[House Report 115-17]
[From the U.S. Government Publishing Office]





115th Congress    }                                  {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                  {         115-17

======================================================================



 
                     INNOCENT PARTY PROTECTION ACT

                                _______
                                

 February 24, 2017.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

   Mr. Goodlatte, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 725]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 725) to amend title 28, United States Code, to 
prevent fraudulent joinder, having considered the same, reports 
favorably thereon without amendment and recommends that the 
bill do pass.

                                CONTENTS

                                                                   Page

Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     2
Hearings.........................................................     3
Committee Consideration..........................................     3
Committee Votes..................................................     3
Committee Oversight Findings.....................................     4
New Budget Authority and Tax Expenditures........................     4
Congressional Budget Office Cost Estimate........................     4
Duplication of Federal Programs..................................     6
Disclosure of Directed Rule Makings..............................     6
Performance Goals and Objectives.................................     6
Advisory on Earmarks.............................................     6
Section-by-Section Analysis......................................     6
Changes in Existing Law Made by the Bill, as Reported............    15
Dissenting Views.................................................    17

                          Purpose and Summary

    Congress has the authority to regulate the jurisdiction of 
the lower Federal courts. As an exercise of that authority, the 
Innocent Party Protection Act establishes a uniform standard 
for determining whether a defendant has been fraudulently 
joined to a lawsuit in order to defeat Federal diversity 
jurisdiction. It also makes clear that Federal courts may 
consider evidence outside the pleadings when deciding a motion 
to remand a case that has been removed to Federal court, as 
well as whether the plaintiff has shown a good faith intent to 
pursue a judgment against a non-diverse defendant.

                Background and Need for the Legislation

    Current Federal court rules allow trial lawyers to keep 
their cases in state court if they sue a defendant from another 
state, as long as they also sue a local defendant in the state 
in which they are filing the case. Not surprisingly, these 
rules have been abused by trial lawyers who fraudulently sue 
local defendants, not because those local defendants have any 
real connection to the lawsuit, but because suing them allows 
the trial lawyers to keep their case in a preferred state court 
forum.
    If a local defendant has ``no real connection to the 
controversy,''\1\ joinder of that defendant is referred to as 
``fraudulent joinder.'' The Supreme Court has recognized, since 
the early 1900's, the fraudulent joinder doctrine as an 
exception to the complete diversity rule. The doctrine allows 
the district court to disregard, for jurisdictional purposes, 
the citizenship of certain nondiverse defendants under certain 
circumstances. The doctrine of fraudulent joinder prevents 
plaintiffs' ``attempts to wrongfully deprive parties entitled 
to sue in the Federal courts of the protection of their rights 
in those tribunals.''\2\ However, despite its importance, the 
Supreme Court has not clarified or elaborated upon the 
fraudulent joinder doctrine since first recognizing it in 
several cases in the early 1900's.
---------------------------------------------------------------------------
    \1\Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S. 146, 152 (1914).
    \2\Alabama Great Southern Railway Co. v. Thompson, 200 U.S. 206, 
218 (1906).
---------------------------------------------------------------------------
    Without guidance from the Supreme Court or Congress on the 
contours of fraudulent joinder, lower Federal courts, as 
described by one commentator, have been forced to grapple 
``with several issues raised by the doctrine, and in doing so, 
have created conflicts among the circuits with respect to the 
standard and procedure used to evaluate allegations of 
fraudulent joinder.''\3\ Indeed, another commentator has 
observed that, ``[p]resently, courts take divergent approaches 
when analyzing claims of fraudulent joinder. Predicting what 
test a court will apply to determine fraudulent joinder is 
difficult, as the standards can shift, even within the same 
opinion.''\4\ According to another commentator, the present 
standards are ``poorly defined and thus subject to . . . 
inconsistent interpretation and application.''\5\ Yet another 
commentator has written that, ``[r]ather than adopting one 
universal approach, courts attempt to discern fraudulent 
joinder by applying a collection of amorphous approaches.'' 
However, one aspect is consistent across different applications 
of the doctrine, and that is that in every court, the burden of 
proving fraudulent joinder is one of the heaviest burdens known 
to civil law.
---------------------------------------------------------------------------
    \3\E. Farish Percy, Making a Federal Case of It: Removing Civil 
Cases to Federal Court Based on Fraudulent Joinder, 91 Iowa L. Rev. 
189, 206-207 (2005).
    \4\Paul Rosenthal, Improper Joinder: Confronting Plaintiffs' 
Attempts to Destroy Federal Subject Matter Jurisdiction, 59 Am. U.L. 
Rev. 49, 64 (2009).
    \5\Peter G. Neiman, Root, Root, Root for the Home Team: Pete Rose, 
Nominal Parties, and Diversity Jurisdiction, 66 N.Y.U.L. Rev. 148, 156 
(1991).
---------------------------------------------------------------------------
    The Framers included Federal diversity jurisdiction in the 
Constitution to provide a neutral Federal forum in which 
interstate controversies could be adjudicated. Accordingly, as 
the Supreme Court has held, the Constitution ``presume[s] . . . 
that state attachments, state prejudices, state jealousies, and 
state interests, might sometimes obstruct, or control, or be 
supposed to obstruct or control, the regular administration of 
justice.''\6\ This legislation will help ensure that Congress's 
extension of Federal diversity jurisdiction is living up to the 
Framers' intentions in a manner fair to everyone.
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    \6\Martin v. Hunter's Lessee, 14 U.S. (1 Wheat.) 304, 347 (1816).
---------------------------------------------------------------------------

                                Hearings

    The Committee on the Judiciary held no hearings on H.R. 
725.

                        Committee Consideration

    On February 2, 2017, the Committee met in open session and 
ordered the bill H.R. 725, favorably reported, with an 
amendment, by a rollcall vote of 17 to 4, a quorum being 
present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following rollcall votes occurred during the Committee's 
consideration of H.R. 725.
    1. Motion to report H.R. 725 favorably to the House of 
Representatives. The motion was agreed to by a rollcall vote of 
17 to 4, a quorum being present.

                             ROLLCALL NO. 1
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................      X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX).................................
Mr. Chabot (OH)................................      X
Mr. Issa (CA)..................................      X
Mr. King (IA)..................................      X
Mr. Franks (AZ)................................      X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................      X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................      X
Mr. Marino (PA)................................      X
Mr. Gowdy (SC).................................      X
Mr. Labrador (ID)..............................      X
Mr. Farenthold (TX)............................
Mr. Collins (GA)...............................      X
Mr. DeSantis (FL)..............................
Mr. Buck (CO)..................................      X
Mr. Ratcliffe (TX).............................      X
Mr. Bishop (MI)................................      X
Ms. Roby (AL)..................................      X
Mr. Gaetz (FL).................................
Mr. Johnson (LA)...............................      X
Mr. Biggs (AZ).................................      X
 
Mr. Conyers, Jr. (MI), Ranking Member..........
Mr. Nadler (NY)................................
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................              X
Ms. Chu (CA)...................................
Mr. Deutch (FL)................................
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Mr. Jeffries (NY)..............................
Mr. Cicilline (RI).............................
Mr. Swalwell (CA)..............................              X
Mr. Lieu (CA)..................................              X
Mr. Raskin (MD)................................              X
Ms. Jayapal (WA)...............................
                                                ------------------------
    Total......................................     17       4
------------------------------------------------------------------------


                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 725, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 10, 2017.
Hon. Bob Goodlatte, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 725, the 
``Innocent Party Protection Act.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Robert Reese, 
who can be reached at 226-2860.
            Sincerely,
                                                Keith Hall,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member




                H.R. 725--Innocent Party Protection Act.

      As ordered reported by the House Committee on the Judiciary 
                          on February 2, 2015.




    H.R. 725 would require Federal courts to deny a motion to 
transfer a case to state court under certain circumstances. The 
bill also would amend the procedures under which Federal courts 
consider a motion to remove a case to state court by permitting 
parties to amend their pleadings.
    Under current law, plaintiffs can choose to bring certain 
claims in Federal or state court. In some cases, plaintiffs may 
view state courts as more favorable because of litigation 
strategy or timing, whereas, defendants may view Federal courts 
as more desirable. In such cases, courts must determine which 
jurisdiction is proper. Under H.R. 725, Federal courts would 
have to deny a motion to transfer a case from Federal court to 
a state court if they find that the plaintiff has 
misrepresented a defendant's state of citizenship or made a 
claim against a specific defendant that is not possible or 
plausible under state law or that is not made in good faith.
    The legislation could have an effect on litigation 
strategies and lead to changes in the number of cases filed in 
state and Federal courts. However, based on information from 
the Administrative Office of the U.S. Courts, CBO expects that 
any change in the number of claims filed in Federal courts 
would not have a substantial effect on the workload of the 
Federal courts. Therefore, CBO estimates that any changes in 
discretionary costs to implement H.R. 725 would not be 
significant.
    Enacting H.R. 725 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply. CBO 
estimates that enacting H.R. 725 would not increase net direct 
spending or on-budget deficits in any of the four consecutive 
10-year periods beginning in 2028.
    H.R. 725 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Robert Reese. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 725 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that H.R. 725 specifically directs 
to be completed no specific rule makings within the meaning of 
5 U.S.C. Sec. 551.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
725 is designed to prevent the fraudulent joinder of parties to 
lawsuits.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 725 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee. Following the text of the various provisions of 
the bill as reported is some commentary on those provisions.
    Sec. 1. Short title. Section 1 sets forth the short title 
of the bill as the ``Innocent Party Protection Act of 2017.''
    Sec. 2. Prevention of Fraudulent Joinder. Section 2 
contains the following provisions.

