A Damn Sham: When Opposition Motions Preclude Removal

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1 Portfolio Media. Inc. 860 Broadway, 6th Floor New York, NY Phone: Fax: A Damn Sham: When Opposition Motions Preclude Removal Law360, New York (August 15, 2012, 1:26 PM ET) -- In asbestos litigation, it is commonplace for plaintiffs to name a broad range of defendants in a given case, letting discovery unfold to determine the proper defendants as more information is learned about the scope of the plaintiffs alleged exposures. These defendants regularly include many that will not likely be implicated in the case. While frustrating for all defendants, this approach is especially troubling to those defendants who, discovery reveals, should be proper parties to the case, as it wreaks havoc with their ability to remove the case to federal court. Because asbestos claims are mostly based in state law, generally, defendants only opportunity to remove such cases to the federal system rests in diversity. Plaintiffs shotgun approach to pleadings in asbestos cases, however, typically leaves multiple nondiverse defendants in the case until the dispositive motions stage of the trial, thereby defeating removal early in the case. Indeed, plaintiffs sometimes keep these defendants in the case for the sole purpose of defeating diversity. When plaintiffs fail to oppose the motions for summary judgment of nondiverse defendants, the remaining defendants are at least afforded the opportunity to ultimately remove a case, albeit well into the discovery process. See, e.g., Johnson v. Celotex Corp., 701 F. Supp. 553, 556 (D. Md. 1988) ( Once the plaintiff s voluntary conduct by way of dismissal, settlement or otherwise indicates an intention to discontinue [its] action against the resident defendant, a nonresident defendant s right to remove arises and is controlling so long as prompt action is taken. ) Recognizing this principle, plaintiffs sometimes will oppose motions for summary judgment of nondiverse defendants even in cases where there is no apparent good-faith basis for the opposition, thus eliminating the defendants ability to remove a case that could otherwise properly be in federal court. This article proposes that federal courts should begin recognizing these sham opposition motions for what they are and permit removal of a case to federal court in the appropriate circumstance once the deadline for opposition motions has passed.

2 Indeed, the argument can and should be made by defendants that sham oppositions are no different in practice than fraudulent joinder, which federal courts have refused to recognize since the late nineteenth century as a valid basis to defeat diversity jurisdiction. The Problem of Sham Oppositions to Dispositive Motions Under the current state of the law, once a plaintiff opposes a nondiverse defendant s motion for summary judgment, removal of the case is defeated, as that defendant will only be dismissed from the case by judicial action. See, e.g., Whitcomb v. Smithson, 175 U.S. 635 (1900) (recognizing this rule early on in the U.S. Supreme Court s jurisprudence on the issue in declining to permit removal after a directed verdict was rendered in favor of the only nondiverse defendant given that the verdict was adverse to the plaintiff, and [made] without his assent ). The rationale behind this rule is that only a plaintiff s voluntary dismissal of a nondiverse defendant should permit removal because only then is there no risk that diversity will be destroyed later on. Higgins v. El DuPont de Nemours & Co., 863 F.2d 1162, 1166 (4th Cir. 1988). In contrast, where the defendant is involuntarily from the plaintiff s perspective dismissed from the case, such as through the grant of a motion for summary judgment, the dismissal ultimately can be appealed, thus creating the potential that complete diversity may be destroyed as the litigation progresses. Id. This voluntariness standard appears sensible where a defendant s liability is arguable and, therefore, any decision in favor of its motion for summary judgment is potentially subject to reversal on appeal. Permitting removal in such a case could create procedural nightmares, where federal trials and state appeals are pending simultaneously, and a nondiverse defendant may be added to defeat diversity at any time potentially even after a verdict has already been rendered in the federal action. Where the plaintiff s opposition to nondiverse defendants is evidently meritless and constitutes nothing more than a transparent attempt to defeat diversity jurisdiction, however, the justifications underlying the voluntariness standard are wanting. In such a case, the standard only serves to unnecessarily preclude the removal of actions that should properly be in federal court, as is a defendant s right. The Analogy to Fraudulent Joinder One situation where courts have declined to require voluntary dismissal of a nondiverse defendant by the plaintiff is in the case of fraudulent joinder, where it is clear from the pleadings that a party has joined the nondiverse defendant solely for the purpose of defeating federal diversity jurisdiction. Schwartz v. State Farm Mut. Auto. Ins. Co., 174 F.3d 875, 878 (7th Cir. 1999).

