The Hain Celestial Group, Inc. v. Palmquist

    Issues

    Must an appellate court vacate a district court’s final judgment as to completely diverse parties if it determines the district court was wrong to dismiss a non-diverse party at the time the case was removed?

    Oral argument:
    November 04, 2025
    Court below:
    United States Court of Appeals for the Fifth Circuit

     

    This case asks the Court to determine whether an appellate court must vacate a district court’s final judgment if it determines the district court erred in dismissing a non-diverse party when the case was removed. The Hain Celestial Group (“Hain”), as Petitioner, argues that the district court had jurisdiction to enter final judgment because the parties before it were completely diverse after Whole Foods, Inc. (“Whole Foods”) was dismissed. Alternatively, Hain argues Whole Foods could be dismissed under Federal Rule of Civil Procedure 21 as a dispensable party. Sarah Palmquist, Grant Palmquist, and E.P. (the “Palmquists”), as Respondents, argue that Whole Foods remained a part of the litigation until the final judgment, destroying the district court’s subject matter jurisdiction. Alternatively, the Palmquists argue that Hain’s Rule 21 argument is improper and would result in prejudice to them. The outcome of this case could impact forum shopping strategies and increase the resources parties must expend if they must relitigate claims after a final judgment is vacated.

    Questions as Framed for the Court by the Parties

    Whether a district court’s final judgment as to completely diverse parties must be vacated when an appellate court later determines that it erred by dismissing a non-diverse party at the time of removal.

    Facts

    Grant and Sarah Palmquist (the “Palmquists”) had a son (“E.P.”) in 2014. The Palmquists allege that E.P.’s diet consisted of “almost exclusively” products manufactured by Hain Celestial Group, Inc. (“Hain”) during his first two years of life. The Palmquists bought Hain’s products from realtor Whole Foods Market, Inc. (“Whole Foods”). E.P.’s development began deteriorating when he was thirty months old.

    The Palmquists took E.P. to medical professionals, and he was diagnosed with multiple mental and physical conditions. Some physicians believed the E.P.’s conditions were caused by autism spectrum disorder.  E.P. was also diagnosed with heavy-metal poisoning.

    The House of Representatives’ Committee on Oversight and Government Reform issued a report in 2021 finding that some baby foods had toxic heavy metals in them, including Hain’s. Soon after the report’s release, the Palmquists filed suit against Hain and Whole Foods in Texas state court. The Palmquists claimed Hain’s products caused E.P.’s heavy metal poisoning, resulting in his developmental delays. The Palmquists sued Hain for negligence and products liability, and they sued Whole foods for negligence and breach of warranty.

    Hain removed the suit from the Texas state court to the United States District Court for the Southern District of Texas under diversity jurisdiction. Hain alleged that the Palmquists improperly joined Whole Foods to the suit to prevent Hain from removing the case to the federal court. Whole Foods is headquartered in Austin, Texas, so the suit had two opposing parties from Texas. Two parties from the same state on opposing sides defeats diversity jurisdiction. The Palmquists amended their initial complaint after removal, adding a more explicit breach of warranty claim against Whole Foods. The Palmquists then filed a motion to remand the suit back to the state court, urging that their claims against Whole Foods were valid and that they did not improperly join Whole Foods to defeat jurisdiction in federal court.

    The district court ruled against the Palmquists’ remand motion, holding that the Palmquists improperly joined Whole Foods to the suit. The district court then dismissed the Palmquists’ claims against Whole Foods. The Palmquists’ suit against Hain continued in the district court, eventually resulting in a jury trial. During the trial, Hain filed a 50(a) motion under the Federal Rules of Civil Procedure, alleging that the Palmquists failed to provide sufficient evidence, thus entitling Hain to judgment as a matter of law. The district court granted Hain’s motion for judgement as a matter of law, dismissing the Palmquists’ claims and entering a final judgment in favor of Hain.

    The Palmquists appealed to the United States Court of Appeals for the Fifth Circuit. The Court of Appeals vacated the district court’s final judgment in favor of Hain, reversed the district court’s order denying the Palmquist’s motion to remand, and remanded the case back to the district court with a direction to remand the case back to the Texas state court.

    Hain petitioned the Supreme Court of the United States for certiorari, which the Court granted on April 28, 2025. 

