In Barlow v. Colgate Palmolive Co., 772 F.3d 1001 (4th Cir. 2014), an en banc decision, the United States Court of Appeals for the Fourth Circuit considered two cases where plaintiffs allegedly misrepresented their intent to pursue claims against non-diverse defendants in actions that were removed to federal district court based upon diversity jurisdiction; after remand of the cases back to state court, the removing defendant filed motions in the federal district court under Federal Rule of Civil Procedure 11 for sanctions and Rule 60(b)(3) for vacatur of the remand orders. The Fourth Circuit held that the district court had jurisdiction, post remand, to rule on the motions for sanctions and vacatur, and that its determination of the motions did not constitute a “review” under 28 U.S.C. § 1447(d), which prohibits federal courts from reviewing orders remanding cases to state court. Id. at 1004, 1009-10.
The decision is significant because it provides a route, albeit a difficult one, to seek vacatur of a remand order where the conduct of the opposing party amounts to fraud, misrepresentation or misconduct within the meaning of Rule 60(b)(3).
The consolidated appeals in Barlow involved asbestos claims brought by two individuals, plaintiffs Barlow and Mosko, in separate Maryland state court actions against Colgate-Palmolive Company (“Colgate”) and a number of other entities. In their lawsuits, Barlow and Mosko alleged that the products of each of the defendants had at some point exposed them to asbestos. Id. at 1004. Although the plaintiffs also alleged claims against certain in-state defendants, Colgate removed the two cases to the United States District Court for the District of Maryland on the basis of diversity of citizenship and contended that the plaintiffs had fraudulently joined the in-state defendants. Colgate based its contention on the plaintiffs’ deposition testimony and interrogatory responses, which purportedly demonstrated that they did not intend to “pursue a claim against any defendant other than Colgate, a diverse defendant.” Id. (citation omitted). The plaintiffs moved for remand of the two cases to state court, asserting that they had viable claims against the non-diverse defendants. Id. at 1005. They admitted, however, that the evidence was circumstantial. Id. at 1005 (citation omitted).
In considering the motions for remand, the district judges in both cases found that there was a possibility that each plaintiff could successfully pursue a claim against the non-diverse defendant in each respective case and, therefore, remanded the cases to Maryland state court. Id. at 1005-06. “‘[T]o establish that a nondiverse defendant has been fraudulently joined, the removing party must establish either: [A] that there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court; or [B] that there has been outright fraud in the plaintiff’s pleading of jurisdictional facts.’” Id. at 1004 n. 2 (quoting Turner v. JP Morgan Chase Bank, N.A., 543 F. App’x 300, 301 (4th Cir. 2013) (per curiam)).
After the two cases were remanded to the state court, the plaintiffs filed a joint motion to consolidate the cases with two other asbestos-related cases. Colgate opposed the consolidation on the grounds that it “could not receive a fair trial in a consolidated proceeding because the alleged sources of asbestos [other than Colgate’s product (the “Cashmere Bouquet” line of powder makeup)] were too different among the cases.” Id. at 1006. In their reply, however, the plaintiffs stated that their exposure to asbestos was limited to Colgate’s product, which Colgate then argued was contrary to what was asserted in the federal district court. Id. At the hearing on the consolidation motion, the plaintiffs admitted that there would be only one defendant in the case. Id.
In response to the plaintiffs’ statements, Colgate filed a motion under Federal Rule of Civil Procedure 11 for sanctions in the federal district court based upon the plaintiffs’ “purported misrepresentations.” Colgate sought monetary penalties, reference of the plaintiffs’ counsel to the state bar and the awarding of any other appropriate relief. Id. at 1006. The two cases were consolidated for the hearing on the motions for sanctions. The plaintiffs’ counsel argued that the statements were not subject to Rule 11. After the hearing, Colgate also moved for relief under Federal Rule of Civil Procedure 60(b)(3) as a supplement to its Rule 11 motion and sought vacatur of the district court’s remand orders. Id. at 1006-07. The district court denied Colgate’s motions, concluding that under 28 U.S.C. § 1447(d), it did not have jurisdiction to vacate or strike the previous remand orders. The district court also indicated that if it were to consider other possible sanctions, it would decline to issue them. Id. at 1007.
On appeal to the Fourth Circuit, Judge Davis wrote for the Court in a 2 to 1 decision, which affirmed the district court, and Judge Floyd dissented. Barlow v. Colgate Palmolive Co., 750 F.3d 437 (4th Cir. 2014). Thereafter, rehearing en banc was granted, and in a decision written by Judge Floyd, the Court found that the district court had jurisdiction to consider Colgate’s motions for sanctions and vacatur of the remand orders, reversed the district court’s orders on the motions and remanded the cases for the district court to “rule on Colgate’s Rule 11 and Rule 60(b)(3) motions on their merits.” Barlow, 772 F.3d at 1013. Judge Wynn concurred in part and dissented in part, and Judge Davis dissented.
In short, the Court concluded that “the types of relief provided by Rule 11 and Rule 60(b)(3) do not involve ‘review’ as proscribed by § 1447(d).” Id. at 1008. Analyzing prior precedent, the Court first held that “district courts have jurisdiction to decide Rule 11 sanctions motions on the merits, even when they are filed after the underlying action is remanded to state court.” Id. at 1009. Although the district court stated, after declining to vacate the remand orders, that it would not impose other possible sanctions if it were to consider them, the Fourth Circuit indicated that the district court’s reasoning was not clear and remanded the cases for reconsideration of Colgate’s motions “in full and in light of this opinion.” Id. at 1010.
Secondly, the Court held that 28 U.S.C. § 1447(d) “does not limit a court’s authority to provide relief – in this case, through vacatur – from a fraudulently obtained remand order under Rule 60(b)(3).” Id. The critical distinction is that “§ 1447(d) prohibits ‘reviewing’ an order, but it does not prohibit ‘vacating’ an order as permitted by Rule 60(b)(3).” Id. The Court explained that: “Rather than assess the merits of a judgment or order, [Rule 60(b)(3)] focuses on the unfair means by which a judgment or order is procured.” Id. (citations omitted). In reaching this conclusion, the Court adopted the Eleventh Circuit’s analysis in Aquamar S.A. v. Del Monte Fresh Produce N.A., Inc., 179 F.3d 1279 (11th Cir. 1999), which the Fourth Circuit described as “recogni[zing] that vacatur of a remand order does not necessarily constitute a proscribed review of a remand decision.” Id. at 1011 (quoting Aquamar, 179 F.3d at 1288).
In his dissent, Judge Davis criticized the majority decision and speculated that it would be reversed if considered by the Supreme Court. Id. at 1018.
The Fourth Circuit’s decision in Barlow allows a removing defendant to consider moving for vacatur of a remand order, despite the prohibition in 28 U.S.C. § 1447(d), where the evidence shows that the plaintiff misrepresented in the district court its intent to pursue a claim against a non-diverse defendant upon remand to state court or engaged in other conduct during the remand process that constitutes fraud, misrepresentation or misconduct within the meaning of Rule 60(b)(3). The parties will, therefore, find it prudent to consider carefully their statements with regard to pursuing non-diverse parties or making jurisdictional representations before seeking remand of a removed case to state court. It will also be interesting to see how the courts construe the Barlow decision in the future.