The exception swallowed the rule. The Fifth Circuit essentially overruled the judicially-created voluntary-involuntary limitation to remove a case post-suit based on federal diversity jurisdiction in Advanced Indicator and Manufacturing, Inc. v. Acadia, 50 F.4th 469, 474 (5th Cir. 2022). Accordingly, this means that if you represent a diverse defendant in a state court case, be on the look-out for opportunities to make the case removable and timely remove the case to federal court.
I. Background of the Voluntary-Involuntary Rule
A defendant may remove a suit to federal court if diversity of citizenship exists, as long as none of the parties in interest properly joined and served are citizens of the State in which action is brought. See 28 U.S.C. § 1441. However, courts have created a voluntary-involuntary rule: when the case is not removable because of joinder of in-state defendant(s), only the plaintiff’s voluntary dismissal of defendant(s) or nonsuit will make the case removable. See Hoyt v. Lane Construction Corp., 927 F.3d 287, 295 (5th Cir. 2019). In other words, “an action nonremovable when commenced may become removable thereafter only by voluntary act of the plaintiff.” See Advanced Indicator and Manufacturing, Inc. v. Acadia, 50 F.4th at 474 (5th Cir. Oct. 3, 2022) (citing Weems v. Louis Dreyfus Corp., 380 F.2d 545, 547 (5th Cir. 1967)).
In 1949, Congress amended Section 1446 to allow removal within thirty (30) days after receipt “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.” See 28 U.S.C. § 1446(b)(3), (c)(1). Then, the Fifth Circuit held that Section 1446(b) did not abrogate the voluntary-involuntary rule. See Hoyt, 927 F.3d at 295; Weems v. Louis Dreyfus Corp., 380 F.2d 545, 547-48 (5th Cir. 1967). Courts have interpreted the Weems holding to establish that the pleading or other paper referenced in Section 1446(b) must be from “some voluntary act of the plaintiff.” See, e.g., Hernandez v. United Parcel Serv., Inc., No. 09-CV-427-KC, 2009 WL 10700077, at *3 (W.D. Tex. Dec. 10, 2009); Joiner v. Mississippi AG Co., No. CIVA 306CV337WHBJCS, 2006 WL 2884523, at *2 (S.D. Miss. Oct. 10, 2006).
II. Improper Joinder Exception to the Voluntary-Involuntary Rule
Nonetheless, the voluntary-involuntary rule is itself subject to a judicially created exception for improper joinder. Hoyt, 927 F.3d at 295; Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 533 (5th Cir. 2006). As noted by the Fifth Circuit in Crockett, the text of 28 U.S.C. § 1441(b) blocks removal only where “properly joined” defendants are citizens of the state in which it is brought. See 28 U.S.C. § 1441(b); Crockett, 436 F.3d at 533, n.7 (noting that the statutory language supports removal where defendants were improperly joined such that the voluntary-involuntary rule was inapplicable).
A defendant may establish improper joinder either by: (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.” See Acadia, 50 F.4th at 473. In assessing a plaintiff’s ability to establish a cause of action against a non-diverse defendant, the inquiry depends on whether the state court has already ruled on the plaintiff’s claim. See Hoyt, 927 F.3d at 296. If the state court has not ruled yet, the federal court asks if “there is any reasonable possibility that a state court would rule against the non-diverse defendant.” Id. (citation omitted) If the state court has made a judgment, the federal court asks whether “there is any reasonable possibility that the judgment will be reversed on appeal.” Id. (citation omitted).
Generally, to determine whether the plaintiff has any possibility of recovery against the non-diverse defendant(s), the court may “conduct a Rule 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant.” Ticer v. Imperium Ins. Co., 20 F.4th 1040, 1046 (5th Cir. 2021); Flagg, 819 F.3d at 136–37. However, when a plaintiff’s complaint has “misstated or omitted discrete facts that would determine the propriety of joinder,” the court may in its discretion “pierce the pleadings and conduct a summary inquiry.” Ticer, 20 F.4th at 1046; Flagg, 819 F.3d at 136–37. Such a summary inquiry “is appropriate only to identify the presence of discrete and undisputed facts that would preclude plaintiff’s recovery against the in-state defendant.” Ticer, 20 F.4th at 1046; Flagg, 819 F.3d at 136–37.
III. Improper Joinder Overtakes the Voluntary-Involuntary Rule
Although the Fifth Circuit held in Weems that the voluntary-involuntary rule survived the enactment of 28 U.S.C. § 1446(b), the Fifth Circuit’s recent holding in Advanced Indicator and Manufacturing, Inc. v. Acadia extends the improper joinder exception already broadened by its holdings in Crockett v. R.J. Reynolds Tobacco Co., and Flagg v. Stryker Corp. to effectively overrule the voluntary-involuntary rule. See Acadia, 50 F.4th at 478 (J. Engelhardt concurring); Crockett, 436 F.3d at 533 (holding that when a state court order creates diversity jurisdiction, and that order cannot be reversed on appeal, the voluntary-involuntary rule is inapplicable); Flagg v. Stryker Corp., 819 F.3d 132, 137 (5th Cir. 2016) (en banc) (holding the time to determine improper joinder is the time of removal).
