# Aguayo v. AMCO Insurance

> District Court, D. New Mexico · October 31, 2014 · 59 F. Supp. 3d 1225

URL: https://www.frixlaw.com/law-library/cases/7227794

## Case

- **Full name:** John AGUAYO, Sr. Denis Aguayo and John Aguayo, Jr. v. AMCO INSURANCE COMPANY
- **Court:** District Court, D. New Mexico
- **Decided:** October 31, 2014
- **Citations:** 59 F. Supp. 3d 1225; 2014 U.S. Dist. LEXIS 160244; 2014 WL 5859098
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Browning
- **Judges:** Browning
- **Cited by:** 70 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/7227794

## How later opinions describe it (automated extraction)

- finding that a “defendant may introduce direct evidence of the plaintiff’s bad faith at this stage—e.g., electronic mail transmissions in which the plaintiff states that he or she is only keeping the removal spoiler joined to defeat removal—but will not receive discovery or an…
- noting that Congress amended the one-year limitation to clarify that it is procedural by modeling it after--the United States Court of Appeals for the Fifth Circuit’s interpretation in Tedford v. Warner-Lambert Co., 327 F.3d 423, 427 (5th Cir.2003)
- finding that the plaintiffs “did not act in bad faith by keeping the removal- spoiling defendants” because the plaintiffs actively litigated their claims
- noting that Congress amended the one-year limitation to clarify that it is procedural by modeling it after the Fifth Circuit’s interpretation in Tedford v. Warner-Lambert Co., 327 F.3d 423, 427 (5th Cir. 2003)

## Opinion text

MEMORANDUM OPINION AND ORDER
JAMES O. BROWNING, District Judge.
THIS MATTER comes before the Court on the Plaintiffs’ Motion to Remand, filed May 28, 2014 (Doc. 12)(“Motion”). The Court held a hearing on August 7, 2014. The primary issue is whether the Court should grant the Motion and remand this case to state court, because it was pending there for “more than 1 year” at the time of removal; or deny the Motion and keep the case on the ground that the Plaintiffs “acted in bad faith in order to prevent [Defendant AMCO Insurance Company] from removing the action.” 28 U.S.C. § 1446 (c)(1). The Court interprets the bad-faith exception — which is only two years old and which no court has yet comprehensively construed — to require an inquiry into whether the plaintiff kept a removal-spoiling party in the ease only for the purpose of preventing removal. The Court construes this inquiry to entail a two-step standard. First, the Court assesses whether the plaintiff actively litigated its case against the removal spoiler in state court. A finding that the plaintiff did not actively litigate against the removal spoiler constitutes bad faith, and the Court will retain jurisdiction over the case. If, on the other hand, the Court finds that the plaintiff actively litigated against the re *1229 moval spoiler, that finding creates a rebut-table presumption that the plaintiff acted in good faith. Second, the defendant may rebut the good-faith presumption, with evidence already in the defendant’s possession, that the plaintiff kept the removal spoiler in the case to defeat removal; the defendant will not, however, receive discovery or an evidentiary hearing in federal court to obtain such evidence. The Court adopts an expansive view of active litigation: the plaintiff need not expect to recover damages from the removal-spoiling defendant; if the plaintiff keeps the removal spoiler joined to obtain discovery from him or her, to force a settlement, to pressure the removal spoiler to testify on the plaintiffs behalf against other defendants, or to obtain a judgment against the removal spoiler that the plaintiff knows the removal spoiler cannot pay, the Court will consider the plaintiff to have actively litigated against the removal spoiler, and unless the removing defendant'can adduce other evidence of bad faith, such as communications from the plaintiff directly attesting to bad faith, the Court will presume good faith and remand the case. In- this case, the Plaintiffs’ actively litigated both against Defendant Michael Trujillo, whom the Plaintiffs twice deposed, and against Defendants Trace Spoonhoward, the New Mexico State Police (“NMSP”), and the State of New Mexico (collectively, “the State Defendants”), with whom the Plaintiffs settled, thus entitling them to a rebut-table presumption of good faith. AMCO Insurance has introduced no direct or convincing circumstantial evidence of bad faith, and has therefore failed to rebut the presumption. The Court, accordingly, grants the Motion and remands the case to state court.
FACTUAL BACKGROUND
The Court takes its facts from the Third Amended Complaint for Damages, filed in state court December 6, 2013, removed to federal court April 29, 2014 (Doc. 11-8, at 7-22)(“Complaint”). 1 This case arises out of the July, 2010, .murder of a young man, Christopher Aguayo, by another young man, Michael Trujillo, using a gun belonging to Trujillo’s surrogate father, Spoonhoward, an officer with the NMSP. Complaint ¶¶ 12-24, at 3-4. All events occurred in Santa Fe, New Mexico, see Complaint ¶ 2, at 2, and all persons involved are New Mexico citizens with the exception of AMCO Insurance, which is a foreign corporation, 2 see Complaint ¶¶3, 5-11, at 2-3.
Trujillo lived with his mother and Spo-onhoward, who was not Trujillo’s biological father, but to whom Trujillo would commonly refer as his “dad.” Complaint ¶ 23, at 4. See id. ¶ 26 , at 4. Trujillo had disciplinary problems: in 2006, he was caught taking a pellet gun from his home to his school; in 2007, he was involved in a fight with another student at his high school; in 2009, his mother had reported him missing, and, when police found him, they reported that he was “belligerent, verbally abusive and that he referred to an officer as a pig.” Complaint ¶ 27, at 5 (internal quotation marks omitted)(quotation unattributed). See id. ¶¶ 28-29 , at 5. Trujillo’s mother acknowledges that she had “extreme difficulties with her son” and worried that he might be in a gang. Complaint ¶ 28, at 5 (internal quotation marks *1230 omittedXquotation unattributed). See id. ¶ 26 , at 4-5. It is unclear what role Spo-onhoward played in Trujillo’s life over the years, but Spoonhoward was aware of Trujillo’s disciplinary issues and of his possible gang affiliation. See Complaint ¶ 30, at 5.
The,NMSP had issued Spoonhoward a .357 Smith & Wesson pistol. See Complaint ¶ 17, at 3; id. ¶¶ 23-24 , at 4. Pursuant to New Mexico Department of Public Safety (“NMDPS”) policy, Spoonhoward was required to safely secure the firearm at all times, whether he was on-or off-duty. See Complaint ¶¶ 31-32, at 5-6. The policy provides:
When not secured on the officer’s person or other department approved locking storage device or locked truck of an issued service vehicle, officers are to ensure that their service weapon is secured and/or stored in a safe manner; and
The service weapon shall be secured so as to be inaccessible to children or unauthorized personnel at all times.
Cqmplaint ¶ 32, at 6 (quotation unattributed).
Trujillo was able to get his hands on this pistol, and, on July 8, 2010, he had his girlfriend arrange a meeting at the Santa Fe Place Mall between him and C. Aguayo. See Complaint ¶ 12, at 3. Trujillo was angry at C. Aguayo about cellular telephone communications that C. Aguayo had engaged in with Trujillo’s girlfriend, and, when C. Aguayo arrived at the mall, Trujillo drove up to him, got out of the car, and shot him four or five times with the pistol. See Complaint ¶¶ 13-18, at 3. C. Aguayo collapsed to the ground, and Trujillo walked up to within three feet of him and emptied the rest pf the gun’s magazine into C. Aguayo. See Complaint ¶ 18, at 3. Trujillo and his girlfriend fled the scene, but Trujillo was picked up by police less than an hour after the shooting. See Complaint ¶ 19, at 3; id. ¶ 22 , at 4. Immediately upon apprehension, Trujillo told police that he “ha[d] to tell you guys I got the gun from my dad[;] he’s a state cop.” Complaint ¶ 23, at 4.
C. Aguayo was bleeding, and slipping in and out of consciousness, when officers arrived at the scene. See Complaint ¶ 20, at 3. He was in great pain and at one point asked officers to shoot him to end his suffering. See Complaint ¶ 20, at 4. Officers rushed him to the hospital, but, shortly after his arrival, he succumbed to his injuries and died. See Complaint ¶ 21, at 4.
At the time C. Aguayo was murdered, the Aguayo family had an AMCO Insur.ance policy that provided them with uninsured motorist benefits. See Complaint ¶ 60, at 9. Because Trujillo used a vehicle in his commission of the crime, the Aguayo family submitted an insurance claim for the full amount of the policy, limit. See Complaint If 62, at 9. AMCO Insurance denied the claim without interviewing any witnesses or speaking with the Aguayo family. See Complaint ¶¶ 63-64, at 9-10.
PROCEDURAL BACKGROUND
This case involves the Plaintiffs’ Motion to remand the case to state court after AMCO Insurance removed it to federal court, arguing that, because the case was pending in state court “more than 1 year,” AMCO Insurance’s removal was improper. 28 U.S.C. § 1446 (c)(1). AMCO Insurance, for its part, contends that removal was justified under the recently passed bad-faith exception to the one-year limitation, which requires that the Plaintiffs’ actions in state court were “in bad faith in order to prevent a defendant from removing the action.” 28 U.S.C. § 1446 (c)(1). . As such, the relevant background to the resolution of this Motion are the parties’ procedural *1231 actions while litigating this case in state court. The parties vary widely in the motives they ascribe to their own and each other’s actions; the objective facts of how the litigation unfolded, however, are not in dispute.
1. The Plaintiffs File Their Case in State Court.
The Plaintiffs — C. Aguayo’s family members and his personal representative — first filed suit in state court on May 24, 2012, naming Trujillo, Spoonhoward, the NMDPS, and the State of New Mexico as Defendants. See Complaint for Damages, filed in state court May 24, 2012, filed in federal court April 29, 2014 (Doc. 1-1). The Plaintiffs then filed an Amended Complaint for Damages, filed in state court November 18, 2012, filed in federal court April 29, 2014 (Doc. 1-2), which additionally alleged one claim against AMCO Insurance — for a declaratory judgment that AMCO Insurance is obligated to “pay the full measure of any judgment obtained against it.” Amended Complaint for Damages ¶ 60, at 9. See Amended Complaint for Damages ¶¶ 50-60, at 8-9. On November 18, 2013 — exactly one year after naming AMCO Insurance — the Plaintiffs dismissed Spoonhoward from the case, and on December 5, 2013, the Plaintiffs dismissed the State of New Mexico and the NMDPS from the case. See Stipulation of Dismissal with Prejudice of All Claims Against New Mexico Department of Public Safety and State of New Mexico at 1, filed in state court December 5, 2013, filed in federal court April 29, 2014 (Doc. 1-3)(“A11 claims against Defendant Trace Spoonho-ward previously were dismissed with prejudice, by stipulation filed November 18, 2013.”). On December 6, 2013, the Plaintiffs filed their most recent version of the Complaint, which names only Trujillo and AMCO Insurance. See Complaint ¶ 56-84, at 9-12. The Complaint alleges two new claims against AMCO Insurance: “bad faith” and “violations of the insurance code.” Complaint ¶¶ 70-84, at 10-12 (capitalization altered). On April 25, 2014 — six days before the case was set to go to trial in . state court — the Plaintiffs dismissed Trujillo from the case, leaving AMCO Insurance as the only Defendant. See Notice of Dismissal, filed in state court April 25, 2014, filed in federal court April 29, 2014 (Doc. 1-11); Notice of Removal ¶ 11, at 3, filed April 29, 2014 (Doc. 1).
Through all of these filings, the Plaintiffs avoided pleading a specific dollar amount of damages sought. See, e.g., Notice of Removal ¶ 10, at 3. According to an affidavit to which AMCO Insurance’s attorney swore, the Plaintiffs served AMCO Insurance with an offer of settlement on April 22, 2014, offering to dismiss the case. See Attorney’s Affidavit ¶ 4, at 1, filed April 29, 2014 (Doc. 1-5); N.M. Civ. P. 1-068 (providing that parties may make offers of settlement, which are similar to offers of judgment in the federal system, see Fed.R.Civ.P. 68). AMCO Insurance’s attorney states that she cannot provide a copy of the offer of settlement or disclose the exact amount involved, but that it is greater than $225,000.00. See Attorney’s Affidavit ¶ 4, at 1 (citing N.M.R. Evid. 11-408 (providing that offers of settlement cannot be used as evidence)).
2. AMCO Insurance Removes the Case to Federal Court.
On April 29, 2014, two days before the case was set to go to trial in state court, AMCO Insurance removed the case to federal court. See Notice of Removal at 1. It asserts diversity jurisdiction, noting that, once Trujillo was dismissed, there is complete diversity between the Plaintiffs — all New Mexico citizens — and AMCO Insurance, an Iowa citizen. See Notice of Removal ¶ 12, at 3; id. ¶¶ 13-15 , at 4. See *1232 also note 2, supra, at 1229-30. It further asserts that it has met its burden in proving satisfaction of the amount-in-controversy requirement by pointing to the offer of judgment, in which the Plaintiffs seek more than $75,000.00 in damages. See Notice of Removal ¶¶ 18-19, at 5 (citing McPhail v. Deere & Co., 529 F.3d 947, 956 (10th Cir.2008))(“Documents that demonstrate a plaintiffs own estimation of the claim’s value are a proper means of supporting the allegations in the notice of removal.”).
Rather than wait for the inevitable motion to remand, AMCO Insurance preemptively addresses the timeliness of its removal. See Notice of Removal ¶ 12, at 3-4; id. ¶¶ 16-17, at 4-5; id. ¶¶ 20-39, at 5-10. It acknowledges that “removal must ordinarily be sought ... within one year of the initiation of the action,” but contends “th[at] requirement ] do[es] not apply where the plaintiffs have acted in bad faith in order to prevent removal.” Notice of Removal ¶ 12, at 3-4 (citing 28 U.S.C. § 1446 (c)(1)). AMCO Insurance alleges that the “Plaintiffs have employed a variety of procedural machinations in order to thwart removal” in light of the complete-diversity requirement. See Notice of Removal ¶ 12, at 4.
