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April 21, 2016 Practice Points

Fifth Circuit En Banc Opinion on Improper Joinder

Carmelite M. Bertaut

If the plaintiff's claims against non-diverse defendants are subject to dismissal but can later be properly re-filed upon completion of a mandatory state administrative proceeding, can such a joinder constitute improper joinder? In the U.S. Fifth Circuit Court of Appeals, the answer is yes.

In a rare en banc opinion on rehearing, the Fifth Circuit recently held that suing non-diverse defendants without having completed a mandatory pre-lawsuit administrative proceeding constituted improper joinder of claims when coupled with claims against diverse defendants. The court reached this decision, notwithstanding that the plaintiff could prosecute his claim in the state administrative hearing, obtain a decision, and then re-file his lawsuit against the non-diverse defendants. Flagg v. Stryker Corp., No. 14-31169, Mar. 24, 2016.

In state court, Flagg had sued his doctors and hospital for medical malpractice in implant surgery, and also sued, in products liability, the manufacturers of the implant.

The plaintiff and his medical providers were Louisiana citizens but the manufacturers were not. The manufacturers removed the suit to federal court, alleging that the in-state defendants had been improperly joined because Flagg had not filed any administrative complaint, which Louisiana law required of medical-malpractice plaintiffs before filing a lawsuit.

Upon removal, Flagg moved to stay the suit to pursue the administrative claim that he had (obviously) not pursued. The manufacturers objected and the district court denied the motion to stay.

The manufacturers then moved to dismiss the malpractice defendants as improperly joined, relying on Melder v. Allstate Corp., 404 F.3d 328 (5th Cir. 2005)and Holder v. Abbott Laboratories, Inc., 444 F.3d 383 (5th Cir. 2006). The district court agreed and dismissed without prejudice the providers. The court then granted the manufacturers' Rule 12(b)(6) motion and dismissed them with prejudice.

On appeal, the original panel raised, sua sponte, federal jurisdiction and concluded that the non-diverse providers had not been improperly joined and directed the district court to remand the case to state court. Flagg v. Stryker, 801 F3d 456 (5th Cir. 2015), vacated, 805 F3d 610 (2015).

On rehearing, the en banccourtnoted that improper-joinder allegations require courts to examine whether the plaintiff has any possibility of recovery against non-diverse defendants, which is usually synonymous with looking to see if a plaintiff can survive a Rule 12(b)(6) motion. Slip op. at 5. However, when a misstatement or omission of material facts is alleged, "the court may instead 'pierce the pleadings and conduct a summary inquiry.'" Slip op. at 6, quoting Badon v RJR Nabisco, Inc. 224 F3d 382, 389, n. 10 (5th Cir. 2002) and citing Wecker v. Nat'l Enameling & Stamping Co., 204 U.S. 176, 185-86 (1907) (district court appropriately considered affidavits when determining whether improper joinder was present).

Moreover, jurisdictional facts are to be determined at removal. Thus, the district court looks at the viability of a plaintiff's claims at the time of removal, and may consider matters beyond the complaint. Here, Flagg had moved to stay the suit, and pursue his administrative claim. As the only "fact outside the complaint that the district court considered," the motion to stay was a "concession" that the plaintiff had not pursued his administrative claim. The district court's analysis was more akin to a Rule 12(b(6) analysis than a full-blown summary-judgment inquiry.

Within this framework, the court concluded that a Louisiana state court would have dismissed the plaintiff's claims against the non-diverse defendants because of his failure to file the administrative complaint. And so, as of removal, Flagg could not establish a cause of action in state court.

There is no requirement of a comprehensive scheme to establish improper joinder, rather only a "bright-line rule: if a statute requires the plaintiff to exhaust his administrative remedies before filing suit, we enforce that statutory mandate as written." Slip. op. at 10.

And because jurisdiction is determined at the time of removal, Flagg's subsequent exhaustion of the administrative process did not retroactively cure his earlier failure.

The majority thus affirmed the district's court's dismissal of the in-state defendants and remanded that portion of the judgment that granted the Rule 12(b)(6) motion of the manufacturers to the original panel who had not reached that aspect of the judgment, concluding there was no diversity jurisdiction. 

—Carmelite M. Bertaut, Stone Pigman Walther Wittmann L.L.C., New Orleans, LA

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