Rose v. Giamatti
721 F. Supp. 906 (1989)
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Rule of Law:
For the purpose of determining federal diversity jurisdiction, a court must disregard the citizenship of any co-defendant who is a merely nominal party or who has been fraudulently joined, meaning there is no possibility the plaintiff can establish a valid cause of action against them. The court will analyze the 'principal purpose of the suit' to identify the real parties in interest.
Facts:
- Peter Edward Rose was the Field Manager of the Cincinnati Reds baseball team, a partnership based in Ohio.
- The Commissioner of Baseball, A. Bartlett Giamatti, a citizen of New York, initiated an investigation into allegations that Rose wagered on major league baseball games.
- Giamatti retained Special Counsel John M. Dowd, who produced a report summarizing evidence gathered during the investigation.
- Giamatti scheduled a hearing to address the allegations and determine if Rose should be disciplined.
- Rose alleged that Giamatti was biased, had prejudged the case, and could not conduct a fair and impartial hearing.
- Under the Major League Agreement, which is incorporated into Rose's employment contract, the Commissioner is granted exclusive, independent authority to investigate matters 'not in the best interests' of baseball and to impose discipline.
- The member clubs of Major League Baseball, including the Cincinnati Reds, agreed to be bound by the Commissioner's decisions and to waive their right of recourse to the courts.
Procedural Posture:
- Peter Edward Rose sued A. Bartlett Giamatti, Major League Baseball, and the Cincinnati Reds in the Court of Common Pleas of Hamilton County, Ohio, a state trial court.
- The state trial court issued a temporary restraining order (TRO) enjoining the defendants from proceeding with disciplinary action against Rose.
- Giamatti and Major League Baseball unsuccessfully sought review of the TRO in the Ohio Court of Appeals, which held the order was not appealable.
- Defendant Giamatti, with the consent of the other defendants, filed a notice of removal to the United States District Court for the Southern District of Ohio, asserting diversity jurisdiction.
- The case was transferred internally within the federal district court from the Cincinnati division to the Columbus division.
- Rose filed a motion to remand the case back to the state court, arguing a lack of complete diversity.
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Issue:
Does a federal district court have subject matter jurisdiction based on diversity of citizenship over an action removed from state court when the plaintiff and certain defendants are citizens of the same state, if those non-diverse defendants are found to be nominal parties or fraudulently joined?
Opinions:
Majority - Holschuh, District Judge
Yes. A federal district court has diversity jurisdiction if the non-diverse defendants are merely nominal parties or have been fraudulently joined, as their citizenship can be disregarded. The crux of this controversy is solely between Rose, a citizen of Ohio, and Commissioner Giamatti, a citizen of New York. The Cincinnati Reds and Major League Baseball are not real parties to this dispute because Rose has no valid cause of action against them. The court must 'pierce the pleadings' and look to the 'principal purpose of the suit' to determine the real parties to the controversy. Here, Rose's complaint admitted no wrongdoing by the Cincinnati Reds, and his claim for 'anticipatory breach' fails because the Reds have no contractual right or duty to control the Commissioner's independent disciplinary process. Similarly, Major League Baseball is a nominal party because, under the Major League Agreement which Rose agreed to, the clubs ceded all control over disciplinary matters to the independent Commissioner, making him an independent arbiter rather than their agent in this context. Since the true dispute is between diverse parties, removal was proper and the court has jurisdiction.
Analysis:
This decision is a significant application of the fraudulent joinder and nominal party doctrines, demonstrating a federal court's willingness to look beyond the face of a complaint to protect its diversity jurisdiction. It prevents plaintiffs from strategically adding non-diverse, but irrelevant, defendants solely to defeat removal to federal court. The case also provides a unique analysis of how the internal governance structure of a private organization like Major League Baseball can legally insulate its members from liability for the actions of its designated independent authority. This ruling reinforces the principle that federal courts will focus on the substantive controversy, not procedural gamesmanship, when determining jurisdiction.
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