In Acadia, the plaintiff sued the insurance company, Acadia (an out-of-state resident) and the adjuster (an in-state resident) in state court. Acadia, 50 F.4th at 472-73. A few weeks later, Acadia elected to accept responsibility for the adjuster under the Texas Insurance Code, and the next day, removed the case to federal court. Id. at 472. One week later, the adjuster filed a motion to dismiss stating that plaintiff could no longer state a claim against him. Id. The plaintiff filed a motion to remand, and the district court denied it based on improper joinder. Id. The Fifth Circuit upheld the district court’s decision, holding that the time of removal is the pertinent moment to determine whether a non-diverse party is improperly joined, making the voluntary-involuntary rule inapplicable. Id. at 473-74. The Fifth Circuit expressly ruled that a district court must examine the plaintiff’s possibility of recovery against the in-state defendant(s) at the time of removal. Id. Importantly, the Fifth Circuit upheld the district court’s decision even though the defendant, Acadia, was the party who took the action to trigger the improper joinder exception. See id. at 473-74, 478-79. As a result, a post-lawsuit, pre-removal action of a defendant may mandate removal as long as a defendant establishes improper joinder at the time of removal.
IV. Implications of the New Fifth Circuit Ruling in Acadia
What does the Fifth Circuit’s ruling in Acadia mean for defendants who discover the case is removable based on their own action or an action of other defendants rather than a voluntary act of the plaintiff?
Acadia opens a whole new world of opportunities for removal to federal court. Prior to Acadia, courts have interpreted 28 U.S.C. § 1446(b)(3) broadly, to include letters with settlement terms, demand letters, deposition answers, and discovery documents within the ambit of “other papers.” See, e.g., Addo v. Globe Life & Acc. Ins. Co., 230 F.3d 759, 761 (5th Cir. 2000); Hobson v. Chase Home Fin., LLC, No. CIVA5:08CV288DCBJMR, 2009 WL 2849591, at *1 (S.D. Miss. Sept. 1, 2009) (explaining that Plaintiff’s summary judgment motion sufficed as a pleading to ascertain whether the case was removable). However, these broad interpretations had been subject to the voluntary-involuntary rule. See Addo, 230 F.3d at 761. After Acadia, any action or pleading of a defendant may implicate that the case is removable. See generally Acadia, 50 F.4th 469; 28 U.S.C. § 1446(b)(3).
While this broadens the possibility of removal after a case is filed, it also results in a quick thirty-day deadline from receipt of any document from either a plaintiff or a defendant where removability may be ascertained. See Acadia, 50 F.4th at 472-74; 28 U.S.C. § 1446(b)(3); see Addo, 230 F.3d at 761 (holding that removal was improper where the defendant failed to remove the case within thirty days of receiving a letter from the plaintiff notifying defendant of the changed circumstances which supported federal jurisdiction). After Acadia, any paper or communication in all aspects of the litigation may implicate removability and begin the thirty-day clock. See Acadia, 50 F.4th at 472-74; 28 U.S.C. § 1446(b)(3); see Addo, 230 F.3d at 761. Accordingly, a diverse defendant must thoroughly analyze any paper received in a case that is potentially removable in order to decipher whether diversity jurisdiction may apply and file a notice of appeal within thirty days of receipt.
The Acadia ruling is consistent with the express statutory language of 28 U.S.C. § 1446(b)(3) and promotes the very purpose of the removal statute, encouraging prompt resort to federal court when a defendant first learns that the federal court has subject-matter jurisdiction. See 28 U.S.C. § 1446(b)(3); Addo, 230 F.3d at 762. However, it remains to be seen whether the Fifth Circuit will extend its ruling to cases in which federal question jurisdiction may be ascertained post-suit. Denson v. LPL Fin., LLC, No. 1:17-CV-215, 2017 WL 10154237, at *6 (E.D. Tex. July 31, 2017) (refusing to dispense of the voluntary-involuntary rule in a federal question case based on lack of binding precedent and discussing lower court cases applying the voluntary-involuntary rule to removals under federal question jurisdiction.).
V. How does Acadia Affect the One-Year Limitation for Removal of Diversity Actions Under 28 U.S.C. § 1446(c)(1)?
It does not change the one-year limitation for removals of diversity actions. If a diverse defendant waits more than one year after the suit is filed, the defendant will have to prove bad faith, an analysis separate and apart from improper joinder. See Hoyt, 927 F.3d at 293. To determine improper joinder, the question of whether the plaintiff is able to establish a cause of action against the non-diverse party focuses on what the plaintiff might prove in the future. See Hoyt, 927 F.3d at 293. Contrastingly, to determine bad faith, the question of whether plaintiff’s litigation conduct meant to prevent removal of the suit focuses on what motivated the plaintiff in the past. See id. A determination of bad faith is subject to a high burden, but “conduct rises to the level of bad faith when a party makes a transparent attempt to avoid federal jurisdiction.” Boney v. Lowe’s Home Centers LLC, No. 3:19-CV-1211-S, 2019 WL 5579206, at *2 (N.D. Tex. Oct. 29, 2019); see also TK Trailer Parts, LLC v. Long, No. 4:20-CV-2864, 2020 WL 6747987, at *6 (S.D. Tex. Nov. 2, 2020), report and recommendation adopted, No. 4:20-CV-2864, 2020 WL 6743738 (S.D. Tex. Nov. 17, 2020) (discussing cases where courts have found bad faith).
Conclusion: Now that the voluntary-involuntary rule is essentially abrogated in diversity jurisdiction cases, diverse defendants who wish to remove their cases to federal court should be diligent in all aspects of the litigation to ascertain whether and when the case is or has become removable.