SC Lawyer, July 2004, #5. Equitable considerations in removal: is one year the final answer?.

AuthorBy Amy D. Harmon

South Carolina Lawyer


SC Lawyer, July 2004, #5.

Equitable considerations in removal: is one year the final answer?

South Carolina LawyerJuly 2004Equitable considerations in removal: is one year the final answer?By Amy D. HarmonHere's the scenario: You are a defendant in North Carolina. You are sued by a plaintiff in South Carolina. Plaintiff filed the action in South Carolina state court. You think for a moment - can I remove to federal court? Then you realize there is a co-defendant from South Carolina. No diversity. But then you begin to question whether there are actual claims against that defendant. You decide to give removal a try and argue fraudulent joinder of your co-defendant. Unsuccessful. The case is remanded to state court. One year and one day after the action was filed, however, plaintiff dismisses your South Carolina co-defendant. At the time of dismissal, plaintiff has never taken discovery or involved the defendant in the litigation in any way. Now there's diversity. File for removal again? Unfortunately, the statute that provides the procedure for removal, 28 U.S.C. § 1446(b), prohibits removal of an action for diversity more than one year after the action was commenced. So you wonder, is that the end of it? Must you merely accept that you are stranded in South Carolina's state court? Many may believe the answer is an unequivocal "yes." However, recent case law around the country indicates that, like many things in the law, the answer to this question may not be black or white or yes or no, but now more of a gray "maybe."

There is a growing area of case law in other circuits that subjects the one-year removal limitation to equitable considerations. These courts, in doing so, have found the one-year limitation in § 1446(b) to be a procedural requirement, rather than a requirement that must be met in order to confer federal jurisdiction. While the Fourth Circuit has not directly ruled on this issue, several district courts in the circuit have been faced with the issue and have ruled inconsistently. The same inconsistent rulings are present across the country.

This article briefly examines this new area of case law and the legal and equitable considerations that led the courts to rule as they did. While many may think this issue is nothing more than a hyper-technical point of federal practice, it in fact can have substantial practical ramifications for where lawsuits are tried and may drastically alter the way plaintiffs and defense attorneys alike react to the possibility of removal.

28 U.S.C. § 1446(b)

Section 1446 of the United States Code sets forth the procedure for the removal of actions from state court to federal court. This section provides that a notice of removal must be filed within 30 days after the defendant receives the initial pleading, or, if it is not evident from the face of the pleading itself that the action is removable, then within 30 days after receipt by the defendant of an amended pleading, motion, order or other paper from which it may be ascertained that the case is or has in fact become removable. One exception to this rule: the case may not be removed on the basis of diversity jurisdiction more than one year after the action was commenced.

While this statute may appear on its face to clearly bar removal on the basis of diversity where more than one year has passed since the action was commenced, numerous district courts across the country have held that this one-year limitation may be tolled by equitable considerations, such as an opposing party's purposeful manipulation of the posture of the lawsuit for the sole purpose of preventing removal. Where this conduct has become evident after the one-year period has run, and there is no other justification for the behavior, i.e. it was done in bad faith, the courts have ruled that the opposing party is equitably estopped from asserting the limitations period as a bar to removal. In order to do so, those courts have first found that the limitation in § 1446 is procedural only, rather than a requirement for jurisdiction. The Fifth Circuit Court of Appeals has recently so held.

Tedford v. Warner-Lambert Co.

In April of 2003 the Fifth Circuit Court of Appeals in Tedford v. Warner-Lambert Co., held explicitly that the time limit for removal is not inflexible and the conduct of the parties may affect whether it is equitable to strictly apply the one-year limit. 327 F.3d 423 (5th Cir. 2003). In Tedford, the plaintiff joined an additional nondiverse defendant hours after being notified by one of the original diverse defendants via courtesy call that it intended to remove the action because its nondiverse co-defendant was not a proper party. The case remained in state court as a result of the subsequently-joined nondiverse defendant.

During the next year, the plaintiff did not take any discovery from the subsequently-joined nondiverse defendant. Then, days before the one-year anniversary of his filing suit, plaintiff signed and post-dated a Notice of Nonsuit as to the subsequently joined nondiverse...

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