A while ago, when we posted primarily about TwIqbal and removed complaints, we commented briefly on a different, but related question – whether TwIqbal (that is to say the Supreme Court’s landmark pleading decisions in Bell Atlantic v. Twombly and Ashcroft v. Iqbal) also applied to a fraudulent joinder evaluation of a plaintiff’s allegations for purposes of remand. We said that we didn’t think so, but that there wasn’t much law, and left it at that. We recently returned to this same issue after being tapped for some in-firm (this is the Reed Smith side) continuing legal education on removal issues.
It turns out that, while we’d still say application of TwIqbal is a minority position in the remand/fraudulent joinder context, it’s better backed precedentially than we had previously thought. In a couple of circuits it is backed (at least arguably) by pre-TwIqbal appellate precedent authorizing use of Rule 12 standards in fraudulent joinder cases. See Simpson v. Thomure, 484 F.3d 1081, 1084 (8th Cir. 2007); Smallwood v. Illinois Central Railroad Co., 385 F.3d 568, 573 (5th Cir. 2003).
There’s also significant precedent for TwIqbal fraudulent joinder analysis in the district courts. In Beavers v. Depuy Orthopaedics, Inc., 2012 WL 1945603 (N.D. Ohio May 3, 2012), a medical device product liability action, the plaintiff’s 21-page, 89-paragraph complaint referred to the non-diverse defendant (a distributor, we think) precisely twice. Id. at *4. Both references were “were global references to defendants collectively” and “lacked any facts” supporting a ground upon which that defendant could be liable. Id. Applying TwIqbal, the court found no doubt that this defendant was fraudulently joined.
Having carefully reviewed Plaintiffs’ complaint, the Court finds the allegations against [the non-diverse distributor], to fall well below the threshold required to meet the plausibility standard required under Twombly. . . . Plaintiffs’ allegations fail to distinguish between the [diverse defendants’] allegedly wrongful acts and those of [the non-diverse defendant]. Assuming the facts as alleged against [that defendant] to be true, without a modicum of additional facts, Plaintiff has failed to establish a colorable basis for liability.
Id. at *5.
The court in Okenkpu v. Allstate Texas Lloyd’s, 2012 WL 1038678 (S.D. Tex. March 27, 2012), applied TwIqbal to find fraudulent joinder:
At issue here is whether Plaintiffs’ Original Petition [that’s Texas talk for a complaint] adequately pleads a reasonable factual basis for predicting that state law would allow recovery against [the non-diverse defendant]. This Court has required a plaintiff to satisfy Rules 8, 9, and 12(b)(6) and Twombly, to allege specific actionable conduct . . . and to distinguish [those] claims . . . from generic, conclusory, statute-tracking claims against the [diverse defendant]. Plaintiffs have failed to do so here with respect to [the non-diverse defendant]. Thus the Court denies the motion to remand and dismisses [him] with prejudice as improperly joined.
Id. at 7 (lots of citations omitted).
The court in Maxwell v. Sassy, Inc., 2011 WL 5837941 (D. Minn. Nov. 21, 2011), also employed a similar TwIqbal approach to fraudulent joinder:
Defendants assert that Plaintiff has failed to allege facts that, even if true, would support her claims against [the non-diverse defendant]. The Court considers the sufficiency of Plaintiff’s complaint against [the non-diverse defendant] as it would under the standard applied in a motion to dismiss pursuant to Rule 12(b)(6). . . . [T]he Court need not accept as true wholly conclusory allegations, or legal conclusions drawn by the pleader from the facts alleged. To survive a motion to dismiss, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Although a complaint need not contain “detailed factual allegations,” it must contain facts with enough specificity “to raise a right to relief above the speculative level.”
Id. at *3 (citations, including several to Twombly, omitted).
Likewise in McConnell v. Funk, 2010 WL 4736257 (S.D. Miss. Nov. 16, 2010), the court applied the Twombly test to “determine whether the plaintiff has pleaded enough facts to state a claim to relief that is plausible on its face” against an allegedly fraudulently joined party.
The Complaint, however, does not contain any specific allegations against [the nondiverse defendant] nor does the Complaint contain any factual support for any allegation that [he] was in any way personally responsible for the subject incident. . . . Thus, the conclusory allegations against [him] are insufficient to survive a Rule 12(b)(6) analysis and, as such, [he] has been fraudulently joined and should be dismissed.
Id. at *3.
A similar ruling from our neck of the woods (Pennsylvania) occurred in Positive Results Marketing, Inc. v. Buffalo-Lake Erie Wireless Systems Co., 2008 WL 2096865 (M.D. Pa. May 16, 2008). The court applied Twombly (Iqbal had not yet been decided) in determining whether the plaintiff had committed fraudulent joinder:
Simply stated, the Complaint does not allege a plausible basis for relief against [the non-diverse defendant]. [Twombly citation]. A plaintiff’s obligation to provide the grounds of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. [Twombly citation]. When there is plainly no valid cause of action against non-diverse defendants, courts in this circuit and without have denied remand based on fraudulent joinder. Because the Complaint fails to allege facts sufficient to show a plausible [theory of liability] against [the non-diverse defendant], remand of this matter is not warranted
Id. at *2.
