Aguayo v. AMCO Insurance
2014 U.S. Dist. LEXIS 160244, 59 F. Supp. 3d 1225, 2014 WL 5859098 (2014)
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Rule of Law:
Under 28 U.S.C. § 1446(c)(1), a plaintiff does not act in bad faith to prevent removal by keeping a non-diverse defendant in a case for more than one year, so long as the plaintiff actively litigates against that defendant. Active litigation creates a rebuttable presumption of good faith, which can only be overcome by direct evidence of the plaintiff's subjective intent to manipulate jurisdiction.
Facts:
- Trace Spoonhoward, an officer with the New Mexico State Police (NMSP), was issued a .357 Smith & Wesson pistol and was required by policy to keep it secured at all times.
- Spoonhoward lived with his surrogate son, Michael Trujillo, and was aware of Trujillo's history of disciplinary problems and possible gang affiliation.
- Trujillo gained access to Spoonhoward's unsecured service pistol.
- On July 8, 2010, Trujillo used the pistol to shoot and kill Christopher Aguayo at the Santa Fe Place Mall following a dispute.
- At the time of the murder, Aguayo's family had an insurance policy with AMCO Insurance Company that provided uninsured motorist benefits.
- The Aguayo family submitted a claim to AMCO under the policy, arguing that Trujillo's use of a vehicle in the commission of the crime triggered coverage.
- AMCO Insurance denied the claim without interviewing witnesses or speaking with the Aguayo family.
Procedural Posture:
- Christopher Aguayo's family (Plaintiffs) filed a lawsuit in New Mexico state court on May 24, 2012, against Michael Trujillo, Trace Spoonhoward, the New Mexico Department of Public Safety, and the State of New Mexico.
- In an amended complaint filed on November 18, 2012, Plaintiffs added AMCO Insurance Company (AMCO) as a defendant.
- Plaintiffs dismissed defendant Spoonhoward by stipulation on November 18, 2013.
- After reaching a settlement, Plaintiffs dismissed the State of New Mexico and the New Mexico Department of Public Safety on December 5, 2013.
- On April 25, 2014, six days before the scheduled state court trial, Plaintiffs voluntarily dismissed Trujillo, leaving AMCO as the sole remaining defendant.
- On April 29, 2014, AMCO removed the case to the U.S. District Court for the District of New Mexico, asserting diversity jurisdiction and arguing that the one-year time limit on removal should be excused due to the Plaintiffs' bad faith.
- Plaintiffs filed a Motion to Remand the case to state court, arguing the removal was untimely.
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Issue:
Does a plaintiff act in bad faith under 28 U.S.C. § 1446(c)(1) by keeping a non-diverse, removal-spoiling defendant in a case for more than one year when the plaintiff actively litigates against that defendant, thereby making removal after the one-year deadline improper?
Opinions:
Majority - Browning, J.
No, a plaintiff does not act in bad faith when they actively litigate against a removal-spoiling defendant, and removal after the one-year deadline is therefore improper. The court established a two-step standard to determine if a plaintiff acted in bad faith under 28 U.S.C. § 1446(c)(1). First, the court assesses whether the plaintiff actively litigated against the removal-spoiling party in state court. If they did not, that constitutes bad faith. If they did, it creates a rebuttable presumption of good faith. Second, the defendant may rebut this presumption with evidence—already in its possession—that the plaintiff kept the spoiler in the case solely to defeat removal. Here, the Plaintiffs actively litigated against the non-diverse defendants: they twice deposed Trujillo and reached a monetary settlement with the State Defendants. This active litigation created a presumption of good faith. AMCO Insurance failed to present any direct or convincing circumstantial evidence to rebut this presumption, relying instead on the timing of dismissals and the fact that Trujillo was judgment-proof. Therefore, the removal was improper under the one-year rule, and the case must be remanded to state court.
Analysis:
This opinion provides one of the first comprehensive judicial interpretations of the 'bad faith' exception to the one-year removal bar added to 28 U.S.C. § 1446(c)(1) in 2012. The court's establishment of a two-step, plaintiff-friendly test focusing on 'active litigation' creates a significant precedent for future removal disputes. This standard prioritizes objective evidence of litigation conduct over a speculative inquiry into a plaintiff's subjective motives, making it more difficult for defendants to successfully remove cases after the one-year mark by alleging bad faith. The decision provides a clear roadmap for plaintiffs wishing to remain in state court, while also limiting defendants' ability to use the bad faith exception as a tool for late-stage forum shopping without substantial evidence.
