Court Opinion

ID: 5130171
Source: CourtListenerOpinion
Date Created: 2021-11-30 19:00:22.295299+00
Date Added: 2024-06-11T08:23:15.956957
License: Public Domain

Case: 20-30196          Document: 00516111210            Page: 1      Date Filed: 11/30/2021

               United States Court of Appeals
                    for the Fifth Circuit                                          United States Court of Appeals
                                                                                            Fifth Circuit

                                                                                          FILED
                                                                                 November 30, 2021
                                         No. 20-30196                                Lyle W. Cayce
                                                                                          Clerk

   George Raymond Williams, Medical Doctor,
   Orthopaedic Surgery, a Professional Medical, L.L.C.,

                                                                     Plaintiff—Appellant,

                                             versus

   Homeland Insurance Company of New York; Med-Comp
   USA, Incorporated,

                                                                  Defendants—Appellees.

                       Appeal from the United States District Court
                          for the Western District of Louisiana
                                 USDC No. 6:19-CV-288

   Before Jones, Haynes, and Ho, 1 Circuit Judges.
   Haynes, Circuit Judge:
           A class of Louisiana medical providers (the “Class”) sued a number
   of Louisiana Preferred Provider Organizations (the “PPOs”) in Louisiana
   state court on state law causes of action approximately ten years ago. The
   Class amended its decade-old state lawsuit to assert newly assigned bad faith

           1
               Judge Ho fully joins in this opinion and also files a concurrence; Judge Jones
   dissents.
Case: 20-30196       Document: 00516111210            Page: 2     Date Filed: 11/30/2021

                                       No. 20-30196

   insurance claims against Homeland Insurance Company, an out-of-state
   defendant. After Homeland removed the case to federal court, the district
   court concluded the claims were barred by an earlier Delaware judgment and
   dismissed the suit.      The Class contends that the district court lacked
   jurisdiction because a non-diverse defendant remained in the case from the
   original lawsuit, and, alternatively, that the court erred in granting preclusive
   effect based on the statute of limitations dismissal in Delaware. We agree
   that the district court lacked jurisdiction. Accordingly, the district court’s
   jurisdictional holding is REVERSED, the district court’s judgment and
   other orders are VACATED, and the case is REMANDED to the district
   court with instructions to remand the entire case to state court.
                                 I. BACKGROUND
          With a long procedural history, this case returns on appeal for the
   third time. 2 In 2009, Plaintiff George Raymond Williams filed a putative
   class action in Louisiana state court on behalf of the Class against three
   Louisiana defendants, including Med-Comp USA. Med-Comp operated a
   PPO network, which contracted with the proposed class of medical providers
   for discounted rates. The Class alleged that the PPOs violated the Louisiana
   Preferred Provider Organization Act (“PPO Act”) by discounting the
   Class’s bills without prior notice. See LA. STAT. ANN. § 40:2203.1(G). In
   2011, the Class amended its complaint to add claims against additional non-
   Louisiana defendants: CorVel Corporation, Homeland Insurance, and
   Executive Risk Specialty Insurance.

          2
             See Williams v. Homeland Ins. Co. of N.Y., 657 F.3d 287 (5th Cir. 2011)
   (Williams I); Williams v. Homeland Ins. Co. of N.Y., 788 F. App’x 297 (5th Cir. 2019)
   (Williams II).

                                            2
Case: 20-30196      Document: 00516111210           Page: 3     Date Filed: 11/30/2021

                                     No. 20-30196

          Executive Risk and Homeland removed the case to federal court,
   asserting both ordinary diversity jurisdiction under 28 U.S.C. § 1332(a) and
   jurisdiction under the Class Action Fairness Act’s (“CAFA”) minimal
   diversity jurisdiction under 28 U.S.C. § 1332(d)(2). CorVel and the Class
   sought to remand pursuant to CAFA’s local controversy exception. 28
   U.S.C. § 1332(d)(4). The district court found the criteria of the exception
   satisfied and remanded the case to Louisiana state court.             Homeland
   appealed, but we affirmed the remand order. Williams I, 657 F.3d at 293.
          On remand, after receiving class certification, the Class settled with
   Executive Risk and all of the Louisiana defendants except Med-Comp. The
   Class also prevailed on its direct-action claims against Homeland in state
   court—leaving Med-Comp as the sole remaining defendant. See Williams v.
   SIF Consultants of La., Inc., 209 So. 3d 903, 906, 912 (La. Ct. App. 2016)
   (affirming summary judgment in favor of the Class on its claims against
   Homeland).
          As part of their settlement agreement, CorVel (Homeland’s insured)
   assigned to the Class its insurance coverage claims against Homeland. This
   assignment underlies the present dispute. The assignment, however, did not
   initially include the bad faith claim CorVel was pursuing against Homeland
   in Delaware state court. 3 See Homeland Ins. Co. of N.Y. v. CorVel Corp.,
   197 A.3d 1042 (Del. 2018). Although CorVel initially prevailed against
   Homeland, the Delaware Supreme Court reversed, holding that the claim
   was barred by the statute of limitations. Id. at 1044. CorVel then assigned
   the entirety of its claims against Homeland to the Class.

          3
           This claim was brought under Louisiana’s Bad Faith Statute. LA. STAT. ANN.
   § 22:1973.

                                           3
Case: 20-30196         Document: 00516111210               Page: 4      Date Filed: 11/30/2021

                                          No. 20-30196

           The Class then amended its still unresolved complaint against Med-
   Comp 4      in Louisiana state court to assert the bad faith claim against
   Homeland that CorVel had just lost on in Delaware. The litigation then
   consisted of the Class bringing state law PPO Act claims as a class against one
   non-diverse defendant (Med-Comp) and a state law bad faith insurance claim
   as an assignee against one diverse defendant (Homeland).
           After being joined again in state court, Homeland removed the case to
   federal court on the basis of ordinary diversity jurisdiction and CAFA
   minimal diversity jurisdiction. Homeland justified removal by arguing that
   Med-Comp’s non-diverse Louisiana citizenship could be disregarded
   because the PPO Act claims against Med-Comp were “improperly and
   egregiously misjoined” with the assignment-based bad faith claim against
   Homeland. The Class moved to remand.
           Adopting a magistrate judge’s report and recommendation, the
   district court denied the motion to remand in part and granted it in part. The
   district court retained jurisdiction over the bad faith claim against Homeland
   and remanded the PPO Act claims against Med-Comp to state court. 5

           4
              It appears that, by the time Williams amended the PPO Act complaint to bring
   the bad faith claim against Homeland in 2019 (approximately ten years after filing it in the
   first place), Med-Comp had essentially gone defunct. It filed its last annual report with the
   State of Louisiana in 2013, and the Louisiana Department of State terminated its corporate
   registration in 2016. Under Louisiana law, however, corporations with terminated
   registrations can still be sued, LA. CODE CIV. PROC. ANN. art. 85, and even corporate
   dissolution does not “abate or suspend” any proceedings that were pending at the time of
   dissolution, LA. STAT. ANN. § 12:1-1405(B)(6). Accordingly, despite Med-Comp’s
   financial condition and the dissenting opinion’s conclusion that “logic” compels
   otherwise, Med-Comp remained in the case.
           5
              The district court indicated that it “denied” the motion to remand, but it is clear
   that it granted the motion in part: the order “remanded” all of the “pre-existing claims”
   against Med-Comp. That is also improper, as the proper mechanism of handling an

                                                 4
Case: 20-30196        Document: 00516111210              Page: 5       Date Filed: 11/30/2021

                                          No. 20-30196

   Bypassing CAFA, the district court reasoned that it had ordinary diversity
   jurisdiction over the case because Homeland was diverse from the Class and
   because Med-Comp, the non-diverse defendant, was improperly joined.
   Without addressing the viability of the Class’s PPO Act claims against Med-
   Comp, the district court reasoned that improper joinder applied because, in
   its capacity as CorVel’s assignee, the Class lacked a reasonable basis for
   recovery against Med-Comp.
           The Class moved for leave to appeal under CAFA’s interlocutory
   appeal mechanism. 28 U.S.C. § 1453(c)(1); see Williams II, 788 F. App’x at
   298. A prior panel of this court denied the Class’s motion. We held that the
   Class did not raise a CAFA issue because the district court based its
   jurisdictional holding entirely on ordinary diversity jurisdiction. Id. at 298–
   99.
           Homeland then moved to dismiss the bad faith claim, which the
   Delaware Supreme Court had resolved in its favor based on the statute of
   limitations. The district court approved a magistrate judge’s report and
   recommendation concerning the motion and held that under the Full Faith
   and Credit Act, 28 U.S.C. § 1738, the court must look to Delaware law for
   applicable preclusion principles. Concluding that Delaware would apply
   claim preclusion to a case that had been dismissed for failure to file within the
   statute of limitations, the court dismissed. The Class timely appealed.

   improperly joined party is to dismiss it, not send it to another court to decide the merits.
   Flagg v. Stryker Corp., 819 F.3d 132, 136 (5th Cir. 2016) (en banc) (“[I]f the plaintiff
   improperly joins a non-diverse defendant, then the court may disregard the citizenship of
   that defendant, dismiss the non-diverse defendant from the case, and exercise subject
   matter jurisdiction over the remaining diverse defendant.”)

