385 F.3d 568 (5th Cir. 2004), 02-60782, Smallwood v. Illinois Cent. R. Co.

Docket Nº:02-60782.
Citation:385 F.3d 568
Party Name:Kelli SMALLWOOD, Plaintiff-Appellant, v. ILLINOIS CENTRAL RAILROAD COMPANY; Mississippi Department of Transportation, Defendants-Appellees.
Case Date:September 10, 2004
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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385 F.3d 568 (5th Cir. 2004)

Kelli SMALLWOOD, Plaintiff-Appellant,


ILLINOIS CENTRAL RAILROAD COMPANY; Mississippi Department of Transportation, Defendants-Appellees.

No. 02-60782.

United States Court of Appeals, Fifth Circuit

September 10, 2004

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Cynthia H. Speetjens, Frazer & Davidson, Jackson, MS, Derek A. Wyatt, Pat M. Barrett, Jr., Barrett Law Office, Lexington, MS, Jeffrey Howard Schultz, Schultz & Murphy, Belleville, IL, for Plaintiff-Appellant.

Charles T. Ozier, George Howard Ritter, William B. Lovett, Jr., Wise, Carter, Child & Caraway, Susan L. Runnels, Kelly Dunleath Simpkins, Wells, Marble & Hurst, Jackson, MS, for Defendant-Appellee.

Emerson Barney Robinson, III, Butler, Snow, O'Mara, Stevens & Cannada, Charles Clark, Watkins & Eager, Jackson, MS, Dan K Webb, Winston & Strawn, Chicago, IL, Charles E. Griffin, Griffin & Associates, James William Craig, Phelps Dunbar, David W. Clark, Billy Berryhill, Bradley, Arant, Rose & White, William C. Brabec, Adams & Reese, Walter D Willson, Wells, Marble & Hurst, Jackson, MS, for Amicus Curiae.

Appeal from the United States District Court for the Southern District of Mississippi.



Today we decide a narrow but not unimportant question regarding diversity jurisdiction in federal courts and the application of the doctrine of "improper joinder." 1 This is the first time this Court en banc has addressed the issue of improper joinder, although a number of panels of this Court have previously addressed it. We hold that, when a nonresident defendant's showing that there is no reasonable basis for predicting that state law would allow recovery against an in-state defendant equally disposes of all defendants, there is no improper joinder of the in-state defendant. In such a situation, the entire suit must be remanded to state court. In this case, it is undisputed that the district court's decision that Smallwood's claims against the in-state defendant were preempted effectively decided the entire case. On these facts, we conclude that the district court erred in deciding the merits of the proffered defense of preemption and in not remanding the case to the state court from which it was removed.


Kelli Smallwood is a Mississippi resident who was injured when a train struck her car at a railroad crossing in Florence, Mississippi. The train was operated by Illinois Central, an Illinois corporation, and the railroad crossing was controlled by an agency of the Mississippi state government, the Mississippi Department of Transportation ("MDOT"). At the time of the accident, the crossing did not have automatic gates; it was equipped only with warning lights, which had been installed using federal funds. After the accident, Smallwood filed suit in Mississippi state

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court against both Illinois Central and MDOT, raising claims of negligence. She alleged, in particular, that MDOT negligently failed to install gates at the crossing despite its knowledge that the crossing was unreasonably dangerous and extraordinarily hazardous.

Illinois Central removed the case to federal court. Illinois Central maintained that Smallwood's claims against MDOT were preempted by the Federal Railroad Safety Act ("FRSA"). 2 Reasoning that the preemption defense barred Smallwood's claims against MDOT, Illinois Central argued that Smallwood had improperly joined MDOT because, under the FRSA, there was no reasonable possibility of recovery against MDOT.