AMCO Insurance’s argument is that: (i) the claims against Spoonhoward, NMDPS, and the State of New Mexico never had anything to do with AMCO Insurance, and, therefore, only Trujillo’s presence in the case made AMCO Insurance a proper party; and (ii) the Plaintiffs' kept Trujillo in the case for over a year, never intending to take him to trial, for the purpose of defeating complete diversity and keeping the case in state court. As to the first part of its two-part argument, AMCO Insurance essentially just asserts it to be true:
Plaintiffs’ claims against Defendants Spoonhoward, NMDPS and the State were unrelated to any claims against AMCO.
Plaintiffs’ claims against Defendants Spoonhoward, NMDPS and the State would have been subject to dismissal under the doctrine of fraudulent joinder, had claims against Defendant Trujillo not already been pending. See Salisbury v. Purdue Pharma, LP, 166 F.Supp.2d 546, 548 (E.D.Ky.2001) (fraudulent joinder is applicable “when the plaintiff joins a defendant who has no joint, several, or alternative liability with a diverse defendant (and there is no nexus between the claims against the diverse and non-diverse defendant)” (citation omitted)).
Notice of Removal ¶ 21, at 6 & n. 2.
As to the second part, AMCO Insurance points to evidence that it says provides circumstantial proof of the Plaintiffs’ intent, including that the Plaintiffs were lethargic in pursuing their claims against Trujillo throughout the case’s lifespan and that the Plaintiffs continually hid the ball with regard to the amount of damages sought. AMCO Insurance notes that the Plaintiffs failed to serve a summons on Trujillo until September 11, 2012, and attaches an exhibit proving the date of service. See Notice of Removal ¶ 24, at 6; Summons to Michael Trujillo at 2, filed in state court September 14, 2014, filed in federal court April 29, 2014 (Doc. 1-12). It also notes that Trujillo was required to file an answer to the Complaint within thirty days of the Complaint’s filing— which he still has not done; that the Plaintiffs were entitled to a default judgment against Trujillo as early as October 12, 2012; and that the Plaintiffs did not seek a default judgment until April 9, 2014. See Notice of Removal ¶¶ 23, 25-26, at 6. See also Motion for Default Judgment, filed in state court April 9, 2014, filed in federal *1233 court April 29, 2014 (Doc. 1-9). AMCO Insurance further notes that the Plaintiffs never sought written discovery on Trujillo, nor did they inquire about his assets. See Notice of Removal ¶¶ 27-28, at 6-7. Most obviously, AMCO Insurance points to the Plaintiffs’ voluntary dismissing Trujillo from the case six days before trial. See Notice of Removal ¶ 30, at 7.
AMCO Insurance argues that, “[wjith its amendment effective January 6, 2012, 28 U.S.C. § 1446 (c)(1) now recognizes the right of a defendant to remove an action kept out of federal court for more than one year by bad-faith conduct of plaintiffs,” and that “[t]he comments to the amendment indicate that it is intended to apply in circumstances such as those at bar.” Notice of Removal ¶¶ 33-34, at 8. It asserts that, because of the amendment’s recentness, “there is a dearth of circuit-level authority construing the scope of ‘bad faith,’ ” but it cites to a district court opinion, Lawson v. Parker Hannifin Corp., No. CIV 13-0923-O, 2014 WL 1158880 (N.D.Tex. Mar. 20, 2014) (O’Connor, J.), which AMCO Insurance says supports its argument.
[T]he court found sufficient ground to apply the “bad-faith” exception to the one-year rule where the plaintiff “did not take a default judgment against Hanlon [the nondiverse defendant] when he failed to timely file an answer in the State Court action ..., never served Hanlon with any discovery, ... non-suited Hanlon approximately one year and three months following the expiration of the one-year removal deadline ... [did not require] Hanlon to pay any money to Plaintiff to settle her allegedly egregious claim against him [and] took her nonsuit against Hanlon less than five weeks before the existing trial date.” Lawson , at *5 (citing Shiver v. Sprintcom, Inc., 167 F.Supp.2d 962, 963 (S.D.Tex.2001) to show that, even before the amendment to 28 U.S.C. § 1446 (c)(1), a federal court would refuse to remand where the defendant removed the case outside one-year period when the plaintiff dismissed the only nondiverse defendant on the eve of trial).
See Notice of Removal ¶ 36, at 8-9. AMCO Insurance criticizes the “Plaintiffs’ stated justification for dismissing Trujillo,” arguing that, in reality, the Plaintiffs dismissed him from the case because he is judgment-proof. See Notice of Removal ¶ 37, at 9. AMCO Insurance asserts that the Plaintiffs knew from the inception of the case that Trujillo is incarcerated for murder and is extremely unlikely to have assets worth suing to collect. See Notice of Removal ¶ 37, at 9. AMCO Insurance concludes its Notice of Removal by setting forth that it has complied with all the formalities of the removal procedure. See Notice of Removal ¶¶ 40-44, at 10-11.
3. The Parties Submit Their Briefing on the Motion.
Within a month of removal, the Plaintiffs filed their Motion to remand the case back to state court. See Motion at 1. The Plaintiffs first contend that “there is a presumption against removal,” Motion at 10 (citing Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.1995)), which “requires a federal court ‘to ... narrowly construe removal statutes,’ ” Motion at 10 (omission in original)(quoting Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1095 (10th Cir.2005)). They then move to their substantive arguments, first contending that — even putting Trujillo aside — each of the State Defendants would, on their own, suffice to defeat com-píete diversity. See Motion at 11-15. Here, the Court suspects that the Plaintiffs have misapprehended AMCO Insurance’s argument. They argue strenuously that their naming of State Defendants was not done in bad faith, nor was it done to *1234 defeat diversity. See Motion at 11-15. To their credit, they present strong evidence to this effect, noting that each of the State Defendants settled out of the case — and were not merely dismissed as the Notice of Removal suggests. See Motion at 12. AMCO Insurance never argues, however, that the State Defendants were named in bad faith; rather, its argument is that, were Trujillo not named in the suit, the Plaintiffs would have no basis for joining AMCO Insurance. See Notice of Removal ¶ 21, at 6 & n. 2. The Plaintiffs address this argument, as well, albeit secondarily:
Recognizing that it cannot make a valid claim that the Aguayos somehow manipulated the State defendants to defeat diversity, AMCO drops a footnote argu-ing that the Aguayosf] claims against the State defendants “would have been subject to dismissal under the doctrine of fraudulent joinder had claims against Defendant Trujillo not already been pending.” Notice of Removal ¶ 21, at 6 n. 2. This is not so. As this Court has recognized, the standard for fraudulent joinder is “whether the defendant has demonstrated that there is no possibility that the plaintiff will recover against an in-state defendant.” Flores-Duenas v. Briones, No. CIV 13-0660 JB/CG, 2013 WL 6503537 , at *22 (D.N.M. Dec. 1, 2013) (Browning, J.). The burden is on AMCO to make this showing. Ullman v. Safeway Ins. Co. [ 995 F.Supp.2d 1196, 1227 ] (D.N.M.2013) (Browning, J.) (“The party asserting fraudulent joinder bears the burden of proof.” (citations omitted)). This burden is a heavy one and presents a high hurdle to the party making the assertion. Dutcher v. Matheson, 733 F.3d 980 (10th Cir.2013); Ullman [ 995 F.Supp.2d at 1227 ], 2013 U.S. Dist. LEXIS 184761, at *83 (citing Montano v. Allstate Indemnity Co. [ 2000 WL 525592 , at *1], 2000 U.S.App. LEXIS 6852, at *1 (10th Cir.2000) (“The case law places a heavy burden on the party asserting fraudulent joinder.”)). The analysis turns on “whether there is a reasonable basis to believe the plaintiff might succeed in at least one claim against the non-diverse defendant.” Nerad v. AstraZeneca Pharms., Inc., 203 Fed.Appx. 911, 913 (10th Cir.2006).
Motion at 14.
The Plaintiffs also counter AMCO Insurance’s contention that it joined Trujillo in bad faith. See Motion at 15-18. They note that AMCO Insurance’s assertion that they did not take written discovery, while true, ignores the fact that they deposed him — in fact, Trujillo initially asserted privilege, the Plaintiffs obtained a court order compelling testimony, and then they deposed him a second time. See Motion at 16 (citing Order Granting Plaintiffs’ Motion to Compel Deposition Testimony and Denying Michael Trujillo’s Motion for Protective Order, filed in state court November 27, 2013, filed in federal court May 16, 2014 (Doc. 11-15, at 38-39)). The Plaintiffs assert that “there was little need for extensive discovery as to Mr. Trujillo’s conduct, because there is no dispute that he killed Christopher Aguayo.” Motion at 16. The Plaintiffs explain their delay in serving Trujillo by contending that they could not locate where he was incarcerated while awaiting his criminal trial. See Motion at 17. They assert that they attended his sentencing hearing, where they learned that he would serve his time at the juvenile detention center in Albuquerque, New Mexico. See Motion at 17. Last, they address their reasons for dismissing Trujillo from the case: “That decision was recognition of the fact that Mr. Trujillo was not going to be able to pay any judgment obtained, ... that chasing ... Chris’s murderer for the rest of their lives to extract money would be an exercise in futility ... [, and] continued contact with *1235 Mr. Trujillo was likely to prolong the grief associated with Chris’s death.” Motion at 18. They also state that the death of Trujillo’s sister played a role in their decision, as they did not "wish to “us[e the] litigation to try and punish Mr. Trujillo or his family.” Motion at 18.
The Plaintiffs also counter AMCO Insurance’s contention that it was not aware that the amount in controversy exceeded the jurisdictional minimum until the Plaintiffs sent their offer of settlement. See Motion at 18-19. They assert that “[o]n October 16, 2013 ... the Aguayos had. told AMCO it would take multiples of the policy limits at issue to settle this case, and that[,] if mediation were to be produetive[,] an ‘opening offer’ of policy limits would be required.” Motion at 19. They argue that “[s]ection 1446(b)(3) provides that ‘notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case in one which is or has become removable,” and that several months passed between AMCO Insurance gaining this knowledge and it filing removal. Motion at 19. The Plaintiffs conclude their Motion by requesting fees and costs associated with filing the “objectively unreasonable” removal. Motion at 20-21 (citing 28 U.S.C. § 1447 (c)).
AMCO Insurance responded to the Motion less than two weeks later. See Defendant’s Response to Plaintiffs Motion to Remand, filed June 10, 2014 (Doc. 15) (“Response”). After some unusually colorful opening language, AMCO Insurance characterized the statutory bad-faith exception to the one-year removal rule: “The amendment standardized an inconsistency among circuits, as the majority already applied an equitable exception to the one-year requirement and allowed removal after a year where plaintiffs had acted in bad faith to defeat diversity.” Response at 2 (citing Wilson v. Gen. Motors Corp., 888 F.2d 779, 781 (11th Cir.1989); Barnett v. Sylacauga Autoplex, 973 F.Supp. 1358 (N.D.Ala.1997); Kinabrew v. Emco-Wheaton, Inc., 936 F.Supp. 351 , 351 nn. 1-2 (M.D.La.1996)). It asserts that the amendment represents “a legislative recognition that ‘[sjtrict application of the one-year limit would encourage plaintiffs to join nondiverse defendants for 366 days simply to avoid federal court, thereby undermining the very purpose of diversity jurisdiction.’ ” Response at 2 (alteration in Response)(quoting Tedford v. Warner-Lambert Co., 327 F.3d 423, 427 (5th Cir.2003) (“T edford” )). AMCO Insurance also contends that, whatever bad faith means in this context, it cannot be the case that the Court must rely on the Plaintiffs’ own representation about the purposes behind their actions. See Response at 4 & n. 1 (citing Forth v. Diversey Corp., No. CIV 13-0808 A, 2013 WL 6096528 , at *3 (W.D.N.Y. Nov. 20, 2013) (“Since it would be extraordinary for a party directly to admit a ‘bad faith’ intention, his motive must of necessity be ascertained from circumstantial evidence.”)).
AMCO Insurance also attempts to distinguish what it says is the Plaintiffs’ characterization of its removal argument — that Trujillo was never a proper party to the case — from its actual argument — that Trujillo was improperly maintained as a party all the way until immediately before trial. See Response at 4. AMCO Insurance contends that, “[i]n the roughly one page in which Plaintiffs acknowledge in any way the length of time they kept Trujillo in the case, they provide supposed reasons for dismissing their claims against Trujillo, but they provide no reason whatsoever for their failure to dismiss those claims until the eve of trial.” Response at 4 (emphasis in original). AMCO Insurance asserts *1236 that the Plaintiffs’ contention that they only realized that it would be unprofitable to take Trujillo to trial six days before the trial “strains credulity to the breaking point.” Response at 5. AMCO Insurance makes a similar argument with regard to the various emotional reasons that the Plaintiffs give for dismissing Trujillo, questioning why these reasons failed to induce them to dismiss Trujillo until the very last minute before trial. See Response at 5.
AMCO Insurance also argues that the dismissals of the State Defendants were “suspiciously timed.” Response at 8 (emphasis omitted)(capitalization altered). They highlight that the Plaintiffs dismissed Spoonhoward exactly one year following their joinder of AMCO Insurance and that they dismissed the other State Defendants the day before amending their complaint to seek money damages against AMCO Insurance. See Response at 8. AMCO Insurance concedes that the State Defendants settled out of the case, but asserts that “the settlement was reached October 2013, approximately six weeks before the dismissals were completed.” Response at 9 (emphasis in original). AMCO Insurance states that, “[wjhile it is not unheard-of that post-mediation negotiations can take a month or more, Plaintiffs cannot credibly deny that the timing of the dismissals is nonetheless dubious.” Response at 9.