                                                5
Case: 20-30196        Document: 00516111210             Page: 6      Date Filed: 11/30/2021

                                         No. 20-30196

                                    II. DISCUSSION
            The district court concluded that it had ordinary diversity jurisdiction
   under 28 U.S.C. § 1332(a)(1). We have jurisdiction to evaluate whether the
   district court was correct. See In re Transtexas Gas Corp., 303 F.3d 571, 576–
   77 (5th Cir. 2002). “We review questions of subject matter jurisdiction de
   novo.” Wagner v. United States, 545 F.3d 298, 300 (5th Cir. 2008) (quotation
   omitted).     When analyzing whether the proponent of jurisdiction has
   established improper joinder, we examine all factual allegations and
   ambiguities of state law in the light most favorable to the party resisting
   jurisdiction. See Campbell v. Stone Ins., Inc., 509 F.3d 665, 669 (5th Cir.
   2007).
            The Class asserts that jurisdiction in federal district court was
   improper because Med-Comp’s presence destroyed complete diversity of
   the parties and barred removal. 6 The Class alternatively contends that the
   district court erred in dismissing the bad faith claim on claim preclusion
   grounds. Because we conclude that the district court lacked jurisdiction in
   this case, we do not reach the merits of the claim preclusion issue.

            Jurisdiction

            A defendant can remove “any civil action brought in a State court of
   which the district courts of the United States have original jurisdiction.” 28

            6
              The Class also argues in its reply brief that Homeland waived or forfeited its
   arguments regarding improper joinder because Homeland did not specifically assert
   improper joinder in its notice of removal. To preserve an argument on appeal, a party must
   “press”—“not merely intimate”—that argument before the district court. F.D.I.C. v.
   Mijalis, 15 F.3d 1314, 1327 (5th Cir. 1994). This argument is unavailing. In the district
   court, Homeland asserted that diversity jurisdiction existed because Med-Comp “was not
   properly joined as a defendant,” and argued in resistance to the Class’s motion to remand
   that the Class had “no reasonable basis for recovery” against Med-Comp. Accordingly,
   we conclude that Homeland did not waive or forfeit its improper joinder argument.

                                               6
Case: 20-30196         Document: 00516111210               Page: 7      Date Filed: 11/30/2021

                                          No. 20-30196

   U.S.C. § 1441(a). Two types of original jurisdiction are at issue here:
   (1) ordinary diversity jurisdiction under 28 U.S.C. § 1332(a)(1) and
   (2) CAFA minimal diversity jurisdiction under 28 U.S.C. § 1332(d). 7 We
   discuss both below.

           1.       Ordinary Diversity Jurisdiction & Improper Joinder Doc-
                    trine

           A case exhibits diversity of citizenship when the parties are citizens of
   different states and the amount in controversy exceeds $75,000. 28 U.S.C.
   § 1332(a)(1). But removal based on diversity is precluded “if any of the
   parties in interest properly joined and served as defendants is a citizen of the
   State in which such action is brought.” § 1441(b)(2). Moreover, ordinary
   diversity jurisdiction requires complete diversity—all of the plaintiffs must
   be citizens of different states than all of the defendants. Flagg v. Stryker Corp.,
   819 F.3d 132, 136 (5th Cir. 2016) (en banc). If a non-diverse defendant is
   improperly joined, however, a district court can disregard the citizenship of
   that defendant for the purposes of evaluating its jurisdiction. Id. Our
   precedents in this area are not based upon the text of the statute but rather
   on the concept that fake or fraudulent joinder of a party to defeat federal
   jurisdiction should not be approved.
           The district court purported to apply our established improper joinder
   doctrine—namely, that a defendant is improperly joined if there is no
   possibility of recovery against it—but its reasoning and conclusions cannot
   be squared with this circuit’s improper joinder jurisprudence. Rather, the

           7
              The district court discussed both possible bases for original jurisdiction, but its
   decision to exercise jurisdiction was based on ordinary diversity jurisdiction. See Williams
   II, 788 F. App’x at 298. On appeal, Homeland also argues that the district court had CAFA
   minimal diversity jurisdiction over the case.

                                                 7
Case: 20-30196        Document: 00516111210             Page: 8      Date Filed: 11/30/2021

                                         No. 20-30196

   district court functionally applied the fraudulent misjoinder doctrine, which
   we have never adopted and do not adopt now.

                 i.        Traditional Improper Joinder Doctrine

           In this circuit, a non-diverse defendant is improperly joined such that
   its citizenship can be ignored for purposes of evaluating diversity jurisdiction
   if the removing party shows either that: (1) there was actual fraud in the
   pleading of jurisdictional facts; or (2) the plaintiff is unable to establish a
   cause of action against the non-diverse defendant in state court. Smallwood
   v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc). 8 In other
   words, committing fraud in the facts or faking a defendant is not a basis for
   denying diversity jurisdiction. That said, it is the removing party’s burden to
   establish improper joinder. See id. at 574. Because Homeland does not allege
   that there was actual fraud in the pleading of jurisdictional facts, we assess
   only whether Homeland has demonstrated that the Class lacks a viable state
   law cause of action against the non-diverse defendant, Med-Comp. We
   typically evaluate this question by evaluating whether the plaintiff had any
   possibility of recovery against the non-diverse defendant in state court at the
   time of removal. See Flagg, 819 F.3d at 136. The inquiry is virtually identical
   to the inquiry on a motion to dismiss for failure to state a claim: “Ordinarily,
   if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper
   joinder.” Id. (quoting Smallwood, 385 F.3d at 573); see also Int’l Energy
   Ventures Mgmt., L.L.C. v. United Energy Grp., 818 F.3d 193, 208 (5th Cir.
   2016). In limited circumstances, however, we permit district courts to
   perform a more detailed factual analysis: if it appears that the plaintiff has

           8
             This circuit has occasionally referred to improper joinder as “fraudulent
   joinder.” See Smallwood, 385 F.3d at 571 n.1. We refer to the doctrine as improper joinder
   and note that the improper joinder doctrine is distinct from the fraudulent misjoinder
   doctrine discussed below.

                                               8
Case: 20-30196         Document: 00516111210              Page: 9       Date Filed: 11/30/2021

                                          No. 20-30196

   misstated or omitted discrete facts that would determine the propriety of
   joinder, a district court can, in its discretion, pierce the pleadings and conduct
   a limited “summary inquiry.” Flagg, 819 F.3d at 136.
           Here, the district court concluded that the Class lacked any possibility
   of recovery against Med-Comp. But the district court did not actually assess
   whether the pleadings or other facts showed that the Class lacked a possibility
   of recovery on its PPO Act claims against Med-Comp. Instead, it proceeded
   down a new path of reviewing the Class in two different capacities in the case:
   (1) the Class-as-the Class, who had the PPO Act claims against Med-Comp;
   and (2) the Class-as-CorVel, who had the assigned bad faith claim against
   Homeland.
           The district court reasoned that because the Class’s litigation was
   under two different capacities, the capacity in which the Class had a suit
   against Homeland, was different from the capacity against Med-Comp and,
   therefore, lacked a possibility of recovery. Thus, the district court concluded
   that Med-Comp was improperly joined such that ordinary diversity
   jurisdiction was appropriate. In reaching that conclusion, the only authority
   the district court cited was our suggestion, in an opinion denying mandamus
   relief, that “it might be concluded that misjoinder of plaintiffs should not be
   allowed to defeat diversity jurisdiction.” In re Benjamin Moore & Co., 309
   F.3d 296, 298 (5th Cir. 2002) (emphasis added). 9

           9
             The dissenting opinion reaches that conclusion. Dissenting Op. at 5–6 & n.7.
   However, as explained more fulsomely below, no Fifth Circuit precedent supports this
   concept. Neither do the dissenting opinion’s two cited authorities. The cited treatise
   indicates only that a party’s different capacities can matter for federal party joinder under
   Federal Rules of Civil Procedure 20 and 21, not removal based on improper joinder. See 6A
   Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal
   Practice and Procedure § 1585 (3d ed. 2010 & Apr. 2021 Update) (noting that a

                                                9
Case: 20-30196        Document: 00516111210               Page: 10       Date Filed: 11/30/2021

                                          No. 20-30196

           The district court’s conclusion to split the Class into two different
   capacities is inconsistent with this circuit’s traditional improper joinder
   analysis and has absolutely no basis in the text of the relevant statutes. We
   have never held that a capacity-by-capacity analysis is warranted in
   evaluating improper joinder. 10 See generally Smallwood, 385 F.3d at 573
   (identifying only actual fraud and impossibility of recovery as constituting
   improper joinder).         Indeed, we apply the traditional no-possibility-of-
   recovery test even when an assigned claim destroys complete diversity; so
   long as that claim is colorable, ordinary diversity jurisdiction is inappropriate.
   See Grassi v. Ciba-Geigy, Ltd., 894 F.2d 181, 182–85 (5th Cir. 1990)
   (collecting cases and stating that, under Supreme Court precedent, “the
   colorable assignment of a complete cause of action to defeat removal [is]
   effective to give the state court exclusive jurisdiction”).

