Palmquist v. Hain Celestial Group

Case: 23-40197 Document: 134-1 Page: 1 Date Filed: 05/28/2024

United States Court of Appeals

for the Fifth Circuit United States Court of Appeals

Fifth Circuit

____________ FILED

May 28, 2024

No. 23-40197

____________ Lyle W. Cayce

Clerk

Sarah Palmquist, Individually and as Next Friend of E.P., a minor;

Grant Palmquist,

Plaintiffs—Appellants,

versus

The Hain Celestial Group, Incorporated; Whole Foods

Market, Incorporated, also known as Whole Foods Market

Rocky Mountain/Southwest, L.P.,

Defendants—Appellees.

______________________________

Appeal from the United States District Court

for the Southern District of Texas

USDC No. 3:21-CV-90

______________________________

Before Stewart, Clement, and Ho, Circuit Judges.

Carl E. Stewart, Circuit Judge:

In 2021, Grant and Sarah Palmquist, individually and on behalf of their

minor son (“Palmquists”), sued baby-food manufacturer, Hain Celestial

Group, Inc. (“Hain”), and grocery retailer, Whole Foods Market, Inc.

(“Whole Foods”), in Texas state court, seeking damages for their son

Ethan’s physical and mental decline that began when he was about thirty

months old. Following removal, the district court dismissed Whole Foods as

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improperly joined and granted judgment as a matter of law in favor of Hain

during trial. The Palmquists appeal the district court’s (1) dismissal of Whole

Foods on improper joinder grounds, (2) denial of the Palmquists’ motion to

remand, and (3) grant of Hain’s motion for judgment as a matter of law. For

the reasons that follow, we hold that the Palmquists were entitled to a remand

to state court because the allegations in their state-court complaint stated

plausible claims against Whole Foods. Thus, we REVERSE the district

court’s judgment denying the Palmquists’ motion to remand, VACATE the

final judgment of the district court, and REMAND with instructions for the

district court to remand the case to the state court.

I. Factual and Procedural History

A. Factual Background

Sarah Palmquist gave birth to Ethan in September 2014 after a healthy

and uneventful pregnancy. During the first two years of his life, Ethan met or

exceeded developmental milestones The Palmquists allege that during this

time, Ethan almost exclusively consumed Hain’s Earth’s Best Organic

Products, which the Palmquists purchased from Whole Foods.

When he was about thirty months old, Ethan’s “social, language, and

behavior[al]” skills rapidly regressed. Ethan’s parents, Grant and Sarah,

visited numerous physicians and specialists for a diagnosis and appropriate

treatment. They aver that those medical tests revealed that Ethan suffered

from several physical and mental disorders. Ethan’s physical ailments

include seizure disorder, chronic diarrhea, epileptiform disorder (excessive

and abnormal brain activity), hypotonia (abnormally decreased muscle tone),

and mitochondrial dysfunction. Ethan’s mental diagnoses range from

intellectual disability to anxiety and aggression. Some physicians attributed

most, if not all, of Ethan’s symptoms to autism spectrum disorder or major

neurocognitive disorder. Some physicians also diagnosed Ethan with heavy-

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metal poisoning. While the Palmquists assert that heavy metal toxicity caused

Ethan’s symptoms, Hain attributes the entirety of Ethan’s disabilities to

autism.

In 2021—several years after Ethan’s heavy metal toxicity diagnosis—

the House Oversight and Reform Committee released a report (“Committee

Report”) demonstrating that certain baby foods, including Hain’s, contained

elevated levels of toxic heavy metals, including arsenic, lead, cadmium, and

mercury. The Committee Report also revealed that: (1) Hain’s Earth’s Best

Organic Products contained up to 129 parts per billion (“ppb”) inorganic

arsenic; (2) some of Hain’s ingredients contained as much as 352 ppb lead;

and (3) Hain did not test for mercury. 1

From 2014 to 2019, Hain only tested some ingredients in its baby

foods for toxic metals but did not test the finished products. In 2019, in an

effort to reduce the heavy-metal concentration in its products, Hain stopped

using a vitamin pre-mixed ingredient, switched to a lower-arsenic-content

rice for its infant cereal, and started final-product testing.

