Civil Procedure - Removal Jurisdiction - Fifth Circuit Establishes "Common Defense" Exception to Fraudulent Joinder Doctrine

Harvard Law Review, January 2005 | Go to article overview

Civil Procedure - Removal Jurisdiction - Fifth Circuit Establishes "Common Defense" Exception to Fraudulent Joinder Doctrine


CIVIL PROCEDURE--REMOVAL JURISDICTION--FIFTH CIRCUIT ESTABLISHES "COMMON DEFENSE" EXCEPTION TO FRAUDULENT JOINDER DOCTRINE.--Smallwood v. Illinois Central Railroad Co. (Smallwood II), 385 F.3d 568 (5th Cir. 2004) (en banc).

Although a lack of complete diversity between adverse parties usually precludes the removal of a state law claim from state court to federal court, (1) federal courts have nonetheless assumed jurisdiction over such cases pursuant to the doctrine of fraudulent joinder. Under this exception, federal courts permit removal when there is no "reasonable basis" upon which the plaintiff can recover against the nondiverse defendants; (2) such removal is deemed proper because the plaintiff presumably has joined the nondiverse defendants solely to defeat diversity jurisdiction. Recently, however, in Smallwood v. Illinois Central Railroad Co. (3) (Smallwood II), the Fifth Circuit, sitting en banc, followed the lead of the Third Circuit in creating a "common defense" exception to the reasonable basis test. (4) Under this rule, removal of a state claim is impermissible when the legal theory upon which the defendant's claim of fraudulent joinder is predicated is a "common defense" that equally disposes of all defendants to the suit. The Fifth Circuit's decision relies upon two incompatible approaches to fraudulent joinder, combining the "common defense" exception's focus on the intent of the plaintiff with the use of a proxy rule. As such, this approach may prevent courts from effectively implementing the doctrine of fraudulent joinder.

Mississippi citizen Kelli Smallwood sustained injuries when a train struck her automobile at a highway crossing in Florence, Mississippi. (5) She filed a negligence suit in state court against the Mississippi Department of Transportation (MDOT), which had installed flashing warning lights at the crossing, and the train operator Illinois Central, which Smallwood claimed had been "authorized and directed" by MDOT to replace the warning signal with an automatic gate but had failed to do so. (6) Though the parties lacked complete diversity, (7) Illinois Central filed a motion to remove the case to federal court under the doctrine of fraudulent joinder. (8) To effectuate removal, Illinois Central claimed that the Federal Railroad Safety Act (9) (FRSA) effectively preempted Smallwood's state law claim against MDOT. (10) The district court agreed, finding that Smallwood had "no possibility" of prevailing on her state negligence claim against MDOT and that, therefore, the in-state defendant had been fraudulently joined. (11) The court accepted jurisdiction and dismissed MDOT from the suit. (12) Then, bound by the "law of the case" that FRSA preempted Smallwood's claims, the trial judge granted Illinois Central's motion for summary judgment. (13)

A three-judge panel of the Fifth Circuit vacated both the district court's dismissal of MDOT and its grant of summary judgment as to Illinois Central, and ordered the district judge to remand the case to state court. (14) Writing for the unanimous panel, Judge Higginbotham looked to Chesapeake & Ohio Railway Co. v. Cockrell, (15) a 1914 Supreme Court case in which a plaintiff injured in a train wreck sued two railroad employees directly and the employer railroad company through respondeat superior. The diverse company argued that the plaintiff's claim against the nondiverse train operators was fraudulent because the charges were "each and all false and untrue." (16) The Cockrell Court found that the railway company in that case had made an argument against the plaintiff's case as a whole, not against the joinder of the employees, and thus the Court affirmed that removal of the case would have been improper. (17) Therefore, Judge Higginbotham argued, allowing Illinois Central to predicate its fraudulent joinder claim on a common preemption defense would be "contrary to the Supreme Court's century-old command ... that the fraudulent joinder allegations be directed toward the joinder, not to 'the merits of the action as an entirety. …

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