Staying Home Revisited: No Removal to Federal Court
A recent opinion from the Massachusetts district court highlights the ongoing battle between personal injury plaintiffs, who often prefer to pursue their claims in state court, versus defendants, who are apt to head for federal court at every opportunity. In Lothrop v. North American Charter, United States District Court Judge Douglas Woodlock rejected the defendants’ claim that one plaintiff had been fraudulently joined for the purpose of destroying diversity. In that sense, the case represents a reversal of the usual situation, in which one defendant claims that another defendant was fraudulently joined for the sole purpose of thwarting removal.
Earlier this year, I wrote about another opinion from Judge Woodlock, in which he rejected a defendant’s attempt to remove a case to federal court before it had even been served with the complaint. The defendant had been monitoring federal court filings, and, as soon as it saw that it had been sued, rushed to the courthouse with its notice of removal, attempting to get the case removed before service of process was effected on an in-state defendant, which would clearly prevent removal.
The essence of the defendants’ claim in Lothrop is that the estate of the second of two men who died in a plane crash had been fraudulently joined because 1) the attorney who signed the complaint was an out-of-state lawyer who had not been admitted pro hac vice, and 2) the proper filing fee had (arguably) not been paid. Thus, the defendants argued, the plaintiff’s complaint–which would destroy diversity and prevent removal to federal court–was a nullity, and that plaintiff had been “fraudulently” joined. The issue was significant, because of the allegedly fraudulently joined plaintiff was from New York, as was one of the defendants–a happy coincidence for the plaintiff that would prevent removal.
Judge Woodlock rejected the defendants’ contentions, observing, probably correctly, that a party would likely be permitted to correct such procedural irregularities to avoid the harsh consequence of dismissal. Given the death of the two decedents in the same plane crash, he found no basis to say that their joinder was “without any reasonable basis in fact and without any purpose to prosecute the cause in good faith.” Thus, he held that the case should be remanded to state court because there was not complete diversity.
The issue of fraudulent joinder was more common in the 1980s, when some plaintiffs’ firms (including an office of which I was then a part) were appointing out-of-state administrators for estates in order to create diversity and get into federal court. The thinking at that time was that a federal court case would get to trial sooner (which often wasn’t true, and in any event didn’t justify the downside of the harsh treatment of plaintiffs in federal court). The practice largely ended with a First Circuit decision in Pallazola v. Rucker, 797 F.2d 1116 (1986), disallowing the practice, and became irrelevant a couple years later when an amendment to 28 U.S.C. § 1332(c)(2) made the citizenship of the personal representative irrelevant, in favor of the residence of the decedent or ward. In recent years, the motion practice has focused more on defeating diversity to stay out of federal court, rather than creating it to get in.