CPLR R. 5015(a)(4) Bad Faith Removal Doesn’t Divest NY Court of Jurisdiction

Now, more than 10 years after the properties were sold and without
giving any excuse for her extraordinary delay, Lane seeks to undo the
foreclosures, oust the current owners from their homes, and vacate the
judgments. Lane's motions, presumably brought pursuant to CPLR
5015(a)(4), allege that Supreme Court lacked jurisdiction during the
limited time period in 1997 between the filing of the removal petition
and the federal court remand. Notably, Lane does not claim, nor could
she, that Supreme Court did not have jurisdiction over the matter at
any other time during the long history of this case. Lane offers no
reason why her removal attempt was proper, nor does she present any
viable defense on the merits of the foreclosure actions. And it is
undisputed that at the time the properties were sold, the federal court
had already remanded the matter to state court.

As a general rule, removal of an action divests the state court of its
jurisdiction over the dispute while the removal petition is pending in
federal court (Matter of Artists' Representatives Assn. [Haley],
26 AD2d 918 [1966]). While no New York case has addressed the specific
issue presented here, a number of other courts have carved out
exceptions to the general rule focusing on situations where removal
petitions were frivolous, duplicative or abusive. For example, in Motton v Lockheed Martin Corp.
(692 So 2d 6 [La App 1997]), after the defendant filed an improper
removal petition but before the federal court remanded, the plaintiff
filed a notice of appeal. The court denied the defendant's motion to
dismiss the appeal, finding that the defendant's removal attempt was
made to delay the plaintiff's right to move forward in the case.

…

We find that under the unique circumstances of this case, where the
federal court found the removal petition to be frivolous on its face
and where it was made in bad faith at the eleventh hour, following an
unsuccessful appeal, the motion court was not required, more than a
decade later, to vacate the judgments based on a claimed lack of
jurisdiction. There is no question that Lane's removal petition was
frivolous. In the order summarily remanding the matter to state court,
the federal court concluded that the petition showed "no non-frivolous
basis for jurisdiction" and that "it clearly appears on the face of the
papers submitted that removal should not be permitted."
[*3]

Moreover, Lane's removal
petition was undeniably untimely. A notice of removal of a civil action
must be filed within 30 days after receipt of a copy of the initial
pleading (28 USC
§ 1446[b]). Here, the foreclosure actions were commenced in
December 1994 and Lane's answers were struck in February 1996, yet the
removal petition was not filed until May 1997. Therefore, in addition
to asserting frivolous grounds for removal, the petition was
time-barred and could not have caused the state court to lose
jurisdiction (see Booth v Stenshoel, 96 Wash App 1019, 1999 WL
438888 [state court had jurisdiction to enter judgment after removal
petition was filed on the day of trial and 16 months after the action
was commenced]; Miller Block Co. v United States Natl. Bank, 389 Pa Super 461, 567 A2d 695 [1989], lv denied
525 Pa 658, 582 A2d 324 91990] [state court not divested of
jurisdiction upon filing of the removal petition where petition was
undisputedly untimely]; Ramsey v A.I.U. Ins. Co., 1985 Ohio App
LEXIS 8157, 1985 WL 10329 [an untimely removal petition is a nullity
and does not divest the state of jurisdiction]).

Lane's bad faith in filing her removal petition is apparent.
After an unsuccessful appeal and the lifting of an appellate stay, Lane
filed for bankruptcy and, as a result, obtained yet another stay of the
foreclosure action, which already had been pending for several years.
After the bankruptcy stay was lifted, plaintiff submitted proposed
judgments of foreclosure. A week later, instead of taking any action in
state court, Lane filed her frivolous removal petition. The only fair
reading of the record is that Lane's actions in attempting removal were
made in bad faith for the purpose of delaying the imminent
foreclosures. Lane's bad faith litigation conduct persists to this day,
as evidenced by her inexcusable delay in waiting more than 10 years to
challenge the judgments despite being aware of their existence within
weeks of their entry.

We recognize that some courts have concluded no exceptions
should be created to the general rule and thus have invalidated state
court action taken after removal but before remand (see e.g. South Carolina v Moore, 447 F2d 1067 [4th Cir 1971]; State ex rel. Morrison v Price, 285 Kan 389, 172 P3d 561 [2007]; People v Martin-Trigona,
28 Ill App 3d 605, 328 NE2d 362 [1975]). These cases are not binding on
us, and in any event, we decline to follow them under the egregious
circumstances presented here. With no good reason, Lane waited over a
decade before deciding to come back to court to challenge the
foreclosures. Her abuse of the legal process, both in filing a bad
faith petition and in failing to move to vacate the judgments she
unquestionably knew about, cannot be countenanced, particularly in
light of the harm that could befall the innocent purchasers of the
properties. To hold otherwise would reward Lane for her inexcusable
delaying tactics and would be entirely "inconsistent with any notion of
fairness and justice" (Farm Credit Bank of St. Paul v Rub, supra, 481 NW2d at 457).