Last week we wrote about Johnson v. DePuy Orthopaedics, Inc., 2012 U.S. Dist. LEXIS 74450 (N.D. Ohio May 30, 2012) and that court’s use of the TwIqbal motion to dismiss standard in deciding the issue of fraudulent joinder. That made perfect sense to us. On fraudulent joinder, defendant bears the burden of showing that plaintiffs can’t state a viable cause of action against the allegedly fraudulently joined defendant. On a motion to dismiss, defendant bears the burden of showing that plaintiffs can’t state a viable cause of action against the defendant. Seems like the same standard should apply. So, we decided to see if other courts agreed with us and with Johnson. What we found is that while courts generally agree that fraudulent joinder walks and talks like a motion to dismiss – it isn’t exactly a motion to dismiss. If it isn’t exactly a motion to dismiss, then what standard applies? What we learned is that question is answered in a myriad of different ways – some courts lean more toward a summary judgment standard because you are allowed to look beyond the pleadings, some look to whether there is a reasonable possibility that the plaintiff has asserted a valid claim, some look to state law – and yes, some do indeed look to Rule 12(b)(6).
First, we’ll quickly acknowledge that there are cases that say the fraudulent joinder standard is something quite different than TwIqbal. For instance, in Junk ex rel. Junk v. Terminix Int’l Co., 628 F.3d 439 (8th Cir. 2010), plaintiff alleged that a pesticide used by a pest control company in her home during and shortly after her pregnancy caused severe neurological problems for her son. Plaintiff sued both the company and the non-diverse employee who treated plaintiff’s house. In deciding plaintiff’s motion to remand, the court stated the “Rule 12(b)(6) standard is more demanding” and that the proper, more lenient, standard is “whether there is arguably a reasonable basis for predicting that the state law might impose liability based upon the facts involved.” Id. At 445 (court reversed denial of remand and reinstated and remanded claims against employee).
An even stronger anti-TwIqbal case we found was Stillwell v. Allstate Ins. Co., 663 F.3d 1329 (11th Cir. 2011). In holding that the district court erroneously applied the federal Rule 12(b)(6) standard to plaintiff’s motion to remand, the court said:
This [fraudulent joinder] standard differs from the standard applicable to a 12(b)(6) motion to dismiss. To survive a 12(b)(6) motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. This plausibility standard asks for more than a sheer possibility that a defendant has acted unlawfully. In contrast, all that is required to defeat a fraudulent joinder claim is a possibility of stating a valid cause of action.
Id. at 1333. The court further explained the distinction:
Nothing in our precedents concerning fraudulent joinder requires anything more than conclusory allegations or a certain level of factual specificity. All that is required are allegations sufficient to establish even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants.
Id. at 1334. Conclusory allegations? TwIqbal says conclusory allegations don’t get a plaintiff past the pleadings stage. So, if the claim isn’t going to survive a motion to dismiss, why should it be allowed to stand to defeat diversity? Granted, in response to a motion to dismiss, plaintiffs are often afforded an opportunity to amend their complaints to allege sufficient facts. Well, maybe that should apply to motions to remand too. If the court thinks the claim as pled doesn’t satisfy Rule 12, give plaintiffs one shot to fix it. If they can’t – the non-diverse defendant will be deemed fraudulently joined and the case proceeds in federal court. Again, this makes sense to us. By the way, in Stillwell, the Eleventh Circuit then went on to apply Georgia’s pleading standards instead of the federal standard at all. This isn’t the only court to come out this way, but we’ll leave that Erie issue for another day.
Fortunately, a great many more courts find fraudulent joinder and Rule 12(b)(6) to be more like first cousins. While most of the decisions we found don’t go as far in embracing TwIqbal as Johnson, the general consensus seems to be that the applicable standard should be something like TwIqbal-light. For instance, the Sixth Circuit, in a case relied on by the Johnson court, said this:
Thus, when deciding a motion to remand involving fraudulent-joinder allegations, the [court] applies a test similar to, but more lenient than, the analysis applicable to a Rule 12(b)(6) motion to dismiss.
