MEMORANDUM OPINION

VIRGINIA EMERSON HOPKINS, United States District Judge.

The case comes before the Court on the Motion To Remand filed by the Plaintiff (the "Motion"). (Doc. 16). Oral argument was held on the motion on February 15, 2018. For the reasons stated herein and at oral argument, the Motion will be GRANTED and this case will be REMANDED to the Circuit Court of Jefferson County, Alabama.

I. INTRODUCTION AND PROCEDURAL HISTORY

A. Initiation of the Lawsuit in State Court

This civil action was filed on May 25, 2016, in the Circuit Court of Jefferson County, Alabama by the Plaintiff, McAdam Properties, LLC, against the following Defendants: Barista Food Service, LLC ("Barista"); Dunkin' Donuts; and Dunkin' Brands Group, Inc. ("Dunkin Brands") (Doc. 1-1)(Doc. 1-1). The case arises out of a lease agreement between the Plaintiff and Barista, a potential franchisee of a "Dunkin' Donuts" franchise, which prompted the Plaintiff to construct part of its shopping center to the particular specifications required of a Dunkin' Donuts store. In October of 2014, after construction had begun, but before construction was completed, "Barista ... informed McAdam Properties that Barista ... would not be taking possession of the premises and that Dunkin' Donuts would take assignment of the lease agreement." (Doc. 1-1 at 3, ¶ 8). The Plaintiff claims it was injured when, in May of 2015, after it completed construction, "Dunkin' Donuts informed McAdam Properties that it would not take assignment of the lease unless it could obtain a franchisee to become a substitute for Barista." (Doc. 1-1 at 4, ¶ 11). The Complaint sets out a claim for fraud (Count One) against all Defendants, and a claim for suppression (Count Two) against only Dunkin' Donuts and Dunkin's Brands.

B. The Removal

The Defendants allege that on November 21, 2017, complete diversity of citizenship pursuant to 28 U.S.C. § 1332 was created when the state court dismissed Barista on the Plaintiff's motion. (Doc. 1-9 at 284). The remaining Defendants removed the case to this Court on December 13, 2017. (Doc. 1).

C. Substitution of Defendants

On January 5, 2018, based on the representation by the Defendant that "Dunkin' Donuts Franchising LLC is the franchisor of the Dunkin' Donuts system. "Dunkin' Donuts" is a trade name, not a business entity" (doc. 1 at 1), this Court Ordered that "Dunkin' Donuts Franchising LLC" be substituted as a Defendant in place of the Defendant named "Dunkin' Donuts." (Doc. 9 at 2). The current Defendants are now Dunkin' Donuts Franchising, LLC and Dunkin' Brands Group, Inc.

D. This Court's Order Regarding Jurisdiction

In the Order substituting parties, this Court also wrote:

(Doc. 9 at 2-3). Thereafter, on January 11, 2018, the Defendants filed document 11 which states, in pertinent part:

(Doc. 11 at 1-2 at ¶¶ 1-3).

Put more simply, the Plaintiff, as an LLC, is a citizen of Alabama, the only state in which its only member is a citizen. Defendant Dunkin' Brands Group, Inc. is a Delaware corporation with its principal place of business in Massachusetts. Therefore, it is a citizen of the states of Delaware and Massachusetts. See, Life of the S. Ins. Co. v. Carzell, 851 F.3d 1341, 1344 (11th Cir. 2017) (citing 28 U.S.C. § 1332(c)(1)) (corporation is a citizen of the state of its incorporation and its principal place of business).

Dunkin' Donuts Franchising LLC is the last in a long chain of LLCs each of which is the sole member of the next. However, the sole member of the first LLC in the chain, Dunkin' Donuts LLC, is Dunkin' Brands Holdings, Inc., which is a citizen of both Delaware and Massachusetts. Because this citizenship is then imputed to each LLC up the chain, Dunkin' Donuts Franchising LLC is also a citizen of both Delaware and Massachusetts.

