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The Supreme Court’s continuing interest in civil procedure already has produced two opinions this term: Martin v. Franklin Capital Corp., 126 S. Ct. 704, 163 L. Ed. 2d 547 (2005) and Lincoln Property Co. v. Roche, 126 S. Ct. 606 (2005). Both opinions involve removal practice. Martin is significant because it resolves a persistent split among the courts of appeals. It is also noteworthy because it is newly appointed Chief Justice John G. Roberts Jr.’s first opinion as a Supreme Court justice. This column explores the Martin case; my next Forum Selection column will discuss the Lincoln Property case. In Martin, the plaintiffs filed a class action in New Mexico state court against Franklin Capital Corp. and Century-National Insurance Co. (Franklin). Franklin removed the case to federal court on the basis of diversity jurisdiction, arguing that punitive damages and attorney fees could be aggregated in a class action to meet the amount-in-controversy requirement. Fifteen months later, the Martins moved to remand on the ground that their claims failed to satisfy the amount-in-controversy requirement. The district court denied the motion and ultimately dismissed the case. On appeal, the 10th U.S. Circuit Court of Appeals agreed that the plaintiffs’ claims did not satisfy the amount-in-controversy requirement. Accordingly, it reversed and remanded with instructions to remand the case to state court. 10th Circuit notes ‘wide discretion’ of lower court Once again before the district court, the plaintiffs moved for attorney fees under 28 U.S.C. 1447(c). The district court concluded that although the removal was improper, Franklin “had objectively reasonable grounds to believe the removal was legally proper,” and therefore denied the Martins’ motion for fees. The Martins appealed again, arguing that � 1447(c) automatically or at least presumptively requires granting attorney fees on remand. The 10th Circuit disagreed, noting the “wide discretion” of the district court, subject to review only for abuse of discretion. 393 F.3d 1143, 1146 (2004). Franklin’s amount-in-controversy argument had relied on case law only subsequently held to be unsound. Thus, Franklin’s basis for removal was objectively reasonable, and the 10th Circuit affirmed the district court’s denial of the plaintiffs’ fee request. Section 1447(c) provides: “An order remanding a case may require payment of just costs and any actual expenses, including attorneys fees, incurred as a result of the removal.” Some courts, like the 10th Circuit, had held that fees should be awarded only when the removing defendant lacked objectively reasonable grounds to believe the removal was proper. See, e.g., Hornbuckle v. State Farm Lloyds, 385 F.3d 538, 541 (5th Cir. 2004). Others ruled that district courts should be more generous in awarding fees to plaintiffs who succeed on motions to remand. See, e.g., Sirotzky v. New York Stock Exchange, 347 F.3d 985, 987 (7th Cir. 2003) (“Provided removal was improper, the plaintiff is presumptively entitled to an award of fees”), and Hofler v. Aetna U.S. Healthcare of Calif. Inc., 296 F.3d 764, 770 (9th Cir. 2002) (affirming fee award even though “the defendant’s position may be fairly supportable”). The Supreme Court granted certiorari to determine what the proper standard should be, and essentially sided with the less generous standard, holding that “absent unusual circumstances, attorney’s fees should not be awarded when the removing party has an objectively reasonable basis for removal.” 163 L. Ed. 2d 553. It was easy for Roberts to reject the plaintiffs’ argument that fees should be automatic. Quoting the statute, he noted that Congress used the word “may” not “shall” or “should.” He said that the plaintiffs were on stronger ground in arguing for a presumption in favor of awarding fees. They had asked the court to analogize � 1447(c) with the statute that authorizes a discretionary award of fees to prevailing plaintiffs in civil rights cases. However, this attempt failed for two reasons. First, unlike the plaintiffs in Martin, a civil rights plaintiff seeking fees under the civil rights statute acts as a private attorney general, helping to ensure compliance with civil rights laws, thereby benefiting the public and vindicating congressional policy of the “highest priority.” Moreover, in a case where a plaintiff is the prevailing party, it is seeking to recover fees from a defendant who, unlike the defendants in Martin, has violated federal law: “[I]ncorrectly invoking a federal right is not comparable to violating substantive