Free Speech

Avenatti v. Fox News Goes Full-On Civ Pro

Remember, the lawyer’s true superpower is to turn every question into a question about procedure.

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From today's opinion by Third Circuit Judge Stephanos Bibas, sitting by designation in Avenatti v. Fox News Network, LLC (D. Del.):

Michael Avenatti believes that Fox News and its media personalities defamed him. He sued them in Delaware state court, but Fox News removed the case to this Court. Avenatti immediately added a nondiverse defendant and moved to remand to state court. But he cannot maneuver his way out of diversity jurisdiction. So I will drop the new defendant and deny his motion to remand….

In 2018, Avenatti was arrested. Because he was a celebrity lawyer, many news outlets covered his arrest. He says that one of them, the Fox News Network, lied about the details of the arrest.

In 2020, Avenatti sued Fox News and many of its hosts and correspondents for defamation in Delaware Superior Court. Four days later, Fox News removed to federal court based on complete diversity of citizenship…. As a Delaware resident, Fox News ordinarily would not have been able to remove from Delaware state court to federal court. 28 U.S.C. § 1441(b)(2). But here it could do so because, when it removed, it had not yet been properly served. And because none of the employees had been served yet, they did not have to join in the removal. Avenatti does not challenge the removal on these grounds.

Instead, a week after he first sued, Avenatti filed an amended complaint adding a new defendant, Fox News correspondent Jonathan Hunt. Because he filed this amendment within twenty-one days of the initial complaint, he did not need leave of the court or the opposing parties. Hunt resides in California[, as does Avenatti]. So Avenatti now moves to remand because there is no longer complete diversity of citizenship, depriving this Court of diversity jurisdiction. His motion does not explain why he did not name Hunt as a defendant at first, even though the original complaint mentioned him….

When a case is removed from state to federal court, a plaintiff cannot defeat subject-matter jurisdiction simply by joining more defendants. Instead, if a plaintiff "seeks" to do so, he must first get the district court's approval. The court has the power to either deny joinder or allow it and remand the case to state court. Defendants argue that this statute gives me discretion to refuse to let Avenatti join Hunt. Avenatti, however, counters that he does not "seek" to join Hunt—he has already done so as of right under Rule 15(a)(1). So he says that unless Hunt's joinder was fraudulent, I must remand.

Defendants are largely right. True, 26 U.S.C. § 1447(e) does not empower me to deny a joinder that has already happened as of right. But Avenatti cannot use this gap in the statute to destroy federal jurisdiction. District courts may cure jurisdictional defects by dropping a party at any time "on just terms." Avenatti created the defect after removal by adding a jurisdiction-destroying defendant. The fraudulent-joinder doctrine does not apply after a proper removal to federal court. So this situation is not governed by that doctrine, but by the factors courts consider under § 1447(e). Those factors favor dropping Hunt and denying Avenatti's motion to remand….

Often, a plaintiff must seek the district court's leave to amend his complaint. If the plaintiff proposes a joinder that would destroy diversity jurisdiction, and the case has already been removed to federal court, the court has discretion to grant or deny the amendment. But that process seems to have a gap: when a plaintiff amends a complaint within twenty-one days of serving the complaint, answer, or motion to dismiss, he does not need the court's permission. He can amend as of right. And if that amendment adds a new, nondiverse defendant, the court seems stuck: it cannot review the propriety of that joinder but must instead remand for lack of jurisdiction.

Most courts prevent this trick from tying the court's hands. If district courts could not police these joinders, plaintiffs could routinely destroy diversity jurisdiction soon after removal. So most courts recognize a district court's power to reject such post-removal joinders, even those made as of right. [Citations omitted. -EV]

Some courts read § 1447(e) as letting them deny even amendments as of right that would destroy diversity. But the statute's text addresses situations where "the plaintiff seeks to join additional defendants." We need not expand the text. The rules already give district courts another way to police joinders, even those as of right. The court, "on motion or on its own," can "at any time, on just terms, add or drop a party." Fed. R. Civ. P. 21. So it can use Rule 21 "to dismiss dispensable parties to the suit in order to preserve diversity."

