The Declaratory Judgment Action: Your Secret Weapon for Staying in State Court

by Tiffany Dupree, Senior Associate

Introduction

You’ve just filed your case in state court. You have a non-diverse party, but you’ve been down this road before. You know that the defendant will try to remove the case to federal court, claiming that you joined the non-diverse party solely to defeat diversity jurisdiction. Truth be told, maybe you did, but you have a duty to your client and know that a state court judge will be more inclined to decide the case in your favor.

The battle of removals and motions to remand is about to begin. If only you had a secret weapon, a surefire way to keep your case in state court. Under recent Louisiana court decisions, adding a claim for declaratory relief may be the secret weapon you’ve been waiting for.

Standards for Removal based on Improper Joinder

Pursuant to 28 U.S.C. § 1332(a)(1), United States district courts have original jurisdiction over civil actions in which the amount in controversy exceeds $75,000 and is between citizens of different states.[1] Under 28 U.S.C. § 1441(a), “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.”[2]

A party seeking removal based on improper joinder of a non-diverse defendant bears a “heavy” burden of proving that joinder is improper.[3] To meet this burden, the removing party must show either “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.”[4] Typically, the removing party does not claim actual fraud in the recitation of the jurisdictional facts. Thus, the pertinent issue before a court faced with removal due to improper joinder is whether the plaintiff is able to establish a cause of action against the non-diverse party.

In determining whether a non-diverse party has been joined improperly, federal courts must consider if it is possible for the plaintiff to recover against the non-diverse defendant under state law.[5] If there is a cause of action for declaratory relief, however, the test is different.[6] The court in Bilyeu v. Wells Fargo Insurance Services, Inc., found that the Louisiana Declaratory Judgment Act (“LDJA”)[7] alters what it means to “recover against” a non-diverse defendant.[8]

The Power of a Declaratory Judgment Action

The LDJA is the applicable law concerning declaratory judgment actions initiated in Louisiana courts.[9] The LDJA provides that “[w]hen declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceedings.”[10] Therefore, the possibility to “recover against” a non-diverse defendant is met when the defendant is an affected, interested party.[11]

An action for a declaratory judgment is sought to determine the rights of the parties.[12] Thus, the analysis set forth in the LDJA begs the question: when would an action to determine the rights of a party ever not affect the party?

The LDJA’s meaning of “recover against” allows a plaintiff to join a non-diverse party solely to defeat diversity jurisdiction, provided that one of the claims asserted is for declaratory relief. The joinder of the non-diverse party is deemed proper because the party will be affected by the declaration regardless of the conclusion the court reaches. If the court concludes that the non-diverse party is liable to the plaintiff, the non-diverse party is affected. If the court concludes that the non-diverse party is not liable to the plaintiff, the non-diverse party is still affected.[13]

The standard under the LDJA for defeating an improper joinder claim is remarkably low. As noted by the court in Alfred Miller Construction Company v. Carboline Company, “[t]he mere fact that [a plaintiff states] a cause of action for a declaratory judgment explaining [his] rights and liabilities under [a contract] is sufficient to defeat a claim of improper joinder.”[14] The defendant’s “heavy” burden in proving improper joinder, coupled with the minuscule requirements the LDJA places on the plaintiff to defeat the claim, creates an easy win for the plaintiff, allowing the case to remain in state court.

Conclusion

Under recent Louisiana caselaw, a claim for declaratory relief seems to be an easy way to win the battle of removals and motions to remand. So, the next time you file an action in Louisiana state court but are concerned that the defendant will remove to federal court based on improper joinder of a non-diverse defendant, be sure to use your secret weapon, the declaratory judgment action.

[1] 28 U.S.C. § 1332(a)(1) (2012).

[2] 28 U.S.C. § 1441(a) (2012).

[3] Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003).

[4] Id. at 647.

[5] Frank’s Int’l, LLC v. Nat’l Union Fire Ins. Co. Pittsburg, No. 16-5252-JJB-RLB, 2016 WL 7242565, at *3 (M.D. La. Nov. 15, 2016) (citing Bilyeu v. Wells Fargo Ins. Servs., Inc., No. 16-00023, 2016 WL 5721070, at *4–5 (W.D. La. Sept. 29, 2016)).

[6] Id.

[7] La. Code Civ. Proc. arts. 1871–1883 (2017).

[8] Bilyeu, 2016 WL 5721060, at *5–6.

[9] Frank’s Int’l, 2016 WL 7242565, at *3. Although there is disagreement among Louisiana courts as to which Declaratory Judgment Act—the LDJA or the Federal Declaratory Judgment Act—should be applied in such cases, both Acts render the same result. Cf Bilyeu, 2016 WL 5721070 with Phoenix Expl. Co. v. Am. Int’l Specialty Lines Ins. Co., 2017 WL 3159013, at *3 n.10 (W.D. La. May 23, 2017).

[10] La. Code Civ. Proc. art. 1880 (emphasis added).

[11] Id.; Bilyeu, 2016 WL 5721060, at *5–6.

[12] Declaratory Judgment, Black’s Law Dictionary (10th ed. 2014).

[13] Phoenix, 2017 WL 7242565, at *3) (stating that the defendant’s motion for summary judgment seeking to declare the defendant not liable to the plaintiff “establishes a reasonable basis for recovery against the defendant based on the plaintiff’s declaratory judgment claim.”).

[14] Alfred Miller Constr. Co. v. Carboline Co., No 13-00084, 2013 WL 4538901, at *4 n.7 (W.D. La. Aug. 26, 2013).

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