One issue that arises frequently is after a case is removed to federal court on diversity jurisdiction grounds, the plaintiff (who wishes to remain in the state court) will file an amended complaint and attempt to add a non-diverse defendant. Plaintiff will then move to remand the case to state court. The other defendants will file a motion claiming that the defendant was fraudulently joined and that the case should not be remanded to state court. The Seventh Circuit just recently decided an appeal on this issue.

The citation is In re Abbott Labs., Preterm Infant Nutrition Prods. Liab. Litig., No. 25-2322, 2026 WL [westlaw number] (7th Cir. July 28, 2026).

Parents sued Abbott and Mead Johnson (formula makers) plus Pennsylvania Hospital, claiming their premature infants developed necrotizing enterocolitis (NEC) after being fed cow’s-milk-based formula. Because the hospital was a non-diverse defendant (same state citizenship as most plaintiffs), its presence in the case blocked the formula makers from removing to federal court on diversity grounds — unless the hospital was “fraudulently joined.”

The cases bounced between Pennsylvania state court and federal court twice. The second time, after the state court dismissed the hospital from the case (and the plaintiffs’ counsel indicated they wouldn’t take an interlocutory appeal), Abbott removed again. The district court denied remand, but on an unusual theory: it found fraudulent joinder not because the plaintiffs’ claims against the hospital were legally weak, but because the plaintiffs hadn’t diligently pursued discovery against the hospital (essentially, one deposition, prompted by the state court’s own prodding) — suggesting they never really intended to win a judgment against it. The district court itself recognized this was a novel legal theory and certified it for immediate appeal.

The Seventh Circuit’s holding: The court rejected that theory entirely. It held that fraudulent joinder can only be established two ways: (1) The plaintiff lied about jurisdictional facts (e.g., misrepresented the non-diverse defendant’s citizenship), or (2) Taking all facts and law in the plaintiff’s favor, the plaintiff has literally no chance of success against the non-diverse defendant — the claim is “utterly groundless.”

The standard: “Consonant with the concerns identified in Poulos, our court, and indeed the other courts of appeals,18 have recognized only two ways of establishing fraudulent joinder: First, by joining a non-diverse party by making false allegations of jurisdictional facts to support joinder. Poulos, 959 F.2d at 73. Second, by showing that the plaintiffs have “no chance of success” in their claims against the non-diverse defendants, after resolving all issues of fact and law in favor of the plaintiffs. Thornton v. M7 Aerospace LP, 796 F.3d 757, 765 (7th Cir. 2015); see also Shur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 764 (7th Cir. 2009).”

A plaintiff’s subjective intent or litigation vigor — how hard they pushed discovery, whether they seemed to be “going through the motions” — is not part of this test and cannot support a fraudulent joinder finding. The court traced this rule back through its own precedent (Poulos), early 20th-century Supreme Court cases, and confirmed that every other circuit to address the question applies the same two-part test. It specifically noted that a plaintiff’s motive for joining a defendant is irrelevant as long as a colorable claim exists.

Why it mattered here: The district court had already found (and stuck with, under law-of-the-case principles) that the plaintiffs had a reasonable possibility of success against the hospital on the merits. Given that, the Seventh Circuit said there was no legal basis left for finding fraudulent joinder — the discovery-diligence rationale was simply not a permissible substitute.

The panel reversed the denial of remand and sent the cases back for further proceedings, effectively meaning the cases should return to state court (with a limited remand instruction for the district court to sort out a separate forum-defendant-rule wrinkle affecting two of the five plaintiffs, who are New Jersey rather than Pennsylvania citizens).