United States Court of Appeals

Fifth Circuit



## FILED

November 9, 2004

Charles R. Fulbruge III

Clerk 

## In the 

# United States Court of Appeals

for the Fifth Circuit

_______________



### m 03-60528

_______________



### L ETHA 

### M. G RAY



### ,

BY AND T HROUGH E LLA R UDD

,

AS N EXT F RIEND FOR THE U SE AND B ENEFIT OF

L ETHA M. G RAY

, A LSO K NOWN AS L ETHA M. G ARY

,



### Plaintiff-Appellant,

VERSUS



### B EVERLY 

### E NTERPRISES 

### -M ISSISSIPPI



### , I NC



### ., ET 

### A L



### .

Defendants,



### B EVERLY 

### E NTERPRISES 

### -M ISSISSIPPI



### , I NC 

### .;

B EVERLY 

### H EALTH AND 

### R EHABILITATION 

### S ERVICES



### , I NC 

### .; J AMES 

### C. L ANDERS 

### ; D AVID



### D EVEREAUX 

### ; D AVID 

### R. B ANKS 

### ; L EWIS 

### S EWELL 

### ; C HARLES 

### R. S INCLAIR 

### ; B OBBIE



### L UCILLE 

### B LACKARD 

### ; A LICHA 

### D. L INDSAY



### ,

Defendants-Appellees.

* * * * * * * * * * * * * * *2 _______________



### m 03-60712

_______________



### M ARY 

### B ODDIE



### ,

I NDIVIDUALLY AND ON B EHALF OF

THE E STATE AND W RONGFUL D EATH B ENEFICIARIES OF D AVID G REEN

,



### Plaintiff-Appellant,

VERSUS



### B EVERLY 

### E NTERPRISES 

### -M ISSISSIPPI



### , I NC 

### .;

B EVERLY 

### H EALTH AND 

### R EHABILITATION 

### S ERVICES



### , I NC 

### .; J AMES 

### C. L ANDERS 

### ; D AVID



### R. D EVEREAUX 

### ; D AVID 

### R. B ANKS 

### ; L EWIS 

### G. S EWELL 

### ;

C HARLIE 

### R. S INCLAIR



### , J R



### ., A LSO K NOWN AS C HUCK S INCLAIR ; J OHN D OES 1-10,



### Defendants-Appellees,

UNIDENTIFIED ENTITIES 1-10,

Appellee.

* * * * * * * * * * * * * * *3 _______________



### m 03-60768

____________



### G ENEVA 

### G. R USHING



### ,

BY AND T HROUGH D OROTHY S HERIFF

, H ER C ONSERVATOR

,

FOR THE U SE AND B ENEFIT OF G ENEVA G. R USHING

,



### Plaintiff-Appellant,

VERSUS



### B EVERLY 

### E NTERPRISES 

### -M ISSISSIPPI



### , I NC 

### .;

B EVERLY 

### H EALTH AND 

### R EHABILITATION 

### S ERVICES



### , I NC 

### .; J AMES 

### C. L ANDERS 

### ; D AVID



### R. D EVEREAUX 

### ; D AVID 

### R. B ANKS 

### ; L EWIS 

### S EWELL 

### ;

C HARLIE 

### R. S INCLAIR



### , J R



### ., A LSO K NOWN AS C HUCK S INCLAIR ;



### A LICHA 

### L INDSAY 

### ; J OHN 

### D OES 

### 1-10; U NIDENTIFIED 

### E NTITIES 

### 1-10,

Defendants-Appellees.

_________________________

Appeals from the United States District Court

for the Southern District of Mississippi

_________________________4

Before S MITH

and G ARZA , Circuit Judges,

and V ANCE

, * District Judge.

J ERRY E. S MITH , Circuit Judge:

The plaintiffs bring this consolidated interl ocutory appeal challenging orders denying

their motions for remand to state court af ter

the defendants remo v ed these actions to federal district court. Because the relevant Mississippi law is, at a minimum, ambiguous, there

is “argu ably a reasonable basis for predicting

that the state law might impose liabilit y on the

facts involved

. . . . ” T

ravis v. Irby

, 326 F.3d

644, 648 (5th Cir. 2003). Under such

circumstances, there is no fraudulent joinder,

and removal is inappropriate, because the lack

of complete diversity divests the district court

o f subject matter jurisdiction. We therefore

reverse and remand.

I.

The plaint iffs filed their respective suits in

Mississippi state court allegi ng t hat residents

of Beverly Healthcare-Northwest nur sing

home were injured as a result of the conduct of

all the defendants. The named defendants

incl ude t he corporate owners of the nursing

home, Bever ly Enterprises-Mississippi, Inc.,

and Beverly Health and Rehabilitation Services, Inc. These defendants are California

corporati ons with their principal place of business in Arkansas and are therefore diverse

from the plaint iff

s, all of whom are residents

and citizens of Mississippi. Also named as defendants are numerous individual licensees and

administrators of the facilit y, some of whom

are diverse from the plaint iffs and othe rs of

whom are non-diverse ( i.e.

