Carolyn Schur v. L.A. Weight Loss Centers, Inco ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-3761
C AROLYN S CHUR, Special Administrator of the
Estate of Pamela Hoppe, Deceased,
Plaintiff-Appellant,
v.
L.A. W EIGHT L OSS C ENTERS, INC.,
S HANI P OOLE, and C OURTNEY M ORR,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 05 CV 353—William D. Stiehl, Judge.
A RGUED F EBRUARY 26, 2009—D ECIDED A UGUST 14, 2009
Before B AUER, K ANNE, and SYKES, Circuit Judges.
K ANNE, Circuit Judge. Illinois citizen Pamela Hoppe died
of liver failure a few months after beginning a diet pro-
gram offered and administered by L.A. Weight Loss
Centers, Inc. Hoppe’s sister, Carolyn Schur, filed suit
against the company on behalf of Hoppe’s estate in
Illinois state court. L.A. Weight Loss removed the case to
2 No. 07-3761
the Southern District of Illinois based on diversity of
citizenship. A magistrate judge subsequently granted
Schur leave to amend her complaint to join three new
defendants, two of whom were Illinois citizens. Eleven
days after filing her second amended complaint, Schur
moved to remand the case to Illinois state court because
the new parties negated complete diversity. The district
judge denied Schur’s motion to remand, finding that
Schur had fraudulently joined the two Illinois defendants
to destroy the court’s diversity jurisdiction. The judge
struck Schur’s second amended complaint and ultimately
granted summary judgment against her.
In addition to appealing the summary judgment deci-
sion, Schur claims that the district judge erred by striking
her second amended complaint after denying her
motion to remand the case to state court. If that decision
was error, she claims that the district court did not have
jurisdiction to grant summary judgment. This case
presents a series of interesting jurisdictional issues, some
of which we have not previously considered. In the end,
we agree with Schur that L.A. Weight Loss did not estab-
lish that joinder was inappropriate, and therefore the
district judge erred in declining to remand the case to
Illinois state court.
I. B ACKGROUND
In mid-2004, forty-two-year-old Pamela Hoppe
resolved to lose weight. To achieve her goal, Hoppe
enrolled in a diet and weight loss program offered by her
local L.A. Weight Loss Center in O’Fallon, Illinois (“the
No. 07-3761 3
Center”). During Hoppe’s initial visit on April 27, 2004, the
Center’s assistant manager, Courtney Morr, explained the
services that L.A. Weight Loss offered, requested that
Hoppe complete an information and medical history
form, and enrolled her in a program. In addition to pro-
viding a strict diet and weekly counseling, the program
suggested that Hoppe take a regimen of nutritional
supplements. That same day, Hoppe purchased a three-
month supply of five supplements marketed and sold
by L.A. Weight Loss. She began her program, and less
than one month later, she purchased an additional three-
month supply of two of the supplements.
Tragically, Hoppe would not need the additional
supply. On August 5, 2004, she visited a local hospital
complaining of jaundice and nausea. The hospital trans-
ferred her to St. Louis University Hospital, where she
was diagnosed with acute liver hepatitis. Hoppe’s condi-
tion deteriorated, and she died on August 29.
On April 13, 2005, Carolyn Schur, Hoppe’s surviving
sister, filed suit on behalf of Hoppe’s estate in Illinois
state court. The complaint alleged a variety of state law
claims against L.A. Weight Loss arising from the adminis-
tration of Hoppe’s diet program. Specifically, Schur
claimed that the recommended nutritional supplements
caused Hoppe’s liver failure. She averred that L.A. Weight
Loss improperly recommended supplements without
testing their safety, failed to warn Hoppe of the associated
risks, lacked adequate procedures for ensuring the
safety of its diet plans, and provided dangerous mixtures
of supplements. Schur later presented evidence from
4 No. 07-3761
Hoppe’s treating physicians and one expert witness
suggesting that her liver condition was drug-induced.
These witnesses also testified that certain ingredients in
the supplements could be toxic to the liver: chromium,
borage seed oil, Ho Shou Wu, Gotu Kola, and niacinamide.
On May 17, 2005, L.A. Weight Loss, incorporated in
Delaware with its principal place of business in Pennsylva-
nia, removed the suit to the Southern District of Illinois
based on diversity of citizenship. See 28 U.S.C. §§ 1332(a),
1441(a). The parties proceeded with discovery in federal
court for over one year, until August 3, 2006, when Schur
filed a motion for leave to amend her complaint to add
claims against three additional defendants. L.A. Weight
Loss did not object to or oppose the motion.
A magistrate judge granted Schur’s motion for leave to
amend on August 10, 2006, and Schur filed her second
amended complaint the next day. Among other amend-
ments, Schur added negligence claims against two L.A.
Weight Loss employees: Morr, the assistant manager
who enrolled Hoppe in the weight loss program and sold
her the supplements; and Shani Poole, the general man-
ager, who allegedly approved, participated in, or super-
vised Hoppe’s program. Poole and Morr, both Illinois
citizens, each answered the newly amended complaint.
Neither defendant moved to dismiss for failure to state
a claim under Federal Rule of Civil Procedure 12(b)(6).
L.A. Weight Loss did not challenge the magistrate
judge’s order permitting the joinder.