B. Procedural History

Attributing the high levels of toxic metals appearing in Ethan’s blood

tests to his consumption of Earth’s Best Organic Products, the Palmquists

sued both Hain and Whole Foods in Texas state court in 2021, alleging strict-

products-liability and negligence claims against Hain and breach-of-

warranties and negligence claims against Whole Foods. 2 The Palmquists

_____________________

1

In 2016, the Food and Drug Administration (“FDA”) published draft guidance

recommending that infant-rice-cereal producers limit end-product inorganic-arsenic levels

to 100 ppb.

2

Hain is a Delaware corporation with its principal place of business in New York

and therefore is a citizen of Delaware and New York. Whole Foods is a citizen of Texas.

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sought to show that heavy-metal exposure causes heavy-metal poisoning and

that Ethan’s consumption of heavy metals in Hain’s products caused his

heavy-metal poisoning and resultant cognitive decline. Hain removed the

case to federal court, contending that Whole Foods, a multinational

supermarket chain headquartered in Austin, Texas, was improperly joined to

defeat diversity jurisdiction. 3

After removal, the Palmquists filed an amended complaint (the

“second amended complaint”) that purportedly “clarified their allegations

against Whole Foods under the federal pleading standard.” In their second

amended complaint, the Palmquists sought to clarify that their breach-of-

warranties cause of action included claims that Whole Foods expressly

represented to the public and to the Palmquists that Hain’s baby food was

safe. The Palmquists also added a negligent-undertaking claim against Whole

Foods.

After amending their complaint, the Palmquists moved to remand the

suit, countering that they had viable claims against Whole Foods under the

Texas Products Liability Act 4 and the Deceptive Trade Practices Act

(“DTPA”). The Palmquists based their remand motion on the details in

their second amended complaint.

The district court determined that any new claims could not be

considered because jurisdiction “is resolved by looking at the complaint at

_____________________

3

The Palmquists amended their state-court petition once in state court before the

case was removed.

4

Chapter 82 of the Texas Civil Practice & Remedies Code outlines the duties of

manufacturers and nonmanufacturing sellers in a products liability action. Section

82.003(a) provides that a nonmanufacturing seller’s protection from liability under

Chapter 82 can be pierced if one of seven exceptions is established. Tex. Civ. Prac. &

Rem. Code Ann. § 82.003(a).

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the time [the] petition for removal [was] filed.” Specifically, the district court

concluded that the Palmquists added a new breach of express warranty claim

in the second amended complaint, in addition to their new negligent-

undertaking claim. Nonetheless, even considering the purportedly new

express breach-of-warranty claim the district court concluded that, under the

Texas Civil Practice & Remedies Code § 82.003(a), “[g]enerally, retail

sellers such as Whole Foods are not liable for the harm caused by the

products they sell.” The district court subsequently determined that the

Palmquists had improperly joined Whole Foods and dismissed their claims

against it.

The Palmquists’ claims against Hain proceeded in federal court. Prior

to trial, Hain moved for summary judgment. The Palmquists’ marketing-

defect claim, manufacturing-defect claim, and negligent-testing claim all

survived summary judgment. On February 6, 2023, a jury trial on the merits

commenced. On February 15, 2023, Hain filed a written motion under Rule

50(a) of the Federal Rules of Civil Procedure, requesting that the court enter

judgment as a matter of law because the Palmquists (1) failed to either prove

specific causation or offer expert testimony to support general causation and

(2) lacked sufficient evidence to establish that Ethan had heavy-metal

toxicity. On February 17, 2023—after the Palmquists had rested—the court

heard, considered, and orally granted in its entirety Hain’s motion for

judgment as a matter of law under Rule 50(a) finding that the Palmquists had

presented “no evidence of general causation.” The court explained that the

jury “heard no testimony from a qualified expert that the ingestion of heavy

metals can cause the array of symptoms that Ethan suffers from, much less

any evidence of at what level those metals would have to be ingested to bring

about those symptoms.” The court ultimately concluded that “the law is

clear that such testimony is necessary to show general causation.” The

Palmquists filed this appeal.

