The Eighth Circuit Court of Appeals held that the district court properly reversed its decision to permit the joinder of two defendants whose presence in the suit would defeat diversity. In Bailey vs. Bayer Cropscience L.P., 563, F.3d 302 (8th Cir. 2009), the lawsuit had been removed to the federal court and Plaintiff subsequently moved to amend the Complaint by adding two additional defendants without notifying the court that such joinder would destroy diversity jurisdiction. The district court permitted the joinder and then Plaintiff moved to remand due to the lack of jurisdiction. When the district court learned the joinder destroyed diversity it reconsidered its prior decision and dismissed the joined defendants.
The Court of Appeals first held that the district court had discretionary authority to reconsider its earlier decision and quoting from another decision said,
Where, as here, the record indicates that the problem of the addition of the non-diverse defendant was not brought to the attention of the Court or recognized by the parties, the filing of the amended complaint should be considered a nullity and the Court given an opportunity to consider whether justice requires that [the plaintiff] be permitted to join [the additional] defendant. (p. 307)
The Court of Appeals then reviewed the applicable law and held that there was no abuse of discretion because the new parties were not necessary and indispensible. In doing so, the court, quoting from a Fifth Circuit case, pointed out that “the district court when faced with an amended pleading naming a new non-diverse defendants in a removed case, should scrutinize the amendment more closely than an ordinary amendment.” (p. 309) With respect to fraudulent joinder, the court said that while it is not directly applicable to the post-removal of context it can be a relevant factor for determining whether to permit joinder under Section 1447(e). The Court of Appeals, however, concluded that in this case the district court may have overemphasized the importance of the fraudulent doctrine and said that the court should ask whether there is “any reasonable possibility” that the Plaintiff could prevail against the non-diverse defendant. (764).