On August 21, Schur moved to remand the case to state
court because the addition of Poole and Morr as defen-
No. 07-3761 5
dants destroyed the federal district court’s diversity
jurisdiction. L.A. Weight Loss opposed the motion on
the ground that Schur had fraudulently joined the
nondiverse defendants. The district judge agreed with
L.A. Weight Loss on March 5, 2007, finding that it was
“reasonably unlikely” that Schur could prevail against the
individual defendants because Illinois law would not
permit Poole and Morr to be personally liable for torts
committed within the scope of their employment. The
district judge also noted that joinder was untimely
because Schur had known of Poole and Morr’s identities
for nearly one year prior to joining them as parties. Because
Schur did not properly join the nondiverse defendants,
the district judge struck her second amended complaint,
and, with diversity jurisdiction still intact, denied her
motion to remand. The judge granted Schur leave to re-
amend her complaint, but she instead filed a motion for
reconsideration, which the district judge denied.
The case progressed, and L.A. Weight Loss filed a
motion for summary judgment on July 16, 2007, which the
district court granted on October 17. Schur now appeals
and claims that the district judge erred in (1) denying
her motion to remand after she properly joined two
nondiverse parties, and (2) granting summary judgment
against her.1 We agree with Schur that the district judge
1
In granting summary judgment, the district court struck the
proposed opinion of Schur’s only expert witness, a decision
that Schur also appeals. Because we find that the district court
lacked jurisdiction to address the merits of Schur’s claim, we
need not address this issue.
6 No. 07-3761
improperly denied remand, and we therefore do not
reach the merits of the court’s summary judgment ruling.
II. A NALYSIS
Before we may address Schur’s substantive arguments,
we must first examine the basis for federal jurisdiction.
See Aaron v. Mahl, 550 F.3d 659, 662 (7th Cir. 2008). We
review de novo questions of subject matter jurisdiction,
including the denial of a motion to remand, Price v. Wyeth
Holdings Corp., 505 F.3d 624, 628 (7th Cir. 2007), but we
typically review a district court’s decision to deny joinder
for an abuse of discretion, see Perrian v. O’Grady, 958 F.2d
192, 194 (7th Cir. 1992).
According to Schur, after the magistrate judge allowed
her to join two nondiverse defendants, the district court
no longer possessed diversity jurisdiction and was re-
quired to remand the case to state court. L.A. Weight
Loss, however, maintains that the district judge had the
authority to reconsider the magistrate judge’s order,
determine that joinder was inappropriate, refuse to join
the nondiverse defendants, and retain subject matter
jurisdiction. Both parties are correct on certain points,
but the analysis is not as simple as either party suggests.
A. Diversity Jurisdiction, Removal, and Joinder of a
Nondiverse Defendant
Although federal diversity jurisdiction provides a
neutral forum for lawsuits between parties from different
No. 07-3761 7
states, we interpret such jurisdiction narrowly and
require complete diversity of citizenship to invoke it. Poulos
v. Naas Foods, Inc., 959 F.2d 69, 71 (7th Cir. 1992) (citing
Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806)); see
also 28 U.S.C. § 1332(a).2 When a plaintiff files suit in state
court but could have invoked the original jurisdiction of
the federal courts, the defendant may remove the
action to federal court. See 28 U.S.C. § 1441(a). The party
seeking removal has the burden of establishing federal
jurisdiction, and federal courts should interpret the
removal statute narrowly, resolving any doubt in favor of
the plaintiff’s choice of forum in state court. Doe v. Allied-
Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993). L.A. Weight
Loss properly removed this action to the Southern
District of Illinois based on diversity jurisdiction on
May 17, 2005.
Following removal, Schur sought to join as defendants
two Illinois residents whose presence would destroy
diversity jurisdiction. When joinder of a nondiverse party
would destroy subject matter jurisdiction,3 28 U.S.C.
§ 1447(e) applies and provides the district court two
2
In addition to complete diversity, § 1332(a) requires that the
amount in dispute exceed $75,000; the parties agree that this
lawsuit satisfies that requirement.
3
This is in contrast to an ordinary pretrial amendment under
Rule 15(a), which provides that “a party may amend its pleading
only with the opposing party’s written consent or the court’s
leave. The court should freely give leave when justice so
requires.” Fed. R. Civ. P. 15(a)(2).
8 No. 07-3761
options: (1) deny joinder, or (2) permit joinder and remand
the action to state court. See Jass v. Prudential Health Care
Plan, Inc., 88 F.3d 1482, 1486 (7th Cir. 1996). These are the
only options; the district court may not permit joinder of
a nondiverse defendant and retain jurisdiction. See Mayes v.
Rapoport, 198 F.3d 457, 462 (4th Cir. 1999); see also David D.
Siegel, Commentary on 1988 Revision of Section 1447, in 28
U.S.C.A. § 1447 (2009) (noting that Congress rejected an
approach permitting a court to allow joinder and retain
the case). A district court has discretion to permit or deny
post-removal joinder of a nondiverse party, and the
court should balance the equities to make the determina-
tion. Mayes, 198 F.3d at 463; see also Perez v. Arcobaleno
Pasta Machs., Inc., 261 F. Supp. 2d 997, 1001 (N.D. Ill. 2003);
In re Bridgestone/Firestone, Inc., 129 F. Supp. 2d 1202, 1204
(S.D. Ind. 2001).
