Date: Apr 2, 2026

Evidence Required for “Bad Faith” to Excuse the One-Year Diversity Removal Bar, and Fee-Shifting for Untimely Removal Under § 1447(c)

Introduction

In Dreamworks Motorsports, Inc. v. Jonathan Klein (4th Cir. Mar. 26, 2026) (unpublished, per curiam), Dreamworks Motorsports, Inc. sued Jonathan Klein in North Carolina state court for unpaid automotive repair charges. The original pleading sought $19,663.57. Roughly ten months after filing—about two months before the one-year deadline for diversity removals—Dreamworks moved to amend to add an unfair trade practice claim and treble damages. The state-court hearing on the amendment was continued (at defense counsel’s request due to a scheduling conflict) to a date after the one-year removal deadline, and the amendment was then allowed.

Klein removed to federal court after the one-year mark, invoking diversity jurisdiction and alleging Dreamworks acted in “bad faith” to prevent timely removal. The district court remanded as untimely, awarded Dreamworks its costs and attorney’s fees under 28 U.S.C. § 1447(c), and later set the fee amount at $13,170. On appeal, the Fourth Circuit (i) affirmed the fee award and the amount, and (ii) denied Dreamworks’s request for appellate sanctions under Fed. R. App. P. 38.

The central issues were: (1) what makes a removal “objectively reasonable” for § 1447(c) fee purposes, (2) what is required to plausibly invoke the “bad faith” exception to the one-year diversity removal bar in 28 U.S.C. § 1446(c)(1), (3) whether Klein had adequate opportunity to respond to remand-related arguments, and (4) whether the fee amount was excessive.

Summary of the Opinion

The Fourth Circuit held the district court did not abuse its discretion in awarding fees under § 1447(c) because Klein lacked an objectively reasonable basis for removal: his “bad faith” allegation was unsupported by evidence and contradicted by the record.
The court rejected Klein’s due process argument, concluding Dreamworks did not raise a genuinely new remand theory in reply and noting Klein did not seek reconsideration even though he could have.
The court upheld the amount of fees awarded, emphasizing the district court’s use of the lodestar method, its exclusion of non-removal work, and its reliance on evidence of reasonable local rates.
The court denied Dreamworks’s request for Rule 38 sanctions, declining to deem the appeal frivolous.

Analysis

Precedents Cited

1) Standard of review; appealability context

In re Lowe, 102 F.3d 731, 733 n.2 (4th Cir. 1996): Cited for the proposition that § 1447(c) fee decisions are reviewed for abuse of discretion. It supports deference to district courts on fee-shifting tied to remand.
Black v. Mantei & Assocs., 145 F.4th 528, 534 (4th Cir. 2025): Reinforces the same abuse-of-discretion standard in the removal/remand fee context.

2) The governing fee standard under § 1447(c)

Martin v. Franklin Cap. Corp., 546 U.S. 132 (2005): The controlling authority for when fees are “just” under § 1447(c). The Fourth Circuit relied on Martin’s rule that, absent unusual circumstances, fees are appropriate only when the removing party lacked an objectively reasonable basis for removal, and that fee awards serve to deter removal used to delay litigation and impose costs. This case directly undercut Klein’s claim that “no Fourth Circuit standard” existed.

3) Evaluating the amount of fees (lodestar and deference)

Zoroastrian Ctr. & Darb-E-Mehr of Metro. Wash., D.C. v. Rustam Guiv Found. of N.Y., 822 F.3d 739, 754 (4th Cir. 2016): Cited for the abuse-of-discretion standard for fee awards and the appellate posture that reversal is warranted only when the district court is clearly wrong or commits legal error.
Grissom v. Mills Corp., 549 F.3d 313, 320, 322 (4th Cir. 2008): Used to emphasize “extremely deferential” review of fee awards due to the district court’s superior familiarity with the litigation and the value of the work performed.
McAfee v. Boczar, 738 F.3d 81, 88 (4th Cir. 2013): Supplies the Fourth Circuit’s three-step framework for arriving at a reasonable fee: (i) calculate the lodestar, (ii) subtract hours on unsuccessful unrelated claims, (iii) adjust for degree of success.
Johnson v. Georgia Highway Express Inc., 488 F.2d 714, 717-19 (5th Cir. 1974): Incorporated via McAfee as the set of factors used to assess reasonableness of hours and rates.
Hensley v. Eckerhart, 461 U.S. 424, 437 (1983): Reinforces district court discretion and cautions against turning fee disputes into frequent appellate relitigation of essentially factual determinations.
Robinson v. Equifax Info. Servs., LLC, 560 F.3d 235, 244-45 (4th Cir. 2009): Cited for the “local prevailing market rate” principle and the evidentiary sufficiency of affidavits from local lawyers familiar with the relevant work and the fee applicants’ skills.