II. STANDARD FOR REMAND

"Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute." Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). For removal to be proper, the court must have subject-matter jurisdiction in the case. "Only state-court actions that originally could have been filed in federal court may be removed to federal court by the Defendant." Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). In addition, the removal statute must be strictly construed against removal, and any doubts should be resolved in favor of remand. See, City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1313 (11th Cir. 2012) ("[b]ecause removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly. Indeed, all doubts about jurisdiction should be resolved in favor of remand to state court.") (citation omitted).

"In removal cases, the burden is on the party who sought removal to demonstrate that federal jurisdiction exists." Friedman v. New York Life Ins. Co., 410 F.3d 1350, 1353 (11th Cir. 2005) (citation omitted); Williams v. Best Buy Co., 269 F.3d 1316, 1319 (11th Cir.2001).

Parker v. Brown, 570 F.Supp. 640, 642 (S.D. Ohio 1983).

Sierminski v. Transouth Financial Corp., 216 F.3d 945, 949 (11th Cir. 2000).

III. ANALYSIS

As noted above, the Defendants removed this case alleging that complete diversity of citizenship exists pursuant to 28 U.S.C. § 1332.1 However, "[a] case may not be removed ... on the basis of jurisdiction conferred by section 1332 more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action." 28 U.S.C.A. § 1446(c). The Complaint in this case was filed in state court on May 25, 2016, and the case was not removed until December 13, 2017-1 year, 6 months, and 19 days (counting the date of removal) after the case was filed.

The Defendants argue that there is bad faith here because the Plaintiff knew that there was no basis for a fraud claim against Barista at the time it filed this case.2 In support of this argument, in their notice of removal they cited the following testimony from the March 24, 2017, deposition of Kerry McAdams, the sole member of the Plaintiff:

(Doc. 1 at 6-7) (quoting doc. 1-9 (Deposition of Kerry McAdams) at 203(286-287)). According to the Defendants, this testimony demonstrates that the Plaintiff knew, at the time the lawsuit was filed, that it had not relied upon any representation from Barista.3 At oral argument, the Defendants argued that Alabama's statute of frauds prevents the Plaintiff from reasonably relying on any representations from Barista.

A. The One Year Time Limit for Removing Diversity Cases (28 U.S.C. § 1446(c))

Section 1446(c) was added to the removal statute pursuant to the Federal Courts Jurisdiction and Venue Clarification Act of 2011, Pub. L. No. 112-63, 125 Stat. 758 (2011) ("An Act to amend title 28, United States Code, to clarify the jurisdiction of the Federal courts, and for other purposes."). See, H.R. REP. 112-10, 15, 2011 U.S.C.C.A.N. 576, 580 ("Section paragraph 1446(c)(1) grants district court judges discretion to allow removal after the 1-year limit if they find that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action."). However, there is very little authority on what "bad faith" means in the context of the statute.

B. The History of the Equitable Exception to the One Year Limit

Acknowledging the "dearth" of case law on this issue, in its opposition to the Motion To Remand, the Defendants argue that "a review of the history of the evolution of [the] bad faith exception shows that it is fully applicable here." (Doc. 21 at 7). The Court agrees that such a review is helpful, but does not agree that it is helpful to the Defendants' argument.

Section 1446 was first amended "to establish a one-year limit on removal based on diversity jurisdiction as a means of reducing the opportunity for removal after substantial progress has been made in state court." H.R. REP. 100-889, 72, 1988 U.S.C.C.A.N. 5982, 6032. In Tedford v. Warner-Lambert Co., 327 F.3d 423, 427 (5th Cir. 2003), the Fifth Circuit became the first circuit court to recognize an equitable exception to the one year limitation. That case is widely regarded as the common law origination of the current statutory exception. See, Nathan A. Lennon, Note, Two Steps Forward, One Step Back: Congress Has Codified the Tedford Exception, but Will Inconsistent Applications of "Bad Faith" Swallow the Rule?, 40 N. Ky. L. Rev. 233, 241-43 (2013); Emily L. Buchanan, A Comity of Errors: Treading on State Court Jurisdiction in the Name of Federalism, 55 S. Tex. L. Rev. 1, 18 (2013) ("In 2011, Congress enacted the Federal Courts Jurisdiction and Venue Clarification Act. Among other amendments, the Act codified the equitable exception to the one-year bar."). Accordingly, a review of that case is appropriate.