, a lso citizens of

Mississippi). In each of the suits (consolidated for purposes of appeal), defendants removed to federal district court, arguing that the in-state defendants were fraudulently jo ined, and therefo re t here is complete diversity. On each o f

the plaint iffs’ mo tions to rem and to state

court, the district court ruled the in-state defendants were fraudulently joined, denied the

motions to remand, and dismissed the claims

against the in-state defendants.

The court held that the complaint did not

state a viable claim against the in-state defendants under Mississippi law, specifically finding that Mississippi law does not provi de a

cause of action for any of the counts alleged

a gainst the in-state defendants: (1) simple

negligence, (2) malic e and/or gross negligence,

(3) med ical malpractice, (4) fraud, and (5)

breach of fiduciary duty.

The court reasoned that the plaint iffs could

not state a claim under state law for simple

negligence against the in-state defendants because, “[u]nder Mississippi law, an agent of a

disclosed principal can incur ‘independent liabilit y when his conduct constitutes gross negligence

, malice, or reckless disrega r d for the

rights’ of another. [But,] Mississippi does not

recognize a cause of

action against an agent

for simple negligence” (quoting Bas s v. Cal.

Life Ins. Co. , 581 So. 2d 1087, 1090 (Miss.

1991) (emphasis added by district court)).

The court further held that the in-state administrato r and licensee defendants did not owe

plaintiffs a duty under state law, so the claims

against those defendants for malice/gross negligence also fail to state a viable cause of

action. The court additionally dismissed the

medical malpractice, fraud, and breach of fiduciary duty claims.

Significant ly, as we will explain, the plain- * District Judge of the Eastern District of Louisiana, sitting by designation.5

t iffs’ briefs challenge o nly the ruling with respect to negligence and gross negligence.

Specifically, t he plaintiffs’ reply brief notes

that the remaining claims “are not before this

court,” nor were they discussed in their opening brief.

The district court r eco gnized that “[n]o

Mississippi case law directly relates” to the

issues at hand and that the “cases leave a great

deal to interpretation.” The court, therefore,

attempted to certify the cases for appeal pursuant to rule 54(b) of the Federal Rules of Civil

Procedure. Because of the peculiar language

used in the district court’s orde rs, however,

we requested supplemental briefing on whether the order in one of these cons olidated

appeals 

### SS No. 03-60712 (“

B oddie ”), was

properly certified so as to confer ap pellate

jurisdiction.

Plaint iffs have moved this court to take

judicial no tice of unreported decisions from

federal district courts in

Mississippi and unreported state court judicial decisions and records. That motion was carried with the case.

II.

On the jurisdictional question, there is no

discernible difference between the wording of

the order purporting to render B oddie fit for

appeal (unde r eit her rule 54(b) or 28 U.S.C.

§ 1292(b)) and the corresponding orders in the

other two cases. Nevertheless, even the defendants concede that we have jurisdiction over

the other two cases under § 1292(b), despite

the fact that there is no indication that the

plaint iffs received the requisite permission

from this court as required by the statute.

The relevant order in Boddie (as well as the

orders in the other two cases) reads in pertinent part: . . . Plaintiff seeks to certify the findings in

the August 11 Opinion

for interlocutory

appeal. Plaintiff invokes t he provisions of

Rule 54(b) of

t he Federal Rules of Civil

Procedure.

. . . In t he subject case, the

Co urt finds that there exists a danger of

hardship or injustic e t hrough delay which

would be alleviated by im mediate appeal

. . . . As such, the Court finds that justice

will be served by the immediate appeal of

this issue . . . .

Plaintiff also invokes the provisions of 28

U.S. C. § 1292(b) . . . . Under § 1292(b),

an issue is appropriate for interlocutory

appeal if it “presen t [s] a controlling

q uest io n of law as to which there is

substantial ground for difference of opinion.” As analyzed abo ve, the fraudulent

joinder of a business manager does present

such a question, and interlocutory appeal is

appropriate for that issue. . . .

. . . For these final reasons, the Court

finds that the subject issue should be decided on interlocutory appeal . . . .

(Brackets in original, citations omitted.)

The defendants urge that the above-quoted

order renders neither an appealable final order

nor a case certified for inter l ocutory appeal.

They rely on the proposition that an order that

dismisses fewer than all defendants is not appeala ble unless the court makes an “express

determination that there is no just reason f or

delay.” F E D

. R. C IV

. P. 54(b). Because the

order in Boddie does not contain this particular phrasing, the defendants conclude rule

54(b) cannot provide the basis for our jurisdiction. Further, defendants contend that the order cannot be appealable under § 1292(b), because this court has not granted leave to take6

an interlocutory appeal.