Even though § 1447(e) does not govern amendments as of right, its factors are not irrelevant; courts can look to them by analogy. After removal, courts should consider under Rule 21 the same factors that they consider under § 1447(e) in deciding whether to drop a party to maintain diversity. Whether the joinder is proposed or has already happened, the inquiry is the same: should the federal court remand because of a new nondiverse party, or not?

True, not all courts agree on this point. Some have held that § 1447(e) does not apply because plaintiffs who amend as of right do not "seek[ ]" to join a nondiverse defendant. They will not disregard the joinder and retain jurisdiction unless they find that the new defendant was fraudulently joined. For a joinder to be fraudulent, there must be no "colorable ground" supporting the claim against it

Though Avenatti asks me to apply the fraudulent-joinder test, I will not. Fraudulent joinder is "an exception to the requirement that removal be predicated solely upon complete diversity." The doctrine applies only at the moment of removal—when the district court assures itself of its jurisdiction—not after a case has been legitimately removed. Instead, I find that under Rule 21, it would be "just" to drop a nondiverse defendant added later if the factors under § 1447(e) would counsel against granting a discretionary joinder….

To decide whether to allow joinder under § 1447(e), many district courts apply the factors set out in Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987). I will too. So I consider:

  • whether the amendment's purpose is to defeat diversity jurisdiction;
  • whether denying amendment will prejudice the plaintiff;
  • whether the plaintiff has delayed in seeking to amend; and
  • any other equities.

 

Plus, I cannot drop Hunt under Rule 21 if he is an indispensable party according to Rule 19(b).

[1.] Purpose. First, I find that Avenatti's purpose in amending was to defeat diversity jurisdiction. He joined Hunt just three days after removal and moved to remand just five days later. When a plaintiff adds a nondiverse defendant right after removal but before any discovery, the court will suspect that he is trying to defeat federal jurisdiction.

The minor substantive differences between the two complaints confirm Avenatti's purpose. The original complaint mentions Hunt, noting that he said on the air that Avenatti "left court last night" after the arrest (which Avenatti says is false). All the amended complaint adds is the label "Defendant" right before "Hunt." The amended complaint also includes one more substantive allegation, charging Hunt and Fox News with publishing an internet article stating that Avenatti was "out on bail after domestic violence charge[s]" and that he "was formally charged last week with felony domestic violence." But Avenatti had already charged Fox News and the other employees with making nearly identical statements on the air and on the web. The extra article adds little.

Plus, Avenatti knew about Hunt's potential liability at the outset. He mentioned Hunt in the original complaint. Yet his motion to remand never explains why he did not name Hunt as a defendant from the get-go. All he does say, in his reply brief and without elaboration, is that he did not know of the additional article until after he filed in state court. That claim is suspicious: no discovery had occurred yet, so he had no occasion to learn anything new. In short, Avenatti's evident purpose was to destroy diversity jurisdiction. Under Hensgens, that factor favors remand.

[2.] Prejudice. Second, the slight changes also suggest that dropping Hunt will not prejudice Avenatti, so this Hensgens factor favors remand. In a sea of similar allegations, Avenatti charges Hunt with only two defamatory statements. And he asserts each charge against Hunt equally against his employer, Fox News. That means that Avenatti can recover fully against Fox News, without Hunt. That also means that Hunt is dispensable. Rule 19 does not require joining joint tortfeasors or both principal and agent.

In response, Avenatti argues that he cannot now sue Hunt separately because his claims will be time-barred. I need not remand just because the statute of limitations may bar these claims, especially because Avenatti can recover fully without Hunt….

[3.] Delay. Avenatti amended quickly, so he was not dilatory under another Hensgens factor. But that does not overcome my conclusion that he added Hunt to defeat diversity jurisdiction and will not suffer if I drop him….

