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United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
May 28, 2024
No. 23-40197
____________ Lyle W. Cayce
Clerk
Sarah Palmquist, Individually and as Next Friend of E.P., a minor;
Grant Palmquist,
Plaintiffs—Appellants,
versus
The Hain Celestial Group, Incorporated; Whole Foods
Market, Incorporated, also known as Whole Foods Market
Rocky Mountain/Southwest, L.P.,
Defendants—Appellees.
______________________________
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 3:21-CV-90
______________________________
Before Stewart, Clement, and Ho, Circuit Judges.
Carl E. Stewart, Circuit Judge:
In 2021, Grant and Sarah Palmquist, individually and on behalf of their
minor son (“Palmquists”), sued baby-food manufacturer, Hain Celestial
Group, Inc. (“Hain”), and grocery retailer, Whole Foods Market, Inc.
(“Whole Foods”), in Texas state court, seeking damages for their son
Ethan’s physical and mental decline that began when he was about thirty
months old. Following removal, the district court dismissed Whole Foods as
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improperly joined and granted judgment as a matter of law in favor of Hain
during trial. The Palmquists appeal the district court’s (1) dismissal of Whole
Foods on improper joinder grounds, (2) denial of the Palmquists’ motion to
remand, and (3) grant of Hain’s motion for judgment as a matter of law. For
the reasons that follow, we hold that the Palmquists were entitled to a remand
to state court because the allegations in their state-court complaint stated
plausible claims against Whole Foods. Thus, we REVERSE the district
court’s judgment denying the Palmquists’ motion to remand, VACATE the
final judgment of the district court, and REMAND with instructions for the
district court to remand the case to the state court.
I. Factual and Procedural History
A. Factual Background
Sarah Palmquist gave birth to Ethan in September 2014 after a healthy
and uneventful pregnancy. During the first two years of his life, Ethan met or
exceeded developmental milestones The Palmquists allege that during this
time, Ethan almost exclusively consumed Hain’s Earth’s Best Organic
Products, which the Palmquists purchased from Whole Foods.
When he was about thirty months old, Ethan’s “social, language, and
behavior[al]” skills rapidly regressed. Ethan’s parents, Grant and Sarah,
visited numerous physicians and specialists for a diagnosis and appropriate
treatment. They aver that those medical tests revealed that Ethan suffered
from several physical and mental disorders. Ethan’s physical ailments
include seizure disorder, chronic diarrhea, epileptiform disorder (excessive
and abnormal brain activity), hypotonia (abnormally decreased muscle tone),
and mitochondrial dysfunction. Ethan’s mental diagnoses range from
intellectual disability to anxiety and aggression. Some physicians attributed
most, if not all, of Ethan’s symptoms to autism spectrum disorder or major
neurocognitive disorder. Some physicians also diagnosed Ethan with heavy-
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metal poisoning. While the Palmquists assert that heavy metal toxicity caused
Ethan’s symptoms, Hain attributes the entirety of Ethan’s disabilities to
autism.
In 2021—several years after Ethan’s heavy metal toxicity diagnosis—
the House Oversight and Reform Committee released a report (“Committee
Report”) demonstrating that certain baby foods, including Hain’s, contained
elevated levels of toxic heavy metals, including arsenic, lead, cadmium, and
mercury. The Committee Report also revealed that: (1) Hain’s Earth’s Best
Organic Products contained up to 129 parts per billion (“ppb”) inorganic
arsenic; (2) some of Hain’s ingredients contained as much as 352 ppb lead;
and (3) Hain did not test for mercury. 1
From 2014 to 2019, Hain only tested some ingredients in its baby
foods for toxic metals but did not test the finished products. In 2019, in an
effort to reduce the heavy-metal concentration in its products, Hain stopped
using a vitamin pre-mixed ingredient, switched to a lower-arsenic-content
rice for its infant cereal, and started final-product testing.
B. Procedural History
Attributing the high levels of toxic metals appearing in Ethan’s blood
tests to his consumption of Earth’s Best Organic Products, the Palmquists
sued both Hain and Whole Foods in Texas state court in 2021, alleging strictproducts-liability and negligence claims against Hain and breach-ofwarranties and negligence claims against Whole Foods. 2 The Palmquists
_____________________
1
In 2016, the Food and Drug Administration (“FDA”) published draft guidance
recommending that infant-rice-cereal producers limit end-product inorganic-arsenic levels
to 100 ppb.
