Wade Clark Mulcahy LLP

In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2023/06/Williams-v.-John-Middleton-Company.pdf">Williams v. John Middleton Company</a>,</em> the Third Circuit Court of Appeals recently issued an  opinion instructive as to what might make for a fraudulent joinder of a defendant for the purposes of avoiding federal court. In the case, plaintiff filed a products liability action after allegedly being injured from attempting to light a cigar/cigarillo which resulted in an explosion. Of the four defendants in the case, two were residents of Pennsylvania and two were not. One of the non-Pennsylvania defendants removed the case to federal court, asserting that the two Pennsylvania defendants were fraudulently joined and that the federal court therefore had “diversity jurisdiction” over the case. The plaintiff subsequently filed to remand the case back. to Pennsylvania state court.

The federal court’s review of joinder law recounted that, in a case with defendants who have the same residency as the plaintiff, a defendant who does not have that same residency may still remove the case to a federal court if “it can establish that the non-diverse defendants were ‘fraudulently’ named or joined solely to defeat diversity jurisdiction.” <em>Williams v. John Middleton Co.</em>, No. CV 23-1158, 2023 WL 3393413, at *1 (E.D. Pa. May 11, 2023) (quoting <em>In re Briscoe</em>, 448 F.3d 201, 216 (3d Cir. 2006)). Likewise, if there “is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant[s], or no real intention in good faith to prosecute the action against the defendant[s] or seek a joint judgment” then joinder is fraudulent. <em>Id</em>.

Despite focusing on the plaintiff’s complaint and assuming that all allegations were true, and without deciding any merits of the case, the federal court decided that the 2 defendants were indeed fraudulently joined and thus denied the plaintiff’s motion to remand. To make this decision the federal court noted that it did however have the ability to look beyond the pleadings and consider other indicators of fraudulent joinder, such as affidavits presenting “undisputed facts.” <em>Id</em> at 2.

The federal court found that the third defendant, who admitted to owning the premises, which in turn was leased to another company which manages a gas station on the property, could not be held liable for the alleged defective cigarillos or lighter, because it was merely a real estate holding company and the contention that it “manufactured, or distributed” the cigarillo or lighter was not supported by the records. Id. at 3. Thus, the court concluded that there was “no reasonable basis in fact or colorable ground supporting” the claims of the plaintiff. <em>Id</em>. The third defendant was accordingly dismissed from the case. The fourth defendant was likewise dismissed from the case, though for a different reason. Simply put, the fourth defendant was found to have been misidentified by the plaintiff, and the plaintiff’s records indicating similarly named entities therefore did not contradict the defendants’ assertions that the fourth defendant had nothing to do with the case.

There are two important reminders to be taken from the federal court’s decision about fraudulently joined defendants: (1) an owner of a premises which sells products is, not necessarily, part of the manufacture and distribution of those products and therefore might be fraudulently joined; and (2) having the same, or a similar name, to an entity which would be a proper defendant certainly does not mean that one is itself a proper defendant, and any such joinder might be fraudulent.

Thanks to Ryan Hunsicker for his assistance in this post. Should you have any questions, please contact <a href="tbracken@wcmlaw.com">Tom Bracken</a>.