Timing Of Removal

Insurance lawyers always want to remove cases filed by insured’s to the Federal Courts.  In most instances they are successful in these efforts.  Here is a situation where the insurance lawyers were too late in getting the case removed to Federal Court.

This case is from the Southern District of Texas, Houston Division.  It is styled, Solaiha Enterprises LLC v. Amguard Insurance Company.

Amguard was the insurer for Solaiha when Solaiha made a claim for property damage.  Amguard refused to pay the claim and Solaiha sued Amguard and Ronnie Patel, the agent who sold the policy.  The lawsuit was filed on May 4, 2017, in State Court.  Solaiha dismissed its claim against Patel in late February of 2019.  Amguard filed a Notice of Removal on March 14, 2019, and Solaiha promptly filed this Motion to Remand arguing that Amguard was untimely in filing its Notice of Removal.

Pursuant to 28 U.S.C. Section 1446(c)(1), a case may not be removed more than one year after commencement of the action, unless the court finds the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.  In this case, more than one year passed.  Amguard argues Solaija acted in bad faith by failing to undertake significant activity in the lawsuit during the one year period after the case was filed.  The law requires the removing party to prove the plaintiff acted in bad faith to prevent the removal.

This Court ruled that Amguard has failed to present evidence of bad faith.  In June of 2017, the law firm that filed the suit on behalf of Solaija was dissolved.  Solaija’s new lawyer was corresponding with Amguard’s adjuster from that time until October 2017.  In fact, in August of 2017, the business personal property portion of the claim was resolved and paid.  Based on these successful efforts, Solaija’s did not immediately serve either of the two named Defendants.

Eventually, in April 2018, Solaija believed that negotiations with Amguard, primarily through an Amguard accountant, regarding Solaija’s claim for loss of business income were not making progress.  As a result, Solaija obtained service on both Defendants on April 13, 2018.  This also included requests for Disclosures to both Defendants.

The Defendants deadline for filing responses to the lawsuit and Disclosures expired.  In 2019, Patel’s counsel contacted Solaija’s counsel to request and discuss dismissal of Patel from the lawsuit.  An Order dismissing Patel was entered on February 21, 2019.

Amguard has failed to demonstrate that Solaija manipulated the state court lawsuit to prevent Amguard from exercising its right of removal.  This is not a case where Plaintiff names a non-diverse defendant, never serves that defendant, and dismisses that defendant as soon as the one year limitation in Section 1446(c) expires.  Amguard failed to establish the “bad faith” exception.