Amicus Curiae Brief — Martin v. Franklin Capital Corp.

fo) FILED

CF, JUL 25 2005

No. 04-1140

IN THE

Supreme Court of the United States

GERALD T. and JUANA M. MARTIN, on behalf of themselves

and all others similarly situated,

Petitioners,

v.

FRANKLIN CAPITAL CORPORATION, a Utah corporation, and

CENTURY-NATIONAL INSURANCE COMPANY,

a California corporation,

Respondents.

On Writ oF CERTIORARI TO THE UNITED STATES

CouRT OF APPEALS FOR THE TENTH CIRCUIT

BRIEF OF PRODUCT LIABILITY ADVISORY

COUNCIL, INC. AS AMICUS CURIAE IN

SUPPORT OF RESPONDENTS

Of Counsel: ROBERT N. WEINER

HuGH YOUNG, JR. Counsel of Record

Propuct LIABILITY ADVISORY RosBertT D. ROSENBAUM

Counc, INc. BRIAN E. BowcuT

1850 Centennial Park Drive SARAH M. BRACKNEY

Suite 510 ARNOLD & Porter LLP

Reston, VA 22091 555 12th Street, N.W.

(703) 264-5300 Washington, DC 20004

(202) 942-5000

Counsel for Amicus Curiae

195621 g

COUNSEL PRESS

OFFICE OF THE CLERK

1ABLE OF CONTENTS

TABLE OF CITED AUTHORITIES

INTEREST OF AMICUS CURIAE

SUMMARY OF ARGUMENT

ARGUMENT

I.

THE OVERRIDING OBJECTIVE OF THE

REMOVAL STATUTE IS TO EXTEND TO

DEFENDANTS THE PROTECTION OF A

NEUTRAL FORUM BASED ON

DIVERSITY JURISDICTION AS AN

ALTERNATIVE TO THE POTENTIALLY

BIASED STATE COURT FORUMS

SELECTED BY PLAINTIFFS

A REMOVAL BASED ON REASONABLE,

BUT ULTIMATELY UNSUCCESSFUL,

GROUNDS DOES NOT, WITHOUT MORE,

JUSTIFY SANCTIONS

A. Plaintiffs Are Devising Novel Strategies

to Block Removal and Defendants Are

Responding Appropriately by Urging the

Courts to Evolve Existing Principles to

Address Those New Strategies

ii

Contents

B. Uncertainties Arising from the Time

Limits in the Removal Statute Are

Another Reason Defendants Must Have

the Latitude to Advance Reasonable

AGQOUIOUES .occccesseseteeneeee

C. Defendants Also Must Have the Latitude

to Make Reasonable Arguments Given

the Uncertainties in Seeking to Establish

Fraudulent Joinder .....scccccccsces

Ili. CONGRESS DID NOT INTEND TO

GRANT HOLLOW REMOVAL RIGHTS,

SUBJECTING DEFENDANTS TO

SANCTIONS IF THEY ARE UNSUCCESS-

FUL IN OVERCOMING PLAINTIFFS’

ye Pere

CONT UGIUIN occ cccccucessesunneeee

APPENDIX A: CORPORATE MEMBERS OF THE

PRODUCT LIABILITY ADVISORY

est « Pri

Page

il

TABLE OF CITED AUTHORITIES

Page

Cases

B., Inc. v. Miller Brewing Co., 663 F.2d 545

EE 17, 18

Boyer v. Snap-on Tools Corp., 913 F.2d 108 (3d Cir.

pee CE Pere hevee es cceseseeecces 16. 17, 19

Chicago, Rock Island, & Pac. Ry. Co. v. Schwyhart,

Cer 9

Clay v. Wyeth, No. 5:04-cv-192-Oc-l1OGRJ

SS I EG IED cc cccccccccccccces 18

Coleman v. Conseco, Inc., 238 F. Supp. 2d 804

EE ee 10

Crowe v. Coleman, 113 F.3d 1536 (11th Cir. 1997)

PPE Mee wiebesesecscecbaceseces 17, 19

Doe v. Kerwood, 969 F.2d 165 (Sth Cir. 1992) .... 13

Erie R. Co. v. Tompkins, 304 U.S. 64 (1938) ...... 4

Exxon Mobil Corp. v. Allapattah Servs., Inc.,

i «<.cosetudeccecveceses 4,9

Franz v. Weth, No. H-04-0169 (S.D. Tex. Apr. 26,

i ae he eee ehbdebeoeenestes 16

iv

Cited Authorities

Page

Hales v. Merck & Co., Inc., No. 03-AR-1028-M

te Fe Fe eee 18

Heimback vy. A.H. Robins Co., Inc., No. 02-0347-S-

eee Gk Ee FEUD. OG, BOE cc ccccccscvcccecs 16

Hroncich v. Wyeth, No. 2:03-cv-659-FTM-29SPC

GRA TUR. SU. BA, SEO cc ccsccccccscescscs 18

In re Benjamin Moore & Co., 309 F.3d 296 (Sth Cir.

SD Sentesseds eheneSWaephdseceueseeees 10

In re Diet Drugs Prods. Liab. Litig., 220 F. Supp. 2d

S46 GBD. PO. BOGE) ccc cccccccccccecs 6, 11, 15, 17

In re Diet Drugs Prods. Liab. Litig., 294 F. Supp. 2d

Se EEE cesdatevadcasccnedecter 10

In re Fen-Phen Litig., No. 1:03-MD-1-RLV

eee Gs DU GE Knee ccdessanescecdet 9,10

In re Rezulin Prods. Liab. Litig., 168 F. Supp. 2d

eee 10, 17

In re Silica Prods. Liab. Litig., 2005 WL 1593936

Ss Ce, SD Se SE wuccccecsdccvcéecss 9,10

Johnson v. Helmerich & Payne, Inc., 892 F.2d 422

SD HEED. k onecneteuetaadassadascenes 11

Vv

Cited Authorities

Johnson v. Wyeth, No. 1:02-CV-1368-TNT (N.D. Ga.