In Tedford, hours after learning that the defendant intended to remove the case, the plaintiff amended her complaint to add a non-diverse defendant. Then, prior to the expiration of the one year period, the plaintiff signed and post-dated a "Notice of Nonsuit" of that defendant, but did not file it with the court or notify the other defendant until the one-year period had expired. The Fifth Circuit held that "[w]here a plaintiff has attempted to manipulate4 the statutory rules for determining federal removal jurisdiction, thereby preventing the defendant from exercising its rights, equity may require that the one-year limit in § 1446(b) be extended." Tedford, 327 F.3d at 428-29. Under the circumstances, the Fifth Circuit determined that "[e]quity demands [the plaintiff] be estopped from seeking to remand the case on the basis of the one-year limit." Id. at 428.5

C. The Defendants Have Not Shown Bad Faith

Recall that "[i]n removal cases, the burden is on the party who sought removal to demonstrate that federal jurisdiction exists." Friedman v. New York Life Ins. Co., 410 F.3d 1350, 1353 (11th Cir. 2005) (citation omitted). In the instant case, that means that the Defendants must show that the Plaintiff "has acted in bad faith in order to prevent a defendant from removing the action." 28 U.S.C.A. § 1446(c). The Defendants have not carried their burden.

The Defendants cite only Tedford in their Notice of Removal. However, in their opposition to the Motion To Remand, the Defendants cite one other case, without discussion, in support of their position — Noyes v. Universal Underwriters Ins. Co., 3 F.Supp.3d 1356 (M.D. Fla. 2014) (Moody, J.), on reconsideration in part, No. 8:13-CV-3077-T-30TGW, 2014 WL 2111695 (M.D. Fla. Apr. 30, 2014).6 Noyes involved a claim by James Noyes against Universal Underwriter's Insurance Company ("Universal") for the alleged bad faith failure to settle an underlying tort case within policy limits. In the underlying tort case, Tampa Auto Service ("Tampa Auto"), where Noyes worked as a service manager, repaired a flat tire on a vehicle owned by Roy Chattelle. Three months after the repair, Chattelle's wife was severely injured when the tire lost its tread, causing an accident. Chattelle sued Tampa Auto, but did not sue Noyes. David LoNigro, the insurer's in-house counsel, was assigned to the case. Seven months after getting the case, LoNigro sent Chattelle a policy limits settlement offer of $1.3 million, which was rejected. Afterwards, Universal transferred the case to outside counsel. On November 4, 2009, the state court entered an order substituting another attorney for LoNigro. On January 24, 2011, Chattelle amended his complaint to add Noyes as a defendant. After trial, the Chattelles won a judgment of $7 million against Tampa Auto and $6 million against Noyes.

On September 27, 2012, Noyes sued Universal and LoNigro in Florida state court for bad faith failure to settle. The opinion then sets out the following procedural history:

Noyes, 3 F.Supp.3d at 1359. Universal argued that the act of fraudulently joining LoNigro in order to destroy diversity amounted to bad faith. "As proof of the fraudulent joinder, Universal point[ed] to the two state court dismissals of the claims against LoNigro which support that Noyes could not have possibly stated a cause of action against LoNigro for legal malpractice." Id. at 1360.

The district court first determined, after significant analysis, that Universal had met its burden of establishing that LoNigro was fraudulently joined for the purpose of destroying diversity. Id. at 1362. Thereafter, the court concluded, with little to no analysis, "that Noyes' fraudulent joinder was meant to manipulate the state court's jurisdiction and constitutes bad faith." Id. at 1363.

With their citation of Noyes, the Defendants seem to be arguing that fraudulent joinder, alone, without bad conduct by the Plaintiff, can be "bad faith" under the statute. That is the position they took at oral argument.

