The Missouri Innocent Seller Statute: A Substantive Means Into Federal Court
James T. Pisciotta1
Introduction
The tactic is all too familiar to defense counsel in Missouri: In an effort to evade federal diversity jurisdiction, a plaintiff claiming injury as the result of an alleged product defect names both the diverse product manufacturer and the local retailer from whom the product was purchased as defendants in a state court action. The plaintiff’s efforts to avoid federal diversity jurisdiction are quite transparent; the overall tone of the complaint makes it abundantly clear that the action is not aimed in any meaningful sense at the local retailer. The local retailer is a wholly unwitting participant to the underlying facts and circumstances of the litigation, except for having simply sold the product to the plaintiff. Accordingly, the plaintiff has no real intention to prosecute any claim whatsoever against the in-state retailer – the retailer is simply a procedural pawn included in the litigation to thwart diversity jurisdiction and will be dismissed once the action is safely secured within the confines of state court.2 Can such an obvious tactic prevent a diverse product manufacturer from removing an action to federal court? Historically, in Missouri the answer was yes. However, a string of decisions from Missouri federal courts have dramatically altered the removal landscape. These decisions permit a product manufacturer to remove an action on the grounds that the local retailer was fraudulently joined as a defendant by operation of the Missouri “innocent seller statute.”3
Adopted as part of Missouri’s Tort Reform Act in 1987, § 537.762, RSMo (2000), known colloquially as the “innocent seller statute,” provides an important mechanism for the dismissal of products liability claims against retailer defendants. In relevant part, the statute allows for the interlocutory dismissal of a retailer whose liability is based solely on its status as a seller in the stream of commerce when the product manufacturer – from whom total recovery may be had – is properly before the court.4 The Missouri legislature enacted the innocent seller statute to protect “innocent” wholesalers and retailers from the perils of products liability claims.”5 Accordingly, the statute greatly benefits retailers by allowing them, at an early stage in the litigation, to seek dismissal from a products liability action where the plaintiff has also sued the product’s manufacturer. This statutory device enables a retailer to avoid the costs and uncertainties of protracted litigation and fosters judicial economy by narrowing the action to those entities most appropriately suited to defend a products liability claim.6
The protections afforded retailers under the innocent seller statute are readily apparent, but until recently it was uncertain whether the statute could be used by a diverse product manufacturer as a basis to remove a state court proceeding to federal court.7 The question of whether the statute provided a viable basis for removal hinged on a seemingly straightforward threshold issue: whether the innocent seller statute was “substantive” or “procedural” in nature. Like so many other seemingly straightforward questions, however, several complexities inherent in the statute prevented an uncomplicated determination. Ultimately, the characterization of the statute is of vital importance because – pursuant to the principles famously announced by the United States Supreme Court in Erie R.R. Co. v. Tompkins – only a state’s substantive statutes bind a federal court sitting in diversity, while the state’s procedural laws yield to federal dictates.8
Most of the early federal cases analyzing the innocent seller statute concluded that the statute was, on whole, procedural and, therefore, did not apply in federal court proceedings. These decisions, however, predate the Supreme Court of Missouri’s seminal decision in Gramex Corp. v. Green Supply, Inc.,9 which authoritatively characterized the statute as inherently substantive in nature. Several federal courts since Gramex have applied the statute within the removal context and concluded that, by virtue of its application, local retailers were fraudulently joined. As a result, the remaining product manufacturers and plaintiffs in those cases were completely diverse, thereby permitting federal jurisdiction.
The Innocent Seller Statute: A Brief Overview
The innocent seller statute allows for the dismissal of a products liability claim against a retailer whose liability is predicated solely on his status as a seller in the stream of commerce and the product manufacturer – “from whom total recovery may be had” – is properly before the court.10 Although allowing for a retailer’s dismissal at any early stage of the litigation, the innocent seller statute contains several procedural safeguards to make certain a plaintiff is not unfairly prejudiced by the dismissal of the retailer. In this regard, the statute only permits dismissal of the retailer when the product manufacturer (or another defendant) is properly before the court and is financially solvent.11 A product manufacturer is “properly before the court” when it is subject to process under Missouri law.12 Determining whether total recovery may be had from a product manufacturer “does not require elaborate financial inquiries[,] but simply bringing parties before the court against whom judgments could be entered for the full amount of the loss.”13
Moreover, “[a]n order of dismissal under [the innocent seller statute] shall be interlocutory until final disposition of plaintiff’s claim by settlement or judgment and may be set aside for good cause shown at anytime prior to such disposition.”14 Lastly, subsection (6) of the statute – the so-called “retention provision” – states that the statute “shall [not] operate to divest a court of venue or jurisdiction otherwise proper at the time the action was commenced.”15 As such, a “defendant dismissed pursuant [to the statute] shall be considered to remain a party to such action for [venue and jurisdictional] purposes.”16 These last two provisions of the statute have fueled a debate concerning whether the innocent seller statute is substantive or procedural in nature. As shown below, the answer to that threshold question necessarily establishes whether the statute may serve as a basis for a diverse product manufacturer to remove a state court action to federal court.