Our court has not articulated a framework for determin-
ing whether post-removal joinder of a nondiverse party is
appropriate. Many other courts, however, including
district courts within our circuit, have applied the follow-
ing factors, which we now adopt: (1) the plaintiff’s
motive for seeking joinder, particularly whether the
purpose is to defeat federal jurisdiction; (2) the timeliness
of the request to amend; (3) whether the plaintiff will
be significantly injured if joinder is not allowed; and (4)
any other relevant equitable considerations. See, e.g., Bailey
v. Bayer CropScience L.P., 563 F.3d 302, 309 (8th Cir. 2009);
Mayes, 198 F.3d at 462; Hensgens v. Deere & Co., 833 F.2d
No. 07-3761 9
1179, 1182 (5th Cir. 1987); 4 Perez, 261 F. Supp. 2d at 1001;
In re Bridgestone/Firestone, 129 F. Supp. 2d at 1204.
If this were all there was to it, this case would be rela-
tively simple. We would review the district judge’s refusal
to allow Schur to join nondiverse defendants Poole and
Morr for an abuse of discretion. But this case includes
additional complications: (1) the magistrate judge actually
granted Schur leave to amend, and Schur joined Poole
and Morr in her second amended complaint; and (2) the
district judge erred when reconsidering the magistrate
judge’s decision.
B. The District Judge’s Review
We must take a slight detour to examine the district
judge’s authority to reconsider the magistrate judge’s
joinder determination. Schur asserts that once the magis-
trate judge allowed her to file her second amended com-
plaint, which joined two nondiverse defendants, the
district judge lacked jurisdiction and was required to
remand the case under § 1447(e). Schur’s argument is not
without support, see, e.g., Cobb v. Delta Exports, Inc., 186
F.3d 675, 677 (5th Cir. 1999) (“[P]ost-removal joinder of
non-diverse defendants . . . destroys diversity for juris-
4
Hensgens was decided prior to the addition of 28 U.S.C.
§ 1447(e), but numerous courts have relied upon its analysis
when determining whether joinder is proper under § 1447(e).
See, e.g., Alpers Jobbing Co. v. Northland Cas. Co., 173 F.R.D.
517, 520 n.6 (E.D. Mo. 1997) (collecting cases).
10 No. 07-3761
dictional purposes and requires remand, even when the
newly joined defendants are not indispensable.”), but
this case is more complex.
The parties do not question that the magistrate judge
possessed the initial authority to grant Schur’s motion to
amend. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(a); S.D.
Ill. R. 72.1(a). The relevant provision of the Federal Magis-
trates Act, 28 U.S.C. § 636(b)(1)(A), implemented through
Federal Rule of Civil Procedure 72(a), permits a district
judge to assign certain “nondispositive” pretrial matters
to a magistrate judge to “hear and decide.” Fed. R. Civ.
P. 72(a) (emphasis added); see also S.D. Ill. R. 72.1(a)(1)
(assigning to a magistrate judge “all pretrial motions
for hearing and determination” (emphasis added)).
A district court may also assign dispositive motions to
a magistrate judge,5 in which case the magistrate judge
may submit to the district judge only a report and recom-
mended disposition, including any proposed findings of
fact. See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b).
The magistrate judge’s recommendation on a dispositive
matter is not a final order, and the district judge makes
the ultimate decision to adopt, reject, or modify it. See
28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(3).
In the Southern District of Illinois, “all pretrial motions,”
with certain exceptions, are automatically assigned to a
5
The parties may also consent to trial or proceedings con-
cerning dispositive matters before a magistrate judge, see Fed. R.
Civ. P. 73, which did not occur in this case.
No. 07-3761 11
magistrate judge. S.D. Ill. R. 72.1(a)(1). Although a motion
to remand is specifically excepted from the automatic
assignment in local rule 72.1(a), a motion to amend a
pleading is not.6 See id.
After a magistrate judge rules (on a nondispositive
matter) or makes a report and recommendation (on a
dispositive matter), either party may object within ten
days. Fed. R. Civ. P. 72; S.D. Ill. R. 73.1(a) (labeling the
procedure for nondispositive matters an “appeal”). Upon
objection, the district judge must review the relevant part
of the magistrate judge’s decision, but the standard of
review varies depending on whether the matter was
dispositive. Compare Fed. R. Civ. P. 72(a) (requiring the
judge, for nondispositive matters, to “set aside any part
of the order that is clearly erroneous or is contrary to
law”), and S.D. Ill. R. 73.1(a), with Fed. R. Civ. P. 72(b)
(requiring the judge, for dispositive matters, to “determine
de novo any part of the magistrate judge’s disposition that
has been properly objected to”), and S.D. Ill. R. 73.1(b).
If no party objects to the magistrate judge’s action, the
district judge may simply accept it. But the district judge
6
We have determined that a motion to amend is
nondispositive, even where the ruling may prevent joining a
defendant. See Hall v. Norfolk S. Ry. Co., 469 F.3d 590, 595 (7th
Cir. 2006). We have not addressed whether a motion to join
a nondiverse defendant whose joinder would destroy the
court’s diversity jurisdiction is “dispositive,” and we need not
answer the question in this case. As we explain, the district
judge was authorized to reconsider the magistrate judge’s
order, even if it was nondispositive.