SA GREED Shanecassduneceocéecucesences

Koch v. PLM Int'l, Inc., 1997 WL 907917 (S.D. Ala.

it I a coaveenkelesenal

Legg v. Wyeth, No. CV-04-S-0435-NE (N.D. Ala.

PD, Bee Ee 8 cv thorescperencsescecescens

SEED Sccecevbdcovensccecesesoncessevenes

McKinney v. Bd. of Trs. of Md. Cmty. Coll.,

955 F.2d 924 (4th Cir. 1992) .............4..

Pacheco de Perez v. AT&T Co., 139 F.2d 1368

CRE GER GRGED ccccceccesesesccesccseaces

Parnas v. Gen. Motors Corp., 879 F. Supp. 91

GEL GED. TRGED ccocevccncccvcvccecesecens

Powers v. Chesapeake & O. Ry. Co., 169 U.S. 92

CREED ccccccccessececesocosenssecesesees

Reeb v. Wal-Mart Stores, Inc., 902 F. Supp. 185

Dn Ce seadeesnénccesecetetuesuue

Staples v. Joseph Morton Co., 444 F. Supp. 1312

GREASE Be CUED cccccccccccccvcsscccessese

vi

Cited Authorities

Page

Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353

oo ee errr 10

Tedford v. Warner-Lambert Co., 327 F.3d 423

ee oe 6, 13,14

Triggs v. John Crump Toyota, Inc., 154 F.3d 1284

DL ctctvcceneskauneuecnwuaeen 16

United Steelworkers of Am., AFL-CIO v. R.H.

Bouligny, Inc., 382 U.S. 145 (1965) ........... 4

Walker v. Armco Steel Corp., 446 U.S. 740 (1980)

RAE bewenNeneses enaneesaeunebaiaue 4

Wecker v. Nat'l Enameling & Stamping Co., 204 U.S.

DE. divnéspsundbacneneeneutuuinans 6

Wilson v. Republic Iron & Steel Co., 257 U.S. 92

DD Giese seaveeeceséeaneudeudscevsecens 6, 16

Statutes

DE vioekddcietedendiunenoseée 2

Ph ec ccvescageeedssseuenbend 11, 12

PG ED ouddvnesdeedesevedcceneens 20

Class Action Fairness Ac* of 2005, Pub. L. No. 109-

NS 8 er ee 6-7

vil

Cited Authorities

Page

Judiciary Act of 1789, ch. 20, § 12, 1 Stat. 73,

Ds cosudsbdcéecacdbedeanseseeteden su 5

Other Authorities

American Law Institute, Feperat JupiciaL Cope

Revision Proyect 466 (2004) ................ 7

Erwin Chemerinsky, Feperat Jurispiction (4th ed.

Di coveseketecéntanesddusabestenuebees 5

Henry J. Friendly, The Historic Basis of Diversity

Jurisdiction, 41 Harv. L. Rev. 483 (1928) ...... 5

S. Rep. No. 109-14(2005) .............ceeeeee 4,7

l

This brief is filed on behalf of the Product Liability

Advisory Council, Inc. as amicus curiae in support of

Respondents, with the written consent of the parties.'

INTEREST OF AMICUS CURIAE

The Product Liability Advisory Council, Inc. (“PLAC”)

is a nonprofit corporation with more than 120 corporate

members representing a broad cross-section of American

industry. Its corporate members include manufacturers and

sellers of products such as automobiles, aircraft, electronics,

chemicals, pesticides, pharmaceuticals and medical devices.’

PLAC’s primary purpose is to file amicus curiae briefs in

cases raising issues that affect the development of products

liability law and that have the potential to affect PLAC’s

members. PLAC has submitted hundreds of amicus briefs in

state and federal appellate courts, including this Court.

The members of PLAC have a significant interest in the

principles relating to the removal of state court actions to

federal courts. In recent years, PLAC members have been

named as defendants in numerous state court actions,

particularly in mass tort product liability cases. They have

gained first-hand experience with devices used by the

plaintiffs’ bar in an effort to block defendants’ removal of

those actions to federal court based on diversity jurisdiction

' Copies of those consents have been filed with the Clerk of the

Court. No counsel for a party in this case authored this brief in whole

or in part, and no person or entity other than amicus curiae, its

members or its counsel made a monetary contribution to the

preparation or submission of this brief.

? A list of PLAC’s current corporate membership is included

as Appendix A to this brief.

2

under the provisions of 28 U.S.C. § 1441(a). PLAC’s

members have a particular interest in retaining the right to

challenge plaintiffs’ improper devices and strategies to block

the appropriate exercise of defendants’ Statutory removal

rights, without the threat of being sanctioned if they are not

able to establish the impropriety of those devices and

Strategies.

SUMMARY OF ARGUMENT

Petitioners argue that this Court should adopt a novel

standard, tilted toward plaintiffs, for implementing the costs

and fees provision of the removal statute. This extraordinary

approach — reading the word “may” in the statute to mean

“shall” — is necessary, Petitioners claim, to Carry Out the intent

of Congress, to fulfill the “large objectives” of the removal

Statute and to satisfy “equitable considerations.” Respondents

have already refuted Petitioners’ arguments concerning

Congress’ intent in amending that provision of the removal

statute. Respondents have also demonstrated that, to the

extent the “large objectives” of the removal statute and

“equitable considerations” bear upon the standard for

awarding fees under that provision, those factors favor the

party-neutral, multi-factor analysis applied by the lower

courts in this case.