The Early Cases: Pre-Gramex
Focusing on the statutory language that a retailer’s dismissal is interlocutory, several courts concluded that, because a defendant retailer remains potentially liable to the plaintiff, the innocent seller statute was merely a procedural device and, therefore, inapplicable in federal court. For example, in Drake v. North American Phillips Corp.,17 the court held that the “paramount effect of § 537.762 is procedural [because] … it provides a mechanism for the dismissal without prejudice of an innocent seller-defendant at an early pre-trial stage of the action . . . with an opportunity for the seller to be pressed back into the action if no one higher on the commercial chain is available to the plaintiff.”18 The Drake court reasoned the innocent seller statute was procedural because, under Missouri’s strict liability paradigm, a retailer remained subject to liability, despite the statute’s provision allowing interlocutory dismissal.19 Accordingly, it was vital to the Drake court’s analysis that a retailer defendant could be forced or “pressed back” into the litigation should another defendant, namely the product manufacturer, fail as a viable defendant at some later stage in the litigation. Citing the retailer’s enduring potential exposure under Missouri strict liability law, several other courts also held that the innocent seller statute was procedural in nature.20
Equally obstructive to a successful removal, some Missouri federal courts also stressed that, even if the innocent seller statute applied in federal court, it could not be used as a predicate for removal because the express terms of the statute mandated that a dismissed retailer remain a party to the action for jurisdictional purposes. In Pender v. Bell Asbestos Mines, Ltd., the court held that diversity jurisdiction did not exist because the explicit terms of the innocent seller statute required that, for jurisdictional purposes, the dismissed local retailer “remain a party to [the suit].” 21
Against this backdrop, the Supreme Court of Missouri decided Gramex Corp. v. Green Supply, Inc.22 In stark contrast to the early federal court decisions, Gramex classified the innocent seller statute as inherently substantive in nature, a decision that ultimately enabled product manufacturers to successfully remove state court proceedings to federal court.
Gramex Corp. v. Green Supply, Inc.
In Gramex, the Supreme Court of Missouri, sitting en banc, considered the nature of the innocent seller statute and concluded that “[a]lthough at first glance this statute appears to be merely a procedural device . . . inherent in the statute is a substantive public policy choice of significant importance.”23 The Gramex Court found it “clear that [the Missouri] legislature sought to protect ‘innocent’ wholesalers and retailers from the perils of products liability claims, both procedurally and substantively by section 537.762.”24 The statute, according to the Court, reflected a “substantive public policy choice of significant importance [because,] [t]o the extent that a plaintiff can otherwise obtain ‘total recovery,’ all liability of a downstream seller, who would otherwise be jointly and severally liable to plaintiff for damages and subject to contribution from the other defendants, is shifted to upstream defendants, including the manufacturer.”25
Gramex’s Aftermath
Since Gramex, that innocent seller statute and its impact on a product manufacturer’s ability to remove an action on the basis of fraudulent joinder has been the subject of several important decisions in Missouri federal courts. Relying on the Gramex Court’s dual classification of the innocent seller statute in Spears v. Bayer Corp.,26 Judge Fenner closely parsed the statute, finding that it contained two substantive provisions, both of which were applicable in federal court:
The Innocent Seller Statute appears to have two substantive portions. The first states that the law applies to a case in which the defendant’s liability is premised solely upon his status as a seller of the product in the stream of commerce. Mo. Rev. Stat. §537.762(1). The second substantive part provides that such a defendant may be dismissed from the action if there is before the court another defendant, such as the manufacturer of the allegedly defective product, from whom total recovery may be had. Mo. Rev. Stat. §537.762(2). The remainder of the law appears to be procedural.27
Honoring its Erie obligation, the Spears court correctly applied the substantive provisions of the innocent seller statute and concluded that they removed any reasonable basis for recovery against the local retailer whose liability was based solely on its status as a mere seller in the stream of commerce. As a result, the court held that the local retailer was fraudulently joined, rendering the product manufacturer and the plaintiff completely diverse for jurisdictional purposes.28
Building on Spears, two decisions arising from the tobacco product liability arena have further confirmed the innocent seller statute’s status as a partially substantive rule of law. In Thomas v. Brown & Williamson Tobacco Corp., Judge Wright, citing Gramex, took a broader view of the statute than Judge Fenner did in Spears and stated unequivocally:
