[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
FRAUDULENT JOINDER PREVENTION ACT OF 2015
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON THE CONSTITUTION
AND CIVIL JUSTICE
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
ON
H.R. 3624
__________
SEPTEMBER 29, 2015
__________
Serial No. 114-44
__________
Printed for the use of the Committee on the Judiciary
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Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
LAMAR S. SMITH, Texas ZOE LOFGREN, California
STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa Georgia
TRENT FRANKS, Arizona PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas JUDY CHU, California
JIM JORDAN, Ohio TED DEUTCH, Florida
TED POE, Texas LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah KAREN BASS, California
TOM MARINO, Pennsylvania CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho HAKEEM JEFFRIES, New York
BLAKE FARENTHOLD, Texas DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia SCOTT PETERS, California
RON DeSANTIS, Florida
MIMI WALTERS, California
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
DAVE TROTT, Michigan
MIKE BISHOP, Michigan
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on the Constitution and Civil Justice
TRENT FRANKS, Arizona, Chairman
RON DeSANTIS, Florida, Vice-Chairman
STEVE KING, Iowa STEVE COHEN, Tennessee
LOUIE GOHMERT, Texas JERROLD NADLER, New York
JIM JORDAN, Ohio TED DEUTCH, Florida
Paul B. Taylor, Chief Counsel
James J. Park, Minority Counsel
C O N T E N T S
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SEPTEMBER 29, 2015
Page
THE BILL
H.R. 3624, the ``Fraudulent Joinder Prevention Act of 2015''..... 3
OPENING STATEMENTS
The Honorable Trent Franks, a Representative in Congress from the
State of Arizona, and Chairman, Subcommittee on the
Constitution and Civil Justice................................. 1
The Honorable Steve Cohen, a Representative in Congress from the
State of Tennessee, and Ranking Member, Subcommittee on the
Constitution and Civil Justice................................. 5
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Chairman, Committee on the Judiciary 6
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, and Ranking Member, Committee on
the Judiciary.................................................. 8
WITNESSES
Elizabeth Milito, Senior Executive Counsel, NFIB Small Business
Legal Center
Oral Testimony................................................. 10
Prepared Statement............................................. 12
Lonny Hoffman, Professor, University of Houston Law Center
Oral Testimony................................................. 19
Prepared Statement............................................. 21
Cary Silverman, Partner, Shook Hardy & Bacon L.L.P
Oral Testimony................................................. 34
Prepared Statement............................................. 36
APPENDIX
Material Submitted for the Hearing Record
Response to Questions for the Record from Cary Silverman,
Partner, Shook Hardy & Bacon L.L.P............................. 56
Prepared Statement of Arthur D. Hellman, Professor, Sally Ann
Semenko Endowed Chair, University of Pittsburgh School of Law.. 62
FRAUDULENT JOINDER PREVENTION ACT
OF 2015
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TUESDAY, SEPTEMBER 29, 2015
House of Representatives
Subcommittee on the Constitution
and Civil Justice
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 11:35 a.m., in
room 2237, Rayburn Office Building, the Honorable Trent Franks
(Chairman of the Subcommittee) presiding.
Present: Representatives Franks, Goodlatte, King, Cohen,
and Conyers.
Staff present: (Majority) Zachary Somers, Counsel; Tricia
White, Clerk; (Minority) James Park, Minority Counsel; and
Veronica Eligan, Professional Staff Member.
Mr. Franks. The Subcommittee on the Constitution and Civil
Justice will come to order. Without objection, the Chair is
authorized to declare recesses of the Committee at any time.
We call today's hearing in order to consider the Fraudulent
Joinder Prevention Act. This is legislation aimed at addressing
an obstacle to the removal of civil litigation from state court
to Federal court in diversity jurisdiction cases.
I want to thank Representative Ken Buck, a Member of the
Judiciary Committee, for introducing this legislation.
Federal diversity jurisdiction exists when the plaintiff
and the defendants to a lawsuit are from different states.
According to the Supreme Court, ``The Constitution has
presumed, whether rightly or wrongly, that state attachments,
state prejudices, state jealousies, and state interests might
sometimes obstruct or control the regular administration of
justice.'' Thus, the Constitution's framers created diversity
jurisdiction to preserve national harmony and promote
interstate commerce by ensuring that a lawsuit involving
citizens of different states could be litigated in a presumably
neutral Federal court rather than in a possibly biased state
court.
In general, under Federal diversity jurisdiction, if a
plaintiff from one state files a lawsuit against a defendant
from another state in state court, the defendant may have that
litigation moved from state court to Federal court. However,
for more than a century, plaintiffs have attempted to defeat
removal in these cases by joining an in-state defendant with no
real connection to the underlying claim.
In response to these attempts to wrongfully deprive
defendants of their right to have their cases heard in Federal
court, the Supreme Court developed the fraudulent joinder
doctrine. But the Supreme Court has not clarified or elaborated
on the doctrine since the early 1900's, nor has Congress
stepped in to statutorily fill the void. This lack of guidance
from the Supreme Court and Congress has led to poorly defined
standards and inconsistent interpretations and application of
the fraudulent joinder doctrine in the lower Federal courts.
For instance, some Federal judges require a showing that
there is no possibility of recovery against a local defendant
in order to keep the case in a Federal court. Others require an
even more difficult showing that the claim be wholly
insubstantial or frivolous. Still other justices or judges
insist that a defendant demonstrate that there is an obvious
failure to a state claim against the defendant.
All of these approaches and the others that are used are
difficult to meet. In fact, current law is so heavily weighted
against defendants that Federal Appeals Judge J. Harvie
Wilkinson recently observed in support of congressional action
to change the standards for joinder that, ``There is a problem
with fraudulent jurisdiction law as it exists today, and that
is that you have to establish that the joinder of a non-diverse
defendant is totally ridiculous, and that there is no
possibility of ever recovering. That is a sham. That is
corrupt. That is very hard to do. The problem is the bar is so
terribly high.''
To make the law more fair, the Fraudulent Joinder
Prevention Act makes a modest change to existing law to ensure
that defendants who are entitled to a Federal forum do not have
their cases sent back to state court based on unreasonable or
inconsistent standards. To accomplish this, the bill simply
adds two additional sentences to the statute governing removal.