12 No. 07-3761
remains the final authority in the case, and he may recon-
sider sua sponte any matter determined by a magistrate
judge. See S.D. Ill. R. 73.1(a). Thus, although the district
judge must make an independent determination of a
magistrate judge’s order upon objection, he is not
precluded from reviewing a magistrate judge’s order to
which a party did not object.7 See Allen v. Sybase, Inc., 468
F.3d 642, 658 (10th Cir. 2006) (“[A] party’s failure to seek
timely review does not strip a district court of its power
to revisit the issue.”); Phillips v. Raymond Corp., 213
F.R.D. 521, 525 (N.D. Ill. 2003) (noting that if a district
judge has authority to reconsider his own nondispositive
discovery rulings, he should have the same authority to
review a magistrate judge’s ruling); cf. Kruger v. Apfel, 214
F.3d 784, 786-87 (7th Cir. 2000) (per curiam) (noting that
Rule 72(b)’s ten-day deadline is not jurisdictional, a
district judge is not barred from considering late objec-
tions, and even without considering the objections, the
7
This issue is distinct from whether a party may, by failing
to object to a magistrate judge’s recommendation, waive its
right to appeal the recommendation and the district judge’s
adoption of it. Rule 72 does not preclude a circuit court of
appeals from establishing such a rule, Thomas v. Arn, 474 U.S.
140, 155 (1985), and our circuit has adopted precisely this
type of waiver principle, see Lorentzen v. Anderson Pest Control, 64
F.3d 327, 330 (7th Cir. 1995). Even this rule, however, is not
jurisdictional, and we may choose to review the district judge’s
decision if objections were not egregiously late and caused
little prejudice to the opposing party. Hunger v. Leininger, 15
F.3d 664, 668 (7th Cir. 1994).
No. 07-3761 13
district judge should have reviewed the magistrate
judge’s dispositive recommendation for clear error).
With these principles in mind, we turn to the case before
us. The twist, of course, is that the magistrate judge’s
action permitted joinder of nondiverse parties, potentially
destroying the court’s diversity jurisdiction. To further
complicate matters, L.A. Weight Loss did not oppose the
motion to amend, nor did it object to the magistrate
judge’s order permitting joinder. The jurisdictional issue
arose only when Schur moved to remand the case to
Illinois state court. According to Schur, this means that
the magistrate judge’s order was final, and the district
judge was required to remand.
We disagree. In the circumstances of this case, the
district judge was not precluded from reconsidering the
magistrate judge’s order granting Schur’s motion to
amend her complaint. Moreover, the record before us
indicates that the magistrate judge never analyzed the
propriety of joining two nondiverse parties.
First, Schur points to L.A. Weight Loss’s failure to object
to the magistrate judge’s order, but, as we have just
explained, this meant that the district judge was not
required to review the order; he was still permitted to
do so sua sponte to determine whether it “[was] clearly
erroneous or . . . contrary to law.” Fed. R. Civ. P. 72(a);
see also S.D. Ill. R. 73.1(a).
Second, and most importantly, the record indicates
that the magistrate judge simply granted Schur’s motion as
a routine matter. Although Schur’s motion stated the
14 No. 07-3761
names of the nondiverse parties, it did not state their
citizenship, nor did it raise the jurisdictional implications
of joining them. The magistrate judge held no hearing on
the motion’s merits. In fact, the record does not indicate
that the magistrate judge actually made a joinder deter-
mination at all, as required by § 1447(e). True, L.A. Weight
Loss should have known the citizenship of its own em-
ployees and objected; by failing to do so, it lost its right
to request that the district judge reconsider the order. But
that did not prevent the district judge from addressing
the issue on his own accord.
Several courts have reached a similar conclusion—that
when a district court is unaware that joinder will destroy
diversity, it may reconsider its prior decision permitting
leave to amend a complaint. See Bailey, 563 F.3d at 307;
Mayes, 198 F.3d at 462 n.11; Hensgens, 833 F.2d at 1182; see
also Williams v. Vincent Int’l, Inc., 192 F.R.D. 544, 547 (S.D.
Miss. 2000) (reversing a magistrate judge’s order permit-
ting joinder of nondiverse parties where the magistrate
judge did not consider the jurisdictional issue, and plain-
tiff did not follow the typical procedure of coupling a
motion for remand with its motion to amend and filing
both with the district court).
The Fourth Circuit’s decision in Mayes is analogous to
the circumstances before us. In Mayes, the plaintiff, follow-
ing removal, joined a nondiverse defendant without
leave of court, as permitted by Rule 15(a).8 198 F.3d at 462
8
Rule 15(a) permits a plaintiff to amend without leave of court
before a responsive pleading is served. Fed. R. Civ. P. 15(a). In
(continued...)
No. 07-3761 15
n.11. Because the plaintiff joined the nondiverse party
without leave, the district court had no opportunity to
decide whether to permit or deny joinder. Id. The court
held that because the district court would have been
forced to remand without ever having determined
the joinder’s propriety, it could later invoke its
authority under § 1447(e) to make that determination. Id.
The Eighth Circuit reached a similar outcome, even
where the district court had an opportunity to deny joinder
of two nondiverse parties. Bailey, 563 F.3d at 307. The
defendant in Bailey—who, like L.A. Weight Loss, was the
employer of the nondiverse defendants and presumably
knew their citizenship—did not object, and the district
court did not learn that joinder would destroy diversity
until the plaintiff moved to remand the case to state
court. Id. at 306-07. The Eighth Circuit determined that
the district court had discretion to reverse its prior deci-
sion. Id. at 307.