Plaintiffs, for their part, remind us that our

existin g jurisprudence explains that a rule

54(b) interlocutory ap p eal is appropriate

where the language of the order appealed, independently or read together with other portions of the record, reflects the court’s unmistakable intent to render the issue appe alable

under rule 54(b), and “nothing else is required

to make the order appealable

. . . .” F o rd v.

Elsbury

, 32 F.3d 931, 934-35 (5th Cir. 1994).

According to plaint iffs, the order reflects just

this sort of unmistakable intent. The defendants completely fail

t o address the “unmistakable intent” argument and rely solely on the

lack of the phrase “no just reason for delay.”

To hold that this order is not appropriate

for revi ew under rule 54(b) because it lacks

the t alismanic words for which the defendants

search would be directly contrary to this circuit’s precedent. In Kelly v. Lee’s Old Fashioned Hamburgers, Inc., 908 F.2d 1218, 1220

(5th Cir. 1990) (en banc), we held that a district court may make the requisite “express determination” without mechanically reciting the

words “no just reason for delay.” 1

S uch an “unmistakable intent” is readi l y

apparent from the face of the district court’s

order. The court found “that there exists a

danger of hardship or injustice through delay

which would be alleviated by immediate appeal

. . . . As such, the Court finds that justice will

be ser ved by the immediate appeal of this

issue.

. . .” This explanation is a mere paraphrase of the seven word s “[t]here is not just reason for delay” 2 

### SS a paraphrase (stating that

a delay would yield injustice, and an immediate

appeal woul d serve justice) that presents an

even stronger justificati o n for appeal than

e xisted in K

elly

, where the district court did

not expressly

co nsider the justice of a delay,

but rather impliedly did so by ordering a final

judgment “pursuant to [rule] 54(b).”

The district court expressed it s finding

merely using a phraseology different from the

seven words of

t he rule. Therefore, we have

jurisdiction to hear the appe al of all three

cases, including Boddie , under rule 54(b).

III.

The plaint iffs’ main contention on appeal is

t hat the district court erred in holding that

Mississippi law does not recognize a cause of

action for negligence or gross negligence

against the in-state defendants. From that,

plaintiffs reason that removal was improper.

A.

Plaint iffs first suggest that the court applied

an incorrect standard in considering their motions to remand. Such a motion will be denied

on grounds of fraudulent joinder only if based

on “(1) actual fraud in the pleading of jurisdictional f acts, or (2) inability of the plaintiff to

establish a cause of action against the nond iverse party in state court.” T ravis v. Irby

, 326 F.3d 644, 64 7 (5th Cir. 2003). Because

neither the parties nor the district court contends there was actual fraud, we look only to

the second test.

1 See also Askanase v. Livi ngwell, Inc. , 981

F.2d 807, 810 (5th Cir. 1993) (“[I]t is not necessary for the Trial Court to recite the magic words

of ‘no just reason for delay.’”). 2 S ee Kelly , 908 F.2d at 1222 (Smith, J., diss enting) (“[S]ince the rule does not specific ally

require incantation of the seven very words, they

could beparaphrased, provided that the court actually states that it had made the required determination.”).7

Though our earlier fraudulent joinder cases

had been uncertain

as t o whether a removing

defendant must demonstrate an absence of any

possibility of recovery in state court, we clarified in Travis that the defendant must demonstrate only that there is no reasonable basis for

predicting that the plaint iff will recover in state

court. I d. T hus, the Tr

avis court noted the

similarit y of the s tandard to that used wi th

respect to a Federal Rule of Civil Procedure

12(b)(6) motion, in that the crucial question is

whether the plaint iff has s et o ut a valid claim

under applicable state law. Id

.

Critically, all disputed questions of fact and

all ambiguities in state law must be resolved in

favor of the plaintiff. Id. (citing Great Plains

Trust Co. v. Morgan Stanley Dean Witter &

Co.

, 313 F.3d 305, 312 (5th C ir. 2002)).

Further, the plaint iff may not rely solely on the

allegations in his co mplaint; the court may

“pierce the pleadings” and consider s ummary

judgment-type evidence to determine whether

the plaint iff truly has a reasonable possibility of

recovery in state court. Id. at 648-49.

The district court correctly recited this standard from Travis

. Nevertheless, plaintiffs contend that t he court “improperly expanded its

review” beyond whether there is a reasonable

possibility that a Missis sippi court might impose liabilit y.

. . .” In making that argument,

t he plaint iffs repeatedly emphasize the

“possibility of recovery” language while giving

only lip service to the “reasonable” modifier.