Embodied in these sentences are two basic concepts: first, that
Federal courts should evaluate fraudulent joinder under one
uniform standard, namely whether the plaintiff states a
``plausible claim for relief'' against the non-diverse
defendant; and second, that the Federal courts are permitted to
look at evidence submitted by both the plaintiff and the
defendants in making this determination.
This legislation will improve the administration of justice
in the Federal courts, and it will especially help small local
businesses and their owners and employees who are currently
unfairly pooled into costly lawsuits by trial lawyers simply to
keep cases in state court.
Small businesses are already over-burdened by litigation as
it is. They should not be further weighed down by cases to
which they have no real connection simply so that an
enterprising attorney can game the system.
I look forward to the witnesses' testimony and any comments
and suggestions they may have with regard to this legislation.
Now I would recognize the Ranking Member for his statement.
[The bill, H.R. 3624, follows:]
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__________
Mr. Cohen. Thank you, Mr. Chair.
Well, you can't claim that this Committee just deals with
political issues. We don't get into all those meaty things like
Planned Parenthood. We take those straight to the floor. We
deal with these issues that really can bore the viewing
audience to death.
Thank you.
H.R. 3624, the Fraudulent Joinder Prevention Act of 2015,
not even an acronym, could more properly be named the Corporate
Defendant Forum Shopping Act, because it does that as well. It
facilitates that in substance.
If enacted, this bill could deny plaintiffs the right to
pursue state law claims in state court and instead allow
defendants to choose where the plaintiffs' claims are heard.
Plaintiff would not have the option of choosing their court.
The bill upends a century--a century; that is a long time--of
legal doctrine governing how Federal court decides whether to
remand a case that was removed by an out-of-state defendant on
diversity grounds and where there is at least one in-state
defendant in the case.
Specifically, this bill would require a court to deny a
motion to remand where the plaintiff cannot show that the
addition of an in-state defendant to a case is based on a
plausible state law claim against the in-state defendant or
that the plaintiff has a good-faith intention to pursue such a
claim against the in-state defendant or to seek a joint
judgment. The bill also allows a court to consider affidavits
or other evidence in making its determination. The bill raises
a number of concerns.
Firstly, there is no evidence that Federal courts have
failed to properly address fraudulent joinders. For 100 years,
the Federal courts have applied the doctrine of fraudulent
joinder, which is an exception to the requirement to complete
diversity. Under this doctrine, a Federal court may retain
jurisdiction based on diversity of citizenship, even when a
complaint names an in-state defendant if an out-of-state
defendant shows that there is no possibility that the plaintiff
would be able to establish a state law claim against the in-
state defendant in state court.
The party trying to remove the case to Federal court, the
out-of-state defendant, has the burden of proving that Federal
diversity jurisdiction is proper. While the standard has been
articulated differently by different courts, they all embody
the same basic principle, that as long as there is any basis
for pursuing a claim against an in-state defendant, the Federal
court must remand the case to state court, kind of an
interesting thing. Normally, some folks on this Committee think
that the states should come first, that states' rights--that
things are ruled better at the local level and the state level.
Not in this particular situation, because business is involved,
and they prefer that the businesses have the option of getting
it out of state court and into Federal court.
This standard is in keeping with the longstanding judicial
recognition that constitutionally, Federal courts are courts of
limited jurisdiction and should therefore construe removal
statutes strictly and narrowly, something you would think would
be liked by this Committee.
Tellingly, the Supreme Court has not appeared to consider
it a problem that different courts articulate the doctrine of
fraudulent joinder differently, nor has it found it a problem
with the way the courts have been applying the doctrine to
address improper joinder. In short, after a century of
application, the court has not deemed it necessary to alter the
way the Federal courts deal with fraudulent joinder.
Secondly, by requiring litigation on the merits at a
nascent stage of litigation, the bill will increase the
complexity and costs surrounding remand motions, dissuading
plaintiffs from pursuing meritorious claims, and add cost to
our Federal budget, something that our children and
grandchildren will have to pay for. That is a quote.
H.R. 3624 shifts the burden of proof from defendants to
plaintiffs in removal cases based on diversity grounds. It also
requires the application of vague and undefined standards,
which invites further litigation over the meaning and scope of
those standards. For instance, what constitutes a plausible
claim is not simply self-evident. We know this because courts
have been struggling to apply the plausibility standard with
respect to pleadings in Federal courts after the Ashcroft v.
Iqbal decision applied such a standard to pleadings under the
Federal Rules of Procedure 8. That decision has produced a
substantial amount of litigation and has led to increased
uncertainty, complexity, and litigation costs.
There is no reason to think the same thing will not happen
once such a plausibility standard is imported into the remand
context, as H.R. 3624 proposes to do. Similarly, the bill's
required inquiry into a plaintiff's subjective good-faith
intention will result in increased litigation as the bill does
not define the phrase ``good faith intention,'' and is not used
anywhere in Title 28. The increase in cost and complexity would
not only drain limited resources of plaintiffs but would also
burden already strained Federal judicial resources.
Finally, this bill offends federalism by denying state
courts the ability to shape state law. State courts are the
final authority on state procedural and substance law, and
state law claims ought to be left to state courts except in
narrow circumstances. This bill would further deny state courts
that authority by making it easier for Federal courts to retain
jurisdiction where only state law claims are at issue.
H.R. 3624 represents just the latest in a long line of
attempts to deny plaintiffs access to state courts and to
extend inappropriately the reach of Federal courts into state
law matters. But it is good that we are not--what is it?--the
hobgoblin of simple minds? Consistency. We are not in those
terms. We get out of that, so that is a wonderful thing. For
those reasons, I oppose the bill.
Mr. Franks. And I thank the gentleman.
And I now recognize the distinguished Chairman of the full
Committee, Mr. Goodlatte, for 5 minutes.
Mr. Goodlatte. Thank you, Mr. Chairman.
America's small businesses are some of the leading victims
of frivolous lawsuits and the extraordinary costs that our
legal system imposes. Everyday local business owners have
lawsuits filed against them based on claims for which they are
ultimately not responsible. These lawsuits impose a tremendous
burden on small businesses and on our economy as a whole, as
America's small businesses are major drivers of the U.S.
economy.
Just 2 weeks ago the House passed the Lawsuit Abuse
Reduction Act to help rein in frivolous lawsuits. Enactment of
that legislation will help eliminate some of the abuses that
exist in the Federal legal system that harm small businesses in
particular.