This case is similar to Mayes and Bailey. As in the Rule
15(a) context, the district judge did not have an opportu-
nity to rule on the propriety of joining a nondiverse
party. Although the magistrate judge had this oppor-
tunity, nothing indicates that he actually conducted the
appropriate analysis under § 1447(e). If a district judge
8
(...continued)
Mayes, the defendant had not answered the initial complaint
when Mayes filed her amended complaint joining a nondiverse
party. 198 F.3d at 462 n.11.
16 No. 07-3761
may reconsider his own order permitting joinder because
he did not recognize the jurisdictional implications of his
action, then he may certainly reconsider a similar order
by a magistrate judge. Under the circumstances of this
case, the district judge was permitted to reconsider the
magistrate judge’s order granting Schur leave to amend
her complaint to add nondiverse parties.
We turn from one procedural quagmire to the next:
whether the district judge, vested with authority to review
the magistrate judge’s decision, properly conducted
the inquiry.
C. The District Judge’s Joinder Determination Under
§ 1447(e)
Having determined that the district judge could review
the magistrate judge’s order permitting Schur to join
Poole and Morr, we now consider whether he correctly
found that joinder was inappropriate. We review a
district judge’s decision to deny joinder for abuse of
discretion, see Perrian, 958 F.2d at 194, although we
review de novo a denial of motion to remand, Price, 505
F.3d at 628. After examining the district judge’s decision,
we find three errors that led the court to deny both
joinder and remand. First, the district judge over-relied
on the fraudulent joinder doctrine; second, he misapplied
this doctrine by determining that Schur had no possibility
of a claim against Poole and Morr; and third, he found
Schur’s joinder to be untimely.
No. 07-3761 17
1. The Fraudulent Joinder Doctrine
In response to Schur’s motion to remand, L.A. Weight
Loss argued that Schur “fraudulently joined” Poole and
Morr, and the district judge agreed. Although we later
find that the judge misapplied the doctrine, we first
consider the propriety of relying on fraudulent joinder
in the post-removal context.
A plaintiff typically may choose its own forum, but it
may not join a nondiverse defendant simply to destroy
diversity jurisdiction. Schwartz v. State Farm Mut. Auto.
Ins. Co., 174 F.3d 875, 878 (7th Cir. 1999); Gottlieb v. Westin
Hotel Co., 990 F.2d 323, 327 (7th Cir. 1993). The “fraudulent
joinder” doctrine, therefore, permits a district court
considering removal “to disregard, for jurisdictional
purposes, the citizenship of certain nondiverse defen-
dants, assume jurisdiction over a case, dismiss the
nondiverse defendants, and thereby retain jurisdiction.”
Mayes, 198 F.3d at 461 (citing Cobb, 186 F.3d at 677-78).9
9
As many courts have noted, the term “fraudulent joinder” is
a bit of a misnomer—the doctrine requires neither fraud nor
joinder. See Mayes, 198 F.3d at 461 n.8; Cobb, 186 F.3d at 678;
Poulos, 959 F.2d at 73; see also Smallwood v. Ill. Cent. R.R. Co., 385
F.3d 568, 573 (5th Cir. 2004) (en banc) (going so far as to adopt
the new term “improper joinder,” although there is no sub-
stantive difference between the two terms). Actual fraud in
alleging jurisdictional facts will suffice to invoke the doctrine,
but the more typical ground is that a plaintiff brought a claim
against a nondiverse defendant “that simply has no chance of
(continued...)
18 No. 07-3761
Fraudulent joinder, however, is arguably inapplicable
to post-removal joinder. Because the doctrine allows a
district court to assume initial diversity jurisdiction
upon removal from state court despite the presence of
nondiverse parties, some courts have held that “it has no
effect once the district court actually possesses jurisdic-
tion—including after the case has been removed.” Mayes,
198 F.3d at 461; see also Cobb, 186 F.3d at 677 (“The fraudu-
lent joinder doctrine does not apply to joinders that occur
after an action is removed.”). The primary rationale for
this position, as the Fifth Circuit noted in Cobb, is that
§ 1447(e) gives the district court the option to either permit
joinder or deny it and remand, meaning that “the defen-
dant thus has an opportunity at the time joinder is con-
sidered to prevent joinder by arguing that there is no
colorable claim against the party the plaintiff is seeking to
join.” 186 F.3d at 678. Consequently, under Cobb, once a
court permits joinder of nondiverse defendants, it loses
subject matter jurisdiction and “ha[s] no power even to
consider whether fraudulent joinder applied.” Id. at 678.
But this conclusion rests on the premise that the district
court had the opportunity to determine, in the first in-
stance, whether the post-removal joinder was appropriate.
9
(...continued)
success, whatever the plaintiff’s motives.” Poulos, 959 F.2d at
73; see also Smallwood, 573 F.3d at 573. And “joinder” is also
misleading because it is irrelevant whether a nondiverse
defendant was actually “joined” or simply named in the
original complaint before the state court. Mayes, 198 F.3d at
461 n.8.