1. The Defendants Have Not Shown Fraudulent Joinder

First, assuming that fraudulent joinder alone is sufficient to qualify as "bad faith" under the statute7, the Defendants make no real attempt, other than in an underdeveloped footnote, to show that there was fraudulent joinder. (See doc. 21 at 9, n. 1). Furthermore, the facts seem to suggest both that there was a valid claim against Barista, and that it was vigorously prosecuted-the Plaintiff survived summary judgment on its claims against Barista after the Defendants made the same arguments they are making now. (See doc. 16 at 5). That alone makes this case factually distinguishable from Noyes.8 The Court also notes that the case against Barista was not settled as a "walk away" as stated by the Defendants. (See doc. 1 at 8). As part of the settlement, Barista agreed to allow the Plaintiff to keep the $69,000 in first month's rent-the very thing Barista had sued for. (See doc. 16 at 4). The Defendants have not satisfied their burden in this regard.9

2. The Defendants Have Not Shown that Fraudulent Joinder Alone Is Equivalent to Statutory "Bad Faith"

The Defendants cite no support for the proposition that "bad faith" under the statute is present when a defendant is fraudulently joined but without some other misconduct by the plaintiff. Indeed, there is significant authority, based on the Tedford exception, to the contrary. For example, in Lafazia v. Ecolab, Inc., No. C.A.NO. 06-491ML, 2006 WL 3613771, at *1 (D.R.I. Dec. 11, 2006) (Almond, M.J.), the plaintiff "was allegedly injured in a workplace accident by electrocution while operating a garbage disposal and dishwasher." Lafazia, 2006 WL 3613771, at *1. As noted by the court:

Id. The plaintiff settled with the employer and the insurer, and then amended his complaint to add another diverse defendant, Ecolab, Inc., who was also a vendor of kitchen cleaning equipment and/or systems to Cedar Crest. The court noted:

Id. The state court granted summary judgment against the Plaintiff on his claims against Johnson Diversity, Inc., which would have made the only remaining claims those against Ecolab, Inc. However, the court noted that because of the inclusion of Cedar Crest in the caption of the amended complaint, and the presence of the premises liability claim, "it was far from clear at that point if Cedar Crest was or was not still a party to this case and if there were proper grounds for removal." Id. The court held that Cedar Crest and Beacon were fraudulently joined parties and wrote:

Id. at *3 (footnote omitted).

Similarly, in Arrighi v. Celebration Station Properties, Inc., No. CIV.A. 10-105-BAJ, 2010 WL 4386066, at *6-7 (M.D. La. Sept. 14, 2010) (Riedlinger, J.), report and recommendation adopted, No. CIV.A. 10-105-BAJ-SC, 2010 WL 4366060 (M.D. La. Oct. 27, 2010), the court applied the Tedford exception, writing:

Outside the fraudulent joinder context, other cases applying the Tedford exception also require some sort of misconduct by the plaintiffs to manipulate jurisdiction.10 For example, in Rauch v. Rauch, 446 F.Supp.2d 432 (D.S.C. 2006), the case was removed two years and five months after it was filed when the plaintiff voluntarily dismissed the non-diverse defendant. The court wrote:

Rauch, 446 F.Supp.2d at 435-36.

In Brooks v. Am. Bankers Ins. Co. of Fla., No. CIV.A. 401CV00008-PB, 2003 WL 22037730, at *1 (N.D. Miss. Aug. 20, 2003) (Pepper, J.), the court wrote:

Brooks, 2003 WL 22037730, at *1. Similarly, in In re Rezulin Prod. Liab. Litig. (MDL No. 1348), No. 00 CIV. 2843 (LAK), 2003 WL 21355201, at *2 (S.D.N.Y. June 4, 2003) (Kaplan, J.), the court wrote:

In re Rezulin Prod. Liab. Litig., 2003 WL 21355201, at *2; see also, Arrighi, 2010 WL 4386066, at *6-7.

Finally, some courts found the exception applicable where the plaintiff purposely concealed the true amount-in-controversy to prevent removal. Jones v. Chavez, No. CIV.A. 11-2039, 2012 WL 441251, at *1 (E.D. La. Feb. 10, 2012) ("Despite receiving MRI results showing that the jurisdictional threshold had been met, Plaintiff did not provide the Defendants with this information until seven months after the test was taken, which was approximately a month after the one-year bar on removal had passed.").

