Should the Eighth Circuit Recognize Procedural Misjoinder?

Article excerpt

I. INTRODUCTION

In the Eighth Circuit and elsewhere, traditional fraudulent joinder occurs when a plaintiff sues a diverse defendant in state court and joins a nondiverse defendant even though the plaintiff has no reasonable basis for a claim against the nondiverse defendant. (1) For example, consider a situation in which a plaintiff brings an action for breach of contract in state court against an out-of-state insurance company and, for the sole purpose of defeating diversity jurisdiction, joins a state resident, such as his local insurance agent, against whom the plaintiff has no true claim. (2) In such circumstances, the insurance agent is said to have been fraudulently joined, and the insurance company may remove the action on diversity grounds and seek to have the unviable claim against the jurisdictional spoiler (the agent) dismissed in order to preserve jurisdiction.

Conversely, procedural or fraudulent misjoinder typically occurs when a plaintiff sues a diverse defendant in state court and joins a nondiverse defendant against which the plaintiff has a reasonable basis for a claim, but that claim has little or nothing to do with the plaintiff's claim against the diverse defendant. (3) Imagine, for example, a plaintiff who brings a common law action for product liability in state court against a nonresident manufacturer and in the same action joins a valid--but completely unrelated--state law claim for the collection of a debt against his next-door neighbor, a resident of the forum state. Prior to an amendment to the removal statute passed by Congress in 1990, the joined defendants would have been authorized to immediately remove the case to federal court on the basis of diversity jurisdiction and ask the district court to sever the unrelated claims. (4) Following the congressional amendment, some defendants in such circumstances found themselves, to their presumably undying annoyance, joined at the hip with what they believed to be an unrelated claim against another defendant and deprived of a previously available express procedural mechanism in federal court for separating the state law claims, so as to support diversity jurisdiction over the action.

To address this situation, many courts, led by the Eleventh Circuit in Tapscott v. MS Dealer Service Corp., (5) have relied upon a judicially created solution known as "procedural misjoinder" or "fraudulent misjoinder." (6) Under this emerging and somewhat controversial doctrine, as articulated in Tapscott, a federal district court remains empowered to separate misjoined state law claims while keeping the claim with diversity and remanding the other, if it concludes that the plaintiff's attempt to join them in a single action was "so egregious as to constitute fraudulent joinder." (7)

This article respectfully suggests that if the Eighth Circuit is ever presented with the question, it should be inclined to resist the temptation to adopt the judicially expedient doctrine of procedural misjoinder. (8) Rather, the Eighth Circuit should consider the intent of Congress in eliminating such claims from those authorized to be removed under diversity jurisdiction and instead rely upon the state court in which the action was originally filed to separate unrelated state claims. Once unrelated state law claims have been unlinked in the state proceedings, a diverse defendant, shed of the jurisdictional spoiler, may then seek to remove the action to federal court on diversity grounds.

II. REMOVAL OF A STATE ACTION TO FEDERAL COURT ON THE BASIS OF DIVERSITY JURISDICTION

"Federal courts are courts of limited jurisdiction." (9) Federal district courts are authorized to assume jurisdiction over a case only if granted authority by both Article III of the United States Constitution and an authorizing federal statute. (10) As the United States Supreme Court has explained, "[j]urisdiction of the lower federal courts is further limited to those subjects encompassed within a statutory grant of jurisdiction. …