Plaintiff sued a major retailer and one of its employees in Philadelphia Court of Common Pleas over injuries sustained in a slip and fall. Plaintiff’s counsel alleged that the employee was a business entity with the store’s business address and therefore a Pennsylvania citizen. Pursuant to law,[1] “Federal district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between—(1) citizens of different States….”
Defendants sought removal of the matter to Federal Court arguing that the employee defendant was fraudulently joined for the purpose of defeating diversity jurisdiction.
Plaintiff did not move to remand the case back to State Court, instead they moved the Court to amend the Complaint to replace the employee defendant with a different employee – the purported store manager at the time of the incident.
In order to address the motion to amend, the Court first had to determine whether the removal was proper. The Court noted that, although plaintiff did not challenge the removal, the Court is responsible to review the question of jurisdiction.[2] The doctrine of fraudulent joinder allows a defendant to remove an action to federal court if a nondiverse defendant was joined solely to destroy diversity jurisdiction.[3] Joinder is fraudulent if “there is no reasonable basis in fact 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.”[4] Here Defendants’ burden of proof is “heavy” as the Court will accept all allegation in the Complaint as true. The fraudulent joinder analysis requires the court to ask only whether the claims are “wholly insubstantial and frivolous,” and “all doubts should be resolved in favor of remand.”[5] However, the Courts are permitted to consider more than just the pleadings (such as affidavits and deposition transcripts) when considering the matter.[6]
Plaintiff argued “participation theory” to support including the employee in the lawsuit (and defeat diversity jurisdiction). Under this theory, corporate officers or employees can be held liable in tort when they personally “participat[e] in the tortious activity” of the corporation.[7] Participation involves misfeasance (improper performance of an act), not nonfeasance (omission of an act which person ought to do).[8] In the Complaint, plaintiff alleged that the employee failed to take various measures to prevent the incident which does not rise to the level of misfeasance. As such, plaintiff’s claims under participation theory were not supported and defendant met their burden to show the employee’s joinder was fraudulent.
After determining that removal was permitted, the Court noted that plaintiff’s “purpose in seeking to join [the manager] is also a transparent attempt to defeat diversity jurisdiction, the Court denies the motion for leave to amend. Finally, the Court will issue a Rule to Show Cause why [plaintiff’s] counsel should not be sanctioned for their machinations.”
In matters involving an incident in Philadelphia county but also involving a defendant who is not a citizen of Pennsylvania, plaintiffs may feel that they have a strong interest in keeping their actions in the Court of Common Pleas rather than Federal Court due to the jury pools, discovery process, and flexibility of the available jurists. As such, some plaintiffs may seek to circumvent the diversity jurisdiction rules by including a defendant who is a citizen of Pennsylvania. Fortunately, as explained above, the Federal Courts have developed precedent on this issue which allows for examination of the defendants along with a high bar for those defendants to argue that their inclusion was only for the purpose of defeating diversity jurisdiction. The high bar serves to prevent defendants from easily removing to Federal court in situations where they think that they would have an advantage, instead, they must prove that Federal court is the proper venue for the action at hand. Helpfully, the Courts can consider more than just the pleadings before them as removal tends to occur at the very start of litigation when those pleadings can be limited.
The Madrid decision can be found here.
For additional questions, please contact Conrad James Benedetto, Esq. and / or John R. Freeman, Esq.
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[1] 28 U.S. Code § 1332
[2] Sayres v. Lancaster Press, No. 93-2796, 1994 WL 71277, at *1 (E.D. Pa. Mar. 8, 1994) (citing Medlin v. Boeing Vertol Co., 620 F.2d 957, 960 (3d Cir. 1980)) (noting that a plaintiff’s “failure to challenge removal cannot confer upon the court subject matter jurisdiction which it does not otherwise possess,” and that “it is the responsibility of the court to inquire, sua sponte, into the question of subject matter jurisdiction”)
[3] Brown v. Jevic, 575 F.3d 322, 326 (3d Cir. 2009)
[4] In re Briscoe, 448 F.3d 201, 216 (3d Cir. 2006) (quoting Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 32 (3d Cir. 1985))
[5] Batoff v. State Farm Ins. Co., 977 F.2d 848, 851-2 (3rd Cir 1992)
[6] In re Briscoe, 448 F.3d 201, 219 (3rd Cir 2006) (quoting Boyer, 913 F.2d at 112)
[7] Wicks v. Milzoco Builders, Inc., 470 A.2d 86, 90 (Pa. 1983); see also Sherfey v. Johnson & Johnson, No. 12-4162, 2014 WL 715518, at *8 (E.D. Pa. Jan. 29, 2014) (explaining that the participation theory requires the complaint to allege “specific facts that plausibly suggest” the officer took part in the tort’s commission).
[8] Loeffler v. McShane, 539 A.2d 876, 878 (Pa. Super. Ct. 1988)