Tuesday, November 17, 2015

Courts Prevent Forum Shopping by Plaintiffs

By Helen Emerson

Jurisdiction is a concept that limits the type of cases courts can adjudicate.  The subject matter jurisdiction of federal courts  -- whether a given federal court can rule on the subject matter of the case in question – takes three forms:  federal question jurisdiction, supplemental jurisdiction and diversity jurisdiction.  Federal question jurisdiction means that federal courts may hear cases that pertain to issues involving the Constitution and federal laws.  Supplemental jurisdiction provides a federal court with the ability to hear a non-jurisdictional claim that is ancillary to a claim over which the court does have jurisdiction.  Diversity jurisdiction authorizes federal courts to hear cases when the parties are citizens of different states and when the amount in controversy is more than $75,000.  For a federal court to exercise diversity jurisdiction, there must be “complete” diversity between the parties – meaning that the persons on one side of the controversy must be citizens of different states from those persons on the other side.  If a person  on one side of the case is a citizen of the same state as a person on the other side of the case, diversity jurisdiction is destroyed. Thus, if diversity exists, an out-of-state defendant is entitled to remove a case from state court to a federal forum.  

In a procedural ploy to avoid federal diversity jurisdiction and keep their cases in state courts, plaintiffs asserting premises liability claims against corporate store owners are joining the individual store managers on duty as defendants.  An out-of-state corporate store owner seeking to remove such a case to federal court must demonstrate “improper joinder” of the in-state store manager.  In these circumstances, the issue of improper joinder turns on whether the plaintiff has pleaded a claim under state law against the in-state defendant.  Thus, the store owner must show there is no reasonable possibility that the plaintiff can establish the liability of, or recover from, the in-state store manager, individually.

Under Texas law, “individual liability arises only when the officer or agent owes an independent duty of reasonable care to the injured party apart from the employer’s duty.”  Leitch v. Hornsby, 935 S.W.2d 114, 117 (Tex. 1996).  Numerous federal district courts have acknowledged that the Texas Supreme Court explicitly extended the holding in Leitch to premises liability cases.  , See, e.g., Solis v. Wal-Mart Stores East, L.P., 617 F. Supp. 2d 476, 481 (S.D. Tex. 2008) (citing Tri v. J.T.T., 162 S.W.3d 552, 562 (Tex. 2005).  Therefore, unless the store manager played a personal role in creating the dangerous condition at issue, there is no reasonable basis under Texas law for an independent claim against the store manager.  

Plaintiffs nevertheless continue to challenge federal diversity jurisdiction by suing the in-state store manager for actions or inactions within the scope of his or her duties as an agent of the corporate store owner.  Fortunately, recent opinions from the federal district courts recognize this as a forum shopping tactic, finding “improper joinder” of the store manager, and upholding diversity jurisdiction.  See, e.g., McCarty v. Hillstone Rest. Grp., 2015 U.S. Dist. LEXIS 108542 (N.D. Tex. August 18, 2015); Kerr v. Target Corp., 2015 U.S. Dist. LEXIS 62116 (E.D. Tex. April 14, 2015).

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