The Plaintiffs replied to the Response less than three weeks later. See Plaintiffs’ Reply in Support of Their Motion to Remand, filed June 27,'2014 (Doc. 23)(“Re-ply”). They first address AMCO Insurance’s contention that there was suspicious delay between when the Plaintiffs reached a settlement agreement with the State Defendants and when the State Defendants were dismissed from the case. See Response at 3. The Plaintiffs assert that “it was the State defendants’ counsel, Mr. [Michael] Dickman, and not the Aguayos’ counsel, that drafted and filed each of the dismissals.” Response at 3 (footnote omitted). The Plaintiffs contend that this distinction is important, because, once one knows that it was the State Defendants who drafted and filed the dismissals, it becomes clear that the Plaintiffs could not have been delaying their dismissal absent a conspiracy. See Response at 3.
The Plaintiffs next defend their contention that they did not initiate or maintain their action against Trujillo in an attempt to defeat diversity. See Response at 6-8. They argue that there is no reason “why the Aguayos would retain a damages expert after AMCO was added as a party to this case if they did not intend to pursue their claims against Mr. Trujillo.” Response at 6 (emphasis in original)(citing Plaintiff John Aguayo Sr.’s Third Supplemental Responses and Objections to Defendant AMCO Insurance Company’s Interrogatories and Requests for Production, filed June, 27, 2014 (Doc. 23)). The Plaintiff assert that
AMCO is inconsistent in presenting its false accusations. For example, in addressing the commonsense notion that if the Aguayos had not intended to seek damages against Mr. Trujillo there would have been no need to name him as a party, AMCO[ ] states “Trujillo was a teenager incarcerated for murder; Plaintiffs could never have viewed him as a viable source of recovery.” Response at 5. However, only one page later in its response AMCO chastises the Aguayos for failing to inquire as to Mr. Trujillo’s ability to pay a judgment. Response at 6-7. Similarly, AMCO argues that the initial identification of Mr. Trujillo as a party to this matter is immaterial because “the central thrust” of its notice of removal is “not that Plaintiffs improperly sued Trujillo in the first in *1237 stance; AMCO’s point is that Plaintiffs maintained their claims against Trujillo until the eleventh hour.” Response at 4. Yet, AMCO subsequently argues that the Aguayos inclusion of Mr. Trujillo as a party was done with the intent “to defeat federal diversity jurisdiction once they named their insurer as a defendant.” Response at 5.
Response at 7 n. 3.
The Plaintiffs do not set forth the appropriate legal standard for the Court to apply, but they distinguish AMCO Insurance’s cases. See Response at 9-11. They argue that Lawson v. Parker Hannifin Corp., the case upon which AMCO Insurance relies most heavily, is distinguishable, because in that case, the plaintiff “promised the court in a verified motion that she would diligently prosecute her action, but took no steps to move the case forward.” Reply at 10. They contend that Forth v. Diversey is distinguishable for similar reasons:
There, the district court found compelling the plaintiffs unfulfilled promise to dismiss a defendant he knew was not a proper party. The court noted that the plaintiffs explanation for reneging on his commitment was that the plaintiff claimed he needed more discovery, but that the plaintiff refused the defendant’s offer to sit for a deposition.
Reply at 10.
4. The Court Holds a Hearing on the Motion.
The Court held its hearing on August 7, 2014. See Transcript of Hearing (taken August 7, 2014)(“Tr.”). 3 The Court began the hearing by noting that it had been faced with a similar motion to remand— relying on the new bad-faith exception in 28 U.S.C. § 1446 (c)(1) — in Peshlakai v. Ruiz, No. CIV 13-0752 JB/ACT (D.N.M. 2013) (Browning, J.). See Tr. at 2:3-19 (Court). The Court noted that, although in that case the plaintiffs ultimately decided to withdraw their motion to remand and try their case in front of the Court, it had some experience wrestling with the statute’s meaning, and it would take some work to ascertain what Congress meant for the exception’s scope to be. 4 See Tr. at 2:15-3:23 (Court).
The parties kept their presentations brief. AMCO Insurance stated that its argument focuses on the “plain text of the statute!,] which requires an intent by the plaintiffs to try and ... defeat diversity jurisdiction.” Tr. at 4:16-18 (Garcia). The Court asked how it could give content to the bad-faith exception and “still somewhat respect the plaintiffs "ability to be master of his or her complaint and where they want to litigate the case.” Tr. at 6:4-8 (Court). AMCO Insurance acknowledged that “it is generally correct that plaintiffs try to stay out of Federal Court,” Tr. at 6:10-11 (Garcia), but that the test should be “whether there was any motivation ... more than just this generalized desire ... to stay out of Federal Court,” Tr. at 6:19-21 (Court).
The Court noted that, when it addressed the issue in Peshlakai v. Ruiz, “not a *1238 single district court had interpreted this” statutory exception. Tr. at 6:25-7:1 (Court). AMCO Insurance first contended that, regardless of the proper substantive standard, the Court should use a preponderance of the evidence standard to evaluate the evidence of bad faith. See Tr. at 7:5-14 (Garcia). It noted, however, that at least one court had applied a clear-and-convincing standard to the question of bad faith. See Tr. at 7:17-20 (Garcia)(referring to Forth v. Diversey Corp., 2013 WL 6096528 ).
The Plaintiffs elaborated on their assertion in the Reply that the delay in dismissing the State Defendants was attributable to the State Defendants. See Tr. 10:22-14:4 (Garcia, Court). The Plaintiffs stated that the dismissal was entered as soon as the State Defendants produced the settlement check. See Tr. at 14:1M: (Garcia). The Plaintiffs also noted that Trujillo had counsel, and that Trujillo’s counsel and mother contributed to the delay in seeking discovery from and ultimately dismissing Trujillo. See Tr. at 15:14-25 (Garcia). The Plaintiffs also reiterated that they were in no rush to seek discovery from Trujillo, both because he was incarcerated and because “[tjhere was no dispute as to liability.”. Tr. at 15:22-25 (Garcia). The Plaintiffs repeated their assertions that they deposed Trujillo twice — because he invoked the Fifth Amendment to the Constitution of the United States on their first attempt to depose him — and that he did not oppose a default motion filed against him. See Tr. at 17:21-25 (Garcia). Last, the Plaintiffs asserted that dismissing defendants on the eve of trial is standard issue narrowing and does not reflect an intent to circumvent federal jurisdiction. See Tr. at 19:2-7 (Garcia)(“I don’t think that’s unusual. Every trial I’ve been involved with people pa[re] down their cases, claims, et cetera, in order to have a streamlined trial.”).
AMCO Insurance argued that, in its view, the statute is not “talking about unethical conduct” when it refers to bad faith. Tr. at 21:22-24 (Wesner). AMCO Insurance stated that it had looked at the amendment’s legislative history and that it indicates that Congress intended the bad-faith exception to be a codification of the equitable exception that had developed in the case law before the amendment’s passage. See Tr. at 22:21-23:16 (Wesner, Court). The Court asked whether there was “any problem with naming Trujillo” in the first instance, and AMCO Insurance answered that there was not. Tr. at 25:7-10 (Court, Wesner). AMCO Insurance then argued:
There are two points in the time line I think where that becomes relevant. First is when they’ve let out the other state defendants and this becomes a case clearly where they’re looking to Amco for their recovery. At that point there was no articulable reason to keep Trujillo in the case they knew he had no assets they knew they were looking for Amco for all their recovery and the only reason that makes any sense to keep him in the case at that point was to stay out of Federal Court.
Tr. at 26:5-14 (Wesner). AMCO Insurance also clarified that it could not remove the action earlier than it did, because, unlike fraudulent joinder, the bad-faith exception is an exception only to the one-year limitation, and not to complete diversity — meaning that it could not remove the case until Trujillo was dismissed. See Tr. at 28:19-30:23 (Wesner, Court). The Court accepted this explanation. See Tr. at 30:21-25 (Wesner, Court)(“MR. WES-NER: I’m not aware of a doctrine on which you can argue bad faith keeping a defendant in the case who is still in the case. THE COURT: You may be right. You may be right.”).
*1239 AMCO Insurance concluded by summarizing its argument:
THE COURT: All right. ' What is your bad faith argument? Is it I guess just the dismissal of Mr. Trujillo and the timing of it or is it also the delay in the dismissal of the stipulations as to the state defendants!?]
MR. WESNER: We raised a couple other factors in the briefing. We raised the timing of their dismissal of the state defendants The first amended complaint against A[MOO], in which they first brought A[MCO] in the case was November 18, 2012. Their dismissal of defendant Spoonhoward was November 18, 2018. Now, we can’t read their minds. [W]e know all we have to go on in these eases is circumstantial evidence.... The Court in [Forth v. Diversey Corp.] noted that it would be extraordinary for a party directly to admit a bad faith intention. His motive must of necessity be ascertained from circumstantial evidence. And for while we think the center piece of our argument removing this case to federal court is that they kept Michael Trujillo in the case knowing that they couldn’t recover anything against him right up until the [e]ve of trial. We think there is' other circumstantial evidence that the plaintiffs wanted to keep this case out of federal [e]ourt. They did let the state defendants out with some ... suspicious timing. Another element is failure to disclose the amount in controversy and it’s come up in the briefing that we had every reason to suspect that the plaintiffs were seeking more than if the jurisdictional amount in controversy and that’s true, we did suspect that but they didn’t unequivocally state the amount they were seeking until their offer of judgment, which was not until April 22, before a May 5th trial date. Up until then we served discovery, plaintiffs responded to discovery on April 1st and refused to identify the amount they were seeking. So the amount in controversy, the timing of the state defendant dismissals, that’s circumstantial evidence. But the real clincher, the point and I think the one factor that would stand alone without any shenanigans with the amount in controversy without any suspicious timing on the state dismissals we would still be having these arguments just because they kept Michael Trujillo in the case without [ — ]
THE COURT: So that’s the big issue for you[?]
MR. WESNER: Yes, it is, Your Hon- or.
Tr. at 31:12-33:10 (Court, Wesner).
The Court stated that it was not prepared to rule from the bench, as it wanted to flesh out the meaning of bad faith before applying it; the Court also noted that, however it ended up defining the exception, it doubted that this case would qualify for the exception, and, thus, it was likely to remand the case. See Tr. at 44:20-45:17 (Court).
LAW REGARDING DIVERSITY JURISDICTION
“Subject-matter jurisdiction under 28 U.S.C. § 1332 (a)(1) requires: (i) complete diversity among the parties; and (ii) that ‘the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.’ ” 5 Thompson v. Intel Corp., No. *1240 CIV 12-0620 JB/LFG, 2012 WL 3860748 , at *12 (D.N.M. Aug. 27, 2012) (Browning, J.) (citing 28 U.S.C. § 1332 (a)). As the Court has previously explained, “[t]he Supreme Court of the United States has described this statutory diversity requirement as ‘complete diversity,’ and it is present only when no party on one side of a dispute shares citizenship with any party on the other side of a dispute.” McEntire v. Kmart Corp., No. CIV 09-0567 JB/LAM, 2010 WL 553443 , at *3 (D.N.M. Feb. 9, 2010) (Browning, J.) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 267-68 , 2 L.Ed. 435 (1806); McPhail v. Deere & Co., 529 F.3d 947, 951 (10th Cir.2008)). The amount-in-controversy requirement is an “estimate of the amount that will be put at issue in the course of the litigation.” Valdez v. Metro. Prop. & Cas. Ins. Co., 867 F.Supp.2d 1143, 1162 (D.N.M.2012) (Browning, J.) (citing McPhail v. Deere & Co., 529 F.3d at 956 ). The Court will discuss the two requirements in turn.
1. Diversity of Citizenship.
For diversity jurisdiction purposes, citizenship is determined by a person’s domicile. See Crowley v. Glaze, 710 F.2d 676, 678 (10th Cir.1983). “A person’s domicile *1241 is defined as the place in which the party has a residence in fact and an intent to remain indefinitely, as of the time of the filing of the.lawsuit.” McEntire v. Kmart Corp., 2010 WL 553443 , at *3 (citing Crowley v. Glaze, 710 F.2d at 678 ). See Freeport-McMoRan, Inc. v. KN Energy, Inc., 498 U.S. 426, 428 , 111 S.Ct. 858 , 112 L.Ed.2d 951 (1991) (holding that diversity jurisdiction is assessed as of the time at which the suit is filed). If neither a person’s residence nor the location where the person has an intent to remain can be established, the person’s domicile is that of his or her parents at the time of the person’s birth. See Gates v. Comm’r of Internal Revenue, 199 F.2d 291, 294 (10th Cir.1952) (“[T]he law assigns to every child at its birth a domicile of origin. The domicile of origin which the law attributes to an individual is the domicile of his parents. It continues until another domicile is lawfully acquired.”). Additionally, “while residence and citizenship are not the same, a person’s place of residence is prima facie evidence of his or her citizenship.” McEntire v. Kmart Corp., 2010 WL 553443 , at *3 (citing State Farm Mut. Auto. Ins. Co. v. Dyer, 19 F.3d 514, 520 (10th Cir.1994)). A corporation, on the other hand, is “deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.” Gadlin v. Sybron Int’l Corp., 222 F.3d 797, 799 (10th Cir.2000) (quoting 28 U.S.C. § 1332 (c)(1)).