   “court may declare a misjoinder of parties if the claims asserted in each capacity are totally
   unrelated and do not meet the standard established by the rules governing party joinder”).
   The cited state court case, Wagoner v. Chevron USA, Inc., resolves only the question of
   whether a Louisiana state court can appropriately sever misjoined claims brought in
   different capacities. 121 So. 3d 727, 734 (La. Ct. App. 2013).
           10
              There are some contexts in which a party’s different capacities can affect the
   improper joinder analysis—but using claim assignment to defeat diversity jurisdiction is
   not one of them. For instance, a party cannot collusively assign claims to create diversity
   jurisdiction. See 28 U.S.C. § 1359 (“A district court shall not have jurisdiction of 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.”); but see Oakley v. Goodnow, 118
   U.S. 43, 45 (1886) (“[N]o authority has as yet been given [to the federal courts] to take
   jurisdiction of a case by removal from a state court when a colorable assignment has been
   made to prevent such a removal.” (emphasis added)). Additionally, a party sometimes takes
   on a different citizenship when it acts in certain representative capacities not at issue
   here—specifically, a party adopts the citizenship of a represented person when acting as
   the representative of a decedent, an infant, or an incompetent person. See 28 U.S.C.
   § 1332(c)(2).

                                                10
Case: 20-30196       Document: 00516111210             Page: 11      Date Filed: 11/30/2021

                                        No. 20-30196

           Applying the traditional analysis here, we conclude that Med-Comp
   was not improperly joined because the Class has a possibility of recovery
   against Med-Comp (a non-diverse defendant) on the PPO Act claims. The
   complaint alleged that Med-Comp failed to provide the Class with benefit
   cards identifying the applicable contractual discount applied to the Class’s
   services and failed to give thirty days written notice of contractual alternative
   rates of pay. Accordingly, the allegations in the complaint plausibly stated
   that Med-Comp violated the PPO Act.                       See LA. STAT. ANN.
   § 40:2203.1(B). Indeed, the Class secured favorable settlements on virtually
   identical claims against other PPOs and won summary judgment in state
   court on essentially the same claims against Homeland, see SIF Consultants,
   209 So. 3d at 912. Viewing the Class’s allegations in the light most favorable
   to it, Campbell, 509 F.3d at 669, we conclude that the Class’s complaint
   provides a possibility of recovery against Med-Comp on its PPO Act claims.
            Homeland does not appear to dispute that the complaint plausibly
   stated a claim. Rather, it argues that we should pierce the pleadings and
   evaluate language in a settlement agreement between the Class and CorVel,
   which, Homeland argues, resulted in the Class releasing some or all of its
   claims against Med-Comp. The district court did not engage in this analysis,
   but even if we construed that it implicitly did, the settlement agreement
   identified by Homeland does not establish that the Class has no possibility of
   recovery against Med-Comp. Indeed, the settlement agreement released
   only the Class’s claims against CorVel. 11 In sum, none of the above facts,
   even if we were to consider them, eliminate all possibility that the Class could
   recover against Med-Comp. At a minimum, the Class could prevail in

           11
               The settlement agreement defines “the Released Parties” as “CorVel and all
   Affiliates thereof,” excludes Med-Comp from the definition of “Affiliates,” and describes
   that the Class released claims against “the Released Parties” relating to an “Episode.”

                                              11
Case: 20-30196         Document: 00516111210             Page: 12       Date Filed: 11/30/2021

                                          No. 20-30196

   Louisiana state court in the face of the settlement agreement and recover
   notwithstanding Med-Comp’s financial situation. Thus, Med-Comp was
   properly joined. There is nothing fraudulent or fake about its presence in this
   lawsuit.

                 ii.        Fraudulent Misjoinder

           Homeland urges us to follow the fraudulent misjoinder doctrine,
   which it claims is consistent with our case law. It is not. That doctrine has
   been adopted only by the Eleventh Circuit, see Tapscott v. MS Dealer Serv.
   Corp., 77 F.3d 1353, 1360 (11th Cir. 1996), abrogated on other grounds by Cohen
   v. Office Depot, Inc., 204 F.3d 1069 (11th Cir. 2000), and a number of district
   courts. See generally 14C CHARLES ALAN WRIGHT & ARTHUR R.
   MILLER, FEDERAL PRACTICE & PROCEDURE § 3723.1 & nn.27, 28 (Rev.
   4th ed. 2020) (describing fraudulent misjoinder as a “newer doctrine”
   related to improper joinder and identifying the split in authority on whether
   to adopt it). In Tapscott, the Eleventh Circuit extended the improper joinder
   doctrine to procedural questions concerning party joinder, holding that the
   “egregious” misjoinder of parties “constitute[s] fraudulent joinder” that
   permits a defendant to remove to federal court. 77 F.3d at 1360. Homeland
   argues that we should do the same and conclude that the Class’s purportedly
   unrelated—but undisputedly viable—claims against the two defendants
   justify removal. Although we have cited Tapscott without disapproving it,12

           12
              Homeland (along with a number of district courts in our circuit and the dissenting
   opinion here) seems to believe that we endorsed some sort of Tapscott-based fraudulent
   misjoinder doctrine in In re Benjamin Moore, 318 F.3d 626, 630–31 (5th Cir. 2002), and
   Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 533 & n.5 (5th Cir. 2006). We did not.
   Specifically, in neither of those cases did we permit removal based on party misjoinder, the
   issue here. Indeed, our decision in Crockett is more properly read for the exact opposite
   proposition: that a defendant contemplating removal can (and should) ask the state court to
   resolve party misjoinder questions and then remove. 436 F.3d at 533.

                                                12
Case: 20-30196     Document: 00516111210            Page: 13   Date Filed: 11/30/2021

                                     No. 20-30196

   this circuit has not adopted it or any other form of the fraudulent misjoinder
   doctrine, and we refuse the invitation to do so now.
          First, and most importantly, § 1441(b)(2) does not provide a textual
   basis for expanding federal jurisdiction to include fraudulent misjoinder, nor
   is there any other statutory authority (or case law interpreting statutory
   authority in this context) that does so. That statute, which does not allow
   removal “if any of the parties in interest properly joined and served as
   defendants is a citizen of the State in which such action is brought,” does not
   reach the question of “properly joined and served” unless the “civil action
   [is] otherwise removable solely on the basis of the jurisdiction under section
   1332(a).”     Thus, it does not support the improper joinder argument
   Homeland asserts.
          Indeed, Homeland’s requested expansion would invite district courts
   to evaluate procedural questions regarding misjoinder that are better
   resolved in state courts prior to removal. Put another way, if there is a
   possibility of recovery against both defendants but one defendant believes the
   case should be severed, there is nothing to prevent seeking that severance in
   state court. If it is granted, then the removal would be straightforward; if not,
   then clearly not appropriate.        Additionally, the sought expansion is
   completely inconsistent with our emphasis that improper joinder is a
   “narrow exception” to § 1332(a)’s complete diversity requirement.
   Campbell, 509 F.3d at 669 (quotation omitted). Homeland’s approach would
   greatly broaden it.
          Second, expanding this circuit’s improper joinder jurisprudence to
   include fraudulent misjoinder is foreclosed by precedent. Our court has gone
   en banc twice on precisely what is needed to remove a case from state to
   federal court on the basis of diversity jurisdiction notwithstanding a lack of
   complete diversity between the parties. Flagg, 819 F.3d at 137; Smallwood,

