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As we mentioned some time ago that the removal statute relating to diversity of citizenship, 21 U.S.C. §1446, had been amended to add a “bad faith” exception to what previously had been a flat one-year ban on the removal of any action filed in state court – even if it wasn’t diverse (and thus removable) when originally filed.  That provision became effective on January 6, 2012.

The thought was that plaintiffs were deliberately suing nondiverse parties against whom they had no intention of ultimately pursuing a claim and then cutting deals with these nominal defendants to let them out or let them slide after the one-year deadline had elapsed. We’re pleased to report on what we believe is the first successful removal under this bad faith exception.  The case is DeLeon v. Tey, 2013 WL 7157957, slip op. (S.D. Tex. Dec. 4, 2013).

In DeLeon, a vaginal mesh case, the plaintiff ostensibly sued a non-diverse treating physician, Tey, but neither the plaintiff nor this ostensible defendant undertook any serious litigation of any claim or defense against one another.  The plaintiff filed a boilerplate malpractice action, alleging no substantive facts, which the defendant never challenged as inadequate.  DeLeon, slip op. at 4 (complaint was “non-specific as to the acts or dates of the alleged negligence” but the defendant “filed only a general denial”).  The complaint was amended three times (once when being transferred from a “county court” to a “district court” in the Texas state system, but we’ll spare you these complications), but the generic malpractice allegation and the equally general defense never changed.  Id. at 5.  In particular, the defendant physician had an iron-clad statute of limitations defense that he never raised.  Id. at 7.

Under Texas procedure, the plaintiff had to have an expert report to pursue a medical malpractice claim.  Plaintiff first used a report by an expert named “Lobel,” which the court described as “sufficient” for that purpose.  Slip op. at 5.  Exactly when the Lobel report was submitted is unclear from the opinion, but our (admittedly incomplete) understanding is that the relevant Texas rules require submission of such a report as part of pre-suit notification (again, we’ll spare you further details).

Shortly before trial, however, (and after expiration of the one-year period), the plaintiff withdrew the “sufficient” Lobel report and substituted a second report by a different expert, Miklos.  Id.  As to defendant Tey, the new Miklos report was patently insufficient:

The Miklos Report, thirty-three pages in length, contains a single sentence asserting Dr. Tey’s liability – “I disagree with Dr. Tey’s decision to implant the [device] in [plaintiff], and doing so fell below the standard of care”. . . .  [A]n expert’s personal opinion does not suffice to establish the standard of care, the breach or causation.  This complete failure to address the standard of care which Dr. Tey should have followed, the breach of that standard or the proximate cause of Plaintiffs’ damages amounts to no expert at all.

DeLeon, slip op. at 6 (footnotes omitted).

The court held that this substitution of a deficient medical malpractice report shortly before trial, together with the absence of any discernible litigation efforts on either side of that claim (including the physician defendant’s failure to assert the statute of limitations defense) demonstrated that it was brought and maintained in bad faith.  The Miklos report became an “other paper” that triggered a new 30-day removal period under amended §1446:

Plaintiffs have brought precious little ammunition to their legal battle against Dr. Tey.  Their pleadings say they allege wrongdoing, but their evidence does not make good on that allegation.  Just as troubling, Dr. Tey has fired exactly two missives in this case, his general denial in State court and a motion supporting remand in this Court.  Yet Dr. Tey clearly possesses an iron clad defense which neither he nor any other party has yet raised

[detailed statute of limitations discussion omitted]

[I]n addition to the options explained above, Dr. Tey possesses a strong legal argument which could either dispose of the claim against him altogether or leave Plaintiffs with an uphill fight. And yet he has not used this argument.  On the DeLeon-Tey front, the guns are silent.  Why Dr. Tey remains in the case can be explained only one way; he remains silent in collusion with Plaintiffs to prevent removal to this Court. Based on the record now before the Court, the Court can only conclude that these parties have acted in bad faith.

DeLeon, slip op. 7-8 (footnotes omitted).

So there you have it – some actual precedent putting some flesh on the bones of the new bad faith exception in §1446.  You know and we know that this kind of shenanigans happens all too frequently in drug/device cases, particularly in mass torts.  DeLeon is a good example of what facts we defendants have to establish in order to use this exception.