IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 98-30539
_______________
JOHNNY LEROY COBB and MARGARET C. COBB,
Plaintiffs-Appellants,
VERSUS
DELTA EXPORTS, INCORPORATED;
PENN-AMERICAN INSURANCE COMPANY;
and
WASTE MANAGEMENT OF LOUISIANA, L.L.C.,
Defendants-Appellees.
_________________________
Appeals from the United States District Court
for the Western District of Louisiana
_________________________
September 7, 1999
Before JOLLY and SMITH, Circuit Judges, in favor of each defendant. We reverse the
*
and STAGG, District Judge. denial of remand and, accordingly, do not reach
the merits of the summary judgment.
JERRY E. SMITH, Circuit Judge:
I.
Johnny and Margaret Cobb appeal the Johnny Cobb (“Cobb”) was operating his
denial of their motion to remand to state court vehicle on a city street in Lake Charles,
for want of subject matter jurisdiction. In the Louisiana, when a piece of heavy equipment, a
alternative, they appeal the summary judgment “front end loader,” backed into his vehicle,
causing him serious personal injury. The
equipment was operated by an employee of
*
District Judge of the Western District of J&P Logging, Inc. (“J&P”), to remove broken
Louisiana, sitting by designation.
limbs and residue from an ice storm. J&P was state court on the ground that there no longer
performing limb removal pursuant to an was complete diversity of citizenship. The
agreement with Delta Exports, Inc. (“Delta”), district court denied remand, reasoning that
which had been hired by Waste Management Waste Management and the city had been
of Louisiana, L.L.C. (“Waste Management”). fraudulently joined, and their joinder would
The City of Lake Charles had entered into an therefore not destroy federal jurisdiction. The
agreement with Waste Management under court then granted summary judgment in favor
which Waste Management would be of Delta and Penn-American, reasoning that
responsible for cleaning up the debris resulting there was no genuine issue of material fact as to
from the storm. Cobb claims that the lack of whether Delta Exports was liable for the
adequate warning of the work being done actions of J&P's employee, as J&P was an
proximately caused the accident. independent contractor. Finally, the court
granted summary judgment in favor of Waste
The Cobbs sued Delta and its insurer, Penn- Management, concluding that the Cobbs could
American Insurance Co. (“Penn-American”), not establish Waste Management's liability for
both foreign domiciliaries, in state court. the actions of J&P's employee.
Delta and Penn-American removed to federal
court on the basis of diversity of citizenship. II.
The federal court granted the Cobbs’ The Cobbs contend that the district court did
unopposed2 motion to amend their complaint not have the option of joining the non-diverse
to add claims against four other defendants, defendants and then declining to remand; once
two of whichSSthe city and Waste the court permitted joinder, they assert, it was
ManagementSSare Louisiana domiciliaries. bound to remand. The defendants argue that
Supreme Court precedent establishes that diver-
The Cobbs then filed a motion to remand to sity, for jurisdictional purposes, is established at
the time of removal, and the later joinder of dis-
pensable, non-diverse defendants does not de-
2
The Cobbs' attorney wrote the defendants' stroy federal jurisdiction. We agree with the
attorney, explaining: Cobbs that post-removal joinder of non-diverse
defendants pursuant to FED. R. CIV. P. 19
I am in the process of filing this week destroys diversity for jurisdictional purposes
a Motion for Leave of Court to Amend and and requires remand, even when the newly
Supplement the Complaint to add additional joined defendants are not indispensable.
parties, including the City of Lake Charles,
Waste Management, Inc., Jack Gibson d/b/a
A.
J&P Logging and James Wright, who was
The plain language of 28 U.S.C. § 1447(e)
the driver of the front-end loader at the time
of the accident. Pursuant to the local rules,
requires a remand:
I am requesting your consent to file this
motion. I would appreciate it if you could If after removal the plaintiff seeks to
let me know as soon as possible whether you join additional defendants whose joinder
will consent to the motion or whether I would destroy subject matter jurisdiction,
should set it for a hearing. the court may deny joinder, or permit
joinder and remand the action to the
The defendants consented to the amendment.