Recently, the [Innocent Seller Statute] has been held to be substantive, rather than a procedural device, and therefore this statute is applicable in federal court.29
After determining that the innocent seller statute was applicable, the Thomas court held that the local retailers of tobacco products were fraudulently joined because any “liability would be based upon the fact that they are [sellers] in the stream of commerce of the allegedly defective product.”30 Having concluded that the local retailers were fraudulently joined by operation of the innocent seller statute, the court denied remand as complete diversity existed between the remaining manufacturing defendants and the plaintiff.31
The innocent seller statute again was successfully utilized to remove an action brought against diverse tobacco manufacturers and local retailers in Carleton v. R.J. Reynolds Tobacco Co.32 There, relying heavily on his previous analysis in Spears, Judge Fenner once again held that the statute had two substantive portions which obligated the court, under Erie, to apply only those sections. After doing so, the Carleton court concluded that the “resident [retailers] were fraudulently joined” because there was no “reasonable basis [in law or fact] supporting a claim against the resident [retailers].”33 Once the citizenship of the fraudulently joined retailers was disregarded, remand was denied because “there [was] complete diversity of citizenship between the remaining parties.”34
Wichmann v. The Proctor & Gamble Manufacturing Co.35 is another Missouri federal court decision allowing the innocent seller statute to serve as a basis for removal jurisdiction. In Wichmann, the product manufacturer argued diversity jurisdiction existed because the statute allowed for the dismissal of the local retailer. In a short, albeit important footnote, the Wichmann court agreed with the diverse defendants and succinctly held that the “statute’s substantive provisions, as discussed in Gramex … are applicable to the instant case under the Erie doctrine.”36 Without the presence of the local retailer, the court denied remand because complete diversity existed between the product manufacturer and the plaintiff. Summarily denying the plaintiffs’ motion for reconsideration, the court reiterated that “the innocent seller statute of Missouri . . . allows for a seller to be dismissed under the conditions set forth in the statute [and, therefore,] … Plaintiffs’ action [against the local retailer] did not have a reasonable basis” for recovery.37
Remaining Confusion
In the wake of Gramex, a few federal court opinions have inexplicably continued to classify the innocent seller statute as procedural. These decisions, however, are of questionable importance because they fail to mention, much less analyze, the Supreme Court of Missouri’s binding decision in Gramex. In Henry v. Mylan Pharmaceuticals, Inc.,38 for example, without reference to Gramex, the court concluded the statute was procedural because “the statute does not affect the substantive liability of the seller.”39 Moreover, some of the post-Gramex statements classifying the innocent seller statute as procedural are, at best, mere dicta. The conclusion of the Henry court, for instance, is of no precedental value because the innocent seller statute was inapplicable under the facts of that case, and thus superfluous to the resolution of the case. Acknowledging that it was “clear that [the plaintiff] allege[d] that [the retailer] [was] liable for more than its acts as a seller in the stream of commerce,” the Henry court appropriately acknowledged that the innocent seller statute did not apply to the facts of the case.40
Open Question: The Constitutionality of The Innocent Seller Statute’s Retention Provision
Although Spears, Thomas, Carleton and Wichmann firmly establish that the innocent seller statute’s substantive portions are applicable in federal court and may be used as a basis to remove a state court action, those cases did not address an interesting question rich with constitutional implications: Does subsection (6) of the statute – the Retention Provision – improperly attempt to abridge federal jurisdiction? Is subsection (6) constitutional? In full, subsection (6) of the innocent seller statute provides:
6. No order of dismissal under this section shall operate to divest a court of venue or jurisdiction otherwise proper at the time the action was commenced. A defendant dismissed pursuant to this section shall be considered to remain a party to such action only for such purposes.41
As noted above, prior to Gramex, several courts concluded that the express terms of subsection (6) functioned to maintain the jurisdictional composition of an action even after a retailer had been dismissed.42 In contrast, Spears held that complete diversity existed after the local retailer was dismissed, despite subsection (6). By applying a proper Erie analysis, the Spears court was able to skirt the constitutional dilemma posed by subsection (6).43 The Spears court simply disregarded those sections of the innocent seller statute it found to be procedural in nature, such as subsection (6).44 Such an approach, although proper under Erie, begs the question: Can a state statute constitutionally abridge otherwise proper federal subject matter jurisdiction?
