Fraudulent Joinder, Federalism, and the Twombly/Iqbal Problem

Abstract

Fraudulent joinder exists when a plaintiff joins a non-diverse defendant to defeat removal to federal court based on diversity jurisdiction. The Supreme Court has held that federal courts can disregard the citizenship of fraudulently joined defendants when determining whether diversity jurisdiction exists.

The federal courts have not adopted a uniform test for fraudulent joinder, but all analogize it to the test used to decide a motion to dismiss for failure to state a claim upon which relief can be granted. Twombly and Iqbal arguably imposed a heightened pleading standard in federal court but many states continue to apply a notice pleading standard. The federal courts are split on whether fraudulent joinder analysis should be conducted with an eye toward the Twombly/Iqbal standard or the state notice pleading standard.

This article proposes that federal courts apply the state court pleading standard when analyzing questions of fraudulent joinder and determine whether the claim against the non-diverse defendant would survive a motion to dismiss for failure to state a claim upon which relief can be granted in state court. If so, then the non-diverse defendant has not been fraudulently joined. Applying this standard will ensure that federal courts respect state sovereignty and do not impermissibly expand their jurisdiction beyond the limits set by Article III and Supreme Court precedent.

Keywords: Twombly, Iqbal, Fraudulent Joinder, Diversity Jurisdiction, Removal, Remand, Notice Pleading, Federalism, State Sovereignty