                                          13
Case: 20-30196     Document: 00516111210           Page: 14    Date Filed: 11/30/2021

                                    No. 20-30196

   385 F.3d at 573.       As articulated above, our established approach is
   straightforward.    Our case law emphasizes substantive viability—not
   procedural questions like party joinder. Smallwood, 385 F.3d at 575. We have
   never held that a defendant can remove a case based on party joinder issues
   in state court. Indeed, we have directed that any viable cause of action against
   a diversity-destroying party requires the entire case to be remanded: “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.” Gray ex rel. Rudd v. Beverley Enters.-Miss., Inc.,
   390 F.3d 400, 412 (5th Cir. 2004) (emphasis added); cf. Grassi, 894 F.2d at
   183–85 (recognizing that the complete assignment of a colorable claim to a
   non-diverse plaintiff generally destroys complete diversity). Permitting a
   party to remove a case and then sever a diversity-destroying defendant
   notwithstanding viable claims against that defendant fundamentally conflicts
   with that statement.
          The severance mechanism for omitting a non-diverse defendant also
   upends our rules on removal. Our precedent makes clear that we look at
   jurisdiction at the time of removal, not after a federal court severance:
   “Crucially, jurisdictional facts are determined at the time of removal, not by
   subsequent events.” Flagg, 819 F.3d at 137 (quotation and brackets omitted).
   Thus, federal court severance does not (and cannot) create jurisdiction that
   otherwise would not exist. Indeed, otherwise a diverse defendant could
   almost always remove and then simply sever the non-diverse defendant to
   remain in federal court. Applying fraudulent misjoinder turns our precedent
   around by effectively allowing a federal district court to engage in significant
   procedural wrangling in order to create jurisdiction. Contra id. at 139. No
   Fifth Circuit precedent supports this concept.
          Our conclusion not to extend improper joinder doctrine to procedural
   questions like party joinder is also practically sound. The response to

                                         14
Case: 20-30196         Document: 00516111210                Page: 15       Date Filed: 11/30/2021

                                            No. 20-30196

   Tapscott and its underlying reasoning has been unfavorable. No other circuit
   court has yet adopted the approach from that case, and it has received, at
   best, mixed reviews from district courts. 13 For good reason: it’s a usurpation
   of the traditional ability of state courts to resolve procedural questions central
   to the administration of their cases.
           It is also a well-known rule that federal courts are courts of limited
   jurisdiction. Adopting the fraudulent misjoinder doctrine will dramatically
   expand federal jurisdiction, putting the federal district courts in this circuit
   in the position of resolving procedural matters that are more appropriately
   resolved in state court—all without a clear statutory hook. See In re Prempro
   Prods. Liab. Litig., 591 F.3d 613, 621–22 (8th Cir. 2010) (summarizing courts’
   criticism of Tapscott as creating an “unpredictable and complex jurisdictional
   rule” that contravenes the principle that federal jurisdiction be “narrowly
   construed”). State courts (courts of general jurisdiction) are certainly able to
   address these issues, and respecting state court resolution of state law issues
   is a bedrock principle of our federal system. See, e.g., Davis v. Mich. Dep’t of

           13
              See, e.g., Handshoe v. DePuy Synthes Sales, Inc., No. 7:19-CV-6-REW, 2019 WL
   4039623, at *3 (E.D. Ky. Aug. 27, 2019) (noting that fraudulent misjoinder doctrine is a
   “solution without a problem”); Murriel-Don Coal Co. v. Aspen Ins. UK Ltd., 790 F. Supp.
   2d 590, 600 (E.D. Ky. 2011) (“[I]n light of the . . . numerous unsettled doctrinal questions,
   the Court agrees with the other district courts that have left the whole enterprise to the
   state courts.”); Rutherford v. Merck & Co., 428 F. Supp. 2d 842, 852 (S.D. Ill. 2006) (“In
   the Court’s view, the Tapscott doctrine is an improper expansion of the scope of federal
   diversity jurisdiction by the federal courts.”); Osborn v. Metro. Life Ins. Co., 341 F. Supp.
   2d 1123, 1127 (E.D. Cal. 2004) (“[T]he last thing the federal courts need is more procedural
   complexity. . . . [T]he better rule would require [the defendant] to resolve the claimed
   misjoinder in state court, and then . . . seek removal of the cause to federal court.”); see also
   Cent. Bank v. Jerrolds, No. 14-1163, 2015 WL 1486368, at *4 (W.D. Tenn. Mar. 31, 2015)
   (declining to adopt the doctrine and noting that most district courts in the Sixth Circuit
   have declined to do so); Stone-Jusas v. Wal-Mart Stores, No. 2:14-cv-00669-JCM-NJK,
   2014 WL 5341686, at *3–4 (D. Nev. Oct. 20, 2014) (noting the widespread rejection of the
   doctrine by district courts in the Ninth Circuit).

                                                  15
Case: 20-30196        Document: 00516111210              Page: 16       Date Filed: 11/30/2021

                                          No. 20-30196

   Treas., 489 U.S. 803, 818 (1989) (noting that state courts have “special
   expertise” on state law and “are in the best position” to adjudicate such
   issues); Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78–79 (1938) (describing the
   dangers of federal courts failing to respect the function of state courts).
   Accordingly, we will not usurp a state court’s ability to decide whether
   parties have been misjoined under a state court’s own procedural rules. See
   Felder v. Casey, 487 U.S. 131, 138 (1988). Indeed, if the Class’s claims against
   Med-Comp really were misjoined, Homeland could have (and should have)
   moved to sever the claims in state court and then removed. 14
           Moreover, the fraudulent misjoinder doctrine poses a challenging
   question as to the correct source of misjoinder law—federal or state. Some
   courts that have adopted the doctrine determine whether a party has been
   misjoined by looking to the party joinder framework of Federal Rule of Civil
   Procedure 20, see, e.g., Goodwin v. Kojian, No. SACV 13-325-JST (JPRx),
   2013 WL 1528966, at *3 (C.D. Cal. Apr. 12, 2013), but doing so puts the cart
   before the horse: as with all federal rules, Rule 20 applies after a federal court
   has jurisdiction, Fed. R. Civ. P. 81(c)(1). So it would be odd to use the
   impropriety of joinder under those rules to establish jurisdiction. See Fed.

           14
               Homeland suggests that the answer is actually more complicated because, it
   claims, requiring defendants to resolve such procedural issues in state court prior to
   removal would force them to “risk missing the 30-day removal deadline under Section
   1446.” Homeland is wrong, at least under our established case law. In a world without the
   fraudulent misjoinder doctrine, the 30-day removal deadline does not start running until
   after the state court concludes the claims are misjoined and severs all non-diverse parties.
   Only at that point does the case “become removable”—thereby starting the removal
   deadline—because only then are the parties completely diverse. 28 U.S.C. § 1446(b)(3);
   14C Charles Alan Wright et al., Federal Practice & Procedure
   § 3723.1 (Rev. 4th ed. 2018 & Apr. 2021 Update) (“The 30-day time limit for
   removal . . . would not begin to run until any misjoined, or fraudulently joined, non-diverse
   party was dropped from the action.”); see also Crockett, 436 F.3d at 532–33 (concluding that
   an “initially nonremovable” case became removable “upon the severance” of non-diverse
   defendants in state court).

                                                16
Case: 20-30196     Document: 00516111210            Page: 17   Date Filed: 11/30/2021

                                     No. 20-30196

   R. Civ. P. 82 (“These rules do not extend . . . the jurisdiction of the district
   court.”). Other courts look to state procedural rules, but doing so conflicts
   with Rule 81’s direction that federal procedural rules apply after removal. See
   Centaurus Unity v. Lexington Ins. Co., 766 F. Supp. 2d 780, 789 n.27 (S.D.
   Tex. 2011) (noting that most courts look to state court joinder rules). Our
   holding that misjoinder issues should be addressed in state court prior to
   removal resolves these inconsistencies.
          Declining to adopt the fraudulent misjoinder doctrine as a basis for
   exercising diversity jurisdiction and holding that misjoinder issues should be
   addressed in state court prior to removal also brings greater clarity to the line
   between removable and non-removable cases. A defendant would have a
   clear framework for determining the removability of a case involving
   plausible but potentially misjoined claims between non-diverse parties. The
   defendant would move to sever those claims on misjoinder grounds before
   removal, and either the state court grants the motion and the case becomes
   removable or it denies the motion and the case remains non-removable. See
   Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532–33 (5th Cir. 2006)
   (recognizing that state court severance to address misjoinder can make a case
   removable notwithstanding the general rule that cases only become
   removable based on the voluntary acts of the plaintiff).