A federal court’s jurisdictiondepends upon the acts passed by Congress pursuant to the power conferred upon it by the Constitution of the United States, and cannot be enlarged, or abridged, by any statute of a State. The legislature or the judiciary of a State can neither defeat the right given by a constitutional act of Congress to remove a case from a court of the State into [the courts] of the United States, nor limit the effect of such removal.45
Thus, it is “well established that states cannot directly or indirectly prevent, defeat, or limit the free exercise of the right to remove.”46
Accordingly, it is settled “that a
state may [not] by statutory or decisional law restrict the subject matter jurisdiction of the
federal courts, …[for] it is axiomatic that
. . . a federal court must look only to federal, not state, law to determine [whether] that jurisdiction [exists], even when the substantive right at issue is a creature of state [law].”47 As such, if subsection (6) of the innocent seller statute is read and applied to divest a federal court of jurisdiction, it unconstitutionally abridges a diverse defendant’s statutory right to remove an otherwise proper action.
While no federal court in Missouri has addressed the specific issue, the retention provision of the Mississippi innocent seller statute –which was identical to subsection (6) of the Missouri innocent seller statute48 — was held to be unconstitutional. In Henderson v. Ford Motor Co.,49 the court held that the provision’s unabashed efforts to defeat a federal court’s removal jurisdiction violated the Supremacy Clause of the United States Constitution. The Henderson court held:
[C]ompletely diverse defendants have the statutory right to remove such an action to federal court on diversity grounds pursuant to 28 U.S.C. §§ 1441, 1446, and 1447. [The retention provision of the Mississippi innocent seller statute] fails to take this into account. Such is in direct conflict not only with the removal statutes but also with Article VI, section 1, clause 2 of the U.S. Constitution which provides that “the Laws of the United States . . . shall be the supreme Law of the Land . . . and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” Hence, no state law can act to deprive the instant defendants from removing this case to federal court.50
Because there is a presumption that legislation is constitutional, the only reasonable – and constitutional – reading of subsection (6) is that the Missouri legislature intended the term “jurisdiction” to apply to the state court’s personal jurisdiction over the dismissed retailer. Moreover, the conclusion that subsection (6) of the innocent seller statute is unconstitutional is also mandated by common sense. If any federal court were bound to apply subsection (6) in the manner suggested by a literal reading of the provision, the result would be the creation of a fool-proof tactic to defeat federal jurisdiction in all product liability cases naming local retailers, despite the absence of any reasonable possibility of recovery against such defendants. Such a result is simply untenable under the Constitution, federal removal statutes, and settled removal jurisprudence.
Practice Points
“[T]here is no other phase of American jurisprudence with so many refinements and subtleties as removal [and remand].”51 Of the many refinements and subtleties inherent in removal law, practitioners should be aware of “an important, but little known rule of removal” not contained anywhere in the federal removal statutes.52 The Eighth Circuit described the “voluntary/involuntary” rule as follows:
The rule establishes a bright line test for evaluating removability. If the dismissal of a defendant in state court creates complete diversity between all parties so that the case may be removed to federal court, the propriety of removal is determined according to whether the dismissal was voluntary or involuntary with respect to the plaintiff. In other words, if the plaintiff voluntarily dismisses the non-diverse defendant, the case may be removed. Removal is improper, however, if the dismissal of that resident defendant was involuntary.53
To avoid the voluntary/involuntary procedural thicket altogether, the best practice is for a product manufacturer to remove the action on the basis of the innocent seller statute while the local retailer is still in the case as a defendant. Once the action has been removed, the local retailer may then file its motion to dismiss. As such, communication and coordination between counsel for the product manufacturer and the local retailer is of utmost importance, even in the earliest stages of litigation.