No. 07-3761 19
In Mayes, the Fourth Circuit took a slightly different
approach to the use of the fraudulent joinder doctrine
in post-removal cases. Faced with facts similar to those
before us, the court noted that fraudulent joinder is not
directly applicable after a case has been removed, but it
may remain relevant to the district court’s analysis when
considering the propriety of joinder under § 1447(e).1 0
Mayes, 198 F.3d at 463. The court therefore determined
that “the fraudulent joinder doctrine can be yet another
element of the district court’s ‘flexible, broad discre-
tionary approach’ to resolving a post removal question of
whether a nondiverse defendant should be joined
under Section 1447(e).” Id. (quoting Gum v. Gen. Elec. Co.,
5 F. Supp. 2d 412, 414 (S.D.W. Va. 1998)). If a defendant
can carry the “heavy burden” of proving fraudulent
joinder, this would counsel against joinder. Id.
We tend to agree with the Fourth Circuit that, although
the fraudulent joinder doctrine is not directly applicable
to the post-removal context, it can be a relevant factor for
determining whether to permit joinder under § 1447(e).
This is particularly so where, as here, the district judge
did not have an opportunity to analyze the propriety of
10
As we noted above, a court analyzing joinder of a nondiverse
party whose presence will destroy diversity should consider
(1) the plaintiff’s motive for seeking joinder, particularly
whether the purpose is to defeat federal jurisdiction; (2) the
timeliness of the request to amend; (3) whether the plaintiff
will be significantly injured if amendment is not allowed; and
(4) any other relevant equitable considerations. See supra pt.II.A.
20 No. 07-3761
joining nondiverse defendants at the time the plaintiff
sought to amend the complaint. But the fraudulent
joinder doctrine is not dispositive of whether joinder is
improper; it is simply another tool in the district judge’s
belt for scrutinizing the plaintiff’s motive for joining a
nondiverse party. After all, the doctrine is but one means
to discern whether the plaintiff sought only to destroy
complete diversity.
The district judge’s opinion in this case indicates that
his approach may have overemphasized the importance
of the doctrine. The judge’s examination of the first
factor of the § 1447(e) analysis—Schur’s motive for
joining Poole and Morr—was limited only to whether L.A.
Weight Loss proved fraudulent joinder. The opinion
went on to evaluate the other § 1447(e) factors, however,
and perhaps the reliance on fraudulent joinder did not
produce reversible error. But we need not make that
determination here, because the doctrine was applied
incorrectly.
2. The District Court’s Application of Fraudulent Joinder
Fraudulent joinder is difficult to establish—a defendant
must demonstrate that, “after resolving all issues of fact
and law in favor of the plaintiff, the plaintiff cannot estab-
lish a cause of action against the in-state defendant.”
Poulos, 959 F.2d at 73; see also Gottlieb, 990 F.2d at 327.
Framed a different way, the district court must ask
whether there is “any reasonable possibility” that the
plaintiff could prevail against the non-diverse defendant.
Poulos, 959 F.2d at 73. A defendant faces a “heavy burden”
No. 07-3761 21
to demonstrate that the joinder is fraudulent, id., and
some courts, including district courts within this circuit,
have suggested that the burden is even more favorable
to the plaintiff than the standard that applies to a motion
to dismiss under Federal Rule of Civil Procedure 12(b)(6),
see Mayes, 198 F.3d at 464; Hartley v. CSX Transp., Inc.,
187 F.3d 422, 424 (4th Cir. 1999); Batoff v. State Farm Ins. Co.,
977 F.2d 848, 852 (3d Cir. 1992) (noting that a Rule 12(b)(6)
inquiry “is more searching than that permissible when
a party makes a claim of fraudulent joinder”); Rutherford
v. Merck & Co., 428 F. Supp. 2d 842, 847 (S.D. Ill. 2006).
In conducting this analysis, a district court must turn to
state law to determine whether the plaintiff has any
reasonable possibility of success. In this case, the
district judge erred in its application of Illinois law by
determining that Poole and Morr could not be held indi-
vidually liable for their conduct.
The district judge’s analysis of Schur’s motive for
joining Poole and Morr stated:
Under applicable Illinois law, a principal is vicari-
ously liable for the torts of its agent when the
agent is acting within the scope of her employ-
ment. Payne v. Witmer, 129 Ill. 2d 351[, 543 N.E.2d
1304] (Ill. 1989). In this vein, Poole and Morr, as
agents of LA Weight Loss, would not be personally
liable for any tort they may have performed while
working within the scope of their employment.
Although this certainly leaves open the possibility
that Poole and Morr did not act within the scope
of their employment, plaintiff makes no such
averment in her Second Amended Complaint. . . .
22 No. 07-3761
As a result, it is reasonably unlikely that an Illinois
state court would find Poole and Morr personally
liable.
The district court’s first sentence is a correct statement of
law, but the conclusion in the second sentence is incorrect.
The district court may have confused the doctrines of
vicarious (derivative) liability and individual (direct)
liability.
Vicarious liability imputes an agent’s misconduct,
performed within the scope of her employment, to the
employer. See Payne, 543 N.E.2d at 1308; Lasko v. Meier, 67
N.E.2d 162, 166 (Ill. 1946) (“A master and servant are
each liable for injuries caused solely by the negligent act
of the servant in the course of his employment. The
servant is liable because he is the active tort-feasor and
committed the act which caused the injury.”).