To that extent, the di stri ct court correctl y

evaluated the fraudulent joinder claim. Although recognizing that Mississippi law on the

subject is cloudy, the court disregarded the

theoretical possibility of recovery and considered whether there was a reasonable possibility

under state law. For example, plaint iffs devote considerable

energy to the contention that the very fact that

Mississip pi state courts have entered judgments against administrators and licensees of

nursing homes in similar cases is conclus ive

evidence of the district court’s error. But, after analyzing the relevant Mississippi caselaw,

t he district court concluded that plaintif f s

lacked a reas o nable possibility of recovery.

This analysis, notwithstanding the fact that we

may find it flawed under de novo review, nevertheless reflected the proper approach under

applicable precedent. See

, e.g.

, id. at 647.

B.

We review the distri ct co urt’s analysis of

state law ( i.e.

, its determination that the plaint iffs lack a reasonable possibility of recovery)

de novo

. S ee McKee v. Kansas City S. Ry.

, 35 8 F.3d 329, 333 (5th Cir. 2004). T he district court init ially concluded, in a cursory analysis, that Mississippi state law precludes recovery for simple negligence against an agent

of a disclosed principal. For this the court relied solely on Bass v. Cal. Lif e Ins. Co. , 581

So. 2d 1087, 1090 (Miss. 1991), holding that

a health insurance plan administrator could not

be held liable in a bad faith denial of coverage

suit based on mere negligent co nduct. The

Bass court noted that such agents owe no duty

of good faith or other fiduciary duties to

insured parties. I

d. F rom this proposition, the

district court extrapolated that no negligence

claims can be brought successful ly against

agents of disclosed principals.

This con clusion was likely erroneous, and

certainly inaccurate enough to warrant remand

under the above-described standard, which resolves all ambiguities in favor of the party

seeking remand. As plaintiffs point out, the

cases relying on Bass ar e almost all in the

context of insura nce agents and adjusters.8

Further, there have been several cases in which

agents of disclosed principals were in fact held

liable for negligence. 3

The defendants counter that the complaints

in the instant cases allege a similar sort of tortcontract hybrid cause of action, and thus, Bass

is controlling. Nevertheless, defendants point

to no additional cases in which the Bass limitation has been applied outside the context of

bad-faith denial of claims. Consequently, the

court incorrectly held that there is no reasonable basis for predicting that a cause of action

for simple negligen ce will lie under the circumstances alleged.

That error, however, is not dis po sitive.

The district cou rt went on to fi nd that the

plaint iffs additi o nally cannot state a cause of

action for malice or gross negligence; the court

based its conclusion on the in-state defendants’

lack of duty to the plaint iffs. These same

arguments apply with equal force to claims for

simple negligence. Thus, if the court was correct in its reason for finding that the plaint iffs

cannot state a claim for gross negligence, then

its erroneous refusal to recogn ize a simple

negligence cause of action would be irrelevant,

for that claim would be barred on the other

grounds. 4 C.

In addition to asserting that the in-state defendants were guilty of simple negligence, the

complaints allege several breaches of supposed

duties under the rubric of “inadequate

management” consti

t uting gross negligence.

The district court stated,

The particular issue in this case is whether the d ut y to adequately manage Beverly

Healthcare was owed by the non-diverse

Defendants to Plaint iff, or whether the duty

was owed to the two corporate Defendants

that owned Beverly Healthcare. If the duty

was owed to Plaintiff, then Plaintiff has

asserted a viable s t ate law cause of action

a nd the case must be rem anded.

Conversely, if the duty was ow e d to the

corporate Defendants, then Plaint iff has no

valid c ause of action agai nst the

non-diverse D efendants, requiring dismissal

of the non-diverse Defendants and denial of

Plaintiff's Motion to Remand.

( Footnote omitted.) The court went on to

conclude that as a general matter , any duty

that the licensees and administrators had to

manage the nursing hom e adequately was

owed not to the plaintiffs, but to the business

itself. The plaintiffs contend this finding is in

error in that both Mississippi common law and

st at utory regulations establish a duty to

plaint iffs.

The com p laints allege that the administrator

and licensee defendants committed gross

negligence in that they failed to comply with

the regulations promulgated by the Mississippi

Department of Health governing nursing

homes. 5 The district court gave cursory atten 3 See

, e.g.

, Wood v. Allstate Ins. Co.

, 1997 WL

570848, at *2 (N.D. Miss. 1997) (“The Bass decision is limited to the tort-contract hybrid cause of

action for bad faith denial of insurance claims.”).

4 Cf. LLEH, Inc. v. Wichita County, Tex., 289

F.3d 358, 364 (5th Cir. 2002) (“We may affirm for

any reason supported by the r ecord, even if not

relied upon by the district court.”). 5 See Mississippi Rules, Regulations, and Mini-

(continued...)9

tion to this argument, noting that there was no

l e gislative intent to create a private cause of

action.

1.