Though § 1447(e) by its terms does not limit amendments as of right after removal, I still apply the factors under § 1447(e) in deciding whether to drop a party under Rule 21. Because Avenatti probably added Hunt only to defeat federal diversity jurisdiction, I am dropping Hunt from the case. I thus deny Avenatti's motion to remand.

Questions about procedure, we turn into questions about questions about procedure.

NEXT: Alan Dershowitz Sues Netflix Over Its Jeffrey Epstein Documentary

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  1. All lawyer procedure is fraudulent rent seeking. It should be charged the way armed robbery is, with the same sentencing guidelines. Both the plaintiff and this judge indulging him, thinking about, replying to his claims need to go to federal stir for stealing our money. A simple “no” would have sufficed, as a decision.

    This scam was taught the English lawyer by the French, in the 12th Century. Lawyers of that day felt great shame if the case of their client ever reached substance. They were 10 times as procedural as today, and fluent in the 3 languages of the court. You had to hire one to have any chance.

  2. So if I get sued and want the case in federal court, I evade service until I remove it.

    1. You can, but it’s actually pretty hard to evade service. Corporations have registered agents. Avenatti’s lawyers may have just blown this (poor lawyer hires poor lawyers).

      1. There is an old saying that dogs resemble their masters. I once observed that the same can be said for lawyers and their clients.

  3. In 2018, Avenatti was arrested. Because he was a celebrity lawyer, many news outlets covered his arrest. He says that one of them, the Fox News Network, lied about the details of the arrest.

    That’s defamatory? And there are damages for that?

    What “details” is he talking about?

    I tracked down the complaint. It’s 43 pages of sheer verbosity. The defamation appears to be that while Avenatti was arrested on a complaint of domesic violence, Fox and various defendants reported he was arrested and charged. In truth, he was never charged. (That is what he alleges).

    Mighty thin gruel for a defamation claim.

  4. Facing several prosecutions and decades in prison, was once feted by CNN and MSNBC.

  5. An interesting decision . . . quite conservative with respect to the partisan points, not nearly so conservative with respect to the legal and practical points. And, to large degree, predictably so.

  6. What does whether the defendants were serves or not have to do with which state they live in?

    1. It doesn’t, but it has to do with whether the suit is removable.

      Federal courts have jurisdiction over purely state causes of action if the parties are completely diverse and the amount in controversy is over $75,000. (There are some other scenarios involving class actions not relevant here.) Thus, a plaintiff can file such a suit in federal court. But plaintiffs often prefer to be in state court, so they may choose not to do so.

      If they do not, the defendants can remove such a case to federal court, but not if any of the defendants is a citizen of the state where the suit is brought. So, in other words, if New Yorker sues a Californian and a Hawaiian in state court in NY, the defendants can remove the case, but if New Yorker sues a Californian and a Hawaiian in state court in HI, the defendants can’t remove the case. However, for the purposes of that analysis, only defendants who have already been served count. So if the Californian removes the case before the Hawaiian is served, the defendants can remove it.

      1. So if you don’t want a case removed, you have to always serve the in-state defendant first.

        Not sure this contributes to the orderly or fair administration of justice. But definitely contributes to lawyers’ employment security.

  7. Were I the Czar, I would abolish diversity jurisdiction altogether. Since I’m not, and in no danger of so becoming, I will continue to live with diversity jurisdiction as it now exists.

    Any lawyer representing a prospective plaintiff who fails to consider whether his initial pleadings could permit a removal to federal court is incompetent — and not by just a little bit.

    Here, Avenatti is represented by outside counsel from Nevada & Delaware, thus avoiding Lincoln’s truism about lawyers who represent themselves having fools for clients. We cannot know whether they privately cautioned him, under cloak of attorney-client privilege, that if he wished to preserve his state-court forum, he should have included a permissible and legitimate non-diverse defendant in his initial pleading; certainly they should have, if they were competent. Perhaps they warned him and he overruled them.

