Generally, a case is not removable to federal court “more than one year after commencement of [an] action.” However, a defendant may remove a case to federal court after the one-year deadline if it can demonstrate the plaintiff acted in bad faith to prevent the defendant from removing the action. Essentially, the “bad faith” exception acts as a safeguard to prevent plaintiffs from deploying tactics that hinder a defendant’s ability to remove a matter to federal court. One common tactic plaintiffs employ to prevent removal is withholding information from a defendant that would allow it to ascertain the true amount-in-controversy, which is what occurred in Schwartzben v. National Fire & Marine Insurance Company.
In Schwartzben, counsel for the plaintiff forwarded a letter to plaintiff’s insurer prior to initiating litigation, which stated that his damages did not exceed $75,000. Therefore, Defendant did not have a basis to believe plaintiff’s damages exceeded the jurisdictional minimum permitting removal. Once litigation began, the insurer served interrogatories to plaintiff to obtain a better understanding of plaintiff’s damages. Yet, the plaintiff refused to respond to the insurer’s discovery requests addressing the total amount of damages sought. The plaintiff even refused to respond to this discovery after the insurer sought relief from the state court, ultimately ignoring the state court’s orders.
After the expiration of the one-year deadline for removal, the plaintiff finally provided the insurer with a transparent response concerning the total amount of damages at issue. Seeing that the amount-in-controversy exceeded the jurisdictional minimum for Federal Court, the insurer removed the case under diversity jurisdiction contending the one-year deadline for removal did not apply because the plaintiff acted in bad faith to prevent removal.
In an effort to remand to state court, the plaintiff argued the “bad faith” exception did not apply because the insurer should have requested additional damages’ discovery, such as depositions and requests for production. The district court rejected this argument and held the insurer fulfilled its due diligence to ascertain plaintiff’s damages, but plaintiff intentionally withheld this information. Notably, the district court emphasized the insurer was under no affirmative duty to seek evidence that would prove the plaintiff was undervaluing his claim before the one-year period expired.
The holding in Schwartzben regarding the duty required of a defendant to ascertain the amount-in-controversy may be limited to its facts because the insurer was utterly deprived of the necessary information it needed to assess removability. Outside of this context, a question remains concerning the level of diligence a defendant must exercise to ascertain the amount-in-controversy even where a plaintiff arguably acts in bad faith to prevent removal. For example, in some circumstances, a defendant may have better access to damages’ information than the plaintiff regarding the valuation of a claim. In these circumstances, a court may use its judgment to determine which party has more access to the relevant information.
Thus, notwithstanding the “forum-shopping” tactics often utilized by a plaintiff, a court may reject a defendant’s “bad faith” argument if it determines that defendant had better access to information to gauge the true amount-in-controversy. On the other hand, this case demonstrates that if a plaintiff “plays games” regarding the amount in controversy and does not provide the necessary information needed by a defendant to determine if the jurisdictional value is met, a court may use the “bad faith” standard to decline remand after the 1-year deadline.
For more information, please contact either Barry Burkett or Blake Hunter.
1. 28 U.S.C. § 1446 (c) (1).
3. 2022 WL 4102799 (S.D. Fla. Sept. 8, 2022).
4. Pretka v. Kolter City Plaza II, Inc., 608 F. 3d 744, 771 (11th Cir. 2010) (explaining that “sometimes the defendant’s evidence on the value of the claims will be even better than the plaintiff’s evidence,” and that a court may use its judgment to determine “which party has better access to the relevant information.”)