``(f) Fraudulent joinder. (1) This subsection shall apply to 
any case in which--(A) a civil action is removed solely on the 
basis of the jurisdiction conferred by section 1332(a);''

    Since fraudulent joinder is only a problem in a subclass of 
cases involving diversity of citizenship jurisdiction, this 
provision makes clear that the bill applies only in cases that 
are removed under the general diversity statute, 28 U.S.C. 
Sec. 1332(a), which states as follows:

        (a) The district courts shall have original 
        jurisdiction of all civil actions where the matter in 
        controversy exceeds the sum or value of $75,000, 
        exclusive of interest and costs, and is between--(1) 
        citizens of different States; (2) citizens of a State 
        and citizens or subjects of a foreign state, except 
        that the district courts shall not have original 
        jurisdiction under this subsection of an action between 
        citizens of a State and citizens or subjects of a 
        foreign state who are lawfully admitted for permanent 
        residence in the United States and are domiciled in the 
        same State; (3) citizens of different States and in 
        which citizens or subjects of a foreign state are 
        additional parties; and (4) a foreign state, defined in 
        section 1603(a) of this title, as plaintiff and 
        citizens of a State or of different States.

``(B) a motion to remand is made on the ground that--(i) one or 
more defendants are citizens of the same state as one or more 
plaintiffs, or--(ii) one or more defendants properly joined and 
served are citizens of the state in which the action was 
brought; and''

    When a case is removed under 28 U.S.C. Sec. 1332(a), there 
can be many grounds for a motion to remand other than those 
that implicate the fraudulent joinder doctrine. Some are 
jurisdictional like the amount-in-controversy requirement; 
others are procedural. If even one of those other grounds is 
well-taken, the case should be remanded whether or not the 
joinder is fraudulent. Paragraph (1)(B) specifies that the new 
provision applies when there is a motion to remand on the 
ground that the joinder of a co-defendant either destroys 
complete diversity or violates the forum defendant rule of 28 
U.S.C. Sec. 1441(b)(2).
    Subparagraph (B)(ii) deals with situations where the 
objection to removal is based on violation of the forum 
defendant rule. This provision is necessary because courts 
apply the fraudulent joinder doctrine when a plaintiff who is 
not a citizen of the forum state names a citizen of the forum 
state as a defendant, implicating 28 U.S.C. Sec. 1441(b)(2), 
which prohibits removal of a diversity case ``if any of the 
parties in interest properly joined and served as defendants is 
a citizen of the State in which [the] action is brought.''
    District courts apply the fraudulent joinder doctrine to 
forum defendants in the same way that they do to defendants who 
share citizenship with the plaintiff. As a district court in 
Missouri observed last year, ``[t]he standards for determining 
whether a resident defendant is fraudulently joined are the 
same as the standards for determining whether a diversity-
destroying defendant is fraudulently joined.''\7\
---------------------------------------------------------------------------
    \7\Byrd v. TVI, Inc., 2015 WL 5568454, at *2 (E.D. Mo. Sept. 21, 
2015) (emphasis added). Accord, In re Ethicon, Inc., Pelvic Repair Sys. 
Prods. Liab. Litig., 2013 WL 6710345, at *3 n.2 (S.D. W. Va. Dec. 19, 
2013) (``In Musewicz, the issue is diversity of citizenship, while in 
Hammons and Delacruz, the issue is the home state defendant rule. 
However, the fraudulent joinder analysis remains the same in both 
instances.''). There are some district court cases on the other side, 
primarily in the Southern District of Illinois.
---------------------------------------------------------------------------
    Paragraph (1)(B)(ii) codifies this line of cases because it 
represents sound policy. It would be very confusing to create a 
situation in which courts apply two different standards to two 
kinds of alleged fraudulent joinder, with a less rigorous 
standard for determining whether an in-state defendant has been 
fraudulently joined. This would be particularly anomalous in 
view of the fact that in most cases the defendant whose joinder 
is challenged is both a co-citizen of the plaintiff and a 
citizen of the forum state. In most instances the plaintiff 
would raise both objections; it would make no sense to apply 
different standards to each of the two. Nor would it make sense 
to apply different standards depending on which objection the 
plaintiff chose to raise.
    Paragraph (1)(B)(ii) uses the exact language of 28 U.S.C. 
Sec. 1441(b)(2), including the limitation to defendants 
``properly joined and served.'' This avoids any implication 
that the provision resolves the ongoing dispute in the lower 
Federal courts over the propriety of removal before service of 
process on resident defendants.\8\ However, the limitation is 
not included in paragraph (1)(B)(i), because ``a defendant who 
is a citizen of plaintiff's state destroys complete diversity, 
regardless of whether that defendant was properly served prior 
to removal.''\9\
---------------------------------------------------------------------------
    \8\See, e.g., Breitweiser v. Chesapeake Energy Corp., 2015 WL 
6322625, at *2 (N.D. Tex. Oct. 20, 2015) (collecting cases and 
referring to the practice as ``snap removal'').
    \9\Jennings-Frye v. NYK Logistics Americas Inc., 2011 WL 642653, at 
*3 (C.D. Cal. Feb. 1, 2011) (citing cases).

``(C) the motion is opposed on the ground that the joinder of 
the defendant or defendants described in subparagraph (B) is 
---------------------------------------------------------------------------
fraudulent.''

    Since fraudulent joinder is only a problem in a subclass of 
cases involving diversity of citizenship jurisdiction, this 
provision makes clear that the bill applies only in cases that 
are removed under the general diversity statute, 28 U.S.C. 
Sec. 1332(a) and where the motion to remand is opposed solely 
on the ground that the joinder of the defendants described by 
subparagraph (B) is fraudulent. This provision is necessary 
because it confines the application of the bill to opposition 
to remand on grounds of fraudulent joinder, which is the 
subject of the bill. The bill does not apply, for example, to 
the related but distinct doctrine of fraudulent misjoinder.\10\
---------------------------------------------------------------------------
    \10\The distinction between the two doctrines was helpfully 
summarized by the court in In re Plavix Prod. Liab. & Marketing Litig., 
2014 WL 4544089, at *5 (D. N.J. Sept. 12, 2014):

      Fraudulent misjoinder, otherwise known as ``procedural 
      misjoinder'', occurs when a plaintiff attempts to defeat 
      removal by misjoining the unrelated claims of non-diverse 
      party plaintiffs against a defendant. Geffen v. Gen. Elec. 
      Co., 575 F.Supp.2d 865, 869 (N.D. Ohio 2008). While 
      fraudulent joinder tests the viability of the claims 
      against the defendant, fraudulent misjoinder tests the 
---------------------------------------------------------------------------
      procedural basis of a party's joinder.

``(2) The joinder of the defendant described in paragraph 
(1)(B) is fraudulent if the court finds that--''

    Paragraph (2) sets forth four situations in which a court 
should find joinder to be fraudulent and should, under 
paragraph (4), deny the motion to remand. With the exception of 
the adoption of a uniform ``plausibility'' standard in 
subparagraph (B), paragraph (2) is largely a codification of 
current fraudulent joinder practice. Subparagraph (C) resolves 
a conflict in the lower courts and makes clear that a plainly 
meritorious affirmative defense, whether under state or Federal 
law, can be the basis for finding fraudulent joinder.
    H.R. 725 does not alter the burden of proving fraudulent 
joinder. As uniformly recognized by courts, the removing party 
must show Federal jurisdiction, and in cases covered by H.R. 
725 this means showing that the in-state defendant has been 
fraudulently joined. The removing party does this by persuading 
the court that one or more of the criteria set forth in 
paragraph (2) are satisfied. If the removing party establishes 
this, then the district court must deny the motion to remand 
described in paragraph (1)(B). If the removing party does not 
carry its burden, then the motion to remand must be granted.
    If, however, the removing party carries its burden, no more 
is required. In particular, the removing party need not 
overcome any ``presumption'' in order to carry its burden.\11\
---------------------------------------------------------------------------
    \11\No inference is intended with respect to the use of a 
presumption in removal cases not involving fraudulent joinder. See Dart 
Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547, 554 (2014) (``We 
need not here decide whether [a purported ``presumption'' against 
removal] is proper in mine-run diversity cases.'').