    But if he were one one-hundredth of the legal genus he pretends to be, he would have already known that — with or without their advice. So more likely, they’re all incompetent.

    I admit to enjoying reading another court decision in which he gets an appropriate come-uppance. And this is a careful and well-supported decision giving him it, in which Judge Bibas quite appropriately avoids giving any hint of his own enjoyment, if any, in delivering it. This ruling is likely to survive any later appeal (if one’s still justiciable by the time a final judgment is rendered) or mandamus (ha! fat chance!).

    But it’s fair to say that this opinion is somewhere near (albeit still slightly short of) the limits of a trial judge’s discretion in resolving remand motions like this one. And it certainly will be cited, possibly with decisive effect, by removing defendants in future similar cases whose plaintiffs’ counsel have likewise been bumbling in their initial formulation of basic case strategy (which always quite properly includes making intelligent choices among available permissible forums), without being nearly so loathsome individuals as Michael Avenatti is.

  8. Avenatti immediately added a nondiverse defendant and moved to remand to state court..//..Avenatti probably added Hunt only to defeat federal diversity jurisdiction

    I have to ask. How often does this kind of thing actually happen, in reality (e.g. attempting to defeat federal diversity jurisdiction)?

    Suppose Avenatti were successful, and the case was remanded back to DE. Is there something in DE law that makes it easier to win defamation cases?

    1. …Suppose Avenatti was successful…

      Need coffee now! 🙂

    2. @ Commenter_XY:

      How often does this kind of thing actually happen, in reality (e.g. attempting to defeat federal diversity jurisdiction)?

      Daily, constantly, in cases much less exotic than this one. in 40 years of civil practice in Houston, I’ve been directly involved in probably a dozen such disputes as part of a removal or remand. Every civil plaintiff’s lawyer ought to be considering his client’s legitimate options among permissible venues, and how that can affect his client’s chances; and there are times and cases in which there are objectively better choices. Lawyers for defendants sued in state courts likewise ought be considering their clients’ removal prospects, if any, in the earliest days of each new representation.

      These are all tools in the litigator’s proper toolbox, in other words, and good lawyers can and should use them when appropriate.

      Is there something in DE law that makes it easier to win defamation cases?

      About 20 seconds of Googling suggests to me that Delaware has a comparatively weak anti-SLAPP statute, which might make it a more appealing forum than otherwise to a defamation plaintiff who might be running serious risks of financial blowback if the case were instead filed in another permissible venue which has a strong anti-SLAPP statute.

      Both in terms of its substantive law and its judiciary (state and federal), Delaware is not otherwise regarded as a very plaintiff-friendly venue, however — instead (according to the conventional wisdom) favoring the entrenched corporate business interests who butter the state’s bread, decade in and decade out.

      Every case is different. But sometimes there are indeed substantive differences in defamation law among two or more different permissible venues; and choosing the venue for filing affects, but doesn’t always control, the likelihood of which state’s substantive defamation law will be held to apply. The same defamation claim that might survive summary judgment motions and get the plaintiff pretrial discovery and the all the way to a jury verdict in Florida might be thrown out without further ado on a motion to dismiss in Texas, for instance.

      1. Interesting….thanks for the background info, Beldar. That stuff is pretty interesting.

        40-years in practice in Houston? I bet you have some hilarious war stories.