The bill we are examining today, the Fraudulent Joinder
Prevention Act, will also help address a litigation abuse that
regularly drags small businesses into court to answer for
claims to which they have no real connection.
In order to avoid the jurisdiction of the Federal courts,
plaintiffs' attorneys regularly join in-state defendants to the
lawsuits they file in state court even if the in-state
defendants' connections to the controversy are minimal or non-
existent. Typically, the fraudulently joined in-state defendant
is a small business or the owner or employee of a small
business. Ultimately, these in-state defendants may not face
any liability as a result of being named as a defendant, but
that does not prevent them from having to spend money to hire a
lawyer and taking valuable time away from running their
businesses to deal with matters related to a lawsuit.
Plaintiffs' attorneys join these basically unconnected in-
state defendants to their lawsuits because the current rules
for determining whether fraudulent joinder has occurred provide
little disincentive to adding an in-state defendant, no matter
how frivolous the claim is against that defendant. In fact, the
system actually encourages plaintiffs to fight to get their
cases sent back to state court once they are removed to Federal
court by providing that plaintiffs may have their attorneys'
fees reimbursed if a case is remanded back to state court.
The Fraudulent Joinder Prevention Act attempts to bring
some balance to a Federal court's determination over whether a
case that has been removed from state to Federal court should
remain in Federal court. It does this by making a modest change
to the statute that governs the fraudulent joinder
determination. The change is modest because it merely requires
Federal judges to apply concepts to the fraudulent joinder
determination that they already regularly use in other areas of
the law.
The bill provides that the standard judges are to use in
determining whether a defendant has been fraudulently joined is
whether the plaintiff states a plausible claim for relief
against an in-state defendant. This plausible claim for relief
standard is already used by Federal judges in determining
whether to grant motions to dismiss.
Additionally, the bill allows judges to determine whether
the claims against an in-state defendant were made in good
faith. Again, judges are already asked in other areas of the
law to examine a party's good or bad faith.
Nothing in this bill forces a judge to decide issues in
favor of a defendant or creates a new standard that Federal
judges and litigants are not already familiar with.
I look forward to the witnesses' testimony on this
commonsense legislative proposal and any suggestions they may
have for ways this legislation can be improved.
Finally, I want to thank Representative Buck for
introducing this bill to help level the playing field for
defendants when questions regarding fraudulent joinder arise.
And I yield back.
Mr. Franks. And I thank the gentleman.
I would now yield to the Ranking Member of the Committee,
Mr. Conyers from Michigan.
Mr. Conyers. I want to thank the Chairman and welcome all
the witnesses.
As with the Class Action Fairness Act, once again we
consider legislation really designed to deny access to justice
for potentially millions of plaintiffs seeking relief under
state law in state court.
This so-called Fraudulent Joinder Prevention Act would flip
on its head the century-old standard governing when a Federal
court must remand cases alleging only state law claims back to
state court where there is at least one in-state defendant in
the case. Specifically, we amend in this bill Section 1447(c)
of Title 28 to require a Federal court, when considering a
motion for remand in a case that was removed from a state court
to Federal court on diversity grounds, where there is also an
in-state defendant, to deny such remand motion if the plaintiff
has not demonstrated that there is a ``plausible claim for
relief against'' an in-state defendant or that the plaintiff
had a good-faith intention to prosecute the action against each
in-state defendant, or to seek a joint judgment.
There are three problems raised with the measure before us.
The first, of course, is that the bill attempts to solve a
non-existent problem. The doctrine of fraudulent joinder which
Federal courts have been applying, as has been already
remarked, for more than a century governs when a Federal court
may ignore, for the purpose of retaining jurisdiction, an in-
state defendant in a state law case that has been removed to
Federal court solely on diversity grounds.
The bill's proponents claim that this legislation is
necessary because the fraudulent joinder doctrine has been
articulated differently by different courts, yet these are
basically distinctions without a difference. All courts must
consider whether there is some basis in law and fact for a
plaintiff to pursue a claim against an in-state defendant. If
there is, then the Federal court must remand the case back to
state court.
If uniformity were truly the concern of the bill's
proponents, the legislation would simply pick one of the
existing articulations of the fraudulent joinder standard and
codify it into law. Instead, it is clear from the bill's
radical changes to longstanding jurisdictional practice that
the true purpose of this measure is simply to stifle the
ability of plaintiffs to have their choice of forum, and
possibly even their day in court.
In addition, the bill would sharply increase the cost of
litigation for plaintiffs and increase the resource burdens on
Federal courts. The bill requires a court to engage in a
substantial merits inquiry at a case's initial procedural stage
without the benefit of any substantial discovery. This
requirement would undoubtedly generate more uncertainty, more
costs, more unnecessary complexity at such an early stage of
the litigation.
Moreover, the bill shifts the burden of proof on a motion
to remand from the defendant to the plaintiff, even though it
is the defendant that is seeking the remand.
The bill also applies a vague, open-ended plausible claim
standard. What constitutes a plausible claim is an open
question in the remand context and would necessarily require
substantial litigation and the corresponding development of a
substantial body of case law.
Similarly, the bill invites substantial litigation by
requiring a showing of the plaintiff's subjective good-faith
intention to pursue a claim against an in-state defendant. Like
``plausibility,'' the bill does not define the term ``good-
faith intention,'' and such a phrase is not used anywhere else
in Title 28, where the bill's amendments would be codified.
All of this will have the cumulative effect of sharply
increasing litigation costs for plaintiffs, possibly to the
point where those with meritorious claims could be dissuaded
from even filing suit, and it will strain the already limited
resources of the Federal judiciary.
And finally, the amendments made by this bill would raise
fundamental federalism concerns. Removal of a state court case
to Federal court always implicates federalism concerns. That is
why the Federal courts generally disfavor Federal jurisdiction
and read removal statutes narrowly. By applying a sweeping and
vaguely worded new standard to the determination of when a
state court may be removed to Federal court, the bill will deny
state courts the ability to decide and ultimately to shape
state law.
As with many similar measures, this bill violates our
fundamental constitutional structure by intruding deeply into
state sovereignty. So I accordingly look forward to hearing the
views of our witnesses today with respect to my concerns, and I
thank the Chair.
Mr. Franks. And I thank the gentleman.
Without further objection, other Members' opening
statements will be made part of the record.
I will now introduce our witnesses.