Despite best efforts to coordinate, there may be circumstances when a non-diverse retailer moves for dismissal prior to removal of the action. For instance, a retailer could insist on immediately moving to dismiss instead of allowing time for the product manufacturer to remove. “Fraudulent joinder is a well established exception to the voluntary-involuntary rule.”54 Consequently, a diverse product manufacturer may attempt to remove an action even after a state court has dismissed a local retailer pursuant to the innocent seller statute.55
Realizing that the innocent seller statute now provides a basis for a proper removal, keen plaintiffs may attempt, through artful drafting, to plead around the statute. Most commonly, rather than alleging each count with specificity against individual defendants, plaintiffs allege counts other than strict liability – such as negligence, fraud or conspiracy – against “all defendants” on a collective basis. Because the statute only protects a retailer whose liability is based solely on its status as a seller in the stream of commerce, plaintiffs argue that the statute is inapplicable because the complaint alleges “active” grounds for liability against the retailer other than the retailer’s passive status as a mere seller. Given that local retailers are frequently small, sole proprietorships or family run businesses, it defies reason and the facts of the case to allege that they were active participants in the design, manufacturing, testing, modification, or advertising of the products that were sold. Courts have been quick to seize upon plaintiffs’ ploy and have refused to allow such artful pleading to defeat removal.56 To aid the court in its determination,57 defendants are wise to submit detailed affidavits evidencing the local retailer’s lack of active participation.58
Of course, in instances where a fraud claim is asserted directly against a retailer, it must meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b).59 Given that no genuine fraud claim genuinely exists against a mere passive retailer, plaintiffs cannot meet the exacting standards of Rule 9(b).60 Furthermore, a complaint should be closely scrutinized to ensure that averments of a retailer’s alleged knowledge of a product’s defects are not contradicted by other irreconcilable allegations in the complaint. For example, a complaint may allege that a retailer fraudulently concealed risks associated with a product, yet at the same time allege that the product manufacturer hid the alleged dangers associated with the product from the general public at large. Courts have viewed such jumbled and contradictory pleadings with extreme suspicion.61
Conclusion
The innocent seller statute is no longer a tool only useful to retailers looking to make an early exit from a products liability action. Since the Supreme Court of Missouri’s determinative classification of the statute, the Spears, Thomas, Carleton and Wichmann decisions have confirmed that the substantive portions of the statute are a viable predicate for product manufacturers to remove actions on the basis of fraudulent joinder. Now, besides protecting retailers from the perils and uncertainties of protracted litigation, the innocent seller statute also provides an important (and substantive) mechanism to prevent plaintiffs from defeating federal jurisdiction by simply naming local retailers in products liability actions.
Footnotes
1 James T. Pisciotta is an attorney in Greensboro, North Carolina. He received his J.D., cum laude, from St. John’s University School of Law and is licensed to practice law in New York and North Carolina.
2 For an interesting overview, see John H. Beisner, et. al., One Small Step for a County Court . . . One Giant Calamity for the National Legal System, Civil Justice Report (No. 7, April 2003), at p. 15 (documenting the egregious example of the lone pharmacy in a small Mississippi town that was named in hundreds of mass tort lawsuits simply for selling prescribed pharmaceuticals).
3 Generally, proper federal diversity jurisdiction requires that, in addition to satisfying the amount in controversy requirement, there be complete diversity between all the parties. See 28 U.S.C. §1332 (a)(1) (“citizens of different States”); Strawbridge v. Curtiss, 7 U.S. 267 (1806) (requiring complete diversity). But compare 28 U.S.C.1332(d) (requiring only minimal diversity between parties in certain class action litigations). The fraudulent joinder doctrine prevents a plaintiff from defeating federal diversity jurisdiction by simply naming a non-diverse defendant. Menz v. New Holland North America, Inc., 440 F.3d 1002, 1004 (8th Cir. 2006) (citing Filla v. Northfolk S. Ry. Co., 336 F.3d 806, 810 (8th Cir. 2003)). “[J]oinder is fraudulent when there exists no reasonable basis in fact and law supporting a claim against the resident defendants.” Id. (quoting Wiles v. Capitol Indem. Corp., 280 F.3d 868, 871 (8th Cir. 2002)). The citizenship of fraudulently joined defendants is disregarded from a court’s jurisdictional analysis. See 28 U.S.C. 1441(a) (for the purposes of removal, “the citizenship of defendants sued under fictitious names shall be disregarded”); see also Iowa Pub. Serv. Co. v. Medicine Bow Coal Co., 556 F.2d 400, 404, n.4 (8th Cir. 1977).
4 See § 537.762 (1), (2) RSMo (2008). The innocent seller statute provides in full:
1. A defendant whose liability is based solely on his status as a seller in the stream of commerce may be dismissed from a products liability claim as provided in this section.
2. This section shall apply to any products liability claim in which another defendant, including the manufacturer, is properly before the court and from whom total recovery may be had for plaintiff’s claim.
3. A defendant may move for dismissal under this section within the time for filing an answer or other responsive pleading unless permitted by the court at a later time for good cause shown. The motion shall be accompanied by an affidavit which shall be made under oath and shall state that the defendant is aware of no facts or circumstances upon which a verdict might be reached against him, other than his status as a seller in the stream of commerce.
4. The parties shall have sixty days in which to conduct discovery on the issues raised in the motion and affidavit. The court for good cause shown, may extend the time for discovery, and may enter a protective order pursuant to the rules of civil procedure regarding the scope of discovery on other issues.
