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News
February 26, 2016

Closing a Loophole in Our Legal System: Fraudulent Joinder Legislation Passes the House

Should trial lawyers be able to add a company to a national lawsuit just because that company is located in a plaintiff-friendly jurisdiction where judges are more likely to rule in their favor? No!

That’s the answer the U.S. House of Representatives gave when it passed the Fraudulent Joinder Prevention Act of 2015 (H.R. 3624) today by a vote of 229-189. This bill closes a loophole in the legal system that has allowed plaintiffs’ lawyers to keep cases that belong in federal courts in state courts instead, giving them an unfair advantage in litigation.  

Here’s how the system currently works. You’re a plaintiffs’ lawyer suing lots of companies across the country. Your local judges know you well, and your state laws favor your case. You’ll have a legal leg up if your case is before them in state court. Trouble is – your case won’t be heard unless your suit includes a local company that gives it legal “standing.” What to do? Add the local company to your list of defendants.

This tactic is known as “fraudulent joinder”—adding a defendant who you would otherwise have no reason to sue to anchor your case in a friendly local court. Plaintiffs’ lawyers have used this tactic to game the system time and again. 

The current standards for determining if a case has been “fraudulently joined,” however, are incredibly hard to meet and are split among the various federal circuits. The Fraudulent Joinder Prevention Act will bring sensibility and uniformity to adjust these standards. 

The new standard allows federal judges to consider if the claim brought against the local defendant under state law is plausible and if the plaintiff’s intention to bring suit against the local defendant is in good faith.

Importantly, the Fraudulent Joinder Prevention Act will make it harder for plaintiffs’ lawyers to use the tactic of “fraudulent joinder” and will protect defendants from continued exploitation.  

To read more on the Fraudulent Joinder Prevention Act, check out our extended blog post here

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