United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS August 7, 2003
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
No. 02-60782
KELLI SMALLWOOD,
Plaintiff-Appellant,
versus
ILLINOIS CENTRAL RAILROAD COMPANY; MISSISSIPPI DEPARTMENT OF
TRANSPORTATION,
Defendants-Appellees.
Appeal from the United States District Court
For the Southern District of Mississippi
Before KING, Chief Judge, and HIGGINBOTHAM, and STEWART, Circuit
Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
A locomotive operated by Illinois Central Railroad Company
(Illinois Central) injured Kelli Smallwood when it struck the
automobile in which she was traveling. The accident occurred at a
Mississippi Department of Transportation (MDOT) railroad crossing
in Florence, Mississippi. At the time of the accident the crossing
did not have automatic gates, but was equipped with automatic,
flashing warning lights which had been installed using federal
funds.
Smallwood filed suit in Mississippi state court alleging
negligence claims against Illinois Central and MDOT. The complaint
averred that MDOT negligently failed to install gates at the
crossing despite its knowledge that the crossing was unreasonably
dangerous and extraordinarily hazardous. It also alleged that MDOT
had more than six months before the accident authorized and
directed Illinois Central to construct gates at the crossing, and
the Federal Highway Administration had approved of this
installation and allowed federal funding to be used for it, but
MDOT and the railroad had negligently delayed in installing the
gates.
Illinois Central removed the case to federal court on the
basis of diversity jurisdiction and fraudulent joinder.1 It
asserted that Smallwood’s joinder of MDOT as a defendant was
fraudulent because she could state no claim against MDOT, since the
Federal Railroad Safety Act (FRSA)2 preempted her claims against
it.3 The district court agreed, denying Smallwood’s motion to
1
Illinois Central is a citizen of Illinois, and Smallwood is
a citizen of Mississippi. Illinois Central argued that for
purposes of diversity jurisdiction the district court should ignore
MDOT’s presence because it was fraudulently joined.
2
49 U.S.C. §§ 20101-20153.
3
Illinois Central argued that the principles of conflict
preemption, not complete preemption, applied. Since it did not
allege complete preemption, it did not remove on the basis of
federal question jurisdiction, because the well-pleaded complaint
rule would have precluded removal on that ground. See infra note
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remand and later dismissing MDOT from the case.4 As the only
remaining defendant in the suit, Illinois Central then moved for
summary judgment on the basis that the FRSA also preempted
Smallwood’s claim against it. The district court granted the
motion and entered judgment in favor of the railroad.
Smallwood has timely appealed, urging error in the denial of
her motion to remand and the dismissal of MDOT. We conclude that
the trial judge erred in finding that MDOT was fraudulently joined,
and vacate the judgment and remand this case to the district court
53.
4
With regard to the delay-in-installation claim, the district
court’s fraudulent joinder determination rested not only on its
finding that the FRSA preempted all of Smallwood’s claims, but also
on its conclusion that Smallwood “did not satisfy her burden of
showing that” MDOT had directed Illinois Central to install
automatic gates at the crossing. However, as we recently reminded,
it is the removing party’s burden to show that “there is absolutely
no possibility that the plaintiff will be able to establish a cause
of action against the non-diverse defendant in state court.”
Travis v. Irby, 326 F.3d 644, 647 (5th Cir. 2003) (internal
quotation marks and italics omitted). Since Illinois Central, the
removing defendant, bore the burden of proving that Smallwood had
fraudulently joined MDOT, it was required to “put forward evidence
that would negate a possibility of liability on the part of” MDOT.
Id. However, Illinois Central has pointed to no evidence it
proffered to the district court contradicting Smallwood’s assertion
that MDOT authorized and directed Illinois Central to install
automatic gates at the crossing. “[S]imply pointing to the
plaintiff’s lack of evidence at this stage of the case is
insufficient to show that there is no possibility for [Smallwood]
to establish [MDOT’s] liability at trial.” Id. at 650-51. The
district court therefore reversed the burden of proof in concluding
that Smallwood “did not satisfy her burden of showing that” MDOT
“was not fraudulently joined.” The only other basis for the
district court’s fraudulent joinder finding was its conclusion that
the FRSA preempted Smallwood’s claims against MDOT.