2
State court. inapplicable here. Under that doctrine, a
federal court may assert diversity jurisdiction
By expressly giving a district court only two when a non-diverse defendant has been
options, this section indicates that the court fraudulently joinedSSi.e., when “either . . . there
may not permit joinder of non-diverse is no possibility that the plaintiff would be able
defendants but then decline to remand, as the to establish a cause of action against the in-state
court did here.2 defendant in state court; or . . . there has been
outright fraud in the plaintiff's pleading of
The legislative history supports this jurisdictional facts.”5 Jernigan v. Ashland Oil,
reading. In adopting the current version of Inc., 989 F.2d 812, 815 (5th Cir. 1993) (citing
§ 1447(e), Congress rejected a version that B., Inc. v. Miller Brewing Co., 663 F.2d 545,
would have permitted district courts to join 554 (Former 5th Cir. Dec. 1981)).
non-diverse defendants and, at their discretion,
retain jurisdiction.3 This history indicates that The fraudulent joinder doctrine does not
Congress must not have intended to permit the apply to joinders that occur after an action is
course of action the district court chose. removed. This court’s caselaw reflects that the
doctrine has permitted courts to ignore (for
Remand is also required by Hensgens v. jurisdictional purposes) only those non-diverse
Deere & Co., 833 F.2d 1179 (5th Cir. 1987), parties on the record in state court at the time
in which we held that the post-removal joinder of removal.6
of a non-diverse, dispensable party destroys
diversity jurisdiction. Indeed, other courts
have opined that § 1447(e), adopted after we 5
See also Burden v. General Dynamics Corp.,
decided Hensgens, is a codification of Hens-
60 F.3d 213, 218 (5th Cir. 1995) (noting that under
gens's holding.4 fraudulent joinder doctrine, court ignores the claims
against non-diverse, fraudulently joined defendants
B. for purposes of determining subject matter
The “fraudulent joinder” doctrine is jurisdiction).
6
See Griggs v. State Farm Lloyds,
2
We rely on the well-known canon of statutory No. 98-20217, 1999 U.S. App. LEXIS 16693 (5th
construction, expressio unius est exclusio Cir. July 20, 1999); Tramonte v. Chrysler Corp.,
alteriusSSor, “the expression of one thing implies 136 F.3d 1025 (5th Cir. 1998); Marathon Oil Co.
the exclusion of another.” See 73 AM JUR.2D v. Ruhrgas, A.G., 145 F.3d 211 (5th Cir. 1998)
Statutes § 211 (1995). (en banc), rev'd on other grounds, 119 S. Ct. 1563
(1999); Rogers v. Hartford Acc. & Indem. Co.,
3
See David D. Siegel, Commentary on 1988 133 F.3d 315 (5th Cir. 1998); Rodriguez v.
Revision of Section 1447, in 28 U.S.C.A. § 1447 Sabatino, 120 F.3d 589 (5th Cir. 1997); Madison v.
(1994) (citing H.R. REP. No. 100-889, 100th Vintage Petroleum, Inc., 114 F.3d 514 (5th Cir.
Cong., 2d Sess., 72-73, reprinted in 1988 1997); In re Excel Corp., 106 F.3d 1197 (5th Cir.
U.S.C.C.A.N. 5982, 6032-33). 1997); Sid Richardson Carbon & Gasoline Co. v.
Interenergy Resources, Ltd., 99 F.3d 746 (5th Cir.
4
See Yniques v. Cabral, 985 F.2d 1031, 1034 1996); Reece v. Wal-Mart Stores, Inc., 98 F.3d 839
(9th Cir. 1993); Heininger v. Wecare Distribs., (5th Cir. 1996), abrogated on other grounds by
Inc., 706 F. Supp. 860, 862 n.4 (S.D. Fla. 1989). (continued...)
3
(...continued)
Murphy Bros., Inc. v. Mitchell Pipe Stringing Inc.,
119 S. Ct. 322 (1999); In re Rodriguez, 79 F.3d
467 (5th Cir. 1996) (Dennis, J., dissenting);
Burden v. General Dynamics Corp., 60 F.3d 213
(5th Cir. 1995); Cavallini v. State Farm Mut. Auto
Ins. Co.,
44 F.3d 256 (5th Cir. 1995); Ford v. Elsbury, 32
F.3d 931 (5th Cir. 1994); Villar v. Crowley
Maritime Corp., 990 F.2d 1489 (5th Cir. 1993);
Jernigan v. Ashland Oil Co., Inc., 989 F.2d 812
(5th Cir. 1993); Asociacion Nacional de
Pescadores v. Dow Quimica de Colombia, S.A.,
988 F.2d 559 (5th Cir. 1993); Harris v. Black
Clawson Co., 961 F.2d 547 (5th Cir. 1992)
(declining to reach fraudulent joinder issue in a
case involving post-removal joinder of non-diverse
defendants); Dodson v. Spiliada Maritime Corp.,
951 F.2d 40 (5th Cir. 1992); LeJeune v. Shell Oil
Co., 950 F.2d 267 (5th Cir. 1992); In re Shell Oil
Co., 932 F.2d 1518 (5th Cir. 1991); In re Shell Oil
Co., 932 F.2d 1523 (5th Cir. 1991); Carriere v.
