```

[House Report 114-422]
[From the U.S. Government Publishing Office]

114th Congress   }                                       {      Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                       {     114-422

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

 
               FRAUDULENT JOINDER PREVENTION ACT OF 2016

                                _______
                                

 February 16, 2016.--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. 3624]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 3624) to amend title 28, United States Code, to 
prevent fraudulent joinder, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.

                                CONTENTS

                                                                   Page

The Amendment....................................................     2
Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     2
Hearings.........................................................     6
Committee Consideration..........................................     6
Committee Votes..................................................     6
Committee Oversight Findings.....................................     7
New Budget Authority and Tax Expenditures........................     7
Congressional Budget Office Cost Estimate........................     7
Duplication of Federal Programs..................................     8
Disclosure of Directed Rule Makings..............................     9
Performance Goals and Objectives.................................     9
Advisory on Earmarks.............................................     9
Section-by-Section Analysis......................................     9
Changes in Existing Law Made by the Bill, as Reported............    17
Dissenting Views.................................................    18

                             The Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Fraudulent Joinder Prevention Act of 
2016''.

SEC. 2. PREVENTION OF FRAUDULENT JOINDER.

  Section 1447 of title 28, United States Code, is amended by adding at 
the end the following:
  ``(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 the defendant or defendants described in 
        paragraph (1) (B) is fraudulent if the court finds that--
                  ``(A) there is actual fraud in the pleading of 
                jurisdictional facts;
                  ``(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 each defendant described in paragraph 
                (1)(B);
                  ``(C) State or Federal law clearly bars all claims in 
                the complaint against all defendants described in 
                paragraph (1)(B); or
                  ``(D) objective evidence clearly demonstrates that 
                there is no good faith intention to prosecute the 
                action against all defendants described in paragraph 
                (1)(B) or to seek a joint judgment.
          ``(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 fraudulent joinder under paragraph 
        (2), it shall dismiss without prejudice the claims against the 
        defendant or defendants found to have been fraudulently joined 
        and shall deny the motion described in paragraph (1)(B).''.

                          Purpose and Summary

    Congress has the authority to regulate the jurisdiction of 
the lower Federal courts. As an exercise of that authority, the 
Fraudulent Joinder Prevention 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

    The current law of Federal jurisdiction allows 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, this body of law has been abused by trial lawyers 
who fraudulently sue local defendants, even though the 
plaintiff's claims against those defendants have little or no 
support in fact or law, because suing them allows the trial 
lawyers to keep their case in a preferred state court forum.
    If a local defendant has no proper 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\ and that ``[r]ather than adopting one universal 
approach, courts attempt to discern fraudulent joinder by 
applying a collection of amorphous approaches.''\5\ According 
to another commentator, the present standards are ``poorly 
defined and thus subject to . . . inconsistent interpretation 
and application.''\6\ 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\Paul Rosenthal, Improper Joinder: Confronting Plaintiffs' 
Attempts to Destroy Federal Subject Matter Jurisdiction, 59 Am. U. L. 
Rev. 49, 73 (2009).
    \6\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).
---------------------------------------------------------------------------
    Testimony at the hearing on H.R. 3624 made clear that this 
very demanding standard has substantial real-world 
consequences. Plaintiffs' attorneys have a strong incentive in 
lawsuits targeting out-of-state businesses to name as an 
additional defendant a local individual or business that had 
only a tangential or peripheral role in the case. Doing so 
allows the plaintiff's lawyer to litigate the case in a state 
court viewed as favorable to the plaintiff, whether due to a 
perception of bias against out-of-state defendants, procedures 
that favor plaintiffs, or other advantages. Current fraudulent 
joinder law allows this gamesmanship even when the plaintiff's 
lawyer can muster only an extremely weak or highly attenuated 
claim against the local defendant.
    To avoid Federal court jurisdiction, plaintiffs' lawyers 
have a number of go-to local defendants that they name 
depending on the type of lawsuit. In personal injury lawsuits, 
such as slip-and-fall claims, against retailers, hotels, and 
other national businesses, plaintiffs' lawyers include a local 
store manager or employee as a defendant. In product liability 
actions, plaintiffs' lawyers include in the lawsuit a local 
distributor, the neighborhood shop that sold the product, or a 
sales representative. In pharmaceutical litigation, plaintiff's 
lawyers also name drug stores, pharmacists, or doctors as 
defendants in the complaint. When an automaker is sued, the 
local dealership or repair shop that serviced the vehicle may 
be dragged into court. In insurance coverage disputes, 
plaintiffs' lawyers name local claims adjusters even when the 
adjuster's only role was to assess the damage claimed by the 
insured.
