Posted On: June 29, 2006 by Michael J. Hassen Email This Post

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Motions to Defeat Diversity Jurisdiction: Class Action Defense Issues

28 U.S.C. § 1447(e)

Once a class action has been removed to federal court based on diversity jurisdiction, a plaintiff may seek to destroy diversity by naming additional defendants. Any such attempt would fall squarely within the ambit of 28 U.S.C. § 1447(e), which provides as follows:

If 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.

The plain language of the statute addresses the two most obvious questions. First, must the district court allow a plaintiff to join additional party-defendants?The answer is clearly "no" - Section 1447(e) expressly states, "the court may deny joinder" (italics added).

Second, must the district court remand the case to state court if it grants leave to add non-diverse party-defendants? Again, the answer is clear - "yes." As the Third Circuit observed, "Hence, a district court can sometimes, after suit is filed, permit the destruction of subject matter jurisdiction."Kabakjian v. United States, 267 F.3d 208, 212 (3rd Cir. 2001).

The Ninth Circuit addressed a situation where the district court granted joinder of non-diverse parties but did not remand the matter.See Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1068 (9th Cir. 2001). Based on the particular circumstances of that case - viz., the existence of original jurisdiction over the matter had it been filed initially in federal court - the Ninth Circuit affirmed. The language of the opinion is, however, instructive:

Once removal has occurred, the district court has two options in dealing with an attempt to join a non-diverse party. 28 U.S.C. § 1447(e) provides that "[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." Newcombe v. Adolf Coors Co., 157 F.3d 686, 691 (9th Cir. 1998). Here, the district court did neither, permitting joinder of the non-diverse parties while retaining jurisdiction over the action. If diversity were the only basis for the court's subject matter jurisdiction, joinder of the non-diverse Insurers would have divested the court of jurisdiction.Desert Empire Bank v. Ins. Co. of N. Am., 623 F.2d 1371, 1374, 1377 (9th Cir. 1980) (permissive joinder of nondiverse defendant following removal to federal court divested court of subject matter jurisdiction).

Morris v. Princess Cruises, at 1068 (italics added).

In sum, Section 1447(e) unambiguously gives the district court only two options when a plaintiff seeks to add a non-diverse party-defendant following removal of the case to federal court:"deny joinder, or permit joinder and remand the action to the State court" (italics added). The court is without discretion to act otherwise.If diversity is destroyed, the case must be remanded unless an independent basis for federal court jurisdiction still exists.