Sears Roebuck & Co., 893 F.2d 98 (5th Cir.
1990); Laughlin v. Prudential Ins. Co., 882 F.2d
187 (5th Cir. 1989); Alcom Elec. Exchange, Inc.
v. Burgess, 849 F.2d 964 (5th Cir. 1988), abro-
gated on other grounds by United States v.
Cooper, 135 F.3d 960 (5th Cir. 1998); Getty Oil
Co. v. Insurance Co. of N. Am., 841 F.2d 1254
(5th Cir. 1989); East Tex. Mack Sales, Inc. v.
Northwest Acceptance Corp., 819 F.2d 116 (5th
Cir. 1987); Green v. Amerada Hess Corp.,
707 F.2d 201 (5th Cir. 1983); Royal v. State Farm
Mut. Fire & Cas. Co., 685 F.2d 124 (5th Cir.
1982); B., Inc.; Keating v. Shell Chem. Co.,
610 F.2d 328 (5th Cir. 1980); Tedder v. F.M.C.
Corp., 590 F.2d 115 (5th Cir. 1979); Frith v.
Blazon-Flexible Flyer, Inc., 512 F.2d 899 (5th Cir.
1975); Jett v. Zink, 474 F.2d 149 (5th Cir. 1973);
Bobby Jones Garden Apts., Inc. v. Suleski,
391 F.2d 172 (5th Cir. 1968); Jett v. Zink, (...continued)
362 F.2d 723 (5th Cir. 1966); Parks v. New York 251 F.2d 930 (5th Cir. 1958); Finn v. American
Times Co., 308 F.2d 474 (5th Cir. 1962); Fire & Cas. Co., 207 F.2d 113 (5th Cir. 1953);
Covington v. Indemnity Ins. Co. of N. Am., Dudley v. Community Pub. Serv. Co., 108 F.2d 119
(continued...) (5th Cir. 1939).
4
relying on the fraudulent joinder doctrine to
This makes sense: A request to join a party justify its refusal to remand. Indeed, once it
against whom recovery is not really possible permitted joinder of the non-diverse defendants,
and whose joinder would destroy subject the court lost subject matter jurisdiction and
matter jurisdiction (i.e., a request fraudulently thus had no power even to consider whether
to join a party) would never be granted. fraudulent joinder applied.8
Section 1447(e) authorizes a court to permit
or prohibit joinder, and the defendant thus has C.
an opportunity at the time joinder is Contrary to the defendants' assertion, this
considered to prevent joinder by arguing that case is not controlled by Freeport-McMoRan,
there is no colorable claim against the party Inc. v. KN Energy, Inc., 498 U.S. 426 (1991)
the plaintiff is seeking to join. There is no (per curiam). There, a gas seller and its parent
need, then, for a doctrine that ignores parties sued a buyer for breach of contract, basing
who are fraudulently joined after removal, for jurisdiction on diversity. Thereafter, one of the
such parties would never be allowed to plaintiffs transferred its interest to a limited
become defendants in the first place. partnership that was not diverse from the
The district court's confusion likely resulted defendant, and plaintiffs sought leave to amend
from the fact that the term fraudulent joinder to substitute the non-diverse party as a plaintiff
is a bit of a misnomer; in the typical case, the under FED. R. CIV. P. 25(c).9 The district court
fraudulently “joined” party is not joined later, permitted plaintiffs to add the party. After a
but instead is named as a defendant in the verdict for plaintiffs, the court of appeals
original state court complaint to avoid reversed, holding that the suit should have been
removal. The doctrine simply does not apply dismissed because the addition of the non-
to defendants who are joined after an action is diverse party after suit was filed destroyed
removed, for in such cases, the defendants diversity jurisdiction. See Freeport-McMoRan,
have a chance to argue against joinder before Inc. v. KN Energy, Inc., 907 F.2d 1022 (10th
the court grants leave to amend.7 Cir. 1990). The Supreme Court reversed and
held that diversity jurisdiction is not defeated by
Accordingly, the district court erred in the substitution of a non-diverse party. The
Court limited its holding to dispensable parties,
noting that if the party that was added had been
7
The defendants contend it would be un-
reasonable to require them to raise fraudulent join-
der at the time joinder is proposed, for local rules 8
We leave open the question whether the court
indicate that sanctions may be imposed against properly could have exercised its inherent power to
attorneys who, without a good faith basis for doing recall its judgment and withdraw its order permitting
so, withhold consent to amend pleadings to join joinder.
parties. See UNIFORM LA. LOC. R. 7.6W. We
9
note, however, that a local rule prohibiting parties In pertinent part, rule 25(c) provides: “In case
from erecting bad-faith barriers to proposed of any transfer of interest, the action may be
joinders in no way prohibits parties from opposing continued by or against the original party, unless the
the joinder of parties against whom recovery is court upon motion directs the person to whom the
impossibleSSparticularly when the proposed join- interest is transferred to be substituted in the action
der would destroy jurisdiction. or joined with the original party.”