          2.     CAFA Minimal Diversity Jurisdiction

          Homeland alternatively argues that the district court appropriately
   exercised jurisdiction because of CAFA minimal diversity jurisdiction. This
   argument, however, is barred by the law of the case doctrine. Under that
   doctrine, we will “follow the prior decisions in a case as the law of that case.”
   Reeves v. AcroMed Corp., 103 F.3d 442, 448 (5th Cir. 1997) (quotation
   omitted). A subsequent panel will reexamine issues of law resolved by a prior
   panel opinion only if: “(i) the evidence on a subsequent trial was substantially

                                          17
Case: 20-30196        Document: 00516111210              Page: 18       Date Filed: 11/30/2021

                                          No. 20-30196

   different, (ii) controlling authority has since made a contrary decision of the
   law applicable to such issues, or (iii) the decision was clearly erroneous and
   would work a manifest injustice.” Id. (quotation omitted).
           Here, a prior panel of this court concluded that the district court’s
   remand order was not based on CAFA minimal diversity jurisdiction. See
   Williams II, 788 F. App’x at 298. None of the three exceptions to the law of
   the case doctrine apply here. See Reeves, 103 F.3d at 448. First, there has
   been no subsequent evidence on the point: the district court has not, for
   example, reconsidered its order and concluded that it had jurisdiction under
   CAFA. See id. Second, there has been no change in controlling authority.
   See id. Third, the prior panel’s decision was not clearly erroneous; the
   district court was clear that its decision to exercise jurisdiction was premised
   on ordinary diversity jurisdiction—not CAFA. See id. To address CAFA
   minimal diversity jurisdiction as an alternative basis for jurisdiction now
   would undermine the prior panel’s conclusion, and we thus decline to do so. 15
                                   III. CONCLUSION
           For the foregoing reasons, we REVERSE the district court’s denial
   of the Class’s motion to remand to state court, VACATE the district court’s
   subsequent orders, and REMAND to the district court with instructions to
   remand the case to state court.

           15
             In particular, our prior decision that CAFA was not in play effectively foreclosed
   review of the district court’s decision to remand the Class’s PPO Act claims to state court.
   See 28 U.S.C. § 1447(d); cf. 28 U.S.C. § 1453(c)(1) (allowing appellate review of remand
   orders made under CAFA). To evaluate CAFA now would essentially reopen that issue by
   requiring this court to determine whether that remand was appropriate, something the law
   of the case doctrine prohibits.

                                               18
Case: 20-30196        Document: 00516111210                Page: 19        Date Filed: 11/30/2021

                                           No. 20-30196

   James C. Ho, Circuit Judge, concurring:
           The question presented in this appeal is an arcane issue of federal civil
   procedure. But the proper answer to that question implicates a fundamental
   principle of judicial methodology: When faced with a conflict between text
   and precedent, we should maximize the former—and minimize the latter.
           “[J]udges swear an oath to uphold the Constitution, consistent of
   course with a judicial system based on precedent. That should mean that we
   decide every case faithful to the text and original understanding of the
   Constitution, to the maximum extent permitted by a faithful reading of
   binding precedent.” Texas v. Rettig, 993 F.3d 408, 409 (5th Cir. 2021) (Ho,
   J., dissenting from denial of rehearing en banc). “So if we are forced to
   choose between upholding the Constitution and extending precedent in
   direct conflict with the Constitution, the choice should be clear: ‘Our duty
   is to apply the Constitution—not extend precedent.’” Id. at 417 (quoting
   NLRB v. Int’l Ass’n of Bridge, Structural, Ornamental, & Reinforcing Iron
   Workers, Local 229, AFL-CIO, 974 F.3d 1106, 1116 (9th Cir. 2020) (Bumatay,
   J., dissenting from denial of rehearing en banc)) (cleaned up). 1

           1
             See also, e.g., Williams v. Taylor-Seidenbach, Inc., 958 F.3d 341, 350 (5th Cir. 2020)
   (en banc) (Ho, J., concurring) (judges should follow legal texts “to the maximum extent
   that Supreme Court precedent permits”) (citing Alvarez v. City of Brownsville, 904 F.3d
   382, 401 (5th Cir. 2018) (en banc) (Ho, J., concurring)); Preterm-Cleveland v. McCloud, 994
   F.3d 512, 543 (6th Cir. 2021) (en banc) (Bush, J., concurring) (same); Edmo v. Corizon, Inc.,
   949 F.3d 489, 506 (9th Cir. 2020) (Bumatay, J., dissenting from denial of rehearing en banc)
   (same); United States v. Johnson, 921 F.3d 991, 1010 (11th Cir. 2019) (en banc) (Jordan, J.,
   dissenting) (when it comes to precedent with a “shaky originalist foundation . . . there is
   always the option of declining to broaden it—of refusing to extend it one inch beyond its
   previous contours”); People v. Mathews, 943 N.W.2d 636, 645 (Mich. 2020) (Viviano, J.,
   dissenting) (judges should not extend precedent “unless the extension is required by the
   Constitution’s original meaning”); see generally Josh Blackman, Originalism and Stare
   Decisis in the Lower Courts, 13 NYU J.L. & LIBERTY 44, 51 (2019) (“[A] judge should only

                                                 19
Case: 20-30196       Document: 00516111210             Page: 20      Date Filed: 11/30/2021

                                        No. 20-30196

          To borrow from a noted opinion by Justice Thomas, “my rule is
   simple”—when legal text conflicts with judicial precedent, we should follow
   the text, not “demonstrably erroneous precedent,” to the maximum
   permissible extent. Gamble v. United States, 139 S. Ct. 1960, 1984 (2019)
   (Thomas, J., concurring). “[F]idelity to original meaning counsels against
   further extension of [] suspect precedents.” Hester v. United States, 139 S.
   Ct. 509, 509 (2019) (Alito, J., concurring in the denial of certiorari).
          And the same logic applies when judicial precedent conflicts with legal
   texts other than the Constitution. See, e.g., Williams, 958 F.3d at 350 (Ho, J.,
   concurring) (same principle requires adhering to “the plain language of
   United States statutes to the maximum extent that Supreme Court precedent
   permits”) (quotations omitted).
          Faithful application of these principles requires me to reverse the
   district court here. For that reason, I concur.
                                              I.
          Diversity jurisdiction generally extends to civil actions where the
   amount in controversy exceeds $75,000—but only if the suit is between
   “citizens of different states.” 28 U.S.C. § 1332(a)(1). It is well established
   that § 1332(a)(1) “require[s] complete diversity between all plaintiffs and all
   defendants.” Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005).
           This case plainly fails the complete diversity requirement. As the
   majority details, this case has undergone a series of procedural twists and
   turns. But all that matters for this appeal is this undisputed fact: Both the
   plaintiff and one of the defendants, Med-Comp USA, Inc., are citizens of

   extend a Supreme Court precedent if the original meaning of the Constitution can support
   that extension.”).

                                             20
Case: 20-30196     Document: 00516111210           Page: 21   Date Filed: 11/30/2021

                                    No. 20-30196

   Louisiana, the forum state. See Flagg v. Stryker Corp., 819 F.3d 132, 137 (5th
   Cir. 2016) (en banc) (“jurisdictional facts are determined at the time of
   removal”) (quotations omitted). As a result, the case is not completely
   diverse and thus cannot be removed to federal court under 28 U.S.C. §
   1441(a).
          As a textual matter, that should be the end of the analysis.
                                         II.
          Homeland Insurance Company nevertheless contends that removal
   jurisdiction is appropriate, because Med-Comp was not properly joined and
   therefore cannot be used to defeat complete diversity in this case. But the
   only possible textual basis for Homeland’s assertion of removal jurisdiction
   is 28 U.S.C. § 1441(b)(2). Homeland does not claim otherwise. And §
   1441(b)(2) does not authorize removal jurisdiction here.
          Under 28 U.S.C. § 1441(b)(2), “[a] civil action otherwise removable
   solely on the basis of the jurisdiction under section 1332(a) of this title may
   not be removed if any of the parties in interest properly joined and served as
   defendants is a citizen of the State in which such action is brought.”
          This provision is commonly known as the “forum-defendant rule,”
   because it prevents defendants from removing diversity cases to federal court
   if one of the defendants resides in the forum state. In re 1994 Exxon Chemical
   Fire, 558 F.3d 378, 391 (5th Cir. 2009).
          Notably, the forum-defendant rule applies only to local defendants
   who are “properly joined.” 28 U.S.C. § 1441(b)(2). So if only one of the
   defendants is local, but that defendant was not “properly joined,” the case is
   still removable under § 1441(b)(2).
          But the case must still satisfy the complete diversity requirement of §
   1332. And the complete diversity requirement must be met at the outset of