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II. STANDARD OF REVIEW

Denial of a remand motion and the determination that a party is

improperly joined are reviewed de novo. Int’l Energy Ventures Mgmt., L.L.C.,

v. United Energy Grp. Ltd., 818 F.3d 193, 199 (5th Cir. 2016) (denying a

remand motion); Kling Realty Co., Inc. v. Chevron USA, Inc., 575 F.3d 510,

513 (5th Cir. 2009) (analyzing improper joinder). “[W]e 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.” Smallwood v. Ill. Cent. R.R. Co.,

385 F.3d 568, 573 (5th Cir. 2004) (en banc) (internal quotation marks and

citations omitted). However, this court reviews a district court’s procedure

for determining improper joinder only for abuse of discretion. Kling Realty

Co., 575 F.3d at 513; Guillory v. PPG Indus., Inc., 434 F.3d 303, 309–10 (5th

Cir. 2005).

III. DISCUSSION

The Palmquists contend that the district court erred in its improper

joinder analysis and erroneously denied their remand motion. The

Palmquists challenge the court’s conclusion that they are unable to recover

against Whole Foods based on the claims alleged in either their state-court

pleading or their second amended complaint. They argue that their second

amended complaint detailed viable claims—already alleged in their original

state-court petition—against Whole Foods, thus defeating diversity

jurisdiction. Specifically, the Palmquists maintain that their state-court

petition alleged a breach-of-warranties claim against Whole Foods before the

case was removed to federal court and their amended federal court complaint

merely contained new allegations clarifying how those claims satisfied the

newly applicable federal pleading standard. Thus, the Palmquists argue they

have stated a claim against Whole Foods, which defeats diversity jurisdiction.

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While the Palmquists concede that circuit precedent recognizes that

plaintiffs cannot defeat removal by changing the substance of their pleadings,

they nevertheless emphasize that removed plaintiffs are allowed to “clarify a

petition that previously left the jurisdictional question ambiguous.” Cavallini

v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264–65 (5th Cir. 1995) (holding

that jurisdiction is judged “on the basis of claims in the state court complaint

as it exists at the time of removal”). They contend that longstanding Fifth

Circuit precedent holds that plaintiffs may “clarify” and “amplify” their

jurisdictional allegations after removal for purposes of improper joinder

analysis. See Griggs v. State Farm Lloyds, 181 F.3d 694, 699–700 (5th Cir.

1999).

A. “Breach of Warranties” Cause of Action

As an initial matter, the parties dispute whether the Palmquists’

breach-of-warranties claim pleaded in state court was broad enough to

encompass a claim for breach of express and implied warranties. We

determine whether removal was proper by examining the Palmquists’

pleading at the time of the petition for removal. See Cavallini, 44 F.3d at 264.

“As the effect of removal is to deprive the state court of an action properly

before it, removal raises significant federalism concerns. The removal statute

is therefore to be strictly construed, and any doubt about the propriety of

removal must be resolved in favor of remand.” Gasch v. Hartford Acc. &

Indem. Co., 491 F.3d 278, 281–82 (5th Cir. 2007) (internal quotation marks

and citations omitted). We conduct our improper joinder analysis “on the

basis of claims in the state court complaint as it exists at the time of removal.”

Cavallini, 44 F.3d at 264. Thus, while we will not entertain new theories not

raised in state court, we will examine the Palmquists’ state-court pleadings

and the viability of those claims alleged against Whole Foods, deferring to

resolve any doubt or ambiguities in favor of remand. Griggs, 181 F.3d at 699.

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Under the paragraph entitled “Breach of Warranties,” the

Palmquists’ as-removed complaint alleged that:

Whole Foods . . . sold Hain’s Earth’s Best Organic baby food

products and in doing so impliedly warranted to the public

generally and specifically that the products were safe for

consumption by infants and young children . . . Whole Foods’

implied warranty was incorrect given the high levels of heavy

toxic metal Hain’s baby food products contained . . . [The

Palmquists’] injuries were sustained because of Whole Foods’

implied warranties.

The “Breach of Warranties” paragraph of the as-removed complaint also

stated that:

[The Palmquists] relied on Whole Foods’ representations that

Hain’s Earth’s Best Organic baby food products were safe and

of the highest quality . . . If Hain’s products were as advertised,

[the Palmquists] would not have been injured by the product.

Hain and Whole Foods markets the Earth’s Best Organic baby

food products as safe, natural, and organically produced.