``(A) there is actual fraud in the pleading of jurisdictional 
---------------------------------------------------------------------------
facts with respect to that defendant;''

    Fraudulent joinder requiring denial of a motion to remand 
is defined by prong (A) as including a situation in which 
actual fraud--that is, the making of false allegations--exists 
in the pleading of jurisdictional facts. Courts have long 
recognized actual fraud in the pleading of jurisdictional facts 
as a basis for fraudulent joinder, although it is seldom 
asserted.\12\ In Coffman v. Dole Fresh Fruit Co.,\13\ for 
example, the court defined ``actual fraud'' as involving 
``false allegations,'' such as misrepresenting or concealing 
the citizenship of a party. The bill preserves this basis for 
finding fraudulent joinder. The bill's language is taken 
directly from a two-part test articulated by the Fifth Circuit 
in the leading case of Smallwood v. Illinois Central R.R. 
Co.\14\ Since then, the same two-part test has been used by 
many courts to define fraudulent joinder. For example, the 
Tenth Circuit said in 2013: ``To establish [fraudulent] 
joinder, the removing party must demonstrate either: (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.''\15\
---------------------------------------------------------------------------
    \12\See, e.g., Boyer Snap-On Tools Corp., 913 F.2d 108, 111 (3d 
Cir. 1990); Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th 
Cir.1983); B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th 
Cir.1981)).
    \13\927 F.Supp.2d 427, 434-35 (E.D. Tex. 2013).
    \14\385 F.3d 568, 573 (5th Cir. 2004) (en banc).
    \15\Dutcher v. Matheson, 733 F.3d 980, 988 (10th Cir. 2013).

``(B) based on the complaint and the materials submitted under 
paragraph (3), it is not plausible to conclude that applicable 
---------------------------------------------------------------------------
State law would impose liability on that defendant;''

    Fraudulent joinder requiring denial of a motion to remand 
is defined in prong (B) as including a situation in which, 
based on the complaint and materials submitted under paragraph 
(3), it is not plausible to conclude, as a legal matter, that 
applicable state law would impose liability on each co-citizen 
or in-state defendant. Prong (B) adopts a single uniform 
standard in place of the many different verbal formulations 
used by the courts today.\16\ In particular, prong (B) 
repudiates the ``any possibility'' standard adopted by some 
courts. Under that standard, ``if there is any possibility that 
the state law might impose liability on a resident defendant 
under the circumstances alleged in the complaint, the Federal 
court cannot find that joinder of the resident defendant was 
fraudulent.''\17\ Some courts have phrased this standard as 
requiring remand unless there is ``no possibility'' that the 
plaintiff can establish a claim against an in-state defendant 
under applicable state law in state court or no possibility of 
recovery by the plaintiff against an in-state defendant.\18\
---------------------------------------------------------------------------
    \16\See, e.g., Paul Rosenthal, Improper Joinder: Confronting 
Plaintiffs' Attempts to Destroy Federal Subject Matter Jurisdiction, 59 
Am. U. L. Rev. 49, 64 (2009) (``Presently, courts take divergent 
approaches when analyzing claims of fraudulent joinder. Predicting what 
test a court will apply to determine fraudulent joinder is difficult, 
as the standards can shift, even within the same opinion.'').
    \17\Florence v. Crescent Resources, LLC, 484 F.3d 1293, 1299 (11th 
Cir. 2007) (emphasis added).
    \18\See, e.g., Hartley v. CSX Transp., Inc., 187 F.3d 422, 426 (4th 
Cir. 1999) (finding that the ``any possibility'' or ``no possibility'' 
standard requires remand if there a ``glimmer of hope'' for the 
plaintiff).
---------------------------------------------------------------------------
    The term ``plausible'' is taken from the Supreme Court's 
jurisprudence interpreting Rule 8 of the Federal Rules of Civil 
Procedure, and the Court's decisions provide substantial 
guidance as to the meaning of the term. Initially, in Bell 
Atlantic Corp. v. Twombly,\19\ the Court distinguished between 
plausible claims and claims that are speculative: ``Factual 
allegations must be enough to raise a right to relief above the 
speculative level.''\20\ Later, in Ashcroft v. Iqbal,\21\ the 
Court distinguished between a probability requirement, which is 
not part of the law, and the plausibility standard: ``The 
plausibility standard is not akin to a ``probability 
requirement,'' but it asks for more than a sheer possibility 
that a defendant has acted unlawfully.'' Plausibility thus 
stands between possibility and probability.
---------------------------------------------------------------------------
    \19\550 U.S. 544 (2007).
    \20\Id. at 555.
    \21\556 U.S. 662, 678 (2009).
---------------------------------------------------------------------------
    The Twombly opinion provided further guidance in the course 
of explaining why the Court was adopting the plausibility 
standard. Quoting from an opinion of the Seventh Circuit, the 
Court said:

        [T]he costs of modern Federal antitrust litigation and 
        the increasing caseload of the Federal courts counsel 
        against sending the parties into discovery when there 
        is no reasonable likelihood that the plaintiffs can 
        construct a claim from the events related in the 
        complaint.\22\
---------------------------------------------------------------------------
    \22\Twombly, 550 U.S. at 558 (quoting Car Carriers, Inc. v. Ford 
Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)) (emphasis added).

    The ``reasonable likelihood'' test, which is synonymous 
with the plausibility standard, can readily be adapted to the 
fraudulent joinder context.\23\ For challenges to the factual 
basis of the plaintiff's claim against the co-citizen or in-
state defendant, the court would look at ``the complaint and 
[other] materials'' and determine whether there is a reasonable 
likelihood that the plaintiff can muster factual support for 
each element of the state-law claim. This ``demands more than 
an unadorned, the-defendant-unlawfully-harmed-me accusation'' 
or ``[t]hreadbare recitals of the elements of a cause of 
action, supported by mere conclusory statements.''\24\ For 
legal challenges, the court would examine the ``applicable 
state law'' and determine whether there is a reasonable 
likelihood that the state courts would impose liability under 
the pleaded facts.
---------------------------------------------------------------------------
    \23\For cases using the ``reasonable likelihood'' test in the Rule 
8 context, see, e.g., 16630 Southfield Limited Partnership v. Flagstar 
Bank, F.S.B., 727 F.3d 502, 504 (6th Cir. 2013) (quoting Twombly); 
Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 
2007).
    \24\Iqbal, 556 U.S. at 778.
---------------------------------------------------------------------------
    The ``reasonable likelihood'' standard is quite different 
from the ``reasonable basis'' and ``reasonable possibility'' 
standards used in some fraudulent joinder cases.\25\ 
``Reasonable likelihood'' is another way of expressing the 
concept of plausibility, and that concept is drawn from 
Twombly-Iqbal jurisprudence, not fraudulent joinder cases.
---------------------------------------------------------------------------
    \25\For example, some courts have used ``no reasonable basis'' 
interchangeably with ``no possibility of recovery.'' See, e.g., In re 
1994 Exxon Chem. Fire, 558 F.3d 378, 385 (5th Cir. 2009) (stating that 
in the Fifth Circuit the test for fraudulent joinder is ``whether the 
defendant has demonstrated that there is no possibility of recovery by 
the plaintiff against an in-state defendant, which stated differently 
means that there is no reasonable basis for the district court to 
predict that the plaintiff might be able to recover against an in-state 
defendant'') (quoting Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 
573 (5th Cir. 2004)).
---------------------------------------------------------------------------
    Professor Martin H. Redish, one of the nation's foremost 
scholars of Federal court jurisdiction, has written that ``the 
Twombly-Iqbal plausibility standard represents the fairest and 
most efficient resolution of the conflicting interests'' in the 
context of pleading.\26\ It will similarly provide a fair and 
efficient approach in the context of fraudulent joinder.
---------------------------------------------------------------------------
    \26\Martin H. Redish, ``Pleading, Discovery, and the Federal Rules: 
Exploring the Foundations of Modern Procedure,'' 64 Fla. L. Rev. 845, 
850 (2012).
---------------------------------------------------------------------------
    Further, the very same plausibility standard used in this 
bill was adopted by the Federal circuit court of appeals in 
which fraudulent joinder cases arise with the greatest 
frequency.\27\ Last Congress, Ranking Member Conyers said of 
the bill that it should ``simply pick one of the existing 
articulations of the fraudulent joinder standard and codify 
[it] into law.''\28\ At the time, the plausibility approach was 
applied by some district courts, but just last year the Fifth 
Circuit Court of Appeals adopted the same plausibility standard 
this bill contains in a case called International Energy,\29\ 
in which the Fifth Circuit stated ``we must consider whether 
[the plaintiff] pleaded `enough facts to state a claim to 
relief that is plausible on its face.'''\30\ The plaintiff in 
that case petitioned for rehearing en banc, but that rehearing 
was denied, with not a single judge on the Fifth Circuit 
requesting a vote.\31\ In just the last year, district courts 
in the Fifth Circuit have issued more than 40 fraudulent 
joinder decisions, without any difficulty, and with results 
that indicate just the sort of reasonable reform that would 
occur nationwide were Congress to settle the conflicts in the 
Federal courts by adopting the plausibility standard--namely, 
roughly two-thirds of the decisions hold the joinder to be 
fraudulent and retain the case, while the others grant the 
motion to remand. There is no evidence that the judges have any 
difficulty applying Federal pleading standards to state claims; 
on the contrary, they appear to be engaging in a routine and 
familiar judicial task. One such case is Johnson v. The 
Travelers Home & Marine Ins. Co.\32\ In that case, district 
Judge Gray Miller found that the allegations against an in-
state insurance adjuster didn't satisfy the plausibility 
standard, stating:
---------------------------------------------------------------------------
    \27\See E. Farish Percy, Making a Federal Case of It: Removing 
Civil Cases to Federal Court Based on Fraudulent Joinder, 91 Iowa L. 
Rev. 189, 192 n. 9 (2005).
    \28\Markup of H.R. 3624 at 46 (Feb. 3, 2016) (unofficial 
transcript), https://judiciary.house.gov/wp-content/uploads/2016/02/
02.03.16-Markup-Transcript-1.pdf [hereinafter Markup Transcript] 
(remarks of Rep. Conyers).
    \29\International Energy Ventures Management LLC v. United Energy 
Group Ltd., 818 F.3d 193 (5th Cir. 2016).
    \30\Id. at 208 (quoting language from the Supreme Court's Twombly 
decision).
    \31\Docket entry, July 13, 2016.
    \32\2016 WL 4061146 (S.D. Tex. July 29, 2016).