2. Amount in Controversy.
The amount-in-controversy requirement, which presently stands at $75,000.00, must be satisfied as between a single plaintiff and a single defendant for a federal district court to have original jurisdiction over the dispute; “a plaintiff cannot aggregate independent claims against multiple defendants to satisfy the amount-in-controversy requirement,” nor can multiple plaintiffs aggregate their claims against a single defendant to exceed the threshold. Martinez v. Martinez, No. CIV 09-0281 JB/KBM, 2010 WL 1608884 , at *18 (D.N.M. Mar. 30, 2010) (Browning, J.). If multiple defendants are jointly liable, or jointly and severally liable, on some of the claims, however, the amounts of those claims may be aggregated to satisfy the amount-in-controversy requirement as to all defendants jointly liable for the claims. See Alberty v. W. Sur. Co., 249 F.2d 537, 538 (10th Cir.1957); Martinez v. Martinez, 2010 WL 1608884 , at *18. Similarly, multiple plaintiffs may aggregate the amounts of their claims against a single defendant if the claims are not “separate and distinct.” Martin v. Franklin Capital Corp., 251 F.3d 1284, 1292 (10th Cir.2001) (Seymour, C.J.). Multiple claims by the same plaintiff against the same defendant may be aggregated, even if the claims are entirely unrelated. See 14AA Charles A. Wright, Arthur R. Miller, Edward H. Cooper, Vikram D. Amar, Richard D. Freer, Helen Hershkoff, Joan E. Steinman & Catherine T. Struve, Federal Practice and Procedure, Jurisdiction § 3704 (4th ed.). While the rules on aggregation sound complicated, they are not in practice: if a single plaintiff—regardless whether he or she is the only plaintiff who will share in the recovery—can recover over $75,000.00 from a single defendant—regardless whether the defendant has jointly liable co-defendants—then the court has original jurisdiction over the dispute between that plaintiff and that defendant. The court can then exercise supplemental jurisdiction over other claims and parties that “form part of the same case or controversy under Article III,” 28 U.S.C. § 1367 (a), meaning that they “derive from a common nucleus or operative fact,” United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 , 86 S.Ct. 1130 , 16 L.Ed.2d 218 (1966).
*1242 Satisfaction of the amount-in-controversy requirement must be established by a preponderance of the evidence. See McPhail v. Deere & Co., 529 F.3d at 953 . In the context of establishing an amount-in-controversy, the defendant seeking removal could appear to be bound by the plaintiffs chosen amount of damages in the complaint, which would seem to allow a plaintiff to avoid federal jurisdiction “merely by declining to allege the jurisdictional amount [in controversy].” McPhail v. Deere & Co., 529 F.3d at 955 . The Tenth Circuit’s decision in McPhail v. Deere & Co. has foreclosed such an option from a plaintiff who wishes to remain in state court. McPhail v. Deere & Co. holds that a defendant’s burden in establishing jurisdictional facts is met if the defendant proves “jurisdictional facts that make it possible that $75,000 is in play.” McPhail v. Deere & Co., 529 F.3d at 955 .
In McPhail v. Deere & Co., the Tenth Circuit relied on the United States Court of Appeals for the Seventh Circuit’s decision in Meridian Securities Insurance Co. v. Sadowski in which the Honorable Frank H. Easterbrook, United States Circuit Judge, explained how a removing defendant asserting diversity jurisdiction in the face of a silent complaint might proceed:
[T]he removing defendant, as proponent of federal jurisdiction, must establish what the plaintiff stands to recover. We have suggested several ways in which this may be done—by contentions, interrogatories or admissions in state court; by calculation from the complaint’s allegations[;] by reference to the plaintiffs informal estimates or settlement demands[;] or by introducing evidence, in the form of affidavits from the defen-. dant’s employees or experts, about how much it would cost to satisfy the plaintiffs demands. The list is not exclusive; any given proponent of federal jurisdiction may find a better way to establish what .the controversy between the parties amounts to, and this demonstration may be made from either side’s viewpoint (what a judgment would be worth to the plaintiff, or what compliance with an injunction would cost the defendant). Once the estimate has been made—and contested factual allegations that support the estimate have been established in a hearing under Rule 12(b)(1) by admissible evidence ... then ... the case stays in federal court unless it is legally certain that the controversy is worth less than the jurisdictional minimum.
Meridian Sec. Ins. Co. v. Sadowski 441 F.3d at 541-42 (citations omitted). The Tenth Circuit adopted the Seventh Circuit’s reasoning, stating:
Meridian eliminates the double standard that would come from misunderstanding what “preponderance of the evidence” requires. The proponent of federal jurisdiction must prove contested facts; and because a defendant has no control over the complaint, he cannot put a large sum of money in controversy simply by demanding it, as a plaintiff often can. But once those underlying facts are proven, a defendant (like a plaintiff) is entitled to stay in federal court unless it is “legally certain” that less than $75,000 is at stake.
McPhail v. Deere & Co., 529 F.3d at 954 . Thus, a defendant removing a matter to federal court has met his or her burden in proving the amount-in-controversy requirement if the defendant has proved any contested facts regarding the amount-in-controversy, and the amount-in-controversy is not legally certain to be less than $75,000.00.
As the Court has previously explained, “[i]n the absence of an explicit demand for more than $75,000.00, the defendant must *1243 show how much is in controversy through other means.” Salazar v. GEICO Ins. Co., No. CIV 10-0118 JB/RLP, 2010 WL 2292930 , at *3 (D.N.M. Apr. 27, 2010) (Browning, J.) (citing McPhail v. Deere & Co., 529 F.3d at 955 ). The Tenth Circuit has identified the means upon which a defendant may rely to show how much is in controversy: (i) the defendant may rely on an estimate of the potential damages from the allegations in the complaint; (ii) the defendant may rely on other documentation to provide a basis for determining the amount in controversy, such as interrogatories obtained in the state court before removal, affidavits, or other evidence submitted in federal court afterward; and (iii) the defendant may rely on the plaintiffs proposed settlement amount if it appears to reflect a reasonable estimate of the plaintiffs claim, because the plaintiffs own estimation of its claim is a proper means of supporting the allegations in the notice of removal. See Salazar v. GEICO, 2010 WL 2292930 , at *3 (citing McPhail v. Deere & Co., 529 F.3d at 956 ). In McPhail v. Deere & Co., the Tenth Circuit found that the defendant met its burden to support diversity jurisdiction where the plaintiffs complaint was silent on the amount in controversy. In its notice of removal, the defendant represented that the amount in controversy exceeded $75,000.00, and incorporated electronic-mail messages and letters of conversations between the parties’ attorneys discussing the value of the claim. The defendant’s counsel interpreted the conversation . as meaning that the plaintiff was seeking more than $75,000.00, but the plaintiffs counsel refused to concede an amount in controversy in excess of $75,000.00, stating “it may very well be” that the amount in controversy would exceed $75,000.00. 529 F.3d at 957 . The Tenth Circuit found that the background information provided enough supplementary information for the district court to conclude that it was not legally certain that the plaintiff would recover an amount less than $75,000.00. See 529 F.3d at 957 . In so ruling, the Tenth Circuit gave the example of a case in which a defendant has allegedly breached a contract and the plaintiff seeks damages in an indeterminate amount. The Tenth Circuit suggested that “a defendant might support jurisdiction by attaching a copy of the contract, valued at more than $75,000, to the notice of removal.” 529 F.3d at 956 .
An example of an amount-in-eontroversy which is not legally certain to reach $75,000.00 is seen in Martin v. Franklin Capital Corp., 251 F.3d 1284 (10th Cir.2001). See 251 F.3d at 1291 . In Martin v. Franklin Capital Corp., the defendant’s notice of removal totaled up all of the dollar figures in the plaintiffs complaint, but some of the dollar amounts were considered background information that were not linked to the plaintiffs attempts to recover damages. See 251 F.3d at 1291 . Because the Tenth Circuit found that the defendant’s notice of removal depended on an erroneous “construction of the [plaintiffs] pleading,” the Tenth Circuit held that the amount-in-controversy requirement was not met. 251 F.3d at 1291 .
LAW REGARDING SUPPLEMENTAL JURISDICTION
It is a fundamental precept of American law that the federal courts are “courts of limited jurisdiction.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 , 125 S.Ct. 2611 , 162 L.Ed.2d 502 (2005). Federal courts “possess only that power authorized by [the] Constitution and statute.... ” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 , 114 S.Ct. 1673 , 128 L.Ed.2d 391 (1994). Among the powers that Congress has bestowed upon the courts is the power to hear controversies arising under federal *1244 law — federal-question jurisdiction — and controversies arising between citizens of different states — diversity jurisdiction. See 28 U.S.C. §§ 1331-32 . Section 1367 additionally grants the federal courts power to hear claims over which the court lacks original jurisdiction, if those claims are part of the same constitutional case - as claims over which the court has original jurisdiction. See 28 U.S.C. § 1367 (a).
1. Congressional Authority to Exercise Supplemental Jurisdiction.
Although a statutory basis is necessary for federal courts to exercise jurisdiction over a controversy, “it is well established — in certain classes of cases — that, once a court has original jurisdiction over some claims in the action, it may exercise supplemental jurisdiction over additional claims that are part of'the same case or controversy.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. at 552, 125 S.Ct. 2611 . The Supreme Court has long subscribed to the concept of supplemental jurisdiction recognized in two common-law doctrines, pendent jurisdiction and ancillary jurisdiction; § 1367’s passage permitted codified those forms of jurisdiction, and additionally courts to also hear cases under pendent-party jurisdiction, which the Supreme Court had previously disallowed in Finley v. United States, 490 U.S. 545 , 109 S.Ct. 2003 , 104 L.Ed.2d 593 (1989). 6 Federal courts may exercise pendent jurisdiction over state law claims when “state and federal claims ... derive from a common nucleus of operative fact.” United Mine Workers v. Gibbs, 383 U.S. 715, 725 , 86 S.Ct. 1130 , 16 L.Ed.2d 218 (1966). Supplemental jurisdiction gives federal courts the flexibility to hear a cause of action after the introduction of third parties, whose insertion into the litigation does not have the support of any independent grounds for federal jurisdiction, when those parties share a common interest in the outcome of the litigation and are logical participants in it. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365 , 375 n. 18, 98 S.Ct. 2396 , 57 L.Ed.2d 274 (1978).
In 1988, the Honorable William H. Rehnquist, then-Chief Justice of the Supreme Court, created the Federal Courts Study Committee to analyze the federal court system and to recommend reforms. See James v. Chavez, No. CIV 09-0540 JB/CG, 2011 WL 6013547 , at *5 (D.N.M. Nov. 21, 2011) (Browning, J.) (citing 16 Moore’s Federal Practice § 106.04[5] (Matthew Bender 3d ed.)). In response to the Committee’s findings regarding pendent, ancillary, and pendent-party jurisdiction, Congress codified the doctrines when it passed the Judicial Improvements Act of 1990:
[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.
*1245 28 U.S.C. § 1367 (a). In enacting 28 U.S.C. § 1367 , Congress conferred upon federal district courts “supplemental forms of jurisdiction ... [that] enable them to take full advantage of the rules on claim and party joinder to. deal economically — in single rather than multiple litigation — with matters arising from the same transaction or occurrence.” Report of the Federal Courts Study Committee, Part II.2.B.2.b. (April 2, 1990), reprinted in 22 Conn. L.Rev. 733, 787 (1990).
2. The District Courts’ Discretion to Exercise Supplemental Jurisdiction.
The Tenth Circuit has followed the Supreme Court’s lead in classifying supplemental jurisdiction not as a litigant’s right, but as a matter of judicial discretion. See Estate of Harshman v. Jackson Hole Mountain Resort Corp., 379 F.3d 1161, 1165 (10th Cir.2004) (citing City of Chi. v. Int’l Coll. of Surgeons, 522 U.S. 156, 173 , 118 S.Ct. 523 , 139 L.Ed.2d 525 (1997)). In circumstances where the supplemental jurisdiction statute may support supplemental jurisdiction, the district court retains discretion to decline to exercise that jurisdiction. The traditional analysis, based on the Supreme Court’s opinion in United Mine Workers v. Gibbs, compelled courts to consider “judicial economy, convenience and fairness to litigants” when deciding whether to exercise supplemental jurisdiction. 383 U.S. at 726 , 86 S.Ct. 1130 . Similarly, Congress’ supplemental jurisdiction statute enumerates four factors that the court should consider:
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.
28 U.S.C. § 1367 (c). In applying these factors, district courts should seek to exercise supplemental jurisdiction in an effort to “vindicate values of economy, convenience, fairness, and comity....” Estate of Harshman v. Jackson Hole Mountain Resort Corp., 379 F.3d at 1164 . Numerous courts have acknowledged that 28 U.S.C. § 1367 (c) necessarily changed the district courts’ supplemental jurisdiction discretion analysis and that, unless one of the conditions of 28 U.S.C. § 1367 (c) exists, courts are not free to decline jurisdiction. See Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 447 (2d Cir.1998) (“[Section 1367 has indeed altered Gibbs’ discretionary analysis.”); McLaurin v. Prater, 30 F.3d 982, 985 (8th Cir.1994) (“The statute plainly allows the district court to reject jurisdiction over supplemental claims only in the four instances described therein.”); Exec. Software N. Am. v. U.S. Dist. Ct., 24 F.3d 1545 , 1557 (9th Cir.1994) (“By codifying preexisting applications of Gibbs in subsections (c)(1)-(3), however, it is clear that Congress intended the exercise of discretion to be triggered by the court’s identification of a factual predicate that corresponds to one of the section 1367(c) categories.”), overruled on other grounds by Cal. Dep’t of Water Res. v. Powerex Corp., 533 F.3d 1087 (9th Cir.2008); Palmer v. Hosp. Auth., 22 F.3d 1559 , 1569 (11th Cir.1994) (“[Supplemental jurisdiction must be exercised in the absence of any of the four factors of section 1367(c)....”) (emphasis in original); Bonadeo v. Lujan, No. CIV 08-0812 JB/ACT, 2009 WL 1324119 , at *8 (D.N.M. Apr. 30, 2009) (Browning, J.) (“28 U.S.C. *1246 § 1367(c) changed the district courts’ supplemental jurisdiction discretion analysis to prohibit courts from declining jurisdiction unless one of the conditions of 28 U.S.C. § 1367 (c) exists.”). At least one other district court in the Tenth Circuit besides this Court has reached the same conclusion. See Gudenkauf v. Stauffer Commc’ns, Inc., 896 F.Supp. 1082, 1084 (D.Kan.1995) (“[A]ny exercise of discretion declining jurisdiction over pendent claims or parties cannot occur until ‘triggered’ by the existence of one of the four conditions enumerated.”).