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with instruction to remand it to the state court from which it was
removed.
I
Smallwood argues that there was no fraudulent joinder and
therefore the district court erred in refusing to remand the case.
We review de novo the district court’s order denying Smallwood’s
motion to remand and its decision that MDOT was fraudulently
joined.5 The removing party bears the burden of establishing
fraudulent joinder, and can do this either by showing “(1) actual
fraud in the pleading of jurisdictional facts, or (2) inability of
the plaintiff to establish a cause of action against the non-
diverse party in state court.”6 The district court found
fraudulent joinder because it determined that Smallwood could not
establish her claims against MDOT in state court. Such a finding
of fraudulent joinder can stand only if the plaintiff has no
possibility of recovery against that defendant.7 “If there is
arguably a reasonable basis for predicting that the state law might
impose liability on the facts involved, then there is no fraudulent
joinder. This possibility, however, must be reasonable, not merely
5
Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co.,
313 F.3d 305, 311 (5th Cir. 2002).
6
Travis v. Irby, 326 F.3d 644, 647 (5th Cir. 2003).
7
Id. at 648.
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theoretical.”8
In determining fraudulent joinder, a trial judge may “pierce
the pleadings” and consider summary judgment-type evidence in the
record.9 However, the court “must also take into account all
unchallenged factual allegations, including those alleged in the
complaint, in the light most favorable to the plaintiff” and
resolve any contested issues of fact and legal ambiguities in the
plaintiff’s favor.10 “The burden of persuasion on those who claim
fraudulent joinder is a heavy one.”11
II
Relying on Chesapeake & Ohio Railway Co. v. Cockrell12 and
Boyer v. Snap-On Tools Corp.,13 Smallwood argues that there was no
fraudulent joinder because its only basis was MDOT’s federal
preemption defense, which was also asserted as a defense by
Illinois Central, the diverse defendant. In Cockrell, an
administrator of an estate, who resided in Kentucky, had filed suit
in a state court of Kentucky against a Virginia railway company and
8
Id. (italics and internal quotation marks omitted).
9
Id. at 649.
10
Id.
11
Id.
12
232 U.S. 146 (1914).
13
913 F.2d 108 (3d Cir. 1990).
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an engineer and fireman who both lived in Kentucky.14 The suit
sought to recover damages for the death of the administrator’s
intestate, who was struck by a train.15 The railway company
attempted to remove the case to federal court on the basis that the
plaintiff had fraudulently joined the railway employees to defeat
federal jurisdiction.16 The state court, declining to surrender its
jurisdiction, proceeded to a trial and entered judgment against the
company, which the state court of appeals affirmed.17
The Supreme Court granted certiorari to determine “whether it
was error thus to proceed to an adjudication of the cause
notwithstanding the company’s effort to remove it into the Federal
court.”18 It concluded that the trial court had not erred in
rejecting the railway company’s fraudulent joinder argument, which
consisted of the short and plain statement that “the charges of
negligence ... against the defendants were each and all ‘false and
untrue and were known by the plaintiff, or could have been known by
the exercise of ordinary diligence, to be false and untrue....’”19
It reached this conclusion on the basis that the plaintiff’s
14
232 U.S. at 150.
15
Id. at 149-50.
16
Id. at 150-51.
17
Id. at 150.
18
Id.
19
Id. at 151.