        These factual allegations are not pled with enough 
        specificity to distinguish particular facts from legal 
        conclusions. For example, Johnson alleges that Nice 
        performed an ``outcome oriented and unreasonable 
        investigation,'' but this allegation merely states a 
        conclusion without identifying any specific way in 
        which Nice's investigation was ``unreasonable.'' The 
        remainder of Johnson's allegations simply track the 
        statutory language of [various provisions of the Texas 
        Insurance Code] without alleging any case-specific 
        facts . . . Johnson's formulaic recitation of the 
        statutory language is insufficient to fulfill Johnson's 
        obligation to provide the grounds on which he is 
---------------------------------------------------------------------------
        entitled to relief.

    The court therefore denied the motion to remand the case 
back to state court. Courts in the Fifth Circuit are now 
reviewing the joinder of innocent parties to cases for forum 
shopping purposes with more scrutiny, which should be the case 
in courts nationwide.
    The Fifth Circuit also recognized that the plausibility 
standard is easy for district courts to apply and appellate 
courts to review, and avoids inconsistency. As the Fifth 
Circuit stated in its decision, ``there are good practical 
reasons for Federal courts to use a Federal test, chief among 
which is that our district courts are intimately familiar with 
that test. They are able to apply it uniformly, and we are able 
to review their applications uniformly.''\33\ The Fifth Circuit 
also recognized that applying different standards, as district 
courts within the Fifth Circuit had done previously, have 
``engendered confusion'' and ``uncertainty.''\34\ The Innocent 
Party Protection Act would remedy that confusion.
---------------------------------------------------------------------------
    \33\818 F.3d 193, 208 (5th Cir. 2016).
    \34\Id. at 201.
---------------------------------------------------------------------------
    In most cases, there will be no dispute as to which state's 
law is the ``applicable state law.'' If there is a 
disagreement, the court must perform a choice of law analysis. 
Under the Klaxon rule, a Federal court sitting in diversity 
applies the choice-of-law rules of the state in which it 
sits.\35\ The ``reasonable likelihood'' standard can be helpful 
here also. If there is a reasonable likelihood that the state 
court in which the Federal court sits would apply law that 
would impose liability on the co-citizen or in-state defendant, 
joinder is not fraudulent.
---------------------------------------------------------------------------
    \35\Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941).
---------------------------------------------------------------------------
    Applying the plausibility standard to fraudulent joinder 
does not require the court to decide any claims on their 
merits. Prong (B) uses the term ``impose liability on,'' drawn 
from fraudulent joinder jurisprudence.\36\ And paragraph (4) 
makes clear that claims against defendants found to have been 
fraudulently joined must be dismissed without prejudice.
---------------------------------------------------------------------------
    \36\See, e.g., Hornbuckle v. State Farm Lloyds, 385 F.3d 538, 542 
(5th Cir. 2004).

``(C) State or Federal law clearly bars all claims in the 
---------------------------------------------------------------------------
complaint against that defendant; or''

    Fraudulent joinder requiring denial of a motion to remand 
is defined by prong (C) as including a situation in which state 
or Federal law clearly bars all claims in the complaint against 
the non-diverse or in-state defendants. This would occur, for 
example, through the affirmative defenses of statute of 
limitations expiration, Federal preemption, or state or Federal 
laws that provide immunity from suit. For example, the Fourth 
Circuit in Johnson v. American Towers, LLC,\37\ held that the 
non-diverse defendant was fraudulently joined because ``the 
Communications Act clearly preempts the [plaintiffs'] state-law 
tort claim against [that defendant] as a matter of law.'' And 
in the leading case of In re Briscoe, the Third Circuit stated: 
``Courts have . . . recognized that a statute of limitations 
defense is properly considered in connection with a fraudulent 
joinder inquiry.''\38\ However, some courts have held that 
affirmative defenses cannot be considered as a basis for 
finding fraudulent joinder; those decisions should no longer be 
followed.\39\
---------------------------------------------------------------------------
    \37\781 F.3d 693, 705-06 (4th Cir. 2015).
    \38\In re Briscoe, 448 F.3d 201, 219 (3d Cir. 2006).
    \39\See, e.g., City of Columbus, Ohio v. Sunstar Columbus, Inc., 
2015 WL 5775532, at *5 (S.D. Ohio Oct. 2, 2015) (``Res judicata and 
collateral estoppel are affirmative defenses'' that a court may not 
address when considering fraudulent joinder); Huitron v. U.S. Foods, 
Inc., 2014 WL 4215656, at *5 (C.D. Cal. Aug. 25, 2014) (``Consent [is] 
is an affirmative defense to defamation'' that is ``not considered'' in 
the fraudulent joinder inquiry). Some courts have mistakenly applied 
the ``well-pleaded complaint'' rule--a rule developed for federal-
question jurisdiction--in the context of fraudulent joinder. These 
decisions too should no longer be followed.
---------------------------------------------------------------------------
    Subparagraphs (B) and (C), taken together, abrogate the 
``common defense'' doctrine associated with the Fifth Circuit 
decision in Smallwood v. Illinois Central R. Co.\40\ Under that 
doctrine, no matter how clear it is that the plaintiff's claim 
against the in-state defendant is barred, the case must be 
remanded to the state court if the same defense also bars the 
claim against the out-of-state defendant. For reasons given by 
the dissenting opinions in Smallwood, the doctrine is seriously 
flawed.\41\ Mandatory language in subparagraphs (B) and (C) 
make clear that in determining whether joinder is fraudulent, 
the court should consider only the claims against the 
defendants described in paragraph (B); the court should not 
examine the case against the diverse, out-of-state defendants.
---------------------------------------------------------------------------
    \40\385 F.3d 568 (5th Cir. 2004) (en banc) (9-7 decision).
    \41\Other flaws are discussed in Case Note, 118 Harv. L. Rev. 1086 
(2005).

``(D) objective evidence clearly demonstrates that there is no 
good faith intention to prosecute the action against that 
defendant or to seek a joint judgment including that 
---------------------------------------------------------------------------
defendant.''

    Prong (D) codifies a proposition that the Supreme Court has 
long recognized: that in deciding whether joinder is 
fraudulent, courts may consider whether the plaintiff has a 
good-faith intention of seeking a judgment against the non-
diverse defendant.\42\ Consistent with Supreme Court precedent, 
courts continue to find fraudulent joinder requiring denial of 
a motion to remand when objective evidence clearly demonstrates 
there is no good faith intention to prosecute the action 
against all defendants or seek a joint judgment against them. 
As the Federal court in Faulk v. Husqvarna Consumer Outdoor 
Products N.A., Inc.\43\ said, ``[w]here the plaintiff's 
collective litigation actions, viewed objectively, clearly 
demonstrate a lack of good faith intention to pursue a claim to 
judgment against a non-diverse defendant, the court should 
dismiss the non-diverse defendant and retain jurisdiction over 
the case.'' That is what Federal courts mean when they describe 
``objective evidence'' in the context of fraudulent joinder, 
namely ``collective litigation actions.'' The Federal court 
decision in In re Diet Drugs Prods. Liab. Litig.,\44\ also 
illustrates how a court can find a lack of good faith intention 
based on a careful analysis of objective evidence.
---------------------------------------------------------------------------
    \42\See Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 98 (1921) 
(``[T]he joinder was a sham and fraudulent--that is, . . . without any 
purpose to prosecute the cause in good faith against the [defendant]'' 
and ``with the purpose of fraudulently defeating the [other 
defendant's] right of removal.'').
    \43\849 F.Supp.2d 1327, 1331 (M.D. Ala. 2012).
    \44\220 F.Supp.2d 414, 420-22 (E.D. Pa. 2002).
---------------------------------------------------------------------------
    The language of this provision is taken almost verbatim 
from an often-cited decision of the Third Circuit. In In re 
Briscoe,\45\ the court said that joinder is fraudulent if 
``there is . . . no real intention in good faith to prosecute 
the action against the defendant or seek a joint judgment.'' 
This language has been quoted in decisions throughout the 
country, and prong (C) codifies it, with added language to make 
clear that the court should not inquire into the subjective 
intent of the plaintiff or his or her lawyer, but rather look 
to objective evidence.
---------------------------------------------------------------------------
    \45\448 F.3d 201, 216 (3rd Cir. 2006).

``(3) In determining whether to grant or deny a motion under 
paragraph (1)(B), the court may permit the pleadings to be 
amended, and shall consider the pleadings, affidavits, and 
---------------------------------------------------------------------------
other evidence submitted by the parties.''