                                         21
Case: 20-30196     Document: 00516111210            Page: 22   Date Filed: 11/30/2021

                                     No. 20-30196

   removal—before any suggestion of improper joinder. The text of § 1441(b)(2)
   makes this clear: Courts must first determine whether an action is “otherwise
   removable solely on the basis of [diversity jurisdiction],” and only if so do
   courts then apply the forum-defendant rule (and its provision concerning
   properly joined local defendants). 28 U.S.C. § 1441(b)(2) (emphasis added).
          The net effect is this: If a case is completely diverse, and one of the
   defendants is local but improperly joined, the case can still be removed
   pursuant to § 1441(b)(2). But if a case is not completely diverse when a notice
   of removal is filed, then nothing in § 1441(b)(2) authorizes the exercise of
   federal removal jurisdiction, period.        Even if the case might become
   completely diverse if the federal court were to dismiss an improperly joined
   defendant, that would not satisfy the terms of § 1441(b)(2), because the case
   was not “otherwise removable” at the outset of removal.
                                         III.
          Homeland does not dispute this textual analysis. Instead, it relies on
   a series of precedents that permit courts to ignore the citizenship of
   improperly joined defendants even in cases that lack complete diversity at the
   outset of removal. See Wecker v. Nat’l Enameling & Stamping Co., 204 U.S.
   176, 185–86 (1907); see also Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 572–
   73 (5th Cir. 2004) (en banc); Flagg, 819 F.3d at 136.
          But these precedents are not based on statutory text—as both our
   circuit and our sister circuits have observed. See, e.g., Green v. Amerada Hess
   Corp., 707 F.2d 201, 206 (5th Cir. 1983) (describing fraudulent joinder as a
   “judicially created doctrine”); Hoyt v. Lane Constr. Corp., 927 F.3d 287, 295
   (5th Cir. 2019) (same); Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287
   (11th Cir. 1998) (same); Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir.
   1999) (same); Mayes v. Rapoport, 198 F.3d 457, 461 (4th Cir. 1999) (same).

                                          22
Case: 20-30196     Document: 00516111210            Page: 23   Date Filed: 11/30/2021

                                     No. 20-30196

          A number of our colleagues have criticized the improper joinder
   doctrine for conflicting with statutory text—not to mention basic principles
   of federalism—calling it “a legal rule fashioned entirely from judges’
   imaginations,” forcing federal courts to “exercise jurisdiction where none
   exists over questions of state law that the state courts are better suited to
   address themselves.” Murriel-Don Coal Co. v. Aspen Ins. UK Ltd., 790 F.
   Supp. 2d 590, 596–97 (E.D. Ky. 2011).
          These critics have acknowledged, of course, that the doctrine is “well-
   established.” Id. at 594. “Like other well-established doctrines, though,
   fraudulent joinder suffers from a common problem—courts rarely stop and
   think about whether the doctrine makes sense.” Id. “A closer look at
   fraudulent joinder reveals a doctrine resting on a rickety foundation,” for “it
   is unclear where federal courts get the authority to decide whether a
   defendant has been fraudulently joined.” Id. at 594–95. “The better course
   is for the court to remand the case and allow the state court to dismiss the
   claims against the non-diverse defendants if those claims truly present no
   hope of success. Once the state court dismisses the non-diverse defendants
   from the case, the remaining diverse defendants would have thirty days to file
   a notice of removal under 28 U.S.C. § 1446(b).” Id. at 597. See also Flores-
   Duenas v. Briones, 2013 WL 6503537, *29 (D.N.M. Dec. 1, 2013) (agreeing
   with concerns expressed in Murriel-Don); Gaither v. Beam Partners, LLC,
   2017 WL 1217166, *3–4 (E.D. Ky. Mar. 31, 2017) (same); Howard v. Pearl
   Interactive Network Inc., 2018 WL 3421824, *4 n.3 (E.D. Ky. July 12, 2018)
   (noting “extensive, foundational criticism of the fraudulent joinder
   doctrine,” citing Murriel-Don).
          As a panel, we are of course bound to follow our circuit precedent.
   And that requires reading precedent faithfully. “Lower court judges don’t
   have license to adopt a cramped reading of a case in order to functionally
   overrule it.” Int’l Ass’n, 974 F.3d at 1116 (Bumatay, J., dissenting from denial

                                         23
Case: 20-30196        Document: 00516111210               Page: 24       Date Filed: 11/30/2021

                                          No. 20-30196

   of rehearing en banc) (quotations omitted). See also Blackman, 13 NYU J.L.
   & LIBERTY at 51 (“Of course, judges can always draw razor-thin distinctions
   and contend that a particular issue is not governed by a non-originalist
   precedent. But judges should resist this temptation.”).
           But our precedent has applied the improper joinder doctrine only in
   cases where a defendant was improperly joined as a matter of substantive law.
   See Flagg, 819 F.3d at 136 (“the test for improper joinder ‘is whether the
   defendant has demonstrated that there is no possibility of recovery by the
   plaintiff against an in-state defendant’”) (quoting Smallwood, 385 F.3d at
   573). None of our precedents involved a defendant who was improperly
   joined as a matter of procedure, as is the case here.
           I see no reason why we should be compelled to extend our erroneous
   precedents to fit this case. This is not a case, after all, in which logic demands
   that we extend an atextual body of precedent in order to preserve rationality
   or consistency in the law. Cf. Leocal v. Ashcroft, 543 U.S. 1, 11 n.8 (2004)
   (courts must interpret statutes “consistently”); Clark v. Martinez, 543 U.S.
   371, 380 (2005) (same). 2
           Moreover, courts often distinguish between matters of substance and
   procedure. See, e.g., Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427
   (1996) (“Under the Erie doctrine, federal courts sitting in diversity apply
   state substantive law and federal procedural law.”) (emphasis added). And

           2
             Both Leocal and Clark involved the interpretation of a statute. In both cases, the
   Supreme Court refused to give the same statutory text a different meaning based on the
   context of the case (in Leocal, for example, the Court refused to construe a statute
   differently based on whether the case involved civil or criminal penalties). That principle
   does not apply here, because improper joinder is a judge-made doctrine and therefore
   subject to judicially created limitations and exceptions. Cf. Davis v. United States, 564 U.S.
   229, 248 (2011) (“The good-faith exception is a judicially created exception to [a] judicially
   created rule,” so “we could . . . recognize . . . exception[s] to the good-faith exception.”).

                                                24
Case: 20-30196     Document: 00516111210           Page: 25   Date Filed: 11/30/2021

                                    No. 20-30196

   there is good reason to draw such a distinction here: It is one thing to invoke
   improper joinder to dismiss claims that are destined to fail on the merits in
   any event—it is quite another to invoke improper joinder to dismiss claims
   that could very well be meritorious.
                                          ***
          We should decide every case by adhering to the governing legal text to
   the maximum extent permitted by a faithful reading of binding precedent.
   That is what the majority does today. I accordingly concur.

                                          25
Case: 20-30196     Document: 00516111210          Page: 26   Date Filed: 11/30/2021

                                   No. 20-30196

   Edith H. Jones, Circuit Judge, dissenting:
          A class of Louisiana medical providers (“the Class”) amended a
   decade-old state lawsuit to assert newly assigned bad faith insurance claims
   against Homeland Insurance Company, an out-of-state defendant. After
   Homeland removed the case to federal court, the district court concluded the
   claims were barred by an earlier Delaware judgment and dismissed the suit.
   The majority holds that the district court lacked jurisdiction because a non-
   diverse defendant remained from the original lawsuit. According to the
   majority, the sky will fall on removal jurisdiction unless this case against
   Homeland proceeds only in Louisiana state court.            The majority’s
   arguments, in my view, prove too much. I would affirm the district court’s
   jurisdiction.
                                Background
          After various procedural twists in state court, the Class of medical
   providers was certified for a variety of insurance coverage claims (Class PPO
   Act claims) and eventually settled with CorVel and all of the Louisiana
   defendants except Med-Comp, which became the sole remaining defendant.
   As part of their settlement agreement, CorVel assigned to the Class its
   insurance coverage claims against Homeland. Later, this assignment was
   expanded to include a bad faith claim made by CorVel against Homeland that
   went to the Delaware Supreme Court (Class-as-CorVel assignee claim). See
   Homeland Ins. Co. of N.Y. v. CorVel Corp., 197 A.3d 1042 (Del. 2018).
          With its newly assigned claim in hand, the Class amended its never-
   resolved complaint against Med-Comp in Louisiana state court to assert
   against its Class-as-CorVel assignee claim against Homeland. The litigation
   then consisted of a Class PPO claim under state law against a non-diverse
   defendant (MedComp) and a Class-as-CorVel assignee claim against the
   diverse defendant (Homeland).