2
Hain is a Delaware corporation with its principal place of business in New York
and therefore is a citizen of Delaware and New York. Whole Foods is a citizen of Texas.
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sought to show that heavy-metal exposure causes heavy-metal poisoning and
that Ethan’s consumption of heavy metals in Hain’s products caused his
heavy-metal poisoning and resultant cognitive decline. Hain removed the
case to federal court, contending that Whole Foods, a multinational
supermarket chain headquartered in Austin, Texas, was improperly joined to
defeat diversity jurisdiction. 3
After removal, the Palmquists filed an amended complaint (the
“second amended complaint”) that purportedly “clarified their allegations
against Whole Foods under the federal pleading standard.” In their second
amended complaint, the Palmquists sought to clarify that their breach-ofwarranties cause of action included claims that Whole Foods expressly
represented to the public and to the Palmquists that Hain’s baby food was
safe. The Palmquists also added a negligent-undertaking claim against Whole
Foods.
After amending their complaint, the Palmquists moved to remand the
suit, countering that they had viable claims against Whole Foods under the
Texas Products Liability Act 4 and the Deceptive Trade Practices Act
(“DTPA”). The Palmquists based their remand motion on the details in
their second amended complaint.
The district court determined that any new claims could not be
considered because jurisdiction “is resolved by looking at the complaint at
_____________________
3
The Palmquists amended their state-court petition once in state court before the
case was removed.
4
Chapter 82 of the Texas Civil Practice & Remedies Code outlines the duties of
manufacturers and nonmanufacturing sellers in a products liability action. Section
82.003(a) provides that a nonmanufacturing seller’s protection from liability under
Chapter 82 can be pierced if one of seven exceptions is established. Tex. Civ. Prac. &
Rem. Code Ann. § 82.003(a).
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the time [the] petition for removal [was] filed.” Specifically, the district court
concluded that the Palmquists added a new breach of express warranty claim
in the second amended complaint, in addition to their new negligent-undertaking claim. Nonetheless, even considering the purportedly new
express breach-of-warranty claim the district court concluded that, under the
Texas Civil Practice & Remedies Code § 82.003(a), “[g]enerally, retail
sellers such as Whole Foods are not liable for the harm caused by the
products they sell.” The district court subsequently determined that the
Palmquists had improperly joined Whole Foods and dismissed their claims
against it.
The Palmquists’ claims against Hain proceeded in federal court. Prior
to trial, Hain moved for summary judgment. The Palmquists’ marketingdefect claim, manufacturing-defect claim, and negligent-testing claim all
survived summary judgment. On February 6, 2023, a jury trial on the merits
commenced. On February 15, 2023, Hain filed a written motion under Rule
50(a) of the Federal Rules of Civil Procedure, requesting that the court enter
judgment as a matter of law because the Palmquists (1) failed to either prove
specific causation or offer expert testimony to support general causation and
(2) lacked sufficient evidence to establish that Ethan had heavy-metal
toxicity. On February 17, 2023—after the Palmquists had rested—the court
heard, considered, and orally granted in its entirety Hain’s motion for
judgment as a matter of law under Rule 50(a) finding that the Palmquists had
presented “no evidence of general causation.” The court explained that the
jury “heard no testimony from a qualified expert that the ingestion of heavy
metals can cause the array of symptoms that Ethan suffers from, much less
any evidence of at what level those metals would have to be ingested to bring
about those symptoms.” The court ultimately concluded that “the law is
clear that such testimony is necessary to show general causation.” The
Palmquists filed this appeal.
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II. STANDARD OF REVIEW
Denial of a remand motion and the determination that a party is
improperly joined are reviewed de novo. Int’l Energy Ventures Mgmt., L.L.C.,
v. United Energy Grp. Ltd., 818 F.3d 193, 199 (5th Cir. 2016) (denying a
remand motion); Kling Realty Co., Inc. v. Chevron USA, Inc.,
575 F.3d 510,
513 (5th Cir. 2009) (analyzing improper joinder). “[W]e have recognized two
ways to establish improper joinder: (1) actual fraud in the pleading of
jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action
against the non-diverse party in state court.” Smallwood v. Ill. Cent. R.R. Co.,
385 F.3d 568, 573 (5th Cir. 2004) (en banc) (internal quotation marks and
citations omitted). However, this court reviews a district court’s procedure
for determining improper joinder only for abuse of discretion. Kling Realty
Co.,
575 F.3d at 513; Guillory v. PPG Indus., Inc.,
434 F.3d 303, 309–10 (5th
Cir. 2005).