As to “large objectives,” a central purpose of the removal

Statute since the dawn of the Republic has been to extend

the protection of diversity jurisdiction to defendants sued

outside their home state. Petitioners emphasize the purposes

of the limitations on removal, but those limitations are

subsidiary to this overriding objective of the statute: to

provide a neutral forum to such defendants. To that end, this

Court and the other federal courts have vigilantly protected

3

defer dants against abusive practices by plaintiffs designed

to frustrate the right of removal.

As to the appropriate equitable considerations in

establishing a standard for fee awards, one of the most crucial

is the development and proliferation of Stratagems to

manipulate federal jurisdiction and defeat defendants’

removal rights. These devices are often difficult for

defendants to overcome at the opening stages of a litigation.

The law is often uncertain. The approaches of the lower courts

vary. And the record is often undeveloped. But it is not

improper for defendants to try, so long as they have a

reasonable basis for such challenges. To over-deter them

would be to reward manipulative conduct by some plaintiffs

and to undercut the central goal of the removal statute. Equity

is best served under these circumstances, not by adopting a

rule tilted toward plaintiffs, but by leaving to the discretion

of the district judge the determination, based on neutral

factors, whether to award fees under the specific facts before

the court. The most iraportant factors in determining whether

fees should be awarded should be the nature of the Strategic

obstacle to removal being challenged, the plaintiff's apparent

intent in erecting the obstacle and the reasonableness of the

defendants’ challenge, even if unsuccessful.

As to the intent of Congress, there is no indication from

any source that Congress intended to grant defendants

removal rights while subjecting them to sanctions for

reasonable, but unsuccessful efforts to exercise those rights.

4

ARGUMENT

I. THE OVERRIDING OBJECTIVE OF THE

REMOVAL STATUTE IS TO EXTEND TO

DEFENDANTS THE PROTECTION OF A

NEUTRAL FORUM BASED ON DIVERSITY

JURISDICTION AS AN ALTERNATIVE TO THE

POTENTIALLY BIASED STATE COURT FORUMS

SELECTED BY PLAINTIFFS

The Constitution provided for diversity jurisdiction of the

federal courts, and the very first Congress implemented it in

the Judiciary Act of 1789. As this Court explained just last Term,

“the purpose of the diversity requirement . . . is to provide a

federal forum for important disputes where state courts might

favor, or be perceived as favoring, home-state litigants.” Exxon

Mobil Corp. v. Allapattah Servs., Inc., 125 8. Ct. 261 1, 2618

(2005); see also Walker v. Armco Steel Corp., 446 U.S. 740,

745 (1980) (“‘[D]iversity of citizenship jurisdiction was

conferred in order to prevent apprehended discrimination in state

courts against those not citizens of the State.’”’) (quoting Erie

R. Co. v. Tompkins, 304 U.S. 64, 74 (1938)); United Steelworkers

of Am., AFL-CIO v. R.H. Bouligny, Inc., 382 U.S. 145, 150

(1965) (Diversity jurisdiction provides “protection of the

nonresident litigant from local prejudice.”). The diversity

jurisdiction clause also reflects a concern, of particular relevance

to present-day suits against out-of-state corporations, “that state

courts might discriminate against interstate businesses and

commercial activities.” It was therefore viewed “as a means of

ensuring the protection of interstate commerce.” ?

*S. Rep. No. 109-14, at 8 (2005) (report accompanying The

Class Action Fairness Act of 2005). That report cited, among other

scholars, Henry J. Friendly, subsequently an eminent judge of the

(Cont'd)

5

Since first implementing the diversity jurisdiction

authorized by Article III, Congress has also allowed

defendants the right to remove to federal court certain cases

brought against them in state courts. See Judiciary Act of

1789, ch. 20, § 12, 1 Stat. 73, 79-80 (providing for removal

when the amount in controversy exceeded $500 and the

defendant was a citizen of a different State). Petitioners’

rendition of the objectives of statutory removal rights is

unbalanced and myopic. The overriding purpose of the

creation of removal rights was to extend the protection of

diversity jurisdiction to defendants. See Erwin Chemerinsky,

FEDERAL JuRISDICTION § 5.5 (4th ed. 2003). Because plaintiffs

select the forum in the first instance, they do not need a right

of removal to invoke diversity jurisdiction. Unless defendants

could remove, diversity would protect only plaintiffs.

Even wholly diverse out-of-state defendants would always

be forced to litigate in the state courts of plaintiffs’ choice.

To be sure, defendants’ removal rights are subject to

limitations, but those limitations do not displace the

overriding objective of the removal statute to provide such

protection to defendants.

Accordingly, this Court has long been Vigilant in

protecting defendants’ removal rights against abusive

practices designed to frustrate those rights. See, e. g., Powers

v. Chesapeake & O. Ry. Co., 169 U.S. 92, 102 (1898) (in suit

against diverse railway and non-diverse local employees,

court permitted belated removal when employees were

(Cont'd)

Second Circuit Court of Appeals. In an examination of the reasons

for the grant of diversity jurisdiction, he found a “principal reason”

to have been a “desire to protect creditors against [state] legislation

favorable to debtors.” Henry J. Friendly, The Historic Basis of

Diversity Jurisdiction, 41 Harv. L. Rev. 483, 496-97 (1928).

6

dismissed from the action at trial); Wecker v. Nat’! Enameling

& Stamping Co., 204 U.S. 176, 185 (1907) (ignoring non-

diverse defendant’s citizenship when joined for the purpose

of preventing exercise of right of removal and without a

factual basis); Wilson v. Republic Iron & Steel Co., 257 U.S.