    In many of these situations, the local defendant, which is 
often an individual or small business, is not subject to 
liability under applicable state law or has a complete defense 
under Federal law, or the plaintiff's lawyer has no intention 
of actually pursuing a judgment against the local defendant. 
But the test for fraudulent joinder is so demanding that the 
district court will feel obliged to grant the plaintiff's 
motion to remand.
    Once the case is remanded to state court, the local 
defendant will often be dropped from the case. By that time, 
the harm is done. Small business owners and other individuals 
who are named as a defendant for an improper reason are forced 
to incur substantial financial costs in defending their 
business. They must dedicate their time and energy to the case. 
They must deal with the heavy emotional toll that a wrongful 
suit may cause. As the great Judge Learned Hand wrote, ``I must 
say that, as a litigant, I should dread a lawsuit beyond almost 
anything short of sickness and death.''\7\ Public policy should 
encourage plaintiffs' attorneys to prudently assess the 
viability of their clients' potential claims before initiating 
a lawsuit and discourage plaintiffs from taking unfounded or 
improvident positions.
---------------------------------------------------------------------------
    \7\Judge Learned Hand, The Deficiencies of Trials to Reach the 
Heart of the Matter (1926).
---------------------------------------------------------------------------
    H.R. 3624 fosters such a policy, and it does so in way that 
is consistent with principles of federalism as they have been 
understood since the Founding. The Judiciary Act of 1789 was 
enacted by a Congress whose members included individuals who 
served in the Constitutional Convention. That Act included a 
provision (Sec. 12) authorizing removal of cases commenced in 
state court if the plaintiff was a citizen of the forum state 
and the defendant was a citizen of another state. Similar 
provisions have been included in the Judicial Code ever since. 
``Thus, from the beginning of the Nation's history, a non-
citizen [of the forum state] sued in state court by a citizen 
of the forum state has had the right to remove the case to 
Federal court, provided that the case satisfied an amount-in-
controversy requirement.''\8\
---------------------------------------------------------------------------
    \8\See Fraudulent Joinder Prevention Act: Hearing Before the 
Subcomm. on the Constitution & Civil Justice of the House Judiciary 
Committee, 114th Cong., 1st Sess. at 64 (2015) (statement of Arthur D. 
Hellman). Professor Hellman added: ``Today the right extends to all 
cases in which all plaintiffs are diverse from all defendants, provided 
that the amount-in-controversy requirement is satisfied and no 
defendant properly joined and served is a citizen of the forum state.'' 
Id. n. 6.
---------------------------------------------------------------------------
    Today, under section 1441(a) of the Judicial Code, a civil 
action can be removed to Federal court based on diversity of 
citizenship jurisdiction if the suit could have been filed in 
Federal court by the plaintiff. Original jurisdiction, however, 
is limited by the rule of ``complete diversity,'' that is, 
Federal jurisdiction is unavailable if any defendant is a 
citizen of the same state as any plaintiff. This is a court-
made rule tracing back to a decision of Chief Justice John 
Marshall--a decision that he is said to have later 
regretted.\9\
---------------------------------------------------------------------------
    \9\See Charles J. Cooper & Howard C. Nielson, Jr., Complete 
Diversity and the Closing of the Federal Courts, 37 Harv. J. L. & Pub. 
Pol'y 295, 324-325 (2014). The Committee notes there are additional 
policy solutions that could promote access to Federal courts when 
plaintiff attorneys seek to evade Federal court jurisdiction for cases 
that are fundamentally interstate in nature. There has been recent 
commentary from legal scholars and practitioners that the diversity 
statute should be amended to effectuate the original understanding of 
the Framers of the Constitution. For instance, the aforementioned 
article in the Harvard Journal of Law and Public Policy entitled 
``Complete Diversity and the Closing of the Federal Courts'' argues 
that ``the statutory requirement of complete diversity of citizenship 
is not one that the First Congress truly intended to impose on Federal 
jurisdiction in the first place, and it very well may be a requirement 
that Congress lacked constitutional authority to impose in any event. 
