Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-md-02096/USCOURTS-azd-2_09-md-02096-10/pdf.json

Nature of Suit Code: 365
Nature of Suit: Personal Injury - Product Liability
Cause of Action: 28:1332 Diversity-Fraud

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NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

IN RE: Zicam Cold Remedy Marketing,

Sales Practices, and Products Liability

Litigation.

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THIS DOCUMENT RELATES TO:

Mikolas v. Matrixx Initiatives, et al., 

CV 10-1233-PHX-FJM.

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No. 09-md-2096-PHX-FJM

ORDER

The court has before it plaintiff Johnny Mikolas’s motion to remand to state court

(doc. 605) and defendants’ response (doc. 652). Plaintiff did not file a reply. 

This action commenced on October 9, 2009, when plaintiff filed a claim against

defendants Matrixx Initiatives, Inc., Zicam L.L.C., and Texas-based retailer HEB Grocery

Company, LP (“HEB”) in the County Court at Law No. 1 of Calhoun County, Texas. On

November 13, 2009, defendants removed the action to the United States District Court for

the Southern District of Texas, pursuant to 28 U.S.C. § 1332. Plaintiff moved to remand on

December 4, 2009, but the transferor court did not rule on his motion before the Judicial

Panel on Multidistrict Litigation transferred the action to MDL 09-2096. 

Plaintiff now renews his motion to remand. Plaintiff argues that because both he and

defendant HEB are residents of Texas, there is not complete diversity between the parties,

and thus we lack jurisdiction over his claims. See 28 U.S.C. § 1332; Exxon Mobil Corp. v.

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We did not permit the addition of a John Doe retailer defendant, due to inconsistency

with the Rule 16 Scheduling Order and the Federal Rules of Civil Procedure (doc. 510). 

2

We denied the motion because of plaintiff’s failure to act diligently to comply with

the Rule 16 Scheduling Order (doc. 673). 

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Allapattah Services, Inc., 545 U.S. 546, 553, 125 S.Ct. 2611, 2617 (2005). Defendants

oppose remand on the grounds that HEB was fraudulently joined, as HEB cannot be liable

under Texas law. They contend that removal was proper, and further, that HEB should be

dismissed with prejudice. 

I

We note at the outset that defendants have previously agreed to the inclusion of other

retailer defendants in personal injury actions arising in Texas. Plaintiff Mary Ann Brandon

moved for leave to amend her complaint to add Wal-Mart Stores, Inc. and Wal-Mart Stores

Texas as defendants (doc. 288), and plaintiff John Touhey moved for leave to amend his

complaint to add as a defendant “John Doe Retailer/Distributor” (doc. 400). Defendants did

not oppose the addition of the retailer defendants (doc. 306).1

 Plaintiff Eugene Thomas

Stanley later moved for leave to amend his complaint to add HEB as a defendant (doc. 551).

Defendants opposed this motion due to its untimeliness, but did not argue that HEB could

not be liable under Texas law (doc. 595).2

II

“Joinder is fraudulent if the plaintiff fails to state a cause of action against a resident

defendant, and the failure is obvious according to the settled rules of the state.” Hunter v.

Philip Morris USA, 582 F.3d 1039, 1043 (9th Cir. 2009). Defendants have the burden to

establish fraudulent joinder by “clear and convincing evidence.” Hamilton Materials, Inc.

v. Dow Chemical Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). In determining whether we

have jurisdiction over an action, we may go beyond the pleadings. “The defendant seeking

removal to the federal court is entitled to present the facts showing the joinder to be

fraudulent.” Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). However,

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we analyze only whether plaintiff has stated a cause of action against the in-state defendant,

and will not conduct an “inquiry as to whether those defendants could propound defenses to

an otherwise valid cause of action.” Id.

Plaintiff’s causes of action are governed by the Texas Civil Practice & Remedies

Code’s provisions on products liability. See Tex. Civ. Prac. & Rem. Code § 82.001(2).

Under Texas law, a seller that did not manufacture a product is not liable for harm caused by

that product unless the claimant proves one of seven statutory exceptions to innocent seller

immunity. Tex. Civ. Prac. & Rem. Code § 82.003(a). Therefore, in order to demonstrate

fraudulent joinder and for us to have jurisdiction over this action, defendants must show that

plaintiff has obviously failed to allege that HEB could be liable under any one of the

exceptions. 

We conclude that although plaintiff has not stated a claim against HEB in accordance

with federal pleading standards, his failure is not “obvious according to the settled rules of

the state,” and thus, the joinder of defendant HEB is not fraudulent. To state a claim for

relief, a complaint must contain “well-pleaded factual allegations” that “plausibly give rise

to an entitlement to relief.” Ashcroft v. Iqbal, __ U.S. __, __, 129 S.Ct. 1937, 1950 (2009).

Plaintiff has not set forth specific facts to show that HEB could plausibly be liable to plaintiff

under one of the exceptions to innocent seller immunity. However, the pleadings are not so

insufficient as to meet the “obviously” without merit prong of fraudulent joinder. Therefore,

plaintiff is entitled to remand. 