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negligence allegations against the railway employees applied with
equal force to the company, which was only liable if the employees
were also liable.20 The Court reasoned that although the
plaintiff’s petition “may have disclosed an absence of good faith
on the part of the plaintiff in bringing the action at all, ... it
did not show a fraudulent joinder of the engineer and fireman.”21
Since “no negligent act or omission personal to the railway company
was charged, and its liability, like that of the two employees,
was, in effect, predicated upon the alleged negligence of the
latter,” the fraudulent joinder allegations “manifestly went to the
merits of the action as an entirety, and not to the joinder; that
is to say, it indicated that the plaintiff’s case was ill founded
as to all the defendants.”22 The Court concluded:
Plainly, this was not such a showing as to engender or
compel the conclusion that the two employees were
wrongfully brought into a controversy which did not
concern them. As they admittedly were in charge of the
movement of the train, and their negligence was
apparently the principal matter in dispute, the plaintiff
had the same right, under the laws of Kentucky, to insist
upon their presence as real defendants as upon that of
the railway company. We conclude, therefore, that the
petition for removal was not such as to require the state
court to surrender its jurisdiction.23
20
Id. at 152-53.
21
Id. at 153.
22
Id.
23
Id. at 153-54; see also Chi., Rock Island & Pac. Ry. Co. v.
Whiteaker, 239 U.S. 421, 425 (1915) (relying on Cockrell to reject
the defendant railway’s argument that the plaintiff had
fraudulently joined the defendant train conductor to defeat
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Smallwood argues that Cockrell applies to her case because she
alleged that Illinois Central and MDOT were jointly and severally
liable for her injury, and the railroad’s contention that her claim
against MDOT is preempted by the FRSA is in actuality not a claim
that MDOT has been fraudulently joined but instead an assertion
that her case is “ill founded as to all the defendants.” She
asserts that preemption of her claims is a merits determination for
a Mississippi state court to make.
Smallwood also relies upon the Third Circuit’s decision in
Boyer v. Snap-On Tools Corp.,24 in which the plaintiff, a former
dealer of Snap-On Tools, filed suit in Pennsylvania state court
against the company and two of its employees, alleging, inter alia,
that they had misrepresented the profitability of the dealership,
the risk of failure, and the amount of capital needed to begin a
dealership.25 The defendants urged that Boyer had signed a release
waiving any and all claims arising out of the plaintiff’s
dealership.26 The parties lacked diversity because the plaintiff
and the employee defendants resided in Pennsylvania, although the
diversity jurisdiction); Ill. Cent. R.R. Co. v. Sheegog, 215 U.S.
308, 316 (1909) (rejecting the defendants’ fraudulent joinder
argument because “the joinder could not be fraudulent in a legal
sense on any ground except that the charge against [the diverse
defendant] was fraudulent and false”).
24
913 F.2d 108, 109-10 (3d Cir. 1990).
25
Id.
26
Id. at 110.
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company was a Delaware corporation with its principal place of
business in Wisconsin.27 Still, the defendants removed the case to
federal court on the basis of diversity jurisdiction and fraudulent
joinder, contending that the plaintiff had no colorable claim
against the employee defendants because of the release.28
The district court denied the plaintiff’s motion to remand on
the basis of the release and granted summary judgment to both Snap-
On and the employee defendants on that same ground.29 The Third
Circuit reversed, reasoning that in addressing the fraudulent
joinder question it need not decide whether the release applied to
the claims against the employee defendants because “that issue ...
[was] equally applicable to Snap-On”;30 “ultimately, this is what
the district court decided when it granted summary judgment” in
favor of all of the defendants based on the release.31 The Boyer
court explained, “in the guise of deciding whether the joinder was
fraudulent,” the district court “stepped from the threshold
jurisdictional issue into a decision on the merits.”32
Boyer cited Cockrell and reasoned that, as in Cockrell, all of
27
Id. at 109.
28
Id. at 110.
29
Id.
30
Id. at 112.
31
Id.
32
Id.