                                        26
Case: 20-30196          Document: 00516111210              Page: 27       Date Filed: 11/30/2021

                                            No. 20-30196

           Homeland removed the refashioned case to federal court on the basis
   of diversity jurisdiction and CAFA minimal diversity jurisdiction. 1
   Homeland argued that Med-Comp’s non-diverse Louisiana citizenship
   should be disregarded because the Class PPO Act claims against Med-Comp
   were “improperly and egregiously misjoined” with the assignment-based
   bad faith claim against Homeland. The Class moved to remand.
           Adopting a magistrate judge’s report and recommendation, the
   district court retained jurisdiction over the Class-as-CorVel assignee claim
   against Homeland and remanded to state court the Class PPO Act claims
   against Med-Comp. The court reasoned that it had ordinary diversity
   jurisdiction over the case because Homeland’s citizenship was diverse from
   the Class, while Med-Comp, the non-diverse defendant, was improperly
   joined. Without addressing the viability of the Class’s PPO Act claims
   against Med-Comp, the district court explained that improper joinder
   applied because, in its new capacity as CorVel’s assignee, the Class qua
   assignee lacked a reasonable basis for recovery against Med-Comp. 2 The
   Class appealed an unfavorable judgment on jurisdiction and on the merits.

           1
               I do not contend that CAFA conferred jurisdiction in the district court.
           2
            Homeland moved to prevent relitigation of the Delaware claim based on the Full
   Faith and Credit Act, 28 U.S.C. § 1738. The district court held that it must look to
   Delaware’s preclusion principles, that Delaware would apply claim preclusion to a case that
   had been dismissed for failure to file within the statute of limitations, and that the claim
   against Homestead must be dismissed. Further discussion of the merits is inappropriate
   here.

                                                 27
Case: 20-30196       Document: 00516111210            Page: 28   Date Filed: 11/30/2021

                                       No. 20-30196

                                     Discussion
            The majority treats this case as if a ruling favoring federal jurisdiction
   will fundamentally undermine settled principles of diversity-based removal
   jurisdiction and its corollary, the “improper joinder” doctrine as articulated
   in this court’s decisions. See, e.g., Smallwood v. Ill. Cent. R.R.Co., 385 F.3d
   568, 573 (5th Cir. 2004)(en banc). I respectfully disagree. As this case was
   framed in state court before the most recent removal, it did not fit the classic
   diversity mold: Louisiana plaintiffs, the PPO Class and the Class-as-CorVel
   assignee, in effect two separate plaintiffs, sued, respectively, the non-diverse
   defendant Med-Comp, a citizen of Louisiana, and the diverse defendant
   Homeland. There are two separate plaintiffs and two entirely distinct legal
   claims.
            My position is that this unconventional alignment could yield federal
   jurisdiction because a non-diverse, in-state defendant’s citizenship destroys
   diversity-based removal jurisdiction only if that defendant is “properly
   joined.”      28 U.S.C. § 1441(b) (emphasis added).           “[I]f the plaintiff
   improperly joins a non-diverse defendant, then the court may disregard the
   citizenship of that defendant, dismiss the non-diverse defendant from the
   case, and exercise subject matter jurisdiction over the remaining diverse
   defendant.” Flagg v. Stryker Corp., 819 F.3d 132, 136 (5th Cir. 2016) (en
   banc).     This court holds that improper joinder can be established by
   the “inability of the plaintiff to establish a cause of action against the non-
   diverse party in state court.” Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568,
   573 (5th Cir. 2004) (en banc) (quoting Travis v. Irby, 326 F.3d 644, 646–47
   (5th Cir. 2003)). And the critical question is “whether the defendant has
   demonstrated that there is no possibility of recovery by the plaintiff against
   an in-state defendant.” Id. The motive or purpose of the joinder is
   irrelevant. Id. at 574. Instead, the test for improper joinder is founded on the
   Federal Rules, whereby a court “conduct[s] a Rule 12(b)(6)-type analysis,

                                            28
Case: 20-30196       Document: 00516111210              Page: 29      Date Filed: 11/30/2021

                                         No. 20-30196

   looking initially at the allegations of the complaint to determine whether the
   complaint states a claim under state law against the in-state defendant.
   Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no
   improper joinder.” 3 Id. at 573. If not, the defendant is improperly joined.
           The majority asserts that Smallwood sets forth the exclusive tests for
   improper joinder, but it ignores that when this court clarified the improper
   joinder test in Smallwood, there was no occasion to consider how the test
   might apply to a situation involving the improper joinder of plaintiffs’
   unrelated claims against an out-of-state and an in-state defendant. See id. at
   571–72. Nor has this court subsequently addressed the situation. What I
   contend is that Smallwood’s logic suggests that if removal jurisdiction exists
   notwithstanding that one plaintiff “improperly” asserted a claim against a
   non-diverse defendant, then jurisdiction also exists if multiple plaintiffs have
   “improperly” joined in-state and out-of-state defendants using claims wholly
   unrelated to the other plaintiffs’ claims.                  Federal Rule of Civil
   Procedure 20(a) places limitations on the joinder of defendants and plaintiffs.
   The Rule provides that either plaintiffs or defendants may be joined in an
   action if “they assert any right to relief . . . with respect to or arising out of
   the same transaction, occurrence, or series of transactions or occurrences.”
   FED. R. CIV. P. 20(a)(1)(A), (2)(A). 4 In this case, there is no relationship
   between the claims of the Class based on the Louisiana PPO statute and the
   Class’s claim as the assignee of CorVel’s insurance coverage dispute with

           3
            There may be other instances where the complaint appears to state a claim, but
   pertinent facts have been omitted or misstated. Id. at 573. The district court may then
   “pierce the pleadings and conduct a summary inquiry.” Id. This is not one of those cases.
           4
             So much for the majority’s complaint about uncertainty as to whether federal or
   state joinder rules should apply in this situation. Federal law should govern post-removal
   joinder just as Rule 12(b)(6)-type analysis governs the “no possibility of recovery”
   determination.

                                              29
Case: 20-30196       Document: 00516111210              Page: 30      Date Filed: 11/30/2021

                                         No. 20-30196

   Homeland. The Class’s original PPO claims were filed because they, as
   medical providers, believed they had not been paid properly by PPO-related
   entities. 5   The assigned claim against Homeland, in contrast, seeks
   reimbursement for CorVel’s settlement with the Class based on the CorVel-
   Homeland insurance policy and violation of Louisiana law prescribing
   insurers’ duties. As a result, the required relationship between Med-Comp
   and Homeland as defendants is lacking
           The majority contends that the Smallwood test, applying
   Rule 12(b)(6), is easily met because the “Class” has a viable claim against
   Med-Comp in addition to its assigned claim against Homeland. This is
   incorrect. As the district court correctly recognized, the claim against
   Homeland is brought in the Class’s capacity as CorVel’s assignee—meaning
   the Class has “stepped into the shoes of [CorVel] for the purposes of this
   lawsuit.” Woodfield v. Bowman, 193 F.3d 354, 359 (5th Cir. 1999) (discussing
   the effect of an assignment under Louisiana state law). Functionally, this suit
   consists of two plaintiffs, the Class and the Class qua “CorVel-assignee,”
   and each asserts a claim against a separate defendant. More important, the
   Class (with the PPO Act claims) asserts no claim against Homeland, and the
   Class qua “CorVel-assignee” asserts no claim against Med-Comp.
   Independently, the “CorVel-assignee” claim against Homeland satisfies
   complete diversity and thus falls within federal jurisdiction, but the PPO Act
   claim against Med-Comp does not.
           The majority simply ignores the nature of an assignment under
   Louisiana law. The Class-as-CorVel’s assignee claim against Homeland is
   delimited by the rights that CorVel possessed. In asserting that claim, the

           5
             Homeland was joined originally pursuant to Louisiana’s direct action statute,
   L.A. Stat. § 22:1269(B), not on the basis of Homeland’s alleged violation of its agreement
   to insure CorVel.