5. Any party may move for a hearing on a motion to dismiss under this section. If the requirements of subsections 2 and 3 of this section are met, and no party comes forward at such a hearing with evidence of facts which would render the defendant seeking dismissal under this section liable on some basis other than his status as a seller in the stream of commerce, the court shall dismiss without prejudice the claim as to that defendant.
6. No order of dismissal under this section shall operate to divest a court of venue or jurisdiction otherwise proper at the time the action was commenced. A defendant dismissed pursuant to this section shall be considered to remain a party to such action only for such purposes.
7. An order of dismissal under this section shall be interlocutory until final disposition of plaintiff’s claim by settlement or judgment and may be set aside for good cause shown at anytime prior to such disposition.
5 Gramex Corp. v. Green Supply, Inc., 89 S.W.3d 432, 446 (Mo. banc 2002)
6 See Nicolas P. Terry, Retreat and Reaction: An Analysis of the Tort Reform Act, 56 UMKC L. Rev. 205, 210 (1988) (“The purpose of this new rule is to reduce the litigation costs of retailers”). Moreover, with dismissal available, the need for retailers to seek contribution or indemnification from “up-stream” defendants, such as product manufacturers, is eliminated. See Stanger v. Smith & Nephew, Inc., No. 4:04CV839HEA, 2005 WL 2333892, at *1 (E.D. Mo. Sept. 21, 2005).
7 See Thomas L. Azar, Jr., Missouri’s “Innocent Seller” Statute and the Federal Courts: Questions of General Applicability and Removal, Missouri Organization of Defense Lawyers, Spring 2005, at 14, available at http://www.humanspan.com/uploads/archives/4914/modlspringnewsletter2005.pdf (Spring 2005) (discussing unsuccessful removal attempts predicated on the innocent seller statute).
8 304 U.S. 64, 78 (1938); see also Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Med. Shoppe Int’l v. Browne, 683 F. Supp. 731, 732 (E.D. Mo. 1988) (a federal court sitting in diversity should apply the substantive law of the state, while applying federal procedural law).
9 89 S.W.3d 432, 446 (Mo. banc 2002).
10 See §§537.762(1), (2) RSMo 2008.
11 While “the exact meaning of ‘another defendant’ is [ambiguous] to achieve the apparent legislative intent [of the statute] court[s] will read the [term to mean] ‘another [products liability] defendant.’” See Nicolas P. Terry, Retreat and Reaction: An Analysis of the Tort Reform Act, 56 UMKC L. Rev. 205, 210 (1988).
12 See Malone v. Schapun, Inc., 965 S.W.2d 177, 179 (Mo. App. E.D. 1997). (“dismissal of a non-manufacturer (i.e., seller in the stream of commerce) should not be granted where the product manufacturer is not subject to process under Missouri law…”) Id. at 182 (citing Nicolas P. Terry, Retreat and Reaction: An Analysis of the Tort Reform Act, 56 UMKC L. Rev. 205, 211 (1998) (“…dismissal of a non-manufacturer should not be granted where the product manufacturer defendant is not subject to process under Missouri law…”).
13 Letz v. Turbomeca Engine Corp., No. 93-1058-CV-W-6, 1993 WL 469182, at *1 W.D. Mo., Nov. 15, 1993). See also Carleton v. R. J. Reynolds Tobacco Co., No. 4:06-CV-00395-GAF (W.D. Mo., filed Nov. 20 2006), at 10. (“…Missouri law requires that [the] claimed risk of insolvency be more than an abstract theoretical possibility before denying a qualifying seller statutory dismissal.”); Dennis J. Dobbels, Missouri Products Liability Law Revisited: A Look At Missouri Strict Products Liability Law Before and After the Tort Reform Act, 53 Mo. L. Rev. 227, 237-38 n.41 (1988).
14 Section 537.762 (7) RSMo 2008 (emphasis added).
15 Id. at (6).
16 Id.
17 204 F. Supp.2d 1204 (E.D. Mo. 2002).
18 Id .at 1240.
19 See id. at 1206 (citing Malone v. Schapun, Inc., 965 S.W.2d 177, 181-82 (Mo. App. E.D. 1997)).
20 See Pender v. Bell Asbestos Mines, Ltd., 46 F. Supp.2d 937, 940 (E.D. Mo. 1999) (“[U]nder the substantive law of Missouri [the retailer defendant] remains potentially liable in this case.”); Dorsey v. Sekisui American Corp., 79 F. Supp.2d 1089, 1092 (E.D. Mo. 1999) (the innocent seller statute does not change the substantive law, a seller in the stream of commerce is still subject to liability under the doctrine of strict liability). See also Pruett v. Goldline Labs., Inc., 751 F. Supp. 1372 (W.D. Mo. 1990) (“§537.762 is a procedural provision and, therefore inapplicable to cases in federal court”) (citing Dennis J. Dobbels, Missouri Products Liability Law Revisited: A Look at Missouri Strict Liability Law Before and After the Tort Reform Act, 53 Mo. L. Rev. 227, 238, n.42 (1988)).