III. DISCUSSION
The Palmquists contend that the district court erred in its improper
joinder analysis and erroneously denied their remand motion. The
Palmquists challenge the court’s conclusion that they are unable to recover
against Whole Foods based on the claims alleged in either their state-court
pleading or their second amended complaint. They argue that their second
amended complaint detailed viable claims—already alleged in their original
state-court petition—against Whole Foods, thus defeating diversity
jurisdiction. Specifically, the Palmquists maintain that their state-court
petition alleged a breach-of-warranties claim against Whole Foods before the
case was removed to federal court and their amended federal court complaint
merely contained new allegations clarifying how those claims satisfied the
newly applicable federal pleading standard. Thus, the Palmquists argue they
have stated a claim against Whole Foods, which defeats diversity jurisdiction.
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While the Palmquists concede that circuit precedent recognizes that
plaintiffs cannot defeat removal by changing the substance of their pleadings,
they nevertheless emphasize that removed plaintiffs are allowed to “clarify a
petition that previously left the jurisdictional question ambiguous.” Cavallini
v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264–65 (5th Cir. 1995) (holding
that jurisdiction is judged “on the basis of claims in the state court complaint
as it exists at the time of removal”). They contend that longstanding Fifth
Circuit precedent holds that plaintiffs may “clarify” and “amplify” their
jurisdictional allegations after removal for purposes of improper joinder
analysis. See Griggs v. State Farm Lloyds,
181 F.3d 694, 699–700 (5th Cir.
1999).
A. “Breach of Warranties” Cause of Action
As an initial matter, the parties dispute whether the Palmquists’
breach-of-warranties claim pleaded in state court was broad enough to
encompass a claim for breach of express and implied warranties. We
determine whether removal was proper by examining the Palmquists’
pleading at the time of the petition for removal. See Cavallini, 44 F.3d at 264.
“As the effect of removal is to deprive the state court of an action properly
before it, removal raises significant federalism concerns. The removal statute
is therefore to be strictly construed, and any doubt about the propriety of
removal must be resolved in favor of remand.” Gasch v. Hartford Acc. &
Indem. Co.,
491 F.3d 278, 281–82 (5th Cir. 2007) (internal quotation marks
and citations omitted). We conduct our improper joinder analysis “on the
basis of claims in the state court complaint as it exists at the time of removal.”
Cavallini,
44 F.3d at 264. Thus, while we will not entertain new theories not
raised in state court, we will examine the Palmquists’ state-court pleadings
and the viability of those claims alleged against Whole Foods, deferring to
resolve any doubt or ambiguities in favor of remand. Griggs,
181 F.3d at 699.
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Under the paragraph entitled “Breach of Warranties,” the
Palmquists’ as-removed complaint alleged that:
Whole Foods . . . sold Hain’s Earth’s Best Organic baby food
products and in doing so impliedly warranted to the public
generally and specifically that the products were safe for
consumption by infants and young children . . . Whole Foods’
implied warranty was incorrect given the high levels of heavy
toxic metal Hain’s baby food products contained . . . [The
Palmquists’] injuries were sustained because of Whole Foods’
implied warranties.
The “Breach of Warranties” paragraph of the as-removed complaint also
stated that:
[The Palmquists] relied on Whole Foods’ representations that
Hain’s Earth’s Best Organic baby food products were safe and
of the highest quality . . . If Hain’s products were as advertised,
[the Palmquists] would not have been injured by the product.
Hain and Whole Foods markets the Earth’s Best Organic baby
food products as safe, natural, and organically produced.