92, 98 (1921) (same). As this Court admonished nearly

100 years ago in Wecker, “the 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 Federal court as to permit

the state courts, in proper cases, to retain their own

jurisdiction.” 204 U.S. at 186.

There is, if anything, greater need for such vigilance now

than in 1907. Indeed, the recent echoes in federal courts of

Wecker’s call for scrutiny reflect the increased salience of

the concern. The Court of Appeals for the Fourth Circuit, for

example, observed that “Congress created the removal

process to protect defendants. It did not extend such

protection with one hand, and with the other give plaintiffs a

bag of tricks to overcome it.” McKinney v. Bd. of Trs. of Md.

Cmty. Coll., 955 F.2d 924, 928 (4th Cir. 1992).4 Congress

recognized the need for protecting defendants’ right to a

neutral federal forum in interstate class action litigation

earlier this year by its enactment of “The Class Action

* See also Tedford v. Warner-Lambert Co., 327 F.3d 423, 427

(Sth Cir. 2003) (“Congress may have intended to limit diversity

jurisdiction [by time limits reducing the opportunity for removal after

substantial progress had been made in state court], but it did not

intend to allow plaintiffs to circumvent it altogether.”); In re Diet

Drugs Prods. Liab. Litig., 220 F. Supp. 2d 414, 425 (E.D. Pa. 2002)

(“As long as Congress authorizes the federal district courts to exercise

subject matter jurisdiction over diversity actions we must protect

the right of parties to invoke it.”).

J

Fairness Act of 2005.” Pub. L. No. 109-2, 119 Stat. 4. That

Act extended protection for defendants in such actions,

following extensive hearings into plaintiffs’ lawyers’

“gam[ing]” procedural rules to keep interstate class actions

in state courts. See S. Rep. No. 109-14, at 4, 10. The same

“gaming” occurs in non-class action litigation against

interstate businesses, as discussed below. The explosion of

mass tort litigation has increased defendants’ need for a

neutral federal forum.

Il. A REMOVAL BASED ON REASONABLE, BUT

ULTIMATELY UNSUCCESSFUL, GROUNDS

DOES NOT, WITHOUT MORE, JUSTIFY

SANCTIONS

~ Petitioners assume that a remand of a removed case

means the defendant somehow acted improperly or

contravened Congress’s intent in removing the case, even if

the removal rested on reasonable grounds. See Pet. Br. at

§ IV.A. Not only is that assertion unfounded, but it also would

subvert the central function of the removal statutes. As the

American Law Institute recently stated, “[c]urrent law invites

contrivance to frustrate defendants’ legitimate rights of

removal by a variety of stratagems ....” American Law

Institute, FEDERAL JupiciAL Cope REVISION PROJECT 466

(2004). We discuss below a sample of some of those

contrivances and the challenges they pose to the appropriate

exercise of removal rights. Even these few samples, however,

demonstrate that Petitioners’ interpretation of the fee award

provision of the removal statute would vitiate the removal

rights that Congress granted.‘

* These examples are drawn primarily from diversity jurisdiction

removals, because removals on that basis arise most often in product

(Cont'd)

8

A. Plaintiffs Are Devising Novel Strategies to Block

Removal and Defendants Are Responding

Appropriately by Urging the Courts to Evolve

Existing Principles to Address Those New

Strategies

Petitioners argue that defendants should not remove

cases based on “novel contentions.” If that were the rule,

however, defendants could not respond to new strategies to

block their right of removal. The law is not static. As Justice

Holmes observed, the life of the law is experience.

Legal standards must adapt to the innovations of thousands

of practitioners plying their ingenuity on behalf of their

clients. Not only is there nothing improper in defendants’

urging courts to extend established principles to plaintiffs’

latest devices to block removal, such advocacy is essential.

As this Court explained more than 100 years ago, it is

sometimes necessary for the court to develop new

interpretations of removal law to “prevent the right of

removal, to which the statute declares the party to be entitled,

from being defeated by circumstances wholly beyond his

control.” Powers, 169 U.S. at 100.

One example of such a new device used in mass tort

cases to block federal court jurisdiction is the filing of mass

complaints, joining — or more aptly misjoining — numerous

plaintiffs diverse from defendants, whose claims could

therefore be removed to federal court if filed individually,

with at least one plaintiff who is not diverse from at least

(Cont'd)

liability litigation. We do not mean to Suggest that there are not similar

issues arising in connection with removals based on federal question

jurisdiction.

9

one defendant. This device multiplies the effect on

removability of one non-diverse plaintiff, using that lack of

diversity to insulate potentially thousands of other plaintiffs

against removal. See Allapattah, 125 S. Ct. at 2617 (diversity

jurisdiction requires that all plaintiffs be diverse from all

defendants). In product liability litigation involving silica,

for example, up to 4,280 plaintiffs joined in a Single

complaint filed in a Mississippi state court, with at least one

plaintiff having the same citizenship as at least one defendant.

See In re Silica Prods. Liab. Litig., 2005 WL 1593936, at

*74-*75 (S.D. Tex. June 30, 2005). In product liability

litigation involving the diet drugs sometimes known as “fen-

phen,” 168 cases were filed in a Georgia municipal court on

behalf of more than 14,000 plaintiffs residing throughout the

nation. In each case, only one or two plaintiffs were Georgia

residents and no more than a handful of plaintiffs lacked

citizenship diverse from that of any defendant. See In re Fen-

Phen Litig., No. 1:03-MD-1-RLY, slip op. at 2 (N.D. Ga.