    Analysis

    JURISDICTION TO ENTER FINAL JUDGMENT

    Hain argues that the district court had jurisdiction to enter final judgment because Hain and the Palmquists were completely diverse parties under the diversity statute. Hain asserts the court of appeals erred in holding that the district court must vacate its decision because it lacked subject matter jurisdiction. Hain contends that in Caterpillar Inc. v. Lewis, the Court established that a federal court’s jurisdiction can be dynamic, allowing it to issue final judgments despite changes in parties and an initial lack of subject matter jurisdiction, as long as the requirements for subject matter jurisdiction are met by the time the judgment is rendered. Hain asserts that the Court’s prior holding allows a federal court to have subject matter jurisdiction for the final judgment if it cured the lack of complete diversity by dismissing the non-diverse party. Hain contends that federal courts are not only able to cure jurisdictional flaws, such as dismissing a party to obtain complete diversity, but that federal courts should also cure a defect when necessary to ensure they have jurisdiction.  Hain also argues that even if the district court erred in dismissing Whole Foods, that error did not later deprive the district court of jurisdiction when it entered final judgment. Therefore, Hain contends that because the district court had complete diversity when it entered the final judgment, that judgment should stand even if the district court erred by dismissing Whole Foods when the case was removed.

    The Palmquists counter that the district court lacked subject matter jurisdiction to enter a final judgment because the parties were not completely diverse. The Palmquists argue that Whole Foods was never effectively dismissed as a party because the district court’s order dismissing Whole Foods was an interlocutory ruling. The Palmquists contend that the district court’s interlocutory ruling was only a step on the path to final judgement. Because interlocutory rulings are held with the case until the federal court enters final judgment, the Palmquists contend that the lack of complete diversity persisted until the district court’s order. Moreover, the Palmquists argue that they never abandoned their claims against Whole Foods. The Palmquists assert that the district court’s denial of remand and the order dismissing Whole Foods was not appealable as a right until the final judgment was entered. The Palmquists distinguish Caterpillar because the plaintiff in that case cured its subject matter defect before final judgment by settling with the non-diverse party. The Palmquists argue that their case is different because they did not settle with Whole Foods, so it remained a party. The Palmquists argue that because there was a lack of complete diversity, the court of appeals correctly ordered the district court to vacate its final judgment because it lacked subject matter jurisdiction over the case.

    DISMISSAL OF WHOLE FOODS UNDER RULE 21

    Hain argues that if the Court holds that the district court lacked jurisdiction to enter a final judgment, the court of appeals’ decision should still be overturned because the appropriate solution would be to dismiss Whole Foods under Federal Rule of Civil Procedure Rule 21. Hain argues that Rule 21 allows federal courts to dismiss dispensable non-diverse parties. Hain also asserts that prior Court decisions hold that non-diverse dispensable parties may be dismissed to cure jurisdictional flaws so long as the dismissal does not prejudice the other parties. Hain argues that Whole Foods is a dispensable party. To support its claim, Hain contends that Whole Foods is not a party required to be a part of the litigation under Federal Rule of Civil Procedure 19. Hain also contends that none of the parties will be prejudiced by dismissing Whole Foods from the case. Hain posits that under Texas state law, which the Palmquists relied on to sue Hain, the Palmquists could hold either Hain or Whole Foods liable jointly or severally.Thus, because the Court has previously held that one defendant cannot be indispensable when any defendant could be held liable independently, Hain contends that no party would be prejudiced if Whole Foods was dismissed from the case. Moreover, Hain argues that Whole Foods did not affect the litigation in any way because it was mentioned minimally at trial, the Palmquists did not seek discovery from Whole Foods, and Whole Food’s conduct would be irrelevant to the district court’s finding that the Palmquists were not entitled to judgment as a matter of law. Hain also posits that the Palmquists have never contended that the proceedings were unfair as to be prejudicial against them. Therefore, Hain contends that the Court should still overturn the Court of Appeals because Whole Foods can be dismissed as a nondiverse dispensable party whose dismissal does not prejudice the other parties.

    The Palmquists contend that Hain’s argument under Rule 21 is improper and lacks merit. The Palmquists highlight that the Court only granted certiorari on the question of whether the judgment of the district court must be vacated in this case, and it did not grant review over a question of whether a nondiverse defendant can be dismissed under Rule 21 when the plaintiff objects to dismissal. The Palmquists contend that the Rule 21 argument should be dismissed as improper because the Supreme Court Rules prohibit raising issues outside of the question presented. Moreover, the Palmquists assert that the Rule 21 argument is not before the Court properly because it was not argued at the district court and therefore not preserved for appeal. The Palmquists further argue that Hain did not seek dismissal of Whole Foods under Rule 21 on appeal; instead, Hain only contended that the district court ruling should be affirmed. The Palmquists also posit that an appellate court’s ability to dismiss under Rule 21 is a discretionary power.Because Hain never asked the district court or the appellate court to dismiss Whole Foods under Rule 21, the Palmquists assert that Hain cannot claim that either court abused its discretion by refusing to dismiss under Rule 21. The Palmquists further claim that Whole Foods could not be dismissed under Rule 21 because it would result in prejudice. Even if the Court assumed Whole Foods was dispensable, the Palmquists argue that dismissing Whole Foods created a prejudice because it was a “tactical advantage” for the Palmquists to include them in their suit as a nondiverse party. The Palmquists note that plaintiffs are the masters of their complaints, and they chose to proceed in state court and file their complaint with a nondiverse party to prevent removal to federal court. The Palmquists contend that allowing a court to dismiss a nondiverse party after removal, when the party was included to prevent removal, would destroy the plaintiff’s tactical advantage to control the litigation’s forum and be prejudicial in almost every case. Therefore, the Palmquists assert that dismissal under Rule 21 is not appropriate because it would result in prejudice.

