Opinion ID: 770968
Heading Depth: 3
Heading Rank: 3

Heading: Fraudulent or Collusive Joinder

Text: 46 As another basis for remand, Plaintiffs insist that defendants fraudulently joined Dead Sea for no purpose but to have it invoke FSIA jurisdiction as Defendants' ticket for admission into federal court. For support, they refer to: 1) thespeed with which the removals occurred; 2) the post-removal agreements between Defendants and Dead Sea; and 3) two of their amended petitions, which expressly state that they are not asserting any claims arising out of products attributable to Dead Sea. 47 We have normally confronted the fraudulent joinder doctrine when a defendant removes a case based on diversity jurisdiction and charges that the plaintiff fraudulently joined a non-diverse defendant to try to prevent removal. That doctrine has not been applied where, as here, a third-party, foreign sovereign is alleged to have been joined willingly and cooperatively to create jurisdiction as a basis for removal. Recognizing this, the district court pressed a different inquiry of the facts surrounding Dead Sea's joinder, pursuant to 28 U.S.C. § 1359, which prohibits federal jurisdiction in a civil action in which any party, by assignment or otherwise, has been improperly or collusively made or joined to invoke the jurisdiction of such court. Section 1359 is designed to prevent the litigation of claims in federal court by suitors who by sham, pretense, or other fiction acquire a spurious status that would allow them to invoke the limited jurisdiction of the federal courts. Nolan v. Boeing Co., 919 F.2d 1058, 1067 (5th Cir. 1990). Its purpose is to prevent the manipulation of jurisdictional facts where none existed before. Id. And it has generally been restricted to circumstances involving assignment of interests from non-diverse to diverse parties to collusively create diversity jurisdiction. See, e.g., Kramer v. Caribbean Mills, Inc., 89 S. Ct. 1487 (1969). Because Plaintiffs did not aver that Defendants had manufactured Dead Sea's status as a foreign sovereign or their claims for contribution or indemnity against Dead Sea, the district court was not persuaded that any jurisdictional facts had been collusively manipulated in contravention of § 1359. We believe that the district court was correct in holding that § 1359 was not applicable. 48 On appeal, Plaintiffs do not appear to challenge the district court's § 1359 analysis. Rather, they question the district court's reliance on that statute as opposed to an analysis predicated on the fraudulent joinder doctrine. As we previously noted, the district court declined to apply that doctrine because it perceptively realized that fraudulent joinder is normally reserved for cases where a third party is alleged to have been joined to defeat diversity jurisdiction as a basis for removal. Accordingly, we are wary of recognizing the applicability of that judicially constructed doctrine in a new context. Moreover, whether we ought to apply the fraudulent joinder doctrine to situations where a third-party, foreign sovereign is alleged to have been joined willingly and cooperatively to create jurisdiction as a basis for removal is complicated by the doctrine's intersection with Congress's paramount desire that a foreign sovereign have access to a federal forum to ensure uniformity in procedure and substance. See, e.g., Nolan, 919 F.2d at 1065. That is, to craft a fraudulent joinder rule to an FSIA entity's right to remove an action from state court would conflict with Congress's intent. We need not, and do not, resolve these issues today, for it is apparent that even if the fraudulent joinder doctrine were to apply to the instant case, Plaintiffs have failed to establish that Dead Sea was fraudulently joined. 49 In those more typical fraudulent joinder cases where a party has been joined to defeat removal, the burden of persuasion is on the one who cries fraudulent joinder. 25 See B., Inc. v. Miller BrewingCo., 663 F.2d 545, 549 (5th Cir. Unit A Dec. 1981). To establish fraudulent joinder, the party crying foul must show that there is no reasonable probability of recovery against the joined party or that there has been outright fraud in the pleadings of jurisdictional facts. See id. If there is no arguably reasonable basis for believing that liability may be established against the joined party, then remand is appropriate. See id. at 550. Normally, a court reviewing allegations of fraudulent joinder should refrain from conducting an evidentiary hearing but may utilize a summary judgment-like procedure. See Burchette v. Cargill, 48 F.3d 173, 176 (5th Cir. 1995). 50 To support their fraudulent joinder allegations, Plaintiffs' rely upon three main points: 1) the speed with which the removals occurred; 2) the post-removal agreements between Defendants and Dead Sea; and 3) two of Plaintiffs' amended state court petitions, which expressly state that they are not asserting any claims arising out of products attributable to Dead Sea. With respect to the first point, the intervals between the filing of the third-party petitions by Defendants and the filing of the notices of removal by Dead Sea were short, but in our view that time interval in and of itself is not enough to establish fraudulent joinder. Indeed, opposing parties often notify each other about pending petitions and arrange for their convenient delivery. See, e.g., 28 U.S.C. § 1608(b)(1) (contemplating special arrangements for service by parties suing agencies or instrumentalities of foreign states). As for Plaintiffs' second point, the post-removal agreements between Defendants and Dead Sea were dated nearly sixteen months after the filing of the third-party petitions against Dead Sea in state court and the removal of those cases. There is nothing in the record reflecting any negotiation and agreement between Defendants and Dead sea prior to the filing of the third-party petitions and the notices of removal. Absent such proof, Plaintiffs have not established that no cause of action could possibly have been asserted against Dead Sea by Defendants at the time of removal. 51 Plaintiffs' third basis for fraudulent joinder, however, merits further discussion. At the time of removal, in two of the dismissed cases, Jorge and Rodriguez, the latest state court amended petitions expressly stated that Plaintiffs were not asserting any claims because of exposure to DBCP or DBCP-containing products designed, manufactured, marketed distributed, or used by Dead Sea Bromine Co., Ltd., Ameribrom, Inc., Israel Chemical Co., Ltd., Dead Sea Works, Ltd., and the State of Israel. The critical issue becomes what law determines the effect of those disclaimers. Without explanation, Plaintiffs seem to think that Texas law applies to this determination and dictates the outcome of any fraudulent joinder analysis. 