Fraudulent Joinder

By Elizabeth C. Buckley

Parties in litigation often dispute the choice of venue for their case.  Generally speaking, a plaintiff in an action—who is allegedly the “wronged” party—has the privilege of choosing the venue in which to file suit.  However, there are various bases upon which a Defendant can request a change of venue.  Foreign defendants view state courts and their juries as being more sympathetic to local plaintiffs in actions against out-of-state defendants, and therefore less likely to dismiss the case or otherwise dispose of the case in a manner favorable to the defendant.  Therefore, when a plaintiff files suit against one or more out-of-state defendants in state court, the defendants often attempt to “remove” the case from state court to federal court for strategic purposes.   Based on the same reasoning, plaintiffs often seek to avoid removal to federal court. 

Out-of-state defendants generally have a broad ability to remove a case from state court to federal court.  Importantly, however, federal jurisdiction is often limited to cases involving diversity of citizenship.  In a case with multiple defendants, if even one of the individual defendants is a citizen of the state in which the action was brought, diversity of citizenship is destroyed and the case cannot be heard in federal court.  Therefore, one method employed by defendants for invoking federal jurisdiction in a removal action is to argue that one of the in-state defendants in the action was fraudulently joined by the plaintiff in order to preclude the application of federal jurisdiction.  If the fraudulent joinder argument is successful, the citizenship of the in-state defendant is ignored for diversity purposes, and the federal court can assume jurisdiction.  For that reason, fraudulent joinder—which is not typically discussed in detail in law school—could be a matter of great practical importance.

Fortunately for plaintiffs, the fraudulent joinder standard is very high.  The party seeking removal via fraudulent joinder must demonstrate either outright fraud in the plaintiff’s pleadings with regard to jurisdictional facts (which is very unlikely in this type of dispute) or demonstrate that there is no possibility that the plaintiff has a cause of action against the in-state defendant, based on the applicable state law.  In other words, there must be no legally cognizable claim of action against the defendant.  Additionally, the court must resolve all issues of law and fact in the plaintiff’s favor in applying this standard.  If there is only a “slight possibility of a right to relief” or a mere “glimmer of hope for the plaintiff,” fraudulent joinder will be denied and the case will be remanded to state court.

To defeat a defendant’s argument for removal based on fraudulent joinder, then, the plaintiff needs to show that he has a glimmer of a chance of establishing a viable claim against the in-state defendant.  This showing could involve referencing state law cases or statutes setting forth a claim, or distinguishing similar cases in which a claim against a similar defendant was denied.  But if there is no authority expressly holding that a claim against the in-state defendant cannot be maintained, fraudulent joinder should be denied.

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