    Discussion

    EFFICIENT ALLOCATION OF LITIGATION RESOURCES 

    In support of Hain, the National Association of Manufacturers (“NAM”) argues that it would be wasteful to have to start the case against Hain all over again in state court despite reaching a final judgment at the district court simply because of an erroneous dismissal. NAM points out that manufacturers are uniquely vulnerable to the cost of duplicative litigation because they are frequently defending against product-liability claims. By requiring the final judgment to be vacated, NAM contends that defendants would be forced to spend significant additional resources to go through the entire litigation process again just to achieve the result they had already won in federal court. Further, NAM stresses that the concern over resources is especially relevant in light of the amount of litigation straining state and federal court systems. According to NAM, affirming the Court of Appeals’ decision would contribute to the growing amount of tort expenditures, which NAM argues is being driven primarily by litigation, as opposed to compensation, costs. As a result, NAM suggests that allowing the Palmquists to relitigate their claims against Hain would merely place additional stress on the litigation resources of the parties and the courts. The finality-despite-error approach, NAM argues, would alleviate those concerns by preventing duplicative litigation.

    In response, a group of civil procedure professors (collectively “Professors”) counter that the Court of Appeals’ ruling promotes efficiency and conserves resources in the long-term because it creates an incentivize for a district courts to rule on remand motions more carefully to avoid having a final judgment vacated for improperly dismissing a non-diverse party.  The Professors also point out that framing the problem in the context of a strain on litigation resources is misleading because federal and state caseloads have decreased in recent years, and tort claims have declined substantially in both federal and state courts. Moreover, the Professors maintain that most of the litigation costs are sunk costs because most litigation costs occur at the pre-trial phase anyway. Therefore, the Professors argue, there would not be significant new costs imposed on Hain since remand would simply transfer all of the pre-trial work already completed. Finally, the Professors argue that, even if NAM is right about the costs, any additional resource burden would be negligible because of the rarity of cases in which an appellate court reverses a district court’s final judgment because of an improper dismissal of a non-diverse party. The Professors point out that, on average, only one case per year in the past thirty-five years would have required vacating a final judgment, and only one of those cases completed a first trial. The Professors conclude that the rule articulated by the Court of Appeals would virtually never result in two trials over the same claim.

    PARTY INCENTIVES AND FORUM SHOPPING

    In support of Hain, the Atlantic Legal Foundation (“ALF”) argues that affirming the lower court’s decision would incentivize plaintiffs to join non-diverse parties, as it could provide them with a second chance if they lose after removal to a federal district court and an appellate court later reverses the dismissal of the non-diverse party. In effect, ALF argues, this creates another opportunity for plaintiffs to forum shop by joining non-diverse parties and appealing every adverse judgment in the hopes a district court’s denial of remand will be reversed. Additionally, the Product Liability Advisory Council, Inc. (“PLAC”) suggests that these incentives are likely to be even more prevalent in the product-liability context because of the availability of potential defendants, including any manufacturer, distributor, or retailer of a product that the plaintiffs allege caused their harm.  PLAC argues that plaintiffs will simply find a non-diverse defendant to sue in order to prevent the case from being removed to federal court.

    On the other hand, the Professors argue that a favorable ruling for the Palmquists is unlikely to change parties’ preexisting incentives in any meaningful way. The Professors contend that, just as defendants would not be more likely to remove cases under the finality-despite-error rule, plaintiffs would not be more likely to join additional non-diverse parties under the court of appeals’ rule. There is no reason, the Professors argue, that a plaintiff would have an additional incentive to join non-diverse parties based on the slim possibility of a sequence of events involving removal, a denial of a motion to remand, an adverse final judgment, and a successful appeal of the denial of remand. Instead, the Professors maintain, it is better to focus on the judicial incentives created by each rule. Under the Court of Appeals’ rule, they argue, the threat of vacatur down the line will incentivize federal district court judges to consider remand motions with greater scrutiny.

    Conclusion

    Authors

    Written by:    Leonardo C. Villa-Forte and Keaton J. Klaus

    Edited by:      Zaria Goicochea

    Acknowledgments

    The authors would like to thank Professor Maggie Gardner for her insights into this case. 

    Additional Resources