Both sides devote considerable energy to

negligence p er se and whether these regulations allow recovery unde r that theory . That

debate is beside the point. The district court

hel d that the plaintiffs did not have a reasonable expectation of recovery against the instate defendants under Mississippi law because, inter alia

, those defendants did not owe

a duty to plaintiffs. Negligence p er se

, on the

other hand, is a theory by which statutes are

us ed t o establish the appropriate standard of

care. In absence of a duty to the plaintiff, the

relevant standard of care is m oot. As even the

plaintiffs note,

The statute’s provisions ar e deemed conclusive exp ressions of the applicable stand ard of care and reasonable conduct. Indeed, the Mississippi Supreme Court has

stated that a violation of an internal regulation “ may serve as evidence of negli

gence ,” even if

it does not gi ve ri se to a

private right of action.

(Quoting Moore v. Mem’l Hosp.

, 825 So. 2d

6 58, 665 (Miss. 2002); other citations omitted.) Thus, t he t heory of negligence p er se

does not speak to the relevant question of

whether the in-state defendants owed any duty

of care to the plaintiffs. 2.

Plaint iffs further argue, citing Min imum

Standards § 408.2(e), 6 that the regulations

provide an “explicit right of action” that establishes a duty. Indeed, the applicable regulation

does appear to gra nt such a right. Unfortunately, it does not appe ar t hat any Mississippi court has determined whether those particular r egulations confer a cause of action.

Plaint iffs point to several recent unreported

federal district court opinions concluding that

such a cause o f act io n is afforded. 7 On the

5 (...continued)

mum Standards for I nstitutions for the Aged and

Infirm (“Minimum Standards” ), as promulgated by

M ISS

. C ODE A

NN

. § 43-11-13(1). 6 Minimum Standards § 408.2(e) provides:

[The resident] has a right of action for damages or other relief for depriv ations or infringements of

his right to adequate and

proper treatment and care established by an

applicable statute, rule, regulation or

contract . . . .

7 See

, e.g.

, Hill v. Beverly Enters.-Mississippi,

Inc.

, No. 3:0 3CV301LN (S.D. Miss. Oct. 31,

2 003), slip op. at 14 (holding, in case involvi n g

these defendants, that although “no Miss i ssippi

state court has passed on the question,” it was reasonable to conclude that a possibility of recovery in

state court existed). As we have said, plaintiffs

have moved for us to take ju dicial notice of numerous un reported Mississippi state court records

and decisions and unpublished authority from federal district courts in Mississippi.

We may take judicial notice of another court’s

judicial action. S ee Karaha Bodas Co. v. Perusahaan Perambangan Minyak Dan Gas Bumi Negara

, No.02-20042, 2003 WL 21027134, at *4 (5th

Cir. 2003). Although we cannot take judicial notice of findings of fact of other courts, the fact that

a judicial act ion was taken is indisputable and is

therefore amenable

to judicial notice. S ee Taylor

v. Charter Med. Corp.

, 162 F. 3d 827, 831 (5th

Cir. 1998).

(continued...)10

other hand, defen dant s counter that in an analogous situation, in Moore v. Mem. Hosp.

, 825 So. 2d 658 (M iss. 2002), involving state

pharmac y board regulations, the court found

no cause of action. But, as noted in Hill , slip

op. at 13, Moore did not hold that regulations

can never establish a legal duty or cause of action, but rather that the particular regulations

considered did not do so.

In summary, Mississippi case law on this

point is non-existent. The Minimum Standards

ma y o r may not provide a private cause of

action that would be applicable here.

Defendants further counter by arguing that,

even assuming the regulations are mea nt to

grant such a cause of action, such a grant

would “greatly overstep [the Department of

Health’s] legislative grant o f authority.” The

relevant statutory grant authorizes the department to

adopt, amend, promulgate and enforce such

rules, regulations and standards, including

classifications, with

respect to all institutions fo r t he aged or infirm to be licensed

under this chapter as may be designed to

further the accomplishment of the purpose

of this chapter in promoting adequate care

of individuals in those in st it utions in the

interest of public health, safety and welfare. M ISS

. C ODE A NN

. § 43-11-13(1). This statut o ry grant of authority may be susceptible to

interpretation both for and a gainst the ability

to grant a private right of action. But, as the

plaint iffs correctly note, that is more appropriately an argum

e nt for the Mississippi courts.

The dearth of applicable caselaw interpreting the Minimum Standards, coupled with the

unreported district court decisions concluding

that a cause of action was intended, weighs

heavily in plaint iffs’ favor. As we said above,

w hen considering a fraudulent joinder ar gument, the court must resolve all ambiguities in

state law in favor of remand. Thus, defendants

are not able to meet t heir heavy burden of

showing that there is no reasonable possibility

that plaintiffs can recover in state court. 8

3.

The district court also concluded that the

licensee an d administrator defendants did not

owe a duty of care to the nursing home residents under Mississippi common law, and

therefore plaint iffs have no reasonable possibilit y of recovering under Mississippi law.

