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February 2015: Fourth Circuit En Banc Removal Victory for Colgate

February 2015

In November 2014, the firm obtained a significant and ground-breaking victory for Colgate-Palmolive Co. in the U.S. Court of Appeals for the Fourth Circuit. That court, sitting en banc, became the first appellate court to hold that federal district courts have authority to vacate orders remanding cases to state court where those orders were procured by fraud, misrepresentations, or other misconduct.

The appeal arose after plaintiffs filed actions against Colgate in the specialized asbestos docket in the Maryland Circuit Court for Baltimore City, seeking millions of dollars in damages for personal injuries under the novel theory—never accepted by any court or regulator—that Colgate’s Cashmere Bouquet cosmetic talcum powder contained asbestos that causes mesothelioma. Plaintiffs named a litany of defendants, including several defendants based in Maryland. After plaintiffs’ deposition testimony and discovery responses indicated that they had no evidence that their injuries might have been caused by any in-state defendant, Colgate removed the actions to federal court on the basis that plaintiffs had fraudulently joined the Maryland defendants to defeat federal jurisdiction. In federal court, plaintiffs’ counsel represented that plaintiffs had bona fide claims against the Maryland defendants that they intended to pursue, and thus sought remand to Maryland state court. The federal court remanded both cases based on these representations.

After securing remand on this basis, plaintiffs’ counsel immediately told the Circuit Court for Baltimore City that each case was a “one defendant case,” disclaiming both the existence of any evidence against an in-state defendant and any intention to pursue claims against those defendants. Colgate thereafter moved in federal court for sanctions and for relief from the remand orders pursuant to Fed. R. Civ. P. 60(b)(3), arguing that plaintiffs’ counsel had made misrepresentations regarding plaintiffs’ intention to pursue claims against the in-state defendants, solely for the purpose of defeating federal jurisdiction. The district court acknowledged that Colgate had raised “substantial” allegations and that the statements by plaintiffs’ counsel “appear to be in sharp conflict,” but nevertheless denied vacatur on the ground that it lacked jurisdiction in light of the prohibition in 28 U.S.C. § 1447(d) on “review[]” of certain orders granting remand to state court.

Colgate appealed, and a divided three-judge panel of the Fourth Circuit affirmed. Bolstered by a nearly 50-page dissenting opinion, Colgate sought rehearing en banc, which was quickly granted. The en banc court thereafter reversed, holding that vacatur of a remand order under Rule 60(b)(3) due to fraud, misrepresentations, or other misconduct does not constitute prohibited “review” of that order. The court of appeals explained that the distinction between “review” and “vacatur” is “not merely semantic” and that “Colgate seeks vacatur based on a collateral consideration—Colgate’s allegation that the remand orders were procured through attorney misconduct—rather than on the remands’ merits.” The court thus reversed the district court’s determination that it lacked jurisdiction to vacate the remand orders, and it directed the district court to rule on Colgate’s motions on the merits. This important decision provides a powerful new tool for the defense bar and ensures that federal courts are not impotent when plaintiffs and their counsel seek to avoid federal jurisdiction through misconduct.