The district court accepted Illinois Central's argument, dismissed MDOT from the case, and denied Smallwood's motion to remand. Applying the "law of the case," the district court then granted summary judgment for Illinois Central on the basis that Smallwood's claim against the railroad was equally preempted. The railroad won its case when it persuaded the district court that the claims against the in-state defendant, MDOT, were preempted. 3

A panel of this court concluded that Illinois Central had not carried its burden of demonstrating that the joinder of MDOT was fraudulent, reversed the district court's dismissal of the case on its merits, and ordered the case remanded to state court. We voted to rehear the case en banc.


The starting point for analyzing claims of improper joinder must be the statutes authorizing removal to federal court of cases filed in state court. The federal removal statute, 28 U.S.C. § 1441(a), allows for the removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." Subsection (b) specifies that suits arising under federal law are removable without regard to the citizenship of the parties; all other suits are removable "only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 4 To remove a case based on diversity, the diverse defendant must demonstrate that all of the prerequisites of diversity jurisdiction contained in 28 U.S.C. § 1332 are satisfied. Relatedly, a district court is prohibited by statute from exercising jurisdiction over a suit in which any party, by assignment or otherwise, has been improperly or collusively joined to manufacture federal diversity jurisdiction. 5 As Professor Wright has noted:

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"[T]he Federal courts should not sanction devices intended to prevent the removal to a Federal court where one has that right, and should be equally vigilant to protect the right to proceed in the Federal court as to permit the state courts, in proper cases, to retain their own jurisdiction." 6

The doctrine of improper joinder rests on these statutory underpinnings, which entitle a defendant to remove to a federal forum unless an in-state defendant has been "properly joined." Since the purpose of the improper joinder inquiry is to determine whether or not the in-state defendant was properly joined, the focus of the inquiry must be on the joinder, not the merits of the plaintiff's case.

Given this focus, we have recognized two ways to establish improper joinder: "(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court." 7 Only the second way is before us today, and we explained in Travis v. Irby 8 that the test for fraudulent joinder is whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant. To reduce possible confusion, we adopt this phrasing of the required proof and reject all others, whether the others appear to describe the same standard or not. 9

There has also been some uncertainty over the proper means for predicting whether a plaintiff has a reasonable basis of recovery under state law. A court may resolve the issue in one of two ways. The court may conduct a Rule 12(b) (6)-type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant. 10 Ordinarily, if a plaintiff can survive a Rule 12(b) (6) challenge, there is no improper joinder. That said, there are cases, hopefully few in number, in which a plaintiff has stated a claim, but has misstated or omitted discrete facts that would determine the propriety of joinder. In such cases, the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry. 11

While the decision regarding the procedure necessary in a given case must lie within the discretion of the trial court, we caution that a summary inquiry is appropriate only to identify the presence of discrete and undisputed facts that would preclude plaintiff's recovery against the in-

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state defendant. 12 In this inquiry the motive or purpose of the joinder of in-state defendants is not relevant. We emphasize that any piercing of the pleadings should not entail substantial hearings. Discovery by the parties should not be allowed except on a tight judicial tether, sharply tailored to the question at hand, and only after a showing of its necessity. Attempting to proceed beyond this summary process carries a heavy risk of moving the court beyond jurisdiction and into a resolution of the merits, as distinguished from an analysis of the court's diversity jurisdiction by a simple and quick exposure of the chances of the claim against the in-state defendant alleged to be improperly joined. Indeed, the inability to make the requisite decision in a summary manner itself points to an inability of the removing party to carry its burden.


Illinois Central argues that the district court's finding of improper joinder was appropriate because Smallwood's claims against MDOT were preempted by federal law. Illinois Central urges, moreover, that it is irrelevant that the FRSA equally bars claims against it.

Facing the question for the first time in an en banc proceeding, we reject the railroad's contention. To justify removal on improper joinder grounds, Illinois Central was required to prove that the joinder of MDOT was improper. Illinois Central, however, brought no contention going to the propriety of the joinder. Rather, the basis of its contention that Smallwood could not recover went, in fact, to the entire case, although it was first directed to Smallwood's claims against MDOT. Then, with jurisdiction secured, and with all the force of the "law of the case,"...

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