Walker v. Philip Morris USA, Inc., 2011 WL 5119441, *6 (6th Cir. 2011) (emphasis added). In a case factually similar to Johnson, the court looked to TwIqbal while acknowledging that it was not the controlling standard:
Although the Court applies the standards governing allegations of fraudulent joinder to this case rather than the Twombly/Iqbal pleading standards, those cases usefully illustrate the inadequacy of Plaintiff’s conclusory allegations to rebut uncontroverted affidavit testimony denying [the defendant distributor’s] knowledge of the . . . Device’s alleged defects.
Askew v. DC Medical, LLC, 2011 WL 1811433, at *5 n.5 (N.D. Ga. May 12, 2011). See, e.g. Little v. Purdue Pharma, L.P., 227 F. Supp. 2d 838, 845-46 (S.D. Ohio 2002) (stating that a fraudulent joinder analysis is “not unlike that related to a [12(b)(6) analysis],” but that “a plaintiff gets more favorable treatment in a fraudulent joinder inquiry than she does in a 12(b)(6) inquiry.”); Travis v. Irby, 326 F.3d 644, 648-49 (5th Cir. 2003) (holding fraudulent joinder and Rule 12(b)(6) standards are similar but the scope of the inquire is different because for fraudulent joinder, the court can “pierce the pleadings”); Lujan v. Girardi|Keese, 2009 U.S. Dist. LEXIS 120501 at *18 (D. Guam) (“The standard to be applied is something akin to a 12(b)(6) type analysis but not as stringent.”); Hill v. Olin Corp., 2007 U.S. Dist. LEXIS 34955 at *13 (S.D. Ill.) (quoting Riddle v. Merck & Co., 2006 U.S. Dist. LEXIS 22085 at *2 (S.D. Ill.)) (“In evaluating a claim of fraudulent joinder, a court ‘conduct[s] a Rule 12(b)(6)-type analysis,’” but “the inquiry on a claim of fraudulent joinder is even more lenient than the Rule 12(b)(6) inquiry . . . .”)
So, under TwIqbal-light, it appears the burden on defendants is heavier and plaintiffs are afforded greater deference. But light or not, the standard still has its roots in TwIqbal which should be good for the defense. The door remains open for defendants to use TwIqbal pleading standards by analogy to emphasize that the plaintiffs have nothing to back up their allegations against a fraudulently joined defendant.
Finally, our research did uncover two more cases directly applying the heightened TwIqbal standard in deciding the fraudulent joinder issue. Because they aren’t drug and device cases, we’ll skip the facts. Here are the highlights regarding the standard:
Alpha Biomedical and Diagnostic Corp. v. Philips Medical System Netherland BV, 2011 U.S. Dist. LEXIS 135655 (D. Puerto Rico):
- When considering fraudulent joinder, a court “ordinarily conducts a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether, under state law, the complaint states a claim against the in-state defendant.” Id. at *4.
- “Thus, while some courts in this district have suggested that a defendant alleging fraudulent joinder bears a particularly heavy burden, it seems simplest to treat the inquiry as a modified version of a motion to dismiss, asking whether a state court complaint states a plausible claim.”
- In assessing whether plaintiff’s tortious interference and defamation claims were viable against the non-diverse defendant, the court explicitly applied TwIqbal. Id. at *9-10.
Pascale Service Corp. v. Int’l Truck & Engine Corp., 2007 U.S. Dist. LEXIS 73339 (D.R.I.)
- First, the court notes that “[s]tandards applied [to fraudulent joinder] run the gamut from a summary judgment standard in which documents outside the pleadings are considered, . . . to a Rule 12(b)(6) standard . . . ” Id. At *8-9.
- Then, citing Twombly, the court found: “While acknowledging that the above standard has been established in reference to Rule 12(b)(6) motions to dismiss, it is equally applicable here. Id. at *11-12.
- The court found a “dearth of facts” sufficient to state a claim against the non-diverse defendant. Id. at *12.
We are sure our research to date has not exhausted this topic, but it has piqued our interest and it will be something we will continue to watch and report on. So, let us know if you have luck using TwIqbal to defeat remand and we’ll add your case to the list.