the conclusion that the majority has been beguiled by Small-wood’s dare to this court to be modern— 1914 style.
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 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.
. 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, 34 S.Ct. 278, 58 L.Ed. 544 (1914), which happens to be the source of authority for the majority's new rule.
. 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.
. 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.
. Subjective tests could often require attempts to penetrate the mind of the plaintiff and turn removal hearings into lengthy proceedings.
. "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, 110 S.Ct. 2447, 110 L.Ed.2d 359 (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”).
. 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, 385 F.3d at 571, Maj. Op. at 571 (stating that the defense must "equally dispose of" the diverse defendant); id. at 574-75, Maj. Op. at 574-75 (stating that the defense must "necessarily compelQ” the same result as to the diverse defendant); id. at 575, Maj. Op. at 575 (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.
. 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.
. 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) “[rjesort 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) "[ajllegations 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.
. 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, 385 F.3d at 573, Maj. Op. at 573. It cites no authority for its circular statement of purpose.
. 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, call to do so, addresses procedure and discovery issues that arise in remand proceedings. This writing is fairly unremarkable except
. 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 merit-less 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
Dissenting Opinion
with whom EDITH H. JONES and RHESA HAWKINS BARKSDALE, Circuit Judges, join, dissenting:
“Courts must be particularly circumspect in reconsidering decisions interpreting statutes.” Bhandan v. First Nat'l Bank of Commerce, 829 F.2d 1343, 1353 (5th Cir.1987) (en banc) (Higginbotham, J., concurring), vacated, 492 U.S. 901, 109 S.Ct. 3207, 106 L.Ed.2d 558 (1989). “As an inferior 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-established tenet of stare deci-sis, however, the majority, in an opinion by Judge Higginbotham that reflects lowest-common-denominator reasoning, 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 “fraudulent joinder” as “improper joinder,” upsetting decades of nomenclature 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 plaintiffs 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, “requiring] 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-ealled-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 (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 all — indeed, that it is prohibited from doing so, because, given that the ultimate result is that it is without jurisdiction over the merits, its power to decide is limited to
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] federal 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, 122 S.Ct. 2450, 153 L.Ed.2d 586 (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 preclude plaintiffs 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 plaintiffs 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 jurisdiction has made such á “decision” that a case is wholly without merit, that case is at an end, and no other court — state or federal — may 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 decision.
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 ultimately to award the plaintiff relief against the instate 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 friction 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.
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” — something 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’ interests, 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.R.Civ.P. 1, but instead in such a manner as to avoid imposition of the majority’s common-defense mechanism. Defenses will be described 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 1843, 1352 (5th Cir.1987) (en banc) (Higginbotham, J., concurring), vacated, 492 U.S. 901, 109 S.Ct. 3207, 106 L.Ed.2d 558 (1989). This principle is especially important where, as here, we are interpreting 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, 58 S.Ct. 817, 82 L.Ed. 1188 (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 experience and with facts newly ascertained.” Vasquez v. Hillary, 474 U.S. 254, 266, 106 S.Ct. 617, 88 L.Ed.2d 598 (1986) (internal quotation and citation omitted). Here, the majority offers absolutely no reason why there is a problem, much less one that so badly needs to be fixed that it can trample stare decisis to achieve a questionable and bizarre result.
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 answer — not even a word — in response to the cogent points made by Judge Jolly in dissent, 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 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 important 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 join-der 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 determined to abandon it. Because our settled jurisprudence on fraudulent joinder should be left alone, I respectfully dissent.
. 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).
Concurrence in Part
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 does not prevail on its fraudulent-joinder claim. ICR fails to show that it is treasonable 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
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 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.
[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 (quoting 49 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 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*590 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., 385 F.3d 568, 573, Maj. Op. at 573 (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 plaintiffs 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, 34 S.Ct. 278. In contrast, where the affirmative defense can 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 un reasonable 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 im
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 Small-wood’s argument, the district court should not have reached that preemption issue to determine jurisdiction. ICR has not shown fraudulent joinder. Remand is appropriate.
. 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.