Avenatti v. Fox News Network LLC

• Decision Date: 21 July 2022
• Docket Number: 21-2702
• Citation: 41 F.4th 125
• Parties: Michael AVENATTI, Appellant v. FOX NEWS NETWORK LLC, a Delaware Limited Liability Company; Sean Hannity; Laura Ingraham; Maria Bartiromo; Howard Kurtz ; Shannon Bream; Bret Baier; Trish Regan; Raymond Arroyo ; Jon Scott; Leland Vittert; Jonathan Hunt
• Court: U.S. Court of Appeals — Third Circuit

41 F.4th 125

Michael AVENATTI, Appellant

v.FOX NEWS NETWORK LLC, a Delaware Limited Liability Company; Sean Hannity; Laura Ingraham; Maria Bartiromo; Howard Kurtz ; Shannon Bream; Bret Baier; Trish Regan; Raymond Arroyo ; Jon Scott; Leland Vittert; Jonathan Hunt

No. 21-2702

United States Court of Appeals, Third Circuit.

Argued June 7, 2022

Filed: July 21, 2022

Shawn R. Perez, [ARGUED], Suite 113-38, 7121 West Craig Road, Las Vegas, NV 89129, Counsel for Appellant

Eric M. George, [ARGUED], Ellis George Cipollone O'Brien & Annaguey, 2121 Avenue of the Stars, Suite 2800, Los Angeles, CA 90067, David E. Ross, Esq., Ross Aronstam & Moritz, 1313 North Market Street, Suite 1001, Wilmington, DE 19801, Counsel for Appellees

Eugene Volokh, UCLA School of Law, 385 Charles E. Young Drive, Los Angeles, CA 90095, Counsel for Amicus

Before: AMBRO, RENDELL, and FUENTES, Circuit Judges.

OPINION OF THE COURT

RENDELL, Circuit Judge.

The plaintiff is master of his complaint, but his power is not absolute. District courts have authority of their own to structure the litigation before them and, in doing so, prevent manipulation by the parties. This includes policing the addition of new parties whose presence would unravel vested jurisdiction.

Michael Avenatti, surprised to find his case removed from the Delaware Superior Court on diversity grounds, amended his complaint to add a new, nondiverse defendant as of right, see Fed. R. Civ. P. 15(a)(1)(A), and then moved for remand. But the District Court rejected Avenatti's motion, invoking its discretionary authority under Federal Rule of Civil Procedure 21 to drop the interloper from the case and restore complete diversity. We conclude this approach was proper, even though the jurisdictional ‘spoiler’ was added by an amendment as of right. Accordingly, we will affirm.

I. BACKGROUND

Plaintiff-Appellant Michael Avenatti is a celebrity lawyer who rose to public prominence in early 2018 by representing Stephanie Clifford (a/k/a Stormy Daniels), a woman with whom then-President Trump had allegedly had an extra-marital affair. But Avenatti's freshly minted fame soon took on a different hue when, in November 2018, he was arrested by officers of the Los Angeles Police Department. Given his public profile, his arrest was covered extensively in the media, including by Defendant-Appellee Fox News Network ("Fox News") and the individual Defendant-Appellees, all of whom were on-air personalities for Fox News. Avenatti claims that the Defendants engaged in a "purposeful and malicious" campaign of defamation and slander against him by lying, on air and in print, about the details of his arrest.

On November 12, 2020, Avenatti sued in Delaware Superior Court. In his initial complaint, he described allegedly defamatory statements made by all the Defendants, including Fox News employee Jonathan Hunt, but Avenatti chose not to name Hunt as a Defendant. Four days later, Fox News removed the case to the U.S. District Court for the District of Delaware, asserting that there was complete diversity among the parties: Avenatti was a California resident, while none of the named Defendants were.¹

Avenatti did not accept this sudden removal to federal court lying down. Instead, on November 19—three days after the case was removed and seven days after it was initiated—Avenatti filed an amended complaint in the District Court. Because the amended complaint was entered within twenty-one days of the initial complaint, Avenatti did not require leave of court or the opposing parties. See Fed. R. Civ. P. 15(a)(1)(A). The amended complaint differed in two respects: first, it named Hunt—a California resident—as a Defendant; and second, it alleged that Hunt had published an article online about Avenatti's arrest which included the same defamatory accusations previously attributed to the other Defendants. Five days after filing the amended complaint, Avenatti moved to remand the case back to state court, arguing that his addition of Hunt—who shared Avenatti's California citizenship—had destroyed diversity, thus depriving the Court of subject matter jurisdiction.²

The District Court denied remand. Avenatti v. Fox News Network, LLC , No. 20-CV-01541-SB, 2021 WL 2143037, at *1 (D. Del. May 26, 2021). In a thorough and well-reasoned opinion, the Court concluded that it had discretionary authority under Rule 21 to drop Hunt from the litigation and thereby restore complete diversity. Id. at *2 (citing Fed. R. Civ. P. 21 ("On motion or on its own, the court may at any time, on just terms, add or drop a party.")). In doing so, the Court considered the four-factor test of Hensgens v. Deere & Co. , 833 F.2d 1179 (5th Cir. 1987), to guide its discretion. In Hensgens , the Fifth Circuit laid out an open-ended balancing test for considering post-removal amendments that add nondiverse parties, asking:

• "the extent to which the purpose of the amendment is to defeat federal jurisdiction,"

• "whether plaintiff has been dilatory in asking for [the] amendment,"

• "whether plaintiff will be significantly injured if [the] amendment is not allowed," and

• "any other factors bearing on the equities."

