Watkins v. Nurture

Background

Plaintiff originally filed this lawsuit in the Civil District Court for the Parish of Orleans, Louisiana, naming multiple defendants including the Sewerage and Water Board of New Orleans (SWB). Defendants removed the action to the U.S. District Court for the Eastern District of Louisiana, asserting diversity jurisdiction — meaning the parties on each side are citizens of different states, allowing a federal court to hear the case under 28 U.S.C. § 1441. The SWB, however, was a non-diverse party whose presence would ordinarily defeat diversity jurisdiction. To justify removal, Defendants argued in their notice of removal that the SWB had been "fraudulently joined" — a legal doctrine allowing courts to disregard a non-diverse defendant if the plaintiff could not possibly state a valid claim against it under settled state law.

Plaintiff did not contest the fraudulent joinder assertion and voluntarily dismissed the SWB without moving to remand. The case was eventually consolidated into this multidistrict litigation (MDL) in the Northern District of California. After roughly four years, Plaintiff filed a second motion to remand, arguing for the first time that the SWB was not fraudulently joined and that complete diversity therefore did not exist at the time of removal. Because subject-matter jurisdiction — a court's fundamental authority to hear a case — can be raised at any time before final judgment under 28 U.S.C. § 1447(c), the court was required to address the question regardless of the delay.

Legal Standard

The Ninth Circuit applies a strong presumption against removal, placing the burden on the removing defendant to establish that removal was proper. Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009). Diversity jurisdiction requires "complete diversity," meaning every plaintiff must be a citizen of a different state from every defendant, assessed at the time of removal. Miller v. Grgurich, 763 F.2d 372, 373 (9th Cir. 1985). Fraudulent joinder is an exception: if a defendant shows that a resident (non-diverse) defendant "cannot be liable on any theory," that defendant's presence is disregarded for diversity purposes. Grancare, LLC v. Thrower, 889 F.3d 543, 548 (9th Cir. 2018). But if there is any "possibility" that a state court would find the complaint states a valid claim against the resident defendant, joinder is not fraudulent. Id. Defendants bear a "heavy burden" to establish fraudulent joinder. Id.

Analysis

Whether the SWB Was Fraudulently Joined

Defendants argued that Plaintiff's original claims against the SWB under the Louisiana Products Liability Act (LPLA) were facially invalid because the SWB, as a water utility, is not a "manufacturer" under the LPLA. The court found this argument insufficient. Defendants cited no Louisiana case holding that a water utility cannot be a manufacturer or that the LPLA excludes entities like the SWB. Whether treated water constitutes a "service" rather than a "product," or whether it is placed "into trade or commerce" as the LPLA requires, are nuanced legal questions not clearly resolved by the statute's text or by prior court decisions. Without binding or persuasive caselaw on point, the court could not conclude that the claim was obviously foreclosed under "settled rules" of Louisiana law — the standard required to establish fraudulent joinder.

Defendants separately argued that Plaintiff's factual allegations about the SWB's water as a source of contaminants were too speculative to support a claim. The court rejected this as a Rule 12(b)(6) argument (the standard for dismissing a complaint for failure to state a claim) rather than a fraudulent joinder argument. Citing Grancare, the court noted that even if a complaint could be dismissed under Rule 12(b)(6), the fraudulent joinder inquiry does not end there — courts must also consider whether amendment could cure the deficiency. Here, Plaintiff had noted in the complaint that he was awaiting test results on water contaminants, suggesting that additional facts might be supplied through amendment. The court therefore found at least a possibility that Plaintiff could have stated a valid claim against the SWB.

At oral argument, Defendants raised two additional theories: (1) that because Louisiana is a civil law jurisdiction (relying on a civil code rather than judge-made common law), the absence of caselaw is unsurprising and should not matter; and (2) that because the LPLA is the exclusive remedy for product liability claims in Louisiana, the existence of other claims against the SWB would imply the LPLA does not apply. The court rejected both. Nothing in the LPLA explicitly excludes entities like the SWB, and no party cited any case — product liability or otherwise — in which anyone had brought a claim against the SWB. These arguments might support a motion to dismiss, but they did not make the failure to state a claim "obvious" under the fraudulent joinder standard.

Plaintiff's Silence as Admission

Defendants relied on Caswell v. Olympic Pipeline Co., 484 F. App'x 151 (9th Cir. 2012) (an unpublished, non-binding decision), which construed a plaintiff's failure to object to a notice of removal and failure to move to remand as an "admission" that non-diverse defendants were fraudulently joined. The court declined to follow Caswell for several reasons. First, courts have an independent, ongoing obligation to ensure subject-matter jurisdiction exists regardless of whether parties raise the issue. See Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010). Treating a party's silence as binding the court's jurisdictional analysis would undermine that obligation and effectively allow subject-matter jurisdiction to be created by delay. Second, the published precedent cited in Caswell — Schnabel v. Lui, 302 F.3d 1023, 1032 (9th Cir. 2002) — held only that failure to contest facts stated in a notice of removal constitutes an admission of those facts, not an admission of the legal conclusion of fraudulent joinder. Third, Caswell predates Grancare, which clarified the fraudulent joinder standard.

Whether Voluntary Dismissal of the SWB Cured the Jurisdictional Defect

Defendants argued that even if diversity was incomplete at removal, the defect was cured when Plaintiff voluntarily dismissed the SWB, relying on Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996). In Caterpillar, the Supreme Court held that where complete diversity was absent at removal, but the non-diverse defendant was dismissed before trial and the case proceeded to a jury verdict and judgment, considerations of "finality, efficiency, and economy" justified allowing the post-trial judgment to stand. The court distinguished Caterpillar on its facts: there has been no trial and no final judgment in the Watkins case. The Ninth Circuit has applied Caterpillar's rule only where a district court has entered judgment after trial or summary judgment following extensive discovery. City of Oakland v. BP PLC, 969 F.3d 895, 909-10 (9th Cir. 2020). The finality rationale simply does not apply here.

Moreover, 28 U.S.C. § 1447(c) mandates remand whenever the court lacks subject-matter jurisdiction "at any time before final judgment." The court read Caterpillar as a rule for appellate review of post-judgment defects, not a license for district courts to overlook jurisdictional defects prior to final judgment. Allowing voluntary dismissal to retroactively cure a removal defect pre-judgment would, in the court's view, effectively eliminate the statutory time limit for remand motions.

Disposition

The court granted Plaintiff's motion to remand. Because Defendants failed to establish fraudulent joinder, complete diversity did not exist at the time of removal, and the court lacked subject-matter jurisdiction. All prior orders in the Watkins case were vacated, and the case was remanded to the Civil District Court for the Parish of Orleans. The court did not reach the separate question about Nurture LLC's citizenship allegations in the notice of removal.