Corporate Counsel Daily, Manufacturer’s ‘improper joinder’ argument regarding instate defendant fails to stop remand, (Apr 9, 2025)

By Susan L. Smith, JD, MA

A couple, who brought an automotive products liability action against a vehicle manufacturer and an instate individual, sufficiently alleged that the individual was a seller under an exception in Texas’ products liability law to remand the action to state court.

A federal district court in Texas granted a couple’s request to remand their automotive products liability action to state court after considering the couple’s motion, the record, and relevant law. The couple had filed their action in Texas state court in October 2024, asserting strict products liability and negligence causes of action against Vanderhall Motor Works, Inc. (Vanderhall), Hall Labs, LLC, General Motors, LLC, and an individual who resided in Texas. Vanderhall, the manufacturer of the Vanderhall Venice vehicle at issue, filed a Notice of Removal in November 2024, contending that this action may be properly removed pursuant to Removal and Diversity of Citizen’s rules (see 28 U.S.C. §§1332, 1441, and 1446). After reviewing all facts, the federal court found that Vanderhall did not demonstrate that the instate individual was improperly joined. Thus, the court granted the couple’s motion to remand their claims to the state court (Whitehead v. Vanderhall Motor Works, Inc., No. 5:24-CV-01327-JKP (W.D. Tex. Apr. 4, 2025)).

Background. In their First Amended Petition, the couple alleged that on January 10, 2023, the husband drove a 2020 Vanderhall Venice on Huber Road in Guadalupe County, Texas. After applying the brakes, the vehicle lost stability and veered off the roadway, ultimately rolling and landing overturned on the husband, causing disabling injuries.

The couple’s complaint alleged that the instate individual was in the business of buying and re-selling three-wheeled autocycles, like the Vanderhall vehicle in question. The individual bought the vehicle, made one or more repairs, and then re-sold it back into the stream of commerce prior to the crash involving the husband. The vehicle, which was already defective and unreasonably dangerous when it left Vanderhall’s possession, remained defective and unreasonably dangerous when the individual sold it and it left the individual’s possession, the couple asserted. According to the complaint, the individual failed to warn the buyer or anyone else about the risks posed by the defective and unreasonably dangerous vehicle.

Arguments. The couple filed a Motion to Remand to State Court in December 2024, contending that the individual named in their complaint as a defendant was a properly joined party whose presence in this action defeated complete diversity and stripped the federal court of jurisdiction. Vanderhall contended that the couple improperly joined the individual and that the couple’s strict products liability and negligence causes of action asserted against the individual had no possibility of success.

Improper joinder analysis. The court stated that the party seeking to invoke the court’s diversity jurisdiction has two ways to establish improper joinder: (1) actual fraud in the pleading of jurisdictional facts; or (2) the inability of the plaintiff to establish a cause of action against the non-diverse party in state court. In this case, Vanderhall’s contention relied on the second test. Thus, the court had to determine whether there was “no reasonable basis for the … court to predict that the plaintiff might be able to recover against an in-state defendant.” The court explained that a plaintiff can show a reasonable basis of recovery if he can survive a 12(b)(6) motion to dismiss for failure to state a claim. The purpose of an improper joinder inquiry is to determine a procedural matter; the focus of the inquiry must be on the joinder, not on the merits of the plaintiff’s case.

Court’s cause of action analysis. Vanderhall claimed that the couple’s strict products liability cause of action against the instate individual had no possibility of success because he did not qualify as a seller under Texas law. The couple contended that they sufficiently alleged the individual’s liability as a seller under Texas law (see Texas Civil Practice and Remedies Code §§82.00(2) and (3)). A seller that did not manufacture a product (a non-manufacturing seller) is not liable for harm caused by a product, unless the claimant proves that one of the exceptions enumerated in the statute applies. In this case, the only exception at issue was the actual knowledge exception set out in the law.

The couple alleged that the instate individual knew or should have known that the Vanderhall vehicle lacked certain safety features and was defective in one or more ways that rendered it unreasonably dangerous at the time it was sold to a consumer, and that these defects were the producing causes and proximate causes of the crash and the husband’s severe injuries. Based on the factual allegations in the couple’s First Amended Petition, the court determined that there was more than a theoretical possibility that they could recover under state law against the individual.

The court also concluded that even if it would let Vanderhall present summary judgment type evidence, the couple’s allegation that the individual was a seller would still be in dispute. While Vanderhall argued that the instate individual was simply an individual who chose to sell one of his personal vehicles to another individual and was not a manufacturer, wholesaler, or retailer of any kind, the arguments ignored the liability to which non-manufacturing sellers are subject pursuant to Texas law. Further, Vanderhall failed to present any authority from Texas courts to support its claim that the individual did not qualify as a seller. Thus, the court found that Vanderhall failed to demonstrate that the individual was improperly joined in the action. Rather, Vanderhall only established that a factual issue existed which would require resolution by a jury. Therefore, the court held that removal was improper.

The case is No. 5:24-CV-01327-JKP.

Judge: Pulliam, J.

Attorneys: Bryan A. Green (Bryan Green Law PLLC) for Zachary Whitehead. Brian Thomas Smith (Dykema Gossett PLLC) for Vanderhall Motor Works, Inc. Mark J. Courtois (Funderburk Funderburk Courtois, LLP) for Hall Labs, LLC.

Companies: Vanderhall Motor Works, Inc.; Hall Labs, LLC

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