Facts
- Nine Maine potato farmers sued Snow Flake Canning Co., a Maine corporation, in Maine state court for alleged breach of contract.
- After filing, the farmers learned Snow Flake had merged into Lamb-Weston, Inc., an Oregon corporation, with Lamb-Weston as the surviving entity.
- The farmers then filed a second Maine state-court action against Lamb-Weston seeking the same relief as in the first suit.
- In the second action, the farmers added George O. Tamblyn, an Oregon citizen, as an additional plaintiff.
- Tamblyn was assigned 1/100 (1%) of each farmer’s claim shortly before the second suit was filed.
- Tamblyn had no prior stake in the dispute and accepted the assignments as an accommodation to a friend associated with plaintiffs’ counsel.
- The parties conceded the assignments were made to destroy complete diversity (because Tamblyn and Lamb-Weston were both Oregon citizens) and thereby prevent removal to federal court.
- Lamb-Weston removed the second action to federal court on diversity grounds.
- Plaintiffs moved to remand, arguing the presence of Tamblyn (an Oregon plaintiff) defeated complete diversity and eliminated federal subject-matter jurisdiction.
Issues
- When plaintiffs assign a small fractional interest in their claims to a non-diverse plaintiff solely to block removal, must the federal court treat the assignee as a true plaintiff for diversity jurisdiction and remand?
- May a federal court disregard a collusive, partial assignment and the assignee’s citizenship in determining the real parties in interest and whether complete diversity exists?
Decision
- The court denied the motion to remand.
- It found the 1% assignments to Tamblyn were collusive and merely colorable because they served no substantive purpose other than defeating diversity.
- The court disregarded Tamblyn’s fractional interests and citizenship for jurisdictional purposes.
- With Tamblyn set aside, complete diversity existed between the Maine farmers (real parties in interest) and Lamb-Weston (Oregon), so removal was proper and the case remained in federal court.
Legal Principles
- Diversity jurisdiction under 28 U.S.C. § 1332 requires complete diversity between plaintiffs and defendants.
- In removal cases, a federal court may examine whether a party’s presence is nominal or the result of a contrived transfer meant only to defeat federal jurisdiction.
- A bona fide assignment of an entire claim may affect diversity, but a tiny, accommodation-based partial assignment made solely to defeat diversity may be disregarded.
- Courts may look to the real parties in interest and ignore sham or colorable arrangements designed to manipulate the federal forum.
Conclusion
Because Tamblyn received only a 1% slice of each claim, had no independent connection to the dispute, and joined solely to defeat diversity and prevent removal, the court treated the arrangement as a collusive jurisdictional tactic, disregarded Tamblyn for diversity purposes, found complete diversity between the remaining parties, and denied remand.