The language in the as-removed complaint was broad enough to
encompass both breach of express and implied warranties’ claims. The
paragraph was entitled “Breach of Warranties,” which could include both
express and implied claims. See Breach of Warranty, Black’s Law Dictionary
(11th ed. 2019) (“[a] breach of an express or implied warranty relating to the
title, quality, content, or condition of goods sold.”); Tex. Bus. & Com. Code
Ann. § 17.50(a)(2) (Texas’s Deceptive Trade Practices Act empowers “[a]
consumer [to] maintain an action where any of the following constitute a
producing cause of economic damages or damages for mental anguish: . . .
breach of an express or implied warranty.”). Although the language in the as-removed complaint generally discussed Whole Foods’ implied warranties, it
also discussed Whole Foods’ express representations regarding Hain’s
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products. We therefore hold that the district court erred in concluding that
the Palmquists added a new breach of express warranty claim in their second
amended complaint.
B. Improper Joinder Analysis
For purposes of our inquiry, circuit precedent directs us to conduct a
Rule 12(b)(6)-type analysis, looking initially at the allegations in the
complaint to determine whether it states a claim under state law against the
in-state defendant. Smallwood, 385 F.3d at 573. Circuit precedent makes clear
that removed state-court petitions are evaluated under the federal pleading
standard. Int’l Energy Ventures Mgmt.,
818 F.3d at 204 (“The Smallwood
opinion instructs us to apply the Rule 12(b)(6)-type analysis, which must
mean the entirety of that analysis. Because that analysis is inseparable from
the federal pleading standard, this is an instruction to apply the federal
pleading standard.”); see also Smallwood,
385 F.3d at 573.
Before we conduct our improper joinder analysis, we must consider
whether the Palmquists were permitted to amend their pleadings to conform
to the federal pleading standard. In other words, we must assess whether we
may consider the “express factual” language that the Palmquists added in
their second amended complaint to describe representations Whole Foods
made about its baby products. We will not consider the negligent-undertaking
claim, a theory not raised in state court, in our analysis of whether Whole
Foods was improperly joined. Griggs, 181 F.3d at 700.
In Peña v. City of Rio Grande City, this court held that where
defendants challenge the pleadings on the merits after a case has been
removed to federal court, plaintiffs should be permitted leave to amend their
complaint in order to conform to the federal pleading standard. 879 F.3d 613,
617 (5th Cir. 2018). Although Peña concerned a motion for judgment on the
pleadings rather than improper joinder,
id. at 616, the same standard—the
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one provided by Federal Rule of Civil Procedure 12(b)(6) used to assess
failure to state a claim—applied. Id. at 618 (“The city’s motion for judgment
on the pleadings is subject to this same standard [to which motions to dismiss
are subject].”); Magee v. Reed,
912 F.3d 820, 822 (5th Cir. 2019) (“[T]he
standard for dismissal under Rule 12(c) is the same as under Rule
12(b)(6).”). 5
Even if Peña is not binding on this panel, its logic makes good sense: a
plaintiff should not be penalized for adhering to the pleading standards of the
jurisdiction in which the case was originally brought. Otherwise, where there
are potentially diverse parties, plaintiffs would essentially have to plead the
federal pleading standard in state court for fear of having their claims against
non-diverse parties thrown out upon reaching federal courts for failing to
comply with the demands of Rule 12(b)(6). Peña, 879 F.3d at 617 (“Removal
from a notice-pleading jurisdiction is a natural time at which justice would
call for the court to permit such an amendment.”) (citing Faulkner v. ADT
Sec. Servs., Inc.,
706 F.3d 1017, 1021 (9th Cir. 2013)).
Hain next contends that Cavallini, Griggs, and ANPAC foreclose the
district court’s examination of the post-removal second amended complaint.
See Griggs, 181 F.3d at 694; Cavallini,
44 F.3d at 256; Asociacion Nacional de
Pescadores a Pequena Escala O Artesanales de Colombia (ANPAC) v. Dow
Quimica de Colombia S.A.,
988 F.2d 559 (5th Cir. 1993). On this issue, we
disagree. Although post-removal filings may not be considered “to the extent
that they present new causes of action or theories not raised in the controlling
_____________________
5
Although Peña concerned a district court’s denial of leave to amend a complaint
under Federal Rule of Civil Procedure 15(a)(1)–(2), by declining to consider the facts
alleged in the second amended complaint and instead assessing the as-removed complaint,
the district court effectively denied the Palmquists the ability to amend their complaint. To
be sure, plaintiffs cannot add new causes of action after a case is removed from state to
federal court, but that is not the proposition that Peña stands for.