The district court analyt ically div i ded the allegat io ns of gross negligence into two categories 

### SS thos e relating to “either (1) the daily

hands-on care of Plaintiff[s]; or (2) the typical

functions of a manager.”

With respect to the latter category, the

court found that “absent extenuating circumstances well beyond those pled in the Complaint,” the in-state defendants owed to the

corporate owners, rather than the residents,

the duty to manage the nursing home

adequately. Although the court purportedly 7 (...continued)

The defendants p oint out that the motion effectively seeks to avoid this circuit’s rul e against

giving precedential value to unpublished opinions.

That would be true if the purpose for which plaintiffs seek to have the cases noticedwere to establish th e m as precedent. It is perfectly permissible, however, for us to take judicial notice of the

very fact of the judicial act that these decisions

represent. We therefore grant the motion. 8 See Jernigan v. Ashland Oil, Inc.

, 989 F.2d

812, 815 (5th Cir.1993) (stating that the burden in

such cases is on defendant).11

relied on several

cases for this proposition,

those decisions are not necessarily on point,

because they more accurately reflect the law as

it relates to allegations of neg ligence with

respect to direct care rather than to inadequate

management. The district court points to no

cases specifically addressing whether a duty of

an agent adequately to manage a facilit y is

owed to the pri ncipal, to thi rd parti es, or to

both.

Plaintiffs aver that such duties need not be

mutually exclusive. Despite the accuracy of

this co nt ention, plaintiffs can point to no authority establis hing that such duality of allegiances exists with respect to a duty to manage

adequately. The defendants, for their part, can

do no better. They cite to no case establishing

that a duty to manage a facilit y adequatel y

cannot be owed to a third party in addition to

the ent ity itself. Although ambiguous

questions of law must be resolved in favor of

the plaint iffs, they, in the absence of a ny

authority, cannot reasonably expect to recover

under state law. These allegations alone,

theref o re, are insufficient to defeat complete

diversity.

Notwithstanding the absence of authority

with respect to the in-state defendants’ alleged

failure adequately to man age t he facility, the

plaint iffs additionally alle ge di rect participation

on behalf of the licensees and administrators in

the suppos ed grossly negligent care of

residents. The district court found that the

plaintiffs cannot adequately show that the instate defendants were sufficiently directly involved in the “hands-on

care of the plaintiff”

to saddle independent tort liabilit y on an agent

of a disclosed principa l

. Both sides concede

that such an agent may be liable under Mississippi law where he was directly involved in the

co mmission of a tort 

### S

S in this case, if the instate defendants were directly involved in

resident care.

The issue, therefore, is what consti tutes

“direct.” The defendants and the district court

apparently equated the t erm with hands-on

care. Plaintiffs, on the other hand, argue for a

more expansive definition.

As we have said, in the context of fraudulent joinder analysis a party may not rely on

t he allegations in his pleadings on their face,

but must show that there is, at minimum, some

reasonable dispute of a fact that, if established,

would demonstrate a reasonable possibility of

recovery. The district court considered

affidavits from the in-state defendants claiming

that “they were no t involved in the hands-on

care of Plaintiff[s],” determined that this

evidence was unrebutted, and therefore found

that plaintiffs’ claims must fail.

The defendants echo this argument o n appeal, contending t h at there is no evidence offered that demonstrates hands-on care or participation in the medical injuries alleged. Plaintiffs claim, however, that liability will lie even

in the absence of such evidence, and they contend that their complaints allege sufficiently direct participation 

### SS

and that such participation

need not be “hands-on,” as defendants

maintain.

D efendants point to Mozingo v. Cor rect

Mfg. Corp. , 752 F.2d 168, 173 (5th Cir.

1985), for the proposition that to face tort liabilit y, an agent such as the in-state defendants

must be the “guiding spirit” or “central figure.”

Defendants further reason that the affidavits of

the in-state defendants, which deny any direct

participation in the care of the plaint iffs, stand

un-rebutted and therefore demonstrate the existence of fraudulent joinder.12

In contrast, plaint iffs rely on cases purporting to establish liabilit

y for a wider spectrum of

acts and omissions. For example, in T urner v.

Wilson

, 620 So. 2d 545, 548-49 (Miss. 1983),

the court stated that directors, officers, and

agents may be liable for torts where they either

participated in the act, authorized it or directed

it, gave consent to an act, or even acquiesced

in a torti ous act that they knew of or “should

have known of” in the exercise of reasonable

care.

Plaint iffs also point to numerous u nreported

district court decisions in Mississippi in which,

under very similar circumstan ces (som e

invo lving the same defendants as in this case),

the courts, in plaint iffs’ words, “rejec ted the

defendants’ ‘myopic view of direct participation’ as requiring personal contact . . .”