The Court has found no solid footing in cases decided since the enactment of the statute. Some cases, including the lone case cited by the Defendants, have held that fraudulent joinder alone can meet the "bad faith" standard. See, Bank of Am., N.A. v. Lebreton, No. CIV 14-0319 JB/KBM, 2015 WL 2226266, at *23 (D.N.M. Apr. 20, 2015) (Browning, J.) (holding that "the addition of the bad-faith exception to the one-year limitation clarifies that the one-year limitation is procedural, rather than jurisdictional, and, thus, extends the applicability of fraudulent-joinder doctrine past the one-year mark."); Aguayo v. AMCO Ins. Co., 59 F.Supp.3d 1225, 1256 (D.N.M. 2014) (Browning, J.) (same). Others require something more akin to bad conduct by the plaintiff. See, In re Zoloft (Sertraline Hydrochloride) Prod. Liab. Litig., No. 12-MD-2342, 2014 WL 2445799, at *3 (E.D. Pa. May 29, 2014) (Rufe, J.) (finding in dicta that defendant's argument that plaintiff lacked a valid claim against defendant was insufficient alone to establish bad faith).

Based on Congress's use of the phrase "bad faith," and the history of the exception prior to its enactment as part of section 1446, and in particular the application of the exception when "manipulation" had occurred, the Court concludes that statutory bad faith requires some sort of intentional misconduct by the plaintiff, not just fraudulent joinder. All of the common law equitable tolling cases cited above have that in common.12 See also, A.S. ex rel. Miller v. SmithKline Beecham Corp., 769 F.3d 204, 211 (3d Cir. 2014) (noting that "[c]ases involving equitable tolling of the one-year time limit often focus on intentional misconduct by the plaintiff"); Barnett v. Sylacauga Autoplex, 973 F.Supp. 1358, 1367 (N.D.Ala. 1997) (Propst, J.) ("[T]he plaintiff's claims are in bad faith if, by [his] actions, [he] attempted to disguise the existence of the removability of the case until the one-year limitation had run."). The Defendants have made no showing of bad faith.

The Court notes that the purpose behind the one-year limitation is to prevent the disruptive removal of cases after substantial progress in the state court had been made. However, if fraudulent joinder alone made a case removable at any time, even after one year from the date the case was filed, the purpose of the limitation would be defeated. A calculating defendant could, itself, "manipulate" jurisdiction by waiting to see how the case progressed in state court before ultimately removing it based on fraudulent joinder. Indeed, in the instant case, discovery has already been completed in the state court, and summary judgment motions have been filed, and, at least as to Barista, ruled upon.

In their briefs, the Defendants argued that they could not have known that the Plaintiff had no claim against Barista until discovery had occurred and the above deposition testimony had been taken.13 However, that alone does not demand the conclusion that the one-year period should be extended. Indeed, that is a regular occurrence in litigation.

At oral argument the Defendants differed form their briefs and argued that it was clear from the date the Complaint was filed that there was no claim against Barista due to the Alabama statute of frauds.14 If that is so, then the case should have been removed within 30 days after service of the Complaint upon these Defendants. 28 U.S.C. § 1446(b)(1). It is unclear exactly when the removing Defendants were served, but it was certainly before June 27, 2016, the day they filed their answer. Giving them the benefit of the doubt, under this argument the latest that they could have removed based upon fraudulent joinder would have been July 27, 2016. This case was not removed until December 13, 2017. (Doc. 1).15

IV. CONCLUSION

Based on the foregoing, the Court finds that the Defendants have not shown bad faith, and their notice of removal was therefore untimely. This matter will be REMANDED.

DONE this 21st day of February, 2018.

ORDER REMANDING CASE

In accordance with the Memorandum Opinion entered contemporaneously herewith, this case is hereby REMANDED to the Circuit Court of Jefferson County, Alabama.