    Paragraph (3) codifies the widely followed judicial 
practice of considering affidavits and other materials outside 
the pleadings when determining whether joinder is 
fraudulent.\46\ As one court aptly put it, ``[i]n analyzing a 
claim of fraudulent joinder, a court is not held captive by the 
allegations in the complaint.''\47\ For example, in Legg v. 
Wyeth,\48\ the Eleventh Circuit ruled that a district court 
erred in refusing to consider affidavits submitted by local 
sales representatives supporting the assertion that the 
representatives were fraudulently joined as defendants.
---------------------------------------------------------------------------
    \46\See, e.g., Herkenhoff v. Supervalu Stores, Inc., 2014 WL 
3894642, at *3 (E.D. Mo. Aug. 18, 2014) (citing authorities).
    \47\Mills v. Allegiance Healthcare Corp., 178 F.Supp.2d 1, 5-6 (D. 
Mass. 2001) (citing cases).
    \48\428 F.3d 1317, 1320-23 (11th Cir. 2005).
---------------------------------------------------------------------------
    Paragraph (3) also makes it clear that the district court 
may allow the plaintiff to amend the complaint to meet 
objections to remand. This provision addresses any concern that 
the plaintiff, having filed a complaint in state court under 
state procedural rules, may not have anticipated application of 
a ``plausibility'' or other Federal standard.
    The two provisions of paragraph (3) work in tandem. Thus, 
in Legg v. Wyeth, supra, the court said:

        The determination of whether a resident defendant has 
        been fraudulently joined must be based upon the 
        plaintiff's pleadings at the time of removal, 
        supplemented by any affidavits and deposition 
        transcripts submitted by the parties.'' The proceeding 
        appropriate ``for resolving a claim of fraudulent 
        joinder is similar to that used for ruling on a motion 
        for summary judgment under Fed.R.Civ.P. 56(b).\49\
---------------------------------------------------------------------------
    \49\Id. at 1322-23 (internal quotations, citations, and emphasis 
deleted).

    H.R. 725 codifies this approach, with one important 
modification: the determination need not be based on the 
plaintiff's pleadings at the time of removal; the plaintiff may 
amend the pleadings to meet objections to remand. However, the 
bill does not authorize any discovery beyond that which is 
---------------------------------------------------------------------------
permitted by existing rules and court decisions.

``(4) If the courts finds that all defendants described in 
paragraph (1)(B) have been fraudulently joined under paragraph 
(2), it shall dismiss without prejudice the claims against 
those defendants and shall deny the motion described in 
paragraph (1)(B).''

    Paragraph (4) makes clear that when a district court 
determines that a defendant has been fraudulently joined, the 
court should dismiss the claims against that defendant without 
prejudice, thereby allowing for a refiling of those claims in 
state court, to be decided on the merits. In providing that the 
claims against the in-state or non-diverse defendants should be 
dismissed without prejudice, paragraph (4) adopts the position 
of all but one of the courts of appeals that have addressed the 
issue.\50\ Only one court of appeals has ruled otherwise, in a 
single sentence without explanation.\51\ That decision should 
no longer be regarded as authoritative.
---------------------------------------------------------------------------
    \50\See Wivell v. Wells Fargo Bank, N.A., 773 F.3d 887, 896 (8th 
Cir. 2014) (citing cases from Third and Tenth Circuits).
    \51\Walton v. Bayer Corp., 643 F.3d 994, 1000-01 (7th Cir. 2011).
---------------------------------------------------------------------------
    With the dismissal of the fraudulently joined defendants, 
the district court can and should deny the motion to remand 
described in paragraph (1)(B).

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

                      TITLE 28, UNITED STATES CODE



           *       *       *       *       *       *       *
PART IV--JURISDICTION AND VENUE

           *       *       *       *       *       *       *


CHAPTER 89--DISTRICT COURTS; REMOVAL OF CASES FROM STATE COURTS

           *       *       *       *       *       *       *


Sec. 1447. Procedure after removal generally

    (a) In any case removed from a State court, the district 
court may issue all necessary orders and process to bring 
before it all proper parties whether served by process issued 
by the State court or otherwise.
    (b) It may require the removing party to file with its 
clerk copies of all records and proceedings in such State court 
or may cause the same to be brought before it by writ of 
certiorari issued to such State court.
    (c) A motion to remand the case on the basis of any defect 
other than lack of subject matter jurisdiction must be made 
within 30 days after the filing of the notice of removal under 
section 1446(a). If at any time before final judgment it 
appears that the district court lacks subject matter 
jurisdiction, the case shall be remanded. An order remanding 
the case may require payment of just costs and any actual 
expenses, including attorney fees, incurred as a result of the 
removal. A certified copy of the order of remand shall be 
mailed by the clerk to the clerk of the State court. The State 
court may thereupon proceed with such case.
    (d) An order remanding a case to the State court from which 
it was removed is not reviewable on appeal or otherwise, except 
that an order remanding a case to the State court from which it 
was removed pursuant to section 1442 or 1443 of this title 
shall be reviewable by appeal or otherwise.
    (e) If after removal the plaintiff seeks to join additional 
defendants whose joinder would destroy subject matter 
jurisdiction, the court may deny joinder, or permit joinder and 
remand the action to the State court.
    (f) Fraudulent Joinder.--
            (1) This subsection shall apply to any case in 
        which--
                    (A) a civil action is removed solely on the 
                basis of the jurisdiction conferred by section 
                1332(a);
                    (B) a motion to remand is made on the 
                ground that--
                            (i) one or more defendants are 
                        citizens of the same State as one or 
                        more plaintiffs; or
                            (ii) one or more defendants 
                        properly joined and served are citizens 
                        of the State in which the action was 
                        brought; and
                    (C) the motion is opposed on the ground 
                that the joinder of the defendant or defendants 
                described in subparagraph (B) is fraudulent.
            (2) The joinder of a defendant described in 
        paragraph (1)(B) is fraudulent if the court finds 
        that--
                    (A) there is actual fraud in the pleading 
                of jurisdictional facts with respect to that 
                defendant;
                    (B) based on the complaint and the 
                materials submitted under paragraph (3), it is 
                not plausible to conclude that applicable State 
                law would impose liability on that defendant;
                    (C) State or Federal law clearly bars all 
                claims in the complaint against that defendant; 
                or
                    (D) objective evidence clearly demonstrates 
                that there is no good faith intention to 
                prosecute the action against that defendant or 
                to seek a joint judgment including that 
                defendant.
            (3) In determining whether to grant or deny a 
        motion under paragraph (1)(B), the court may permit the 
        pleadings to be amended, and shall consider the 
        pleadings, affidavits, and other evidence submitted by 
        the parties.
            (4) If the court finds that all defendants 
        described in paragraph (1)(B) have been fraudulently 
        joined under paragraph (2), it shall dismiss without 
        prejudice the claims against those defendants and shall 
        deny the motion described in paragraph (1)(B).

