Bills
| 3.23.22

Should it be Easier for Federal Courts to Deal With Misdirected Lawsuits? (H.R. 725)

Do you support or oppose this bill?

What is H.R. 725?

(Updated August 26, 2021)

This bill would change the process federal courts use to determine whether a case should be removed from a state court to a federal court because the parties to the suit are citizens of different states. It aims to make it easier for federal judges to release local defendants from a lawsuit that they’ve been added to through “fraudulent joinder” if it’s not plausible to conclude that state law would’ve held them liable or if the plaintiff doesn’t have a good-faith intention to seek a judgement against the defendant. Fraudulent joinder refers to the improper addition of defendants to a lawsuit in order to keep the case in state courts that may be more friendly to the plaintiffs claims.

The addition of a defendant would be classified as fraudulent joinder if the court finds that:

  • Actual fraud in the pleading of jurisdictional facts with respect to the defendant;

  • State law wouldn’t plausibly hold the defendant liable;

  • State or federal law bars all claims in the complaint against that defendant;

  • No good faith intention to prosecute the action against that defendant or to seek a joint judgment which includes that defendant.

In determining whether to grant or deny the motion to remand the case back to state court, the federal court may allow pleadings to be amended and must consider the pleadings, affidavits, and other evidence submitted by the parties to the case. A federal court finding that defendants have been fraudulently joined to the case must dismiss without prejudice claims against those defendants and deny the motion to remand.

Argument in favor

Federal judges should have more discretion in determining whether a defendant in a lawsuit has been fraudulently added to the suit in order to get a case remanded back to a state court. If the plaintiff doesn’t have a good-faith intent to seek a judgement against the defendant or there’s no plausible liability, the defendant should be released from the case.

Argument opposed

This legislation would make it easier for wealthy, corporate defendants to avoid being held liable for their wrongdoing by making litigation more time consuming and expensive. Federal courts shouldn’t be put in the position of deciding matters of state law and unnecessarily burdening plaintiffs to the point where future plaintiffs may not file suit.

Impact

Plaintiffs in lawsuits and defendants who have been fraudulently added to a lawsuit; state courts; and federal courts.

Cost of H.R. 725

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Rep. Ken Buck (R-CO) introduced this bill to protect innocent small businesses from being fraudulently added to a lawsuit by trial lawyers as a tactic to get a lawsuit sent back to a state court that may be more receptive to the plaintiff’s claims than the federal court its assigned to:

“When our small businesses are tied up in fraudulent lawsuits, their ability to create jobs and grow the economy is significantly reduced. The Innocent Party Protection Act guards the integrity of our judicial system by protecting small businesses from these bad-faith lawsuits.”

The Democrats on the House Judiciary Committee filed a joint dissent to this legislation in the bill’s committee report, which read in part:

“[This bill] is a blatant attempt to tilt the playing field in favor of corporate wrongdoers by making it far more burdensome, expensive, and time-consuming for injured people to obtain justice from such wrongdoers… These new requirements will create tremendous uncertainty and add unnecessary complexity into the remand process. They will also increase the length and cost of litigation, delaying adjudication of potentially meritorious claims and burdening plaintiffs to the point where future plaintiffs may even be dissuaded from filing suit.”

This legislation has the support of five Republican cosponsors and passed the House Judiciary Committee on a vote of 17-4.


Media:

Summary by Eric Revell

(Photo Credit: Jeff Kubina / Creative Commons)