        1. You’re welcome; thanks for the reply.

          1. Since you asked, here’s one war story very much on point that I can share (having sought and gotten that client’s permission, since it contains client confidences):

            In Main v. Royall, 348 S.W.3d 381 (Tex. App.—Dallas 2011, no pet’n), the plaintiff was a Dallas real estate developer, H. Walker Royall, who was infuriated by his portrayal in a book called Bulldozed: Kelo, Eminent Domain and the American Lust for Land (2007), written by Carla Mains and published by Encounter Books. In addition to suing Mains and Encounter in a Texas state district court, Royall also originally sued the Galveston Daily News, which had published a book review written by an unpaid volunteer, a retired NASA engineer from Galveston, that in turn contained quotes from the book. Neither Mains nor Encounter were from Texas, and had Royall sued them alone, they could have removed the case to federal court under diversity of citizenship. But his lawyer (a former colleague of mine at Baker Botts in the 1980s) had included the GDN and retired engineer as additional defendants, ostensibly because they had “re-published” Mains’ and Encounter’s allegedly defamatory statements in the book review; since both Texans, their presence in the case “destroyed complete diversity” and prevented a removal unless the removing defendants could also prove that they’d been “fraudulently joined.”

            I was hired by the retired engineer, and promptly worked myself out of a job by persuading his homeowners insurer to defend and indemnify him; the standard-form Texas homeowners policy covers defamation lawsuits so long as they haven’t arisen from the conduct of the insured’s business from his home, and I provided the insurer with conclusive documentation showing that my client (its insured) had written the review purely as a voluntary submission without any payment or other valuable consideration from the Galveston Daily News. This pleased my client, since that meant his insurer would then hire counsel to take over his defense at the insurer’s expense, and the insurer also thereby recognized its duty to indemnify my client against any resulting judgment up to policy limits.

            The “re-publication” argument was just strong enough to get around a potential “fraudulent defense” argument, and the case therefore wasn’t removed to federal court.

            But — as I’d predicted to my client before handing over the reins of his defense to his insurer — just after the one-year anniversary of filing, both he and the Galveston Daily News were voluntarily nonsuited (dismissed) by Royall’s lawyers, paying nothing by way of settlement or judgment. They’d been in the case solely for tactical reasons — to prevent the out-of-state defendants, who were the real targets and adequately solvent from removing. Under 28 U.S.C. § 1446(c)(3) provides that “[a] case may not be removed [based on diversity of citizenship] more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.” And once the remaining defendants’ removal rights had expired, Royall’s lawyers no longer wanted a third and fourth set of defense attorneys cross-examining each of Royall’s witnesses and opposing each of Royall’s motions.

            My client thought I had a pretty good crystal ball when my prediction came true. But in fact any seasoned Texas trial lawyer could and should have seen this scenario playing out exactly this way.

            As it turned out, though, the Texas state courts are, in general, reflexively hostile to defamation plaintiffs, and between the Texas Legislature and the Texas Supreme Court, Texas defamation law is a decidedly unlevel playing field, slanted to favor defamation defendants almost across the board, granting them special rights and privileges not available to other sorts of civil defendants. One such special right was that of seeking an interlocutory appeal in the middle of pretrial proceedings. Normally one may only appeal after entry of a final judgment, but defamation defendants whose summary judgment motions are denied in the trial court may immediately rush to have that reviewed by the appellate courts. This appellate court agreed with Mains and Encounter that the trial court erred in denying their summary judgment motion. As a result, the court of appeals threw out most of Royall’s claims in the linked decision. I can’t recall whether that tail-end of the case was then dismissed by the trial court, or simply dropped by Royall and his lawyers after the thorough whipping they received in the appellate court during the interlocutory appeal. But it ended with a whimper, not a bang.

            And indeed, Carla Main went on to become one of the witnesses who testified before the Texas Legislature when it passed the first (since-heavily amended) version of the Texas anti-SLAPP statute.

            At some point, Royall had also sued Chicago Law prof Richard Epstein for “blurbing” the book, i.e., writing something for its back cover. Prof. Volohk wrote about Prof. Epstein’s dismissal from the case — for lack of personal jurisdiction, not on the merits — in 2009.

            1. Erratum: “to get around a potential ‘fraudulent defense’ argument” should have read “to get around a potential ‘fraudulent joinder’ argument” in that last.

              Thanks to Prof. V for fishing my comment (with its three links) out of the moderation filter!