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the defendants had raised the same dispositive defense based on the
release, and the plaintiff’s arguments that the release was invalid
“involve identical legal and factual issues applicable to the
individual defendants and Snap-on.”33 That court concluded:
[W]here there are colorable claims or defenses asserted
against or by diverse and non-diverse defendants alike,
the court may not find that the non-diverse parties were
fraudulently joined based on its view of the merits of
those claims or defenses. Instead, that is a merits
determination which must be made by the state court.34
Several district courts across the country have applied identical
reasoning in refusing to find fraudulent joinder where the only
basis for the claim is a defense equally applicable to all of the
defendants, diverse and nondiverse.35
33
Id. at 112-13.
34
Id. at 113; cf. 14B CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE &
PROCEDURE § 3721 (3d ed. Supp. 2003) (“[T]he defendant may not use
removal proceedings as an occasion to adjudicate the substantive
issues of a case. Thus, a nondiverse codefendant may not remove a
case to federal court on the theory that because it was not liable
to the plaintiff, it should be disregarded for removal jurisdiction
purposes. In such a situation, the question of the defendant's
liability should be adjudicated in the state forum and not, de
facto, in the context of procedures such as removal.”).
35
See, e.g., Lovell v. Bad Ass Coffee Co. of Hawaii, Inc., 103
F. Supp. 2d 1233, 1237 (D. Haw. 2000) (“There is a distinction ...
between a complete lack of a cause of action against a sham
defendant and an inquiry as to whether those defendants could
propound defenses to an otherwise valid cause of action. A finding
of fraudulent joinder is improper if the defendant’s assertions go
to the merits of the action as an entirety, and not to the joinder;
that is to say, it indicated that the plaintiff’s case was ill
founded as to all the defendants.” (internal quotation marks
omitted)); Cheskiewicz ex rel. Cheskiewicz, No. 02-3583, 2002 WL
1880524, at *3 (E.D. Pa. Aug. 15, 2002) (“[T]he defendants’
arguments about the effect of the Vaccine Act on plaintiffs’ claims
are not unique to ... the non-diverse defendants, but are instead
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Illinois Central and MDOT reply that we have allowed
fraudulent joinder claims to be premised on the validity of the
nondiverse defendants’ affirmative defenses and that we have also
refused to remand a case on the basis of the common defense theory.
Although we have before looked to the validity of a nondiverse
party’s affirmative defenses in determining whether that party was
fraudulently joined, we did not confront, much less decide, whether
defenses common to diverse and nondiverse defendants could serve as
the basis for a claim of fraudulent joinder.36
MDOT and the railroad argue that Dudley v. Community Public
general to all removing defendants. Each is a manufacturer of a
vaccine or Thimerosal having allegedly impacted the plaintiffs, and
each will have the same opportunity to assert the Vaccine Act as a
defense to plaintiffs’ claims. However meritorious those defenses
may be, they are not unique to the non-diverse parties. Their
disposition is a merits determination which must be made by the
state court.” (internal quotation marks omitted)).
We do not address today the situation in which a defense is
not common to all defendants.
36
Sid Richardson Carbon & Gasoline Co. v. Interenergy Res.,
Ltd., 99 F.3d 746, 753 (5th Cir. 1996) (“Having concluded that Sid
Richardson successfully stated a claim for breach of contract and
corporate disregard, we turn to the affirmative defenses raised by
the [nondiverse] defendants. Should the defendants prevail on any
of these defenses, it necessarily follows that joinder was
fraudulent, and the district court properly exercised its removal
jurisdiction. On the other hand, if there is any possibility that
Sid Richardson might survive the affirmative defenses, we must
vacate for remand to state court.”). In that case we had no need
to broach the issue whether a defense equally applicable to all
defendants could not serve as the basis for a fraudulent joinder
argument because we found that the motion to remand should have
been granted on the alternative basis that, even considering the
defenses raised by the defendants, they did not preclude the
plaintiff’s claim. Id. at 753-57.
