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Judge Rakoff of the Southern District of New York Applies State Pleading Requirements to Grant Motion for Remand in Favor of Products Liability Plaintiff in Resnik v. Rite Aid of New York, Inc., et al. – Determining that Plaintiff did not Fraudulently Join Codefendants

Written by: Evan M. O’Hara, Esq.

Editor: Nicole A. Callahan, Esq.

On July 12, 2021, the Honorable Jed S. Rakoff, United States District Judge for the Southern District of New York, issued a decision granting the plaintiff’s motion to remand her products liability claim against a number of corporate entities to the Supreme Court of the State of New York, New York County, based on the absence of diversity jurisdiction.  The plaintiff claimed that her use of Johnson & Johnson’s (“J&J”) baby powder and Shower to Shower talcum powder between 1960 and 2016, both of which she alleged contained asbestos, caused her ovarian cancer.  The plaintiff initially sued Rite Aid and Walgreens in the Supreme Court of the State of New York, New York County, asserting that she purchased the products from pharmacies owned by each entity.  She later amended her complaint to add claims against J&J and Kolmar Labs (who she claimed processed and packaged the products), as well as CVS and Duane Reade.  J&J removed the case to the United States District Court for the Southern District of New York based on diversity of citizenship, arguing that the New York citizenships of Rite Aid, Walgreens, and Kolmar should be disregarded because they were fraudulently joined.  The plaintiff filed a motion to remand.

In support of its fraudulent joinder position, J&J argued that the pleadings lacked sufficient allegations to give rise to viable claims against all three New York-based defendants under both federal and New York State pleading standards.  For Rite Aid and Walgreens, it argued that the plaintiff’s allegations that (1) both entities engaged in the manufacture, sale and distribution of materials and products containing asbestos, (2) both continually advertised and marketed talc as safe for human use, and (3) the plaintiff purchased asbestos-containing talcum products from their stores, were too conclusory and vague.  The Court disagreed, stating that based on New York State’s relatively lax pleading standard, the allegations were sufficient, and it was possible that the plaintiff could prevail in state court against either defendant.

For Kolmar, J&J argued that the plaintiff failed to plead a sufficient connection between Kolmar’s talc processing operation and the products purchased by the plaintiff, and that the allegation that Kolmar processed the talc in the products to which the plaintiff was exposed was “demonstrably false”.  Both J&J and the plaintiff attempted to submit evidence in the form of deposition testimony related to Kolmar’s processing of J&J talc products.  The Court stated that although the issue was whether the plaintiff could succeed in state court based only on the pleadings, if it could consider the testimony evidence it would raise a factual question in the plaintiff’s favor.  The underlying implication in the Court’s findings being that the factual allegations of the complaint, without the additional evidence, satisfied New York State pleading requirements.

J&J also argued that the affirmative defense of contract specification established that there was no possibility that the plaintiff could recover against Kolmar.  The Court disagreed again, noting that the pleadings left open the possibility that the plaintiff could prove that: Kolmar did not process the talcum powder in accordance with J&J specifications; the talcum products were obviously defective; and/or Kolmar had actual knowledge of the alleged defect.

The Court’s fraudulent joinder analysis highlights the difficulties defendants encounter when the federal burden of proof – a clear and convincing demonstration that there is no possibility, based on the pleadings, that a plaintiff can state a cause of action against the non-diverse defendant in state court – intersects with the notice pleading standards of New York State Courts.  First, defendants asserting that another party was fraudulently joined for the sole purpose of defeating diversity jurisdiction should be prepared to argue that, even using the far more lenient pleading requirements of New York State, there is no possibility for recovery against a specific defendant.  Second, defendants must be prepared to limit the support for their position to information contained within the four corners of the complaint.  This is true for arguments that the complaint lacks the minimally required factual allegations, as well as that the complaint conclusively establishes some defense will act as a bar to recovery under any and all circumstances.

Cite: Resnik v. Rite Aid of New York, Inc., 21-cv-4609 (JSR) (S.D.N.Y. Jul. 12, 2021)