5
indispensable when suit was filed, the addition non-diverse, indispensable defendant was
of the non-diverse party would have defeated joined. See id. at 1096. We indicated,
diversity jurisdiction. however, that had the defendant been a
dispensable party, it would have been error for
The instant defendants rely on a passage in the court to conclude that addition of the party
Freeport-McMoRan explaining that destroyed subject matter jurisdiction. See id.
if jurisdiction exists at the time an action
is commenced, such jurisdiction may not
be divested by subsequent events. . . .
“Jurisdiction once acquired . . . is not
divested by a subsequent change in the
citizenship of the parties. Much less is
such jurisdiction defeated by the
intervention, by leave of court, of a
party whose presence is not essential to
a decision of the controversy between
the original parties.”
Freeport-McMoRan, 498 U.S. at 428 (quoting
Wichita R.R. & Light Co. v. Public Util.
Comm'n, 260 U.S. 48, 54 (1922)). De-
fendants also point to the Freeport-McMoRan
Court's statement that “diversity jurisdiction,
once established, is not defeated by the
addition of a nondiverse party to the action.”
Id. These statements, defendants maintain,
indicate that post-removal joinder of non-
diverse, dispensable defendants does not
destroy diversity jurisdiction, for diversity is
established when an action is commenced.
Defendants conclude that, as there was
complete diversity when the lawsuit was filed,
post-removal joinder of Waste Management
and the city does not destroy diversity
jurisdiction.
Defendants also note that dictum from
Whalen v. Carter, 954 F.2d 1087 (5th Cir.
1991), supports their reading of Freeport-
McMoRan. In Whalen, we held that the
district court did not err in concluding that
diversity jurisdiction was destroyed when a
6
Defendants maintain that the lesson of this Defendants read Freeport too broadly. Con-
dictum is that, while joinder of indispensable, trary to the insinuation in Whalen's dictum,
non-diverse parties destroys jurisdiction, Freeport-McMoRan did not hold that diversity
joining a dispensable, non-diverse party does jurisdiction is unaffected by post-removal join-
not.10 The Cobbs admit that Waste der of dispensable, non-diverse parties pursuant
Management and the city are dispensable to FED. R. CIV. P. 19. Granted, the Freeport-
parties. Accordingly, defendants conclude, the McMoRan Court's broad statement that
law as established in Freeport-McMoRan and “diversity jurisdiction, once established, is not
Whalen is that diversity is not destroyed, and defeated by the addition of a nondiverse party
the court did not err in joining the non-diverse to the action,” 498 U.S. at 429, read in a
parties and then retaining jurisdiction. vacuum, would suggest that the joinder of
Waste Management and the city did not destroy
Defendants also contend that Freeport- diversity. There are good reasons, however, to
McMoRan overruled Hensgens. They point read this broad statement as dictum and to
out that the Hensgens court cited Owen, understand Freeport-McMoRan as limited to
437 U.S. at 374, in support of the proposition the context of an addition under FED. R. CIV. P.
that “addition of a nondiverse party will defeat 25.
jurisdiction.” See Hensgens, 833 F.2d at
1181. In Freeport-McMoRan, the Court First of all, the Freeport Court was faced
stated that “Owen casts no doubt on the with a rule 25 addition, not joinder under
principle established by the cases previously rule 19. Second, to read Freeport-McMoRan
cited that diversity jurisdiction is to be as holding that a court may permit post-
assessed at the time the lawsuit is com- removal joinder of a non-diverse defendant and
menced.” Freeport-McMoRan, 498 U.S. at retain jurisdiction is to understand the Court as
429. Acco rdingly, defendants argue, having overruled § 1447(e), a provision whose
Hensgens, which relied on Owen, is not good plain language and legislative history indicate
law to the extent that it concludes that joinder that a court can do no such thing.
of a non-diverse defendant will destroy
diversity that existed when an action is filed. Courts, of course, may overrule statutes on
constitutional grounds, but the limits of
diversity jurisdiction are determined purely by
10
statute. State Farm Fire & Cas. Co. v.
