If the terms “removal” and “fraudulent joinder” pique your interest, you will want to familiarize yourself with the recent United States Fifth Circuit Ruling in Boone v. Citigroup, Inc., ___ F.3d ___ (5th Cir. 2005), 2005 WL 1581091 (5th Cir. (Miss.)).
In Boone, the Fifth Circuit explained its holding in its earlier en banc opinion in Smallwood v. Illinois Central Railroad Company, 385 F.3d 568 (5th Cir. 2004) (referred to as “Smallwood II”). Essentially, the Boone panel explained that a defense is considered to be a “common defense” under Smallwood II only when the showing or factual basis that demonstrates the applicability of the defense to the resident defendants, also necessarily demonstrates the applicability of the defense to all of the claims asserted against the non-resident defendants.
The Boone court reminded its readers that under Smallwood II, a removal based upon improper joinder should not be allowed when all of the defendants, both resident and non-resident, have interposed a “common defense.” Further, a defense is considered to be “common” under Smallwood II only when the showing or factual basis that demonstrates the applicability of the defense to the resident defendants also necessarily demonstrates the applicability of the defense to all claims asserted against the non-resident defendants.
The federally erudite will doubtless recall that in Smallwood II the plaintiff was injured when her car was hit by a train at a railroad crossing that was maintained by the Mississippi Department of Transportation (“MDOT”). The plaintiff filed suit against the railroad and MDOT in state court asserting only state law claims. The railroad removed on the basis that the plaintiffs’ negligence claims against MDOT were preempted by the Federal Railroad Safety Act and, therefore, MDOT had been improperly joined. The district court agreed and denied remand. Following that, the district court granted a summary judgment in favor of the railroad on the same exact grounds, noting that the plaintiff had adduced no evidence or argument to suggest that the preemption conclusion against MDOT did not equally compel judgment in favor of the railroad.
On appeal, the Fifth Circuit, en banc, reversed the district court and ordered a remand. The court found that where a non-resident defendant establishes that a resident defendant was improperly joined by way of a showing that equally disposes of all claims against the non-resident defendant as well, the joinder is not improper “because the non-resident defendant has merely demonstrated that the plaintiff’s entire case is without merit and an improper joinder inquiry is about subject matter jurisdiction, not the merits of the entire case.” Id at *5.
The Boone court explained that the Smallwood II “common defense” theory is applicable “‘only’ where the showing that there is no reasonable basis for predicting state law would allow the plaintiff to recover against the resident defendant is such that the same showing ‘equally’ and ‘necessarily’ ‘compels’ the conclusion that recovery is precluded against ‘all’ non-resident defendants.” Id at Boone. Under these limited circumstances, removal is considered to be improper because “there is no improper joinder, but simply a wholly meritless suit.” Id.
In Boone, the plaintiffs, who had obtained loans and credit insurance from various locations of First Family Services, Inc., sued several entities related to First Family and three of its employees who were alleged to have been involved in the plaintiffs’ loan transactions. The trial court denied remand and granted summary judgment in favor of all of the defendants based upon the Mississippi residual statute of limitations. On appeal, the plaintiffs argued that, under Smallwood II, the case should be remanded because the defendants had interposed a “common defense” – the Mississippi residual statute of limitations, which disposed equally of all claims against all defendants, both resident and non-resident.
In determining whether Smallwood II required a remand, the Boone court distinguished the facts in Smallwood from those in Boone, noting that, while all the Boone defendants had been dismissed based upon the same statute of limitations defense, the showing that demonstrated that the statute of limitations precluded recovery against the resident defendants did not “equally” and “necessarily” compel “dismissal of all claims against all of the diverse defendants.” Id at *5.
The court explained that the Boone plaintiffs’ claims against the non-resident defendants were not simply premised on vicarious liability for the torts of the resident defendants. Rather, some of the claims against the non-resident defendants were “analytically distinct from and in addition to their respondeat superior claims.” Id at *6. The Boone court concluded that while both the resident and non-resident defendants had successfully asserted a defense based on the same residual statute of limitations, that was not a “common defense” in the sense intended by Smallwood II. Id at *7.
For example, in Boone, it was noted in a footnote that one of the claims against the non-resident defendants was for alleged fault in training their employees. Obviously, in order to determine whether that claim was subject to dismissal based upon the statute of limitations, dates and times related to when that alleged fault in training occurred would have to be presented. Since the plaintiffs did not assert a “fault in training” claim against the resident defendants, the facts related to when that fault in training occurred would not have been part of the showing that demonstrated that the claims against the resident defendants were subject to dismissal based upon the statute of limitations. Therefore, that showing would not have necessarily compelled the conclusion that the claim against the non-resident defendants for alleged fault in training was also subject to dismissal based upon the statute of limitations.
Based upon Boone, in order to overcome a motion to remand a case removed on the basis of improper joinder, the removing defendants will have to demonstrate that there is at least one claim asserted against the non-resident defendants that is “analytically distinct” from those asserted against the resident defendants. If there are additional facts that must be considered by the court with regard to a claim against the non-resident defendants, (beyond those considered by the court with regard to the claims against the resident defendants), then it seems that the claims are analytically distinct and not subject to a “common defense” plea thereby allowing the federal court to retain subject matter jurisdiction.