  9. I’m curious about the tactical reason Avenatti wants to be in state court. What’s the benefit to him of getting a remand?

    1. It is generally believed by the plaintiff’s tort bar that state courts are more sympathetic to their clients, and less likely to dismiss the case on a motion to dismiss or on summary judgment, which increases the settlement value of the case.

      I had a law school classmate who later told me that one of his specialities was dealing with something called “fraudulent joinder.” Meaning, the plaintiff joins a non-diverse party in an attempt to avoid removal to federal court. The defendant removes it anyway, and argues that the extra party is not proper and should be discounted.

  10. Can we sic DaivdBehar on Avenatti and Dershowitz?

    This would (partially) assuage his bloodlust and keep these nut cases out of society’s hair.

    1. I guess “insapiens curiae” would work as a name for his role when filing advice for those courts.

  11. I am still stunned but the very notion of Avenatti-for-president. That was a thing for a while.

    1. It’s not that long about — maybe five years — that the idea of Trump for president would have been considered just as unthinkable.

      1. And before that, the idea of a junior senator with four years experience and no accomplishments becoming president was also thought unthinkable. But then the media decided that, like the Catholic Church, they have the power of conferring sainthood, including a halo, and the rest is history.

        1. Being inexperienced, and being a dumpster fire, are not quite the same thing.

          1. Since you mention it, I saw a line in a Youtube clip that perfectly encapsulates what I think about Trump.

            The main character is a nice guy, his neighbor is a real jerk. At one point, the nice guy says to his neighbor, “You’re a real a–hole.”

            To which the neighbor replies, “I am an a–hole. The world needs a–holes to get rid of the s–t.”

            1. Except he didn’t get rid of it; he exacerbated it. He blatantly and without even bothering to try to hide it used the presidency to enrich himself and his family. He destroyed international relationships his predecessors took decades to build. He didn’t drain the swamp; he expanded it.

              I might be willing to overlook his faults if we’d gotten good governance out of him, but we didn’t. Any other temper throwing toddler would have done just as well.

          2. No, they are not; however, sometimes they are partners in crime.

      2. It’s not that long about — maybe five years — that the idea of Trump for president would have been considered just as unthinkable.

        That’s because, at the time, he simply wasn’t taken seriously as a potential political figure, not because he was generally thought to be a scumbag. That didn’t happen until after he won the R nomination and he became a threat that had to be taken seriously, and the left started trotting out unsubstantiated accusations of sexual assault ant the like.

        1. I think the people who knew, covered, and had worked with Trump had a pretty good idea that he was a scumbag. Anyone who didn’t know he made his money by lying, cheating, stealing and ripping his creditors and investors off simply wasn’t paying attention. But you’re right; he wasn’t taken seriously as a candidate so most people weren’t paying that much attention to him.

        2. That’s because, at the time, he simply wasn’t taken seriously as a potential political figure, not because he was generally thought to be a scumbag.

          In the narrow sense, I suppose this is true; most people just thought of him as gossip column fodder and a game show host. But people who had followed his career as a failed developer/casino operator knew that he was a scumbag.

  12. Like Cool Cal, I can say it in less than three words:

    LIBEL PROOF

    1. Good arguments to that effect can be made, and they might even become the basis for a summary judgment. See, e.g., Wehling v. Columbia Broadcasting System, 721 F.2d 506 (5th Cir. 1983) (quoting & applying Texas’ “substantial truth” doctrine in affirming summary judgment premised on the defamation plaintiff’s criminal fraud conviction):

      The critical test should be whether the defamation, as published, would affect the mind of the reader or listener in a different manner then would the misconduct proved. If the effect on the mind of the recipient would be the same, any variance between the misconduct charged and the misconduct proved should be disregarded.

      All this boils down to your same two words, though.

      1. (Meant to leave a link to Wehling, since I’m a big fan of CBS’ appellate counsel in that case.)

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