(quoting Hill ). In those unreported cases, the

district court held that a nursing home administ rator, like the in-state defendants, may be

held liable for their personal torti ous conduct

without personal, hands-on contact with the

plaint iff. S ee, e.g.

, Hill

. Rather, allegations of

failure t o perform managerial duties, such as

maintaining adequate records and supervising

those members o f the staff who handled the

residents’ day -to-day care, were held sufficient

to “af fo rd a reasonable basis for imposing

personal liabilit

y unde r Mississippi law.”

Bradley v. Grancare, Inc.

, No.4:03CV93-P-B,

at *5-6 (N.D. Miss. Aug. 18, 2003).

Lastly, plaint iffs rely on Rein v. Benchmark

Constr. Co. , 2003 WL 21356013 (Miss. June

12, 2003), for the proposition that the question

whether these defendants owe a duty to plaint iffs is one of fact. In R ein

, a nursing home

resident sued a pest co nt ro l company for injuries inflict

ed by ants. The court found that it

was possible that the pest control company

was an independent contractor wit h no independent duty to the plaint iff. Nevertheless, it

held that the question was one for the trier of

fact. I d. at *12. Thus, plaintiffs assume that

there is at least a reasonable possibility that the

non-diverse defendants in this case owe a duty

to them.

On balance, plaint iffs have the better of the

argument 

### SS

at least strong e nough to demonstrate a reasonable possibility of recovery under Mississippi law. Plaintiffs cannot demonstrate hands-on contact by the defendants, but

such activity does not seem required to impose

personal liabilit

y under M ississippi law. One

may easily be a direct participant in t orti ous

conduct by merely authorizing o r negligently

failing t o remedy misconduct by one’s subordinates.

It is uncertain, at this stage of the litigation,

whether plaint iffs will be able to prove their allegations of direct participation to the satisfaction of the trier of fact. Nevertheless, it is

at least reasonable to expect that a Mississippi

court might find that the allegations of the instate defendants’ misfeasance and nonfeasance

are sufficient to state a claim under state law.

The district court therefore erred in not recognizing the reasonable possibility of plaintiffs’

recovery against the in-state defendants under

Mississippi law 

### SS

especially in light of the

recognized ambiguity in the caselaw that must

be resolved in favor of remand.

IV.

At oral argument, we raised, and the parties

have subsequently addressed in supple m ental

briefs, t he specter of a jurisdictional defect in

these cases arising from the plaint iffs’ election

to appeal only the district court’s decisions on

the negligence and gross negligence causes of

action. The plaintiffs, at argument and in their

supplemental brief, attempt to sidestep this po-13

tential pitfall by arguing that, alt ho ugh their

brief discusses the negligence and gross negligence causes of action, they did not necessarily

fail to appeal the decisions regarding the other

causes of action.

We disagree. As we have noted, plaintiffs’

re p ly brief specifically contends that the defendants err in focusing on the other causes of

action in that those causes o f action “are not

before this Court.”

A.

The failure to appeal those decisions, defendants contend, forecloses any possibility of

success on plaint iffs’ appeal. Defendants reason as follows: By failing t o appeal the dismissal of the medical

malpractice, breach of

fiduciary duty, and fraud claims, plaint iffs concede that they have no reasonable possibility of

success on the merits of those claims. Further,

by not appealing those decisions, plai nt iffs

allow the dismissals to stand and therefore

tacitly agree that the c o urt had jurisdiction

o ver those claims in order to dismiss them.

Therefo re, if we rule that the district court

erred in finding the in-state defendants

fraudulently joined in the negligence and gross

negligence claims (and we have so ruled), the

district court will be caught between a veritable Scylla and Charybdis.

That is, although we will have commanded

the court to r emand, because the two claims

we addressed here have a reasonable possibility of success on the merits, the district court

will not be able concomitantly to remand the

dismissed claims, the result being that the entire action will not be remanded, but only some

claims, a course of action that is contrary to 28

U.S.C. § 1441. Under the removal statute, in

a diversity action where all claims relate to the

same constitutional case, individual claims cannot be removed, but on ly entire actions. 9

Consequently, goes defendants’ argument,

plaint iffs, by failing to challenge the district

court’s jurisdiction over the other claims, have

forgone the abilit

y to have their negligence and

gross negligence claims rem anded to state

court.

This argument is interesting and migh t be

persuasive, but for one fatal flaw. Underlying

the entire argument is the notion tha t by not

appealing the decisions on some counts, the

plaint iffs have “wai v ed” the issue of subject

matter jurisdiction over those counts. Subject

matter jurisdiction, howeve r, cannot be

waived. 10

That being so, plaint iffs’ failure to appeal

t he other causes of action is not dispositive.

We have said , above, that the di stri ct court’s

refusal to recognize a reasonable possibility of

recovery under state law on the negligence and

gross neglige nce claims was error. Consequently, on remand from this court, the district

court must remand the e ntire case to state

court.