3 One means of proving fraudulent joinder, and thus obtaining removal, is through a showing of the inability of the plaintiff to establish a cause of action against the nondiverse party in state court. Smallwood v. Ill. Centr. R. Co., 385 F.3d 568, 573 (5th Cir. 2004); see also, e.g., Whitaker v. Am. Telecasting Inc., 261 F.3d 196, 207 (2nd Cir. 2001) ( Joinder will be considered fraudulent when it is established that there can be no recovery against the defendant under the law of the state on the cause alleged. ) (internal quotations and corresponding punctuation omitted); Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3rd Cir. 1990) ( [J]oinder is fraudulent where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant... ) (internal quotations omitted); Schwartz, 174 F.3d at 878 (holding that fraudulent joinder is found where there exists no reasonable possibility that a state court would rule against the in-state defendant ) (internal quotations and corresponding punctuation omitted). In making this determination, even at the pleadings stage, a number of circuits permit federal trial courts to look beyond the plaintiff s allegations to identify the presence of discrete and undisputed facts that would preclude [a] plaintiff s recovery against the in-state defendant. Smallwood. See also Linnin v. Michielsens, 372 F. Supp. 2d 811, (E.D. Va. 2005) ( Federal courts have the authority to look beyond the pleadings and consider summary-judgment-type evidence, such as the affidavits and the depositions accompanying either a notice of removal or a motion to remand, particularly when doing so may provide the only way in which the federal courts can protect a litigant s right to a federal forum based on diversity jurisdiction. ) (quoting 13F CHARLES A. WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE & PROCEDURE 3641 (3d ed. 2009)). Certainly, this inquiry can be no clearer or easier than at the dispositive motions stage of a case. Indeed, if viewing the facts and evidence disclosed in discovery in the light most favorable to the plaintiff reveals a complete inability of the plaintiff to establish a cause of action against the nondiverse party in state court, then removal should be permitted. Smallwood, 385 F.3d at 573. The Exemplary Sham Opposition Recently, this precise situation arose in a case pending in Maryland state court, but a diverse defendant was unable to remove the case due to the prevailing strict interpretation of the voluntariness standard. The case in question was governed by the law of Maryland, which has adopted what is commonly referred to as the frequency, regularity and proximity test. See Eagle-Picher Indus. Inc. v. Balbos, 326 Md. 179, 210 (1992). At the summary judgment stage, this test requires a plaintiff to produce evidence that the injured party was frequently and regularly in proximity to respirable asbestos from the particular defendant s product. See Anchor Packing Co. v. Grimshaw, 115 Md. App. 134, 186 (Md. Ct. Spec. App. 1997) (holding that to survive summary judgment, [a] plaintiff must present evidence to show that he inhaled asbestos fibers shed by the specific manufacturer s product and observing that the relevant evidence is the frequency of the use of the product and the regularity of the plaintiff s employment in proximity thereto ).

4 The plaintiff in the case, a Maryland resident, sued a number of defendants comprising both in-state and out-of-state companies. At the dispositive motions stage, however, in addition to one diverse defendant s motion for summary judgment, the plaintiff opposed the motion for summary judgment of just one other defendant a Maryland-based supplier of boilers. Nonetheless, the evidence of the case established that the plaintiff had absolutely no basis to recover against this defendant. Indeed, the plaintiff had alleged exposure to asbestos through washing her husband s work clothing. Her husband had testified, however, that he assisted in the installation of package boilers just three or four times during his career, only some of which may have been supplied by the boiler supplier in question. Moreover, the plaintiff s husband had testified that the boiler installation process did not create any respirable dust. Given this testimony, even the plaintiff s materials science expert opined that the plaintiff s husband would not have been exposed to any appreciable amounts of airborne asbestos fibers from the installation of boilers during his career, meaning the plaintiff could not have been secondarily exposed to asbestos from any boilers supplied by the defendant in question at a level sufficient to meet Maryland s liability standard. Evidently, the case presented a prime example of a sham opposition to a motion for summary judgment a conclusion supported by the fact that the plaintiff did not even oppose the motions for summary judgment of the manufacturers of the boilers that the plaintiff s husband had identified helping install, who just so happened to be out-of-state defendants. Unfortunately, the United States District Court for the District of Maryland declined to permit removal on the novel theory presented in this article. Its determination does not mean, however, that other courts may not be more receptive to this argument especially if defendants continue to present the issue at the federal level. Conclusion Early in its recognition of the doctrine of fraudulent joinder, the U.S. Supreme Court declared that: Federal courts should not sanction devices intended to prevent a removal to a federal court where one has that right, and should be equally vigilant to protect the right to proceed in the dederal court as to permit the state courts, in proper cases, to retain their own jurisdiction. Wecker v. Nat l Enameling & Stamping Co., 204 U.S. 176, 186 (1907). In the current landscape, one situation where this long-standing federal policy would be furthered is through a recognition that sham oppositions to dispositive motions cannot defeat removal of an otherwise properly removable case. Such a rule would be especially apropos in the context of asbestos litigation, where recognition of the principle would operate to counterbalance the broad leeway that plaintiffs are afforded at the pleading stage to join potentially nonimplicated parties to the case.

5 Unless and until federal courts recognize such a rule, plaintiffs in asbestos cases will continue to be able to keep nondiverse defendants in a case solely for the purpose of defeating federal diversity jurisdiction, thus undermining federal policy. Schwartz, 174 F.3d at 878. Accordingly, when confronted with sham oppositions, defendants should at least consider challenging the practice at the federal level by analogizing to the jurisdiction s fraudulent joinder principles. Perhaps by raising the issue of sham oppositions in proper cases, and thus exposing the consistent methodology behind plaintiffs strategic decisions at the dispositive motions stage, defendants can, in time, succeed in changing this area of law in their favor. --By Robin Silver & Alexander P. Creticos, Miles & Stockbridge PC Robin Silver is a principal and Alexander Creticos is an associate in Miles & Stockbridge s Baltimore office. The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice. All Content , Portfolio Media, Inc.