The Tenth Circuit has held that district courts should presume to decline jurisdiction over state claims when federal claims no longer remain: “When all federal claims have been dismissed, the court may, and usually should, decline to exercise jurisdiction over any remaining state claims.” Koch v. City of Del City, 660 F.3d 1228, 1248 (10th Cir.2011) (quoting Smith v. City of Enid ex rel. Enid City Comm’n, 149 F.3d 1151, 1156 (10th Cir.1998)). This proclamation is consistent with the Supreme Court’s statement that
[n]eedless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law. Certainly, if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well.
United Mine Workers of Amer. v. Gibbs, 383 U.S. at 726 , 86 S.Ct. 1130 (footnote omitted). The Court has previously stated that a district court should usually decline to exercise supplemental jurisdiction when 28 U.S.C. § 1367 (c) applies. See Armijo v. New Mexico, No. CIV 08-0336 JB/ACT, 2009 WL 3672828 , at *4 (D.N.M. Sept. 30, 2009) (Browning, J.) (“The Supreme Court and the Tenth Circuit have not only acknowledged such a result, they have encouraged it.”). The Tenth Circuit has recognized that a district court does not “abuse [its] discretion” when it declines to exercise supplemental jurisdiction over a claim “under 28 U.S.C. § 1367 (c)(3) ... where it ‘has dismissed all claims over which it has original jurisdiction.’ ” Muller v. Culbertson, 408 Fed.Appx. 194, 197 (10th Cir.2011) (unpublished). 7
LAW REGARDING REMOVAL, REMAND, FRAUDULENT JOINDER, PROCEDURAL MISJOINDER, AND BAD FAITH
If a civil action filed in state court satisfies the requirements for original federal *1247 jurisdiction — meaning, most commonly, federal-question or diversity jurisdiction— the defendant may invoke 28 U.S.C. § 1441 (a) to remove the action to the federal district court “embracing the place where such action is pending.” 28 U.S.C. § 1441 (a). See Huffman v. Saul Holdings LP, 194 F.3d 1072, 1076 (10th Cir.1999) (“When a plaintiff files in state court a civil action over which the federal district courts would have original jurisdiction based on diversity of citizenship, the defendant or defendants may remove the action to federal court... .’’)(quoting Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 , 117 S.Ct. 467 , 136 L.Ed.2d 437 (1996)). In a case with multiple defendants, there must be unanimous consent to removal; any one defendant may spoil removal and keep the entire case in state court. See 28 U.S.C. § 1446 (b)(2)(A). Only true defendants have removal rights: plaintiffs defending counterclaims and third-party defendants may not remove an action, 8 and their con *1248 sent is not required for removal if all the true defendants consent. See Hamilton v. Aetna Life & Cas. Co., 5 F.3d 642 (2d Cir.1993); Wiatt v. State Farm Ins. Co., 560 F.Supp.2d 1068 (D.N.M.2007) (Browning, J.).
To remove a case based on diversity, the diverse defendant must demonstrate that all of the usual prerequisites of diversity jurisdiction are satisfied. Under 28 U.S.C. § 1332 (a), a federal district court possesses original subject-matter jurisdiction over a case when the parties are diverse in citizenship and the amount in controversy exceeds $75,000.00. See 28 U.S.C. § 1332 (a); Johnson v. Rodrigues, 226 F.3d 1103, 1107 (10th Cir.2000). Diversity between the parties must be complete. See Caterpillar Inc. v. Lewis, 519 U.S. at 68 , 117 S.Ct. 467 ; Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220, 1225 (10th Cir.2004). In addition to the requirements of original jurisdiction, § 1441(b)(2) lays out the “forum-defendant rule,” which provides that a case may not be removed on the basis of diversity jurisdiction if any defendant is a citizen of the state in which the state-court action was brought. Brazell v. Waite, 525 Fed.Appx. 878, 884 (10th Cir.2013) (unpublished) (“[W]e note that § 1441(b)(2) — the so-called forum-defendant rule — provides as a separate requirement that ‘[a] civil action dtherwise removable solely on the basis of [diversity] jurisdiction ... may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.’ ” (alteration in original)(quoting 28 U.S.C. § 1441 (b)(2))). The forum-defendant rule applies only to cases removed under diversity jurisdiction; a defendant may remove a case brought against it in its home state on the basis of federal-question jurisdiction. See 28 U.S.C. § 1441 (b). Last, a case cannot be removed if it began with a nondiverse party or forum-citizen defendant and only later came to satisfy the requirements of removal jurisdiction, unless: (i) the plaintiff voluntarily dismissed the removal-spoiling party, see DeBry v. Transamerica Corp., 601 F.2d 480, 488 (10th Cir.1979); Flores-Duenas v. Briones, No. CIV 0660 JB/CG, 2013 WL 6503537 , at *12 n. 6, *26 (D.N.M. Dec. 1, 2013) (Browning, J.) (describing the operation of the “voluntary-involuntary” rule); 9 or (ii) the removal-spoiling party was fraudulently joined or procedurally misjoined — doctrines described below.
1. The Presumption Against Removal.
Federal courts are courts of limited jurisdiction; thus, there is a presumption against removal jurisdiction, which the defendant seeking removal must overcome. *1249 See Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.1995); Fajen v. Found. Reserve Ins. Co., 683 F.2d at 333; Martin v. Franklin Capital Corp., 251 F.3d at 1290 ; Bonadeo v. Lujan, No. CIV 08-0812 JB/ACT, 2009 WL 1324119 , at *4 (D.N.M. Apr. 30, 2009) (Browning, J.) (“Removal statutes are strictly construed, and ambiguities should be resolved in favor of remand.”). The defendant seeking removal must establish that federal court jurisdiction is proper “by a preponderance of the evidence.” McPhail v. Deere & Co., 529 F.3d at 953 (10th Cir.2008). See Bonadeo v. Lujan, 2009 WL 1324119 , at *4 (“As the removing party, the defendant bears the burden of proving all jurisdictional facts and of establishing a right to removal.”). Because federal courts are courts of limited jurisdiction, the Tenth Circuit has ruled that “courts must deny such jurisdiction if not affirmatively apparent on the record.” Okla. Farm Bureau Mut. Ins. Co. v. JSSJ Corp., 149 Fed.Appx. 775, 778 (10th Cir.2005) (unpublished). On the other hand, this strict construction and presumption against removal should not be interpreted as a hostility toward removal cases in the federal courts. See McEntire v. Kmart Corp., No. CIV 09-0567 JB/LAM, 2010 WL 553443 , at *2 (D.N.M. Feb. 9, 2010) (Browning, J.) (citing Bonadeo v. Lujan, 2009 WL 1324119 , at *12 (“Strict construction does not mean judicial hostility toward removal. Congress provided for removal, and courts should not create rules that are at tension with the statute’s language in the name of strict construction.”)).
“It is well-established that statutes conferring jurisdiction upon the federal courts, and particularly removal statutes, are to be narrowly construed in light of our constitutional role as limited tribunals.” Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1095 (10th Cir.2005) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 , 61 S.Ct. 868 , 85 L.Ed. 1214 (1941); United States ex rel. King v. Hillcrest Health Ctr., 264 F.3d 1271, 1280 (10th Cir.2001)). “All doubts are to be resolved against removal.” Fajen v. Found. Reserve Ins. Co., 683 F.2d 331, 333 (10th Cir.1982). “The burden of establishing subject-matter jurisdiction is on the party asserting jurisdiction.” Montoya v. Chao, 296 F.3d 952, 955 (10th Cir.2002).
2. Procedural Requirements of Removal.
Section 1446 of Title 28 of the United States Code governs the procedure for removal. “Because removal is entirely a statutory right, the relevant procedures to effect removal must be followed.” Thompson v. Intel Corp., 2012 WL 3860748 , at *5. A removal which does not comply with the express statutory requirements is defective and must be remanded to state court. See Huffman v. Saul Holdings LP, 194 F.3d at 1077 . See also Chavez v. Kincaid, 15 F.Supp.2d 1118, 1119 (D.N.M.1998) (Campos, J.) (“The [rjight to remove a case that was originally in state court to federal court is purely statutory, not constitutional.”).
Section 1446(a) of Title 28 of the United States Code provides that a party seeking removal of a matter to federal court shall file a notice of removal in the district and division where the state action is pending, “containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.” Such notice of removal is proper if filed within thirty-days from the date when the case qualifies for federal jurisdiction. See Caterpillar Inc. v. Lewis, 519 U.S. at 68-69 , 117 S.Ct. 467 ; 28 U.S.C. § 1446 (b). The Tenth Circuit has further elaborated that, for the thirty-day period to begin to run, “this court requires clear and unequivocal notice from the [initial] *1250 pleading itself’ that federal jurisdiction is available. Akin v. Ashland Chem. Co., 156 F.3d 1030, 1036 (10th Cir.1998). The Tenth Circuit specifically disagrees with “cases from other jurisdictions which impose a duty to investigate and determine removability where the initial pleading indicates that the right to remove may exist.” Akin v. Ashland Chem. Co., 156 F.3d at 1036 . 10
After the notice of removal is filed, all state-court proceedings are automatically stayed, and the other defendants in the case — if not all defendants joined in the removal — have thirty days to consent- to the removal of the action. See 28 U.S.C. § 1446 (b)(2). “When a civil action is removed solely under section 1441(a) [the standard removal statute, which excludes multiparty, multiforum jurisdiction], all defendants who have been properly joined and served must join in or consent to the removal of the action.” 28 U.S.C. § 1446 (b)(2)(A). The failure of all defendants to consent to removal will result in remand. The rule of unanimity applies to all defendants, whether they are required parties under rule 19 or merely proper parties under rule 20. Defendants who have not been served, however, need not join in removal. See Kiro v. Moore, 229 F.R.D. 228, 230-32 (D.N.M.2005) (Browning, J.).
Section 1447(c) permits the district court to “require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447 (c). The Supreme Court has stated that “[t]he appropriate test for awarding fees under § 1447(c) should recognize the desire to deter removals sought for the purpose of prolonging litigation and imposing costs on the opposing party, while not undermining Congress’ basic decision to afford defendants a right to remove as a general matter, when the statutory criteria are satisfied.” Martin v. Franklin Capital Corp., 546 U.S. 132, 140 , 126 S.Ct. 704 , 163 L.Ed.2d 547 (2005). The Tenth Circuit has limited district courts’ discretion to impose costs and fees to those cases in which the removal was objectively unreasonable. See Garrett v. Cook, 652 F.3d 1249, 1254 (10th Cir.2011) (“[C]ourts may award attorney’s fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal.”).
3. Fraudulent Joinder.
A defendant may remove a case to federal court based upon diversity jurisdiction in the absence of complete diversity if a plaintiff joins a nondiverse party fraudulently to defeat federal jurisdiction. See Am. Nat’l Bank & Trust Co. v. Bic Corp., 931 F.2d 1411 , 1412 (10th Cir.1991); Hernandez v. Menlo Logistics, Inc., No. CIV 12-0907 JB/WPL, 2013 WL 5934411 , at *14-17 (D.N.M. Sept. 30, 2013) (Browning, J.). A defendant may remove on the basis of fraudulent joinder either while the non-diverse party is still joined or after it is dismissed from the case — the doctrine can thus function as an exception to either complete diversity or the voluntary-involuntary rule. “ ‘[A] fraudulent joinder analysis [is] a jurisdictional inquiry,’ ” Bio-Tec Envtl., LLC v. Adams, 792 F.Supp.2d 1208, 1214 (D.N.M.2011) (quoting Albert v. Smith’s Food & Drug Ctrs., Inc., 356 F.3d 1242, 1247 (10th Cir.2004)), and, thus, the Tenth Circuit instructs that the district court should “pierce the pleadings, consid *1251 er the entire record, and determine the basis of joinder by any means available,” Dodd v. Fawcett Publ’ns, Inc., 329 F.2d 82, 85 (10th Cir.1964) (citations omitted). ' “A district court may disregard a nondiverse party named in the state court complaint and retain jurisdiction if joinder of the nondiverse party is a sham or fraudulent.” Baeza v. Tibbetts, No. CIV 06-0407 MV/WPL, 2006 WL 2863486 , at *3 (D.N.M. July 7, 2006) (Vazquez, J.). The Supreme Court has stated: “Merely to traverse the allegations upon which the liability of the resident defendant is rested or to apply the epithet ‘fraudulent’ to the joinder will not suffice: the showing must be such as compels the conclusion that the joinder is without right and made in bad faith.” Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S. 146, 152 , 34 S.Ct. 278 , 58 L.Ed. 544 (1914). The Tenth Circuit has explained that allegations of fraudulent join-der complicate the analysis whether removal is proper, because, “[wjhile a court normally evaluates the propriety of a removal by determining whether the allegations on the face of the complaint satisfy the jurisdictional requirements, fraudulent joinder claims are assertions that the pleadings are deceptive.” Nerad v. As traZeneca Pharms., Inc., 203 Fed.Appx. 911, 913 (10th Cir.2006) (unpublished).
