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In a Removed Diversity Case, May a District Court Sever a Non-Diverse Defendant Absent a Finding of Fraudulent Joiner or Misjoinder? Caselaw Split

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From Cooke-Bates v. Bayer Corp., 2010 U.S. Dist. LEXIS 121255 (E.D. Va. Nov. 15, 2010) (on motion for certification under § 1292(b)):

As a general matter, Rule 21 permits the Court to sever a party from a case in order to achieve complete diversity and establish proper jurisdiction of a civil action. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 832 (1989); Caperton v. Beatrice Pocahontas Coal Co., 585 F.2d 683, 691 (4th Cir. 1978) ("[N]on-diverse parties whose presence is not essential under Rule 19 may be dropped to achieve diversity between the plaintiffs and defendants."). Courts do indeed differ on whether it is proper to sever a non-diverse defendant in a diversity case removed from federal court absent a finding of fraudulent joinder or fraudulent misjoinder.

[Footnote 5] Some district courts, faced with a removed diversity case in which the defendant alleges the plaintiff joined a non-diverse party solely to defeat complete diversity but fails to convincingly demonstrate fraudulent misjoinder, insist on remanding the case and refuse to sever the non-diverse party under Rule 21. See Ash v. Providence Hosp., 2009 WL 424586 at *9 n. 19 (S.D. Ala. Feb. 17, 2009). Several courts have acted differently, dropping a dispensable non-diverse party after removal of a case pursuant to Rule 21 even in lieu of a showing of fraudulent joinder or misjoinder. See Joseph v. Baxter Int'l Inc., 614 F.Supp.2d 868, 872-73 (N.D. Ohio 2009). Several local courts have done just that. See Linnin v. Michielsens, 372 F.Supp.2d 811, 825-26 (E.D. Va. 2005) (expressly concluding a dispensable party should be severed under Rule 21); Bay Tobacco, LLC v. Bell Quality Tobacco Products, LLC, 261 F.Supp.2d 483 (E.D. Va. 2003); Hughes v. Sears, Roebuck and Co., 2009 WL 2877424 (N.D. W.Va. Sept. 2, 2009).

But the disagreement can hardly be characterized as "significant." 12 U.S.C. § 1292(b). The decision to sever a party under Rule 21 is largely within the Court's discretion. Caperton, 585 F.2d at 691. Cooke-Bates provides no authority suggesting an intense dispute among the circuits about the propriety of severing a non-diverse after removal, or an overwhelming consensus among non-controlling circuits that doing so is improper. Nor does she convincingly demonstrate that this issue is so "pivotal and debatable" to merit halting this litigation to petition the Fourth Circuit to settle it. *** So while Cooke-Bates identifies a source of disagreement among federal courts, she falls short of meeting the exacting standard required in order to earn certification. See Difelice, 404 F.Supp.2d at 908 (noting § 1292(b)'s requirements should be strictly construed).

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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