Monday, March 12, 2007
Badon v. RJR Nabisco is one of my favorite cases to teach to show the proper scope of the traditional fraudulent-joinder inquiry. (The following factual description is simplified for readability.)
Plaintiff was a smoker who sued diverse cigarette manufacturers. She also joined nondiverse cigarette wholesalers. The manufacturers removed, arguing that the plaintiff had fraudulently joined the wholesalers because she could not state a valid cause of action against them. The plaintiff moved to remand, arguing that she had alleged valid causes of action against the wholesalers, namely redhibition and breach of warranty under Louisiana law. The district court denied the motion to remand, and the plaintiffs appealed under 1292(b).
The Badon case linked above is the 5th Circuit's second decision concerning the correctness of the district court's denial of the motion to remand. What happened the first time? The first time, the Fifth Circuit noted there were no clear controlling precedents resolving whether the plaintiff had stated valid causes of action against the wholesalers. So, the court certified questions to the Louisiana Supreme Court regarding whether the plaintiff had stated valid causes of action against the wholesalers. The Louisiana Supreme Court declined to answer.
Now, having received no answer from the La. Sup. Ct., the Fifth Circuit turned back to the correctness of the district court's denial of the remand motion. In this type of fraudulent-joinder case, the court noted, the district court can only ask whether there is a "reasonable basis to predict that the plaintiff might recover" against the nondiverse defendant. It's not a full-scale Erie guess; the court can only find fraudulent joinder if there is no reasonable basis. Having received no definitive answer from the state's high court, the Fifth Circuit concluded that there was arguably a reasonable basis to predict the plaintiff might recover against the wholesalers, and thus the district court erred by not remanding. So, many years later, the lawsuit can begin in state court.
At this point, I stop and ask the students, what is wrong with this picture. Eventually the lights start going on. --RR