Whether the employer is held vicariously liable for the
agent’s conduct, however, does not affect the agent’s
independent tort liability. See Towns v. Yellow Cab Co., 382
N.E.2d 1217, 1221 (Ill. 1978) (“[A]ny act of the servant
which renders the master liable also renders the servant
liable.”); Lasko, 67 N.E.2d at 166 (“Being the real actor, [the
agent] is nonetheless liable because acting for another.”);
Fortech, L.L.C. v. R.W. Dunteman Co., 852 N.E.2d 451, 456
(Ill. App. Ct. 2006) (noting that an agent’s tort liability “is
normally unaffected by the fact that he is an agent or
servant” (quotations omitted)). As the Illinois Supreme
Court said long ago:
It is not [the agent’s] contract with the principal
which exposes him to, or protects him from, liabil-
No. 07-3761 23
ity to third persons, but his common-law obligation
to so use that which he controls as not to injure
another. That obligation is neither increased nor
diminished by his entrance upon the duties of
agency; nor can its breach be excused by the plea
that his principal is chargeable.
Baird v. Shipman, 23 N.E. 384, 384 (Ill. 1890) (per curiam);
see also Gateway Erectors Div. of Imoco-Gateway Corp. v.
Lutheran Gen. Hosp., 430 N.E.2d 20, 21 (Ill. App. Ct. 1981);
Romualdo P. Eclaea, Christine M. Gimeo & Thomas
Muskus, Employment § 202, in 17 Illinois Law and Practice
(2008) (“A person is not absolved of personal liability to
a third person on account of his or her negligence or other
wrongful act merely because at the time such person
was acting as an employee within the scope of the em-
ployment.”). Thus, an agent can be individually liable
even where his employer is also vicariously liable.
It was error to conclude that Poole and Morr could not
be personally liable simply because L.A. Weight Loss
might also be held vicariously liable for their conduct. Nor
is the liability of Poole or Morr dependant on whether
they were acting within the scope of their employment.
Had they been acting outside the scope of their employ-
ment, it would have only meant that Schur could not
hold L.A. Weight Loss vicariously liable for its employees’
torts; it meant nothing to Poole’s or Morr’s individual
liability.
This error is somewhat understandable. The district court
likely intended to invoke the traditional rule that an agent
who breaches a duty owed solely to her principal is not
independently liable to an injured third party. See Bovan v.
24 No. 07-3761
Am. Family Life Ins. Co., 897 N.E.2d 288, 295 (Ill. App. Ct.
2008). In essence, this principle is the reverse of vicarious
liability—where a tort is alleged directly against the
principal for its own misconduct, we may not impute a
duty the principal owed to a third party to an agent
merely acting pursuant to duties it, in turn, owed to the
principal. Id. at 296; see also Stein v. Rio Parismina Lodge, 695
N.E.2d 518, 522 (Ill. App. Ct. 1998) (“While the acts of an
agent may be considered to be acts of the principal, acts
of the principal are never imputed to the agent.” (citation
omitted)). But an agent is liable in tort to a third party
harmed by the agent’s conduct when the agent breaches
an independent duty that she owes to the third
party. Bovan, 897 N.E.2d at 295 (quoting Restatement
(Third) of Agency § 7.02, at 138 (2006)); see also Cahill v. E.
Benefit Sys., Inc., 603 N.E.2d 788, 792 (Ill. App. Ct. 1992);
Bescor, Inc. v. Chi. Title & Trust Co., 446 N.E.2d 1209, 1212
(Ill. App. Ct. 1983).
Due to the nature of his analysis, the district judge did
not rule on whether Schur alleged that Poole and Morr
owed a duty to Hoppe that was independent of the duties
they owed to L.A. Weight Loss. At oral argument, L.A.
Weight Loss asserted that the court did rule on this
issue, albeit “obliquely.” But the district judge’s discussion
refers only to principles of vicarious liability, and we
conclude that Schur sufficiently alleged an independent
duty.
Whether a duty exists is a question of law. Widlowski v.
Durkee Foods, Div. of SCM Corp, 562 N.E.2d 967, 968 (Ill.
1990). “It is well settled that every person owes a duty
No. 07-3761 25
of ordinary care to all others to guard against injuries
which naturally flow as a reasonably probable and fore-
seeable consequence of an act, and such a duty does not
depend upon contract, privity of interest or the proximity
of relationship, but extends to remote and unknown
persons.” Id. To determine whether an individual owed
a duty to another, a court considers whether the risk of
harm was reasonably foreseeable. Id.
We cannot say that Schur had no “reasonable possibility”
of success against Poole and Morr individually. L.A.
Weight Loss is correct that some allegations against
Poole and Morr were not actionable because they did not
allege an independent duty. One example is the
claim that the defendants “failed to adequately train,
supervise, and/or instruct the staff so that the plaintiff
would receive adequate warnings about the ‘diet supple-
ments,’ ” which invokes duties Poole and Morr owed to
L.A. Weight Loss, not to Hoppe.
But Schur alleged that both Poole and Morr had a
personal duty “to exercise reasonable care in the supply
and provision of counseling services and diet supple-
ments,” and that both defendants “approved a diet plan
that included taking supplements in excess of the direc-
tions on the LA Weight Loss labels.” This allegation
extends beyond a duty owed to L.A. Weight Loss and
invokes a duty that Poole and Morr owed directly to
Hoppe.
