• Eleventh Circuit Addresses Fraudulent Joinder of Individual Sales Representatives in Product Liability Case against Corporate Defendant
  • February 20, 2006 | Author: Jennifer E. Miller
  • Law Firm: Holland & Knight LLP - Chicago Office
  • A growing trend in complex product liability litigation involves naming local entities -- dealerships, pharmacies, individual sales representatives, or employees -- as party defendants to an action in order to defeat diversity of citizenship and prevent removal of cases to federal court. As this tactic grows in popularity, courts are being forced to review not only the citizenship of these additional parties, but also the substantive claims against them to determine if they were fraudulently joined. This issue was recently addressed by the Eleventh Circuit Court of Appeals in a case arising out of Alabama.

    In Legg v. Wyeth, et al., 428 F.3d 1317 (11th Cir. 2005), plaintiffs Carl and Dorothy Legg were residents of Alabama. Mr. Legg alleged that he sustained injuries after taking Redux, an anti-obesity drug designed and manufactured by Wyeth. In their complaint, the plaintiffs named several Wyeth entities as well as three individual Wyeth sales representatives as defendants. The Wyeth entities were all foreign corporations, but two of the sales representatives were residents of Alabama.

    Wyeth removed the case to the United States District Court for the Northern District of Alabama, alleging that the plaintiffs fraudulently joined the in-state sales representatives in an effort to defeat diversity of citizenship and keep the case in Alabama state court.1 In support, Wyeth attached affidavits from all three sales representatives, which stated the citizenship and residency of each sales representative as well as whether each sales representative was ever involved in the sale of Redux. The District Court, without consideration of the affidavits, determined that there was no fraudulent joinder and awarded the plaintiffs their costs and fees for contesting the removal. Because 28 USC §2447(d) bars review of the remand, Wyeth appealed the award of fees.2

    In order to fairly review the award, the Eleventh Circuit Court of Appeals examined the objective validity of Wyeth's removal. According to the Court, a determination of fraudulent joinder rests on the plaintiff's pleadings at the time of removal and any supplements submitted by the parties, including affidavits and deposition transcripts. Further, although a district court must resolve any question of fact in the favor of the plaintiff, the burden is on the plaintiff to dispute those facts raised by the defendants. The three affidavits from the Wyeth sales representatives stated that they either never sold the drug at issue or did not know that it was associated with the particular side effects at issue. The plaintiffs offered no evidence to counter those affidavits. The Court stated that if a plaintiff chooses not to dispute such evidence, then a question of fact cannot be resolved in his or her favor. After considering the substance of the affidavits, and the plaintiffs' failure to oppose them with counter-affidavits or other evidence, the Court determined that the Wyeth sales representatives had been fraudulently joined as codefendants, the removal to federal court was proper, and the award of costs was not warranted.

    The Legg decision is significant since it establishes that if a defendant alleges fraudulent joinder in attempting to remove a case to federal court, it should consider supporting its removal papers with affidavits, deposition testimony, or other evidence demonstrating that the plaintiffs have no reasonable basis in fact to support their claims against the nondiverse defendant. This forces the plaintiff to set forth a credible theory of liability against the nondiverse defendant, which is often difficult. Further, the plaintiff may not be able to challenge the submitted affidavits or evidence with any supporting evidence of their own, which may ultimately lead to a successful removal. In certain situations, if time permits, it may be beneficial to conduct discovery relating to the local party defendant in order to bolster the fraudulent joinder argument.

    Congress created the removal process in order to protect defendants. Courts are well aware that a common strategy for plaintiffs' attorneys is to name local defendants to prevent adjudication against the real targets in a federal forum. "So long as federal diversity jurisdiction exists ... the need for its assertion may well be greatest when plaintiff tries hardest to defeat it." See Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990).

    1 The opinion also suggests that the plaintiffs filed the lawsuit in Alabama state court in order to avoid inclusion in an MDL set up for similar Redux cases in the United States District Court for the Eastern District of Pennsylvania.

    2 28 U.S.C § 1447(d) bars the review of a remand order based on lack of subject matter jurisdiction. However, it does not prevent an appellate court from reviewing the award of costs and fees entered in conjunction with removal arguments.