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A deeply divided 5th U.S. Circuit Court of Appeals, sitting en banc, recently handed down a decision that limits federal trial judges’ ability to consider certain suits removed from state courts to federal courts based on claims of improper joinder. Since the purpose of an improper joinder inquiry is to determine whether the in-state defendant was properly joined in a case, the focus of the federal district judge’s inquiry “must be on the joinder, not the merits of the plaintiffs’ case,” Judge Patrick Higginbotham wrote for the 5th Circuit majority in Kelli Smallwood v. Illinois Central Railroad Co., Mississippi Department of Transportation (MDOT). The decision, issued on Sept. 10 and revised on Sept. 23, marks the first time that the entire court has addressed the issue of improper joinder of defendants in remand situations. The federal removal statute, 28 U.S.C. 1441, allows the removal of a civil action brought in a state court if jurisdiction over the case can be established in federal district court. A defendant can establish federal court diversity jurisdiction by proving that an in-state defendant was improperly joined in the case to keep the case in state court although no viable claim existed against that defendant. The holding in Smallwood is “narrow” and applies only to a limited range of cases in which the allegation of improper joinder rests on a showing that there is no reasonable possibility that state law would allow the plaintiff to recover against the in-state defendant and that showing also would apply to all defendants, Higginbotham wrote in the opinion. Tommy Jacks, a plaintiffs attorney and partner in Mithoff & Jacks in Austin, Texas, who is not involved in Smallwood, says the fact that the 5th Circuit chose such a narrow point to address remand issues for the first time signals that the court is trying to make a larger point. Jacks says it seems that the majority’s decision constitutes an effort “to put a leash on federal district judges” with regard to how aggressive they can be in addressing cases that come before them based on claims of improper joinder. The 5th Circuit majority is saying that a federal district court first must examine the joinder issue and determine if the court has jurisdiction before looking at any issue that has to do with the merits of the case, Jacks says. “If you go beyond that, you’ve gone too far,” he says. But in a dissenting opinion, Judge E. Grady Jolly wrote that the majority “designs a troublesome and unnecessary ‘common-defense’ rule to amend a long established and fairer rule.” Judges Edith Jones, Jerry Smith, Rhesa Barksdale, Emilio Garza and Edward Prado joined Jolly in the dissent. Judge Edith Brown Clement issued a separate opinion in which she concurred in the judgment only and dissented from part of its reasoning. Smith also wrote a separate dissenting opinion in which, among other things, he took the majority to task for a change in nomenclature on the joinder issue. “[I]n a remarkable showing of euphemistic chutzpah, the majority has renamed ‘fraudulent joinder’ as ‘improper joinder,’ upsetting decades of nomenclature without apparent reason,” Smith wrote. Kelly Simpkins, an attorney for one of the defendants in Smallwood, says the 5th Circuit traditionally has used an objective test to determine fraudulent joinder. If an out-of-state defendant who removes a case to federal court shows there is no possibility for the plaintiff to recover from the in-state defendant, the inquiry stops there, Simpkins says. The majority’s decision will cause federal district courts to evaluate a plaintiff’s claims against an out-of-state defendant to determine whether an in-state defendant properly was included in a case, he says. “Rather than avoiding an evaluation of the merits, this will cause a [federal] district court to probe deeper,” says Simpkins, attorney for the Mississippi DOT and a partner in Wells, Marble & Hurst in Jackson, Miss. Rocky Rhodes, a South Texas College of Law associate professor who teaches courses on civil procedure and the federal courts, says the Smallwood majority embraces the principles of federalism and allows state courts to decide whether cases are without merit and should be dismissed. “The decision by the majority is in accordance with the principles of federalism and respect between state and federal courts,” Rhodes says. “They are giving state courts every chance to handle the cases, which is consistent with what a conservative court does,” Longview, Texas, solo Frank Supercinski, a plaintiffs attorney not involved in the case, says of the judges who make up the Smallwood majority. But Dana Livingston Cobb, a partner in the Austin office of Alexander Dubose Jones & Townsend, which represents plaintiffs and defendants, says, “Upon remand from federal court, a state trial court may be understandably confused about what effect it should give a federal