The fact that the plaint iffs did not appeal

9 See Arang o v. Guzman Travel Advisors

Corp.

, 621 F.2d 1371, 1376 (5th Cir. 1980) (stating that on removal, cases ar e considered in their

entirety); c

f. United Mine Workers v. Gibbs, 3 83

U.S. 715, 725 (1966) (defining an entire Article III

“case” as claims deriving from a “common nucleus

of operative fact”).

10 See, e.g., Clinton v. New York

, 524 U.S. 417,

428 (1998 ) (stating that jurisdictional questions,

e ven of statutory, not constitutional, magnit ude,

may not be waived); Bridgmon v. Array Sys.

Corp.

, 325 F.3d 572, 575 (5th Cir. 2003) (explaining that courts have duty to raise question of subject matter jurisdiction sua sponte ).14

the dismissal of the other claims does not make

it impossible fo r the di stri ct court to rem and

those claims as well. Because we hold that the

plaint iffs have a reasonable possibility of

recovering in state court on at least two causes

o f action, removal was improper, complete

diversity does not exist, and the district court

never properly had jurisdiction ove r thi s

action.

The consequence of the district court’s lack

of juris dict io n is that the dismissal of those

claims must be also be reversed. Although our

fraudu lent joinder decisions have never made

t he issue entirely pellucid, § 1441’s holistic

approach to rem

o val mandates that the existence of even a single valid cause of action

against in-state defendants (despite the

pleading of several unavailing claims) requires

remand of the entire case to state court. 11 B.

Defendants suggest that if plaint iffs had effectively waived the jurisdictional question

with respect to the fraud, breach o f fiduciary

duty, and medical malpractice claims, the district court co u ld retain jurisdiction over the

dismissed claims and assume jurisdiction over

the appealed claims through the supplemental

jurisdiction statute, despite the lack of complete diversity. This approach is a non-starter.

As both part ies agree in their supplemental

briefs, 28 U.S.C. § 1367, which authorizes

district courts to exercise supplemental jurisdiction, cannot apply in this instance.

Specifically, § 1367(b) “has l imits . . . on

the use of supplemental jurisdiction in diversity

cases so tha t it will not defeat the established

rule of complete diversity.” 12 As we noted in

McLaughlin v. Miss. Pow er Co. , 376 F.3d

344, 354 (5th Cir. 2004), “§ 1367(b) provides

that there m

ust be complete diversity where

parties are joined in a diversity suit under

[Federal Rule of Civil Procedure 19 or] 20 . .

. .” 13 Because multiple defendants, like those

in this case, are allowed under Federal Rule of

Civil Pro cedure 20, complete diversity must

exist, and § 1367(b) does not authorize the exercise of supplemental jurisdiction. 11 See Green v. Amerada Hess Corp.

, 707 F.2d

201, 208 (5th Cir. 1983 ) (“If even one of [the

plaintiff’s] many claims might be successful, a remand to state court is necessary.”); Mood y Nat’l

B ank v. St. Paul Mercury Ins. Co. , 193 F. Supp.

2d 995, 1000 (S.D. Tex. 200 2) (remanding because plaintiff could recover under one of his many

theories); Blanchard v. State Farm Lloyds

, 206 F.

Supp . 2d 840, 845 (S.D. Tex. 2001) (requiring

only one valid cause of action for remand); accord

Cabalceta v. Standard Fruit Co. , 883 F.2d 1553,

1561 (11th Cir. 1989) (explaining that a court

l ooks “to see whether there is no possibility the

plaintiff can establish any cause of action a g ainst

the resident defendant

. . .”). This line of reasoning

is consistent with our continued instruction that

“diversity removal, powerful as it is, [must] remain

with in its congressionally marked traces [as]

demanded by principles of comity and federalism

. . . .” Smallwood v. Ill. Cent. R.R. , 385 F.3d 568,

576 (5th Cir. 2004) (en banc). 12 13B C HARLES A LAN W RIGHT ET AL

., F ED

ERAL P RACTICE AND P R OCEDURE 2 D § 3567.3,

2004 Supp. at 96. S ee also id. at § 3567.2 (stating

that because of r ule 20, “if a . . . diversity of citizenship case is brought against multiple defendants, § 1367(b) precludes supplemental jurisdiction.” Id. § 3567.2, 2004 Supp. at 83.

13 S ee also, e.g.

, Taylor v. Am. Tobacco Co.

, 983 F. Supp. 686, 691 (E.D. Mich. 1997) (stating

that court cannot exercise original jurisdiction over

claims against diverse parties and supplemental

jurisdiction over claims against in-sta te defendants).15

The dismissal of the negligence and gross

negligence claims, and the dismissal of the additional claims, are REVERSED, and this matter is remanded to the dis t rict court with

instruction to remand to state court.