Supreme Court To Settle if All’s Well That Ends Well in Diversity Jurisdiction

The Supreme Court has granted certiorari in Hain Celestial Group, Inc. v. Palmquist to determine whether a final order issued by a federal court may stand if an appellate court later determines the district court erred in dismissing a nondiverse defendant and denying a motion to remand.^[1]

In Hain, the plaintiffs (Palmquists) brought product-liability and breach-of-warranty claims against baby-food manufacturer Hain Celestial Group and grocery retailer Whole Foods in Texas state court, alleging injuries related to heavy metals in Earth’s Best Organic Products.^[2] Hain removed the case, arguing that because the Palmquists’ state-court complaint could not state a viable claim against Whole Foods (a Texas corporation), Whole Foods had been improperly joined and, therefore, diversity jurisdiction existed.^[3] Notwithstanding subsequent amendment “clarifying” the complaint by the plaintiffs, the district court agreed with Hain, dismissed Whole Foods, and denied the plaintiffs’ motion to remand.^[4]

After Whole Foods was dismissed, a jury trial was held over the claims between the Palmquists and Hain, and the district court ultimately granted Hain’s motion for a judgment as a matter of law, holding that the plaintiffs had presented “no evidence on general causation.”^[5]The Palmquists appealed, arguing that their state-court complaint had always alleged a viable claim against Whole Foods and the case should never have been tried in federal court.^[6]The Fifth Circuit agreed and both reversed the judgment denying remand and vacated the district court’s final judgment between Hain and the Palmquists.^[7] In vacating the final judgment, the Fifth Circuit rejected Hain’s argument that the judgment should be preserved because diversity jurisdiction existed at the time judgment was entered.^[8]

Hain petitioned for certiorari, identifying a circuit split on the issue, with three circuits (the Fourth, Eighth, and Ninth) holding that when a district court errs by dismissing a nondiverse party and declining to remand a case and the case then proceeds to final judgment with completely diverse parties, the final judgment should be preserved. In contrast, the Fifth and Eleventh Circuits have now held that in those circumstances, the judgment must be vacated.^[9]

Hain argues that vacating judgments in this situation “guarantees that enormous judicial and party resources will go to waste in those circuits.”^[10]As the Product Liability Advisory Council, Inc. notes in its amicus brief, “[t]hose concerns are particularly acute in products liability cases,” where “plaintiffs in a products-liability case often argue that any company involved at any point in the manufacture or distribution of the product at issue contributed to the plaintiffs’ injury.”^[11]The National Association of Manufacturers contends that if the vacatur rule is upheld, it will only provide greater incentive for plaintiffs to bring weak or frivolous claims against defendants, because plaintiffs would get a “mulligan” in the event of a loss on the merits in federal court and state tort law may develop to be more plaintiff friendly during the delay of a remand appeal.^[12]

In response, the Palmquists emphasize that the plaintiff is “the master of the complaint” and may choose to destroy diversity jurisdiction by naming a defendant from her own state, absent a showing of fraudulent joinder.^[13]The Palmquists further argue that the limited jurisdiction of federal courts “must be honored ‘regardless of the costs it imposes,’ ”^[14]and that the “concerns of finality, efficiency, and economy” are not relevant to the “cure of the jurisdictional defect.”^[15]

Key Takeaway

As plaintiffs increasingly express an interest in state court forums, defendants face uncertainty about whether a judgment between diverse parties can stand if an appellate court disagrees with a trial court’s earlier dismissal of a diversity-destroying defendant. The Supreme Court is set to resolve a circuit split on the issue following oral argument on November 4. The decision will have particular impact on product liability actions involving multiple possible defendants up and down the supply chain.

Oral argument is scheduled for November 4, 2025.

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[1] Hain Celestial Grp., Inc. v. Palmquist, 145 S. Ct. 1960 (2025) (granting review of question 1); Petition for Writ of Certiorari at i, Hain Celestial Grp., Inc. v. Palmquist, 145 S. Ct. 1960 (2025) (No. 24-724).

[2] Palmquist v. Hain Celestial Grp., Inc., 103 F.4th 294, 299 (5th Cir. 2024), cert. granted in part, 145 S. Ct. 1960 (2025).

[3] Id.

[4] Id. at 300.

[5] Id.

[6] Id. at 300–01

[7] Id. at 301–08.

[8] Id. at 307–08; compare id., with Junk v. Terminix Int’l Co., 628 F.3d 439, 447 (8th Cir. 2010) (citing Caterpillar Inc. v. Lewis, 519 U.S. 61, 64 (1996)) (“[A] district court’s error in failing to remand a case improperly removed is not fatal to the ensuing adjudication if federal jurisdictional requirements are met at the time judgment is entered.”).

[9] Petition for Writ of Certiorari at 14, Hain Celestial Grp., Inc. v. Palmquist, 145 S. Ct. 1960 (2025) (No. 24-724).

[10] Id. at 12.

[11] Brief for the Products Liability Advisory Council, Inc. as Amicus Curiae Supporting Petitioner at 3–4, Hain Celestial Grp., Inc. v. Palmquist, __ U.S. __ (No. 24-724).

[12] Brief for the National Association of Manufacturers et al., as Amici Curiae Supporting Petitioner at 20–21, Hain Celestial Grp., Inc. v. Palmquist, __ U.S. __ (No. 24-724).

[13] Brief for Respondents at 18, Hain Celestial Grp., Inc. v. Palmquist, __ U.S. __ (No. 24-724) (citing Royal Canin U.S.A., Inc. v. Wullschleger, 604 U.S. 22, 35 (2025)).

[14] Id. at 3 (quoting Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 571 (2004)).

[15] Id. at 31 (quoting Grupo Dataflux, 541 U.S. at 574).