district court’s holding that there was no fraudulent joinder of the in-state defendant, only a lawsuit lacking in merit,” says Cobb, who is not involved in the case. In his dissenting opinion, Smith wrote that the majority’s decision leaves a state court free to ignore a federal court’s conclusions on the merits in a case. “The majority thus unnecessarily and unwittingly creates friction between state and federal jurisdictions,” Smith wrote in dissent. RELYING ON ‘COCKRELL’ According to the majority opinion, Smallwood, a Mississippi resident, was injured when a train operated by Illinois Central struck her car at a railroad crossing equipped with warning lights but without automatic gates to prevent vehicles from crossing the tracks when a train was coming. George Ritter, an attorney for Illinois Central, says Smallwood sued the railroad company and MDOT, which controlled the crossing, in the Rankin County Circuit Court in Mississippi. Ritter, a shareholder in Wise, Carter, Child & Caraway in Jackson, says his client removed the case to the U.S. District Court for the Southern District of Mississippi. According to the 5th Circuit’s majority opinion, Illinois Central contended that the Federal Railroad Safety Act (FRSA) pre-empted Smallwood’s claim against MDOT. The railroad argued that Smallwood had improperly joined MDOT because, under the FSRA, she had no reasonable possibility of recovering damages against the state agency — a contention Smallwood disputed. Pat Barrett Jr., Smallwood’s attorney, says his client alleges that Illinois Central and MDOT negligently delayed installation of the gates at the railroad crossing. Barrett, a principal in the Barrett Law Offices in Lexington, Miss., says the FRSA may pre-empt direct signalization claims if certain criteria are present. “But negligent delay claims are a horse of a different color,” he says. According to the majority opinion, the federal district court dismissed MDOT from the suit and denied Smallwood’s motion to remand the case to state court. The federal district court then granted Illinois Central’s summary judgment motion on the basis that the FSRA also pre-empted Smallwood’s claim against the railroad. A 5th Circuit panel — made up of Higginbotham, Chief Judge Carolyn Dineen King and Judge Carl Stewart — concluded last year that Illinois Central had not met its burden that the joinder of MDOT was fraudulent, reversed the district court’s dismissal of the case and ordered the case remanded to state court. Simpkins says the whole court voted to consider the case after the defendants petitioned for a rehearing en banc. To justify removing the case to federal district court on the ground of improper joinder, Illinois Central was required to show that the joinder of MDOT was improper, but argued instead that Smallwood could not recover on its claims against the state agency, according to the majority opinion. With jurisdiction in federal court secured, Illinois Central directed the same presumption to the merits of Smallwood’s claims against the railroad, Higginbotham wrote in the opinion. The majority cited the U.S. Supreme Court’s 1914 decision in Chesapeake & Ohio Railway Co. v. Cockrell, in which the high court considered whether a railroad engineer and a firefighter, in-state defendants who controlled a train when a death occurred, had been fraudulently joined in the suit against the railroad. Although the Supreme Court held that the plaintiff might have shown an absence of good faith in bringing an action in which each and all charges were “false and untrue,” that showing did not prove fraudulent joinder of the in-state defendants. “What you have is not improper joinder, but an improper lawsuit,” Rhodes says. Rhodes says the Smallwood majority is saying that the case should go back to state court, which will decide whether the suit has merit. The U.S. Congress has not given the federal courts authority to make that determination, he says. However, one of the judges isn’t convinced that Smallwood’s case is frivolous. In her concurring/dissenting opinion, Clement wrote that Illinois Central raised a strong argument for construing the FRSA as applying in this case but that the strength of the railroad’s argument “falls short of showing that it is unreasonable to construe FRSA as not applying.” Jolly wrote in his dissenting opinion that the majority inflates the significance of Cockrell “through a strained application based on a serious misreading” of that case. “In fact, it is only by seizing language taken out of context and ignoring the sum of this case [ Cockrell] in all of its parts — factual and legal — that the majority creates its misguided amendment to our traditional rule,” Jolly wrote. The nation’s highest court will have a chance to look at the issue. Simpkins and Ritter say their clients intend to file petitions for a writ of certiorari with the U.S. Supreme Court.

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