Removal, Fraudulent Joinder, and the Kansas Defendant
Lena, a Kansas citizen, was injured in Topeka when her car was struck by a delivery truck. She sued in Shawnee County District Court against Marcus, the Kansas citizen who drove the truck, and High Plains Logistics, a Colorado corporation with its principal place of business in Denver. The petition alleges Marcus was negligent and High Plains is vicariously liable; it also alleges High Plains negligently entrusted the truck to Marcus after an earlier moving violation. High Plains timely filed a notice of removal under 28 U.S.C. §§ 1332 and 1441, asserting that Marcus is a Kansas citizen but was fraudulently joined because Kansas workers' compensation law gives High Plains immunity and because Marcus has no assets. Lena did not file a remand motion within 30 days. Six months later, High Plains moves to dismiss Marcus, and Lena moves to remand. The state court had never ruled on any motion. High Plains argues removal was proper because the Colorado company is the real defendant.
1. Must the federal court remand? Explain the jurisdictional and procedural analysis, including the effect of Lena's failure to move within 30 days.
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Remand is required. Subject-matter jurisdiction is measured at the time of removal. At that moment, Lena was a Kansas citizen, Marcus was a Kansas citizen, and High Plains was a Colorado citizen. Complete diversity was absent because Lena and Marcus share Kansas citizenship, and 28 U.S.C. § 1332 requires complete diversity. Section 1441(b)(2) also bars diversity removal when a properly joined forum defendant is sued in his home state, although the absence of complete diversity is independently fatal.
Marcus's lack of assets is irrelevant to joinder. A defendant is fraudulently joined only if there is no possibility of recovery against him under state law. The petition pleads a plausible negligence claim and a negligent-entrustment theory. Workers' compensation exclusivity may be an affirmative defense, but it does not make recovery impossible on the face of the pleadings, especially where the petition does not establish that both defendants were statutory employers covered by the same exclusive remedy.
The 30-day deadline in § 1447(c) applies to procedural defects. Lack of subject-matter jurisdiction may be raised at any time, by a party or by the court sua sponte. Dismissing Marcus after removal does not retroactively create jurisdiction. The court must remand rather than dismiss.
2. Assume the court finds Marcus was fraudulently joined. What result follows, and what standard governs fraudulent joinder?
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If Marcus was fraudulently joined, the court disregards his Kansas citizenship for diversity purposes. Diversity would then be complete between Lena (Kansas) and High Plains (Colorado), and removal would be proper if the amount in controversy is satisfied. But fraudulent joinder is a narrow exception, and the removing party bears a heavy burden.
The standard is whether there is no possibility of recovery against the resident defendant under the applicable state law. The court must resolve contested factual issues and ambiguities in the plaintiff's favor and should not decide the merits. A defense that might succeed on summary judgment is not enough. Here, High Plains relies on workers' compensation immunity and Marcus's lack of assets. Lack of assets does not defeat a claim. Immunity could defeat recovery only if the facts conclusively establish the statutory employment relationship and exclusivity. The negligent-entrustment theory may fall outside exclusivity, and the removal record does not establish all elements. Thus fraudulent joinder is unlikely. If it were found, the case would proceed in federal court against High Plains only.
3. If remand is granted, may Lena recover attorney's fees under § 1447(c)? What facts matter?
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Section 1447(c) permits an award of just costs and actual expenses, including attorney's fees, only if removal was objectively unreasonable. A remand for lack of diversity is not automatically fee-shifting; a defendant may remove in good faith if it plausibly believed jurisdiction existed.
Here, High Plains removed despite an in-state, non-diverse defendant and a plausible state-law claim. Its no-assets argument is legally irrelevant to fraudulent joinder. The failure to address complete diversity and the forum-defendant rule could support a finding of objective unreasonableness, particularly if High Plains knew Marcus was properly joined and served. The court has discretion. Lena should document the fees attributable to removal and remand. If the court finds High Plains had a colorable fraudulent-joinder theory, however, fees may be denied even though remand is ordered.