26 Indeed, the only affidavit that either Plaintiffs or Defendants refer to in their briefs with respect to the choice of law issue does not support Plaintiffs' position but actually suggests the opposite. Defendants, on the other hand, make a blanket assertion that the relevant choice of law for determining whether a party was fraudulently joined in a DBCP-related case is the law of the country where the plaintiff was exposed to DBCP, i.e., Honduras in the case of Rodriguez and various foreign countries in the case of Jorge. Forsupport, they cite to a decision out of the Eleventh Circuit. See Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1562 (11th Cir. 1989). In Cabalceta, several Costa Rican plaintiffs brought suit in Florida state court against several defendants, including many in the present appeals, for injuries from exposure to DBCP. The defendants removed the case to federal district court where it was ultimately dismissed on forum non conveniens. Among the issues on appeal was whether the plaintiffs had fraudulently joined one of the defendants, Dole Fresh Fruit Co. (Dole), to defeat removal. To determine whether the plaintiffs had a colorable cause of action, the district court applied Florida law. The plaintiffs charged that this was error because when the district court dismissed the case on forum non conveniens, it ruled that Costa Rican law would apply. Noting that the plaintiffs' pleadings at the time of removal did not definitely assert that they were proceeding against Dole under Florida law, the Eleventh Circuit agreed with the plaintiffs and reversed, remanding the fraudulent joinder issue so that the plaintiffs' cause of action against Dole could be evaluated under Costa Rican law. 52 We find Cabalceta instructive but not dispositive of the instant cases. We note first that Plaintiffs have not alleged in either Jorge or Rodriguez that their claims are made under the laws of any particular state or nation. Next, we turn to the Texas law of conflicts for guidance as Texas is the state in which the forum district court sits. See W.R. Grace & Co. v. Continental Cas. Co., 896 F.2d 865, 873 (5th Cir. 1990). In Gutierrez v. Collins, 583 S.W.2d 312, 318 (Tex. 1979) (Johnson, J.), the Texas Supreme Court adopted the most significant relationship test as enunciated in sections 6 and 145 of the Restatement (Second) of Conflicts as governing all conflicts cases sounding in tort. Those sections provide: 53 § 6. Choice of Law Principles 54 (1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law. 55 (2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include 56
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58 (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, 59 (d) the protection of justified expectations, 60 (e) the basic policies underlying the particular field of law, 61 (f) certainty, predictability and uniformity of result, and 62 (g) ease in the determination and application of the law to be applied. 63 § 145. The General Principle 64 (1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6. 65 (2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include: 66 (a) the place where the injury occurred, 67 (b) the place where the conduct causing the injury occurred, 68 (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and 69 (d) the place where the relationship, if any, between the parties is centered. 70 These contacts are to be evaluated according to their relative importance with respect to the particular issue. 71 In addition, § 173 of the Restatement (Second) of Conflicts states that [t]he law selected by application of the rule of § 145 determines whether one tortfeasor has a right to contribution or indemnity against another tortfeasor. At least one court has interpreted that section to mean that the source of law governing the primary liability claim is also the source of law governing the contribution claim. See 50-Off Stores, Inc. v. Banque Paribas (Suisse) S.A., No. SA-95-CA-159, 1997 WL 790739, at  (W.D. Tex. May 20, 1997); cf. Marathon Pipe Line Co. v. Drilling Rig Rowan/Odessa, 761 F.2d 229, 235 (5th Cir. 1985) (This court has held that the body of law establishing the indemnitee's primary liability governs his claim for indemnity or contribution against a third party.). 72 Our evaluation of the choice of law issue under these prescribed rules leads us to conclude that Texas law would not qualify as the appropriate source of law. Among other things, more than 99 percent of the Jorge and Rodriguez plaintiffs are citizens of another country and not of the United States. All of the plaintiffs' injuries occurred in various foreign countries, principally Honduras, and those foreign countries obviously have an interest in protecting the rights and welfare of their citizens. And even if the source of law governing Defendants' contribution claims were different than that for governing the primary liability issue, our review suggests no reason why Texas law would necessarily be the preferred choice. As the party crying foul, Plaintiffs have the burden of proof and persuasion to show that there is no arguably reasonable basis for believing that liability may be established against Dead Sea. Plaintiffs have not cited us to any case law or statutory provision of any jurisdiction, other than Texas, likely to be chosen as the source of law for determination of (i) the Plaintiffs' liability claim against the various Defendants, (ii) the claims for indemnity or contribution among the various Defendants, or (iii) the effects of Plaintiffs' disclaimer respecting Dead Sea on any of the foregoing. 73 Given the multiplicity of differing provisions that the various systems of jurisprudence in the countries involved in this litigation have on the subjects of primary tort liability, apportionment of liability among joint tortfeasors, indemnity and contribution, and the disclaimer in this case, and given the incremental nature of the claimed exposure, the numerous sources of DBCP's going into the particular products produced by the manufacturing Defendants, the apparently very small and undifferentiated percentage attributable to Dead Sea, and the various quantities of product that each grower Defendant could have purchased from any particular manufacturer, we conclude that Plaintiffs have failed to sustain their burden. Therefore, we are unable to conclude that Defendants fraudulently or collusively joined Dead Sea to create federal court jurisdiction and to remove their cases. 27