Justices to consider diversity jurisdiction, procedural problems, and baby food

The arguments next Tuesday in The Hain Celestial Group v Palmquist probably will sound like a session of a first-year civil procedure course, as the Supreme Court will consider what to do when a trial court improperly dismisses a defendant who would have deprived it of jurisdiction to hear the case.

If you don’t try cases for a living, that description of the issue before the justices might require a little unpacking. Let’s start with the idea of “diversity” jurisdiction, which is in the federal Constitution, and says that federal courts can hear cases that involve parties from different states even if the cases don’t raise any questions of federal law – on the theory that the federal courts (supposedly) will provide a more neutral forum than those of the states. Crucially, the Supreme Court held almost 200 years ago that federal courts can hear such cases only if diversity is “complete” – that is, if all the parties on one side of the case are from states that are different from the states where all the parties on the other side of the case are located.

Diversity jurisdiction is available to either the plaintiff or the defendant. That is to say, the plaintiff in a case with diverse parties can bring the suit initially in federal court. But if the plaintiff brings the suit in state court, the defendant can “remove” the case to federal court, and the federal court can proceed through a trial and judgment.

To put those rules into context, Texas resident Sarah Palmquist believes that high levels of heavy metals in baby food harmed her child. She sued both Whole Foods (a Texas-based grocer) where she bought some of the food and The Hain Celestial Group (not a Texas company), which manufactured it. 

Because one plaintiff (Palmquist) and one defendant (Whole Foods) are from Texas, the parties are not completely diverse. Ordinarily, that would mean that the case would have to stay in state court. That is relevant, because the lawyers who bring these kinds of cases generally have a strong belief that Texas state courts are much more receptive to their claims than the federal courts.

Hain responded by removing the case to a federal court in Texas, where it argued that the claims against Whole Foods were so feeble that the grocer should be removed from the case. The federal court agreed and dismissed Whole Foods from the case. Because that left only Palmquist (from Texas) and Hain (not from Texas), the case could stay in federal court, where Hain prevailed after a two week-long trial.

At that point, Palmquist went to a federal appeals court, which concluded that it was a mistake to remove Whole Foods from the case. With Whole Foods back in the case, the appeals court reasoned that the district court never had jurisdiction over the case and sent the whole case back to the Texas state courts, where Palmquist would get a chance to press her claims against Whole Foods and Hain together, presumably in a second trial.

The question for the justices is what courts should do when there is a jurisdictional mistake like this one. Hain argues that it makes no sense to ignore that Palmquist got everything to which she was entitled – a day in court with a full-blown trial against Hain. At the time that trial occurred, Hain emphasizes, the parties were completely diverse: Palmquist (from Texas) on one side and Hain (not from Texas) on the other. The decision that Whole Foods should have been there is not a good enough reason to throw out the trial that seemed completely legitimate at the time.

Palmquist, on the other hand, emphasizes that we have jurisdictional rules for a reason, and that they are designed to allocate cases between state and federal courts. What we now know is that this case belonged in state court, not federal. Palmquist especially emphasizes the idea that the plaintiff is traditionally “master of the complaint,” and has a strong entitlement to adjudication of the case it chose to bring. Palmquist wanted to be in state court, and she wanted a trial where she had both Whole Foods and Hain as joint defendants, and that is the complaint she filed. She has not yet gotten to have that trial; Hain’s decision to sever itself from Whole Foods – now that we know it was incorrect – should not deprive Palmquist of the litigation structure her lawyers designed when they brought the case.

To me, the most surprising thing about the case is that pretty clearly neither the Supreme Court nor Congress has spoken to this question explicitly, so the justices have a somewhat free hand here in deciding what to do. Some of the justices surely will be influenced by the waste of declaring the trial “doesn’t count” for anything. But I think it is just as clear that some will think that it makes more sense for state courts to decide the things that Congress left to them, which at this point well might include Palmquist’s complaint against Hain and Whole Foods. The case has first-rate advocates on both sides, so we should have an informative argument.