The 'Fraudulent Joinder Prevention Act of 2016': A New Standard and a New Rationale for an Old Doctrine
The Federalist Society Review, Vol. 17, p. 34 (2016)
14 Pages Posted: 26 Jul 2016 Last revised: 24 Jan 2017
Date Written: July 22, 2016
H.R. 3624, the “Fraudulent Joinder Prevention Act of 2016” (FJPA), was approved by the House of Representatives on Feb. 25, 2016. The purpose of the bill, as its sponsor has explained, is to establish “a uniform standard for determining whether a [local] defendant has been fraudulently joined to a lawsuit, in order to defeat federal diversity jurisdiction.” The new standard would make it somewhat easier for defendants to remove diversity cases to federal court notwithstanding the joinder of an in-state or co-citizen defendant.
The bill now awaits action in the Senate. Should the Senate act favorably on the legislation? That depends on whom you ask. Supporters argue that the bill corrects an imbalance in current doctrine that allows plaintiffs to game the system, defeat the legitimate removal rights of out-of-state defendants, and drag local individuals or small businesses into lawsuits notwithstanding their “tangential or peripheral role” in the controversy. Opponents insist that the bill is “a solution in search of a problem,” that it seeks “to tilt the civil justice playing field in favor of corporate defendants,” and that it will “create problems by upending longstanding rules and potentially wreak havoc on the Federal courts.”
This article provides an initial look at the FJPA. Part I sketches the background. Part II traces the evolution of the bill, and Part III describes its provisions. Parts IV through VI discuss the principal points of contention between the bill’s supporters and its opponents. The article concludes by suggesting that the debate over the FJPA reflects a deeper disagreement over the role of removal based on diversity of citizenship in the American legal system. For opponents of H.R. 3624, diversity removal is an anomaly in the law, to be kept under tight restraints and made available only when absolutely necessary. In this view, the requirement of complete diversity is a desirable and almost unassailable part of the legal regime. In contrast, for supporters of the bill, diversity removal is an integral part of the judicial system established by the Constitution and the Judiciary Act of 1789. The anomaly, if there is one, is the complete-diversity rule — a rule that perhaps should be abrogated or modified because it can prevent defendants from removing cases to federal court when the purpose of diversity jurisdiction would support removal.
Keywords: Fraudulent joinder, Removal jurisdiction, Diversity jurisdiction, Federal jurisdiction, Litigation strategy, Legislation, Judicial Code, Complete diversity rule
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