Our first witness is Elizabeth Milito. Ms. Milito served as
Senior Executive Counsel with the National Federation of
Independent Business Small Business Legal Center, a position
that she has held since March of 2004. She is responsible for
managing cases and legal work for the Small Business Legal
Center and has testified before Congress on numerous occasions
on the impact regulations in the civil justice system have on
small business. Ms. Milito previously worked as a trial
attorney and has an extensive background in tort, medical
malpractice, employment, and labor law.
Welcome.
Our second witness is Lonny Hoffman. Professor Hoffman is
the Associate Dean and Law Foundation Professor at the
University of Houston Law Center. He is a specialist on
procedural law in Federal courts and state courts and has
authored numerous Law Review articles. Professor Hoffman has
testified before Congress and lectured around the world on
civil litigation subjects. He is a member of the Supreme Court
of Texas' Rules Advisory Committee and Editor-in-Chief of The
Advocate, a quarterly journal published by the Litigation
Section of the State Bar of Texas.
Welcome, sir.
Our final witness is Cary Silverman, a partner at the law
firm Shook, Hardy & Bacon in Washington, D.C. Mr. Silverman's
public policy work focuses on civil justice reform, and he has
published over 25 articles in prominent law journals. He
regularly authors amicus briefs on behalf of national business,
trade, and other advocacy groups in cases before the U.S.
Supreme Court and state high courts. Mr. Silverman has
testified before Congress and most state legislatures, and is
an adjunct professor at the George Washington University Law
School.
Now, each of the witnesses' written statements will be
entered into the record in its entirety, and I would ask that
each of you summarize your testimony in 5 minutes or less. To
help you stay within that time, there is a timing light in
front of you. The light will switch from green to yellow,
indicating that you have 1 minute to conclude your testimony.
When the light turns red, it indicates that the witness' 5
minutes has expired.
So before I recognize the witnesses, it is the tradition of
the Subcommittee that they be sworn. So, if you would please
stand and be sworn?
Do you solemnly swear that the testimony that you are about
to give will be the truth, the whole truth, and nothing but the
truth, so help you God?
Please be seated.
Let the record reflect that the witnesses answered in the
affirmative.
I now recognize our first witness, Ms. Milito, and if you
would make sure that microphone is turned on. Thank you, ma'am.
TESTIMONY OF ELIZABETH MILITO, SENIOR EXECUTIVE COUNSEL, NFIB
SMALL BUSINESS LEGAL CENTER
Ms. Milito. Thank you, Chairman Franks, Ranking Member
Cohen, and distinguished Committee Members. I am happy to
appear here today on behalf of the National Federation of
Independent Business, which represents more small businesses
than any other organization. Because litigation entails angst
and great expense for small businesses, NFIB is pleased to see
this Committee's attention focused on the issue of fraudulent
joinder.
Fraudulent joinder remains a source of confusion and
unnecessary litigation in our courts, and impacts far too many
innocent small businesses. The situation unfolds as follows.
Plaintiff's attorneys will name a small business such as a
local pharmacy or insurance agent with little connection to the
complaint in order to deny the Federal courts of jurisdiction.
In many instances, the plaintiff has no intention of imposing
liability on the fraudulently joined party.
With courts divided over the standard for finding that a
defendant is fraudulently joined, the small business is forced
to engage in protracted litigation when all they want is to be
dismissed from the case entirely. Public policy should
encourage plaintiffs' attorneys to prudently assess the
viability of their clients' potential claims before initiating
a lawsuit and discourage plaintiffs from taking unfounded or
improvidently cavalier positions. Along these lines, we should
aim to create strong disincentives against naming a small
business as a defendant in a case where the claim against the
business is particularly weak.
This is especially so where the plaintiff's apparent motive
in naming the defendant is to use the defendant as a body
shield against invocation of Federal jurisdiction, or what is
also referred to as fraudulent joinder.
But unfortunately, as the law currently stands, plaintiffs
actually have a perverse incentive to bring weak or attenuated
claims against small business defendants for the sake of
defeating Federal jurisdiction. Given the tremendous costs of
litigation and the inevitable risk that a plaintiff might
prevail if the case goes before a sympathetic jury or an errant
judge, we must also address the reality that small business
defendants are rationally discouraged from vindicating their
rights, and so long as this remains true, plaintiffs' attorneys
will inevitably waive the benefit of pursuing a questionable
defendant as outweighing the risks.
Accordingly, NFIB supports the Fraudulent Joinder
Prevention Act, which would provide greater clarity in the law
on removal, and reduce litigation. It would accomplish these
things by requiring that a Federal court considering a motion
for remand determine whether the complaint states a plausible
claim for relief against the non-diverse defendant. This
language would eliminate the current legal standards that
strongly favor plaintiffs' motions for remand. The court would
also consider whether the plaintiff has a good-faith intention
to prosecute the action against the non-diverse defendant or to
seek judgment against the non-diverse defendant.
This bill is straightforward and offers a simple and
commonsense fix for a problem that has generated much confusion
and unnecessary litigation in Federal courts at the expense of
small businesses.
On behalf of America's small business owners, I thank this
Subcommittee for holding this hearing and inviting me to
testify. I am happy to answer your questions.
[The prepared statement of Ms. Milito follows:]
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__________
Mr. Franks. Thank you, Ms. Milito.
And I would now recognize our second witness, Mr. Hoffman.
If you would make sure that microphone is on.
TESTIMONY OF LONNY HOFFMAN, PROFESSOR,
UNIVERSITY OF HOUSTON LAW CENTER
Mr. Hoffman. Chairman Franks and Ranking Member Cohen,
thank you for inviting me to testify today. I have three brief
but important points I want to make that I hope everyone on the
Committee will consider as they are considering this
legislation. I hope in particular proponents of the bill will
consider them seriously.
First, as Representatives Cohen and Conyers have already
pointed out, there is no need for this bill. Fraudulent joinder
law is well settled. But I want to expand on that point a bit
further.
Under fraudulent joinder law today, while it is certainly
true that the defendant has a heavy burden to meet to show that
fraudulent joinder exists, which is as it should be, that
burden is hardly insurmountable. For every story of a non-
diverse defendant found to have been properly joined, I can
cite an equal number where the court found the plaintiff's
claim had no reasonable basis under the substantive law. This
makes a couple of things clear, and the first I think is that
we should be wary against legislating by anecdote.