Oct. 15, 2003).° In response to this new strategy, defendants

have properly argued that plaintiffs have invented a new form

of fraudulent joinder, just as inappropriate as plaintiffs’

fraudulently joining non-diverse defendants against whom

plaintiffs have no intention of seeking a recovery or no valid

claim. See Chicago, Rock Island, & Pac. Ry. Co. y.

Schwyhart, 227 U.S. 184, 194 (1913) (“fraudulent joinder”

of a defendant is found either when there is no real intention

to get a joint judgment or when there is no colorable ground

for such a judgment).

A number of courts have accepted that argument, and

this removal-blocking device has come to be known as

* Unpublished decisions cited in this brief will be provided upon

the request of the Court.

10

“fraudulent misjoinder.”’ Not every court, however, has

recognized this device as a form of fraudulent joinder.

See, e.g., In re Benjamin Moore & Co., 309 F.3d 296, 298

(Sth Cir. 2002) (district court had remanded case despite

fraudulent misjoinder claim; Court of Appeals agreed with

defendants that “it might be concluded that misjoinder of

plaintiffs should not be allowed to defeat diversity

jurisdiction,” but the Court was without jurisdiction to

overturn district court). Even courts which accept the general

proposition that joinder of plaintiffs may constitute a form

of fraudulent joinder differ as to the standard to apply in

evaluating such a claim. Compare, e.g., Tapscott v. MS Dealer

Serv. Corp., 77 F.3d 1353, 1360 (11th Cir. 1996) (requiring

“egregious” misjoinder for finding of fraudulent misjoinder),

with In re Rezulin Prods. Liab. Litig., 168 F. Supp. 2d at

147-48 (rejecting requirement of “egregiousness”); compare

Koch v. PLM Int'l, Inc., 1997 WL 907917, at *34 (S.D. Ala.

Sept. 24, 1997) (applying federal joinder rules), with In re

Diet Drugs Prods. Liab. Litig., 294 F. Supp. 2d at 678-79

” See, e.g., In re Silica Prods. Liab. Litig., 2005 WL 1593936,

at *75 (finding that each plaintiff's claim should be considered in

evaluating federal jurisdiction as if that claim had been severed from

all the other plaintiffs’ claims); Coleman v. Conseco, Inc., 238

F. Supp. 2d 804, 818 (S.D. Miss. 2002) (finding that 48 plaintiffs,

only 3 of whom were non-diverse from defendants, were fraudulently

misjoined and remanding only those 3 plaintiffs’ claims to state

court); In re Diet Drugs Prods. Liab. Litig., 294 F. Supp. 2d 667,

677-79 (E.D. Pa. 2003) (finding fraudulent misjoinder in six Georgia

cases, each having one Georgia non-diverse plaintiff and numerous

out-of-state and diverse plaintiffs); In re Rezulin Prods. Liab. Litig.,

168 F. Supp. 2d 136, 146-47 (S.D.N.Y. 2001) (finding fraudulent

misjoinder of plaintiffs because only some of multiple plaintiffs had

valid claims against non-diverse defendants): In re Fen-Phen Litig..,

slip op. at 3 (finding fraudulent misjoinder of more than 14,000

plaintiffs).

1]

(applying state joinder rules). In the Eleventh Circuit,

moreover, where an element of “egregiousness” is required

for a finding of fraudulent misjoinder, the courts have not

yet defined what conduct would be considered sufficiently

“egregious” for that purpose.

Particularly in connection with such a newly evolving

principle of law, where the boundaries and even the direction

are unclear, where the standards vary from jurisdiction to

jurisdiction, defendants must have room for reasonable

advocacy, even if they are unsuccessful in convincing a

particular court of their position. As with any effort to extend

established principles to new circumstances, defendants will

not always be successful in challenging this improper device.

But that does not make those efforts improper, and the Court

should not chill them.

Another example of plaintiffs’ new anti-removal tactics

also came to light in the “fen-phen” litigation. The court

assigned the multidistrict litigation found substantial

evidence that some defendants had colluded with the

plaintiffs’ bar to deny the principal defendant its Statutory

removal rights. See In re Diet Drugs Prods. Liab. Litig.,

220 F. Supp. 2d at 420-22. The colluding defendants had

refused to grant required consents to the principal defendant's

removals in hundreds or thousands of cases. See id. Without

those consents, the principal defendants’ removals were

blocked.* In return, plaintiffs ultimately dismissed those

co-defendants. However, the evidence of such collusion took

years to uncover. Surely, a defendant in such circumstances

should not be sanctioned for challenging such collusion, even

if the defendant fails to convince a court of the collusion.

* Courts have interpreted 28 U.S.C. § 1446(b) to require that

all defendants join in or consent to removal. See, e.g., Johnson v.

Helmerich & Payne, Inc., 892 F.2d 422, 423 (Sth Cir. 1990).

12

B. Uncertainties Arising from the Time Limits in the

Removal Statute Are Another Reason Defendants

Must Have the Latitude to Advance Reasonable

Arguments

In order that the case not proceed wastefully in state court

for too long prior to removal, Congress imposed time limits ~

on defendants’ removal rights. A defendant must remove a

State court case within 30 days after service. 28 U.S.C.

§ 1446(b). However,

[iJf the case stated by the initial pleading is not

removable, a notice of removal may be filed

within 30 days after receipt by the defendant .. .

of a copy of an amended pleading, motion, order

or other paper from which it may first be

ascertained that the case is one which is or has

become removable, except that a case may not be

removed on the basis of [diversity] jurisdiction

--. More than | year after commencement of the

action.

Id. Working within these time limits creates Significant

uncertainties for defendants.