The language in the as-removed complaint was broad enough to

encompass both breach of express and implied warranties’ claims. The

paragraph was entitled “Breach of Warranties,” which could include both

express and implied claims. See Breach of Warranty, Black’s Law Dictionary

(11th ed. 2019) (“[a] breach of an express or implied warranty relating to the

title, quality, content, or condition of goods sold.”); Tex. Bus. & Com. Code

Ann. § 17.50(a)(2) (Texas’s Deceptive Trade Practices Act empowers “[a]

consumer [to] maintain an action where any of the following constitute a

producing cause of economic damages or damages for mental anguish: . . .

breach of an express or implied warranty.”). Although the language in the as-

removed complaint generally discussed Whole Foods’ implied warranties, it

also discussed Whole Foods’ express representations regarding Hain’s

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products. We therefore hold that the district court erred in concluding that

the Palmquists added a new breach of express warranty claim in their second

amended complaint.

B. Improper Joinder Analysis

For purposes of our inquiry, circuit precedent directs us to conduct a

Rule 12(b)(6)-type analysis, looking initially at the allegations in the

complaint to determine whether it states a claim under state law against the

in-state defendant. Smallwood, 385 F.3d at 573. Circuit precedent makes clear

that removed state-court petitions are evaluated under the federal pleading

standard. Int’l Energy Ventures Mgmt., 818 F.3d at 204 (“The Smallwood

opinion instructs us to apply the Rule 12(b)(6)-type analysis, which must

mean the entirety of that analysis. Because that analysis is inseparable from

the federal pleading standard, this is an instruction to apply the federal

pleading standard.”); see also Smallwood, 385 F.3d at 573.

Before we conduct our improper joinder analysis, we must consider

whether the Palmquists were permitted to amend their pleadings to conform

to the federal pleading standard. In other words, we must assess whether we

may consider the “express factual” language that the Palmquists added in

their second amended complaint to describe representations Whole Foods

made about its baby products. We will not consider the negligent-undertaking

claim, a theory not raised in state court, in our analysis of whether Whole

Foods was improperly joined. Griggs, 181 F.3d at 700.

In Peña v. City of Rio Grande City, this court held that where

defendants challenge the pleadings on the merits after a case has been

removed to federal court, plaintiffs should be permitted leave to amend their

complaint in order to conform to the federal pleading standard. 879 F.3d 613,

617 (5th Cir. 2018). Although Peña concerned a motion for judgment on the

pleadings rather than improper joinder, id. at 616, the same standard—the

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one provided by Federal Rule of Civil Procedure 12(b)(6) used to assess

failure to state a claim—applied. Id. at 618 (“The city’s motion for judgment

on the pleadings is subject to this same standard [to which motions to dismiss

are subject].”); Magee v. Reed, 912 F.3d 820, 822 (5th Cir. 2019) (“[T]he

standard for dismissal under Rule 12(c) is the same as under Rule

12(b)(6).”). 5

Even if Peña is not binding on this panel, its logic makes good sense: a

plaintiff should not be penalized for adhering to the pleading standards of the

jurisdiction in which the case was originally brought. Otherwise, where there

are potentially diverse parties, plaintiffs would essentially have to plead the

federal pleading standard in state court for fear of having their claims against

non-diverse parties thrown out upon reaching federal courts for failing to

comply with the demands of Rule 12(b)(6). Peña, 879 F.3d at 617 (“Removal

from a notice-pleading jurisdiction is a natural time at which justice would

call for the court to permit such an amendment.”) (citing Faulkner v. ADT

Sec. Servs., Inc., 706 F.3d 1017, 1021 (9th Cir. 2013)).

Hain next contends that Cavallini, Griggs, and ANPAC foreclose the

district court’s examination of the post-removal second amended complaint.

See Griggs, 181 F.3d at 694; Cavallini, 44 F.3d at 256; Asociacion Nacional de

Pescadores a Pequena Escala O Artesanales de Colombia (ANPAC) v. Dow

Quimica de Colombia S.A., 988 F.2d 559 (5th Cir. 1993). On this issue, we

disagree. Although post-removal filings may not be considered “to the extent

that they present new causes of action or theories not raised in the controlling

_____________________

5

Although Peña concerned a district court’s denial of leave to amend a complaint

under Federal Rule of Civil Procedure 15(a)(1)–(2), by declining to consider the facts

alleged in the second amended complaint and instead assessing the as-removed complaint,

the district court effectively denied the Palmquists the ability to amend their complaint. To

be sure, plaintiffs cannot add new causes of action after a case is removed from state to

federal court, but that is not the proposition that Peña stands for.