Id. at 1182. As we explain below, considering this test as a guide to Rule 21's "just terms" condition was permissible.

Here, the District Court applied the Hensgens factors and found: Hunt had been joined to defeat diversity; Avenatti would not be prejudiced by Hunt's excision because he was dispensable; and, although Avenatti had not been dilatory, federal jurisdiction should be retained by dropping Hunt. Accordingly, it dismissed Hunt and retained jurisdiction.

On August 13, 2021, upon Defendants' motion, the District Court dismissed the amended complaint without prejudice, finding that Avenatti had not pled plausible defamation claims against any Defendant. Avenatti did not contest the motion, and, after dismissal, he informed the District Court that he intended to stand on his amended complaint. The Court then dismissed his complaint with prejudice.

This appeal followed. Before us, Avenatti trains his fire on the District Court's denial of remand. He argues that the case should have been returned to state court, and so the District Court was without jurisdiction to dismiss his amended complaint.

II. JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction to review the District Court's orders under 28 U.S.C. § 1291. The District Court's disputed jurisdiction was premised on 28 U.S.C. §§ 1332(a) and 1441. "[A] federal court always has jurisdiction to determine its own jurisdiction." United States v. Ruiz , 536 U.S. 622, 628, 122 S.Ct. 2450, 153 L.Ed.2d 586 (2002).

We exercise de novo review over the District Court's denial of the motion to remand, as the underlying basis for the denial implicates a question of law. Ario v. Underwriting Members of Syndicate 53 at Lloyds for 1998 Year of Account , 618 F.3d 277, 287 (3d Cir. 2010). If the District Court's invocation of Rule 21 to resolve the remand motion was legally proper, then we review its application of the Rule for abuse of discretion. See DirecTV, Inc. v. Leto , 467 F.3d 842, 844 n.1 (3d Cir. 2006) ("We review the District Court's decision to drop parties under Rule 21 for an abuse of discretion."); see also Schur v. L.A. Weight Loss Centers, Inc. , 577 F.3d 752, 762 (7th Cir. 2009). The determination of a party's dispensability is also reviewed for abuse of discretion. Steel Valley Auth. v. Union Switch & Signal Div. , 809 F.2d 1006, 1010 (3d Cir. 1987). Finally, we review the District Court's resolution of the motion to dismiss de novo, Doe v. Princeton Univ. , 30 F.4th 335, 341 (3d Cir. 2022), and its factual findings for clear error, FTC v. AbbVie Inc. , 976 F.3d 327, 368 (3d Cir. 2020).

III. THE DISTRICT COURT DID NOT ERR BY DROPPING HUNT AND RETAINING JURISDICTION

When a plaintiff files suit in state court but could have invoked the original jurisdiction of the federal courts, the defendant may remove the action to federal court. 28 U.S.C. § 1441(a). The party seeking removal has the burden of establishing federal jurisdiction and we interpret the removal statute narrowly, resolving any doubt in favor of the plaintiff's choice of forum in state court. Brown v. Jevic , 575 F.3d 322, 326 (3d Cir. 2009). Fox News properly removed this action to the U.S. District Court for the District of Delaware based on diversity jurisdiction.

Just after removal, Avenatti amended his complaint as of right to add Hunt as a defendant, seeming to undo the complete diversity upon which jurisdiction was premised. Had Avenatti sought leave of court for this addition, then 28 U.S.C. § 1447(e) would have governed the situation. Under § 1447(e), "[i]f after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court." As Avenatti points out, because the text of § 1447(e) by its terms applies where a plaintiff "seeks to join" a nondiverse defendant, it is not obvious that it covers party additions effected by way of Rule 15(a)(1)(A) amendments. Those amendments do not normally require any seeking ; they are simply accomplished. Avenatti thus contends that, without recourse to § 1447(e), the District Court was left with only two options: (1) remand to state court; or (2) inquire whether Hunt could be dropped under the doctrine of fraudulent joinder.

The District Court rejected these proposed alternatives, calling instead on its discretionary authority under Rule 21 to drop Hunt and restore complete diversity. In doing so, the Court invoked the four-factor test of Hensgens v. Deere & Co. , 833 F.2d 1179 (5th Cir. 1987), to guide its discretion. Avenatti insists that the Court should have used fraudulent joinder rather than the Hensgens factors—and that the Court misapplied the factors in any event.

We think the District Court chose the correct path. Where, as here, a nondiverse defendant...