                                              30
Case: 20-30196        Document: 00516111210               Page: 31       Date Filed: 11/30/2021

                                          No. 20-30196

   Class takes on the separate and distinct persona of the assignor, CorVel. 6 See
   Wagoner v. Chevron USA, Inc., 48,119 (La. App. 2 Cir. 7/24/13), 121 So. 3d
   727, 734 (“Wagoner I and Wagoner II do not include the ‘same parties,’
   because the Wagoners are appearing in a different capacity in Wagoner II than
   they did in Wagoner I.”). Thus, the Class acting as CorVel’s assignee cannot
   accomplish what CorVel in the first instance could not. Ultimately, the Class
   wishes to have it both ways: it wants to assume CorVel’s identity on the
   merits of the Homeland claim but discard it while navigating any procedural
   hurdles. I find no support for this tactic in our precedent or that of Louisiana.
           Retaining federal jurisdiction in the face of improper joinder is
   premised on the idea that defendants may remove an entire lawsuit to federal
   court, and the district court can sever the portion that does not belong under
   the Federal Rules. Whether Rule 12(b)(6), i.e. the “no possibility” test, or
   the joinder Rules underlie the severance makes no difference. The court here
   severed the improperly joined claim. The district court is permitted to “add
   or drop a party . . . [and] sever any claim against a party.” FED. R. CIV. P. 21.
   The court’s exercise of authority in severing the Med-Comp claim is in
   accord with Smallwood, which permits the court, post-removal, to dismiss a
   claim against the non-diverse defendant under Rule 12(b)(6).

           6
             It is this distinction that also empowers courts to sever unrelated claims asserted
   in different capacities when they would otherwise be permissible under Federal Rule of
   Civil Procedure 18(a). See 6A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND
   PROCEDURE CIVIL § 1585 (3d ed. 2020 update) (“[W]hen a party asserts or defends against
   claims that have been properly asserted in more than one capacity, the rules relating to the
   joinder of parties rather than those dealing with the joinder of claims probably will apply.
   For example, a party may assert one claim as an individual and another claim as the
   administrator of an estate. . . . In these situations there are essentially two different
   claimants, and although joinder under Rule 18(a) may be proper, the court may declare a
   misjoinder of parties if the claims asserted in each capacity are totally unrelated and do not
   meet the standard established by the rules governing party joinder.”).

                                                31
Case: 20-30196        Document: 00516111210               Page: 32        Date Filed: 11/30/2021

                                           No. 20-30196

           It is implied, though the majority does not really contend, that Rule 21
   cannot be used to “extend” federal jurisdiction. See FED. R. CIV. P. 82. But
   improper joinder cannot deprive the federal courts of jurisdiction. Diversity
   jurisdiction exists for the suit between the Class-as-CorVel assignee and
   Homeland. Thus, using Rule 21 to sever the improperly joined parties and
   claims does not extend or create federal jurisdiction, it merely reinforces the
   statutorily prescribed balance between state and federal courts. This result
   discourages artful joinder schemes devised around anchor plaintiffs. This is
   not different from using a Rule 12(b)(6)-type analysis to determine that there
   is “no possibility of recovery” against an in-state defendant who is therefore
   improperly joined.         “[T]he Federal courts should not sanction devices
   intended to prevent the removal . . . where one has that right, and should be
   equally vigilant to protect the right to proceed in the Federal court as to
   permit the state courts, in proper cases, to retain their own jurisdiction.”
   Smallwood, 385 F.3d at 573 (quoting 14 CHARLES ALAN WRIGHT ET AL.,
   FEDERAL PRACTICE & PROCEDURE § 3641, at 173 (3d ed. 1998)).
           The majority criticize my analysis for several additional reasons, none
   of which are persuasive. First, I allegedly extend our current authorities on
   “improper joinder” beyond the “no possibility of recovery” rule. Arguably
   true, but I plead logic, and the unusual circumstances here, which bespeak
   obvious joinder machinations undertaken to avoid federal court. 7 Second,
   the majority asserts that the “improper joinder” analysis of Smallwood and
   other cases is completely confined to the “no possibility of recovery” rule.

           7
              What possible reason was there to revive a case against MedComp, the only
   remaining local defendant, which is defunct? And why rev up the Class PPO claim against
   such a defendant, although plaintiffs’ counsel might perhaps have found a way to extract
   fees at the end of litigation? Little did the plaintiff Class-as-Corvel assignee know that, had
   my position prevailed, the favorable judgment for Homeland here might well have been
   reversed.

                                                 32
Case: 20-30196        Document: 00516111210               Page: 33        Date Filed: 11/30/2021

                                           No. 20-30196

   Textually, the term “properly joined” and its negative inference
   “improperly joined” both envelop “joinder,” an action in no way
   semantically limited, nor limited by the Federal Rules, to 12(b)(6)
   deficiencies.
           Third, the majority deride application of Tapscott v. MS Dealer Serv.
   Corp., 77 F.3d 1353, 1360 (11th Cir. 1996), abrogated on other grounds by Cohen
   v. Office Depot, Inc., 204 F.3d 1069 (11th Cir. 2000), which enunciated a
   “fraudulent misjoinder” doctrine. Of course, Tapscott has received mixed
   reviews in lower courts, but, as the majority recognize, its analysis is not
   criticized by Wright & Miller. Further, the logic of Tapscott makes sense
   where the basic aim of improper joinder analysis is to prevent parties from
   manipulating their pleadings to deprive diverse defendants of the federal
   forum to which they are statutorily entitled. This court, before today’s
   opinion, favorably cited Tapscott on two occasions. See In re Benjamin Moore,
   318 F.3d 626, 630-31 (5th Cir. 2002); Crockett v. R.J. Reynolds Tobacco Co.,
   436 F.3d 529, 533 (5th Cir. 2006). In Crockett, moreover, the court approved
   “recognizing an exception to the voluntary-involuntary rule where
   defendants are improperly, though not fraudulently, joined.” Id. In so doing,
   this court noted that its “conclusion finds support in the text of Sec. 1441(b),
   which does not refer to ‘nonfraudulently joined’ parties. Rather, it blocks
   removal only where ‘properly joined’ defendants are citizens of the state in
   which the action is brought.” Id. n. 7. 8
           Finally, the majority assert that federal courts interfere with state
   court case management if they conduct post-removal joinder assessments.
   This is pure speculation, because the case before us is plain. The Class

           8
             To be sure, in Crockett, the state court had severed the “improperly joined” in-
   state defendants, and defendants may try to do that before removal. But this court went
   farther and explicitly tied the state court’s severance to the Fed. R. Civ. Pro. 20(a) as well.

                                                 33
Case: 20-30196        Document: 00516111210               Page: 34       Date Filed: 11/30/2021

                                          No. 20-30196

   asserting the PPO claim against a non-diverse defendant is wholly separate,
   legally and juridically, from the Class-as-CorVel assignee claim against the
   diverse defendant Homeland. Misjoinder under the Federal Rules is not
   debatable, even if the majority refuses to debate. 9
           In sum, if the Class-as-CorVel assignee wished to preclude Homeland
   from gaining access to the federal courts, there is a simple solution. It could
   have filed suit in the state courts of New York or Minnesota, where the
   defendant is incorporated or has its principal place of business. But having
   chosen to pursue litigation in Louisiana, the Class should have been bound
   by Homeland’s right to proceed in federal court.
                                       Conclusion
           The only in-state defendant was improperly joined in a claim that the
   Class-as-CorVel assignee had no legal right to pursue. The plaintiffs’
   mischievous use of their PPO Class claim cannot cure this defect because the
   PPO Class had no ability or right to maintain suit against Homeland. Federal
   removal jurisdiction is proper under 28 U.S.C. Sec. 1442(b) because, under
   the logic of our authorities, Med-Comp was not “properly joined” in the
   separate suit by the Class-as-CorVel assignee against Homeland.                             I
   respectfully dissent.

           9
             In fact, the majority view means that the peculiarities of state procedure can
   dictate federal court jurisdiction—a result the Supreme Court has rejected in a similar
   context. See Chicago, R.I. & P.R. Co. v. Stude, 346 U.S. 574, 580, 74 S. Ct. 290, 294 (1954)
   (rejecting removal on the basis that the removing parties, although denominated
   defendants under state practice, were plaintiffs under federal law); id. (“For the purpose
   of removal, the federal law determines who is plaintiff and who is defendant. It is a question
   of the construction of the federal statute on removal, and not the state statute. The latter’s
   procedural provisions cannot control the privilege of removal granted by the federal
   statute.”) (citation omitted).

                                                34