The Fraudulent Joinder Doctrine...It’s Not Just For Fraud Or Joinder

Michael W. Mitchell, Christopher G. Smith, Donald H. Tucker, Jr. and Andrew P. Atkins

In Weidman v. ExxonMobil Corporation, et al., No. 13-2007 (4^th Cir., January 8, 2015), the Fourth Circuit confirmed that the “fraudulent joinder” doctrine requires neither an allegation of fraud nor a situation involving a motion to join a new party. The doctrine also applies when there is no possibility of establishing a claim against the non-diverse party. Accordingly, even in the absence of fraud and joinder, the fraudulent joinder doctrine remains a useful tool for parties seeking to maintain federal diversity jurisdiction.

In Weidman, Dr. Weidman was employed by ExxonMobil as a Senior Physician in Fairfax, Virginia until he was terminated in January 2013. He allegedly discovered that ExxonMobil had been operating illegal pharmacies in multiple states and that it had been illegally stockpiling large quantities of medication in its clinics. He claimed that his supervisor engaged in a “malicious campaign of retaliation” when Dr. Weidman refused to participate in the “scheme” and reported the violations. He then sued ExxonMobil, along with ten ExxonMobil employees, alleging that he was fired in retaliation for reporting illegal pharmacy practices. His theories of recovery consisted of several state law tort claims, as well as a claim for wrongful discharge. Dr. Weidman, a resident of Virginia, filed his claim in Virginia state court. Three of the ten ExxonMobil employees were also residents of Virginia.

The defendants removed the case to federal court, but Dr. Weidman moved to remand the case back to Virginia state court for lack of complete diversity. The district court retained jurisdiction and dismissed all of Dr. Weidman’s claims, which he appealed to the Fourth Circuit.

Complete diversity is generally required for a federal court to retain jurisdiction based on diversity of citizenship. However, the district court relied upon the fraudulent joinder doctrine as the basis for jurisdiction. As the Fourth Circuit explained, the fraudulent joinder doctrine “saves” diversity jurisdiction when there are non-diverse defendants. While the doctrine was first developed to address cases in which parties purposefully joined non-diverse defendants for the sole, fraudulent purpose of divesting the federal courts of jurisdiction, the Fourth Circuit noted that neither an allegation of fraud nor actual joinder is now required. Instead, a federal court can retain jurisdiction if “there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court.” (emphasis in original)

Applying the doctrine to Dr. Weidman’s case, the Fourth Circuit found that he could not succeed on any of his claims against the non-diverse defendants. One of the defendants was named only in the caption of the case. As to the other non-diverse defendants, either no allegations had been made against them personally or their factual connection was simply insufficient to state a claim. The Fourth Circuit affirmed the district court’s decision to retain jurisdiction and then went on to affirm the dismissal of all of Dr. Weidman’s claims, except his claim for wrongful discharge.

Weidman is a reminder that any decision to remove on diversity grounds, or to oppose a remand, should include a careful assessment of the claims against the non-diverse defendants. What may appear on the surface to be a lack of diversity in fact may present an opportunity to invoke the fraudulent joinder doctrine and save diversity jurisdiction.

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