           *       *       *       *       *       *       *


                            Dissenting Views

    H.R. 725, the ``Innocent Party Protection Act,'' is the 
latest attempt by the Majority to tilt the civil justice 
playing field in favor of corporate defendants by making it 
more difficult for plaintiffs to pursue state law claims in 
state courts. The bill would dramatically alter existing law by 
overriding the century-old doctrine of fraudulent joinder, 
under which Federal courts must remand a diversity case to 
state court if one defendant that is a citizen of the same 
state as the plaintiff (hereinafter ``in-state defendant'') was 
joined and where there is a reasonable basis under state law 
for a claim against that defendant. H.R. 725 also effectively 
repeals a statutory exception to diversity jurisdiction where a 
properly-joined out-of-state defendant is a citizen of the 
state in which the suit is originally brought, known as the 
``local defendant'' exception. The bill would impose burdensome 
and vague new requirements on a Federal court when considering 
a motion to remand in a case that was removed to Federal court 
solely on the basis of diversity of citizenship and where there 
is both an in-state and an out-of-state defendant present or 
where there is a local defendant. Specifically, before a 
Federal court could grant a motion to remand, the bill would 
require the court to find, among other things, that there is no 
actual fraud in the pleading of jurisdictional facts, that the 
addition of the in-state or local defendant to a case is based 
on a ``plausible'' state law claim against that in-state or 
local defendant, and that the plaintiff has a good faith 
intention to pursue the action against the in-state or local 
defendant or to seek a joint judgment.
    H.R. 725 raises several serious concerns that, taken 
together, threaten to delay and possibly deny justice for 
plaintiffs with meritorious state law claims. First, as with 
many civil justice measures that the Majority has proposed, the 
bill is a solution in search of a problem. As noted, current 
law already establishes a standard for courts to determine 
whether a party has been improperly joined, a standard that has 
been in place for a century. Tellingly, the U.S. Supreme Court 
has not seen fit to change this standard, and H.R. 725's 
proponents offer no evidence that Federal courts have routinely 
failed to properly address fraudulent or otherwise improper 
joinder. Moreover, a defendant may be able to move to dismiss a 
claim in state court against an in-state defendant before 
removing the remaining claims to Federal court.
    Second, by applying a vague and undefined ``plausibility'' 
standard to state law claims, H.R. 725 will generate tremendous 
uncertainty, complexity, and additional cost to the 
consideration of a motion to remand, which is ordinarily a 
common procedural matter considered at a nascent stage of a 
diversity case. The difficulty in applying a ``plausibility'' 
standard in the pleadings context is instructive in this 
regard, as this plausibility pleading standard has spawned much 
litigation over what constitutes a ``plausible'' claim. 
Similarly, the bill further heightens uncertainty and 
complexity by requiring a court to inquire into the ``good 
faith'' of the plaintiff's subjective intentions during this 
jurisdictional stage of the case, providing no guidance as to 
what constitutes ``good faith.'' These various requirements 
would effectively mandate a trial on the merits of a state law 
claim against a state defendant at the early procedural stage 
of a case when a court is ill-equipped to make such 
determinations and could even involve a defendant over which a 
Federal court may not have jurisdiction. In addition to adding 
burdens on litigants, these new requirements will strain 
already-limited Federal judicial resources.
    Finally, H.R. 725 deeply intrudes on state sovereignty by 
denying state courts the ability to decide, and thereby shape, 
state procedural and substantive law; and by shifting that 
power to Federal courts. Indeed, it is out of respect for 
federalism and recognition that Federal courts are supposed to 
be courts of limited jurisdiction that the Supreme Court added 
the requirement of complete diversity and Congress specified a 
minimum amount in controversy requirement in order for a state 
case to be removed to Federal court. Respect for federalism is 
also why Federal courts developed the practice of construing 
removal statutes narrowly, as reflected in the current 
fraudulent joinder doctrine, which favors remand to state 
courts except in very limited circumstances. The bill runs 
counter to this fundamental constitutional value, while also 
denying plaintiffs the prerogative to choose a state forum for 
the adjudication of state law claims.
    Given the bill's serious flaws, a broad coalition 
consisting of 54 consumer, environmental, and workers' rights 
organizations, including the Alliance for Justice, the Asbestos 
Disease Awareness Organization, the Center for Justice & 
Democracy, the Consumer Federation of America, the National 
Association of Consumer Advocates, the National Consumer Law 
Center, the National Employment Lawyers Association, the 
Natural Resources Defense Council, Public Citizen, and the 
Sierra Club, oppose H.R. 725.\1\ They warn that the bill 
``would upend long established law in the area of Federal court 
jurisdiction'' and ``would result in needless micromanagement 
of Federal courts and a waste of judicial resources.''\2\ In 
addition, the Obama administration issued a strong veto threat 
with respect to a bill considered in the last Congress that was 
substantively identical to H.R. 725.\3\ The Administration 
observed that the measure would ``add needless complexity to 
civil litigation and potentially prevent plaintiffs from 
raising valid claims in State court.''\4\
---------------------------------------------------------------------------
    \1\Letter from 54 consumer groups to Rep. Bob Goodlatte (R-VA), 
Chairman, and Rep. John Conyers, Jr.(D-MI), Ranking Member, H. Comm. on 
the Judiciary (Feb. 1, 2017) (on file with the Democratic Staff of the 
H. Comm. on the Judiciary).
    \2\Id.
    \3\Executive Office of the President, Office of Management and 
Budget, Statement of Administration Policy--H.R. 3624, Fraudulent 
Joinder Prevention Act of 2016 (Feb. 24, 2016).
    \4\Id.
---------------------------------------------------------------------------
    For the foregoing reasons, and those discussed below, we 
strongly oppose H.R. 725.

                       DESCRIPTION AND BACKGROUND

                              DESCRIPTION

    H.R. 725 would impose a series of new requirements on 
courts considering motions to remand in certain types of 
diversity cases. As a general matter, all of these requirements 
will make it harder for plaintiffs to successfully have cases 
solely raising state law claims remanded back to state court.
    Section 2 of the bill would add a new subsection (f) to 28 
U.S.C. Sec. 1447, the Federal statute governing remands of 
cases that have been removed to Federal court from state court. 
New section 1447(f)(1) specifies that the bill's requirements 
apply in cases where: (1) a civil action has been removed only 
on the basis of diversity jurisdiction (i.e., all plaintiffs 
are citizens of different states than all defendants); (2) a 
motion to remand the case back to state court is made on the 
ground that at least one of the defendants is a citizen of the 
same state as at least one of the plaintiffs (i.e., that there 
is no complete diversity of citizenship between the parties, as 
required by the diversity statute) or that one of the 
defendants is a citizen of the state in which the state court 
action was brought (such cases are currently an exception to 
diversity jurisdiction, provided for in 28 U.S.C. 
Sec. 1441(b)(2)); and (3) the motion to remand is opposed on 
the ground that the joinder of an in-state or local defendant 
is fraudulent.
    New proposed section 1447(f)(2) specifies the circumstances 
pursuant to which a court can find that joinder was fraudulent. 
These circumstances include a case where the court finds that 
there is actual fraud in the pleading of jurisdictional facts 
or where state or Federal law clearly bars all claims against 
in-state or local defendants. A court can also find that 
joinder of a party was fraudulent, based on evidence, if ``it 
is not plausible'' to conclude that state law would impose 
liability on an in-state or local defendant or where objective 
evidence ``clearly demonstrates'' that the plaintiff lacked the 
``good faith intention'' to pursue the civil action against 
such a defendant or to seek a joint judgment.
    The plausibility standard for determining whether remand 
would be appropriate appears to import the heightened pleading 
standard articulated in Ashcroft v. Iqbal\5\ into the remand 
context. Additionally, the bill fails to define ``good faith 
intention,'' a term that is not used in any other provision in 
title 28 of the U.S. Code. Such a determination would 
inherently require a subjective inquiry into the plaintiff's 
intention in adding the in-state defendant, rather than the 
objective inquiry under current law asking whether the 
plaintiff had a reasonable basis for pursuing such a claim.
---------------------------------------------------------------------------
    \5\556 U.S. 662 (2009).
---------------------------------------------------------------------------
    New section 1447(f)(3), among other things, requires a 
court to consider pleadings, affidavits, and other evidence 
submitted by the parties in assessing whether joinder was 
fraudulent when considering a motion to remand.

                               BACKGROUND

    Diversity jurisdiction refers to the jurisdiction of 
Federal courts over cases where the underlying claims arise 
solely under state law, but the parties are citizens of 
different states. A plaintiff may file a case in Federal court 
on diversity grounds or a defendant may remove a case filed in 
state court to Federal court on such basis.
    The diversity jurisdiction of Federal courts is rooted in 
Article III, section 2 of the Constitution, which provides, in 
pertinent part, that the ``judicial Power [of the United 
States] shall extend to . . . Controversies . . . between 
Citizens of different States. . . .''\6\ Congress's statutory 
grant of diversity jurisdiction is narrower than the scope of 
this constitutional provision, requiring, for example, a 
minimum amount in controversy.\7\ The Supreme Court has further 
limited the scope of diversity jurisdiction by requiring 
``complete'' diversity--i.e., that no defendant can be a 
citizen of the same state as any plaintiff.\8\
---------------------------------------------------------------------------
    \6\U.S. Const. art. III, Sec. 2, cl. 1.
    \7\28 U.S.C. Sec. 1332(a) (2017).
    \8\Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806).
---------------------------------------------------------------------------
    The Federal diversity statute is codified at 28 U.S.C. 
Sec. 1332 and provides, among other things, that Federal 
district courts shall have jurisdiction over all civil actions 
where the amount in controversy exceeds $75,000 and is between 
citizens of different states.\9\ Section 1332(c)(1) specifies 
that for purposes of the diversity statute and the Federal 
removal statute, a corporation is deemed to be a citizen of 
every state and foreign state where it is incorporated and 
where it has its principal place of business.\10\ For class 
actions, section 1332(d)(2) requires at least $5 million amount 
in controversy and recognizes diversity where any class member 
is a citizen of a different state than any defendant, among 
other things, making it relatively easier to remove class 
actions from state to Federal court.\11\
---------------------------------------------------------------------------
    \9\28 U.S.C. Sec. 1332(a)(1) (2017).
    \10\28 U.S.C. Sec. 1332(c)(1) (2017).
    \11\28 U.S.C. Sec. 1332(d)(2) (2017).
---------------------------------------------------------------------------
    Under 28 U.S.C. Sec. 1441(b), a defendant may seek to 
remove any civil action filed in a state court to a Federal 
court in the district where the state action is pending based 
solely on diversity jurisdiction, but the court must disregard 
the citizenship of defendants sued under fictitious names, and 
a case may not be removed if any of the parties properly joined 
and served as defendants is a citizen of the state in which the 
action is brought (the ``local defendant'' exception).\12\ 
Section 1447 of title 28, United States Code, outlines 
procedures for the Federal courts to follow after removal.\13\
---------------------------------------------------------------------------
    \12\28 U.S.C. Sec. 1441(b) (2017).
    \13\28 U.S.C. Sec. 1447 (2017).
---------------------------------------------------------------------------
    The judicially-created doctrine of fraudulent joinder is an 
exception to the requirement for complete diversity. Under the 
doctrine, a case may be removed to Federal court even if there 
is an in-state defendant in the case because the plaintiff 
failed to state a case against the in-state defendant. \14\ In 
seeking to remove a state case to Federal court, defendants 
often assert that a plaintiff has fraudulently joined an in-
state defendant solely to defeat diversity jurisdiction.
---------------------------------------------------------------------------
    \14\The Fraudulent Joinder Prevention Act of 2015: Hearing on H.R. 
3624 Before the Subcomm. on the Constitution and Civil Justice of the 
H. Comm. on the Judiciary, 114th Cong. 3 (2015) (written statement of 
Lonny Hoffman, Law Foundation Professor of Law, University of Houston 
Law Center) [hereinafter ``Hoffman Statement''].
---------------------------------------------------------------------------
    The test for determining whether joinder is improper under 
this doctrine is whether the defendant has demonstrated that 
there is no possibility of recovery by the plaintiff against 
the in-state defendant or no reasonable basis for a claim 
against such defendant, an extremely difficult and often 
impossible standard for a defendant to meet.\15\ If the Federal 
court finds, upon removal, that the fraudulently joined party 
was not properly joined to the case, it must dismiss that party 
from the case.
---------------------------------------------------------------------------
    \15\Id. at 3-4.
---------------------------------------------------------------------------
    The Supreme Court has recognized that federalism issues are 
always implicated in the removal context and, therefore, has 
made clear that removal statutes should be strictly and 
narrowly interpreted to resolve all doubts and ambiguities 
against removal.\16\ The doctrine of fraudulent joinder 
reflects this general policy.\17\
---------------------------------------------------------------------------
    \16\Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 
(1941).
    \17\Hoffman Statement at 5.
---------------------------------------------------------------------------