Legal Reasoning

1) Interaction between the one-year bar and the “bad faith” exception

Section 1446(c)(1) generally prohibits removal based on diversity “more than 1 year after commencement” unless a district court finds the plaintiff acted in “bad faith” to prevent removal. Klein’s theory depended on converting Dreamworks’s amendment timing into “bad faith” forum manipulation. The Fourth Circuit agreed with the district court that the record did not support that theory: Dreamworks moved to amend about two months before the one-year deadline and scheduled the amendment hearing with enough time to obtain a ruling within the one-year period. In the panel’s view, those facts cut against deliberate delay.

Critically, the court treated “bad faith” not as a label that can be asserted to evade the one-year bar, but as a fact-dependent showing that requires evidentiary support. Because Klein offered “no evidence” for bad faith, his removal lacked a factual foundation. That absence of record support mattered because removal “reasonableness” under § 1447(c) turns on the credibility of the asserted basis for federal jurisdiction or statutory exception.

2) “Objectively reasonable basis” exists as a governing standard

Klein argued there was no Fourth Circuit standard for “objectively reasonable basis.” The court rejected that premise by applying Martin v. Franklin Cap. Corp., which provides the controlling standard nationwide. The panel thus treated the fee question as a straightforward Martin application: if the asserted ground for removal (here, the “bad faith” exception) is unsupported and contradicted by the record, the removing defendant lacks an objectively reasonable basis, making fee shifting “just” under § 1447(c).

3) Procedural fairness / “new argument in reply”

Klein claimed a due process violation because Dreamworks supposedly introduced a new theory in reply and he lacked a chance to respond. The panel found no new argument; it characterized Dreamworks’s reply as a response to Klein’s own bad-faith allegations. The court also highlighted that Klein did not seek reconsideration of the initial fee order—an available procedural step that would have provided a vehicle to address any claimed surprise.

4) Reasonableness of the fee amount

On amount, the court emphasized deference to the district judge’s “close and intimate” knowledge of the litigation. The district court used the lodestar method, excluded time not “incurred as a result of removal” (specifically, time spent responding to Klein’s motion to dismiss), and relied largely on declarations from independent North Carolina attorneys to establish reasonable rates and effort. Applying Robinson v. Equifax Info. Servs., LLC, the panel accepted this as adequate proof of local market rates and found no clear error or legal mistake.

Impact

Practical evidentiary burden for “bad faith”: Even though the opinion is unpublished and “not binding precedent,” it signals that within the Fourth Circuit, conclusory claims of plaintiff “bad faith” under § 1446(c)(1) are unlikely to support late removal unless anchored in concrete record evidence. Timing alone—especially when the plaintiff sought amendment before the one-year deadline—may be insufficient.
Fee exposure as a deterrent: The decision underscores Martin’s deterrence rationale: defendants who remove after the one-year bar without a well-supported exception risk paying the plaintiff’s fees incurred because of the removal.
Litigation conduct can undermine “bad faith” narratives: The fact that defense counsel’s scheduling conflict pushed the amendment hearing past the one-year deadline functioned as an implicit rejoinder to forum-manipulation claims. Future litigants should expect courts to scrutinize who caused the timing problem and whether the plaintiff actually tried to obtain a timely ruling.
Fee-amount review remains highly deferential: By leaning on Grissom v. Mills Corp., Hensley v. Eckerhart, and Rustam Guiv Found. of N.Y., the opinion reinforces that appellate courts rarely disturb a district court’s reasoned lodestar analysis.

Complex Concepts Simplified

Removal (28 U.S.C. § 1441(a)): A defendant’s right to move a case filed in state court to federal court when the federal court could have heard it originally (e.g., diversity jurisdiction).
One-year diversity removal limit (28 U.S.C. § 1446(c)(1)): Even if diversity jurisdiction exists, a defendant generally cannot remove a case more than one year after it began in state court.
“Bad faith” exception (28 U.S.C. § 1446(c)(1)): A narrow escape hatch: if the plaintiff acted in “bad faith” to prevent removal, the one-year limit may not apply. This case illustrates courts expect evidence, not speculation, to invoke the exception.
Remand and § 1447(c) fees: If the federal court sends the case back to state court (remands it), the court may order the removing party to pay “just costs and any actual expenses, including attorney fees,” that were incurred because of the removal.
“Objectively reasonable basis” (from Martin): The key fee question: did the defendant have a reasonable, legally and factually grounded argument for removal? If not, fees are often appropriate.
Lodestar: The standard method for calculating fees: reasonable hours × reasonable hourly rate, then adjusted as needed (e.g., excluding unrelated unsuccessful work).
Fed. R. App. P. 38 sanctions: A rule allowing a court of appeals to award damages and costs if an appeal is frivolous. The Fourth Circuit declined to impose sanctions here.

Conclusion

Dreamworks Motorsports, Inc. v. Jonathan Klein reaffirms, in the removal/remand fee context, a disciplined application of Martin v. Franklin Cap. Corp.: when removal rests on an unsupported assertion—here, a factually unsubstantiated claim that the plaintiff acted in “bad faith” to thwart removal beyond the one-year bar—district courts act within their discretion to award § 1447(c) fees incurred as a result of the improper removal. The opinion also highlights the Fourth Circuit’s strong deference to district courts on the amount of fees when the lodestar is properly applied and non-removal work is excluded.