21 46 F. Supp. 2d 937, 940 (The retailer “is therefore still a party and diversity jurisdiction does not exist”); Dorsey, 79 F. Supp.2d at 1092 (a dismissed retailer would remain a party for jurisdictional purposes).
22 89 S.W.3d 432 (Mo. banc 2002).
23 Gramex, 89 S.W.2d at 445.
24 Id. at 446 (emphasis added).
25 Id.at 445 (bold in original).
26 Spears v. Bayer Corp.,No. 03-1151-CV-W-GAF (W.D. Mo. filed Mar. 29, 2004) at 5.
27 Id. Interestingly, Spears was not the first decision to hold that the innocent seller statute contained both substantive and procedural components. Years before the Supreme Court of Missouri decided Gramex, Judge Sachs concluded that “the statute is both procedural and substantive.” Letz v. Turbomeca Engine Corp., No. 93-1058-CV-W-6, 1993 WL 469182, at *1 (W.D. Mo. Nov. 15, 1993).
28 See Spears at 5-7 (finding fraudulent joinder and denying remand).
29 Thomas v. Brown & Williamson Tobacco Corp., No. 06-0223-CV-W-SOW, 2006 WL 1194873, at *3 (W.D. Mo. April 28, 2006).
30 Id.
31 See id.
32 Carleton v. R.J. Reynolds Tobacco Co., No.4:06-CV-00395-GAF (W.D. Mo. filed Nov. 20, 2006).
33 Id. at 11.
34 Id.
35 Wichmann v. Proctor & Gamble Mfg. Co., No. 4:06CV1457 HEA, 2006 WL 3626904 (E.D. Mo. Dec. 11, 2006).
36 Id. at *2, fn.3.
37 Wichmann v. Proctor & Gamble Mfg. Co., No. 4:06CV1457 HEA, 2007 WL 735017, at * 1 (E.D. Mo. March 8, 2007).
38 Henry v. Mylan Pharm., Inc., No. 05-CV-40092-NKL, 2005 WL 2101049, at *5 (W.D. Mo. Aug. 31, 2005).
39 Id. See also Stanger v. Smith & Nephew, Inc., No. 4:04CV839HEA, 2005 WL 2333892 (E.D. Mo. Sept. 21, 2005) (without reference to, or discussion of, Gramex).
40 Henry, 2005 WL 2101049, at *5.
41 Section 537.762 (6), RSMo (2008).
42 See, e.g., Pender, 46 F. Supp.2d at 940 (the retailer “is therefore still a party and diversity jurisdiction does not exist”); Dorsey, 79 F. Supp. 2d at 1092 (a dismissed retailer would remain a party for jurisdictional purposes).
43 See Spears, at 5 (other than sections (1) and (2), the remaining portions of the statute are procedural and do not apply in federal court); Med. Shoppe Int’l v. Browne, 683 F. Supp. 731, 732 (E.D. Mo. 1988) (a federal court sitting in diversity should apply the substantive law of the state, while applying federal procedural law).
44 See Spears, at 5 (holding that only subsections (1) and (2) were substantive in nature, while “[t]he remainder of the law appears to be procedural.”) (emphasis added); see also Carleton, at 7 (noting that Erie obligates the court to apply the substantive sections of the statute only).
45 Goldey v. Morning News, 156 U.S. 518, 523 (1895).
46 Kansas Pub. Employees Ret. Sys. v. Reimer & Koger Assocs., Inc., 4 F.3d 614, 619 (8th Cir. 1993) (citing Goldey). See also Chicago & N.W.R. Co. v. Whitton, 80 U.S. 270, 282 (1871) (a statute’s clause requiring an action to be brought in state court was unconstitutional and did not prevent removal of the action). In a broader jurisdictional sense, a state, through its legislative enactments, may not divest a federal court of any aspect of its Article III jurisdiction. See, e.g., Greyhound Lines, Inc. v. Lexington State Bank & Trust Co., 604 F.2d 1151, 1154-55 (8th Cir. 1979) (state legislature’s decision to give county courts exclusive jurisdiction over claims against estates did not restrict federal diversity jurisdiction); Kanouse v. Westwood Obstetrical & Gynecological Assocs., 505 F. Supp. 129 (D. N.J. 1981) (federal diversity jurisdiction not limited by state statute concerning jurisdiction over medical malpractice actions).