                         CONCERNS WITH H.R. 725

            I. H.R. 725 IS A SOLUTION IN SEARCH OF A PROBLEM

    While seeking to further stack the deck against plaintiffs 
by making it harder to pursue state law claims in state court, 
the bill does not address any actual existing problem. H.R. 
725's proponents offer no credible evidence that Federal courts 
are systematically ignoring improper joinder of in-state 
defendants in diversity cases or that the fraudulent joinder 
doctrine is ineffective. Ostensibly, the bill's proponents seek 
a uniform fraudulent joinder standard. Nevertheless, all 
articulations of the current century-old standard embody the 
same principle that unless there is no reasonable basis or 
possibility of recovery against an in-state defendant, the 
court should allow the in-state party to remain in the case and 
remand the case to state court. The fraudulent joinder doctrine 
is well-settled and is the same standard in substance in every 
circuit, whatever the semantic variances among different 
courts. Moreover, proponents offer no evidence that there is 
any problem with the way that Federal courts have applied the 
``local defendant'' exception to diversity jurisdiction,\18\ 
which H.R. 725 effectively repeals. Additionally, a defendant 
has the option of seeking to dismiss a non-meritorious claim 
against an in-state defendant in state court prior to removal 
to Federal court.\19\ In short, H.R. 725 does not address an 
actual problem, but would, instead, create problems by upending 
longstanding rules and potentially wreak havoc on the Federal 
courts.
---------------------------------------------------------------------------
    \18\28 U.S.C. Sec. 1441(b)(2) (2017).
    \19\See 28 U.S.C. Sec. 1446(b)(3) (2017) (providing that a case is 
removable within 30 days after initial pleadings if case has become 
removable within that time period).
---------------------------------------------------------------------------

 II. H.R. 725 WILL DRAMATICALLY INCREASE UNCERTAINTY, COMPLEXITY, AND 
          COSTS RELATED TO THE CONSIDERATION OF REMAND MOTIONS

A. LThe application of a vague and undefined ``plausibility'' standard 
        will require a determination on the merits of a state law claim 
        at a point in the case when a court is ill-equipped to do so.
    H.R. 725 requires that, prior to granting a motion to 
remand, a court must find that it is ``plausible to conclude 
that applicable State law would impose liability'' on an in-
state or local defendant. Although this plausibility standard 
is inherently vague, the bill does not define ``plausible'' or 
provide any guidance as to how a court should apply the term. 
As Professor Lonny Hoffman, the Minority witness who testified 
last Congress at the Constitution Subcommittee hearing on this 
bill warned, this vague term ``would force courts to struggle 
with determining what `plausible' means for purposes of 
deciding whether to grant remand.''\20\ Professor Hoffman 
further noted that in addition to being ambiguous, the 
``plausibility'' requirement is a new one, making it even more 
problematic by making it hard for courts to apply the standard 
in a consistent and coherent way.\21\
---------------------------------------------------------------------------
    \20\Hoffman Statement at 6.
    \21\Id. at 7.
---------------------------------------------------------------------------
    The bill seeks to import the Federal plausibility pleading 
standard into the standards for granting remand motions. The 
U.S. Supreme Court, in its 2009 Ashcroft v. Iqbal decision, 
established a new standard for judging the sufficiency of facts 
alleged in a civil complaint. \22\ Prior to Iqbal, the Court 
had made clear that, in interpreting Federal Rule of Civil 
Procedure 8,\23\ which governs pleadings in civil cases, a 
civil action should not be dismissed ``unless it appears beyond 
doubt that the plaintiff can prove no set of facts in support 
of his claim which would entitle him to relief.''\24\ According 
to commentators, the pre-Iqbal view was that Rule 8 should be 
``interpreted liberally'' because ``until the plaintiff can 
remain in court long enough to have an opportunity to examine 
those files and to question defendants and others, the merits 
of a case cannot be determined.''\25\
---------------------------------------------------------------------------
    \22\556 U.S. 662 (2009).
    \23\Rule 8 requires, among other things, that a complaint must 
contain ``a short and plain statement of the claim showing that the 
pleader is entitled to relief. . . .'' Fed. R Civ. P. 8(a)(2).
    \24\Conley v. Gibson, 355 U.S. 41, 46 (1957)
    \25\Herman Schwartz, The Supreme Court Slams the Door, The Nation, 
Sept. 30, 2009.
---------------------------------------------------------------------------
    The Court's holding in Iqbal reflected a decision to 
abandon more than half a century of established civil 
litigation practice. In Iqbal, the Court put forward a new test 
under which Federal judges are to determine which civil 
complaints will withstand a motion to dismiss. First, a 
complaint must contain factual allegations, rather than legal 
conclusions, and second, the factual allegations must be 
plausible, with plausibility ``a context-specific task that 
requires the reviewing court to draw on its judicial experience 
and common sense.''\26\ Later, Justice Ruth Bader Ginsberg, in 
her comments about the decision, observed that the court's 
``majority messed up the federal rules.''\27\ Not surprisingly, 
Iqbal has spawned much litigation over what constitutes a 
``plausible'' claim for purposes of pleading under Rule 8.\28\
---------------------------------------------------------------------------
    \26\556 U.S. at 679.
    \27\Adam Liptak, 9/11 Case Could Bring Broad Shift on Civil Suits, 
N.Y. Times, July 21, 2009.
    \28\Although the Supreme Court first established the notion of a 
``plausibility'' pleading requirement in 2007 in the antitrust case of 
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), it was in Iqbal 
that the Court expanded the ``plausibility'' pleading requirement to 
all civil suits. This new pleading requirement has been described as 
``an open door to judicial bias'' and a ``padlock on the courthouse 
door.'' Tony Mauro, Plaintiffs Groups Mount Effort to Undo Supreme 
Court's `Iqbal' Ruling, The Nat'l L. J., Sept. 21, 2009. It is a 
significant departure from the ``bare-bones complaint'' and 
``mechanical'' approach that had been established in the previous 50 
years. Adam Liptak, 9/11 Case Could Bring Broad Shift on Civil Suits, 
N.Y. Times, July 21, 2009.
---------------------------------------------------------------------------
    The experience of Federal courts in attempting to apply a 
``plausibility'' standard to pleadings is instructive. Iqbal 
has spawned numerous inconsistent and incoherent decisions 
attempting to define what constitutes a ``plausible'' pleading. 
As Professor Hoffman noted, the ``attempt to incorporate 
plausibility into jurisdictional law would raise identical 
difficulties to those that now plague the cacophony of Rule 
12(b)(6) decisional law [addressing whether pleadings raise 
``plausible'' claims]. Yet, the proposed amendments [in H.R. 
725] are oblivious to this danger and silent on how district 
courts are to determine whether the claims asserted against a 
non-diverse defendant are plausible.''\29\ Seven years after 
the Supreme Court required that a ``plausibility'' standard be 
applied to Federal pleadings, Federal courts still struggle 
with its application, and there is little reason to think that 
the same difficulties would not arise with respect to the 
application of such a standard in the context of remand 
motions, with tremendous time and money spent litigating the 
question of plausibility.
---------------------------------------------------------------------------
    \29\Hoffman Statement at 7.
---------------------------------------------------------------------------
    In addition to being vague and difficult to apply, H.R. 
725's plausibility standard would force a court to conduct a 
mini-trial on the merits of a plaintiff's state law claims at a 
jurisdictional stage of the case, in the absence of discovery 
or the opportunity to fully develop the factual record and 
before the court's jurisdiction (i.e., the court's power to 
decide the case in the first place) is even established. For 
these reasons, current fraudulent joinder law does not impose 
such a requirement for merits review and instructs courts to 
avoid merits determinations. The fraudulent joinder doctrine 
requires a court only to take a limited look outside the 
pleadings and to avoid crossing the line from jurisdictional 
inquiry to a decision on the merits. Thus, in yet another way, 
H.R. 725 would dramatically change current law and practice.
    In sum, H.R. 725's plausibility standard would introduce 
tremendous uncertainty and complexity into Federal courts' 
determinations of remand motions because of its inherent 
vagueness and the difficulty of its application. Moreover, the 
standard requires a Federal court, as part of a jurisdictional 
inquiry, to engage in an extensive merits review of a 
plaintiff's state law claims against an in-state or local 
defendant. These factors will spawn a tremendous amount of 
litigation over the application of what currently is a simple 
procedural motion, potentially making many state law cases 
cost-prohibitive for many plaintiffs to pursue.
B. LThe requirement that a court determine a plaintiff's subjective 
        ``good faith intention'' and some of the bill's other 
        requirements are ambiguous, difficult to apply, and represent a 
        significant departure from current law.
    As with its plausibility requirement, H.R. 725's mandate 
that a court find that a plaintiff had a ``good faith intention 
to prosecute the action against'' an in-state or local 
defendant or to seek a joint judgment is likewise vague and 
undefined. The bill provides no guidance as to the meaning of 
``good faith intention'' or how such a standard is to be 
applied. The term ``good faith intention'' is not used anywhere 
in Title 28 of the United States Code. Moreover, like the 
plausibility requirement, the requirement that a court inquire 
into a plaintiff's subjective intentions is one that a court is 
ill-equipped to apply at a jurisdictional stage of the case.
    In addition, the ``good faith intention'' requirement is a 
significant departure from current law. Under the fraudulent 
joinder doctrine, the term ``fraudulent'' is a term of art that 
does not require the proof of actual fraudulent intent on the 
plaintiff's part.\30\ ``Fraudulent'' joinder typically refers 
to any improper joinder, regardless of the plaintiff's intent, 
and the court's inquiry is limited to whether there was some 
basis in law for the plaintiff's claim against the in-state 
defendant. Yet, H.R. 725 mandates that a court determine that a 
plaintiff joined an in-state or local defendant with the ``good 
faith intention'' of pursuing a claim against such a defendant, 
changing longstanding law and introducing additional 
uncertainty into the consideration of remand motions.
---------------------------------------------------------------------------
    \30\Hoffman Statement at 7.
---------------------------------------------------------------------------
    Similarly, H.R. 725's requirement that a court find no 
``actual fraud in the pleading of jurisdictional facts'' 
misdirects the court's attention toward a plaintiff's 
subjective intent when determining whether to grant a remand 
motion. As noted, current law requires a court only to look at 
whether there was a reasonable basis for the plaintiff's claim, 
regardless of the plaintiff's intent in naming a particular 
defendant. The ``actual fraud'' standard, like the ``good faith 
intention'' standard, is a major change to current fraudulent 
joinder law, one that would be very cumbersome to implement.
    As with the plausibility requirement, the ambiguity and 
novelty of the ``good faith intention'' and ``actual fraud'' 
standards will spawn increased litigation over their meaning 
and application, leading to increased uncertainty and costs for 
litigants and unnecessary and harmful delay in resolving 
threshold jurisdictional questions.
C. LThe bill's requirements open the door to dilatory tactics by 
        defendants to further delay resolution of a case, deny 
        plaintiffs the prerogative to choose the forum for their 
        claims, and strain Federal judicial resources.
    Justice delayed is justice denied, and H.R. 725's various 
requirements will have the effect of significantly delaying the 
ultimate resolution of many plaintiffs' state law claims 
against in-state or local defendants. This factor may further 
incentivize out-of-state defendants to remove cases to Federal 
court and to prolong proceedings on motions to remand, knowing 
that the burden of sharply increased costs and length of 
litigation will fall disproportionately on plaintiffs, who 
typically have fewer litigation resources than the average out-
of-state corporate defendant. This potential outcome may even 
have the effect of dissuading plaintiffs from filing suit in 
state court in the first place.
    H.R. 725 also denies plaintiffs the prerogative to select 
the forum in which their claims will be heard by making it much 
easier for an out-of-state defendant to remove a case to 
Federal court, leaving the choice of forum in the defendant's 
hands in many more cases than currently. Additionally, the 
bill, if enacted, could result in a significant increase in the 
workload of Federal courts, straining already limited judicial 
resources.
    This legislation must be seen as part of a longstanding 
effort to make it easier for defendants to remove purely state 
law matters to Federal court. For instance, more than a decade 
ago, Congress passed the Class Action Fairness Act of 2005 
(CAFA).\31\ Among other things, CAFA expanded Federal diversity 
jurisdiction for class actions, including eliminating the 
requirement for complete diversity in class actions, making it 
easier for defendants to remove class and ``mass actions'' from 
state to Federal courts. CAFA opponents--including Ranking 
Member John Conyers, Jr. (D-MI) and Representative Jerrold 
Nadler (D-NY)--argued that it was a blatant attempt to tilt the 
playing field in favor of defendants. They opposed expansion of 
Federal diversity jurisdiction as an unwarranted effort to make 
it ``far more burdensome, expensive, and time-consuming for 
groups of injured persons'' to use the class action mechanism 
to vindicate their rights under state law.\32\ They expressed 
concern that CAFA would undermine state law by divesting state 
courts of the ability to interpret and develop state procedural 
and substantive law and that it would increase the workload of 
already over-burdened Federal courts.\33\ H.R. 725 simply would 
continue to exacerbate this problem.
---------------------------------------------------------------------------
    \31\P.L. 109-2, 119 Stat. 4 (Feb. 18, 2005).
    \32\See H. Rep. 108-144 at 157-76, 108th Cong. (dissenting views to 
Committee report accompanying H.R. 1115, Class Action Fairness Act of 
2003, which the House passed by a vote of 253-170).
    \33\Id. at 166-70.
---------------------------------------------------------------------------