A

Plaintiff claims HEB may be liable under the first exception, for sellers who

participated in the product’s design. Tex. Civ. Prac. & Rem. Code Ann. § 82.003(a)(1).

Plaintiff makes no specific factual contention that HEB, a Texas-based grocery store and not

a drug producer, was involved in Matrixx’s design of the Zicam products. Such participation

would be unusual, and HEB executive John Plemmons has denied involvement in product

design. Plemmons Affidavit, Ex. 1. Plaintiff’s generalized and conclusory allegation that

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“defendants defectively designed the Zicam No-Drip Liquid Nasal Gel” is insufficient to

show that HEB could be found liable due to its participation in product design. This

exception is obviously inapplicable.

B

Second, plaintiff claims HEB could be liable as a retailer who made express, incorrect

factual representations on which plaintiff relied, where plaintiff would not have been harmed

if the product had been as represented. Tex. Civ. Prac. & Rem. Code Ann. § 82.003(a)(5).

Plaintiff argues he has sufficiently alleged that HEB misrepresented Zicam and can therefore

be liable. In his complaint, plaintiff alleged that all defendants, including, HEB, violated the

Texas Deceptive Trade Practices Act. That law prohibits “representing that goods or services

have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which

they do not have” and “representing that goods or services are of a particular standard,

quality, or grade, or that goods are of a particular style or model, if they are of another.” Tex.

Bus. & Com. Code. Ann. § 17.46(b)(5) & (7). Plaintiff claims this allegation is sufficient to

have pled the innocent sellers exception for factual misrepresentation. 

Defendants have not presented clear and convincing evidence that HEB could not be

liable under the express misrepresentations exception. It is true that plaintiff has not asserted

any allegations about statements HEB made regarding Zicam products, much less specific

misrepresentations on which plaintiff relied and which lead to his harm. Additionally,

Plemmons stated that HEB made no representations about the safety or efficacy of Zicam.

Plemmons Affidavit, Ex. 1. This would be fatal if the complaint were judged by federal

standards. However, that does not mean that plaintiff has obviously failed to state a claim

under Texas law against HEB under the misrepresentation exception to seller immunity. It

is too soon to know with certainty that no representative of HEB made any claim about

Zicam, and in considering fraudulent joinder, we make no “inquiry into the merits of the

plaintiff’s claims.” Hunter, 582 F.3d at 1045. Because it is not obvious according to settled

Texas rules that plaintiff has failed to state a claim against HEB for liability pursuant to the

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misrepresentation exception, we cannot conclude that joinder was fraudulent. 

C

Third, plaintiff claims defendants, including HEB, may be liable for having actual

knowledge of the defect. Plaintiff alleges in his complaint that defendants, including HEB,

violated the Texas Deceptive Trade Practices Act’s prohibition on failure to disclose known

information with intent “to induce the consumer into a transaction into which the consumer

would not have entered had the information been disclosed.” Tex. Bus. & Com. Code. Ann.

§ 17.46(b)(24). Plaintiff argues that this claim of failure to disclose sufficiently alleges

liability under the innocent sellers exception for sellers who know of the defect that caused

the claimant’s harm. Tex. Civ. Prac. & Rem. Code Ann. § 82.003(a)(6). 

Again, plaintiff makes no specific allegations that HEB knew of the alleged defect in

Zicam that caused his injury, and Plemmons denies HEB’s awareness of any risk. Plemmons

Affidavit, Ex. 1. While this would be insufficient under federal pleading standards, again,

it does not follow that plaintiff has obviously failed to state a claim under Texas law. What

relevant HEB employees knew is unknown at this stage. Plaintiff has made allegations about

HEB’s failure to disclose information, and those allegations are sufficient to prevent

defendants from overcoming the “strong presumption against removal jurisdiction.” Hunter,

582 F.3d at 1042. 

D

Fourth, plaintiff alleges that HEB is liable under the innocent sellers exception for

retailers who have exercised substantial control over the content of a warning, where that

warning is inadequate and claimant’s harm resulted from the inadequacy of the warning.

Tex. Civ. Prac. & Rem. Code Ann. § 82.003(a)(4). This exception obviously does not apply

to HEB. Plaintiff does not allege that HEB was involved in the labeling of Zicam, which

would be unlikely, and Plemmons denies any such control. Plemmons Affidavit, Ex. 1.

Plaintiff’s allegations are obviously insufficient to show that HEB could be found liable due

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to its control over Zicam product labeling.

III

We conclude that defendant has not shown that plaintiff has obviously failed to state

a claim under Texas law against HEB. Therefore, IT IS ORDERED GRANTING

plaintiff’s motion to remand (doc. 605). IT IS FURTHER ORDERED REMANDING

Mikolas v. Matrixx Initiatives, et al., CV 10-1233-PHX-FJM to the County Court at Law No.

1 of Calhoun County, Texas.

DATED this 31st day of August, 2010.

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