Yet, the requirement has governed diversity jurisdiction throughout our 
nation's history, and in recent times it has been used by plaintiffs as 
an instrument to close the Federal courts to the very types of inter-
state disputes for which the Founders intended to provide a neutral 
Federal forum.'' See id. at 326, available at http://www.harvard-
jlpp.com/wp-content/uploads/2014/01/37_1_295_
Cooper_Nielson.pdf.
---------------------------------------------------------------------------
    The fraudulent joinder doctrine was developed by courts as 
a way of limiting the gamesmanship that would otherwise be 
permitted by an unyielding and mechanical application of the 
rule of complete diversity. But current decisional law in all 
circuits makes it very difficult for defendants to counter any 
but the most blatant manipulation.\10\
---------------------------------------------------------------------------
    \10\For example, in Simpkins v. Southern Wine & Spirits of America, 
2010 WL 3155844 (N.D. Cal. Aug. 9, 2010), the district court 
acknowledged that ``the result it [was] compelled to reach in light of 
the very high standard for establishing fraudulent joinder may not 
further the interests of judicial economy and deterrence of forum 
shopping.''
---------------------------------------------------------------------------
    H.R. 3624 addresses the problem by codifying a somewhat 
more robust version of the fraudulent joinder doctrine than the 
one now applied by the lower Federal courts. In particular, the 
bill expands the class of situations in which the citizenship 
of a local defendant can be disregarded in determining whether 
the case can be removed on the basis of diversity. The bill 
adopts a uniform approach for evaluating fraudulent joinder 
that will result in a more realistic examination of whether a 
plaintiff has stated a viable claim against a local defendant 
and intends to pursue a judgment against that individual or 
entity.
    The bill will give out-of-state defendants a better 
opportunity to secure the neutral Federal forum that they would 
be entitled to if sued alone. And it will help to protect 
individuals and small businesses from being dragged into court 
when their involvement in the controversy is peripheral at 
best. But removal law is otherwise unchanged.
    H.R. 3624 is precisely the kind of remedy urged by one of 
the most respected Federal judges in the country, Judge J. 
Harvie Wilkinson of the Fourth Circuit Court of Appeals.\11\ It 
is a narrowly targeted legislative response to a very real 
problem created by current law.
---------------------------------------------------------------------------
    \11\See Hearing, supra note 9, at 47 (statement of Cary Silverman) 
(quoting remarks by Judge Wilkinson).
---------------------------------------------------------------------------
    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.''\12\ 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.
---------------------------------------------------------------------------
    \12\Martin v. Hunter's Lessee, 14 U.S. (1 Wheat.) 304, 347 (1816).
---------------------------------------------------------------------------

                                Hearings

    The Committee's Subcommittee on Constitution and Civil 
Justice held 1 day of hearings on H.R. 3624, the Fraudulent 
Joinder Prevention Act, on September 29, 2015. Testimony was 
received from Elizabeth Milito, Senior Executive Counsel, NFIB 
Small Business Legal Center; Cary Silverman, Partner, Shook, 
Hardy & Bacon LLP; and Lonny Hoffman, Professor, University of 
Houston Law Center.

                        Committee Consideration

    On February 3, 2016, the Committee met in open session and 
ordered the bill H.R. 3624 favorably reported with an 
amendment, by a rollcall vote of 13 to 10, 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. 3624.
    1. H.R. 3624, with an amendment in the nature of a 
substitute that was adopted by voice vote, was reported out. 
Approved 13 to 10.

                             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. Forbes (VA)................................      X
Mr. King (IA)..................................      X
Mr. Franks (AZ)................................      X
Mr. Gohmert (TX)...............................      X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................      X
Mr. Marino (PA)................................      X
Mr. Gowdy (SC).................................
Mr. Labrador (ID)..............................
Mr. Farenthold (TX)............................
Mr. Collins (GA)...............................
Mr. DeSantis (FL)..............................
Ms. Walters (CA)...............................      X
Mr. Buck (CO)..................................      X
Mr. Ratcliffe (TX).............................
Mr. Trott (MI).................................      X
Mr. Bishop (MI)................................      X
 
Mr. Conyers, Jr. (MI), Ranking Member..........              X
Mr. Nadler (NY)................................              X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................              X
Mr. Johnson (GA)...............................              X
Mr. Pierluisi (PR).............................              X
Ms. Chu (CA)...................................              X
Mr. Deutch (FL)................................