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petition filed in state court,” they can be considered to the extent they

“clarify or amplify the claims actually alleged” in the removed pleading.

Griggs, 181 F.3d at 700 (citing Cavallini, 44 F.3d at 263).

Hain maintains that the district court’s decision correctly followed

Cavallini. It argues that this court similarly rejected the plaintiffs’ attempt in

Cavallini to amplify their allegations consistent with similar facts as the

instant case. See 44 F.3d at 264 (holding that ANPAC “offers no support”

for the plaintiffs’ assertion that “their amended complaint would have

clarified any jurisdictional ambiguity in their state court complaint”). But

recall that the Cavallini panel pinpointed that, at the time the case was

removed, the state-court petition “simply [did] not allege any facts against

[the non-diverse defendant]. Other than listing his name and address for

purposes of service, the petition [did] not specifically mention [the non-

diverse defendant] at all.” Cavallini, 44 F.3d at 260 n.8. While the petition

alleged various causes of action, it did not delineate under which theories the

non-diverse defendant could be liable to the plaintiffs. Id. It was under these

circumstances that the panel determined that “[t]he Cavallinis’ proposed

amended complaint [did] not clarify the jurisdictional facts at the time of

removal; it attempt[ed] instead to amend away the basis for federal

jurisdiction.” Cavallini, 44 F.3d at 265.

Although the Palmquists added an additional negligent-undertaking

claim against Whole Foods, they too clarified their existing breach-of-

warranties claim with supporting jurisdictional facts. As is the case here,

adding new causes of actions and clarifying already alleged causes of actions

are not mutually exclusive. We have already determined that the Palmquists

may not expand the substance of their pleadings, for jurisdictional purposes,

with the negligent-undertaking allegations. We, too, follow circuit precedent

by permitting them to “clarify” their already averred jurisdictional

allegations after removal for purposes of an improper joinder analysis. See

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Griggs, 181 F.3d at 700 (acknowledging that post-removal evidence may be

considered when determining whether removal was proper “only to the

extent that the factual allegations in [petitioner’s] affidavit clarify or amplify

the claims actually alleged in the amended petition that was controlling when

the suit was dismissed”); Cavallini, 44 F.3d at 265 (differentiating a case that

allows for “clarification of a state court complaint” after removal from a case

where “there is no need for clarification of [the] complaint [because] it does

not contain allegations against [a non-diverse defendant] that state a claim for

relief under [the] legal theories pleaded”); ANPAC, 988 F.2d at 565 (holding

that “the court is considering information submitted after removal” because

it “clarif[ies] a petition that previously left the jurisdictional question

ambiguous”).

Turning now to the substance of our improper joinder analysis, when

conducting a Rule 12(b)(6)-type analysis, we must accept all well-pleaded

facts as true and view them in the light most favorable to the non-moving

party. In re S. Scrap Material Co., 541 F.3d 584, 587 (5th Cir. 2008). A plaintiff

must state a claim for relief that is facially plausible by pleading “factual

content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Anderson v. Valdez, 845 F.3d

580, 589 (5th Cir. 2016) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

Yet, the plausibility standard “simply calls for enough fact to raise a

reasonable expectation that discovery will reveal evidence of the necessary

claims or elements.” In re S. Scrap Material Co., 541 F.3d at 587 (quoting

Twombly, 550 U.S. at 556) (internal quotation marks omitted).

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When considering whether a plaintiff has stated a claim against a non-

diverse party in state court, 6 the test “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.” Id. “This means that there must

be a reasonable possibility of recovery, not merely a theoretical one.”

Campbell v. Stone Ins., Inc., 509 F.3d 665, 669 (5th Cir. 2007) (quoting Ross v.

