Removal of a civil lawsuit from state to federal court is frequently sought by defendants seeking the perceived benefits of litigating in federal court, including more populous jury pools and heightened prospects of success with dispositive motions practice.[1]
By contrast, state court jury pools are generally more narrow, and courts tend to afford defendants fewer opportunities for early dismissal.[2]
A successful removal requires scrupulous adherence to a variety of rules, including strict time limitations. A recent string of cases across the U.S. have forced courts to analyze the undeveloped bad-faith exception under Title 28 of the U.S. Code, Section 1446(c)(1).[3]
These cases include Babler v. Soo Line Railroad Co., in the U.S. District Court for the Eastern District of Wisconsin, decided on July 13; Hunt v. Siegel Group Nevada Inc., in the U.S. District Court for the District of New Mexico, decided on June 6; and others discussed herein.
Under Section 1446(c)(1), additional limitations are placed on defendants seeking to remove an action based on diversity of citizenship. South Carolina courts, as well as the U.S. Court of Appeals for the Fourth Circuit, which embraces South Carolina, have noted the absence of authority on this issue.
Getting to Federal Court
As explained by the Fourth Circuit, in its 1995 decision in Davis v. North Carolina Department of Corrections, defendants have a federal statutory right to remove a civil action brought in state court over which “the district courts of the United States have original jurisdiction.”[4] Federal question jurisdiction, diversity jurisdiction and supplemental jurisdiction provide the avenues used by defendants to achieve removal.
Federal question jurisdiction exists when the cause of action arises under the U.S. Constitution, federal laws or any U.S. treaties.[5] Diversity jurisdiction requires complete diversity of citizenship between the parties, and an amount in controversy in excess of $75,000.[6]
Supplemental jurisdiction allows a cause of action that is not appropriate to be presented in federal court as an original matter to be heard, if there is another cause of action in the case that derives from the same nucleus of operative fact.[7]
Removal Procedure Under Title 28, Section 1446
Regardless of which of the three bases for removal summarized above that a defendant asserts, Section 1446 governs the procedure for seeking removal. Section 1446(a) provides that the party seeking removal must file a notice of removal in the federal district court located in the district and division where the state court action is pending.
Section 1446(b) sets forth the deadlines for the removal process — the most important of which is that the notice of removal must be filed within the earlier of 30 days after the defendant receives the initial pleading, or 30 days after the defendant is served with the summons if the initial pleading is not required to be served on the defendant under state law.
Subsections 1446(b)(2) and 1446(b)(3) address cases with multiple defendants, and explain how to proceed if a pleading is adjusted to permit removal.[8]
The One-Year Removal Deadline and Bad Faith Exception
Distinct from the initial 30-day removal deadline are the provisions of Section 1446(c)(1) that limit the time period in which a defendant may remove the action to one year from the date the original complaint was filed in state court, “unless the district court finds that the plaintiff acted in bad faith to prevent a defendant from removing the action.”
The bad faith exception to the one-year removal deadline has not been fully developed by South Carolina’s federal courts. As noted by the District of South Carolina in its 2014 decision in Mansilla-Gomez v. Mid-South Erectors Inc., “[t]he Fourth Circuit Court of Appeals has not addressed the issue, and only a handful of district courts in the circuit have weighed the bad faith exception in section 1446.”[9]
Thus, South Carolina courts have been left to rely on precedent from outside jurisdictions when analyzing the exception provided under Section 1446(c)(1).
Defining Bad Faith Under Section 1446(c)
Section 1446(c)(3)(B) sheds light on what Congress intended bad faith to constitute:
If the notice of removal is filed more than 1 year after commencement of the action and the district court finds that the plaintiff deliberately failed to disclose the actual amount in controversy to prevent removal, that finding shall be deemed bad faith under paragraph (1).
While this part of the statute provides guidance, it does not answer the question of what courts should consider when determining whether a plaintiff’s delay or failure to disclose was deliberate.
Although South Carolina courts and the Fourth Circuit have yet to establish a definitive standard specifically for bad faith under Section 1446(c)(1),[10] South Carolina precedent — such as Delaney v. CasePro and Shorraw v. Bell, decided by the District of South Carolina in 2015 and 2016, respectively — has established that bad faith under the Federal Rules of Civil Procedure generally “connotes an action taken without any colorable legal or factual basis.”[11]
South Carolina courts have also held, as stated in Delaney, that for the exception to apply, “the court must find that Plaintiff has acted … in order to prevent a defendant from removing the action.”[12]
Additionally, district courts within the Fourth Circuit — like the U.S. District Court for the Southern District of West Virginia in its 2021 opinion in Mullins v. Rish Equipment — have looked at whether a plaintiff engaged in forum manipulation.[13] As with claims of bad faith outside of Section 1446, courts have required the moving party to meet a higher burden.