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Service Co. decided the question.37 Dudley held that the district
court erred in denying the plaintiffs’ remand motion, reasoning
that a Texas law did not apply to prohibit the plaintiffs’ claims
against the nondiverse defendant.38 The plaintiffs, the widow and
dependent of a deceased electric company employee who had been
electrocuted on the job, had sued the company and the deceased’s
superintendent for gross negligence.39 The superintendent and the
plaintiffs both lived in Texas, while the company was a citizen of
Delaware.40 Nevertheless, the company removed the case to federal
court on the basis of diversity jurisdiction, arguing that the
plaintiffs had fraudulently joined the superintendent because the
Texas Workmen’s Compensation Law acted as a defense to the
plaintiffs’ claims against the employee.41 The court rejected this
contention, finding that the law allowed an action against the
superintendent for exemplary damages.42
The company never claimed that the Compensation Law barred the
plaintiffs’ claims against it. Instead, we explained that the
company contended that the law blocked any action against “a co-
37
108 F.2d 119 (5th Cir. 1939).
38
Id. at 123.
39
Id. at 120-21.
40
Id. at 120.
41
Id. at 121.
42
Id. at 122-23.
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employe[e] for injury or death” so “there could be no right of
action against” the superintendent.43 The only indication that the
Compensation Law could be applied to defeat the plaintiffs’ claims
against both defendants is the court’s statement that if section
three of the law, which provided that employees of a company
falling within the scope of the law had no right of action against
their employer or co-employees for personal injuries, were read in
isolation of the other sections, “Dudley’s representatives could
sue neither [the superintendent] nor the common employer.”44
However, the court quickly added that section five allowed a
plaintiff to recover exemplary damages from an employer for
personal injuries.45 Thus, the only question was whether the law
also allowed exemplary damages against a co-employee. The court
found that the law did allow such damages, and that therefore the
defendant superintendent was not fraudulently joined.46
The only other case Illinois Central and MDOT rely upon in
asserting that we must reject the common defense theory is a
District of Colorado case, Frontier Airlines, Inc. v. United Air
Lines, Inc.47 The Frontier court found fraudulent joinder on the
43
Id. at 121.
44
Id.
45
Id. at 122.
46
Id.
47
758 F. Supp. 1399 (D. Colo. 1989).
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basis of the defendants’ common conflict preemption defense and
applied its preemption analysis to the plaintiff’s claims against
the diverse defendant.48 However, the opinion does not consider
Cockrell or Boyer. Indeed, the plaintiff apparently did not argue
that fraudulent joinder could not be based on the common preemption
defense.49
Illinois Central and MDOT have cobbled together no reasoned
support for their position, which is contrary to the Supreme
Court’s century-old command in Cockrell that the fraudulent joinder
allegations be directed toward the joinder, not to “the merits of
the action as an entirety.” Moreover, it contravenes the purpose
48
Id. at 1411.
49
Although not cited by MDOT and Illinois Central, Ritchey v.
Upjohn Co., 139 F.3d 1313 (9th Cir. 1998), also supports their
argument. There the Ninth Circuit found fraudulent joinder because
the claims against the nondiverse defendants were barred by the
statute of limitations. Id. at 1319-20. It did so despite the
fact that the same statute of limitations defense applied to bar
the claim against the diverse defendant. Id. at 1320. However,
the Ritchey court acknowledged the awkwardness of applying a common
defense to find fraudulent joinder:
We recognize that it is, perhaps, slightly peculiar to
speak of [the nondiverse defendants] as sham defendants
because the statute of limitations bars a claim against
them, when that would seem to lead to an argument that
[the diverse defendant] itself is a sham defendant
because the statute of limitations has also run against
it. Nevertheless, the fact is that [the plaintiff] did
not state a cause of action against anyone, and his
failure to state that cause of action against [the
nondiverse defendants] demonstrates beyond peradventure
that they were sham defendants for purposes of removal.
Id.
