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We’re pretty familiar with most diversity-based removal techniques, so when we see something unusual, we sit up and take notice (as we did with removal before service) – then we blog about it.  Today’s case is Bahalim v. Ferring Pharmaceuticals, Inc., 2017 WL 118418 (N.D. Ill. Jan. 12, 2017).  The unusual aspect of Bahalim is the target of the defendant’s successful fraudulent joinder argument.  As discussed in the opinion, the parties in Bahalim are completely diverse.  Id. at *1.  However, the case would ordinarily be stuck in state court due to the “forum defendant” rule – that even a diverse case isn’t removable where the plaintiff sues the defendant in the defendant’s home state court. Id. at *2.

[T]he forum defendant rule disallows federal removal premised on diversity in cases where the primary rationale for diversity jurisdiction − to protect defendants against presumed bias of local courts − is not a concern because at least one defendant is a citizen of the forum state.

Id. (quoting Morris v. Nuzzo, 718 F.3d 660, 665 (7th Cir. 2013)).

The manufacturer defendant removed anyway, and asserted that the so-called “forum defendant” was fraudulently joined.  Predictably, the plaintiffs claimed that fraudulent joinder couldn’t be used to dismiss a forum defendant.  The defendant responded that it was proper to use fraudulent joinder against a forum defendant because the purposes of the forum defendant rule were not served where a sham forum defendant was sued to keep an out-of-state defendant in state court.

The Seventh Circuit had punted on this question in Morris, but had identified the relevant “policy interests for courts to balance.” Bahalim, 2017 WL 118418, at *3.  They are:

(1) the plaintiff’s right to select the forum and the general interest in confining federal jurisdiction to its appropriate limits, versus (2) the defendant’s statutory right of removal and guarding against abusive pleading practices.

Id.  As to the first, Bahalim held, “improperly joining a forum defendant also lessens a plaintiff’s choice of forum.”  Id.  Any “deference” to the plaintiffs’ choice of forum here was further “weakened” by their being litigation tourists looking for a friendly venue.  Id. (“neither Plaintiff is an Illinois citizen”).  As to the second, the court held that a fraudulently joined forum defendant wasn’t “properly joined” as the removal statute required:

[B]y its own terms, the forum defendant rule precludes removal only when there is a “properly joined and served” resident defendant.  Based on this statutory language, Defendant argues that a fraudulently joined forum defendant is an improperly joined defendant.  The Court agrees.

Id. (citations omitted).  Thus, “the general interest in confining federal jurisdiction to its appropriate statutory limits weighs in favor of Defendants.”  Id.

Bahalim also considered fraudulent joinder of forum defendants to be an “abusive pleading practice.”  Id. at *4.  The policy reasons for the fraudulent joinder doctrine applied equally where a sham forum defendant, rather than a non-diverse sham defendant, prevents the diverse defendant from exercising a “right” of removal that would “otherwise have.”  Id.

Thus, Bahalim answered the question avoided in Morris in the affirmative – fraudulent joinder could be applicable to forum defendants.

The defendant alleged to be fraudulently joined had “never marketed, manufactured, promoted, or distributed” the drug at issue.  2017 WL 118418, at *4.  It had simply been engaged by the manufacturer to undertake certain ministerial aspects of a drug recall.  Id.  As a matter of law (Utah and Texas in this case), such a defendant had no duty to provide drug users with warnings:

Because [the forum defendant] did not manufacture, promote, distribute, or sell [the drug], Plaintiffs cannot bring a product liability-failure to warn claim against [it]. . . .  Plaintiffs’ product liability − failure to warn claims against Defendant . . . have no chance of success.

Id. (citations omitted).  Nor did such a defendant have a duty to warn in negligence:

[The forum defendant’s] conduct in administering the reimbursement program and issuing a check to one of the Plaintiffs in this lawsuit does not establish that [it] owed a duty to “issue a proper and prompt warning” or to take “corrective action.”

Id. at *5.  Nor did plaintiffs allege causation, since the defendant in question “did not manufacture, promote, distribute, or sell” the product.  Id.

So the fraudulently joined defendant was dismissed.  That left out-of-state plaintiffs suing an out-of-state defendant.  Anytime that happens, under the United States Supreme Court’s recent personal jurisdiction cases, there’s a good likelihood that the case will be dismissed on that basis.  And so it was in Bahalim.  Given Bauman, plaintiffs didn’t even try general personal jurisdiction, and they lost on specific jurisdiction.  Simply selling a drug in the forum did not give rise to specific jurisdiction where the plaintiffs neither bought the drug nor suffered injury there.  Bahalim, 2017 WL 118418, at *6.  Nor was the defendant’s hiring of an in-state contractor to conduct the certain ministerial aspects of a drug recall sufficient:

[The defendant retained [the forum defendant] to administer the [drug] Reimbursement Program − not the [drug] recall − and [the forum defendant] never had the authority, responsibility, or ability to recall [the drug].

Id. Further, “it is well-settled that a defendant’s relationship with the forum state for purposes of personal jurisdiction cannot be established via a third-party defendant’s conduct with the forum state.”  Id. (citations omitted).  The same facts that established fraudulent joinder also defeated this argument for personal jurisdiction.  Id.

So the whole case was dismissed. That means it’s appealable.  We’ll watch for a possible appellate decision on this unusual removal issue.