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)...............................              X
Mr. Jeffries (NY)..............................              X
Mr. Cicilline (RI).............................              X
Mr. Peters (CA)................................              X
                                                ------------------------
    Total......................................     13      10
------------------------------------------------------------------------

                      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

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 16, 2016.
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. 3624, the 
``Fraudulent Joinder Prevention Act of 2016.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Marin 
Burnett, who can be reached at 226-2860.
            Sincerely,
                                                Keith Hall,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member

         H.R. 3624--Fraudulent Joinder Prevention Act of 2016.

      As ordered reported by the House Committee on the Judiciary 
                          on February 3, 2016.

    H.R. 3624 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. 3624, Federal courts would 
have to deny a motion to transfer 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 is not made in 
good faith.
    Based on information from the Administrative Office of the 
U.S. Courts, CBO expects that the increase in claims would not 
have a substantial effect on the workload of the Federal 
courts. Therefore, CBO estimates that the additional 
discretionary costs to implement H.R. 3624 would not be 
significant.
    Because enacting H.R. 3624 would not affect direct spending 
or revenues, pay-as-you-go procedures do not apply. CBO 
estimates that enacting H.R. 3624 would not increase net direct 
spending or on-budget deficits in any of the four consecutive 
10-year periods beginning in 2027.
    H.R. 3624 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Marin Burnett. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 3624 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. 3624 specifically directs 
to be completed no specific rule makings within the meaning of 
5 U.S.C. 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. 
3624 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. 3624 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 ``Fraudulent Joinder Prevention Act of 
2016.''
    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); and''

    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. 
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. 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, ``The 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.''\13\
---------------------------------------------------------------------------
    \13\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 
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.\14\ 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.''\15\
---------------------------------------------------------------------------
    \14\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'').
    \15\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 defendants described in paragraph (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. 
1332(a) and where the motion to remand is opposed solely on the 
ground that the joinder of the defendants described by 
paragraph (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.\16\
---------------------------------------------------------------------------
    \16\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 or defendants 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. 3624 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. 
3624 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.\17\
---------------------------------------------------------------------------
    \17\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;''

    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.\18\ In Coffman v. Dole Fresh Fruit Co.,\19\ 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.\20\ 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.''\21\
---------------------------------------------------------------------------
    \18\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)).
    \19\927 F.Supp.2d 427, 434-35 (E.D. Tex. 2013).
    \20\385 F.3d 568, 573 (5th Cir. 2004) (en banc).
    \21\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 each defendant described in 
---------------------------------------------------------------------------
paragraph (1)(B); or''

    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.\22\ 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.''\23\ 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.\24\
---------------------------------------------------------------------------
    \22\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.'').
    \23\Florence v. Crescent Resources, LLC, 484 F.3d 1293, 1299 (11th 
Cir. 2007) (emphasis added).
    \24\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,\25\ 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.''\26\ Later, in Ashcroft v. Iqbal,\27\ 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.
---------------------------------------------------------------------------
    \25\550 U.S. 544 (2007).
    \26\Id. at 555.
    \27\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.\28\
---------------------------------------------------------------------------
    \28\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.\29\ 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.''\30\ 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.
---------------------------------------------------------------------------
    \29\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).
    \30\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.\31\ 
``Reasonable likelihood'' is another way of expressing the 
concept of plausibility, and that concept is drawn from 
Twombly-Iqbal jurisprudence, not fraudulent joinder cases.
---------------------------------------------------------------------------
    \31\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.\32\ It will similarly provide a fair and 
efficient approach in the context of fraudulent joinder.
---------------------------------------------------------------------------
    \32\Martin H. Redish, ``Pleading, Discovery, and the Federal Rules: 
Exploring the Foundations of Modern Procedure,'' 64 Fla. L. Rev. 845, 
850 (2012).
---------------------------------------------------------------------------
    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.\33\ 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.
---------------------------------------------------------------------------
    \33\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.\34\ And paragraph (4) 
makes clear that claims against defendants found to have been 
fraudulently joined must be dismissed without prejudice.
---------------------------------------------------------------------------
    \34\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 all defendants described in paragraph (1)(B), 
---------------------------------------------------------------------------
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,\35\ 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.''\36\ 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.\37\
---------------------------------------------------------------------------
    \35\781 F.3d 693, 705-06 (4th Cir. 2015).