This view, the defendants note, was adopted Tashire, 386 U.S. 523, 530-31 (1967). Hence,
in Kerr v. Smith Petroleum Co., 889 F. Supp. 892,
the Court must defer to § 1447(e), and in
896 (E.D. La. 1995) (concluding that because
reading Freeport-McMoRan, we should assume
“the[] nondiverse defendants were not indis-
pensable at the time of the filing of th[e] lawsuit,
the Court did so.
their later addition [did] not destroy diversity
jurisdiction . . . .”). But see Sharp v. Kmart Corp., Finally, two other courts of appeals, while
991 F. Supp. 519, 527 (M.D. La. 1998) (holding not directly addressing the issue at hand, have
that case must be remanded if non-diverse, suggested that Freeport-McMoRan's holding is
dispensable defendant is joined by amendment of limited and does not contravene § 1447(e). In
complaint after case has been removed to federal Casas Office Machs. v. Mita Copystar of Am.,
court).
7
42 F.3d 668 (1st Cir. 1994), the court held In Burka v. Ætna Life Ins. Co., 87 F.3d 478
that, when a court permitted substitution of (D.C. Cir. 1996), the court also suggested that
dispensable, non-diverse defendants for Freeport-McMoRan's holding is limited to
fictitious defendants,11 diversity jurisdiction substitutions under rule 25. The Burka court
was destroyed. The court noted Freeport- found that defendants' rule 25(c) motion to
McMoRan's holding but observed that substitute a non-diverse, dispensable party did
“specific legislative directives override the not defeat jurisdiction. See id. at 482. The
general principles announced in these cases” court construed Freeport-McMoRan as “estab-
dealing with diversity jurisdiction. Id. at 674. lish[ing] that the addition of a non-diverse party
The court then cited § 1447(e), which it said pursuant to Rule 25(c) does not deprive the
“relates expressly to joinder.” Id. District Court of subject matter jurisdiction,
and hence does not require remand or dis-
Though the issue before the Casas court missal.” Id. at 480 (emphasis added).
was not joinder but substitution, the court still
held that § 1447(e), not the rule of Freeport- The defendants in Burka had filed a
McMoRan, applied, because “the legislative rule 25(c) motion seeking to substitute a non-
history to [§ 1447(e)] indicates that § 1447(e) diverse, dispensable defendant a week before
applies also to the identification of fictitious the plaintiff sought to join the same non-diverse
defendants after removal.” Id. In other defendant pursuant to rule 19. The plaintiffs
words, the Casas court reasoned that argued that joinder under rule 19 would destroy
Freeport-McMoRan's rule was extremely diversity and that the case should be remanded
narrow, applying only to rule 25 substitutions pursuant to § 1447(e). They also argued that
that do not involve the mere identification of even if the court did allow defendants' earlier
fictitious parties. motion under rule 25(c), that rule triggered the
application of the remand provision set forth in
If § 1447(e), not Freeport-McMoRan, ap- § 1447(e).
plies to a subset of substitutions that are
mentioned only in the provision's legislative The Burka court did not accept this latter
history, then, a fortiori, the provision's text argument but held, instead, that a rule 25(c)
must trump Freeport-McMoRan. That text transfer-of-interest-based substitution is not a
expressly addresses post-removal joinder of form of “joinder” within the meaning of
parties under rule 19, and it is thus a “specific § 1447(e). It also concluded that the addition
legislative directive[] [that] override[s] the of the non-diverse defendant in that case was
general principles announced in [Freeport- under rule 25(c), not rule 19. Accordingly,
McMoRan].” Id. § 1447(e) did not require remand. The
implication is that, had the addition occurred
pursuant to rule 19, § 1447(e) would have
11
That the fictitious defendants might have been required a remand. Burka's reasoning, then,
non-diverse was properly disregarded when the supports the view that Freeport-McMoRan is
case was initially removed to federal court on limited to rule 25 substitutions and that post-
diversity grounds, for 28 U.S.C. § 1441(a) pro- removal joinders, whether dispensable or
vides that “[f]or purposes of removal . . ., the indispensable, are controlled by § 1447(e).
citizenship of defendants sued under fictitious
names shall be disregarded.”
8
For the foregoing reasons, we decline to
read Freeport-McMoRan as broadly as the
defendants do. Its holding does not overrule
Hensgens or § 1447(e), both of which suggest
that the district court erred in permitting
joinder of Waste Management and the city and
then declining to remand. We therefore
REVERSE the court's order denying remand,
and we REMAND with instructions to remand
to state court.
9