Also in Pascale Service Corp. v. International Truck & Engine Corp., 2007 WL 2905622, at *2-4 (D.R.I. Oct. 1, 2007), the court held that Twombly “is equally applicable” to fraudulent joinder. Id. at *3. Because “the sole factual allegation relating to [the non-diverse defendant] in Plaintiff’s Verified Complaint relates to its citizenship,” the court agreed “that the complete lack of factual support for Plaintiff’s legal claims against [that defendant] renders joinder fraudulent.” Id. See Elchehabi v. Chase Home Finance, LLC, 2012 WL 3527178, at *3-4 (S.D. Tex. Aug. 15, 2012) (applying TwIqbal and finding fraudulent joinder where “the complaint does not contain sufficient factual allegations to hold that the alleged wrongdoing was plausible”); Wegener v. Wells Fargo Bank, NA, 2012 WL 844520, at *2-3 (E.D. Tex. Feb. 17, 2012) (applying Twombly “plausible on its face” standard in context of fraudulent joinder; denying remand); Brown v. Aurora Loan Services, LLC, 2011 WL 2783992, at *4 (E.D. Tex. June 7, 2011) (same); Mechali v. CTX Mortgage Co., 2011 WL 2683190, at *4 (E.D. Tex. June 7, 2011) (same); Nelson v. Nationwide Mutual Insurance Co., 2011 WL 2604723, at *4 (S.D. Miss. June 30, 2011) (applying TwIqbal and finding fraudulent joinder where “there are no factual allegations capable of supporting a claim”); Palmer v. Liberty Mutual Insurance Co., 2010 WL 2773381, at *6-7 (S.D. Miss. July 13, 2010) (applying Iqbal and finding fraudulent joinder where “no underlying facts sufficient to give rise to liability against [the non-diverse defendant] are presented and, indeed, most of the allegations against [him] must be disregarded”), reconsideration denied, 2011 WL 284495 (S.D. Miss. Jan. 25, 2011); Rosamond v. Great American Insurance Co., 2010 WL 2723195, at *1-2 (S.D. Miss. July 6, 2010) (applying Twombly and finding fraudulent joinder where “[n]ot a single fact is alleged anywhere” against the non-diverse defendant); Hoidas v. Wal-Mart Stores, Inc., 2010 WL 1790864, at *2 (N.D. Ill. April 30, 2010) (applying Twombly and finding fraudulent joinder where a “mere formulaic recitation that [the non-diverse defendant] owed a duty ‘to exercise a reasonable degree of care . . .’ is not sufficient to meet the pleading standard”); Crawford v. Charles Schwab & Co., 2009 WL 3573658, at *2-4 (N.D. Tex. Oct. 30, 2009) (applying Iqbal “naked assertions devoid of further factual enhancement” standard in context of fraudulent joinder and denying remand); First Baptist Church v. GuideOne Mutual Insurance Co., 2008 WL 4533729, at *5-6 (E.D. Tex. Sept. 29, 2008) (applying Twombly and finding fraudulent joinder where “the state court [complaint] identifies only the law that forms the basis of the claims without identifying how [the non-diverse defendant] violated that law”); Soroe v. State Farm Fire & Casualty Co., 2008 WL 687025, at *1-2 (S.D. Miss. March 10, 2008) (applying Twombly “sufficient to raise a claim for relief above the speculative level” standard in context of fraudulent joinder; denying remand); Tippen v. Republic Fire & Casualty Insurance Co., 2007 WL 4219352, at *2 (E.D. La. Nov. 28, 2007) (applying Twombly “plausible on its face” standard in context of fraudulent joinder; denying remand); Taylor v. Shelter Lincoln Mercury Ltd., 2007 WL 3244701, at *1-2 (W.D. La. Nov. 2, 2007) (applying Twombly “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action” standard in context of fraudulent joinder; denying remand).
Having now conducted relatively thorough research, we can accurately state that, while TwIqbal remand analysis is like comment k across the board, not a majority position, it is certainly a respectable argument. We didn’t see any appellate precedent rejecting it, and we found favorable federal district court precedent for use of TwIqbal in this context from the first, third, fifth, sixth, seventh, and eighth circuits. We particularly note the preponderance of cases from the states comprising the Fifth Circuit (Texas, Mississippi, and Louisiana). However, we’d have to classify the Ninth Circuit in this respect (as in several others) as a disaster area. However, at least in some places, it is possible to argue TwIqbal on remand and prevail.