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petition filed in state court,” they can be considered to the extent they
“clarify or amplify the claims actually alleged” in the removed pleading.
Griggs, 181 F.3d at 700 (citing Cavallini,
44 F.3d at 263).
Hain maintains that the district court’s decision correctly followed
Cavallini. It argues that this court similarly rejected the plaintiffs’ attempt in
Cavallini to amplify their allegations consistent with similar facts as the
instant case. See 44 F.3d at 264 (holding that ANPAC “offers no support”
for the plaintiffs’ assertion that “their amended complaint would have
clarified any jurisdictional ambiguity in their state court complaint”). But
recall that the Cavallini panel pinpointed that, at the time the case was
removed, the state-court petition “simply [did] not allege any facts against
[the non-diverse defendant]. Other than listing his name and address for
purposes of service, the petition [did] not specifically mention [the non-diverse defendant] at all.” Cavallini,
44 F.3d at 260 n.8. While the petition
alleged various causes of action, it did not delineate under which theories the
non-diverse defendant could be liable to the plaintiffs.
Id. It was under these
circumstances that the panel determined that “[t]he Cavallinis’ proposed
amended complaint [did] not clarify the jurisdictional facts at the time of
removal; it attempt[ed] instead to amend away the basis for federal
jurisdiction.” Cavallini,
44 F.3d at 265.
Although the Palmquists added an additional negligent-undertaking
claim against Whole Foods, they too clarified their existing breach-ofwarranties claim with supporting jurisdictional facts. As is the case here,
adding new causes of actions and clarifying already alleged causes of actions
are not mutually exclusive. We have already determined that the Palmquists
may not expand the substance of their pleadings, for jurisdictional purposes,
with the negligent-undertaking allegations. We, too, follow circuit precedent
by permitting them to “clarify” their already averred jurisdictional
allegations after removal for purposes of an improper joinder analysis. See
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Griggs, 181 F.3d at 700 (acknowledging that post-removal evidence may be
considered when determining whether removal was proper “only to the
extent that the factual allegations in [petitioner’s] affidavit clarify or amplify
the claims actually alleged in the amended petition that was controlling when
the suit was dismissed”); Cavallini,
44 F.3d at 265 (differentiating a case that
allows for “clarification of a state court complaint” after removal from a case
where “there is no need for clarification of [the] complaint [because] it does
not contain allegations against [a non-diverse defendant] that state a claim for
relief under [the] legal theories pleaded”); ANPAC,
988 F.2d at 565 (holding
that “the court is considering information submitted after removal” because
it “clarif[ies] a petition that previously left the jurisdictional question
ambiguous”).
Turning now to the substance of our improper joinder analysis, when
conducting a Rule 12(b)(6)-type analysis, we must accept all well-pleaded
facts as true and view them in the light most favorable to the non-moving
party. In re S. Scrap Material Co., 541 F.3d 584, 587 (5th Cir. 2008). A plaintiff
must state a claim for relief that is facially plausible by pleading “factual
content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Anderson v. Valdez,
845 F.3d
580, 589 (5th Cir. 2016) (quoting Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009)).
Yet, the plausibility standard “simply calls for enough fact to raise a
reasonable expectation that discovery will reveal evidence of the necessary
claims or elements.” In re S. Scrap Material Co.,
541 F.3d at 587 (quoting
Twombly, 550 U.S. at 556) (internal quotation marks omitted).
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When considering whether a plaintiff has stated a claim against a non-diverse party in state court, 6 the test “is whether the defendant has
demonstrated that there is no possibility of recovery by the plaintiff against
an in-state defendant, which stated differently means that there is no
reasonable basis for the district court to predict that the plaintiff might be able
to recover against an in-state defendant.” Id. “This means that there must
be a reasonable possibility of recovery, not merely a theoretical one.”
Campbell v. Stone Ins., Inc., 509 F.3d 665, 669 (5th Cir. 2007) (quoting Ross v.
Citifinancial, Inc.,
344 F.3d 458, 462 (5th Cir. 2003)). The burden of
persuasion on a party claiming improper joinder is a “heavy one.”