A defendant having reason to believe there is fraudulent

joinder but possessing incomplete evidence to that effect at

the outset of the case faces a practical dilemma. If the

defendant removes the case at the outset based on the limited

facts then available, it risks remand for failure to meet the

significant burden of demonstrating fraudulent joinder at that

time. On the other hand, if the defendant does not remove

13

the case within the first 30 days, but does so later based on

additional facts obtained in discovery, it risks an objection

that the removal is untimely, that there were sufficient facts

available at the outset to have supported the grounds on which

the defendant subsequently removed the case. The same type

of dilemma arises as the facts emerge in discovery. As

developing evidence increasingly Suggests fraudulent joinder,

the defendant will have to make a judgmenf when it is first

ascertainable that the case has become removable. As part

of that assessment, the defendant will also need to weigh

whether the evidence is yet sufficient to meet the defendant’ s

burden of establishing fraudulent joinder. When these

judgment calls are reasonable, but a federal court ultimately

disagrees and finds the defendant removed either too early

or too late, it would be inequitable to subject the defendant

to sanctions.

Moreover, plaintiffs are well aware of the Statutory time

limits and often act in a manner designed inequitably to

prevent defendants from removing on a timely basis.

Defendants may properly challenge those tactics as

inequitable. For example, in Tedford v. Warner-Lambert Co.,

plaintiff sued a non-diverse prescribing physician along with

an out-of-state drug manufacturer but signed a dismissal of

the claim against the physician. However, the plaintiff did

not disclose that dismissal to the manufacturer until the one-

year time limit for removal had passed. When removing the

case, the manufacturer successfully argued as a matter of

equity that the one-year deadline should be tolled because of

plaintiffs’ manipulation. The court agreed. See 327 F.3d at

426-27; see also, e.g., Doe v. Kerwood, 969 F.2d 165, 169

(Sth Cir. 1992) (recognizing equitable power of the court to

consider exceptions to the statutory 30-day limit on removal);

14

Staples v. Joseph Morton Co., 444 F. Supp. 1312; 1313-14

(E.D.N.Y. 1978) (plaintiff estopped from moving to remand

when he induced defendant to refrain from removing on a

timely basis). However, the courts are split on whether such

equitable tolling applies and it is in any event not clear what

conduct triggers an equitable exception to the statutory time

periods. See, e.g., cases cited in Tedford, 327 F.3d at 426

n.4. It would be unfair and contrary to the central purposes

of the removal statute to put a defendant at high risk of

sanctions in order to find out the answer to this legal question

in a particular jurisdiction.

C. Defendants Also Must Have the Latitude to Make

Reasonable Arguments Given the Uncertainties

in Seeking to Establish Fraudulent Joinder

Plaintiffs suing out-of-state defendants have not only

developed new stratagems to block removal but have

continued to use the older tactic of joining non-diverse

defendants with no intention of pursuing a judgment or no

colorable claim against the them. It is a common practice,

for example, for mass tort plaintiffs Suing out-of-state

corporate defendants in state court to name as a co-defendant

a low-level corporate employee living in that state or a local

distributor of the product in question, merely to keep the

case in state court and without any interest in seeking a

judgment against the co-defendant. If the corporate defendant

has reason to believe, as a legal or factual matter, that the

local defendant is fraudulently joined, it is entirely

appropriate to challenge that device. Proving fraudulent

joinder, however, is often a difficult challenge for defendants.

They face uncertainties even as to the procedures the district

court will employ in resolving such a claim.

15

This phenomenon is demonstrated by the predicament

of the Bankston Drugstore in rural Fayette, Mississippi,

which was sued in hundreds of cases filed there and was

later usually dropped from the suit. It was no secret to the

courts or the parties that the only reason Bankston Drugstore

was being sued was to keep the case in state court.

Establishing that proposition was no simple matter, however.

One court, relying on the testimony of the owner of that

pharmacy before the House Judiciary Committee, explained

the situation as follows:

As the only pharmacy in Jefferson County,

Mississippi, the store is named in hundreds of

lawsuits involving the sale of allegedly defective

drugs, including fen-phen. Hilda Bankston, the

former owner of the pharmacy, testified [before

the House Judiciary Committee] that because of

this “lawsuit frenzy” she has had to spend

innumerable hours retrieving information for

potential plaintiffs, testifying in court, enduring

the whispers and questions of customers and

neighbors who wonder what the pharmacy did to

end up in court so often, and worrying about

whether her business would survive. . . . Although

the pharmacy is usually dropped from the

lawsuits, the costs of hiring lawyers and

obtaining insurance can become prohibitive.

As Ms. Bankston sees it, her “life’s work was

merely a means to an end for trial lawyers seeking

to cash in on lucrative class actions — a back door

into the Jefferson County court system.”

In re Diet Drugs Prods. Liab. Litig., 220 F. Supp. 2d at 424

(internal citations omitted).

16

Defendants could challenge such a removal-blocking

strategy by showing that the plaintiff had no good faith

intention of pursuing the non-diverse defendant to judgment.

See, e.g., Wilson, 257 U.S. at 98; Triggs v. John Crump

Toyota, Inc., 154 F.3d 1284, 1291 (11th Cir. 1998); Boyer v.

Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990).

But proving the plaintiff's intent in bringing a lawsuit is rarely

a certainty for a defendant considering removal. In rare cases,

there might be direct evidence of intent. See, e.g., Mask v.

Chrysler Corp., 825 F. Supp. 285, 286-87 (N.D. Ala. 1993)

(plaintiff's counsel sent letter to non-diverse automobile

dealership defendant joined in suit against manufacturer,

Stating that plaintiff did not intend to pursue the dealership

to judgment); Heimback v. A.H. Robins Co., Inc., No. 02-

0347-S-BLW, slip op. at 2-3 (D. Id. Nov. 14, 2002) (non-

diverse physician-defendant testified that patient-plaintiff had

assured him that physician was joined in suit against drug

manufacturer only to keep the case in state court). In other

cases, a defendant might only have circumstantial evidence.