The party asserting fraudulent joinder bears the burden of proof. See Montano v. Allstate Indemnity Co., 211 F.3d 1278 , 2000 WL 525592 , at *1 (10th Cir.2000) (unpublished) (“The case law places a heavy burden on the party asserting fraudulent joinder.”). “To justify removal based on diversity jurisdiction, a defendant must plead a claim of fraudulent joinder with particularity and prove the claim with certainty.” Couch v. Astec Indus., Inc., 71 F.Supp.2d 1145, 1146-47 (D.N.M.1999) (Baldock, J.). Before 2013, the most recent published Tenth Circuit decision to state the burden of proof for demonstrating fraudulent joinder was issued over forty years earlier in Smoot v. Chicago, Rock Island & Pacific Railroad Co., 378 F.2d 879 (10th Cir.1967). The Tenth Circuit said that fraudulent joinder must be “established with complete certainty upon undisputed evidence.” Smoot v. Chi., Rock Island & Pac. R.R. Co., 378 F.2d at 882 .
Actual fraud — e.g., a plaintiff colluding with a nondiverse defendant to defeat removal 11 — suffices to establish fraudulent joinder, but it is not required. See McLeod v. Cities Serv. Gas Co., 233 F.2d 242 , 246 (10th Cir.1956) (“[Cjollusion in joining a resident defendant for the sole purpose of preventing removal ... may be shown by any means available.”). In Smoot v. Chicago, Rock Island & Pacific Railroad Co., the Tenth Circuit stated two other bases for finding fraudulent joinder: (i) “[t]he joinder of a resident defendant against whom no cause of action is stated is patent sham”; or (ii) “though a cause of action be stated, the joinder is similarly fraudulent if in fact no cause of action exists.” Smoot v. Chi., Rock Island & Pac. R.R. Co., 378 F.2d at 882 (quoting Dodd v. Fawcett Pubs., Inc., 329 F.2d 82, 85 (10th Cir.1964)). In Smoot v. Chicago, Rock Island & Pacific Railroad Co., the Tenth Circuit found fraudulent joinder because the non-liability of the joined party was “established with complete certainty upon undisputed evidence.” 378 F.2d at *1252 882 . “This does not mean that the federal court will pre-try, as a matter of course, doubtful issues of fact to determine remov-ability; the issue must be capable of summary determination and be proven with complete certainty.” Smoot v. Chi., Rock Island & Pac. R.R. Co., 378 F.2d at 882. In Smoot v. Chicago, Rock Island & Pacific Railroad Co., the plaintiff died when his car collided with a freight train. See 378 F.2d at 881 . The plaintiffs estate sued the railroad company and joined a non-diverse alleged employee as a defendant. See 378 F.2d at 881 . It was undisputed that the diversity-destroying party’s employment with the railroad company had “terminated almost fifteen months before the collision and that he was in no way connected with the acts of negligence ascribed to him.” 378 F.2d at 881 .
In recent unpublished decisions, the Tenth Circuit has adopted different articulations of the burden of proof for fraudulent joinder, two of which are from the United States Court of Appeals for the Fifth Circuit. In Montano v. Allstate Indemnity Co., the Tenth Circuit quoted favorably Hart v. Bayer Corp., 199 F.3d 239 (5th Cir.2000), which stated:
To prove their allegation of fraudulent joinder [the removing parties] must demonstrate that there is no possibility that [plaintiff] would be able to establish a cause of action against [the joined party], in state court. In evaluating fraudulent joinder claims, we must initially resolve all disputed questions of fact and all ambiguities in the controlling law in favor of the non-removing party. We are then to determine whether that party has any possibility of ' recovering against the party whose join-der is questioned.
Montano v. Allstate Indemnity Co., 211 F.3d 1278 , 2000 WL 525592 , at *4-5 (alteration in original) (quoting Hart v. Bayer Corp., 199 F.3d at 246) (internal quotation marks omitted). The Tenth Circuit stated that the standard for proving fraudulent joinder “is more exacting than that for dismissing a claim under Fed.R.Civ.P. 12(b)(6); indeed, the latter entails the kind of merits determination that, absent fraudulent joinder, should be left to the state court where the action commenced.” Montano v. Allstate Indemnity Co., 211 F.3d 1278 , 2000 WL 525592 , at *2. The Tenth Circuit in Montano v. Allstate Indemnity Co. also quoted from Batoff v. State Farm Insurance Co., 977 F.2d 848 (3d Cir.1992), which stated: “A claim which can be dismissed only after an intricate analysis of state law is not so wholly insubstantial and frivolous that it may be disregarded for purposes of diversity jurisdiction.” Batoff v. State Farm Ins. Co., 977 F.2d at 853 .
In Nerad v. AstraZeneca Pharmaceuticals, Inc., the Tenth Circuit adopted a different articulation of the burden of proof. The Tenth Circuit stated that, where fraudulent joinder is asserted, “the court must decide whether there is a reasonable basis to believe the plaintiff might succeed in at least one claim against the non-diverse defendant.” 203 Fed.Appx. at 913 (citing Badon v. RJR Nabisco, Inc., 224 F.3d 382 , 393 (5th Cir.2000)). The Tenth Circuit explained that “[a] ‘reasonable basis’ means just that: the claim need not be a sure-thing, but it must have a basis in the alleged facts and the applicable law.” 203 Fed.Appx. at 913 .
The Fifth Circuit recognized the inconsistencies in various articulations of the standard for fraudulent joinder and directly addressed the problem in Travis v. Irby, 326 F.3d 644 (5th Cir.2003):
Neither our circuit nor other circuits have been clear in describing the fraudulent joinder standard. The test has been stated by this court in various *1253 terms, even within the same opinion. For example, the Griggs [v. State Farm Lloyds, 181 F.3d 694 (5th Cir.1999),] opinion states,
To establish that a non-diverse defendant has been fraudulently joined to defeat diversity, the removing party must prove ... that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the non-diverse defendant in state court.
181 F.3d at 699 (emphasis added) (citing Burden v. Gen. Dynamics Corp., 60 F.3d 213, 217 (5th Cir.1995)); The Griggs opinion later restates that test as follows — “Stated differently, we must determine whether there is any reasonable basis for predicting that [the plaintiff] might be able to establish [the non-diverse defendant’s] liability on the pleaded claims in state court.” 181 F.3d at 699 (emphasis added). Similarly, in summing up federal law, Moore’s Federal Practice states at one point; “To establish fraudulent joinder, a party must demonstrate ... the absence of any possibility that the opposing party has stated a claim under state law.” 16 Moore’s Federal Practice § 107.14[2][c][iv][A] (emphasis added). It then comments: “The ultimate question is whether there is arguably a reasonable basis for predicting that state law might impose liability on the facts involved.” Although these tests appear dissimilar, “absolutely no possibility” vs. “reasonable basis,” we must assume that they are meant to be equivalent because each is presented as a restatement of the other.
326 F.3d at 647 (emphases in original). The Fifth Circuit has settled upon this phrasing:
[T]he test for fraudulent joinder is whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant.
Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir.2004) (“To reduce possible confusion, we adopt this phrasing of the required proof and reject all others, whether the others appear to describe the same standard or not.”).
In Zufelt v. Isuzu Motors America, LCC, 727 F.Supp.2d 1117, 1124 (D.N.M.2009) (Browning, J.), the Court addressed the standard courts should use when addressing fraudulent joinder and concluded that, to establish that a party was fraudulently joined, a defendant has the burden of demonstrating that “there is no possibility that the plaintiff would be able to establish a cause of action” against the party alleged to be fraudulently joined. 727 F.Supp.2d at 1124 -25 (citing Montano v. Allstate Indem. Co., 211 F.3d 1278 , 2000 WL 525592 , at *4-5). The Court explained:
[T]his District has consistently adopted the “possibility” standard when assessing fraudulent joinder claims. See Allen v. Allstate Ins. Co., No. CIV 08-0733, 2008 WL 6045497 (D.N.M. Oct. 31, 2008) (Browning, J.) (holding that the claims asserted against the non-diverse defendant were “possibly viable under New Mexico law, and ... sufficient to preclude federal jurisdiction”); Baeza v. Tibbetts, 2006 U.S. Dist. LEXIS 95317 , at *11, 2006 WL 2863486 [at *4 (D.N.M. July 7, 2006) ] (stating that “[r]emand is required if any one of the claims against [the defendant] is possibly viable”); Provencio v. Mendez, No. CIV 05-623, 2005 U.S. Dist. LEXIS 39012 , at *25, 2005 WL 3662957 , at *9 (D.N.M. Sept. 29, *1254 2005) (Browning, J.) (stating that “there must be no possibility the [plaintiffs have a claim against [the non-diverse defendant]”); Couch v. Astec Indus., Inc., 71 F.Supp.2d at 1147 (stating that, to defeat removal jurisdiction, “[t]he plaintiff need only demonstrate the possibility of the right to relief’). This Court, in Couch v. Astec Indus., Inc., noted with approval the language of the United States Court of Appeals for the Eleventh Circuit, which states that “if there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court.” Couch v. Astec Indus., Inc., 71 F.Supp.2d at 1147 (quoting Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir.1998)) (emphasis in original).
Zufelt v. Isuzu Motors Am., LCC, 727 F.Supp.2d at 1128-29 .
In Brazell v. Waite, the Tenth Circuit stated that the “removing party must show that the plaintiff has ‘no cause of action’ against the fraudulently joined defendant,” but it did not further elaborate on that burden. 525 Fed.Appx. at 881 (citing Dodd v. Fawcett Publ’ns, Inc., 329 F.2d 82, 85 (10th Cir.1964); Roe v. Gen. Am. Life Ins. Co., 712 F.2d 450 , 452 n. * (10th Cir.1983)).
In 2013, the Tenth Circuit published its first opinion since 1946 regarding the burden of proof for demonstrating fraudulent joinder: “ ‘To establish fraudulent joinder, the removing party must demonstrate either: (1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.’ ” Dutcher v. Matheson, 733 F.3d 980, 988 (10th Cir.2013) (Briscoe, C.J., joined by Seymour & Bacharach, J.J.) (quoting Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 242, 249 (5th Cir.2011)). In Dutcher v. Matheson, the Tenth Circuit reviewed a district court’s holding that it had diversity jurisdiction over a case where Utah citizens sued Re-conTrust, a Texas-based national bank, Stuart T. Matheson, a Utah citizen, and Matheson’s law firm. See Dutcher v. Matheson, 733 F.3d at 983, 987 . The plaintiffs alleged that Matheson and his law firm enabled ReconTrust to conduct an illegal nonjudicial foreclosure by holding the foreclosure sales on behalf of the Texas-based bank. See 733 F.3d at 983 . The defendants removed the case to federal court and alleged that the plaintiffs fraudulently joined the Utah defendants. See 733 F.3d at 983 . The district court agreed, finding that, under Utah law, “an attorney cannot be held liable to a non-client absent fraud, collusion or privity of contract.” 733 F.3d at 988 . The Tenth Circuit disagreed with that characterization of Utah law, finding instead that, in the case on which the defendants relied, the Utah Supreme Court “has simply limited the circumstances in which a lawyer owes a duty of care to non-clients from actions arising out of the provision of legal services.” 733 F.3d at 988 . In rejecting the claim of fraudulent joinder, the Tenth Circuit said
that does not mean that the plaintiffs have stated a valid claim against Mathe-son and his law firm. Or even that Matheson and his law firm are not somehow fraudulently joined. But the defendants needed to clear a high hurdle to prove something they have yet to prove, i.e., fraudulent joinder.
733 F.3d at 989 .
The Tenth Circuit did not elaborate on the defendant’s burden to show fraudulent joinder, except to say that it is *1255 “a high hurdle.” 733 F.3d at 989 . It quoted, however, Cuevas v. BAC Home Loans Servicing, LP, a Fifth Circuit opinion that repeats the clarified standard from the Smallwood v. Illinois Central Railroad Co. case. See Dutcher v. Matheson, 733 F.3d at 988 (10th Cir.2013) (quoting Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 242, 249 (5th Cir.2011)).
Under the second way, the test is “whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an instate defendant.” [Smallwood v. Ill. Cent. R.R. Co., 385 F.3d at 573 .] If there is no reasonable basis of recovery, then the court can conclude that the plaintiffs decision to join the in-state defendant was indeed improper, unless that showing compels the dismissal of all defendants. There is no improper join-der if the defendants’ showing compels the same result for the resident and nonresident defendants, because this simply means that the plaintiffs case is ill founded as to all of the defendants. Such a defense is more properly an attack on the merits of the claim, rather than an inquiry into the propriety of the joinder of the in-state defendant.
Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d at 249 (emphasis in original) (citations omitted)(internal quotation marks omitted). Based on the Tenth Circuit’s history of relying on Fifth Circuit analysis in fraudulent joinder cases, the Tenth Circuit would likely approve this additional explanation of the fraudulent joinder standard. Accordingly, the Court will use the following standard for fraudulent joinder: whether the defendant has demonstrated that there is no possibility that the plaintiff will recover against an instate defendant. Cf. Zufelt v. Isuzu Motors Am., LCC, 727 F.Supp.2d at 1124-25 (concluding that fraudulent joinder occurs when “there is no possibility that the plaintiff would be able to establish a cause of action” against the party alleged to be fraudulently joined). No case sets forth the burden of proof that applies to (much rarer) allegations of actual fraud, such as plaintiff-defendant collusion, see note 11, supra, at 1251, and accompanying text, but the Court concludes that the clear-and-convincing standard — the usual standard for fraud — is appropriate, see, e.g., United States v. Thompson, 279 F.2d 165, 167 (10th Cir.1960) (“An allegation of fraud is a serious matter; it is never presumed and must be proved by clear and convincing evidence.” (citations omitted)).
