Shook Partners Victor Schwartz and Cary Silverman have authored a law review article, “Protecting the Victims of Fraudulent Joinder: How Congress and Federal Judges Can Help," for Rutgers Law Record. The article explains how plaintiffs often name a local defendant—often a small business or individual employee of a company—solely to eliminate “complete diversity” and litigate their case in a friendly state court. The fraudulent joinder doctrine allows federal courts to disregard the citizenship of a local defendant who is not the true target of the litigation and retain jurisdiction. In order to show fraudulent joinder, many courts require defendants to show a plaintiff has “no possibility”—not even a "glimmer of hope"—of recovery against the local defendant under state law, they explain.
The article urges Congress and the courts to develop a balanced and consistent approach to evaluating fraudulent joinder. A core requirement is requiring a plaintiff to allege a “plausible” claim against a local defendant, drawing from federal pleading standards. Schwartz and Silverman observe that pending federal legislation, the Innocent Party Protection Act, incorporates this standard and makes other modest modifications to fraudulent joinder law that would bring uniformity to the doctrine.