    \36\In re Briscoe, 448 F.3d 201, 219 (3d Cir. 2006).
    \37\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.\38\ 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.\39\ 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.
---------------------------------------------------------------------------
    \38\385 F.3d 568 (5th Cir. 2004) (en banc) (9-7 decision).
    \39\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 all 
defendants described in paragraph (1)(B) or to seek a joint 
---------------------------------------------------------------------------
judgment.''

    Prong (C) 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.\40\ 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.\41\ said, ``Where 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.,\42\ also 
illustrates how a court can find a lack of good faith intention 
based on a careful analysis of objective evidence.
---------------------------------------------------------------------------
    \40\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.'').
    \41\849 F.Supp.2d 1327, 1331 (M.D. Ala. 2012).
    \42\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,\43\ 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.
---------------------------------------------------------------------------
    \43\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.\44\ As one court aptly put it, ``In analyzing a 
claim of fraudulent joinder, a court is not held captive by the 
allegations in the complaint.''\45\ For example, in Legg v. 
Wyeth,\46\ 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.
---------------------------------------------------------------------------
    \44\See, e.g., Herkenhoff v. Supervalu Stores, Inc., 2014 WL 
3894642, at *3 (E.D. Mo. Aug. 18, 2014) (citing authorities).
    \45\Mills v. Allegiance Healthcare Corp., 178 F.Supp.2d 1, 5-6 (D. 
Mass. 2001) (citing cases).
    \46\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).\47\
---------------------------------------------------------------------------
    \47\Id. at 1322-23 (internal quotations, citations, and emphasis 
deleted).

    H.R. 3624 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 fraudulent joinder under paragraph 
(2), it shall dismiss without prejudice the claims against the 
defendant or defendants found to have been fraudulently joined 
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.\48\ Only one court of appeals has ruled otherwise, in a 
single sentence without explanation.\49\ That decision should 
no longer be regarded as authoritative.
---------------------------------------------------------------------------
    \48\See Wivell v. Wells Fargo Bank, N.A., 773 F.3d 887, 896 (8th 
Cir. 2014) (citing cases from Third and Tenth Circuits).
    \49\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 the defendant or defendants 
        described in paragraph (1) (B) is fraudulent if the 
        court finds that--
                    (A) there is actual fraud in the pleading 
                of jurisdictional facts;
                    (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 each defendant 
                described in paragraph (1)(B);
                    (C) State or Federal law clearly bars all 
                claims in the complaint against all defendants 
                described in paragraph (1)(B); or
                    (D) objective evidence clearly demonstrates 
                that there is no good faith intention to 
                prosecute the action against all defendants 
                described in paragraph (1)(B) or to seek a 
                joint judgment.
            (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 fraudulent joinder under 
        paragraph (2), it shall dismiss without prejudice the 
        claims against the defendant or defendants found to 
        have been fraudulently joined and shall deny the motion 
        described in paragraph (1)(B).

           *       *       *       *       *       *       *

                            Dissenting Views

    H.R. 3624, the ``Fraudulent Joinder Prevention Act of 
2016,'' is the latest attempt 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.\1\ H.R. 3624 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. The bill 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 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 can 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.
---------------------------------------------------------------------------
    \1\The Committee on the Judiciary considered and passed an 
amendment in the nature of a substitute to H.R. 3624 during the 
February 3, 2016 markup. The description and analysis contained herein 
reflect the reported version of H.R. 3624 as amended by the amendment 
in the nature of a substitute.
---------------------------------------------------------------------------
    H.R. 3624 threatens to delay and possibly deny justice for 
plaintiffs with meritorious state law claims. First, as with 
many civil justice measures that the Committee has considered, 
the bill is a solution in search of a problem. Current law 
already establishes a standard for courts to determine when a 
party has been improperly joined, a standard that has been in 
place for a century. Tellingly, the Supreme Court has not seen 
fit to change this standard, and H.R. 3624's proponents offer 
no objective 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, H.R. 3624 will generate tremendous uncertainty, 
complexity, and additional cost to the consideration of motions 
to remand, which are ordinarily common procedural matters 
considered at a nascent stage of a diversity case. The bill 
applies a vague and undefined ``plausibility'' standard to 
state law claims. Similarly, the bill requires a court to 
inquire into the ``good faith'' of the plaintiff's subjective 
intentions, providing no guidance as to what constitutes ``good 
faith intention.'' These various requirements would effectively 
mandate a trial on the merits of a state law claim against a 
state defendant at an early procedural stage of the 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. 3624 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 added 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. H.R. 3624 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 21 groups, 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 Disability Rights Network, 
the National Employment Lawyers Association, oppose H.R. 