An unresolved question is whether fraudulent joinder permits the removal of actions that have been pending in state court for over a year. Section 1446(c)(1) provides: “A case may not be removed under subsection (b)(3) on the basis of jurisdiction conferred by section 1332 more than 1 year after commencement of the action....” 28 U.S.C. § 1446 (c)(1). The two district court cases from the Tenth Circuit to address the issue both concluded that it does not, but those opinions were issued before Congress amended § 1446 in 2012 to add the remainder (the omitted portion) of the sentence quoted earlier in this paragraph': “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. § 1446 (c)(1). See Chidester v. Kaz, Inc., No. CIV 08-0776 TCK/PJC, 2009 WL 2588866 , at *3 (N.D.Okla. Aug. 19, 2009) (Kern, J.); Caudill v. Ford Motor Co., 271 F.Supp.2d 1324, 1327 (N.D.Okla.2003) (Eagan, J.). Outside the Tenth Circuit, the Courts of Appeals have said little, and district courts appear more-or-less evenly *1256 split on the issue, with some holding that a case can be removed on the basis of fraudulent joinder after the one-year mark, see Hardy v. Ajax Magnathermic Corp., 122 F.Supp.2d 757, 759 (W.D.Ky.2000); Johnson v. Heublein, Inc., 982 F.Supp. 438, 444-45 (S.D.Miss.1997); Barnett v. Sylacauga Autoplex, 973 F.Supp. 1358, 1367 (N.D.Ala.1997); Leslie v. BancTec Serv. Corp., 928 F.Supp. 341, 346 (S.D.N.Y.1996); Morrison v. Nat’l Ben. Life Ins. Co., 889 F.Supp. 945, 950-51 (S.D.Miss.1995); Saunders v. Wire Rope Corp., 777 F.Supp. 1281, 1282-83 (E.D.Va.1991); Greer v. Skilcraft, 704 F.Supp. 1570, 1582-83 (N.D.Ala.1989), and others concluding that the fraudulent-joinder doctrine bows to the one-year limitation, see Ariel Land Owners, Inc. v. Dring, 245 F.Supp.2d 589, 600-02 (M.D.Pa.2003); Codner v. Am. Home Prods. Corp., 123 F.Supp.2d 1272, 1274 (W.D.Okla.2000); Hattaway v. Engelhard Corp., 998 F.Supp. 1479, 1481-82 (M.D.Ga.1998); Russaw v. Voyager Life Ins. Co., 921 F.Supp. 723, 724-25 (M.D.Ala.1996); Zumas v. Owens-Corning Fiberglas Corp., 907 F.Supp. 131, 133-34 (D.Md.1995); Price v. Messer, 872 F.Supp. 317 (S.D.W.Va.1995); Norman v. Sundance Spas, Inc., 844 F.Supp. 355, 356-57 (W.D.Ky.1994); Santiago v. Barre Nat’l, Inc., 795 F.Supp. 508, 510-12 (D.Mass.1992); Brock v. Syntex Labs., Inc., 791 F.Supp. 721, 722-23 (E.D.Tenn.1992); Cofer v. Horsehead Research & Dev. Co., 805 F.Supp. 541, 543-44 (E.D.Tenn.1991); O’Rourke v. Communique Telecomms., Inc., 715 F.Supp. 828, 829 (E.D.Mich.1989). Again, however, all of these cases came before the addition of 28 U.S.C. § 1446 (c)(1), which grafted a bad-faith exception to the one-year limitation, discussed at length later in this opinion. The Court concludes that the addition of the bad-faith exception to the one-year limitation clarifies that the one-year limitation is procedural, rather than jurisdictional, see Analysis Part I.A.1.d, infra, at 1269-71 (explaining the rift that developed among the Courts of Appeals, before the passage of § 1446(c)(1), over whether the one-year limitation is procedural, and thus subject to waiver, or jurisdictional, and thus not subject to waiver or exception), and, thus, extends the applicability of fraudulent join-der doctrine past the one-year mark. Thus, defendants may remove a case on fraudulent joinder grounds even after it has been pending in state court for more than one year.
Another unresolved question regarding fraudulent joinder is whether it creates an exception to the forum-defendant rule — which provides that even an action with complete diversity cannot be removed if any defendant is a citizen of the forum state — in addition to creating an exception to the rule of complete diversity. See 28 U.S.C. § 1441 (b)(2). Courts and commentators recite fraudulent joinder as involving the legally unjustifiable naming of a nondiverse party, a party who defeats complete diversity, or a diversity-spoiling party, but no case addresses whether the doctrine extends to the wrongful naming of a diverse party whose inclusion in the lawsuit nonetheless defeats removal because of the party’s status as a citizen of the forum state. See Brazell v. Waite, 525 Fed.Appx. at 884 & n. 3 (implying, but not holding or stating clearly, that fraudulent joinder is an exception to the forum-defendant rule, and noting an “apparent lack of ruling from any federal appellate court, and [a] split among district courts, on the issue” (citing Morris v. Nuzzo, 718 F.3d 660, 666 (7th Cir.2013))); Hernandez v. Cooper Tire & Rubber Co., No. CIV 12-1399 JWL, 2013 WL 141648 , at *2 n. 2 (D.Kan. Jan. 11, 2013) (“Some courts have extended the fraudulent joinder doctrine to diverse, in-state defendants in light of the forum defendant rule.... ” (citing Morris *1257 v. Mid-Century Ins. Co., No. CIV 12-0578 SEB/DML, 2012 WL 3683540 , at *5 (S.D.Ind. Aug. 24, 2012), vacated and remanded sub nom. Morris v. Nuzzo, 718 F.3d 660 )). Although the policy justifications behind fraudulent-joinder doctrine would seem to apply just as strongly to the forum-defendant rule as they do to complete diversity, there is an important legal distinction between the two requirements: complete diversity is a requirement of original subject-matter jurisdiction and is found in § 1332; the forum-defendant rule is unique to removal jurisdiction — it does not apply to cases filed in federal court in the first instance — and is found in § 1441. See 28 U.S.C. §§ 1332 (a), 1441(b)(2). Fraudulent joinder, however, only ever applies in the removal context, and does no work in cases filed in federal court in the first instance. As such, the Court sees no principled reason to limit fraudulent-join-der doctrine’s application to the joining of nondiverse parties to defeat complete diversity, while excluding the functionally identical practice of fraudulently joining forum-citizen defendants to defeat the forum-defendant rule. The Court, therefore, construes fraudulent joinder doctrine as permitting removal whenever a plaintiff fraudulently joins a party that defeats removal jurisdiction, whether that defeat comes by way of complete diversity or the forum-defendant rule.
A district court’s order to remand based on a finding of fraudulent joinder is not reviewable by the Tenth Circuit. See Nerad v. AstraZeneca Pharms., Inc., 203 Fed.Appx. at 913 (holding that, because the district court remanded based on its conclusion that it lacked subject-matter jurisdiction at the time of removal, 28 U.S.C. § 1447 (d) precluded the Tenth Circuit from reviewing the order). The fraudulent joinder inquiry on a motion to remand is a subject-matter jurisdiction inquiry. See Albert v. Smith’s Food & Drug Ctrs., Inc., 356 F.3d at 1247 .
4. Procedural Misjoinder, 12
Rule 20 of the Federal Rules of Civil Procedure provides:
(a) Persons Who May Join or Be Joined.
(1) Plaintiffs. Persons may join in one action as plaintiffs if:
(A) they assert any right to relief jointly, severally, or in the alternative with respect to or arising out- of the same transaction, occurrence, or series of transactions or occurrences; and
(B) any question of law or fact common to all plaintiffs will arise in the action.
(2) Defendants. Persons — as well as a vessel, cargo, or other property subject to admiralty process in rem— may be joined in one action as defendants if:
(A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, *1258 occurrence, or series of transactions or occurrences; and
(B) any question of law or fact common to all defendants will arise in the action.
(3) Extent of Relief. Neither a plaintiff nor a defendant need be interested in obtaining or defending-against all the relief demanded. The court may grant judgment to one or more plaintiffs according to their rights, and against one or more defendants according to their liabilities.
Fed.R.Civ.P. 20(a).
“Procedural misjoinder,” also known as “fraudulent misjoinder,” is a recent development that is related to fraudulent join-der, but distinct from it. As Professor E. Farish Percy of the University of Mississippi School of Law has explained:
Fraudulent misjoinder occurs when a plaintiff sues a diverse defendant in state court and joins a non-diverse or instate defendant even though the plaintiff has no reasonable procedural basis to join such defendants in one action. While the traditional fraudulent joinder doctrine inquires into the substantive factual or legal basis for the plaintiffs claim against the jurisdictional spoiler, the fraudulent misjoinder doctrine inquires into the procedural basis for the plaintiffs joinder of the spoiler. Most state joinder rules are modeled after the federal joinder rule that authorizes permissive joinder of parties when the claims brought by or against them arise “out of the same transaction, occurrence, or series of transactions or occurrences” and give rise to a common question of law or fact. Thus, in a case where the joined claims are totally unrelated, a federal district court may find removal jurisdiction pursuant to the fraudulent misjoinder doctrine even though the' plaintiff has a reasonable substantive basis for the claim against the jurisdictional spoiler.
E. Farish Percy, Defining the Contours of the Emerging Fraudulent Misjoinder Doctrine, 29 Harv. J.L. & Pub. Pol’y 569, 572 (2006) (footnotes omitted).
The Eleventh Circuit formulated the doctrine in Tapscott v. MS Dealer Service Corp., and explained its purpose as follows:
Misjoinder may be just as fraudulent as the joinder of a resident defendant against whom a plaintiff has no possibility of a cause of action. A defendant’s “right of removal cannot be defeated by a fraudulent joinder of a resident defendant having no real connection with the controversy.” Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97 , 42 S.Ct. 35 , 66 L.Ed. 144 (1921).
Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353, 1360 (11th Cir.1996) (footnote omitted).
The facts of Tapscott v. MS Dealer Service Corp. illustrate the doctrine’s operation. The case involved two putative state law class actions, joined together in a single case: (i) a class action in which an Alabama resident alleged that four defendants, including an Alabama resident, had violated various provisions of Alabama fraud and consumer-protection- law in connection with the “the sale of ‘service contracts’ on automobiles sold and financed in Alabama,” 77 F.3d at 1355 ; and (ii) a class action in which Alabama alleged three defendants, including Lowe’s Home Centers, a North Carolina resident, had violated Alabama consumer-protection law in connection with the sale of retail product, see 77 F.3d at 1355 . The second class action named Lowe’s Home Centers as “the putative defendant class representative for a ‘merchant’ class.” 77 F.3d at 1355 . This unified case matched particular plaintiffs *1259 “with particular defendants against whom they allege individual claims”; as relevant here, the only two class representatives for the class action were Alabama residents, and they asserted claims only against Lowe’s Home Centers. 77 F.3d at 1359-60 .
The district court concluded that there was no allegation of joint liability or conspiracy, and that the claims involved in the car-sales class action were “wholly distinct from the alleged transactions involved in the” retail-products class action. 77 F.3d at 1360 . Rather, “[t]he only similarity between” the two classes was that they both alleged violations of Alabama statutory law; “[s]uch commonality on its face [was] insufficient for joinder.” 77 F.3d at 1360 . The Eleventh Circuit agreed and explained:
Although certain putative class representatives may have colorable claims against resident defendants in the putative “automobile” class, these resident defendants have no real connection with the controversy involving [the retail-products plaintiffs and] Lowe’s in the putative “merchant” class action. We hold that the district court did not err in finding an attempt to defeat diversity jurisdiction by fraudulent joinder. We do not hold that mere misjoinder is fraudulent joinder, but we do agree with the district court that Appellants’ attempt to join these parties is so egregious as to constitute fraudulent joinder.
77 F.3d at 1360 .
The procedural misjoinder doctrine’s reach outside the Eleventh Circuit is unclear. The Tenth Circuit recently' described the doctrine’s status as follows: “It appears that the Fifth Circuit may also accept procedural misjoinder. No circuit has rejected .the doctrine, but the district courts and the commentators are split.” Lafalier v. State Farm Fire & Cas. Co., 391 Fed.Appx. 732, 739 (10th Cir.2010) (citing, for the proposition that the Fifth Circuit accepts the doctrine, Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d at 532-33; In re Benjamin Moore & Co., 309 F.3d 296, 298 (5th Cir.2002)). While the Tenth Circuit recognized that “[t]here may be many good reasons to adopt procedural misjoinder,” it declined to adopt the doctrine, because it would not have changed the result in that case. Lafalier v. State Farm Fire & Cas. Co., 391 Fed.Appx. at 739 . See 14B Charles A. Wright & Arthur Miller, Federal Practice & Procedure § 3723, at 867-77 & n. 122 (3d ed.2009)(confirming the developing doctrine’s unclear status). The Court, however, has adopted the doctrine and applied it in two cases, although it concluded in both cases that no procedural misjoinder occurred, and both cases thus resulted in remand. See Ullman v. Safeway Ins. Co., 995 F.Supp.2d 1196 (D.N.M.2013) (Browning, J.); Flores-Duenas v. Briones, 2013 WL 6503537 .
5. The “Bad Faith” Exception to the One-Year Removal Bar for Diversity Cases.
Since 1988, 28 U.S.C. § 1446 has provided that no case that has been pending more than one year in state court can be removed on the basis of diversity jurisdiction. 13 On January 6, 2012, Congress put *1260 into effect the Federal Courts Jurisdiction and Venue Clarification Act of 2011, Pub.L. No. 112-63, 125 Stat. 760, 762 (“JVCA”), which, among other changes, added a bad-faith exception to the one-year limitation. As a result, the current subsection (c) is almost entirely new;' it reads as follows, with the sole sentence of the statute that pre-exists the JVCA underlined:
Requirements; removal based on diversity of citizenship.—
(1) A case may not be removed under subsection (b)(3) 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.
