Should the Eighth Circuit recognize procedural misjoinder?

South Dakota Law Review, Spring, 2008 by Ronald A. Parsons, Jr.

Both the United States Supreme Court and the Eighth Circuit have held that fraudulent joinder is to be determined "on the face of plaintiffs state court pleadings." (37) Thus, "[t]he right of removal is generally determined from the record and the status of the pleadings at the time the petition for removal is filed." (38) The burden of proving fraudulent joinder is on the removing party opposing remand. (39) Unless a defendant was fraudulently joined under the standard established by the Eighth Circuit, district courts lack subject matter jurisdiction and the case must be remanded to state court. (40) The Eighth Circuit has further cautioned that "where the sufficiency of the complaint against the non-diverse defendant is questionable, 'the better practice is for the federal court not to decide the doubtful question in connection with a motion to remand but simply to remand the case and leave the question for the state courts to decide." (41)

IV. THE (EMERGING?) DOCTRINE OF PROCEDURAL MISJOINDER

Occasionally, an action is filed in state court against both diverse and nondiverse defendants in which it is readily apparent that the traditional fraudulent joinder doctrine has no application because the plaintiff has a reasonable basis for bringing a claim against both defendants. But what if the claim against the resident defendant, although viable, is not related at all to the cause of action brought against the nonresident? In other words, to borrow some familiar terminology, what if the claims do not arise from the same "nucleus of operative facts"? In such cases, the nonresident defendant sometimes removes the action to federal court anyway, contending that the federal court should sever the claims to create jurisdiction over the diverse defendant, and send only the defendant that had spoiled diversity back to state court. And sometimes, a district court will agree to do just that on the basis of a new judicial concept known as procedural or fraudulent misjoinder.

Under this new and unsettled doctrine, procedural misjoinder occurs when a plaintiff sues a diverse defendant in state court and joins a viable claim involving a nondiverse party, or a resident defendant, even though the plaintiff has no reasonable procedural basis to join them in one action because the claims bear no relation to each other. (42) In such cases, some courts have concluded that diversity is not defeated where the claim that destroys diversity has "no real connection with the controversy" involving the claims that would qualify for diversity jurisdiction. (43) Thus, as explained in the Wright, Miller and Cooper treatise, "procedural misjoinder may represent a third type of fraudulent joinder, the others being lack of any possibility of the plaintiff having a claim against a joinedTarty and outright fraud by the plaintiff in the statement of jurisdictional facts." (44)

A. TAPSCOI T V. MS DEALER SERVICE CORP.

Fraudulent or procedural misjoinder is far from an accepted doctrine of removal jurisprudence. Since its unveiling by the Eleventh Circuit in 1996, only one additional federal appellate court appears to have recognized the doctrine in a reported decision. The Eleventh Circuit remains the only circuit on record to have expressly adopted and utilized the procedural misjoinder doctrine. In Tapscott v. MS Dealer Service Corp., the Eleventh Circuit discovered and recognized "egregious" procedural misjoinder as a new and distinct type of fraudulent joinder. (45) In that case, one group of plaintiffs seeking to represent a class sued a group of defendants for statutory fraud arising from the sale of automobile service contracts. (46) Another group of plaintiffs representing a separate proposed class sued another defendant for statutory fraud arising from the sale of retail product service contracts. (47) The sole defendant on the claim involving retail products was diverse, but the defendants on the automobile claims were not. (48) The diverse defendant removed the action, and the plaintiffs' motion to remand was denied. (49)