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Any defendant that has litigated – and lost − remand motions has encountered plaintiffs with very flexible facts, particular in opposition to fraudulent joinder arguments.  By that we mean:  dates that change after remand, non-diverse defendants that suddenly had nothing to do with anything, damages shrinking below the jurisdictional minimum, product exposures that disappear, “yes” that becomes “no” (and vice versa) in plaintiff testimony.  That kind of thing.

But there’s nothing anybody can do about it, right?  After all, a federal statute, 28 U.S.C. §1447(d), bars federal review of remand orders, so no matter how outrageous a plaintiff’s fraud on the court during the remand process is, they skate, and the defendants are stuck in state court, right?

Wrong.  At least not now.  At least in the Fourth Circuit.  See Barlow v. Colgate Palmolive Co., ___ F.3d ___, 2014 WL 6661086 (4th Cir. Nov. 25, 2014).

In the first precedential decision to address this issue, last week the en banc Fourth Circuit held in Barlow that, when a plaintiff’s remand-related misrepresentations are bad enough, a remand order can be vacated under Fed. R. Civ. P. 60(b)(3), with the result being that the case retroactively returns to federal court.  It’s a matter of first impression (prior adverse appellate decisions were all non-precedential), so all defendants should study Barlow closely.

Barlow wasn’t a drug/device case, but rather (not all that surprisingly) asbestos litigation.  The defendant in question, sued on the theory that makeup (makeup!?!) exposed the plaintiff to asbestos, removed on the theory that certain in-state defendant employers, allegedly responsible for on-the-job exposure, were fraudulently joined.  Plaintiff (actually more than one, but we’ll simplify things) alleged enough “circumstantial” evidence of exposure to those defendants’ asbestos products to obtain remand under the very loose fraudulent joinder standards.  2014 WL 6661086, at *2.

Back in state court, plaintiff sought consolidation with other similar (jeez) makeup suits, and the defendant resisted because the non-diverse employers introduced plaintiff-specific exposure issues.  In response to that, plaintiff flip-flopped, and argued that she was not alleging exposure to any types of asbestos except in her makeup (including the in-state employers that had defeated removal).  Id.  In open (state) court, the following exchange took place:  The Court:  “‘It is a one-defendant case, right?’ Counsel answered, ‘Yes.’”  Id.

The defendant returned to federal court and filed a motion seeking both relief for fraud on the court under Rule 60(b)(3) and sanctions under Rule 11.  The federal district judge ruled that §1447(d) prevented “review” in the form of vacating the remand order, but believed “substantial” issues of misconduct existed.  2014 WL 6661086, at *3.  Defendant appealed and eventually the issue was heard by the full, en banc Fourth Circuit.

Cutting to the chase, the Fourth Circuit ruled that “vacating” a fraudulently obtained remand order under Rule 60 was not “review” prohibited under §1447(d):

[Section] 1447(d) does not limit a court’s authority to provide relief − in this case, through vacatur − from a fraudulently obtained remand order under Rule 60(b)(3).  Critically, §1447(d) prohibits “reviewing” an order, but it does not prohibit “vacating” an order as permitted by Rule 60(b)(3).  This distinction is not merely semantic.  Rather, as several fundamental tenets of statutory construction demonstrate, it is a distinction with an important difference. . . .  Rule 60(b)(3) provides that a court “may relieve a party” from a “final judgment, order, or proceeding” for “fraud …, misrepresentation, or misconduct by an opposing party.”  Rather than assess the merits of a judgment or order, it focuses on the unfair means by which a judgment or order is procured.

Barlow, 2014 WL 6661086, at *6-7 (emphasis added).  “[A]ttorney misconduct,” the Barlow court ruled, was a “collateral consideration” that permitted the federal court to act, notwithstanding the statutory prohibition of “review,” because it was not an “assessment of the merits.”  Id. at *7.  Where a party has affirmatively misled the court, “vacatur does not require reassessing the facts that were presented to the district court at the time the cases were removed.”  Id. at *8.

Barlow also ruled – based on more prior precedent, including Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990) – that Rule 11 permuted sanctions for making misrepresentations to the court while the case was pending, even though an intervening remand had divested the court of jurisdiction.  2014 WL 6661086, at *4-6.

Under Barlow (which is only one circuit), a defendant must have evidence of an outright lie critical to a remand decision to seek relief under Rule 60(b)(3).  Such conduct could be the plaintiff:  (1) representing in opposition to remand that a distributor (McKesson?) or a sales representative was involved with the marketing of the prescription medical product that the plaintiff used, and (2) back in state court the same plaintiff later denies (or admits having no evidence) that these same parties were involved.

We don’t think that vacatur of remand orders under the Barlow rationale will ever become a routine occurrence, but we do believe that some plaintiffs, emboldened by §1447(d) preventing any review of their shenanigans, have been playing fast and loose with the (lack of ) facts in remand situations.  Further, because of the potential for wasted time and effort, we strongly recommend that once back in state court, any defendant that thinks it was rooked should immediately focus on the discovery necessary to establish that the plaintiff made statements without a good faith investigation/evidentiary support.  A lot of federal judges will be reluctant to grant Barlow motions anyway, so there’s no reason to encumber those motions with any allegations of dilatory behavior.

Finally, we’d like to point out that fraud on the court under Barlow is a separate avenue from the “bad faith” exception that Congress added to 21 U.S.C. §1446(c), effective in 2012.  See Our post here.  That exception only tolls the one-year post-filing removal deadline for actions not immediately removable.  See §1446(b)(3).  Because it is predicated on fraud on the court under Rule 60(b)(3), Barlow’s rationale can logically apply to any misrepresentation of fact that led to remand, including – as in Barlow – post-removal misrepresentations in federal court.