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Gray v. Martin

United States District Court, Sixth Circuit

November 13, 2013

PENNY GRAY, Plaintiff,
NATHAN MARTIN, et al., Defendants.


AMUL R. THAPAR, District Judge.

Defendant Esurance Property & Casualty Insurance Company ("Esurance") removed this case to federal court on the basis of diversity jurisdiction. But the one-year window for removal has closed. Therefore, 28 U.S.C. § 1446 bars removal of this case, and the Court must remand it back to state court.


This case arises out of a 2010 traffic accident. Driving in Floyd County, Kentucky, Penny Gray collided with Nathan Martin. R. 1-1 at 2. Both drivers were citizens of Kentucky. See id. at 1. On July 1, 2010, Gray sued Martin in state court for negligence. Id. at 2. Gray's initial complaint also asserted a breach of contract claim for Underinsured Motorist ("UIM") benefits against her insurer, Esurance, a corporate citizen of California. Id. at 1, 3. Gray amended her complaint to add two more defendants and ultimately settled with all defendants but Esurance by November 2012. See R. 1 at 2; R. 7-1 at 2 (concurring with the defendant's account). Settlement negotiations with Esurance continued, and on May 7, 2013, the parties agreed on an amount to settle the remaining UIM claim "in exchange for a Full and Final Release." See R. 7-2. Despite an agreement in principle, Gray and Esurance haggled over the scope of that release for the next ten weeks. Amid those negotiations, Gray moved to amend her complaint on June 14, seeking to add bad faith claims against Esurance. See R. 1-3 (Motion to Amend Complaint). The state judge granted her request on July 3. See R. 7-3 (Order Granting Motion to Amend). Shortly thereafter, the parties resolved their differences, and on July 17 they executed a final release agreement that released Esurance from Gray's original UIM claim but left her bad faith claims intact. See R. 7-5 at 3-4. According to Gray, and undisputed by Esurance, the litigants then promptly filed an agreed order dismissing the UIM claim. R. 7-1 at 3. With only Gray's bad faith claims remaining, Esurance removed the case to this Court on July 19, invoking this Court's diversity jurisdiction. See R. 1. Gray has now moved to remand. See R. 7.


Removal has its limits. Defendants generally may remove a civil action brought in state court to federal court if they could have originally brought that action in federal court. 28 U.S.C. § 1441(a). But because removal disrupts state court proceedings, Congress established certain restrictions on that right. A defendant has only thirty days to seek removal after receiving either an "initial pleading" indicating the case is removable or an "amended pleading, motion, order or other paper" indicating the case has become removable. 28 U.S.C. § 1446(b) (2006 & Supp. IV 2010). Additionally, Congress created a narrow window for initially ineligible cases to become removable based on diversity jurisdiction. The defendant may not remove a case pursuant to diversity jurisdiction "more than 1 year after commencement of the action" if that case as "stated by the initial pleading is not removable." Id.

In 2011 Congress added a bad faith exception to the one-year time limit, but that version of the removal statute does not apply here. See Federal Courts Jurisdiction and Venue Clarification Act of 2011 ("FCJVCA"), Pub.L. No. 112-63, § 103, 125 Stat. 758, 760 (2011) (providing that a defendant may remove a case more than one year after it commences if "the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action"). The current version of § 1446 only applies to cases "commenced, within the meaning of State law, in State court" on or after the FCJVCA's effective date, January 6, 2012. § 105, 125 Stat. at 762. This suit commenced for purposes of state law, and thus the FCJVCA, when the Kentucky circuit court first issued a summons on July 1, 2010, in response to Penny Gray's initial complaint. See R. 1-1 at 8 (summons); see also Ky. R. Civ. P. 3.01 ("A civil action is commenced by the filing of a complaint with the court and the issuance of a summons or warning order thereon in good faith."); Ky. Rev. Stat. § 413.250 ("An action shall be deemed to commence on the date of the first summons or process issued in good faith from the court having jurisdiction of the cause of action."). The pre-amendment language of § 1446 therefore applies here. References in this opinion to § 1446 and its subsections accordingly point to the version predating the FCJVCA. Since Esurance's removal comes over three years after this suit began-well outside the statutory window- the Court must grant Gray's motion to remand.

