U.S. Supreme Court Affirms Fifth Circuit in Palmquist, Reinforcing Limits on Jurisdiction Where “Fraudulent Joinder” is Claimed

Fishman Haygood special counsel Steve Herman recently published an article on the U.S. Supreme Court’s affirmation of the Fifth Circuit in Palmquist v. Hain, which underscores the continued scrutiny courts will apply to removal efforts based on alleged fraudulent joinder. Continue reading below or click here to read on JD Supra.

A recent decision by the Supreme Court of the United States affirms the United States Court of Appeals for the Fifth Circuit in Palmquist v. Hain Celestial Group, confirming that plaintiffs sufficiently pleaded claims against a non-manufacturing divest the federal court of Jurisdiction, even with respect to a defense verdict in favor of the manufacturer at trial.

The Case

Grant and Sarah Palmquist’s son, Ethan, was born after a healthy and uneventful pregnancy and met early developmental milestones. During his first two years, Ethan primarily consumed baby food products manufactured by Hain Celestial Group and sold by Whole Foods Market.

As a toddler, Ethan experienced developmental regression. While some physicians attributed his symptoms to autism spectrum disorder or a major neurocognitive disorder, others diagnosed heavy metal poisoning.

In 2021, a report issued by the U.S. House Oversight and Reform Committee found elevated levels of toxic heavy metals—including arsenic, lead, cadmium, and mercury—in certain commercial baby foods, including products manufactured by Hain. The Palmquists subsequently filed suit in Texas state court against both Hain and Whole Foods, asserting products liability and negligence claims against Hain, and warranty and negligence claims against Whole Foods.

Removal and District Court Ruling

Hain removed the case to federal court, arguing that Whole Foods, a Texas-based retailer, was improperly joined to defeat diversity jurisdiction.

After removal, the Palmquists amended their complaint to clarify that their breach-of-warranty claims included allegations that Whole Foods made express representations regarding the safety of Hain’s products and added a negligent undertaking claim.

The district court declined to consider these amendments for jurisdictional purposes and concluded that Whole Foods, as a non-manufacturing seller, could not be held liable under Texas Civil Practice & Remedies Code § 82.003(a).

The court therefore dismissed Whole Foods as improperly joined and retained jurisdiction. The case proceeded to trial on the merits against Hain, at the conclusion of which the court granted judgment as a matter of law in Hain’s favor due to lack of evidence on causation.

The Fifth Circuit Reversal

On appeal, the Fifth Circuit reversed, finding that the district court erred in its fraudulent joinder analysis.

First, the court held that the original complaint was “broad enough” to encompass both express and implied warranty claims. Although the allegations emphasized implied warranties, they also referenced express representations by Whole Foods regarding product safety. Accordingly, the amended complaint did not introduce a “new” claim.

Second, the Fifth Circuit addressed the viability of claims against Whole Foods under Texas law. The court emphasized that:

• Federal courts sitting in diversity must apply state substantive law; and
• Existing Texas authority suggests that even relatively general representations may support claims against non-manufacturing sellers.

The Palmquists alleged that Whole Foods represented it “carefully vets its products” to ensure high standards. Accepting those allegations as true and resolving ambiguities in favor of the plaintiffs, the court found a reasonable possibility of recovery under Texas law.

The Fifth Circuit also noted that Whole Foods’ business model—built on consumer trust in product quality—supports the inference that it holds itself out as having specialized knowledge about the products it sells.

The court therefore concluded that Whole Foods was not improperly joined, and that the case should be remanded to state court.

With respect to Hain, the trial, and judgment as a matter of law, in Hain’s favor was void ab initio, as the federal court was without jurisdiction. Hence, the claims against Hain would be remanded, along with the claims against Whole Foods, for further proceedings in Texas State Court.

Supreme Court Affirms

The Supreme Court of the United States granted certiorari and unanimously affirmed the Fifth Circuit’s decision. Palmquist v. Hain Celestial Group, No. 24-724, 2026 WL 501733 (Feb. 24, 2026).

Key Takeaways

The decision reinforces several important principles:

• Narrow application of fraudulent joinder: Courts must resolve doubts in favor of remand where plaintiffs plausibly state claims under applicable state law.
• Broad reading of pleadings: Complaints may encompass multiple legal theories even if not expressly labeled with precision.
• Potential retailer exposure: Non-manufacturing sellers may face liability where they make representations about product safety or quality, at least under Texas law.
• State law primacy in diversity cases: Federal courts must rely on state—not federal—authority when assessing the viability of claims.
• Risk of Relitigation: Defendants who escape liability in federal court, even after trial on the merits, may face relitigation if it is determined that the court lacked subject-matter jurisdiction.

Looking Ahead

Palmquist underscores the continued scrutiny courts will apply to removal efforts based on alleged fraudulent joinder. It also signals increased litigation risk for retailers that market products as safe, vetted, or high quality, particularly in industries facing heightened regulatory and public attention.

For litigants, the decision serves as a reminder that jurisdictional disputes can be outcome-determinative and that early-stage pleading strategies remain critical in complex product liability litigation.

For a more detailed discussion of the Fifth Circuit’s 2024 ruling and the underlying allegations, please see Fishman Haygood’s prior JD Supra article on Palmquist v. Hain Celestial Group (2024) here.

Steve Herman’s broad civil practice spans 30 years of sophisticated commercial and class action experience, including co-lead counsel in the Deepwater Horizon Oil Spill litigation. Learn about his practice.