It also suggests that for those who support the bill, their
real beef isn't with fraudulent joinder law or with the way
that judges apply it. Instead, it is with the substantive law
itself that this Congress and state legislatures have enacted
to protect citizens. Courts find fraudulent joinder when the
substantive law allows recovery, they find joinder proper, and
they find fraudulent joinder when it does not. There is no need
to change fraudulent joinder law. If opponents are unhappy with
the substantive law, then that is what they need to be talking
about.
Of course, they are not because they know there is not a
lot of political support for taking away substantive rights. So
it turns out to be much easier to talk about technical
procedural reform.
Which brings me to the second point I want to make.
Whatever one thinks about current law, this bill would not
achieve the uniformity that is supposedly desired. One problem
is, as noted earlier, the bill would force courts to determine
what the word ``plausible'' means. This is very hard to do, and
we already know this. We don't have to guess because of the
Supreme Court's plausibility cases, the Bell Atlantic v.
Twombly case in 2007, and the Ashcroft v. Iqbal case in 2009.
These cases have spawned decisions from the lower courts almost
too numerous to count. Do you know that last week the count on
Iqbal was that there were 85,000 cases that it cited? It had
become the number-one most cited case in the history of all
cases being cited, and that is in less than 6 years. The
record-holder that it replaced had held that position, but it
took it 25 years to get there, the Anderson v. Liberty Lobby
case. And this deluge of cases applying the Court's ambiguous
plausibility test hasn't brought uniformity to pleading law.
Instead, what counts as plausible varies, often greatly, from
circuit to circuit.
In addition to having to figure out what ``plausible''
means, courts would also have to determine what the plaintiff's
good faith was. But how in the world is a district judge to
figure out the plaintiff's good or bad faith only 30 days after
a lawsuit has been filed, which is when the remand hearing
typically takes place?
Like plausibility, this good-faith requirement is certain
to lead to years of litigation, which is only going to make
litigation more expensive, as Representative Cohen has already
pointed out, for everyone, though I would highlight in
particular for plaintiffs.
Which brings me to the third and final point I want to
make. Though the bill is only a page-and-a-half long, there
should be no misunderstanding that the proposed amendments
would dramatically alter existing law. All other subject-matter
jurisdiction doctrines that exist today, all others, recognize
that any merits inquiry at the jurisdictional stage should be
limited.
For example, to show that a plaintiff hasn't met the
minimum amount in controversy, the defendant bears a heavy
burden of showing ``to a legal certainty'' that the claim is
really for less than $75,000. This same approach is taken with
regard to Federal question jurisdiction. Only a showing by the
defendant that the plaintiff's claim is ``wholly insubstantial
and frivolous'' will dismissal be warranted. Thus,
jurisdictional law consistently recognizes that judges are ill-
equipped to conduct the kind of exhaustive merits inquiries at
the very outset of a case that this bill would urge before
there has been an opportunity for the facts to come out through
discovery.
So, in sum, this legislative body should recognize, I hope,
the collective judicial wisdom that fraudulent joinder law
reflects and resist legislating technical procedural reforms.
Instead, I want to submit, it should recall the advice given by
a former Solicitor General who, when testifying against a bill
a few years ago that would have reversed the courts'
plausibility decisions, the Twombly and the Iqbal decisions I
mentioned earlier, advised that legislators should ``leave
procedure to the rulemakers.'' That is what General Garre told
the Senate Judiciary Committee, and I submit that that advice
is worth remembering today.
Thank you, Chairman.
[The prepared statement of Mr. Hoffman follows:]
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__________
Mr. Franks. And I thank the gentleman.
And we will now recognize our third witness, Mr. Silverman.
TESTIMONY OF CARY SILVERMAN, PARTNER,
SHOOK HARDY & BACON L.L.P
Mr. Silverman. Thank you, Mr. Chairman, Ranking Member
Cohen, and distinguished Members of the Subcommittee. I
appreciate the opportunity to testify today on behalf of the
U.S. Chamber and the Institute for Legal Reform.
The current process by which courts decide fraudulent
joinder is in need for reform. The doctrine is intended to
secure the Constitution's promise of a neutral Federal forum in
lawsuits involving citizens of different states. Instead, it
routinely allows for manipulation and gamesmanship. Such
lawsuits have a toll on people who are sued solely to keep a
case in state court. It also deprives litigants of an impartial
forum, sending cases to local courts where the deck may be
stacked against them. And, for the Judiciary, it has resulted
in confusion and unnecessary litigation.
Let me briefly explain how this works. Plaintiffs' lawyers
typically want to litigate their cases in state court. That is
understandable. They have an advantage there. They are likely
familiar with the judges and the trial court's local
procedures. And as the Founders recognized, there is a danger
that local courts may inherently favor local plaintiffs, and
that remains as true today as it did then.
As you explained, Mr. Chairman, when each of the defendants
is from a state different from each of the plaintiffs, there is
complete diversity. A defendant can then remove the case from
state to Federal court. It is easy, however, for a plaintiff's
lawyer to destroy complete diversity. All he needs to do is
name a local person or a business as a defendant, one from the
same state as the plaintiff.
The plaintiff typically has no intention of actually
litigating that claim or seeking a judgment against that person
when its remand of that person will likely be dismissed. The
only reason that the person is included is to block the Federal
court from hearing the case.
As my prepared testimony shows, this tactic often involves
naming people such as local managers, salespeople, insurance
claims adjusters, or others who are not typically personally
liable as a defendant when the real target is their employer.
It involves naming local retailers, often family businesses
that have nothing to do with how a product was designed, when
the real product was the manufacturer. It involves naming local
pharmacies that may have sold a drug but had no involvement in
developing its labeling or warnings, when the real target is
the pharmaceutical maker.
Fraudulent joinder provides Federal courts with the ability
to ignore the presence of a local defendant when it is named in
a lawsuit only to defeat Federal jurisdiction. There are two
problems, however, with how courts evaluate fraudulent joinder
which brings us to this bill today.
The first is that Federal courts are all over the map as to
how they decide it. My prepared testimony outlines five
different approaches courts have taken. There is the ``no
possibility of a claim or recovery'' approach, which is what
one Federal circuit refers to as the ``no glimmer of hope''
standard. There is the ``wholly and substantial and frivolous''
approach, which seems akin to Federal Rule 11, also an
extremely high standard. There are some courts that consider
whether there is an obvious failure to state a claim. There are
others that consider whether there is a reasonable basis for
the claim, or a reasonable possibility of success. Other courts
simply consider whether the plaintiff does indeed state a
claim, taking an approach similar to an ordinary motion to
dismiss, and that which is provided in the bill.
The courts also significantly vary on the evidence they
will consider, and if they will consider at all whether the
plaintiff has a good-faith intent to seek a judgment against a
local defendant.
So the first problem is confusion in the law. The second is
that these standards range from nearly impossible to very
difficult to meet. This is the case even when the claim against
a local defendant is extraordinarily weak.
The Fraudulent Joinder Prevention Act will help bring
clarity to the law, reduce gamesmanship and litigation, and
preserve access to a neutral Federal forum. The bill does so by
adopting a uniform approach, requiring a plaintiff to state a
plausible claim against the local defendant. This is a standard
regularly applied by Federal courts when deciding a motion to
dismiss. It is a modest tweak to the standard for fraudulent
joinder. It does not expand diversity jurisdiction. It is
balanced. A plaintiff still gets the benefit of the doubt. Nor
does it dictate any results or tilt a judge's discretion on
removal one way or the other. Rather, the bill will clarify
that judges have broad discretion to consider evidence when
deciding fraudulent joinder such as affidavits submitted by
either party, or whether there is a good-faith intent to seek
recovery from the local defendant.
The result will be a more realistic assessment of whether a
plaintiff has stated a viable claim against a local defendant
and intends to pursue a judgment against that person.
Plaintiffs with legitimate claims against a local defendant
will be able to litigate in state court, and out-of-state
defendants that show there is no viable claim against the local
defendant will be able to have the lawsuit decided in a neutral
Federal forum.
Thank you again for holding this hearing and inviting me to
testify today. I welcome your questions.
[The prepared statement of Mr. Silverman follows:]
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__________
Mr. Franks. Thank you, Mr. Silverman.
Thank you all for your testimony.
We will now proceed under the 5-minute rule. I will begin
by recognizing myself for my 5 minutes.
My first question is to you, Ms. Milito. In his written
testimony, Professor Hoffman discusses the cost he argues this
bill may impose upon plaintiffs and the courts. Could you
please elaborate further on the very real costs that the
current fraudulent joinder standard imposes on American small
businesses?
Ms. Milito. Yes. Thank you very much for that question. In
my remarks I noted that litigation brings great angst and
expense to small business owners. In my time at NFIB, which is
now well over 10 years, I talk with business owners too often
who are named as a defendant in a lawsuit, and my discussions
with them mirror the findings that the Small Business
Administration found in the study they conducted a few years
ago to determine what is the real impact of litigation on small
businesses, and they found there are really four things. There
is financial expense. There is an emotional expense. There are
changes to how a business operates, including a wariness,
unfortunately, that develops with their customers, and I find
this when I talk with business owners too. It is who do we
trust anymore? Are they going to target us? Who are the
customers that I can trust there, too? And then the final
thing, and this is a very real concern with small businesses in
this day and age of social media, is damage to the business'
reputation, and that goes back too to the financial cost, but
it is kind of a separate thing too. There is real damage to a
business' reputation when they are named as a defendant in
litigation alongside of, say, a big pharmaceutical company, and
then you have the local drugstore named too. It makes the
papers, and that is a real concern for small business owners.
Thank you.
Mr. Franks. Thank you.
Mr. Silverman, in his testimony Professor Hoffman asserts
that fraudulent joinder law is applied uniformly, with some
minor variances based on semantics. Do you agree with that,
that the standard Federal judges apply to decide the fraudulent
joinder question is uniform across the Federal courts, and that
any difference between the standard applied is merely
semantics?
Mr. Silverman. Mr. Chairman, I would respectfully disagree.
What I have seen in my research is that even within a Federal
circuit, the standard varies significantly from case to case.
Even as many courts seem to follow the ``no possibility of a
claim'' approach, those same courts go on to define that
possibility very differently, whether it is a reasonable
possibility, absolutely no possibility, or no glimmer of hope,
and some are looking at it in the plain way of whether there is
actually a claim at all.
I don't think it is just semantics. I think there is a
great amount of variation that leads, I think the evidence
shows, to different results. My prepared testimony cites at
least three Law Review articles that recognize these
significant variations and that they are a problem.
I also believe that Professor Arthur Hellman of the
University of Pittsburgh School of Law submitted prepared
testimony that agrees with that assessment.
Mr. Franks. Well, let me follow up. The Fraudulent Joinder
Prevention Act essentially makes three changes regarding the
Federal courts' fraudulent joinder determination. Number one,
it permits judges to look at affidavits and other evidence. It
creates a uniform plausible claims standard. And it requires
that plaintiffs act in good faith when joining defendants to
their lawsuits. Do these three changes create new legal
concepts, or are they all based on concepts that Federal judges
are familiar with?
Mr. Silverman. All of these concepts are firmly rooted in
U.S. Supreme Court jurisprudence, some of which goes back 100
years. These are concepts from existing law.
First, as to the plausibility standard, as we have
discussed today, this is the same standard that Federal courts
now routinely apply to determine whether the complaint states a
viable claim when there is a motion to dismiss. It is a
standard set by the U.S. Supreme Court that is now well
understood and every day is being applied in cases. It doesn't
surprise me, as the Professor has stated, that there are 85,000
cases citing this case because it comes up every single time
there is a motion to dismiss, and courts know what to do with
it.
As to the affidavits and other evidence, this is more a
clarification or codification of existing law than a change.
Most courts are already considering these materials when
deciding fraudulent joinder.
With respect to good faith, the Supreme Court has said, in
cases dating back to 1921 and 1931, that courts, when deciding
fraudulent joinder, can look at the good faith in bringing a
claim against that local defendant and seeking a judgment. This
would just codify that and clarify that it applies, because not
all courts are looking at it.
Mr. Franks. Well, thank you, Mr. Silverman.
I am now going to recognize the Ranking Member for 5
minutes for his questions.
Mr. Cohen. Thank you, Mr. Chairman.
Professor Hoffman, you teach at the University of Houston
Law School?
Mr. Hoffman. I do. I have recently stepped down as the
Associate Dean, so I should clarify the Chairman's remarks, a
happy change. I am no longer the Associate Dean, and now I get
to return to my regular life and not take care of everybody
else's.
