Dreamworks Motorsports, Inc. filed a breach of contract and unjust enrichment lawsuit in North Carolina state court against Jonathan Klein, a Maryland citizen, seeking unpaid repair costs. Approximately ten months after filing, Dreamworks moved to amend its complaint to add an unfair trade practice claim and treble damages. Dreamworks initially scheduled a hearing on this motion for July 2023, but the hearing was continued to November 2023 after Klein's counsel requested a delay due to scheduled leave. This new hearing date fell more than three months after the one-year statutory deadline for diversity-based removal had expired. The state court granted the amendment, but instead of answering, Klein removed the case to federal court, arguing that Dreamworks had acted in bad faith by delaying the amendment to prevent timely removal. The district court remanded the case to state court, finding the removal untimely and awarding Dreamworks attorney's fees and costs under 28 U.S.C. § 1447(c).
The Fourth Circuit analyzed the case under 28 U.S.C. § 1446(c)(1), which prohibits removal based on diversity of citizenship more than one year after the action is commenced, unless the district court finds that the plaintiff acted in bad faith to prevent removal. The court applied the standard from Martin v. Franklin Capital Corp., which requires that fees be awarded only where the removing party lacked an objectively reasonable basis for seeking removal. The court found that Dreamworks moved to amend the complaint ten months after filing, well within the one-year window, and that the delay in the hearing was caused by the defendant's counsel's request for leave, not by a deliberate attempt to manipulate the forum. Because Klein provided no evidence that Dreamworks acted in bad faith, the court concluded that his argument for removal lacked an objectively reasonable basis. The court also rejected Klein's due process claim, noting that Dreamworks did not raise a new argument in its reply but merely responded to Klein's allegations, and that Klein failed to seek reconsideration of the initial fee order. Finally, regarding the fee amount, the court applied the abuse of discretion standard, noting that the district court properly used the lodestar method and subtracted hours unrelated to the removal, making the award reasonable.
This decision reinforces the strict one-year deadline for diversity removal in the Fourth Circuit and clarifies that strategic litigation delays by plaintiffs, absent evidence of malicious intent to manipulate the forum, do not trigger the bad faith exception. Defendants who remove cases after the deadline without a strong factual basis for bad faith face the risk of having to pay the plaintiff's attorney's fees and costs. The ruling also confirms that district courts retain broad discretion in calculating fee awards under § 1447(c) and that appellate courts will not second-guess these calculations absent a clear error of law.