Citifinancial, Inc., 344 F.3d 458, 462 (5th Cir. 2003)). The burden of

persuasion on a party claiming improper joinder is a “heavy one.” Id. “[A]ny

contested issues of facts and any ambiguities of state law must be resolved”

in favor of remand. Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 242,

249 (5th Cir. 2011) (quoting Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003)).

C. Nonmanufacturing Seller Liability

The parties agree that Section 82.003(a)(5) of the Texas Products

Liability Act governs whether Whole Foods is potentially liable in this action.

Although Section 82.003 appears to limit rather than establish liability, our

court has required plaintiffs to address Section 82.003 to state a claim against

_____________________

6

Whole Foods does not argue that the Palmquists have committed actual fraud in

the pleading of jurisdictional facts.

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nonmanufacturing sellers, George v. SI Grp., Inc., 36 F.4th 611, 620, n.5 (5th

Cir. 2022), so we do the same here. 7

The Palmquists argue that they have pleaded sufficient facts to

establish that the exception under Section 82.003(a)(5) applies. Section

82.003(a)(5) provides that a nonmanufacturing reseller may not be held liable

unless:

(A) The seller made an express factual representation about an

aspect of the product;

(B) The representation was incorrect;

_____________________

7

We note, however, that we were unable to locate any caselaw from Texas state

courts indicating that Section 82.003 can be used to establish liability in the first instance.

Cf., Amazon.com, Inc. v. McMillan, 625 S.W.3d 101, 109 (Tex. 2021) (“Chapter 82 is a

liability-restricting statute.”); Transcon. Ins. Co. v. Briggs Equip. Tr., 321 S.W.3d 685, 701

(Tex. App.—Houston [14th Dist.] 2010, no pet.) (assuming that the defendant had met its

burden to show that it was a “seller” entitled to the application of Section 82.003 when

assessing whether the Section 82.003 exceptions applied); but cf. McMillian, 625 S.W. at

109 (describing Section 82.003 as “imposing liability” on nonmanufacturing sellers in

certain instances). Rather, Section 82.003 establishes an exception to the common law’s

imposition of strict liability for sellers of defective products. McMillan, 625 S.W.3d at 109

(“Chapter 82 does not expand the pool of potentially liable non-manufacturing sellers

beyond those recognized at common law; it reduces that pool.”). Thus, the exceptions

listed in Section 82.003 appear to be exceptions to that exception. See Sidwell v. Zuo Mod.

Contemp., Inc., No. 05-20-00127-CV, 2022 WL 3040634, at *3 (Tex. App.—Dallas Aug. 2,

2022, no pet.) (Chapter 82 “limits the circumstances under which a nonmanufacturing

seller may be liable to a claimant . . . unless one of the enumerated exceptions” in Section

82.003 applies) (internal quotation marks and citation omitted). So, it would seem that to

recover against a nonmanufacturing seller, a plaintiff would need to prove both a products

liability cause of action, see Tex. Civ. Prac. & Rem. Code § 82.001 (2) and that one

of the Section 82.003 exceptions applied. No party has argued that the Palmquists have not

otherwise stated a claim sufficient to establish liability in the first instance, so we need not

address it. See Rollins v. Home Depot USA, 8 F.4th 393, 397 (5th Cir. 2021) (“A party forfeits

an argument . . . by failing to adequately brief the argument on appeal.”). We also note that

the caselaw requiring plaintiffs to plead facts sufficient to overcome Section 82.003

immunity to state a claim appears to originate from federal, rather than Texas courts. See,

e.g., Alonso ex rel. Est. of Cagle v. Maytag Corp., 356 F. Supp. 2d 757, 761 (S.D. Tex. 2005).

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(C) The claimant relied on the representation in obtaining or

using the product; and

(D) If the aspect of the product had been as represented, the

claimant would not have been harmed by the product or would

not have suffered the same degree of harm[.]

Tex. Civ. Prac. & Rem. Code Ann. § 82.003(a)(5).

The Palmquists argue they can meet each element of this exception.

First, they contend that “Whole Foods markets [Hain’s] Earth’s Best

Organic baby food products as safe, natural, and organically produced.”

