The Eastern District of Pennsylvania recently entered a fraudulent joinder order that is worth highlighting because it applies a fraudulent joinder standard that we think should apply more broadly. It has always puzzled us why courts are hesitant to find non-diverse or local defendants fraudulently joined. You know what we mean. A plaintiff from State X files state-law claims against a defendant from State Y in some place other than State Y. That is a removable case, except that plaintiffs will frequently name a bogus defendant from either State X or the forum state to defeat the defendant’s right to remove.
That is fraudulent joinder, and it is a type of forum manipulation that we see all too often. Sure, we remove the cases anyway, and federal judges sometimes agree with us that the non-diverse or forum defendants are fraudulently joined, leading them to retain jurisdiction. But more often than not, they don’t, depending on the facts and the applicable standards
The facts and the applicable standards. That is why we like the order in Bentley v. Merck & Co., No. 17-1122, 2017 WL 2311299 (E.D. Pa. May 26, 2017). In Bentley, ten plaintiffs from Pennsylvania, Nevada, and Missouri sued a New Jersey pharmaceutical company in Pennsylvania state court. Id. at * 1. That’s removable based on diversity of citizenship, right? Well, to avoid federal court, the plaintiffs also sued a company employee who happened to reside in Pennsylvania. The problem was that the plaintiffs had no claim against the local employee and had no intention of actually pursuing a claim against her.
That played into the fraudulent joinder standard in the Third Circuit, where fraudulent joinder exists if
“there is no reasonable basis or colorable ground supporting the claim against the joined defendant,” or no real intention in good faith to prosecute the action against the defendant or seek a joint judgment.
Bentley v. Merck & Co., 2017 WL 2311299 at *2 (citing Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990); In re Briscoe, 448 F.3d 201, 216 (3d Cir. 2006); Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 32 (3d Cir. 1985)). Focus on the last part, the part that the court underlined—“no real intention in good faith to prosecute the action” against the non-diverse or forum defendant. The first part is similar to standards that some other circuits apply, i.e., whether there is a reasonable basis for the claim.
But the “no real intention to prosecute” standard cuts right to the core—are the plaintiffs genuinely seeking redress from the non-diverse or forum defendant, or are they just manipulating the forum? It is a fair question to ask, and while courts in other circuits will consider such evidence, the Third Circuit’s standard makes it express and places it front and center.
What then happened in Bentley? It turns out that the same plaintiffs’ attorney had sued the same defendants in federal court, too. But in the federal case, called Juday, he voluntarily dismissed the Pennsylvania employee. Id. at *2. That is to say, when the presence of the Pennsylvania employee made no difference to the forum, the plaintiffs did not care about her and let her go. They kept her in in the cases only where her presence purportedly would defeat diversity, which lay bare exactly what their intentions were. The district court viewed it this way:
We note that in Juday which was initially filed in the federal court, the presence of [the employee], a Pennsylvania citizen, would not defeat this court’s diversity jurisdiction since the plaintiffs were citizens of Indiana. Thus, her dismissal had no effect on federal subject matter jurisdiction. In contrast, if plaintiffs’ arguments against fraudulent joinder and against removal of cases with an in-state defendant are correct, her continued presence as a defendant in these ten cases would require remand.
. . . .
We find that the only reason plaintiffs have joined [the employee] as a defendant is to defeat this court’s subject matter jurisdiction and that they have no real intention in good faith to prosecute these actions against her to judgment. We reach this compelling finding in light of the stipulation of dismissal of [the employee] in Juday and the plaintiffs’ retention of [the employee] in the other similar cases where the same counsel represents all the plaintiffs. Plaintiffs’ attorney conceded this inconsistency at oral argument and offered no explanation for it . . . .
Id. at *3. The evidence in this case thus was particularly stark, and counsel candidly acknowledged that the plaintiffs had no intention of pursuing judgments against the individual defendant since they had a large corporate defendant already in the case. On that record, the district court had only one justifiable path—denying the plaintiffs’ motion to remand.
We note that proving fraudulent joinder would not require evidence this strong. As in Bentley, plaintiffs tend to fraudulently join the same defendants over and over again, and they never make any genuine effort to proceed to judgment against them. That history is evidence in the next case that the plaintiffs have “no real intention in good faith to prosecute the action.” Voluntary dismissals and candid concessions of counsel would seal the deal, as they did in Bentley. But less should be sufficient. The order in Bentley is the right result for the right reason, and the standard applied is one that courts should apply more broadly.