Id. “[A]ny
contested issues of facts and any ambiguities of state law must be resolved”
in favor of remand. Cuevas v. BAC Home Loans Servicing, LP,
648 F.3d 242,
249 (5th Cir. 2011) (quoting Travis v. Irby,
326 F.3d 644, 649 (5th Cir. 2003)).
C. Nonmanufacturing Seller Liability
The parties agree that Section 82.003(a)(5) of the Texas Products
Liability Act governs whether Whole Foods is potentially liable in this action.
Although Section 82.003 appears to limit rather than establish liability, our
court has required plaintiffs to address Section 82.003 to state a claim against
_____________________
6
Whole Foods does not argue that the Palmquists have committed actual fraud in
the pleading of jurisdictional facts.
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nonmanufacturing sellers, George v. SI Grp., Inc., 36 F.4th 611, 620, n.5 (5th
Cir. 2022), so we do the same here. 7
The Palmquists argue that they have pleaded sufficient facts to
establish that the exception under Section 82.003(a)(5) applies. Section
82.003(a)(5) provides that a nonmanufacturing reseller may not be held liable
unless:
(A) The seller made an express factual representation about an
aspect of the product;
(B) The representation was incorrect;
_____________________
7
We note, however, that we were unable to locate any caselaw from Texas state
courts indicating that Section 82.003 can be used to establish liability in the first instance.
Cf., Amazon.com, Inc. v. McMillan, 625 S.W.3d 101, 109 (Tex. 2021) (“Chapter 82 is a
liability-restricting statute.”); Transcon. Ins. Co. v. Briggs Equip. Tr.,
321 S.W.3d 685, 701
(Tex. App.—Houston [14th Dist.] 2010, no pet.) (assuming that the defendant had met its
burden to show that it was a “seller” entitled to the application of Section 82.003 when
assessing whether the Section 82.003 exceptions applied); but cf. McMillian, 625 S.W. at
109 (describing Section 82.003 as “imposing liability” on nonmanufacturing sellers in
certain instances). Rather, Section 82.003 establishes an exception to the common law’s
imposition of strict liability for sellers of defective products. McMillan, 625 S.W.3d at 109
(“Chapter 82 does not expand the pool of potentially liable non-manufacturing sellers
beyond those recognized at common law; it reduces that pool.”). Thus, the exceptions
listed in Section 82.003 appear to be exceptions to that exception. See Sidwell v. Zuo Mod.
Contemp., Inc., No. 05-20-00127-CV,
2022 WL 3040634, at *3 (Tex. App.—Dallas Aug. 2,
2022, no pet.) (Chapter 82 “limits the circumstances under which a nonmanufacturing
seller may be liable to a claimant . . . unless one of the enumerated exceptions” in Section
82.003 applies) (internal quotation marks and citation omitted). So, it would seem that to
recover against a nonmanufacturing seller, a plaintiff would need to prove both a products
liability cause of action, see Tex. Civ. Prac. & Rem. Code § 82.001 (2) and that one
of the Section 82.003 exceptions applied. No party has argued that the Palmquists have not
otherwise stated a claim sufficient to establish liability in the first instance, so we need not
address it. See Rollins v. Home Depot USA,
8 F.4th 393, 397 (5th Cir. 2021) (“A party forfeits
an argument . . . by failing to adequately brief the argument on appeal.”). We also note that
the caselaw requiring plaintiffs to plead facts sufficient to overcome Section 82.003
immunity to state a claim appears to originate from federal, rather than Texas courts. See,
e.g., Alonso ex rel. Est. of Cagle v. Maytag Corp.,
356 F. Supp. 2d 757, 761 (S.D. Tex. 2005).
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(C) The claimant relied on the representation in obtaining or
using the product; and
(D) If the aspect of the product had been as represented, the
claimant would not have been harmed by the product or would
not have suffered the same degree of harm[.]
Tex. Civ. Prac. & Rem. Code Ann. § 82.003(a)(5).
The Palmquists argue they can meet each element of this exception.
First, they contend that “Whole Foods markets [Hain’s] Earth’s Best
Organic baby food products as safe, natural, and organically produced.”
