Rathbun v. Barretts Minerals, Inc.

Background

John Edwin Rathbun and Gwendolyn Rathbun filed a state-court lawsuit asserting negligence, strict liability, negligent misrepresentation, fraud by nondisclosure, and loss of consortium. They alleged that John Rathbun was exposed to asbestos fibers through asbestos-containing products and that the defendants’ conduct and products contributed to his mesothelioma and related injuries.

Chattem removed the case to federal court based on diversity jurisdiction, which allows federal courts to hear certain cases involving parties from different states. The plaintiffs moved to remand, meaning they asked the federal court to return the case to state court. They also requested attorney’s fees and costs. Lucky separately had a summary-judgment motion pending, but the order does not state a separate disposition of that motion.

Fraudulent-Joinder Issue

Chattem and Lucky opposed remand, arguing that Safeway and Lucky were fraudulently joined to defeat federal jurisdiction. The plaintiffs did not dispute that Safeway and Lucky were the only defendants named in the complaint who resided in California like the plaintiffs, but they disputed that the defendants had shown fraudulent joinder.

The court explained that fraudulent joinder may be established by actual fraud in pleading jurisdictional facts or by showing that the plaintiff cannot establish a cause of action against the nondiverse defendant in state court. If there is any possibility that a state court could find that the complaint states a claim against a resident defendant, the joinder is proper and the federal court must remand. Doubts about an inartful, ambiguous, or technically defective complaint are resolved in favor of remand.

The defendants argued that the complaint identified only Gold Bond powder, which Chattem manufactured, and that Dr. Rathbun had not testified that he purchased Gold Bond from Safeway or Lucky. The record also showed that Dr. Rathbun had used Johnson & Johnson Baby Powder on his children. The plaintiffs represented that Gwendolyn Rathbun would testify that she purchased that product at Safeway and Lucky, although her deposition had not occurred when the case was removed.

Ruling

The court found that the defendants’ arguments largely challenged whether the plaintiffs could prove their claims against Safeway and Lucky. The defendants did not show that the plaintiffs could not possibly state a claim against those defendants, either under the existing complaint or after an amendment adding facts about exposure to Johnson & Johnson Baby Powder or other asbestos-containing products. The court therefore declined to find that Safeway and Lucky were fraudulently joined.

Because there was not complete diversity, the court held that it lacked subject-matter jurisdiction and granted the plaintiffs’ motion to remand. It remanded the case to Alameda Superior Court and directed the clerk to close the federal file.

The court did not award attorney’s fees and costs. It concluded that, although the defendants’ removal arguments were unpersuasive, removal was not objectively unreasonable based on the complaint as it was then pleaded.