Does Inclusion of the Store Manager as a Non-Diverse Defendant Prevent Removal?
The Concept of Fraudulent Joinder
By Floyd G. Cottrell, Cottrell Law Group
Removal to United States District Court is often advisable to avoid unfavorable state court venues and obtain other advantages for the defense, such as greater experience in federal court practice. Removal “requires satisfaction of the amount in controversy requirements as well as complete diversity between the parties, that is, every plaintiff must be of diverse State citizenship from every defendant.” In Re Briscoe, 448 F.3d 201, 215 (3d Cir. 2006); 28 U.S.C. §§ 1332(a) and 1441.
Plaintiffs anticipating removal sometimes include a non-diverse defendant such as the manager of the store to defeat removal. Removal can then only occur if the joinder of non-diverse defendants was “fraudulent,” defined as, ”where there is no reasonable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek to join judgment.” Brown v. Jevic, 575 F. 3d 322, 326 (3d Cir. 2009), citing In Re Briscoe, supra. The burden of showing fraudulent joinder is on the removing defendant. Batoff v. State Farm Ins. Co, 977 F.2d 848 (3d Cir. 1992).
However, the burden of persuasion shifts when plaintiff seeks to amend the complaint after removal to add a non-diverse defendant and force a remand to State Court. Many courts follow the 5th Circuit analysis of Hensgen v. Deere & Co, 833 F.F2d 1179 (5th Cir. 1987) identifying the following factors determining whether the amendment should be allowed: (1) whether the purpose of the plaintiff’s motion is to defeat diversity jurisdiction; (2) whether the plaintiff was dilatory in seeking to amend the complaint; (3) whether the plaintiff will be prejudiced if the motion is not granted; and (4) any other equitable factors.
To defense counsel, inclusion of the non-diverse defendant store manager or other store employee solely as a “poison pill” against removal is fairly self-evident, since the store itself is vicariously liable for the employee’s actions and his or her presence in the lawsuit is superfluous. Unfortunately, some courts are tolerant of these machinations.
In determining whether joinder of a non-diverse manager or store employee is fraudulent, most courts follow a test of whether there is “no possibility” of the employee defendant being found negligent. “In order to show that naming a non-diverse defendant is ‘fraudulent joinder’ effected to defeat diversity, the defendant must demonstrate by clear and convincing evidence, either that there has been outright fraud committed in plaintiff’s pleadings, or there is no possibility, based on the pleadings, that a plaintiff can state a cause of action against the non-diverse defendant in State Court.” Fayet v. Target Corp., 201 U.S. Dist. LEXIS 32522 (S.D.N.Y.), citing, Pampillonia v. RJR Nabisco, Inc., 138 F. 3d 459 (2d Cir. 1998); See also, Frontera v. Michaels Stores. Inc., 2019 U.S. Dist. LEXIS 58424(S.D. Fl.); Allen v. Home Depot U.S.A., Inc., 2004 U.S. Dist. LEXIS 20014 (W.D. Tx.)
In some states such as Florida and Texas, the “no possibility” test can satisfied by state law requiring that the employee-defendant directly participate in the tortious conduct. See e.g., Accordino v. Wal-Mart Stores East, L.P., 2005 U.S. Dist. LEXIS 34328 (M.D. Fl.)(fraudulent joinder found where the manager, “… did not personally participate in the events giving rise to the accident, did not have knowledge of the conditions surrounding the accident, and was not present at the Wal-Mart store at the time the accident occurred”); Leitch v. Hornsby, 935 S.W.2d 114, 1996 Tex. LEXIS 166, 40 Tex. Sup. J. 159 (1996).
However, the law in other jurisdictions may not be as favorable. Courts have declined to find joinder fraudulent, notwithstanding that the store manager did not directly participate in the negligence or was even present on the premises where the accident occurred. For example, in Holquin v. Kolh’s Dep’t Store, Inc., 2016 U.S. Dist. LEXIS 30356 (D.N.J.), plaintiff slipped and fell on an advertising sign that fell to the floor of the store. Although the defendant store manager was not on duty at the time of the incident, he had been on duty earlier, which “leaves open the possibility that while (he) was on duty, the store’s signage created a hazardous condition that (he) negligently failed to remedy.” In Ahearn v. BJ’s Wholesale Club, Inc., 2020 U.S. Dist LEXIS 47320 (E.D. Pa.), plaintiff slipped and fell on a liquid on the floor of defendant’s store. The manager was named a defendant although he was not on duty on the day of the accident. The court, nevertheless, found a colorable claim against the manager for, inter alia, failing to train employees and institute safety policies. And in Agostino v. Costco Wholesale Corp, 2021 U.S. Dist. LEXIS 125670 (D.N.J.), plaintiff was permitted to amend the complaint to name the store manager as an additional defendant based on his general duty to provide a safe premises.
The foregoing suggests that the decision to charge fraudulent joinder must be informed by an analysis of the pleadings and plaintiff’s theories of liability; the law of the forum state; and the facts pertaining to the particular non-diverse store manager or employee.