The key litigated issue in Morris was whether the fraudulent joinder doctrine applies to the forum state defendant rule in cases removed to federal court on diversity grounds.

Morris arose out of an automobile accident and subsequent insurance dispute. The plaintiff, an Indiana citizen, sued two defendants, a Californian and an Ohio citizen, in Ohio state court alleging tortious bad faith to pay an insurance claim and breach of contract. The defendants removed to the Northern District of Ohio on diversity grounds. Eventually, the case was transferred to the Southern District of Indiana.

After removal, the plaintiff moved for remand under the forum state defendant rule, which prohibits removal on diversity grounds if at least one of the defendants is a citizen of the state where the suit is brought (28 U.S.C. § 1441(b)(2)). Here, one of the defendants was a citizen of Ohio, the same state where the action was originally commenced.

Opposing remand, the defendants argued that the Ohio defendant had been fraudulently joined, and therefore his presence in the suit did not stand as an impediment to removal. Under the fraudulent joinder doctrine, a defendant's right to remove on diversity grounds is not defeated by joinder of a non-diverse defendant against whom the plaintiff's claim has no chance of success.

The district court observed that most fraudulent joinder cases involve a defendant who is non-diverse to the plaintiff and was joined to defeat diversity jurisdiction. Nevertheless, the court could find "no principled basis" for refusing to extend the doctrine to a diverse resident defendant joined for purposes of triggering the forum state defendant rule.

The district court ultimately concluded that the claims against the Ohio defendant stood no chance of success under state law, and as a result, the Ohio defendant was fraudulently joined. The court then dismissed all of plaintiff's claims against the Ohio defendant and denied the plaintiff's motion to remand.

In its May 23, 2013 opinion, the Seventh Circuit expressed reluctance to extend the fraudulent joinder doctrine to the forum state defendant rule. According to the court, allowing defendants to side-step the forum state defendant rule by arguing that a diverse resident defendant was fraudulently joined might significantly expand a defendant's right to removal. In the court's opinion, there were no sound policy reasons to justify such an expansion.

However, the Seventh Circuit decided not to rule definitively on the issue "absent a more thorough and able presentation of the relevant balance of interests" by counsel. In the court's opinion, to "offer a first appellate resolution of a question not often considered even in district courts in a case in which the briefs are, at best, unhelpful, would be unwise."

Assuming fraudulent joinder did apply, the Seventh Circuit ruled that there was more than a reasonable possibility that the Ohio defendant could be held liable under state law. Accordingly, the court held that the Ohio defendant was not fraudulently joined and that remand to state court was required.

Morris potentially impacts a defendant's ability to remove in a number of ways, including when to remove.

Normally, a defendant must remove within 30 days of being served with the summons and complaint (28 U.S.C. § 1446(b)(1) and Murphy Bros. v. Michetti Pipe Stringing, Inc. 526 U.S. 344, 347-48 (1999)). If the case is not removable from the outset, a defendant may remove within 30 days after receiving an amended pleading, order or other paper from which it may first be ascertained that the case is removable (28 U.S.C. § 1446(b)(3)).

If the fraudulent joinder doctrine is recognized as a way to defeat the forum state defendant rule, a defendant could remove within the initial 30-day period and simply explain in its notice of removal that the forum state defendant was fraudulently joined by the plaintiff.

Not so under Morris. If the Seventh Circuit's reasoning is followed, a defendant would either have to: