Fraudulent Removal
Fraudulent Removal and Multidistrict Litigation
Mass torts often involve multiple categories of defendant. The opioid litigation involved manufacturers, distributors, retailers, and doctor-intermediaries. Similarly, a drug or device case might involve both the product’s manufacturer and distributor, as well as the sales representative, the doctor-intermediary, and in the case of a device, the facility where it was implanted. Since doctors and sales representatives lack the resources of multi-billion-dollar corporations and therefore do not monitor dockets to be ready to snap remove any and all state suits against them, it is often possible to sue and serve them first. Once such a forum-state-defendant has been sued and served, the foreign manufacturer and distributor defendants can then be added as parties, and they cannot then remove the suit to federal court.
At this juncture, the foreign defendant has another trick up its sleeve: the fraudulent joinder doctrine. Recall that under the federal removal statute, the forum-state-defendant rule only applies if that defendant is properly joined.[1] If such a defendant can be shown to have been improperly joined, then the action may still be removed.
In the Third Circuit, a defendant is fraudulently joined 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.’”[2]
In the Johnson & Johnson Talcum Powder MDL,[3] for example, one of the transferred plaintiffs had named Rite Aid, a non-diverse retailer, as a defendant in her suit. Accordingly, the plaintiff moved to remand her case, and the court granted the motion to remand.[4]
If an action includes both state-law causes of action and causes of action created by federal law (causes of action arising under a federal statute, the U.S. Constitution, or a treaty—federal questions, in other words), the entire action is removable.[5] But once removed, the court is required to sever the non-federal claims and remand them to state court.[6]
In an irony lost to removing defendants (and often the courts), the doctor or hospital that a manufacturer will claim was fraudulently joined as a defendant is the very same doctor or hospital the manufacturer will claim was a learned intermediary later in the suit. Of course, if the doctor is a learned intermediary, and the manufacturer properly warned them, then it is still possible that the intermediary’s poor communication to the patient constitutes professional malpractice, meaning that they would have been a proper defendant from the beginning, and were not improperly joined at all. At the same time, it bears noting that state law varies on the availability of causes of action against retailers, sales representatives, or others.[7]
[1] 28 U.S.C. § 1441(b)(2).
[2] Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 32 (3d Cir. 1985) (quoting Goldberg v. CPC International, 495 F. Supp. 233, 239 (N.D. Cal. 1980)).
[3] In re Johnson & Johnson Talcum Powder Products Marketing, Sales Practices and Products Litigation, 2018 WL 4771908 (D.N.J. 2018).
[4] 2018 WL 4771908, at *1.
[5] 28 U.S.C. § 1441(c)(1). Cf. 28 U.S.C. § 1367(a) (creating supplemental jurisdiction over state-law claims “that are so related to [federal question] claims . . . that they form part of the same case or controversy under Article III of the United States Constitution.”). But cf. 28 U.S.C. § 1367(b) (denying supplemental jurisdiction over state-law claims brought by plaintiffs against defendants made parties under Rules 14 (third-party practice), 19 (compulsory joinder), 20 (permissive joinder), and 24 (intervention) where the only basis for federal subject-matter jurisdiction is diversity).
[6] 28 U.S.C. § 1441(c)(2). And note that only defendants against whom federal causes of action are raised must consent to removal. 28 U.S.C. § 1441(c)(2).
[7] In Texas, for example, under normal circumstances a retailer is not liable in a products liability action simply because they sold the product. See Tex. Civ. Prac. & Rem. Code § 82.003(a).