Specifically, they state in their second amended complaint that:
As a seller of “natural and organic foods,” Whole Foods
specifically represents to its customers that it only sells
products that are of the “highest quality.” Whole Foods further
represents to the public that it “carefully vet[s] our products to
make sure they meet our high standards by researching ingredients,
reading labels and auditing sourcing practices.” And it promises
its customers that “if it doesn’t meet our standards, we don’t
sell it.” In short, “Whole Foods” claims to “take pride in what
we do sell and even more in what we don’t” by refusing to sell
products with harmful ingredients. Whole [F]oods made these
express factual representations about Hain’s Earth’s Best Baby
Food.
The Palmquists further contend that Whole Foods’ representations
were incorrect given the high levels of heavy toxic metals that Hain’s baby
food contained, that they relied on Whole Foods’ representations that Hain’s
baby food was safe and high quality, and that had Whole Foods’ claims been
true, Ethan would not have been injured.
Hain, for its part, contends that the Palmquists cannot satisfy the first
element of Section 82.003(a)(5) because the only allegations set forth in the
operative complaint are generalized, positive statements, which it asserts are
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not actionable under Texas law. Per Hain, the statements must be about its
baby food products specifically. Whole Foods makes similar arguments,
asserting that generalized, positive statements are not actionable under
Section 82.003(a)(5). The district court adopted such reasoning in denying
the Palmquists’ motion to remand. See Howard v. Lowe’s Home Ctrs., LLC,
306 F. Supp. 3d 951, 958 (W.D. Tex. 2018), aff’d,
765 F. App’x 76 (5th Cir.
2019); Gill v. Michelin N. Am., Inc.,
3 F. Supp. 3d 579, 585 (W.D. Tex. 2013).
As to Hain’s argument that the statements must be about Hain’s
products specifically, the Palmquists’ operative complaint directly links the
allegations to Hain’s products. And, when conducting a Rule 12(b)(6)-type
analysis, we must accept all well-pleaded facts as true. In re S. Scrap Material
Co., 541 F.3d at 587.
Hain, Whole Foods, and the district court all relied on decisions from
federal courts for the proposition that alleged misrepresentations may be too
general to be actionable. This is a problem, however, because “federal courts
sitting in diversity apply state substantive law.” Shady Grove Orthopedic
Assoc., P.A. v. Allstate Ins. Co., 559 U.S. 393, 437 (2010) (citation omitted).
Federal courts look to the decisions of the Texas Supreme Court (and lacking
any authoritative decision, decisions from the intermediate appellate courts)
to determine matters of Texas law. Primrose Oper. Co. v. Nat’l Am. Ins. Co.,
382 F.3d 546, 564-65 (5th Cir. 2004). And “any ambiguities of state law must
be resolved in favor of remand.” African Methodist Episcopal Church v. Lucien,
756 F.3d 788, 793 (5th Cir. 2014). Neither Hain nor Whole Foods have
pointed to any Texas cases to support its argument that Whole Foods’
representations about the quality of its food are too generalized.
Although there are few Texas cases interpreting Section 82.003(a)(5),
the few that the Palmquists point to have found fairly generalized statements
adequate enough to support a claim against a nonmanufacturing seller. See
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Transcon. Ins. Co. v. Briggs Equip. Tr., 321 S.W.3d 685, 702 (Tex. App.—
Houston [14th Dist.] 2010, no pet.) (holding that the plaintiff had asserted a
viable claim against a seller who assembled a hydraulic lift and “told [the
purchaser’s] employees that it was ‘okay’ not to use the outriggers.”); JSC
Nizhnedneprovsky Tube Rolling Plant v. United Res., LP,
2016 WL 8921926, at
*9 (Tex. App.—Corpus Christi–Edinburg [13th Dist.] Dec. 21, 2016, no pet.)
(holding that the evidence supported a jury finding of liability where a seller
incorrectly represented that a pipe was of a certain grade (i.e., quality)).
Moreover, other Texas express representation cases outside of those
interpreting Section 82.003(a)(5) likewise support the Palmquists’ argument
that fairly generalized statements may sometimes be actionable. See
Pennington v. Singleton,
606 S.W.2d 682, 687 (Tex. 1980) (determining that
statements expressing that products were in “excellent condition,” “perfect
condition,” and “just like new” were actionable under Texas’s DTPA). This
is especially so, under Texas law, where a seller purports to have specialized
knowledge. See Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am.,
341
S.W.3d 323, 338 (Tex. 2011).