Mr. Cohen. You are the John Boehner of Houston, yes.
When you go back to your class, what will you tell them
about this hearing and the law that we discussed and the
reasons why you even think this came to a hearing in the United
States Congress?
Mr. Hoffman. So, the issues that we talk about are exactly
the issues that we talk about every day in my course, subject
matter removal, pleading standards. I mean, every one of these
we either have talked about or are on the syllabus to talk
about. This is very familiar law.
As I tried to indicate in my remarks specifically on
fraudulent joinder in terms of how old it is, courts have been
applying it for a long time, and with thousands of cases it
should come as no surprise that there are variances in
language. I quote a Fifth Circuit case, for instance, that even
goes out of its way to point out that just within that one
circuit some of the courts say ``no possibility,'' as Mr.
Silverman pointed out, and others say things like ``no
reasonable basis'' or ``no reasonable possibility.'' And then
the Fifth Circuit goes on to say those standards are
interchangeable.
So maybe the thing to really drive home here is the same
thing I drive home with my students, which is that procedure
drives many outcomes in cases, sometimes positively, sometimes
negatively. The concern that we should always have whenever we
reform procedure or try to think about making reforms is
whether in doing so we are changing the balance of power in
some way that makes it harder. What I fear is that in a
circumstance like this where the real issue is the substantive
law, as I indicated earlier, that we are really focused in the
wrong place.
And again, just to make one other point about that to make
sure that point is clear, regardless of what the semantic
standard is, Representative Cohen, with fraudulent joinder,
what really happens is that when courts find that the
substantive law provides a right for relief, they find there is
no fraudulent joinder and they send it back. And conversely,
when they find that there is no reasonable chance of recovery
because the law doesn't provide a right to recover, they find
appropriately that fraudulent joinder has occurred. So the
action is in the substantive law. If you were to read 100
cases, I would submit that--I don't want to say 100 out of 100,
but almost all of them are going to break exactly as I say.
So it raises a nice lesson for students that procedure,
unfortunately or fortunately, can be important because of the
power that goes in and goes behind a lot of these procedural
rules.
Mr. Cohen. Thank you.
Ms. Milito, if you were a student in Professor Hoffman's
class, what would you ask him about this? And when he explains
that there is really no need for change in the law, that this
is all based on the substantive law, then why would there even
be a need to have this law to help small business?
Ms. Milito. I would ask him about, if you will, vindicating
the rights of these small business owners, the defendants in
the case, who are, as I have been told by a member, wrongly
accused in an action, and how can we more efficiently get to
that ``no reasonable chance of recovery'' finding? Is there a
way that we can get to the finding that Professor Hoffman just
referred to quicker and in a more efficient manner in our
courts without getting to discovery? Because there is one thing
you learn in civil procedure: discovery can go on for a long
time, and it can be very expensive. And the small business
owners who I hear from who believe they are wrongly accused
don't want to get to that stage of litigation. They want to get
out. So that would be my question to the professor.
Mr. Cohen. And, Professor, would you respond to her now?
Mr. Hoffman. So, obviously, I don't agree with the
substance, but I thought she said it very well, and if you were
in my class I would have given you an A.
Mr. Cohen. Mr. Silverman said that there are a whole lot of
differences in the different districts on this issue. Aren't
there are a lot of differences in districts on other issues as
well?
Mr. Hoffman. Certainly, and again----
Mr. Cohen. How do those normally get resolved?
Mr. Hoffman. The cases percolate through the system.
Eventually, enough of them make it to the circuit courts, to
the intermediate courts of appeals. Sometimes there is
agreement within those courts, sometimes there isn't. When
there isn't, once in a blue moon the Supreme Court uses one of
its very, very few--it only hears about 70 cases a year
nowadays, so it can't resolve all these issues, but
occasionally it does.
I mean, plausibility is a good example of that. I mean,
this notion that we are doing it a lot, and therefore we know
what we are doing, really I think, respectfully, misses the
mark. If you think about it, even if we don't engage in an
empirical debate about what is or isn't going on in the lower
courts, just look at the word ``plausible.'' I mean, what does
it mean for something to be plausible?
Again, going back to my class, I can tell you that if my
students were here to testify, they would tell you that they
are utterly baffled by what this standard is that the Court has
announced, and it really got announced out of whole cloth. I
mean, the test that Twombly announced in 2007 was essentially a
brand-new test, and certainly as a matter of pleading standards
was new, and the courts are struggling to figure this out.
There isn't any reason to think that for plausibility, as well
as for this business about good faith, that it would come out
any differently if we were to incorporate it into remand law.
And, by the way, just one other point about good faith. You
know, there is a nice lesson here. In 2011, Congress passed the
JVCA, the Jurisdiction and Venue Clarification Act, and one of
the changes that it made, an interesting point of comparison
here, is they amended 1446. It used to be that a defendant
could only remove a diversity case if it was within 1 year of
when it had been commenced. But then there were some plaintiffs
who once in a while played games and maybe would dismiss the
non-diverse defendant 366 days later.
So the law got amended to say you could look at the
plaintiff's bad faith after the case had been on file for a
year, bad faith in keeping the case from being removed, and the
Congress amended the law to put bad faith in there, but it is
after a year has gone by. In other words, it gives the district
judge a chance to sit back and say has the plaintiff been
pursuing discovery equally against the non-diverse and diverse
defendant? If they haven't, if they have basically been
ignoring the non-diverse defendant, it is some pretty good
evidence that maybe they aren't really targeting them.
But what this bill does is it says, literally in the first
inning of the game, but even before the inning has ended, 30
days into the case, the district judge is supposed to figure
out what good faith the plaintiff had, and that isn't a
standard that we know, and it is one that I submit is going to
cause a great deal of confusion.
Mr. Cohen. Well, thank you for your testimony, and in spite
of that fact I am still going to hope that Greg Ward has a bad
game when he plays Memphis. [Laughter.]
Mr. Hoffman. So noted.
Mr. Franks. I thank the gentleman, and I now yield to the
gentleman from Iowa for his questions.
Mr. King. Thank you, Mr. Chairman. I appreciate being
recognized. I appreciate the testimony of the witnesses and the
trouble you take to help inform this Congress.
As I listened to the testimony here this morning, I have a
couple of questions along the way I would direct first to Mr.