3624.\2\ They warn that the bill ``would upend long established 
law in the area of Federal court jurisdiction, place 
unreasonable burdens on the Federal judiciary, and make it more 
difficult for Americans to enforce their rights in state 
courts.''\3\
---------------------------------------------------------------------------
    \2\Letter from 21 consumer groups to Rep. Bob Goodlatte (R-VA), 
Chairman, and Rep. John Conyers, Jr.(D-MI), Ranking Member, H. Comm. on 
the Judiciary (Feb. 2, 2016), on file with the Democratic Staff of the 
H. Comm. on the Judiciary.
    \3\Id.
---------------------------------------------------------------------------
    For the foregoing reasons, and those discussed below, we 
strongly oppose H.R. 3624.

                       BACKGROUND AND DESCRIPTION

                               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. . . .''\4\ Congress's statutory 
grant of diversity jurisdiction is narrower than the scope of 
this constitutional provision, requiring, for example, a 
minimum amount in controversy.\5\ 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.\6\
---------------------------------------------------------------------------
    \4\U.S. Const. art. III, Sec. 2, cl. 1.
    \5\28 U.S.C. Sec. 1332(a) (2016).
    \6\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.\7\ Section 1332(c)(1) provides 
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.\8\ 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.\9\
---------------------------------------------------------------------------
    \7\28 U.S.C. Sec. 1332(a)(1) (2016).
    \8\28 U.S.C. Sec. 1332(c)(1) (2016).
    \9\28 U.S.C. Sec. 1332(d)(2) (2016).
---------------------------------------------------------------------------
    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).\10\ 
Section 1447 of title 28, United States Code, outlines 
procedures for the Federal courts to follow after removal.\11\
---------------------------------------------------------------------------
    \10\28 U.S.C. Sec. 1441(b) (2016).
    \11\28 U.S.C. Sec. 1447 (2016).
---------------------------------------------------------------------------
    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. \12\ 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.
---------------------------------------------------------------------------
    \12\H.R. 3624, the Fraudulent Joinder Prevention Act of 2015: 
Hearing 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.\13\ 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.
---------------------------------------------------------------------------
    \13\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.\14\ The doctrine of fraudulent joinder 
reflects this general policy.\15\
---------------------------------------------------------------------------
    \14\Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 
(1941).
    \15\Hoffman Statement at 5.
---------------------------------------------------------------------------

                              DESCRIPTION

    H.R. 3624, as amended, would impose a number 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 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 from 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 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\16\ 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 or local defendant, rather 
than the objective inquiry under current law, which asks 
whether the plaintiff had a reasonable basis for pursuing such 
a claim.
---------------------------------------------------------------------------
    \16\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.

                        CONCERNS WITH H.R. 3624

           I. H.R. 3624 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. 
3624'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 party to be added 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,\17\ 
which H.R. 3624 effectively repeals. Additionally, a defendant 
might have the option of seeking to dismiss a non-meritorious 
claim against an in-state defendant in state court prior to 
removal to Federal court.\18\ In short, H.R. 3624 does not 
address an actual problem, but would instead create problems by 
upending longstanding rules and potentially wreak havoc on the 
Federal courts.
---------------------------------------------------------------------------
    \17\28 U.S.C. Sec. 1441(b)(2) (2016).
    \18\See 28 U.S.C. Sec. 1446(b)(3) (providing that a case is 
removable within 30 days after initial pleadings if case has become 
removable within that time period).
---------------------------------------------------------------------------

 II. H.R. 3624 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. 3624 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. This plausibility standard is 
inherently vague and the bill fails to define ``plausible'' or 
provide any guidance as to how a court should apply the term. 
As Professor Lonny Hoffman, the Minority witness who testified 
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.''\19\ 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.\20\
---------------------------------------------------------------------------
    \19\Hoffman Statement at 6.
    \20\Id. at 7.
