Commercial Litigation and Arbitration

Does Fraudulent Joinder Doctrine Apply to Plaintiffs as Well as Defendants? — Case Law Split

From Taco Bell Corp. v. Dairy Farmers of Am., 727 F. Supp. 2d 604 (W.D. Ky. 2010):

The parties debate at great length whether the fraudulent joinder doctrine can ever apply to the joinder of plaintiffs. Certainly, the doctrine is generally applied to joinder of defendants. The Sixth Circuit has never affirmatively addressed this issue and only a few district courts from other circuits have done so. The majority of those courts have held, without much discussion, that fraudulent joinder can apply to both defendants and plaintiffs. See, e.g., Miller v. Home Depot, U.S.A., Inc., 199 F.Supp. 2d 502, 508 (W.D. La. 2001) ("The fraudulent joinder doctrine can be applied to the alleged fraudulent joinder of a plaintiff."); Sims v. Shell Oil Co., 130 F. Supp. 2d 788, 798 (S.D. Miss. 1999) ("The principles of the doctrine of fraudulent joinder . . . apply to fraudulently joined defendants as well as fraudulently joined plaintiffs."). At least one court, however, has discussed the issue in depth and held that fraudulent joinder only applies to defendants. Johnston Industries, Inc. v. Milliken & Co., 45 F. Supp. 2d 1308, 1312 (M.D. Ala. 1999). For the following reasons, this Court sides with the majority view.

There is no significant difference between fraudulent joinder of plaintiffs and fraudulent joinder of defendants. The primary purpose of fraudulent joinder is to ensure that plaintiffs do not avoid diversity jurisdiction by pleading illegitimate claims involving non-diverse parties. See, e.g., Saginaw Housing Comm'n v. Bannum, Inc., 576 F.3d 620, 624 (6th Cir. 2009) ("Fraudulent joinder occurs when the non-removing party joins a party against whom there is no colorable cause of action."). That purpose is fulfilled both where the plaintiff improperly sues non-diverse defendants against whom it has no viable claim and where the plaintiff joins additional non-diverse plaintiffs who have no viable claims.

[Footnote 3] Plaintiffs argue that defendants have an alternative remedy when plaintiffs are fraudulently joined. According to Plaintiffs, a defendant may simply move to dismiss the fraudulently joined plaintiff in the state court action and then, upon dismissal, remove. However, there are significant time limitations on diversity jurisdiction removal. It is possible that a motion to the state court may exceed those time limits, thus eliminating the possibility of removal despite the propriety of diversity jurisdiction.

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