I. Esurance's Removal Comes Over One Year After This Action Commenced.

As Esurance admits, see R. 8 at 3, it has attempted to remove this case "more than 1 year after the commencement of the action." 28 U.S.C. § 1446(b). Although the Sixth Circuit has sent mixed signals on whether state or federal law governs when an action commences for removal purposes, that does not matter here because both state and federal law point to the same date. Compare Easley v. Pettibone Mich. Corp., 990 F.2d 905, 908 (6th Cir. 1993) (holding that state law governs), with Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 534 (6th Cir. 1999) (applying the definition of "commencement of the action" found in Fed.R.Civ.P. 3 to determine when the one-year clock began in a diversity action). Kentucky law, as already described, requires two events to occur to "commence" an action: filing of the initial complaint and issuance of the first summons from the appropriate court. Since both of those events in this case happened on the same day-July 1, 2010-Gray's suit commenced, within the meaning of state law, on that date. Federal law similarly dates the commencement of this suit at July 1, 2010, when Gray filed her original complaint. See Fed.R.Civ.P. 3 ("A civil action is commenced by filing a complaint with the court."). Esurance, for its part, concedes that the phrase "commencement of the action" as used in § 1446 refers "to the original complaint commencing a lawsuit." R. 8 at 3. Esurance's notice of removal thus occurred 3 years and 18 days after this suit commenced.

II. No Construction or Exception Renders Esurance's Removal Timely.

So, how does that not end the matter in favor of remand? Esurance offers two alternative arguments that its notice of removal is timely. First, it invokes the so-called "revival exception" to the 30-day window, a questionable doctrine that restarts the removal clock if an amended complaint so substantially alters the nature of the case as to functionally constitute an entirely new action. R. 8 at 2-4 (citing Johnson v. Heublein Inc., 227 F.3d 236, 241 (5th Cir. 2000)); see also Wilson v. Intercollegiate (Big Ten) Conference Athletic Ass'n, 668 F.2d 962, 965 (7th Cir. 1982) (recognizing the exception). But see Dunn v. Gaiam, Inc., 166 F.Supp.2d 1273, 1279 (C.D. Cal. 2001) (doubting the revival exception's legitimacy); Messick v. Toyota Motor Mfg., Ky., Inc., 45 F.Supp.2d 578, 581 (E.D. Ky. 1999) (same); Burke v. Atl. Fuels Mktg. Corp., 775 F.Supp. 474, 476 (D. Mass. 1991) (same). Grounding revival in § 1446(b)'s text, Esurance maintains that Gray's third amended complaint, by adding bad faith claims, is so different from the prior version that it amounts to a new "initial pleading" and, thus, the one-year time limit does not even apply. R. 8 at 4; see also Brierly, 184 F.3d at 534-35 (holding that the one-year rule only applies to cases that were not removable based on the initial pleading). If correct, Esurance had thirty days to remove from when Gray added her new claims, making its removal timely. R. 1 at 5.

Even if Esurance is wrong on that score, however, it also invokes the "estoppel" exception to the one-year removal window, an equitable doctrine-akin to the now-codified exception for bad faith-which a few courts have adopted. R. 8 at 5-8 (citing Tedford v. Warner-Lambert Co., 327 F.3d 423, 426-27 (5th Cir. 2003)). Gray's conduct tolls the one-year clock, Esurance argues, because "[s]he used the existing lawsuit in an attempt to thwart" removal. Id. at 8. Gray is further estopped from asserting the one-year rule because the Floyd County Circuit Court should have dismissed her suit as settled before she added her claims for bad faith. Id. at 7. Had that occurred, the argument goes, Gray would have been forced to bring those claims as an entirely new suit, eligible for removable. Id. at 7-8.

Neither of Esurance's arguments can be squared with the removal statute. Because the one-year window for removal has long closed, the Court ...

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