47 MCI Telecomm. Corp. v. Teleconcepts, Inc. 71 F.3d 1086, 1109 (3d Cir. 1995) (concurring opinion) (citing cases).
48 Compare Miss. Code Ann. § 11-1-64(6) (Supp. 2003) (repealed September 1, 2004) with § 537.762 (6), RSMo 2008.
49 Henderson v. Ford Motor Co., 340 F. Supp.2d 722 (N.D. Miss. 2004).
50 Id. at 726 (quoting Burton v. Werner Co., 335 F. Supp. 2d 734, 735-36 (N.D. Miss. 2004)).
51 Hagerla v. Miss. River Power Co., 202 F. 771, 773 (S.D. Iowa 1912). See Deborah Pearce Reggio, Removal and Remand: A Guide to Navigating Between the State and Federal Courts, 23 Miss. C. L. Rev. 97 (Spring 2004).
52 Christopher P. Nease & Christy Martin Liddle, The Unwritten Rule of Removal, 49 For The Defense 8 (Oct. 2007).
53 In re Iowa Mfg. Co., 747 F.2d 462, 463 (8th Cir. 1984).
54 Insinga v. LaBella, 845 F.2d 249, 254 (11th Cir. 1988); see also Lane v. Champions Int’l Corp., 844 F. Supp. 724, 729-30 (S.D. Ala. 1994).
55 See, e.g., Morgan v. Chase Home Finance, LLC, 306 Fed. Appx. 49, 2008 WL 5422863, at 5 (5th Cir. 2008) (remand denied; fraudulently joined defendant dismissed in state probate court); Poulos v. Naas Foods, Inc., 959 F.2d 69 (7th Cir. 1992) (removal proper; fraudulently joined defendant dismissed on summary judgment while in state court); Wiacek v. Equitable Life Assurance Soc’y of the United States, 795 F. Supp. 223, 225 (E.D. Mich. 1992) (remand denied; fraudulently joined defendant dismissed in state court); Christopher P. Nease & Christy Martin Liddle, The Unwritten Rule of Removal, 49 For The Defense 8, 12 (Oct. 2007) (The relevant case law seems “to indicate that a defendant can remove based on fraudulent joinder after a state court dismisses the non-diverse party…”).
56 See, e.g,, Thomas, 2006 WL 1194873, at *3 (plaintiff’s fraudulent concealment claim pled collectively against the “Defendants” generally had no reasonable possibility of recovery against the local retailers); Rials v. Philip Morris USA, No. CIV A 306CV583BA, 2007 WL 586796, at *7-*8 (S.D. Miss. Feb. 21, 2007) (remand denied, despite plaintiff’s collective pleading, the plaintiff had no reasonable possibility of recovery against the local retailer); In re Rezulin Prods. Liability Litig., 133 F. Supp.2d 272 (S.D.N.Y. 2001) (remand denied, criticizing the plaintiffs’ tactic of imputing one entity’s alleged misrepresentations to local defendants for the purposes of alleging a fraud claim); Badon v. R.J.R. Nabisco Inc., 224 F.3d 382 (5th Cir. 2000) (generally pled conspiracy claim against a retailer was insufficient to prevent removal). Cf. Bhd. of Teamsters v. Philip Morris Inc., No. 97 C 8113, 97 C 8114, 1998 WL 242130 (N.D. Ill. May 8, 1998) (“Although the plaintiffs refer to the ‘defendants’ generally, it defies logic to include the distributors with the rest of the [tobacco manufacturer] defendants in the general factual allegations directed at all of the defendants.”)
57 In conducting its fraudulent joinder analysis, the court is free to consider evidentiary materials beyond the pleadings. See, e.g,, Thomas, 2006 WL 1194873, at *3, fn.1 (“[T]he Court may consider the Petition, affidavits, and other relevant materials.”).
58 See id. (noting that affidavits evidenced that plaintiff’s fraudulent concealment claim against a local retailer had no reasonable possibility of recovery).
59 See Fed. R. Civ. P. 81(c)(1) (federal procedural rules “apply to a civil action after it is removed from a state court”).
60 See Rezulin, 133 F. Supp.2d at 283.
61 See, e.g., Louis v. Wyeth-Ayerst Pharm., Inc., No. 5:00CV102LN, at 4-5 (S.D. Miss. filed Sept. 25, 2000) (remand denied); Rezulin 133 F. Supp. 2d at 290 (remand denied where allegations that a pharmacist knew of the dangers allegedly associated with a medication were “purely tendentious” in light of the complaint’s contrary allegations that the manufacturer hid the dangers of it from the public).