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In Hain Celestial Group, Inc. v. Palmquist (No. 24-724), the Supreme Court will determine (1) whether a district court's judgment resolving litigation between completely diverse parties must later be vacated for lack of subject matter jurisdiction if an appellate court subsequently concludes that, at the time the case was removed from state court, the case did not have complete diversity jurisdiction, and (2) whether a plaintiff may block diversity jurisdiction by updating the complaint after removal to include a valid claim against a nondiverse defendant.
The Respondents (the "Palmquists") sued two Petitioners ("Hain" and "Whole Foods") in a Texas state court, alleging that their child suffered injuries as a result of ingesting baby food manufactured by Hain and purchased at Whole Foods. Hain, acting alone, removed the case on diversity grounds and successfully argued in the district court that Whole Foods, a Texas resident, should be dismissed because it was fraudulently joined for the purpose of defeating complete diversity of citizenship.
The case proceeded through trial, and the district court held that Hain was entitled to judgment as a matter of law because the Palmquists failed to establish that Hain's product caused their child's injuries. After final judgment, the Palmquists appealed. The Fifth Circuit held that the district court erred by dismissing Whole Foods and, as a result, vacated the district court's final judgment, ordering the case remanded to state court for lack of complete diversity. The Supreme Court granted review.
At the November 4, 2025, oral argument, the primary dispute centered on whether the improper dismissal of a non-diverse party rendered the district court's final judgment void ab initio (void at the outset) because the district court never had subject matter jurisdiction over the case. Petitioners primarily argued that a fraudulent-joinder dismissal operates to preclude the dismissed defendant from ever becoming a party whose residence should be considered for purposes of diversity jurisdiction. Respondents disagreed, arguing that a fraudulent-joinder dismissal is an interlocutory ruling subject to appellate review, and the Fifth Circuit's decision to reverse the dismissal meant that Whole Foods was a party throughout the litigation, thereby defeating the court's subject matter jurisdiction to decide the case.
Pointing to the Court's recent holding in Royal Canin v. Wullschleger (which we covered here), that a federal court loses jurisdiction once a complaint is amended to remove all federal claims, Justice Kagan questioned why the same logic should not apply in diversity cases. But she and Justice Jackson also expressed concern that the Respondents' proposed rule could imperil the finality of judgments in cases where a non-diverse defendant was dismissed as fraudulently joined—a result Justice Jackson suggested would generate substantial waste.
Justice Jackson also observed that the Petitioners' proposed rule could likewise create waste for plaintiffs forced to conduct trials in both state and federal courts, rather than resolving all claims against all defendants in a single proceeding. Justice Sotomayor went further, suggesting that plaintiffs who are improperly denied the right to have their grievances heard in a single lawsuit against all defendants are inherently prejudiced. Justices Barrett and Jackson also expressed concern that plaintiffs could face additional prejudice if estopped from litigating issues in a second suit that were decided against a different party in another forum.
Justice Gorsuch pointed out that Petitioners' improper removal of the case to federal court left them with unclean hands, undermining their unfairness argument. Justice Thomas, by contrast, questioned why Respondents waited to appeal the ruling after trial and final judgment, failing to seek an interlocutory appeal of the dismissal, suggesting that the case may have been cleaner if they had done so.
Stay tuned for Dykema's decision alert after the Court issues its opinion, expected later this term.
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