Hoffman. As I listened to your testimony, one of the points you
made is that we need to be aware of legislating by anecdote. It
is one of my concerns, too. When I was first elected to state
office, I fell prey to that myself. And when it was pointed out
to me that you can't fix every problem by legislation, it was
one of the few times that I heard someone say something that
immediately changed my mind on the spot. So, that matters.
However, you also mentioned that you could show as many
cases on the opposite side of this argument. So anecdote
matched up against anecdote, where is the preponderance of the
anecdotes, in your opinion?
Mr. Hoffman. So, I think it is right, and I am glad you
asked me that question. The standard is a high standard, so it
is certainly more often the case, and depending on the circuit
sometimes much more often the case, that a defendant, a non-
diverse defendant who has been named is found not to have been
fraudulently joined, and so the motion to remand is granted.
My point is to say it is a big litigation system. It is a
big country. We have lots of cases, and I have no doubt that
there are cases where judges have made a mistake on one side.
My point is only that there are just as many, and I am happy to
give examples. But again to your point, there is a danger if we
focus only on the examples.
Mr. King. I think instead I would go this way with it, that
we are talking about justice here on the Judiciary Committee,
and when we talk about justice, it is not something we do away
with as far as the preponderance of the anecdotes that we have.
It should be what is the best thing we can do to bring out the
maximum amount of justice and equity, and I am one of those
people who forbids my staff to use the word ``fair,'' which I
didn't notice anybody using this morning, because you can't
define that. It has multiple utilizations and code, but there
is no consistent definition of ``fair.'' So we should be
providing justice and equity.
What provides justice and equity? The other two witnesses
would argue this bill does. You argue that it is too complex
and we should trust the collective judicial wisdom. That is a
little bit harder to swallow here in the aftermath of some of
the Supreme Court decisions that have come down lately, the
collective judicial wisdom.
But I would just make the point that I don't hear anyone
testifying that there is any reservation about Congress'
constitutional authority to write these regulations. There is
no one among the panel that would make that case, is there?
Mr. Hoffman. No. The only point, to the extent that I have
made one, Representative King, in my written testimony--I
didn't say anything today--is I think there are concerns about
the Federalism issues because of the nature of what happens.
But I want to be clear in that I don't think there is, for
example, an Article 3 issue involved here as kind of the scope
of----
Mr. King. Okay, and that was my point. I just wanted to
establish that. We don't have a disagreement on Article 3
authority.
Mr. Hoffman. We do not.
Mr. King. And I certainly agree. But you made another point
about the definition of the word ``plausible,'' that it is not
defined. So isn't it true that under current practice, then,
``plausible'' is defined by each judge? That would be some of
the essence of your testimony, as I understand.
Mr. Hoffman. It is. The only thing I will add is, in
reference to your last remarks, despite perhaps your fear of
the collective judicial wisdom, the Supreme Court in both
Twombly and Iqbal advised us that plausibility is determined by
a judge's judicial wisdom and common sense.
Mr. King. Which means they know it when they see it.
Mr. Hoffman. So perhaps proponents of the bill should
pause----
Mr. King. I think you get my point on that, Mr. Hoffman.
[Laughter.]
Let me make another point, then, while we have an
opportunity here. I have with me a quote from Fourth Circuit
Judge J. Harvie Wilkinson, which you are apparently familiar
with. He recently observed this with regard to the joinder
issue: ``There is a problem with fraudulent jurisdiction law as
it exists today, and that is that you have to establish that
the joinder of a non-diverse defendant is totally ridiculous
and that there is no possibility of ever recovering, that it is
a sham, that it is corrupt. That is very hard to do. The
problem is the bar is so terribly high.''
Don't we have the presumption in favor of the fraudulent
defendants that would join this, and isn't the burden too high?
You said it is complex, and there are anecdotes on either side
of this. But in the end, if we are after justice and equity and
it gets to be a burden to litigate through that, the argument
to simplify our system doesn't argue necessarily in favor of
justice. Would you agree with that?
Mr. Hoffman. Thank you for your question. Let me see if I
can try to answer it this way.
First of all, in terms of Judge Wilkinson's remarks, I
don't know when they were made, whether he was speaking to a
Federalist Society group or whether he was--I suspect it is not
from a judicial opinion. Obviously, we know there are many,
many judicial opinions. I just don't know, so I can't speak to
it.
In terms of the substantive part of your question,
Representative King, my answer to you I think, and I will try
to be very brief on this, is really to track what I said
before. To the extent that there is an issue, and I submit
there isn't, but to the extent the Committee or proponents
think there is an issue, the issue doesn't lie with fraudulent
joinder law or with how judges are applying it in their
particular places, but rather it is with the substantive law.
And again, what I meant by that, to expound that point,
regardless of how the standard is, whether it is no possibility
or reasonable possibility, whatever it is for figuring out
whether a defendant has been improperly joined, the cases turn
almost exclusively on this question of whether or not the law
allows recovery.
This is not to legislate by anecdote, but I will just give
you one example to try to put some meat on the bones of what I
am trying to say. So, there was a case out of Mississippi just
a couple of years ago where there was a woman who was in a
nursing home and terrible things happened to her. She was
deprived of water, she had multiple falls and bruises.
So anyway, she ends up suing the nursing home, and she also
sues the administrators, the folks who are running the home.
They are, of course, the non-diverse defendants. So the
administrators bring a motion saying--you know, they remove it,
and in response to the motion to remand, they say we were
fraudulently joined. Their argument is they say we can't be
held liable unless we actually were the ones who physically
touched, physically injured the plaintiff.
What the court ends up ruling is that under Mississippi
law, physical injury is not the only requirement for holding a
supervisor liable. So the point is, to the extent there is an
issue, they may have a beef with Mississippi law--maybe it goes
too far, maybe it doesn't--but it is not a fraudulent joinder
issue.
Mr. King. Well, I am not disagreeing with the point that is
in the heart of that. I am recognizing that the clock has wound
down. I have other curiosities about this I will seek to
examine, but I want to thank all the witnesses and the Chairman
and yield back the balance of my time.
Mr. Franks. I thank the gentleman.
I suppose when it comes to plausibility, we can explain it
to the judges, but perhaps we can't understand it for them as
well.
This concludes today's hearing. Thanks to all of our
witnesses for attending.
Without objection, all Members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
And again, I thank the witnesses, I thank the Members, and
I thank the audience.
This hearing is adjourned.
[Whereupon, at 12:35 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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