The Bad Faith Exception in South Carolina’s Federal Courts
South Carolina’s federal courts, in cases including Mansilla-Gomez, Delany, and Brewer v. Outback Steakhouse of Florida, have demonstrated that, in some instances, genuine mistakes, like voluntarily dismissing nondiverse parties after discovery and alleging additional damages, do not amount to bad faith, and instead are inherent, acceptable aspects of civil litigation.
Mansilla-Gomez v. Mid-South Erectors
In Mansilla-Gomez, the defendant alleged that the plaintiff acted in bad faith for failing to provide his citizenship in his complaint and an interrogatory response. The defendant claimed that because of this omission, it was unaware of the existence of diversity of citizenship, and lost the opportunity for removal.
The court rejected the defendant’s assertions, explaining that:
[A]lthough [the plaintiff] admittedly failed to provide a response to supplemental interrogatories because of what he called an oversight and also left out his citizenship in the state complaint … the Plaintiff has not acted in bad faith for purposes of section 1446. For the bad faith exception to apply, the court must find that Plaintiff has acted in bad faith in order to prevent a defendant from removing the action. Here, however, the court finds that other factors might have motivated Plaintiff’s decision to leave out his citizenship in the complaint and other reasons might have caused Plaintiff’s delay in responding to the interrogatories. Furthermore, the court finds that [the] requests for admission were compound requests that could have yielded a variety of responses.[14]
Delaney v. CasePro
In Delaney, the Court considered whether the plaintiff acted in bad faith by joining additional parties to preclude removal by the defendant. The court noted that in this context, the bad faith exception under Section 1446(c)(1) and the doctrine of fraudulent misjoinder presented a “heavy burden” for the moving party to overcome.
The court ultimately found that the defendant failed to meet its burden because it did not produce any evidence of bad faith on the part of the plaintiff.[15]
Brewer v. Outback Steakhouse of Florida
In Brewer, decided by the District of South Carolina in 2021, the defendant argued that the plaintiff acted in bad faith by failing to disclose the amount in controversy in order to inhibit removal.
In answering the defendant’s first set of interrogatories, the plaintiff listed his damages as “pain and suffering, permanent injuries, loss of enjoyment of life, out-of-pocket expenses, physical and mental anguish, mental distress, lost wages” and nominal medical expenses.
In addition, the plaintiff testified during his deposition that he would have to “live with pain for the rest of [his] life.” The court found that this information was sufficient to put the defendant on notice that the amount in controversy exceeded $75,000, and thus, the plaintiff did not act in bad faith.
Guidance From Other District Courts in the Fourth Circuit and Outside Jurisdictions
Cases from other federal district courts, including Brown v. Wal-Mart Stores, Cameron v. Teeberry Logistics, Mullins, McDonald-Lerner v. Neurocare Associates, Woods v. Nationstar Mortgage and Watts v. RMD Holdings, offer further guidance.
Brown v. Wal-Mart Stores
In Brown, decided by the U.S. District Court for the Western District of Virginia in 2014, the plaintiff filed suit against Walmart for $70,000. The citizenship of the parties was diverse.
After Walmart requested a settlement conference and discovery, the plaintiff delayed his response until more than a year after filing the original suit, and demanded $200,000 to settle the case. This prompted Walmart to file a notice of removal, asserting the bad faith exception.
The court agreed that Walmart’s removal was timely because the plaintiff’s delays were in bad faith.[16]
Cameron v. Teeberry Logistics
In Cameron, decided by the U.S. District Court for the Northern District of Georgia in 2013, the court found the plaintiff acted in bad faith when she specifically pled that “the case was not removable” but then failed to amend her complaint once she realized the amount in controversy exceeded $75,000.
The court determined that the plaintiff’s failure to amend her complaint, coupled with the specificity of her original ad damnum, constituted bad faith.[17]
Mullins v. Rish Equipment
Most recently, in Mullins, the plaintiff failed to dismiss an extraneous nondiverse defendant purely to prevent removal. The court noted that there were various conversations between the parties regarding dismissing the nondiverse defendant that were memorialized in writing.
The court found that the plaintiff acted in bad faith, and that he should and would have dismissed the nondiverse defendant earlier, had it not been for the threat of removal.[18]
McDonald-Lerner v. Neurocare Associates
In McDonald-Lerner, decided by the U.S. District Court for the District of Maryland in 2014, the plaintiffs brought suit against defendants who were residents of various states. However, one of the defendants was nondiverse.
The plaintiff voluntarily dismissed the nondiverse defendant after the one-year deadline for removal. The remaining defendants asserted that the plaintiffs never intended to obtain judgment against the nondiverse defendant, and had acted in bad faith.
However, the court found a lack of evidence, and that the defendants had failed to meet their heightened burden of proof for bad faith under Section 1446(c)(1).[19]
Woods v. Nationstar Mortgage
In Woods, decided by the Southern District of West Virginia in 2018, the defendants claimed that the plaintiffs engaged in forum manipulation by adding additional claims after more than one year of litigating.
