Egad — yet another post on removal!
We’ll try to keep it mercifully brief.
In In re Avandia Marketing, Sales Practices and Prods. Liab. Litig., [That caption about covers the waterfront, doesn’t it?] MDL No. 1871, 2009 U.S. Dist. LEXIS 51558 (E.D. Pa. June 18, 2009), GlaxoSmithKline removed two “Avandia supposedly increases the risk of heart attack” cases from state court. GSK removed the Martinez case from a state court in New Mexico and the Brown case from North Carolina. Both were then transferred to the MDL in Philadelphia, and Judge Rufe ruled on plaintiffs’ motions to remand.
In Martinez, the main question was whether the GSK detail representative, Carmen Hoss, was fraudulently joined on a product liability claim. Plaintiff alleged that GSK deceived the world about the supposed cardiac risks of Avandia. But plaintiff also pleaded that Hoss was aware of those cardiac risks and supposedly misrepresented them, so plaintiff could sue Hoss for the misrepresentation. 2009 U.S. Dist. LEXIS at *13-*14. GSK said that Hoss wasn’t aware of any supposed cardiac risks of Avandia and so was fraudulently joined.
Think for a minute about plaintiff’s alleged scam: GSK is supposedly trying to hide the risks of its drug from the world, but nonetheless tells its sales reps about those very risks?! Judge Rufe acknowledged that “GSK’s argument [that there was no suggestion that the sales rep knew of the alleged risks] has some appeal — it is difficult to imagine a scenario in which a drug company divulges otherwise secret information about the dangers of its products in training materials or educational sessions given to sales representatives.” Id. at *17.
But New Mexico state law doesn’t require specificity in pleading, and the general (and implausible) allegations of Hoss’s knowledge of Avandia’s risks “are potentially sufficient under New Mexico law.” Id. at *20. The court thus remanded the Martinez case.
We have three reactions to that.
But we can’t reveal the first reaction in polite company, so we’ll keep it to ourselves.
Our other two reactions are legal, so we’ll keep typing: First, this holding means that removal is easier in states with rules that require fact pleading (such as Pennsylvania) than in states that permit mere notice pleading (such as New Mexico). The additional details required in a fact pleading state will make it harder to support spurious claims. That’s a curious result, but it’s not necessarily wrong: State court rules govern pleadings in state courts, and those rules may affect removal issues.
Second, we assume that the Twombly/Iqbal pleading standards (which we’ve discussed here and here, among other places), which now apply in federal court, will over time be adopted in some state courts — particularly state courts with rules of procedure modeled on the Federal Rules. Thus, over time, “implausible” state court complaints will no longer state claims, and defendants will have more opportunities to remove based on fraudulent joinder.
The other Avandia removal was in the Brown case. The question there was whether GSK’s principal place of business was in North Carolina or Pennsylvania. (Brown was a citizen of North Carolina. If GSK’s PPB was in North Carolina, then the parties would not be diverse, and the court would have to remand the case.) Applying the “center of activities” test, which the Third Circuit uses to determine a corporation’s principal place of business, Judge Rufe found that, as of late 2008, GSK’s principal place of business was in Pennsylvania. Diversity existed, and plaintiff’s motion to remand Brown was denied. Id. at *29.
As to that holding, we note only that on June 8, the Supreme Court granted certiorari in Hertz v. Friend, No. 08-1107, which presents the question “[w]hether the location of a nationwide corporation’s headquarters can be considered for purposes of determining principal place of business for diversity jurisdiction citizenship under 28 U.S.C. § 1332.” The cert petition (here’s a link, courtesy of SCOTUS blog) notes that courts currently use four different tests to determine a corporation’s principal place of business; the Third Circuit’s “center of activities” test is just one of the four.
Thus, a decision in Hertz v. Friend (which the Supreme Court will presumably decide in late 2009 or early 2010) may provide guidance on the appropriate way to determine a corporation’s principal place of business.