Legal Definitions - realignment

Realignment refers to a court's process of re-evaluating the true positions of the parties involved in a lawsuit. Even if individuals or entities are formally listed as a "plaintiff" (the party bringing the suit) or a "defendant" (the party being sued), the court will look beyond these initial labels to understand their actual legal interests and desired outcomes in the case.

If the court finds that parties initially placed on opposite sides of a lawsuit actually share the same fundamental objective or interest, it will "realign" them, placing them on the same side for jurisdictional purposes. This process is most commonly used to determine if a federal court has "diversity jurisdiction," which requires all plaintiffs to be from different states than all defendants to ensure fairness and prevent potential bias against an out-of-state party.

Here are some examples:

• Corporate Dispute: Imagine a scenario where a group of minority shareholders sues a corporation and its board of directors, alleging financial mismanagement. One of the named "defendants" is a specific board member who, despite being formally sued, actually agrees with the minority shareholders that the corporation has been mismanaged and wants the same outcome (e.g., the removal of certain executives or a change in corporate policy). In this situation, a court might perform a realignment, moving that board member from the defendant side to the plaintiff side because their ultimate interest aligns with the suing shareholders. This realignment could then impact whether the federal court has diversity jurisdiction over the case, especially if that board member shares the same state of residence as other defendants.

• Insurance Claim Dispute: Consider a homeowner who sues their insurance company for refusing to pay out a claim after a devastating house fire. The homeowner also names their mortgage lender as a "defendant" in the lawsuit, not because they have a dispute with the lender, but because the lender has a financial interest in the property and the insurance payout. In reality, the mortgage lender also wants the insurance company to pay the claim, just like the homeowner. A court could perform a realignment, moving the mortgage lender from the defendant side to the plaintiff side, as their ultimate interest is identical to the homeowner's: to compel the insurance company to pay. This reclassification could affect the determination of diversity jurisdiction if, for instance, the mortgage lender's state of incorporation is the same as the insurance company's.

• Trust Beneficiary Conflict: Suppose several beneficiaries of a family trust sue the trustee for alleged breaches of fiduciary duty and mismanagement of trust assets. Another beneficiary, who was initially named as a "defendant" because they are a necessary party to the trust dispute, actually agrees with the suing beneficiaries that the trustee has acted improperly and seeks the same remedies (e.g., removal of the trustee, recovery of lost funds). A court might undertake a realignment, shifting this beneficiary from the defendant group to the plaintiff group. This is because their true legal interest and desired outcome in the litigation align with those of the original plaintiffs. Such a realignment could then be crucial in assessing whether the federal court has the necessary diversity jurisdiction to hear the case.