The plaintiffs claimed that they were unaware of the additional claims at an earlier time. As in McDonald-Lerner, the court held that the defendants did not submit sufficient evidence demonstrating that the plaintiffs intentionally avoided amending their complaint in order to prevent removal.[20]
Watts v. RMD Holdings
In Watts, decided by the Southern District of West Virginia in 2012, the plaintiff sued two defendants responsible for injuries he sustained in an automobile collision. One defendant was the Department of Transportation for the plaintiff’s home state of West Virginia, seemingly precluding the possibility of removal.
However, over a year into the case, the plaintiff and the nondiverse defendant reached a settlement. The remaining defendant immediately removed the action.
The district court found that the defendant’s removal was improper because of the one-year limitation under Section 1446(c)(1). The court rejected the defendant’s assertion that the settlement effort evidenced bad faith.
Conclusion
The opacity of the law in South Carolina and the Fourth Circuit regarding the bad faith exception under Section 1446(c)(1) leaves litigants with little guidance on the statute’s operation and its associated repercussions.
Recent precedent indicates, however, that courts will find bad faith when defendants present clear evidence that a plaintiff has intentionally delayed or withheld information that is pertinent to removal. Courts have also found bad faith when a plaintiff clearly has joined a nondiverse defendant solely to bar removal.
The decisions rendered to date also illustrate the burden defendants must overcome in order to prove bad faith. Merely claiming bad faith based on a suit’s longevity, without presenting evidence of the plaintiff’s ill intent, is insufficient.
Protection under Section 1446(c)(1) does not extend to those who lack specificity in their discovery requests, ignore ambiguities in the plaintiff’s discovery responses or fail to present evidence of bad faith.
In other words, courts tend to acknowledge the existence of bad faith when presented with precise evidence. However, they will not afford the opportunity of removal under the exception to defendants who have not exercised due diligence in vetting an opponent’s claim.
N. Denver Smith is an attorney at Butler Snow LLP.
Anna Mobley at the University of South Carolina School of Law and Belle Scott at Charleston School of Law contributed to this article.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Scott Dodson, The Forum Defendant Rule in Arkansas, 2007 Ark. L. Notes 73 (2007).
[2] Federal and State Court, 2019 TXCLE-IPLW 1-I.
[3] Babler v. Soo Line Railroad Co., No. 22-CV-560-JPS, 2022 WL 2712889 (E.D. Wis. July 13, 2022); Boudreaux v. State Farm Mut. Auto. Ins. Co., No. 21-CV-2874, 2022 WL 2352333 (W.D. La. June 7, 2022), report and recommendation adopted, No. 21-CV-2874, 2022 WL 2347162 (W.D. La. June 28, 2022); Hunt v. Siegel Group Nevada Inc., No. CV 22-00278 WJ-JFR, 2022 WL 1987726 (D.N.M. June 6, 2022).
[4] Davis v. N.C. Dep’t of Corr. , 48 F.3d 134, 138 (4th Cir.1995).
[5] 28 U.S.C.A. §1331.
[6] 28 U.S.C.A. §1332.
[7] 28 U.S.C.A. §1367.
[8] The “other paper” exception also allows a defendant to remove an action outside of the 30-day limit if they obtain additional information which constitutes sufficient notice that removal is appropriate.
[9] Mansilla-Gomez v. Mid-South Erectors Inc., No. 0:14-CV-00308-JFA, 2014 WL 1347485, at 2 (D.S.C. April 3, 2014).
[10] Shorraw v. Bell , No. 4:15-cv-03998-JMC, 2016 WL 3586675 (D.S.C. 2016) (citing) Johnson v. HCR Manorcare LLC , No. 1:15-cv-00189, 2015 WL 4665809, at 4 (N.D.W.Va. 2015).
[11] Delaney v. CasePro Inc., No. 9:14-CV-4355-DCN, 2015 WL 1862871 (D.S.C. April 23, 2015).
[12] Id.
[13] Ramirez v. Johnson & Johnson , No. 2:15-cv-09131, 2015 WL 4665809, at *3 (S.D.W. Va. Aug. 6, 2015).
[14] Mansilla-Gomez, 2014 WL 1347485, at 2.
[15] Delaney, 2015 WL 1862871 at 1-3.
[16] Brown v. Wal-Mart Stores Inc., 2014 WL 60044 (W.D.Va. Jan.7, 2014).
[17] Cameron v. Teeberry Logistics LLC, 920 F. Supp.2d 1309 (N.D. Ga. Jan. 30, 2013).
[18] Mullins v. Rish Equipment Co., 2021 WL 4448296 (S.D.W.V. 2021).
[19] McDonald-Lerner v. Neurocare Associates PA, RWT 14-cv-0942, 2014 WL 1356602 (D. Md. 2014).
[20] Woods v. Nationstar Mortgage LLC, No. 2:18-cv-00568, 2018 WL 3420813 (S.D.W.V. 2018).
