Removal, Fraudulent Joinder, and the Unserved Manager
Patsy, a Mississippi citizen, sues in Mississippi state court for injuries from a fall at a Delta Equipment store. She names Delta Equipment, Inc., a Delaware corporation with its principal place of business in Tennessee, and Ray, the Mississippi store manager who inspected the aisle. The complaint alleges Delta failed to maintain the aisle and that Ray 'negligently performed the inspection and failed to warn.' Patsy seeks $70,000 compensatory damages, punitive damages, and attorney's fees. Ray was served at the store the same afternoon. Twenty-eight days later, Delta removes to federal court, asserting diversity and arguing Ray is fraudulently joined because Mississippi law does not impose personal liability on a manager for corporate premises defects. Patsy moves to remand. Delta's notice attaches an affidavit from Ray saying he 'followed corporate policy,' but no state court has addressed whether a manager who personally undertakes an inspection owes a duty. The case is in the Southern District of Mississippi.
1. Should the district court remand? Apply the federal removal statutes and the Fifth Circuit's fraudulent-joinder standard.
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Remand is the likely result. Removal requires complete diversity. Patsy and Ray are both Mississippi citizens, so Delta must show that Ray was fraudulently joined. Under the Fifth Circuit's Smallwood standard, the question is not whether Patsy will win against Ray, but whether there is any arguably reasonable basis for predicting that Mississippi law might impose liability on him. The removing defendant bears a heavy burden, and the court must resolve factual and legal ambiguities in favor of remand.
A store manager who personally undertakes an inspection may owe a duty to invitees under a negligent-undertaking or premises-liability theory, especially where the complaint alleges reliance on his inspection. The fact that no Mississippi case is directly on point does not make joinder fraudulent; it makes the state-law question unsettled. Delta's affidavit that Ray followed corporate policy is a merits defense, not proof that no claim exists. The $70,000 demand plus punitive damages might satisfy the amount in controversy, but that does not cure the diversity defect. The court should grant Patsy's motion to remand under 28 U.S.C. § 1447(c).
2. Suppose the district court remands. Patsy later voluntarily dismisses Ray without prejudice, and Delta again removes. May the second removal stand?
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The second removal can likely proceed, but only if it is based on a new jurisdictional fact. A remand order based on lack of subject-matter jurisdiction is not reviewable on appeal or by mandamus under § 1447(d), and it ordinarily bars a second removal on the same ground. Here, however, Patsy's voluntary dismissal of Ray eliminates the only nondiverse party and creates complete diversity. Under § 1446(b)(3), Delta may remove within 30 days after receiving the order or amended pleading that first makes the case removable.
The Fifth Circuit permits a successive removal when the first removal was defeated by a nondiverse party who is later voluntarily dismissed, provided the second notice is timely and not an attempt to relitigate the same fraudulent-joinder ruling. Delta should not rely on the original fraudulent-joinder theory; it should rely on the new fact of complete diversity. If the dismissal is with prejudice or is a sham, the court may look behind it. The amount in controversy also must be satisfied. On these facts, the second removal is probably proper.
3. Assume Ray is diverse and Delta removes. Does the $70,000 compensatory demand plus punitive damages and attorney's fees satisfy the amount in controversy?
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The amount in controversy is assessed from the complaint and the notice of removal. Patsy's $70,000 compensatory demand is below $75,000, but punitive damages count if they are recoverable under Mississippi law and not merely speculative. Mississippi allows punitive damages for gross negligence or willful misconduct, and the complaint's allegation that Ray failed to warn after an inspection could support that theory. Attorney's fees generally do not count unless a statute or contract authorizes them, so the fee request alone should not satisfy the threshold.
Delta must prove by a preponderance that the amount in controversy exceeds $75,000. If Patsy files a binding stipulation, before removal, that she will not seek more than $75,000, the amount is not met. Without such a stipulation, the combination of compensatory and punitive damages likely satisfies the threshold.