  III. H.R. 725 OFFENDS FEDERALISM AND REPRESENTS A SERIOUS INTRUSION 
                         INTO STATE SOVEREIGNTY

    H.R. 725 raises serious federalism concerns by denying 
state courts the ability to shape state substantive and 
procedural law and by instead transferring that power to 
Federal courts. Indeed, many of us raised very similar 
federalism concerns in opposing CAFA more than 10 years ago, 
but H.R. 725 ignores these concerns.
    Removal of a state court case to Federal court always 
implicates federalism concerns, which is why the Federal courts 
generally disfavor Federal jurisdiction and read removal 
statutes narrowly. As noted earlier, this is why the fraudulent 
joinder doctrine places a very high burden on a defendant 
opposing a remand motion to show that there was no reasonable 
basis for the addition of an in-state defendant, thus favoring 
remand to state courts except under very limited circumstances. 
By replacing this well-settled doctrine with sweeping and 
vaguely-worded new standards for the determination of when a 
state case may be remanded to state court, H.R. 725 denies 
state courts the ability to decide and, ultimately, to shape 
state law.
    In addition, the bill further infringes state sovereignty 
by giving Federal courts the power to shape state pleading law. 
This is particularly true with respect to the application of 
the bill's ``plausibility'' standard. When a suit is maintained 
in state court, the applicable pleading standard may not be the 
plausibility pleading standard articulated in Iqbal. Yet, when 
a Federal court is required to review a state law claim in the 
context of a remand motion, it will effectively be applying the 
heightened Iqbal pleading standard to the plaintiff's claims 
against an in-state or local defendant, progressively 
undermining the authority of state courts to set their own 
pleading standards for state court cases. As a practical 
matter, any plaintiff who chooses to add an in-state defendant 
to a case filed in state court must meet the Iqbal pleading 
standard to support a remand back to state court should the 
case be removed to Federal court.
    Finally, by effectively repealing the local defendant 
exception to diversity jurisdiction provided for in 28 U.S.C. 
Sec. 1441(b)(2), H.R. 725 further chips away at state 
sovereignty, expanding the power of Federal courts to decide 
state law matters. This is particularly egregious in the case 
of repealing the local defendant exception because the 
principal concern justifying diversity jurisdiction--the risk 
of prejudice against an out-of-state defendant by a state 
court--is absent in the case of a defendant that is a citizen 
of the state where the suit was filed, as Congress clearly 
recognized by putting the local defendant exception into 
statute.

                               CONCLUSION

    H.R. 725 is a blatant attempt to tilt the playing field in 
favor of corporate wrongdoers by making it far more burdensome, 
expensive, and time-consuming for injured people to obtain 
justice from such wrongdoers. The bill's proponents have failed 
to offer any credible evidence that there is a need to replace 
the well-settled fraudulent joinder doctrine. Moreover, the 
bill will impose novel, highly ambiguous, and difficult-to-
apply requirements on Federal courts considering remand motions 
in certain circumstances. These new requirements will create 
tremendous uncertainty and introduce unnecessary complexity 
into the remand process. They will also increase the length and 
cost of litigation, delaying adjudication of potentially 
meritorious claims and burdening plaintiffs to the point where 
future plaintiffs may even be dissuaded from filing suit. 
Finally, the bill represents a serious intrusion into 
sovereignty by denying state courts the ability to shape state 
law and inappropriately shifting that power to Federal courts.
    For the foregoing reasons, we respectfully dissent and urge 
our colleagues to stand on the side of justice and to join us 
in opposing H.R. 725.

                                   Mr. Conyers, Jr.
                                   Mr. Nadler.
                                   Ms. Lofgren.
                                   Ms. Jackson Lee.
                                   Mr. Cohen.
                                   Mr. Johnson, Jr.
                                   Mr. Deutch.
                                   Mr. Gutierrez.
                                   Ms. Bass.
                                   Mr. Richmond.
                                   Mr. Jeffries.
                                   Mr. Cicilline.
                                   Mr. Swalwell.
                                   Mr. Lieu.
                                   Mr. Raskin.
                                   Ms. Jayapal.

                                  [all]