Diversity Defeated After Judgment: May an Appellate Court Vacate a Judgments?

This article previews the Supreme Court case in The Hains Celestial Group, Inc., Whole Foods Market, Inc. v. Sarah Palmquist., No-24-724, argued to the Court on November 4, 2025. The Court will address the question whether an appellate court may vacate a trial court judgment where the appellate court determines that the federal court proceeded erroneously because it lacked diversity jurisdiction to adjudicate the case? The case is on appeal from the Fifth Circuit. In the underlying litigation, Texas parents sued Hains Celestial and Whole Foods in Texas state court alleging their son’s autism was caused by their son’s ingestion of Hain Celestial’s organic baby food products, sold by Whole Foods. Hains is a corporate citizen of Delaware and New York; Whole Foods is a Texas corporate citizen. Hains removed the case to federal court and alleged valid diversity jurisdiction, contending that Whole Foods was fraudulently joined to defeat diversity jurisdiction. The Plaintiffs then amended their complaint to allege a valid state law claim against Whole Foods, to obviate the fraudulent joinder argument. The district court denied the remand, dismissed Whole Foods as fraudulently joined, and subsequently granted Hain’s a Rule 50(a) directed verdict.

On appeal, the Fifth Circuit did not address the underlying merits supporting the directed verdict dismissal. Instead, the Fifth Circuit vacated the district court’s judgment and ordered the litigation sent back to Texas state court, to begin over again. The Fifth Circuit concluded that the district court erred in dismissing Whole Foods as fraudulently joined. Because the district court should never have dismissed Whole Foods, the court’s initial lack of complete diversity “lingered” through to the district court’s final judgment. Because the jurisdictional defect remained through the case, the Fifth Circuit concluded the case had to be remanded to state court, notwithstanding the trial judgment.

The Hain’s appeal invites the Court to delve deeply into the weeds of removal jurisdiction jurisprudence where there have been changes to the litigation after removal. This will involve the Court in discussions of the timing of a district court’s consideration of removal petitions and what the court should carefully evaluate. The Court will need to clarify the effects of post-removal amendments of claims to fend off challenges of fraudulent joinder. It may require the Court to reconsider the black-letter rules of fraudulent joinder and the circumstances of when courts may disregard or must dismiss a fraudulently joined party.

Given the severe consequence of the Fifth Circuit’s decision ordering vacatur of the district court’s judgment and remand to state court, the Court may very well take into account the prudential considerations that the Petitioner raises: namely, the wasteful and inefficient use of party and judicial resources occasioned by the Fifth Circuit’s decision. Or, the Court may agree with the Respondents that such prudential considerations are immaterial when the principle of courts of limited jurisdiction is at the heart of litigation.