By the very nature of such evidence, however, a defendant is

always uncertain at the time of removal whether or not it

will be able to prevail in establishing a lack of intent on that

basis. See, e.g., Parnas v. Gen. Motors Corp., 879 F. Supp.

91,94 (E.D. Mo. 1995) (evidence insufficient to demonstrate

lack of intent); Franz v. Wyeth, No. H-04-0169, Slip op. at

6-13 (S.D. Tex. Apr. 26, 2004) (proposed plaintiff agreement

to dismiss non-diverse defendant if diverse defendant would

agree not to remove case was insufficient evidence of lack

of intent to pursue non-diverse defendant to judgment).

An alternative to proving a lack of intent to pursue the

defendant would be to demonstrate that there is no reasonable

possibility of plaintiff's establishing a claim against the non-

diverse defendant. If the law governing liability is uncertain,

17

however, the courts will give the plaintiff the benefit of the

doubt in ruling on a fraudulent joinder challenge to the claim

against that defendant. See, e.g., Crowe v. Coleman, 113 F.3d

1536, 1540 (11th Cir. 1997); Boyer, 913 F.2d at 111: B., Inc.

v. Miller Brewing Co., 663 F.2d 545, 549 (Sth Cir. 1981).

In some cases, plaintiffs’ strategy for defeating removal

is to make factual allegations in their complaint sufficient

on their face to state a claim against a non-diverse defendant,

even when no valid claim exists as a factual matter. See, e.2.,

In re Diet Drugs Prods. Liab. Litig., 220 F. Supp. 2d at 422

(50 plaintiffs sued Dr. Seymour Hersh alleging that he had

prescribed a drug to them, even though the evidence showed

that none of the plaintiffs had been treated by or had had any

contact whatever with Dr. Hersh); Jn re Rezulin Prods. Liab.

Litig., 168 F. Supp. 2d at 138-141 (non-diverse field sales

representative joined in suit against drug manufacturer under

State law requiring sale of the drug for liability, despite

evidence that the representative had never sold the drug).

Defendants face uncertainty, however, as to how far the

district court will permit them to go in introducing evidence

to establish that there is no colorable claim against the non-

diverse defendant. First, courts differ, even within the same

circuit, as to whether their review of a fraudulent joinder

claim is limited to the allegations of the complaint or whether

they may consider evidence proffered by the parties.

See, e.g., Pacheco de Perez v. AT&T Co., 139 F.2d 1368,

1380 (11th Cir. 1998) (fraudulent joinder determination to

be made based on complaint supplemented by any affidavits

and deposition transcripts); Johnson v. Wyeth, No. 1:02-CV-

1368-TNT (N.D. Ga. Jan. 3, 2003) (determining fraudulent

18

joinder based in part on deposition transcripts); Hales v.

Merck & Co., Inc., No. 03-AR-1028-M, slip op. at 6-7

(N.D. Ala. Jung 26, 2003) (court would not consider non-

diverse defendants’ affidavits in deciding fraudulent joinder);

Legg v. Wyeth, No. CV-04-S-0435-NE, slip op. at 10 (N.D.

Ala. Apr. 27, 2004) (refusing to consider non-diverse field

sales representative defendant’s affidavit that she had never

promoted or had anything else to do with the drug in

question); see also Reeb v. Wal-Mart Stores, Inc., 902 F. Supp.

185, 187-88 (E.D. Mo. 1995) (discussing the split of authority

in the Eighth Circuit on whether or not to permit “piercing

of the pleadings” in evaluating fraudulent joinder).

Even within a single judicial district, judges’ divergent

views of the limitations on piercing the pleadings can lead

to different decisions based on substantially identical facts.

Compare, e.g., Clay v. Wyeth, No. 5:04-cv-192-Oc-10GRJ,

slip op. at 28 (M.D. Fla. Sept. 23, 2004) (Hodges, J.) (finding

that pharmacy and drug company sales representatives were

fraudulently joined because the affidavits and other evidence

submitted by the parties established that there was no

reasonable basis for the claims against these defendants),

with Hroncich v. Wyeth, No. 2:03-cv-659-FTM-29SPC, slip

op. at 3-4 (M.D. Fla. Jan. 12, 2004) (Steele, J.) (refusing to

go beyond allegations of complaint and remanding case that

involved similar facts and evidence and the same types of

non-diverse defendants as in Clay).

Courts that permit some piercing of the pleadings,

moreover, often limit the factual issues they will consider.

See, e.g., B., Inc., 663 F.2d at 551 (“The question of whether

the plaintiff has set forth a valid claim against the in-state

defendant(s) should be capable of summary determination.”);

eae ee e___ __ eG

19

Crowe, 113 F.3d at 1541-42 (district court is to stop short of

adjudicating the merits of the case); Boyer, 913 F.2d at 112

(recognizing uncertainty as to extent of permissible inquiry

into the validity of the claim).

Particularly under these circumstances, it would be

inequitable and contrary to the central purpose of the removal

Statute for plaintiffs’ legal fees to be imposed on a defendant

merely because it is unsuccessful in establishing fraudulent

joinder in a particular case.

