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When the removal defect “lingers,” the judgment dies

3/2/26

By: Robert Scavone Jr.

In Hain Celestial Group, Inc. v. Palmquist (Feb. 24, 2026), the Supreme Court unanimously held that when a case is improperly removed to federal court for lack of complete diversity, a district court cannot “cure” the jurisdictional defect by erroneously dismissing the nondiverse defendant before final judgment. If that dismissal is later reversed on appeal, the jurisdictional defect “lingered through judgment,” and the federal judgment must be vacated.

What happened

The Palmquists sued Hain, a Delaware corporation operating out of New Youk and Whole Foods (Texas) in Texas state court, alleging their child’s developmental conditions were linked to heavy metals allegedly present in baby food. Hain removed to federal court, arguing Whole Foods was improperly joined. The district court agreed, dismissed Whole Foods, denied remand and the case proceeded to trial against Hain alone. After the plaintiffs rested, the district court entered judgment for Hain as a matter of law on causation grounds.

The Fifth Circuit reversed the improper-joinder ruling, concluded the federal court never had diversity jurisdiction, vacated the judgment and sent the case back to state court—prompting Supreme Court review to resolve a circuit split.

The Supreme Court’s holding and reasoning

Justice Sotomayor’s unanimous opinion begins from first principles: federal courts are courts of limited jurisdiction, and appellate courts must assure themselves of “the jurisdiction…of the lower courts.” The key precedent is Caterpillar Inc. v. Lewis, 519 U.S. 61 (1991). Caterpillar recognized a narrow exception where a jurisdictional defect existing at removal can be excused only if it is properly and finally cured before trial and final judgment. But Caterpillar also emphasized that if the defect “lingered through judgment,” vacatur is required.

Here, Whole Foods’ dismissal was wrong and interlocutory (i.e., not final and subject to review after judgment). When the Fifth Circuit corrected that error and restored Whole Foods, complete diversity disappeared, meaning the defect was never truly cured. The Supreme Court rejected the argument that “end-of-case” diversity created by a court’s own mistaken dismissal could save the judgment, explaining it has “never held that a district court can create jurisdiction through its own mistakes.”

Efficiency didn’t change the result. The Court acknowledged Caterpillar’s “considerations of finality, efficiency, and economy,” but only in the context of excusing a removal-statute “misstep” after a proper cure—not where the jurisdictional defect itself was never cured.

Rule 21 can’t be used to override the plaintiff’s forum choice (in this posture)

As a fallback, Hain urged dismissal of Whole Foods under Federal Rule of Civil Procedure 21 (“add or drop a party”). The Court distinguished Newman-Green, Inc. v. Alfonso-Larrain, 490 U.S. 826 (1989), which allowed Rule 21 dismissal of a dispensable nondiverse party in appropriate circumstances, emphasizing the need to consider prejudice.

This case was different because a defendant sought to drop another properly joined, nondiverse defendant—over the plaintiffs’ consistent objection—to keep the case in federal court. The Court stressed that the plaintiff is “the master of the complaint” and generally has the right to select the forum; Rule 21 does not permit courts or defendants to override that choice here.

Justice Thomas’s concurrence: a warning shot about “improper joinder”

Justice Thomas joined the Court in full but wrote separately to express skepticism about the modern “improper joinder” doctrine. He questioned whether federal courts can decide merits-type issues to dismiss nondiverse defendants when jurisdiction is lacking—suggesting the Court should, in a future case, consider whether the doctrine improperly expands federal jurisdiction.

Practical takeaways for litigators

• Removal strategy: A removal premised on improper/fraudulent joinder carries serious risk—if the nondiverse party is later deemed properly joined, the federal merits judgment can be wiped out entirely.
• Finality matters: To fit within Caterpillar’s safe harbor, the jurisdictional defect must be actually and finally cured before judgment—not “cured” by an interlocutory ruling that can be reversed.
• Rule 21 is not a backdoor fix (at least where the plaintiff timely objects and the case was improperly removed to begin with).

For more information, please contact Robert Scavone Jr. at robert.scavone@fmglaw.com or your local FMG attorney.

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.