Bad Faith

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Here’s some more inside baseball on grounds for removing cases from state to federal court.  In brief, the issue is this: does the “bad faith” standard added to the removal statute (28 U.S.C. §1446(c)(1)) in 2011 approximate the fraudulent joinder standard so that fraudulent joinder becomes a form of “bad faith” not subject to the one-year limit otherwise imposed on removals by reason of diversity of citizenship?  Fraudulent joinder is also an exception the “voluntary/involuntary” rule.  E.g., Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 532 (5th Cir. 2006); Mayes v. Rapoport, 198 F.3d 457, 461 n.8 (4th Cir. 1999); Insinga v. LaBella, 845 F.2d 249, 254 (11th Cir. 1988).

We wish to acknowledge the assistance of Emily Kimmelman, a Reed Smith 2016 summer associate, in compiling the research for this post.

In 2011 (effective January 6, 2012), Congress passed the Federal Courts Jurisdiction & Venue Clarification Act (the “JVCA”).  The JVCA did a number of things, which we discussed here (back then (in 2011), we were most interested in Congress having left intact the statutory language that allows removal before service).  What we’re discussing today is the JVCA’s creation of a “bad faith” exception in 28 U.S.C. §1446(c)(1).  Specifically, §1446(c)(1) provides for diversity jurisdiction removal, even after one year if “the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.”

Nothing is certain, except the controversy over how the bad faith exception interacts with the fraudulent joinder exception to the voluntary-involuntary rule.  Everybody knows the standard for fraudulent joinder.  It exists where “there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment.”  In re Briscoe, 448 F.3d 201, 217 (3d Cir. 2006).Continue Reading Fraudulent Joinder & Bad Faith – Explaining Another Removal Muddle

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This post is from the non-Reed Smith part of the blog only.

Removing a case to federal court can be a tedious process.  There are lots of deadlines and notices that need to be sent to different places.  But sometimes the process can be more than tedious.  It can be long.  And when it gets long, the plaintiff won’t help.  He’ll resist.

When that happens, you have to stick to it and be the little remover that could.

In Jackson v. St. Jude Medical Neuromodulation Div., 2015 U.S. Dist. LEXIS 975 (M.D. Fla. Jan. 28, 2015), St. Jude, one of three defendants, removed the case to federal court based on diversity jurisdiction.  But a few months later the federal court remanded the case back to state court because St. Jude couldn’t establish that the amount in controversy for each defendant exceeded the jurisdictional baseline of $75,000.

But – and this is key – St. Judge didn’t give up.  It knew that plaintiff was seeking more than $75,000.  So it asked.  When the case was returned to state court, St. Jude served a request that plaintiff admit that the amount in controversy exceeded $75,000 as to each defendant.  Id. at *5.  Co-defendant Medtronic did the same.  Id.  There was a timing issue, though.  The federal rules gave plaintiff 30 days to respond to the request.  Yet in fewer than 30 days the one-year, final deadline for a defendant to remove a case to federal court based on diversity would pass.  28 U.S.C. 1446(c)(1).

The plaintiff knew this.  So he resisted.  He refused to agree to a shortened deadline to respond to the request for admission.  Instead, he moved for a protective order and to strike the request.  So St. Jude and Medtronic doubled down.  They moved to expedite plaintiff’s response.  Id.  And they won.  The court ordered plaintiffs to respond to the request for admission ten days before the one-year removal period would run out.  Id.Continue Reading If at First You Don’t Remove, Try, Try Again

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Any defendant that has litigated – and lost − remand motions has encountered plaintiffs with very flexible facts, particular in opposition to fraudulent joinder arguments.  By that we mean:  dates that change after remand, non-diverse defendants that suddenly had nothing to do with anything, damages shrinking below the jurisdictional minimum, product exposures that disappear, “yes” that becomes “no” (and vice versa) in plaintiff testimony.  That kind of thing.

But there’s nothing anybody can do about it, right?  After all, a federal statute, 28 U.S.C. §1447(d), bars federal review of remand orders, so no matter how outrageous a plaintiff’s fraud on the court during the remand process is, they skate, and the defendants are stuck in state court, right?

Wrong.  At least not now.  At least in the Fourth Circuit.  See Barlow v. Colgate Palmolive Co., ___ F.3d ___, 2014 WL 6661086 (4th Cir. Nov. 25, 2014).

In the first precedential decision to address this issue, last week the en banc Fourth Circuit held in Barlow that, when a plaintiff’s remand-related misrepresentations are bad enough, a remand order can be vacated under Fed. R. Civ. P. 60(b)(3), with the result being that the case retroactively returns to federal court.  It’s a matter of first impression (prior adverse appellate decisions were all non-precedential), so all defendants should study Barlow closely.Continue Reading Fraud on a Federal Court Allows Vacation of Remand Orders

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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)…

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Our friends at Sidley have sent along another interesting removal/remand decision out of the Yazmin/Yaz MDL in the Southern District of Illinois.  Since we all get some joy from orders denying remand that come from this district (encompassing some notorious hellholes), they shared it with us, and we’re sharing it with you.  While…

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