III. CONGRESS DID NOT INTEND TO GRANT

HOLLOW REMOVAL RIGHTS, SUBJECTING

DEFENDANTS TO SANCTIONS IF THEY

ARE UNSUCCESSFUL IN OVERCOMING

PLAINTIFFS’ STRATAGEMS

The foregoing discussion includes only some examples

of the uncertainties facing many defendants considering

removing a case against them filed in state court. Plaintiffs

suing out-of-state corporations have many devices available

to frustrate defendants’ exercise of their right to seek the

neutral forum provided by the federal court. Defendants

cannot always be successful in challenging those devices in

the face of the uncertainties discussed above. But there is no

indication in the removal statute, its legislative history or its

“large objectives” that Congress intended to require

defendants who acted reasonably nonetheless to pay the

plaintiffs’ legal fees whenever defendants are unsuccessful

in upholding a removal. To the contrary, these factors weigh

heavily in favor of the type of multi-factor, party-neutral

standard employed by the Court of Appeals in this case. When

“equitable considerations” are added to the mix, there can

be no question that the equities overwhelmingly favor this

Court’s affirming the application of that type of standard.

20

CONCLUSION

For the foregoing reasons, the Court should affirm the

Tenth Circuit’s ruling as to the standards for determining an

award of costs and fees under 28 U.S.C. § 1447(c) and as to

the decision in this case.

Respectfully submitted,

Of Counsel: RosBert N. WEINER

HuGH YOUNG, Jr. Counsel of Record

Propuct LIABILITY ADVISORY RoBERT D. ROSENBAUM

CounclL, INc. Brian E. Bowcut

1850 Centennial Park Drive SARAH M. BRACKNEY

Suite 510 ARNOLD & Porter LLP

Reston, VA 22091 555 12th Street, N.W.

(703) 264-5300 Washington, DC 20004

(202) 942-5000

Counsel for Amicus Curiae

la

APPENDIX A:

CORPORATE MEMBERS OF THE

PRODUCT LIABILITY ADVISORY COUNCIL

3M

Altec Industries

Altria Corporate Services, Inc.

American Household, Inc.

American Suzuki Motor Corporation

Amgen Inc.

Andersen Corporation

Anheuser-Busch Companies

Appleton Papers, Inc.

Arai Helmet, Ltd.

Astec Industries

Aventis Pharmaceuticals, Inc.

BASF Corporation

Bayer Corporation

Beretta U.S.A Corp.

BIC Corporation

Biro Manufacturing Company, Inc.

Black & Decker (U.S.) Inc.

BMW of North America, LLC

Boeing Company

Bombardier Recreational Products

BP America Inc.

Bridgestone Americas Holding, Inc

Briggs & Stratton Corporation

Bristol-Myers Squibb Company

Brown-Forman Corporation

CARQUEST Corporation

Caterpillar Inc.

Chevron Corporation

Continental Tire North America, Inc.

2a

Appendix A

Cooper Tire and Rubber Company

Coors Brewing Company

Crown Equipment Corporation

DaimlerChrysler Corporation

Deere & Company

The Dow Chemical Company

E & J Gallo Winery

E.I1. DuPont De Nemours and Company

Eaton Corporation

Eli Lilly and Company

Emerson Electric Co.

Engineered Controls International, Inc.

Estee Lauder Companies

Exxon Mobil Corporation

Ford Motor Company

Freightliner LLC

General Electric Company

General Motors Corporation

GlaxoSmithKline

The Goodyear Tire & Rubber Company

Great Dane Limited Partnership

Guidant Corporation

Harley-Davidson Motor Company

The Heil Company

Honda North America, Inc.

Hyundai Motor America

ICON Health & Fitness, Inc.

Illinois Tool Works, Inc.

International Truck and Engine Corporation

Isuzu Motors America, Inc.

Johnson & Johnson

Johnson Controls, Inc.

3a

Appendix A

Joy Global Inc., Joy Mining Machinery

Kawasaki Motors Corp., U.S.A.

Kia Motors America, Inc.

Koch Industries

Kolcraft Enterprises, Inc.

Kraft Foods North America, Inc.

Lincoln Electric Company

Masco Corporation

Mazda (North America), Inc.

McNeilus Truck and Manufacturing, Inc.

Medtronic, Inc.

Mercedes-Benz of North America, Inc.

Michelin North America, Inc.

Miller Brewing Company

Mine Safety Appliances Company

Mitsubishi Motors North America, Inc.

Nintendo of America, Inc.

Niro Inc.

Nissan North America, Inc.

Novartis Consumer Health, Inc.

Novartis Pharmaceuticals Corporation

Occidental Petroleum Corporation

PACCAR Inc

Panasonic

Pentair, Inc.

Pfizer Inc.

Pharmacia Corporation

Porsche Cars North America, Inc.

PPG Industries, Inc.

Purdue Pharma L.P.

Putsch GmbH & Co.KG

The Raymond Corporation

4a

Appendix A

Raytheon Aircraft Company

Remington Arms Company, Inc.

Rheem Manufacturing

RJ Reynolds Tobacco Company

Schindler Elevator Corporation

SCM Group USA Inc.

Shell Oil Company

The Sherwin-Williams Company

Smith & Nephew, Inc.

St. Jude Medical, Inc.

Sturm, Ruger & Company, Inc.

Subaru of America, Inc.

Synthes (U.S.A.)

Terex Corporation

Textron, Inc.

Thomas Built Buses, Inc.

TK Holdings

The Toro Company

Toshiba America Incorporated

Toyota Motor Sales, USA, Inc.

TRW Automotive US LLC

Tyson Foods, Inc.

UST (U.S. Tobacco)

Volkswagen of America, Inc.

Volvo Cars of North America, Inc.

Vulcan Materials Company

Water Bonnet Manufacturing, Inc.

Watts Water Technologies, Inc.

Whirlpool Corporation

Wyeth

Yamaha Motor Corporation, U.S.A.

Yokohama Tire Corporation

Zimmer, Inc.