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of the fraudulent joinder doctrine, which is to prevent a plaintiff
from naming a nondiverse party as a defendant solely for the
purposes of depriving the court of jurisdiction.50
III
Reference to traditional removal rules and principles persuade
that the Boyer court’s holding, based on Cockrell, is necessary to
prevent erosion of the well-pleaded complaint rule and serves the
federal-state balance. The well-pleaded complaint rule bars
removal on the basis of federal question jurisdiction unless that
jurisdiction is evident from the face of the complaint.51 A federal
defense then does not give a defendant the right to remove:
“[S]ince 1887 it has been settled law that a case may not
be removed to federal court on the basis of a federal
defense, including the defense of preemption, even if the
defense is anticipated in the plaintiff’s complaint, and
even if both parties admit that the defense is the only
question truly at issue in the case.”52
It is true that complete preemption acts as a narrow exception to
the well-pleaded complaint rule, but neither Illinois Central nor
MDOT disputes that it is conflict preemption, not complete
50
See 15 MOORE’S FEDERAL PRACTICE § 102.21[5][a] (James Wm. Moore
et al., eds., 3d ed. 1998).
51
Terrebonne Homecare, Inc. v. SMA Health Plan, Inc., 271 F.3d
186, 188 (5th Cir. 2001).
52
Roark v. Humana, Inc., 307 F.3d 298, 304 (5th Cir. 2002)
(quoting Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463
U.S. 1, 13-14 (1983)).
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preemption, which is at issue here.53
Because Illinois Central claims only conflict preemption, it
is not entitled, under the well-pleaded complaint rule, to a
federal forum for its resolution.54 If Illinois Central had removed
on the basis of federal question jurisdiction, pointing to a
federal defense, the district court could not have “resolve[d] the
dispute regarding preemption,” and would have “lack[ed] power to do
anything other than remand to the state court where the preemption
issue [could] be addressed and resolved.”55 We, like the Third
Circuit, recognize that “[s]tate courts are competent to determine
whether state law has been preempted by federal law, and absent
complete preemption, they must be permitted to perform that
53
Complete preemption occurs when a federal statute has a
“preemptive force ... [that] is so powerful as to displace entirely
any state causes of action.” Id. at 305 (internal quotation marks
omitted). If “a federal cause of action completely preempts a
state cause of action, any complaint that comes within the scope of
the federal cause of action necessarily arises under federal law.”
Id. (internal quotation marks omitted). Such an action is excepted
from the well-pleaded complaint rule and confers original and
removal jurisdiction. Id.
On the other hand, conflict preemption, also known as ordinary
preemption, fails to establish federal question jurisdiction.
“Rather than transmogrifying a state cause of action into a federal
one – as occurs with complete preemption – conflict preemption
serves as a defense to a state action.” Giles v. NYLCare Health
Plans, Inc., 172 F.3d 332, 337 (5th Cir. 1999). The well-pleaded
complaint rule prevents a defendant from removing simply on the
basis of conflict preemption. Roark, 307 F.3d at 305.
54
Roark, 307 F.3d at 305.
55
Giles, 172 F.3d at 337.
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function with regard to state law claims brought before them.”56
Regardless of whether it intended to, Illinois Central
circumvented this limit on removal jurisdiction by removing on the
basis of its conflict preemption defense but clothing it in a claim
of diversity jurisdiction and fraudulent joinder. It successfully
convinced the district court to decide the preemption question,
which if Illinois Central had removed the case on the basis of
federal question jurisdiction the court would have had no power to
do, in the guise of determining whether MDOT, the non-diverse
party, had been fraudulently joined. This use of fraudulent
joinder frustrates the overarching principle of the well-pleaded
complaint rule, that state courts are equally competent to decide
federal defenses.
IV
We conclude that the district court erred in denying
Smallwood’s motion to remand and in dismissing MDOT as a party,
vacate the judgment in favor of Illinois Central, and remand the
case to the district court with instruction to remand it to the
state court from which it was removed. It is for Mississippi state
courts to decide the merits of MDOT and Illinois Central’s common
preemption defense.
VACATED and REMANDED.
56
Goepel v. Nat’l Postal Mail Handlers Union, 36 F.3d 306, 316
(3d Cir. 1994) (internal quotation marks omitted).
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