The Palmquists alleged that Whole Foods represents that it “carefully
vet[s] [its] products to make sure they meet [] high standards by researching
ingredients, reading labels and auditing sourcing practices.” Accepting these
facts as true, and interpreting ambiguities of state law in favor of the
Palmquists, we hold that the district court erred in determining that there
was no possibility of recovery under Section 82.003(a)(5). In particular, we
note that Whole Foods purports to have special knowledge about the
ingredients in Hain’s baby food that is not available to customers. As the
Palmquists argue, the Whole Foods business model depends on this
reputation and customers’ willingness to a pay a premium for products that
Whole Foods advertises as healthy and high quality. Therefore, the district
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court erred in concluding that Whole Foods was improperly joined and in
denying the Palmquists’ motion to remand. 8
D. The Caterpillar Exception to Remand
Lastly, at issue is whether the district court’s refusal to remand the
case to state court requires us to vacate the take-nothing judgment. Hain and
Whole Foods rely on Caterpillar, Inc. v. Lewis, 519 U.S. 61 (1996), to argue
against remand. Hain argues that vacatur of the final judgment is not the
correct remedy, under Caterpillar and Newman-Green, Inc. v. Alfonzo-Larrain,
490 U.S. 826 (1989), because there was complete diversity
jurisdiction at the time judgment was entered. It urges this court—in the
interests of judicial efficiency and finality—to preserve the judgment below
even if we determine remand should have been granted at the beginning of
the case. However, the Palmquists argue that, unlike Caterpillar, the
jurisdictional defect here was not cured prior to judgment. We agree with the
Palmquists. Remand is proper in the instant case because the jurisdictional
defect was never cured.
The case involving state law claims in Caterpillar was removed on the
basis of diversity jurisdiction. 519 U.S. at 64. Correspondingly, the district
court denied the plaintiff’s motion to remand the case to state court.
Id. Prior
to final judgment, however, the sole non-diverse defendant in Caterpillar was
dismissed after that defendant and the plaintiff voluntarily settled. Thus, the
settlement reached between the non-diverse party and the plaintiff created
the diversity of citizenship between parties necessary to give rise to federal
subject matter jurisdiction.
Id. The Supreme Court said as much by holding
_____________________
8
Hain further contends that the Palmquists’ claim constitutes a claim for fraud
that must satisfy the heightened pleading requirements of Federal Rule of Civil Procedure
9(b). But Hain failed to make this argument before the district court, thus it is forfeited.
Rollins, 8 F.4th at 397.
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that the removal defect was cured when the non-diverse party was dismissed
after removal but before trial commenced. Id. at 73–75 (holding that the
“jurisdictional defect was cured, i.e., complete diversity was established
before the trial commenced”). Consequently, the Court declined to remand
the case for a new trial in state court.
Id. The Court affirmed that “[d]espite
a federal trial court’s threshold denial of a motion to remand, if, at the end of
the day and case, a jurisdictional defect remains uncured, the judgment must
be vacated.”
Id. at 76–77.
This case is not controlled by Caterpillar. The improper removal
affected the subject-matter jurisdiction in this case. Unlike Caterpillar,
complete diversity did not exist at the time judgment was entered because
the Palmquists alleged non-fraudulent claims against a non-diverse
defendant, Whole Foods. Where a jurisdictional defect lingers (i.e., lack of
subject matter jurisdiction) through judgment in the district court, the case
must be remanded because the federal court lacked jurisdiction. McKee v.
Kansas City S. Ry. Co., 358 F.3d 329, 336 n.4 (5th Cir. 2004). The district
court should have remanded the case because “federal courts are courts of
limited jurisdiction and because without complete diversity the federal courts
do not have subject matter jurisdiction over a case that does not concern a
federal question.” See
id. at 336–37.
IV. CONCLUSION
For the foregoing reasons, we REVERSE the district court’s
judgment denying the Palmquists’ motion to remand, VACATE the final
judgment of the district court, and REMAND with instructions for the
district court to remand the case to the state court from which it was
removed. Because we have determined that the district court erred in
denying the Palmquists’ motion to remand the case to the state court, we do
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not address whether the district court erred in granting judgment as a matter
of law in favor of Hain.
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