Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

WALTON v. BAYER CORPORATION (May 23, 2011)

Cathy Walton alleges that she suffered serious injuries as a result of taking a prescription drug manufactured by a Bayer Corporation affiliate and sold at a pharmacy operated by Niemann Foods. She brought suit against Bayer and Niemann in Illinois state court, alleging that the two defendants failed to warn of the drug's serious side effects. Although Niemann is an Illinois citizen, Bayer removed the case to federal court on the grounds that Niemann was improperly joined. Chief Judge Herndon (S.D. Ill.) denied Walton's request to remand and dismissed Niemann, with prejudice. Walton abandoned prosecution of the suit after that order. The court later dismissed the suit with prejudice when Walton refused to comply with a discovery order. Walton appeals.

In their opinion, Judges Cudahy, Posner, and Manion affirmed. The Court first confirmed its own appellate jurisdiction, notwithstanding Bayer's argument that Walton should not be allowed to turn a non-appealable interlocutory order into an appealable order by abandoning the case. The Court distinguished the cases Bayer cited and concluded that there was nothing wrong with her tactic. She should be allowed to risk her claim's success on being right about jurisdiction. The Court next turned to the question of the district court's jurisdiction. It rejected Walton’s first argument that the complaint did not meet jurisdictional amount. Her alleged injuries are quite serious and suggest that she is seeking at least the jurisdictional amount -- and she has not exercised her absolute ability to defeat removal by committing to accept no more than the jurisdictional amount. The Court also rejected her argument that a minor procedural defect precluded federal jurisdiction. The Court turned to her principal argument -- lack of complete diversity. Walton argued both that Niemann was a proper defendant and that, if it was not, fraudulent joinder's "common defense" exception applied. With respect to the first of those arguments, the Court looked to the "learned intermediary" doctrine, under which one's prescribing physician is principally responsible for warning a patient of a drug's side effects and a manufacturer is excused from any obligation to warn. Under Illinois law, a pharmacy like Niemann is only obligated to warn a customer of risks that are known to it but possibly unknown to the prescribing physician (for example, potential interactions with other prescriptions dispensed by the pharmacy). Since Walton did not allege that Niemann had such knowledge, Niemann had no obligation to warn and was properly dismissed. With respect to Walton's second argument, the Court turned to the common defense exception to fraudulent joinder. Under that doctrine, if a plaintiff makes identical claims against both the diverse and non-diverse defendants, a fraudulent joinder argument is really an attack on the merits of the entire case. That attack must be resolved in the state court. If, therefore, Bayer and Niemann both have the same learned intermediary defense, it must be resolved in state court. That is not the case, however. Walton alleges that Bayer concealed the drug's side effects, even from physicians. The two defendants therefore do not share a common defense, the exception to fraudulent joinder does not apply, and the district court properly dismissed Niemann. As an aside, the Court noted that a Walton victory based on the common defense exception in the appellate court would have resulted in a remand, only for Walton to lose in state court. The doctrine of judicial estoppel would not allow Walton to argue in the appellate court that her claims against Bayer and Niemann were identical and then argue in state court that her claim against Bayer was different.

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SCHUR v. L.A. WEIGHT LOSS CENTERS, INC. (August 14, 2009)

Pamela Hoppe, an Illinois citizen, joined a weight loss program at her local L.A. Weight Loss Center ("Center"). After just several months of diet and nutritional supplements, Hoppe died of acute liver hepatitis. Her estate filed suit in state court against the Center alleging a variety of state law claims. The Center removed the case to federal court on diversity grounds, where the parties conducted discovery for just over one year. The estate then amended its complaint, adding claims against two Center employees, both Illinois residents. The estate then moved to remand the case to state court because of the new lack of diversity. On the Center's motion, the court struck the amended complaint on the grounds that the new defendants were fraudulently joined. Later, the court granted summary judgment to the Center. The estate appeals.

In their opinion, Judges Bauer, Kanne and Sykes vacated and remanded. The Court addressed the jurisdictional issue first. It noted that 28 U.S.C § 1447(e) applies when a plaintiff seeks to join a non-diverse party that would eliminate subject matter jurisdiction. A district court has two options -- it can deny the joinder and keep the case or it can allow the joinder and remand the case. It should not do what the court did here – allow the joinder and keep the case. The Court then adopted a framework of factors a lower court should consider in exercising its discretion on joinder: the plaintiff's motive, the timeliness of the request, the harm to the plaintiff if denied, and other equitable considerations. Before addressing these factors, the Court “detoured” to address whether the district court had the authority to reverse the joinder decision, further complicated by the fact that a magistrate judge had granted the motion to amend. In the particular posture of this case, the Court concluded that the district court was permitted to reconsider the magistrate's order. Because the motion was granted as a routine matter without any indication of its jurisdictional significance, the Court joined several other courts in concluding that a district court may reconsider a prior joinder decision when it was unaware that joinder would defeat diversity. Finally, the Court proceeded to examine the lower court's exercise of its discretion. The lower court had relied on the doctrine of fraudulent joinder in striking the amended complaint. It found that it was unlikely that the estate could prevail against the individual defendants. The Court concluded that the district court misapplied Illinois law in reaching that conclusion. Although vicarious liability can result in employer liability for employees' misconduct when the acts were committed within the scope of employment, it does not affect the employees' direct liability. The Court found that it was error to conclude that it was unlikely for the state to succeed against the individual employees. With respect to the plaintiff’s delay in adding the individual employees, the Court acknowledged that the amendment followed a year of discovery but emphasized that the amendment came within a few months of the estate learning of each employee's role in the events prior to Hoppe's death. Thus, the Court concluded that the lower court abused its discretion in denying the remand. Since it had no jurisdiction, it should not have reached the merits and neither did the Court.

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