By using their discretion to create a personalized pro-
gram requiring the ingestion of an assortment of nutri-
tional supplements, Poole and Morr were under a duty to
Hoppe to act reasonably in light of foreseeable conse-
26 No. 07-3761
quences. See Gateway Erectors Div., 430 N.E.2d at 21 (“ ‘If the
agent once actually undertakes and enters upon the
execution of a particular work, it is his duty to use rea-
sonable care in the manner of executing it, so as not to
cause any injury to third persons which may be the
natural consequence of his acts . . . .’ ” (quoting Baird, 23
N.E.2d at 384)). This is particularly so if Schur can prove
her allegations that Poole and Morr instructed Hoppe to
exceed L.A. Weight Loss’s recommended dosages. Cf.
Hauck v. ConocoPhillips Co., No. 06-135, 2006 WL 1596826,
at *4 (S.D. Ill. June 6, 2006) (rejecting fraudulent joinder
where plaintiff joined a nondiverse safety manager at a
refinery because (1) the employer defendant entrusted
responsibility for safety at the refinery to him, (2) third
persons would rely on him to perform his duty, and
(3) failure to perform his duty could result in physical
injury); Katonah v. USAir, Inc., 868 F. Supp. 1031, 1035-36
(N.D. Ill. 1994) (rejecting fraudulent joinder where plain-
tiff joined a nondiverse maintenance employee who
purportedly failed to investigate an errant noise in a plane
that subsequently crashed).
The aforementioned analytical problems led the
district judge to conclude that Schur had no possibility of
succeeding against Poole and Morr. The outcome of this
analysis, then, was that she must have had no motive
for joining them other than to destroy diversity.
3. Timeliness of Schur’s Motion to Amend
There is one final problem. In addition to determining
that Schur could not succeed against Poole and Morr, the
No. 07-3761 27
district judge also found that the timing of Schur’s motion
to amend weighed against granting her motion. Specifi-
cally, the judge stated that Schur knew the identity of
Poole and Morr from the beginning of discovery in August
2005, yet she waited almost a year before seeking to join
them in August 2006. But this conclusion ignores that
Schur learned of the defendants’ role in the events
leading to Hoppe’s death only after obtaining L.A.
Weight Loss’s responses to discovery requests on June 8,
2006. Even then, Schur objected to the discovery’s com-
pleteness, continued to question L.A. Weight Loss’s
counsel regarding when she would receive more
complete responses, and ultimately filed a motion on
June 27 to obtain information “so that all proper parties
can be identified” and to schedule depositions of Poole
and Morr, among others. And, of course, Schur was
unable to ask Hoppe who directed or administered her
weight loss program. Schur sought to amend her com-
plaint to join the new defendants within two months of
learning of their roles, and the district judge mistakenly
relied on the one-year delay in his § 1447(e) joinder analy-
sis.
Although an extensive delay between removal and a
motion to amend typically weighs against permitting
joinder, under the facts of this case, the timing of Schur’s
motion to amend actually supports her position. Had
Schur sought to join Morr and Poole immediately after
removal, but without additional discovery providing a
legitimate reason for doing so, it would have suggested
that the joinder’s only purpose was to destroy juris-
diction. See, e.g., Mayes, 198 F.3d at 463 (noting that it is
28 No. 07-3761
especially important to scrutinize a plaintiff’s attempt to
add a nondiverse defendant when it comes “immediately
after removal but before any additional discovery has
taken place”). In this case, the record shows that Schur
sought leave to join Morr and Poole as defendants only
after learning of their roles in Hoppe’s death. Her motion
was timely.
D. Summary of Analysis
We believe that the district court (1) overemphasized
the fraudulent joinder doctrine, which is not directly
applicable to post-removal joinder; (2) improperly applied
that doctrine by errantly concluding that Illinois law did
not support at least some of Schur’s claims against Poole
and Morr; and (3) wrongly concluded that Schur’s
motion was untimely. We find that, as a result, the district
judge improperly struck Schur’s second amended com-
plaint and denied remand.
Our review of the record indicates that the district
court should have remanded Schur’s case to Illinois state
court. Application of the fraudulent joinder doctrine does
not help us determine, in this case, whether Schur sought
to join Morr and Poole solely to defeat diversity juris-
diction, and we see no other evidence suggesting that she
did so. Schur was also not dilatory in seeking joinder. As
for balancing the equities, we recognize L.A. Weight Loss’s
interest in avoiding the potential biases of local courts,
see Poulos, 959 F.2d at 71, but we must also consider
Schur’s interest in avoiding the cost and inconvenience
of parallel lawsuits in state and federal court. Signifi-
No. 07-3761 29
cantly, Schur would present her case in federal court
without also litigating her claims against the two em-
ployees who actually provided her late sister with the
supplements that purportedly killed her. The allegations
in the complaint extend beyond L.A. Weight Loss’s mere
failure to study, research, or warn of the supplements’
effects and dangers; Schur included allegations related
to Hoppe’s individual program and dosages in excess of
L.A. Weight Loss’s directives.
Because we have determined that the district court
erred by denying remand, it had no jurisdiction to reach
the merits of Schur’s lawsuit, and neither do we.
III. C ONCLUSION
Because the district court lacked jurisdiction to determine
the merits of the dispute, we V ACATE the district court’s
order striking Schur’s second amended complaint; we
also V ACATE the district court’s order granting summary
judgment against Schur; and we R EMAND to the district
court with instructions to R EMAND this matter to the
state court from which removal was granted.
8-14-09