The English novelist George Eliot wrote that "it's but
little good you'll do watering last year's
crops." And, by reason of 28 U.S.C.
§ 1446(c)(1), which establishes a one-year outer time
limit on removal of diversity cases, it's but little good
you'll do removing last year's cases. Unless ...
.
Historically, most courts have been astonishingly single-minded in
enforcing the statutory one-year limitation. This, in turn,
has encouraged creative subterfuges by plaintiffs' counsel who
are determined to keep their cases in state courts. First and
foremost among these is to sue a non-target defendant who shares
the plaintiff's citizenship, only to nonsuit or settle cheaply
with that defendant after a year has gone by. The truck
driver, the innocent retailer, the local affiliate of a national
company or organization – all have been potential candidates
for this approach. Only where the defendant can meet the
exacting standards for showing fraudulent joinder – no
possibility of recovery against the non-diverse defendant as a
matter of law – has this strategy been overcome.
Manipulation of jurisdictional amounts has been another favored
approach. In Texas, for example, where pleadings can be freely
amended, it has been easy to plead a low ad damnum, or
none at all, and then to amend after the one-year
deadline. This, in turn, has led to gamesmanship, as
defendants try to determine the real damage claims through
discovery before the year runs, and plaintiffs try to stall that
effort. And there has been no need to put any lipstick on this
particular pig: the author has unsuccessfully tried to defend
removal in a Tennessee case where, after a pleading alleging
damages of only $10,000 [then, the applicable federal
jurisdictional amount] had been on file for ten years, the
plaintiff filed an amended pleading saying, in effect, "Did we
say ten thousand? We meant to say five million!" A
few courts have recognized a "manipulation exception" to
the one-year limit, but precious few.
As of January 6, 2012, however, all that has
changed. Effective for cases filed in state court on or after
that date, there is now an exception to the one-year rule where the
district court finds that the plaintiff "has acted in bad
faith in order to prevent a defendant from removing the
action." A deliberate failure to disclose the actual
amount in controversy to prevent removal is deemed to have been in
bad faith. Thus the manipulation exception has to some degree
been codified.
The statute is silent on what constitutes bad faith (except for
the deliberate non-disclosure provision) and on how it can be
discovered or proven. The most direct evidence of bad faith
would necessarily come in most cases from plaintiff's
counsel. In these circumstances, can a defendant meet the
standard for discovery of work product under Fed. R. Civ. P.
26(b)(3)(A)? Can a lawyer-expert opine that cases such as the
one at hand typically involve amounts in controversy far in excess
of the limit, or that the timing of the dropping of the non-diverse
defendant indicates bad faith? Are there cases (the 500-fold
damage increase after ten years comes to mind) where the
circumstances themselves support a finding of bad
faith? Lawyers should turn on their word processors and polish
their oratorical skills as these questions begin to be posed to and
answered by the courts.
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