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Keller Logistics Group, Inc. v. Navistar, Inc.

United States District Court · Civil Procedure

Civil ProcedureRemovalDiversity JurisdictionBad-Faith Exceptionremovaldiversity jurisdictionone-year limitbad faith

Facts

Plaintiffs, Ohio corporations, purchased or leased sixty-five Navistar trucks from an Ohio dealer in 2011 and 2012 and sued Navistar and the dealer in Ohio state court. After refiling the action in 2016, Plaintiffs kept the non-diverse dealer in the case for more than two years while litigating motions and discovery. Shortly before the original 2015 suit, Plaintiffs' principal allegedly stated he had no problem with the dealer and that counsel told him to sue the dealer to keep the case in Ohio rather than federal court. Plaintiffs later voluntarily dismissed the dealer in March 2019 while summary judgment was pending, and Navistar removed within thirty days.

Issue

Whether Navistar could remove the case more than one year after commencement under 28 U.S.C. § 1446(c)(1) because Plaintiffs acted in bad faith to prevent removal by joining and keeping the non-diverse dealer in the case. More specifically, the question was whether Plaintiffs intentionally kept the dealer in the action beyond the one-year mark for the sole purpose of defeating diversity removal.

Rule

Under 28 U.S.C. § 1446(c)(1), a defendant may remove a diversity case after the one-year limit if the district court finds that the plaintiff acted in bad faith to prevent removal. In this context, bad faith means intentional conduct to deny the defendant the chance to remove the case to federal court; it is not enough that the plaintiff simply preferred state court, and the validity of the claim against the non-diverse defendant at filing does not by itself defeat a finding of bad faith. Where a plaintiff joins and keeps a non-diverse defendant in a state-filed case, bad faith turns on whether the desire to remain in state court was the but-for cause of keeping that defendant in the case beyond one year.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nora Bendix, a citizen of Kentucky, sued Ridgeway Industrial Systems, a Delaware corporation with its principal place of business in Michigan, and Bluegrass Service Center, a Kentucky repair shop, in Louisville state court. Two weeks before filing, Nora told the shop's owner that she was adding the shop only because her lawyer said that would keep the case out of federal court; over the next 18 months, she served extensive discovery on Ridgeway, none on the shop, never discussed settlement with the shop, and dismissed the shop after Ridgeway highlighted the lack of any case against it in summary-judgment briefing.

If Ridgeway removes within 30 days after dismissal of the Kentucky shop, and the case was commenced more than one year earlier, how should the federal court most likely rule on Nora's motion to remand?

Explanation. The majority held that § 1446(c)(1) permits removal after one year if the plaintiff acted in bad faith to prevent removal, meaning intentional conduct to deny the defendant the opportunity to remove. Direct admissions that the nondiverse defendant was kept in the case to avoid federal court, combined with failure to actively litigate against that defendant and dismissal only when its presence was challenged, support bad faith. The rule does not require that the original claim be frivolous, and the one-year limit is not absolute when the bad-faith exception applies. (Derived from Keller Logistics Group, Inc. v. Navistar, Inc. (n.d.).)