When a district court refers a motion to remand to a magistrate judge, is that matter a nondispositive one in which the magistrate has the authority to enter an order of remand? Or is it a dispositive matter in which the magistrate judge may only make a recommendation subject to the district court's de novo review? That was the issue the Fifth Circuit resolved for the first time in Davidson v. Georgia-Pacific, LLC, No. 14-30925, 2016 U.S. App. LEXIS 7090 (5th Cir. April 19, 2016).
Davidson contracted mesothelioma and died. His survivors brought a survival and wrongful death action in Louisiana state court against several diverse defendants and two Louisiana defendants. Georgia-Pacific removed the case to federal court contending that the two non-diverse defendants were fraudulently joined. Plaintiffs moved to remand.
The motion to remand was referred to a magistrate judge who found the plaintiffs' pleadings sufficient to state a claim against the Louisiana defendants and remanded. The defendants appealed the remand order to the district court. The district court treated the magistrate's ruling as one presenting a non-dispositive issue which could be set aside only if "clearly erroneous or contrary to law." The court reversed the magistrate and denied remand. Plaintiffs appealed to the Fifth Circuit.
Noting that the Second, Third, Sixth, Ninth and Tenth Circuits had all concluded that remand motions should be treated as dispositive matters in which only the district court could enter orders, the Fifth Circuit concurred with its five sister circuits, reasoning that "a remand order is dispositive insofar as proceedings in the federal court are concerned" and thus is "the functional equivalent of an order of dismissal."
It found additional support for this conclusion in the fact that an order of remand is normally not reviewable on appeal, yet magistrate rulings on nondispositive matters are appealable to the district court. And there is a timing problem—absent a stay, a removal order sends the case back to state court and deprives the federal court of jurisdiction that would allow for district court review. Accordingly, the Fifth Circuit joined the uniform view of other courts of appeals and held that "a motion to remand is a dispositive matter on which a magistrate judge should enter a recommendation to the district court subject to de novo review."
The Fifth Circuit then reviewed de novo the district court's decision and reversed because the district court applied an improper standard in determining fraudulent joinder. The correct test is whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, not—as the district court held—whether the plaintiff has failed to produce evidence supporting the possibility of recovery against the in-state defendant.
Because the district court used the wrong standard and Georgia-Pacific failed to negate possible liability of the nondiverse defendants, the Fifth Circuit reversed and remanded to the district court for entry of an order remanding the case to state court.
The case is significant because it controls how a magistrate's ruling on a motion to remand is reviewed by the district court and how the district court's order is reviewed by an appellate court
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