Specifically, they state in their second amended complaint that:

As a seller of “natural and organic foods,” Whole Foods

specifically represents to its customers that it only sells

products that are of the “highest quality.” Whole Foods further

represents to the public that it “carefully vet[s] our products to

make sure they meet our high standards by researching ingredients,

reading labels and auditing sourcing practices.” And it promises

its customers that “if it doesn’t meet our standards, we don’t

sell it.” In short, “Whole Foods” claims to “take pride in what

we do sell and even more in what we don’t” by refusing to sell

products with harmful ingredients. Whole [F]oods made these

express factual representations about Hain’s Earth’s Best Baby

Food.

The Palmquists further contend that Whole Foods’ representations

were incorrect given the high levels of heavy toxic metals that Hain’s baby

food contained, that they relied on Whole Foods’ representations that Hain’s

baby food was safe and high quality, and that had Whole Foods’ claims been

true, Ethan would not have been injured.

Hain, for its part, contends that the Palmquists cannot satisfy the first

element of Section 82.003(a)(5) because the only allegations set forth in the

operative complaint are generalized, positive statements, which it asserts are

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not actionable under Texas law. Per Hain, the statements must be about its

baby food products specifically. Whole Foods makes similar arguments,

asserting that generalized, positive statements are not actionable under

Section 82.003(a)(5). The district court adopted such reasoning in denying

the Palmquists’ motion to remand. See Howard v. Lowe’s Home Ctrs., LLC,

306 F. Supp. 3d 951, 958 (W.D. Tex. 2018), aff’d, 765 F. App’x 76 (5th Cir.

2019); Gill v. Michelin N. Am., Inc., 3 F. Supp. 3d 579, 585 (W.D. Tex. 2013).

As to Hain’s argument that the statements must be about Hain’s

products specifically, the Palmquists’ operative complaint directly links the

allegations to Hain’s products. And, when conducting a Rule 12(b)(6)-type

analysis, we must accept all well-pleaded facts as true. In re S. Scrap Material

Co., 541 F.3d at 587.

Hain, Whole Foods, and the district court all relied on decisions from

federal courts for the proposition that alleged misrepresentations may be too

general to be actionable. This is a problem, however, because “federal courts

sitting in diversity apply state substantive law.” Shady Grove Orthopedic

Assoc., P.A. v. Allstate Ins. Co., 559 U.S. 393, 437 (2010) (citation omitted).

Federal courts look to the decisions of the Texas Supreme Court (and lacking

any authoritative decision, decisions from the intermediate appellate courts)

to determine matters of Texas law. Primrose Oper. Co. v. Nat’l Am. Ins. Co.,

382 F.3d 546, 564-65 (5th Cir. 2004). And “any ambiguities of state law must

be resolved in favor of remand.” African Methodist Episcopal Church v. Lucien,

756 F.3d 788, 793 (5th Cir. 2014). Neither Hain nor Whole Foods have

pointed to any Texas cases to support its argument that Whole Foods’

representations about the quality of its food are too generalized.

Although there are few Texas cases interpreting Section 82.003(a)(5),

the few that the Palmquists point to have found fairly generalized statements

adequate enough to support a claim against a nonmanufacturing seller. See

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Transcon. Ins. Co. v. Briggs Equip. Tr., 321 S.W.3d 685, 702 (Tex. App.—

Houston [14th Dist.] 2010, no pet.) (holding that the plaintiff had asserted a

viable claim against a seller who assembled a hydraulic lift and “told [the

purchaser’s] employees that it was ‘okay’ not to use the outriggers.”); JSC

Nizhnedneprovsky Tube Rolling Plant v. United Res., LP, 2016 WL 8921926, at

*9 (Tex. App.—Corpus Christi–Edinburg [13th Dist.] Dec. 21, 2016, no pet.)

(holding that the evidence supported a jury finding of liability where a seller

incorrectly represented that a pipe was of a certain grade (i.e., quality)).

Moreover, other Texas express representation cases outside of those

interpreting Section 82.003(a)(5) likewise support the Palmquists’ argument

that fairly generalized statements may sometimes be actionable. See

Pennington v. Singleton, 606 S.W.2d 682, 687 (Tex. 1980) (determining that

statements expressing that products were in “excellent condition,” “perfect

condition,” and “just like new” were actionable under Texas’s DTPA). This

is especially so, under Texas law, where a seller purports to have specialized

knowledge. See Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341

S.W.3d 323, 338 (Tex. 2011).

