Here’s another guest post, by Richard Dean and Peter Reed of Tucker Ellis. They describe a successful combination (what we might call a “one-two punch” if that phrase were not already taken) of lack of personal jurisdiction under Bauman (also called Daimler) with removal, once the non-diverse (and fraudulently misjoined) plaintiffs lost their defendants. We mentioned the state court ruling a while ago, here, but this post puts it in greater perspective. As always all credit and blame go to our guest posters.
Plaintiffs like to use multi-plaintiff filings to defeat federal diversity jurisdiction and keep cases in state court in contravention of the spirit, if not the technical language, of the Class Action Fairness Act (“CAFA”). That’s why a recent set of decisions from the Oklahoma state and federal courts is so heartening. First, an Oklahoma state court properly recognized that the bright-line jurisdiction rule of Daimler AG v. Bauman, 124 S. Ct. 746 (2014), precluded the non-forum plaintiffs from obtaining jurisdiction over non-forum defendants, resulting in the dismissal of their suits. Second, those non-forum plaintiffs were the only non-diverse parties, so dismissal of their suits presented a second opportunity for defendants to remove the remaining cases to federal court. Third, a federal court held that the subsequent removal was not barred by the infamous voluntary-involuntary dismissal rule, which is often used to send “other paper” removals back to state court. See Kathleen Teague v. Johnson & Johnson, et al., No. Civ-14-702-L, slip op. (W.D. Okla. Oct. 14, 2014).
This saga began with 11 filings with under 100 plaintiffs each (approximately 650 total) in a single-judge state county court in Oklahoma. In each of the 11 cases, only one or two plaintiffs were from Oklahoma and all the other plaintiffs were from out of state (including one or two jurisdictional spoilers). Defendants removed under principles of fraudulent misjoinder and CAFA. They lost. The District Court remanded the case, see Halliburton v. Johnson & Johnson, 983 F. Supp.2d 1355 (W.D. Okla. 2013), and the Tenth Circuit affirmed that decision, see Parson v. Johnson & Johnson, 749 F.3d 879 (10th Cir. 2014). Defendants argued that filing several hundred cases before a single state court judge constituted an implicit proposal for a joint trial under CAFA, but the Tenth Circuit held that the statute’s technical language required a more express statement of any such request from plaintiffs.
The cases were then sent back to state court where defendants challenged the court’s personal jurisdiction over the claims of the out of state plaintiffs based upon Daimler. The state court agreed and dismissed all the claims of the out of state plaintiffs because general jurisdiction over the defendants they sued was not available, and out-of-state plaintiffs could not resort to “specific” jurisdiction. Teague v. Johnson & Johnson, 2014 WL 5343318, Order at ¶1 (Okla. Cir. Pottawatomie Co. July 2, 2014). This shows the power of Daimler to challenge multi-plaintiff filings where most of the plaintiffs are from other states, and how CAFA removals aren’t the only vehicle to deal with mass filings. Out of the original 650 plaintiffs, the state court ruling left 12 remaining plaintiffs in 11 cases, all from Oklahoma. None of the defendants was from Oklahoma, so there now was complete diversity between those remaining plaintiffs and the defendants.
[Editor’s note: this was the decision we discussed in our earlier post – the rest is new]
Defendants once again removed, this time citing the “other paper” provision. 28 U.S.C. §1446(b)(3) (removal timely when effected 30 days after an “other paper” creating diversity). Plaintiffs again sought remand, this time arguing that the voluntary-involuntary dismissal rule barred removal. The judicially-created rule, which precludes “other paper” removals when the dismissal of the non-diverse party is “involuntary” as to the plaintiff, is often cited to bar such removals because many state-court orders do not reflect “voluntary” actions on the part of the plaintiff. But, as Defendants argued here, the rule has only ever been applied to the dismissal of non-diverse defendants, and the justifications for the rule do not apply when non-diverse plaintiffs are dismissed because they can’t sue any of the defendants they named. After all, no action, either voluntary or involuntary, was taken as to the cases of the remaining (Oklahoma) plaintiffs, who still maintained all of their claims against all of the defendants they sued.
The court agreed, noting that it had seen no cases where the voluntary/involuntary rule was applied after the dismissal of suits brought other, non-diverse plaintiffs based on those plaintiffs’ failure to obtain personal jurisdiction over the defendants they sued. The court explained that the rule’s significance lies in “the involuntary dismissal of a defendant without the assent of the plaintiff,” and since that situation was not present here, the rule did not bar the removal. Slip op. at 9-10. The rule thus had no application to actions taken concerning the claims of other plaintiffs in multi-plaintiff complaints.
Plaintiff also objected that the state court order was not final or appealable, and that, until it was, the non-diverse plaintiffs were still part of the case. The Court made short shrift of this argument, noting that the “other paper” provision is in no way limited to final, appealable orders. Slip op. at 6-7.
The combination of these two rulings provides a roadmap for handling multi-plaintiff misjoinder cases designed to defeat federal diversity jurisdiction in venues that do not recognize fraudulent misjoinder. First, in state court, Daimler provides a quick, bright-line basis for dismissal of non-forum plaintiffs who are unable to obtain personal jurisdiction over the defendants they sue. Second, in the remaining cases involving resident plaintiffs, a defendant can then remove any now-diverse cases to federal court, as the federal court’s order here rightly decides that the voluntary-involuntary rule does not apply to the dismissal of other, non-diverse plaintiffs.