---------------------------------------------------------------------------
    The drafters of H.R. 3624 appear to import the Federal 
plausibility pleading standard into the bill's new standards 
for granting remand motions. In 2009, the U.S. Supreme Court 
issued its decision in Ashcroft v. Iqbal\21\ whereby the Court 
established a new standard for judging the sufficiency of facts 
alleged in a civil complaint. Prior to Iqbal, the Court had 
made clear that, in interpreting Federal Rule of Civil 
Procedure 8,\22\ 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.''\23\ 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.''\24\
---------------------------------------------------------------------------
    \21\556 U.S. 662 (2009).
    \22\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).
    \23\Conley v. Gibson, 355 U.S. 41, 46 (1957)
    \24\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. Justice Ruth Bader Ginsberg, who dissented 
from the Iqbal decision, said, ``the court's majority messed up 
the federal rules.''\25\ 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\ Not surprisingly, Iqbal has spawned 
much litigation over what constitutes a ``plausible'' claim for 
purposes of pleading under Rule 8.\27\
---------------------------------------------------------------------------
    \25\Adam Liptak, 9/11 Case Could Bring Broad Shift on Civil Suits, 
N.Y. Times, July 21, 2009.
    \26\556 U.S. at 679.
    \27\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). But 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 
vague ``plausibility'' standard to pleadings foreshadows the 
difficulties that would arise in applying a similar standard to 
remand motions. 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. 3624] 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.''\28\ 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.
---------------------------------------------------------------------------
    \28\Id.
---------------------------------------------------------------------------
    In addition to being vague and difficult to apply, H.R. 
3624's plausibility standard would force courts 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. 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.
    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. 3624 would dramatically change current 
law and practice.
B. LH.R. 3624's subjective ``good faith intention'' and ``actual 
        fraud'' standards are ambiguous, difficult to apply, and 
        represent a significant departure from current law.
    As with its plausibility requirement, H.R. 3624'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 vague and undefined. 
The bill provides absolutely 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 presence of fraudulent intent on the 
plaintiff's part.\29\ ``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. 3624 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.
---------------------------------------------------------------------------
    \29\Hoffman Statement at 7.
---------------------------------------------------------------------------
    Similarly, H.R. 3624'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. 3624's various 
requirements, taken individually and collectively, 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. 3624 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 under current law. Additionally, 
the bill could result in a significant increase in the workload 
of Federal courts, straining already limited judicial 
resources. As Representative Hank Johnson (D-GA) noted during 
the Committee markup, there are currently 72 Federal judicial 
vacancies, so ``our [federal] trial courts, where the makers of 
this bill would like to see cases go is backlogged, so you do 
not get justice.''\30\
---------------------------------------------------------------------------
    \30\Unofficial Tr. of Markup of H.R. 3624, the ``Fraudulent Joinder 
Prevention Act of 2015,'' by the H. Comm. on the Judiciary, 114th 
Cong., at 65 (Feb. 3, 2016).
---------------------------------------------------------------------------
    H.R. 3624 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. 3624 simply 
continues 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. 3624 OFFENDS FEDERALISM AND REPRESENTS A SERIOUS INTRUSION 
                         INTO STATE SOVEREIGNTY

    H.R. 3624 raises serious federalism concerns by denying 
state courts the ability to shape state substantive and 
procedural law and instead transfers that power to Federal 
courts. 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. 3624 will deny 
state courts the ability to decide and, ultimately, to shape 
state law in many cases.
    H.R. 3624 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.
    Finally, by effectively repealing the local defendant 
exception to diversity jurisdiction provided for in 28 U.S.C. 
Sec. 1441(b)(2), H.R. 3624 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 not present 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

    As with so many civil justice measures that the Committee 
has considered in the last three Congresses, H.R. 3624 is an 
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 state 
sovereignty by denying state courts the ability to shape state 
law and inappropriately shifting that power to Federal courts. 
For the foregoing reasons, we strongly oppose H.R. 3624 and 
urge our colleagues to do the same.

                                   Mr. Conyers, Jr.
                                   Mr. Nadler.
                                   Ms. Jackson Lee.
                                   Mr. Cohen.
                                   Mr. Johnson, Jr.
                                   Ms. Chu.
                                   Mr. Deutch.
                                   Mr. Gutierrez.
                                   Mr. Richmond.
                                   Ms. DelBene.
                                   Mr. Jeffries.
                                   Mr. Cicilline.

                                  [all]
```