The Palmquists alleged that Whole Foods represents that it “carefully

vet[s] [its] products to make sure they meet [] high standards by researching

ingredients, reading labels and auditing sourcing practices.” Accepting these

facts as true, and interpreting ambiguities of state law in favor of the

Palmquists, we hold that the district court erred in determining that there

was no possibility of recovery under Section 82.003(a)(5). In particular, we

note that Whole Foods purports to have special knowledge about the

ingredients in Hain’s baby food that is not available to customers. As the

Palmquists argue, the Whole Foods business model depends on this

reputation and customers’ willingness to a pay a premium for products that

Whole Foods advertises as healthy and high quality. Therefore, the district

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court erred in concluding that Whole Foods was improperly joined and in

denying the Palmquists’ motion to remand. 8

D. The Caterpillar Exception to Remand

Lastly, at issue is whether the district court’s refusal to remand the

case to state court requires us to vacate the take-nothing judgment. Hain and

Whole Foods rely on Caterpillar, Inc. v. Lewis, 519 U.S. 61 (1996), to argue

against remand. Hain argues that vacatur of the final judgment is not the

correct remedy, under Caterpillar and Newman-Green, Inc. v. Alfonzo-

Larrain, 490 U.S. 826 (1989), because there was complete diversity

jurisdiction at the time judgment was entered. It urges this court—in the

interests of judicial efficiency and finality—to preserve the judgment below

even if we determine remand should have been granted at the beginning of

the case. However, the Palmquists argue that, unlike Caterpillar, the

jurisdictional defect here was not cured prior to judgment. We agree with the

Palmquists. Remand is proper in the instant case because the jurisdictional

defect was never cured.

The case involving state law claims in Caterpillar was removed on the

basis of diversity jurisdiction. 519 U.S. at 64. Correspondingly, the district

court denied the plaintiff’s motion to remand the case to state court. Id. Prior

to final judgment, however, the sole non-diverse defendant in Caterpillar was

dismissed after that defendant and the plaintiff voluntarily settled. Thus, the

settlement reached between the non-diverse party and the plaintiff created

the diversity of citizenship between parties necessary to give rise to federal

subject matter jurisdiction. Id. The Supreme Court said as much by holding

_____________________

8

Hain further contends that the Palmquists’ claim constitutes a claim for fraud

that must satisfy the heightened pleading requirements of Federal Rule of Civil Procedure

9(b). But Hain failed to make this argument before the district court, thus it is forfeited.

Rollins, 8 F.4th at 397.

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that the removal defect was cured when the non-diverse party was dismissed

after removal but before trial commenced. Id. at 73–75 (holding that the

“jurisdictional defect was cured, i.e., complete diversity was established

before the trial commenced”). Consequently, the Court declined to remand

the case for a new trial in state court. Id. The Court affirmed that “[d]espite

a federal trial court’s threshold denial of a motion to remand, if, at the end of

the day and case, a jurisdictional defect remains uncured, the judgment must

be vacated.” Id. at 76–77.

This case is not controlled by Caterpillar. The improper removal

affected the subject-matter jurisdiction in this case. Unlike Caterpillar,

complete diversity did not exist at the time judgment was entered because

the Palmquists alleged non-fraudulent claims against a non-diverse

defendant, Whole Foods. Where a jurisdictional defect lingers (i.e., lack of

subject matter jurisdiction) through judgment in the district court, the case

must be remanded because the federal court lacked jurisdiction. McKee v.

Kansas City S. Ry. Co., 358 F.3d 329, 336 n.4 (5th Cir. 2004). The district

court should have remanded the case because “federal courts are courts of

limited jurisdiction and because without complete diversity the federal courts

do not have subject matter jurisdiction over a case that does not concern a

federal question.” See id. at 336–37.

IV. CONCLUSION

For the foregoing reasons, we REVERSE the district court’s

judgment denying the Palmquists’ motion to remand, VACATE the final

judgment of the district court, and REMAND with instructions for the

district court to remand the case to the state court from which it was

removed. Because we have determined that the district court erred in

denying the Palmquists’ motion to remand the case to the state court, we do

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not address whether the district court erred in granting judgment as a matter

of law in favor of Hain.

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