(2) If removal of a civil action is sought on the basis of the jurisdiction conferred by section 1332(a), the sum demanded in good faith in the initial pleading shall be deemed to be the amount in controversy, except that—
(A) the notice of removal may assert the amount in controversy if the initial pleading seeks—
(i) nonmonetary relief; or
(ii) a money judgment, but the State practice either does- not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded; and
(B) removal of the action is proper on the basis of an amount in controversy asserted under subparagraph (A) if the district court finds, by the preponderance of the evidence, that the amount in controversy exceeds the amount specified in section 1332(a).
(3)(A) If the case stated by the initial pleading is not removable solely because the amount in controversy does not exceed the amount specified in section 1332(a), information relating to the amount in controversy in the record of the State proceeding, or in responses to discovery, shall be treated as an ‘other paper’ under subsection (b)(3). [ 14 ]
(B) If the notice of removal is filed more than 1 year after commencement of the action and the district court finds that the plaintiff deliberately failed to disclose the actual amount in controversy to prevent removal, that finding shall be deemed bad faith under paragraph (1).
*1261 28 U.S.C. § 1446 (c) (boldface in original) (underscoring added to show pre-JVCA content).
A plaintiffs “bad faith” can manifest itself in either of the two requirements for diversity jurisdiction: (i) a plaintiff can name or retain nondiverse parties or forum-citizen defendants to defeat complete diversity or the forum-defendant rule, respectively; or (ii) it can obfuscate the quantity of damages it seeks for the purpose of defeating the amount-in-controversy requirement. 15 It is clear how the Court should construe (ii) — the Tenth Circuit’s opinion in McPhail v. Deere & Co. has already fleshed out a detailed framework for analyzing the amount-in-controversy requirement, see Law Regarding Diversity Jurisdiction Part 2, supra, at 1241-44 (describing McPhail v. Deere & Co. in detail), and the JVCA’s legislative history indicates that, far from abrogating McPhail v. Deere & Co., section 1446(c)’s amount-in-controversy provisions were intended to codify the approach that the Seventh Circuit chartered in Meridian Securities Insurance Co. v. Sadowski and that the Tenth Circuit advanced in McPhail v. Deere & Co., see Report to the Committee on the Judiciary of the United States House of Representatives § 103, at 15-16, H.R. 112-10 (2011)(citing only two cases under the heading “Amount in controversy and removal timing,” McPhail v. Deere & Co. and Meridian Securities Insurance Co. v. Sadowski, and stating that the JVCA’s amendments “follow the lead of [those] cases” (emphasis omitted)). 16 *1262 On the other hand, § 1446(c)’s text says nothing at all about (i), nor has any court attempted to comprehensively define it. The JVCA’s legislative history gives the Court some clue as to the exception’s basic nature, but, in answering this question— what constitutes “bad faith” vis-a-vis improperly joining or keeping joined nondi-verse parties or forum-citizen defendants — the Court will have to stake out its own definition.
For the reasons explained in the Analysis, the Court construes the bad-faith exception as a two-step standard. First, the Court inquires whether the plaintiff actively litigated against the removal spoiler in state court: asserting valid claims, taking discovery, negotiating settlement, seeking default judgments if the defendant does not answer the complaint, et cetera. Failure to actively litigate against the removal spoiler will be deemed bad faith; actively litigating against the removal spoiler, however, will create a rebuttable presumption of good faith. Second, the defendant may attempt to rebut this presumption with evidence already in the de *1263 fendant’s possession that establishes that, despite the plaintiffs active litigation against the removal spoiler, the plaintiff would not have named the removal spoiler or would have dropped the spoiler before the one-year mark but for the plaintiffs desire to keep the case in state court. The defendant may introduce direct evidence of the plaintiffs bad faith at this stage — e.g., electronic mail transmissions in which the plaintiff states that he or she is only keeping the removal spoiler joined to defeat removal — but will not receive discovery or an evidentiary hearing in federal court to obtain such evidence.
ANALYSIS
The Plaintiffs did not act in bad faith by keeping the removal-spoiling defendants, Trujillo and the State Defendants, joined past the one-year mark, because the Plaintiffs actively litigated against them, and AMCO Insurance has produced no direct evidence to rebut the presumption of good faith that this active litigation creates. The Court interprets the bad-faith exception to apply to plaintiffs who keep a removal-spoiling party in the case past the one-year mark for the purpose of defeating removal, i.e., it applies when the removal spoiler would not have been in the case at the one-year mark but for the plaintiffs’ deliberate forum manipulation. To create a workable gauge for this inquiry — one that honors the bad-faith exception’s statutory content and respects Congress’ desire for additional removals, while protecting plaintiffs from unwelcome intrusions into their work-product and private litigation strategy — the Court construes the bad-faith exception to entail a two-step standard. First, the Court looks to whether the plaintiff actively litigated against the removal-spoiling defendant in state court: asserting valid claims, taking discovery, negotiating settlement, seeking default judgments if the defendant does not answer the complaint, et cetera. If the plaintiff did not actively litigate against the removal spoiler, then bad faith is established; if the plaintiff actively litigated against the removal spoiler, then good faith is rebuttably presumed. In the standard’s second step, the defendant may attempt to rebut the good-faith presumption with direct evidence of the plaintiffs subjective bad faith. Although the Court will allow subjective evidence at the second step, the Court will only permit defendants to use the evidence they already have on hand, and will not permit discovery or provide an evidentiary hearing on the bad-faith issue. .
After laying out its construction of the bad-faith exception, the Court will discuss concerns.it has with construing the bad-faith exception as a standard rather than a rule: it will be difficult for defendants to prevail on a bad-faith removal and keep the case in federal court; it will be easy, however, for defendants to concoct a color-able bad-faith argument, remove the case to federal court, and then lose the remand battle without having costs assessed against them — a result that the Court fears many defendants will prefer over staying quietly in state court. The Court is thus concerned that the bad-faith exception is a recipe for many more improper removals. These removals, while doomed for remand, will produce significant judicial inefficiency and needless friction between federal and state courts. Ultimately, however, § 1446(c)(l)’s text demands a standard, and not a rule, and the Court must be faithful to the statutory text above all else. Similarly, current Supreme Court precedent forecloses the other method of which the Court could conceive to curb wasteful improper removals — presumptively imposing costs against defendants under § 1447(c) on all removals that result in remand.
*1264 I. THE COURT CONSTRUES THE BAD-FAITH EXCEPTION AS A TWO-STEP STANDARD.
The Court fashions its two-step standard by first interpreting the statute’s content and then forming a workable test to effectuate that content. Section 1446’s historical development and present-day text elucidate the exception’s content. The bad-faith exception does not codify fraudulent joinder doctrine or expand it to reach new claims; 17 it has little to do with fraudulent joinder, and the plaintiffs assertion of legally or factually unsound claims does not trigger the exception. Rather, the bad-faith exception prohibits plaintiffs from asserting good claims in bad faith: it permits removal whenever a plaintiff keeps a removal-spoiling party in the case past the one-year mark, and the removal-spoiling party is one whom the plaintiff would not have kept in the case but for the plaintiffs desire to defeat removal.
This subjective inquiry into the plaintiffs intent is a difficult test for courts to apply, and runs the risk of putting the plaintiffs’ attorneys on the stand and asking them about their litigation strategy. Furthermore, this subjective inquiry — if it focused only on what is in the plaintiffs counsel’s mind — could result in the Court almost never sustaining removal, because the plaintiff can virtually always articulate some basis other than forum manipulation for keeping the removal spoiler in the case; because there is no marginal expense to the plaintiff associated with naming or keeping an additional defendant in a case, the plaintiff could then argue that the non-forum manipulation reason that he or she articulated, however weak, outweighs the nonexistent costs of joining or keeping the removal-spoiling defendant. To craft a workable standard, the Court will not focus on whether the plaintiff was motivated by a desire to stay out of federal court, but will instead approach the issue by looking primarily at objective criteria, evaluating whether the plaintiff in fact pursued a non-forum-manipulation reason for joining and keeping the removal-spoiling defendant, i.e., whether the plaintiff actively litigated against the removal spoiler.
The Court will define “actively litigate” broadly. The core incentive that the judicial system provides for plaintiffs to assert claims against defendants is money damages — plaintiffs name defendants with the goal of obtaining a judgment against them and, ultimately, of collecting on that judgment. Recovery is not the only permissible end for which a plaintiff can name a defendant, however, and plaintiffs often name defendants from whom they have no hope of recovering damages. Provided that the plaintiff has colorable claims against the defendant — and fraudulent joinder doctrine, not the bad-faith excep *1265 tion, permits removal when the plaintiff lacks a colorable claim — any of the following are permissible purposes for naming and keeping a defendant in a case: (i) recovering damages from the defendant pursuant to a judgment; (ii) obtaining a judgment against the defendant, even if the plaintiff knows the defendant will be unable to satisfy the judgment; (iii) obtaining a settlement from the defendant, even if the plaintiff has already decided that it would not under any circumstances be economical to take the defendant to trial; (iv) leveraging the claims against the defendant to encourage the defendant to testify on the plaintiffs behalf against other defendants; or (v) obtaining discovery from the defendant by virtue of the increased scope of discovery available against parties relative to nonparties. If the plaintiff shows that he or she pursued any of these ends, then the Court will presume that the plaintiff acted in good faith. At that point, the defendant may attempt to rebut the good-faith presumption with evidence of the plaintiffs subjective bad faith, but the defendant may only use evidence already in his or her possession, and will not receive additional discovery or an evidentiary hearing to develop the bad-faith argument.
The Court will first describe how it interprets the bad-faith exception to apply to plaintiffs whose subjective desire to stay in state court is the but-for cause of their decision to keep the removal-spoiling party joined in the case past the one-year mark. It will then describe how it crafted the two-step standard.
A. THE COURT INTERPRETS THE BAD-FAITH EXCEPTION TO REQUIRE THE COURT TO GAUGE THE PLAINTIFF’S SUBJECTIVE INTENT TO DEFEAT REMOVAL.
Interpreting the bad-faith exception is as much a matter of figuring out what it does not do as it is figuring out what it does. First, the bad-faith exception is an exception only to the one-year limitation— not to complete diversity or the forum-defendant rule. If the plaintiff keeps a removal-spoiling party, i.e., a diversity-destroying party or a forum-citizen defendant, joined all the way through trial, then the defendant can never remove the case under the bad-faith exception, regardless how much “bad faith” the plaintiff had in doing so. The text compels this interpretation: the bad-faith exception is linguistically linked to the one-year limitation by the conjunction “unless,” meaning “[e]x-cept on the condition that”; there is no suggestion that bad faith also constitutes an exception to the complete-diversity and forum-defendant rules, which are in different United States Code sections. 28 U.S.C. § 1446 (c)(1) (“A case may not be removed ... more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith.... ”); The American Heritage Dictionary of the English Language 1402 (William Morris ed., New College ed.1976)(defining “unless”).
Second, the bad-faith exception does not abrogate, nor is it an exception to, the voluntary-involuntary rule — -the rule that states that the plaintiff must voluntarily dismiss the removal spoiler, rather than the removal spoiler securing his or her own dismissal, for the case to be removable. The voluntary-involuntary rule preexists, by roughly a century, both the bad-faith exception and its parent rule, the one-year limitation. It would be odd to conclude that a rule, the voluntary-involuntary rule, whose operation was unaltered by the passage of a second rule, the one-year limitation, would then be altered or abrogated by passage of an exception to the second rule. Moreover, the voluntary- *1266 involuntary rule still does most of its work — and, before the JVCA, did all of its work — before the one-year mark. For example, if a defendant names a single non-diverse defendant and several diverse defendants, and the nondiverse defendant successfully moves to dismiss the case against him within a month of filing, the remaining, completely diverse defendants would still be unable to remove the case unless they could prove that' the nondi-verse defendant had been fraudulently joined. The core operation of the voluntary-involuntary rule has nothing to do with the one-year limitation, and the Court sees no reason why an exception to the one-year limitation would impact it.
Third, as the Court has already stated, the bad-faith exception is not a codification or expansion of fraudulent joinder doctrine. Perhaps it should have been: fraudulent joinder doctrine is a judicially created doctrine; if a defendant has a right to remove when there is complete diversity, and a single nondiverse party destroys diversity, then there must be something to prevent the plaintiff from naming a nondiverse defendant, against whom he or she has no valid claim, just to prevent removal. The historical development of § 1446 and the JVCA’s legislative history, however, make it clear that the bad-faith exception does something different. It was designed to codify an equitable exception, which a minority of courts had recognized, that applied to plaintiffs who joined — and then, after one year, dismissed — defendants that they could keep in the suit, but that they did not want to keep in the suit, except as removal spoilers.
Turning to what the bad-faith exception does, the statute’s text offers little guidance, and what few clues it provides can be better understood once bad faith is separated from the much more intuitive concept of fraudulent joinder, which requires delving into the statute’s historical development and legislative history. That the inquiry focuses on the plaintiffs subjective intent can be gleaned from the statutory text, which forbids removal more than one year after filing “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. § 1446 (c)(1) (emphasis added). These words strongly suggest intentionality and purpose.
1. § 1446(c)(l)’s Historical Development and Legislative History.
The current § 1446(c)(1) evolved in four phases: (i) most modern provisions governing diversity jurisdiction and removal, including complete diversity, amount in controversy, and the forum-defendant rule, originated in the early days of the nation, and have never been any different; (ii) the Supreme Court devised the voluntary-involuntary rule and fraudulent joinder doctrine around the turn of the ninete

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/7227794. Public record. Not legal advice.