We have reported before on defendants’ efforts to remove cases from the Philadelphia County Court of Common Pleas to federal court. We don’t spend a lot of time examining their motives, other than to express our wholehearted approval of the strategy and noting at times that the Philadelphia CCP has taken its share of criticism. The fact is your bloggers have spent considerable parts of their legal careers representing clients in the Philadelphia CCP, and we are the first to sing its praises when we believe praise is due. We also have voiced our disagreement, sometimes vigorously, when we believe proceedings or results should go a different way. As the old saying goes, we call them like we see them.
Recent efforts to remove cases in Philadelphia have focused on establishing principal places of business outside of Pennsylvania. As the removal jurisdiction nerds among us know all too well, the forum defendant rule set forth in 28 U.S.C. § 1441(b)(2) prohibits removal of a case to federal court if a properly joined and served defendant is a citizen of the forum state, even where there is complete diversity of citizenship. As a result, establishing a principal place of business—and thus citizenship—outside Pennsylvania can make the difference between proceeding in federal court and proceeding in the CCP, as good or as bad as that might be.
This is an issue worth fighting for, as the recent order in Sherfey v. Johnson & Johnson, No. 12-4162, 2014 U.S. Dist. LEXIS 10690 (E.D. Pa. Jan. 29, 2014), makes perfectly clear. The plaintiffs sued the defendant over-the-counter drug manufacturer in the Philadelphia courts, and apparently staying in state court was really important to these plaintiffs: Not only did that allege that defendant manufacturer’s principal place of business was in Pennsylvania, they also sued numerous company officials, all Pennsylvania residents. Despite these measures—and we believe the fraudulent joinder of defendants is among the most transparent and offensive tactics that plaintiffs pursue in our cases—the district court denied the plaintiffs’ motion to remand.
The result is good for the defendants, but the order’s reasoning is not exceptional. The drug manufacturer defendant’s principal place of business is actually in New Jersey, which explains a lot. As we mentioned just the other day, New Jersey has a product liability statute that creates presumptions that are very helpful to the defense. These plaintiffs could have sued this defendant in New Jersey state court, where they would not have had to worry about removal. But could it be that the plaintiffs were trying to avoid the application of New Jersey law? Just saying. On the merits of the principal place of business dispute, we reported here on the order that this district judge followed. In a nutshell, the bulk of the management functions for this defendant are carried out by executives who work in Skillman, New Jersey, which makes New Jersey the principal place of business. The district judge in Sherfey adopted that conclusion without further commentary.
The court spent much longer explaining why the individual defendants had no potential liability under Pennsylvania law because the plaintiffs had alleged no more than ordinary nonfeasance, mainly the alleged failure to address quality issues and strengthen the warnings. Id. at **17-33. Under Pennsylvania’s “participation theory” of individual liability, the plaintiff “must establish that the individual officer or agent engaged in misfeasance rather than mere nonfeasance.” Id. at **19-20. In other words, the individuals must have engaged in affirmative bad acts, which the plaintiffs did not allege. That means no potential liability, which means the individual defendants were fraudulently joined, which means their Pennsylvania citizenship did not matter one iota. That is the correct result.
The remarkable feature of this order is the extent to which the parties litigated federal jurisdiction involving this drug manufacturer and this product. The same dispute was playing out before four different judges in the Eastern District of Pennsylvania. The parties files motions to remand and motions for reconsideration “including several briefings, an evidentiary hearing . . . , and post-evidentiary filings.” Id. at *13. The parties urged some judges to wait until another issued rulings, but then when the orders went uniformly against the plaintiffs, they renewed their efforts with the same judges they had previously asked to wait and see. When all is said and done, Sherfey is another example of plaintiffs trying to manipulate the forum and block a defendant’s right to remove cases to federal court. That right is important, and while we knock the plaintiffs for their gamesmanship, we commend the defendants for fighting the good fight and the district court for coming to the right conclusion. We guess what goes on in the Philadelphia CCP does not always stay in the Philadelphia CCP.