federal law.” Id. at 553. Thus, a presumptive right to fees under � 1447(c) is unwarranted absent “more explicit statutory language.” Having rejected the plaintiffs’ arguments, Roberts turned to Franklin’s arguments. He rejected Franklin’s argument that � 1447(c) grants courts jurisdiction to award costs and attorney fees only when otherwise warranted under, for example, Federal Rule of Civil Procedure 11. Although Roberts found that Franklin was correct that the predecessor to � 1447(c) was enacted, in part, to provide courts with jurisdiction to award costs on remand, contrary to the defendants’ position, the statute also supplies a standard, “just” costs, for the award of costs. Accordingly, “Section 1447(c) authorizes courts to award costs and fees, but only when such an award is just. The question remains how to define that standard.” Id. at 554. The court rejected the next argument, offered by the U.S. solicitor general, seeking to define the “just” standard very narrowly. The position here also was borrowed from the context of civil rights law: Fees should be awarded only on a showing that the unsuccessful party’s position was “frivolous, unreasonable, or without foundation,” the standard applied by the Supreme Court for awarding fees against unsuccessful plaintiffs and unsuccessful intervenors in civil rights cases. Roberts wrote: “But just as there is no basis for supposing Congress meant to tilt the exercise of discretion in favor of fee awards under � 1447(c) . . . so too there is no basis here for a strong bias against fee awards.” Rather, the language of � 1447(c) and its context are “more evenly balanced between a pro-award and anti-award position than was the case” in the civil rights context. Accordingly, the court said that it was not persuaded that fees under � 1447(c) should either “usually be granted or usually be denied.” Id. So, what is a district court to do when presented with a motion for fees under � 1447(c)? In a nice turn of phrase, somewhat reminiscent of the recent confirmation battles: “We have it on good authority that a motion to [a court's] discretion is a motion, not to its inclination, but to its judgment; and its judgment is to be guided by sound legal principles. Discretion is not whim, and limiting discretion according to legal standards helps promote the basic principle of justice that like cases should be decided alike.” Id. (omitting citations). In explaining how a district court ought to go about exercising its discretion, Roberts ironically turns to a statement quoted in one of the civil rights cases. When applying fee-shifting statutes, the court has “found limits in ‘the large objectives’ of the relevant Act, which embrace certain ‘equitable considerations.’ ” Id. at 555. Turning to the removal statutes, Roberts noted that Congress had granted a right to a federal forum to state court defendants in a certain cases. He questioned why Congress would grant a right to remove on the one hand, but discourage its exercise in all but those obvious cases, on the other. The key on fees is reasonableness of removal However, Congress, by enacting � 1447(c), also thought that fee-shifting would be appropriate in some cases. Congress understood that the removal and remand process “delays resolution of the case, imposes additional costs on both parties, and wastes judicial resources.” Id. The 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.” Id. These “large objectives” suggest that the standard for awarding fees should turn on the reasonableness of the removal: “Absent unusual circumstances, courts may award attorney’s fees under � 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees should be denied.” Id. Additionally, according to the court, district courts have discretion to consider whether unusual circumstances warrant a departure from this standard. Interestingly, the only example that Roberts provided was where a plaintiff, as opposed to the defendant, is playing games, such as where the plaintiff delays making a motion to remand (was the 15-month delay in Martin itself such a situation?), or the plaintiffs’ failure to disclose facts necessary to determine jurisdiction may affect the decision to award attorney fees. Because the plaintiffs did not dispute the reasonableness of Franklin’s removal arguments, the Supreme Court affirmed the judgment of the 10th Circuit. Martin was not an especially tough first opinion for Roberts to pen. However, it does involve an aspect of the all-important forum selection battle. A decision that supported the plaintiffs’ position would have discouraged some defendants from removing marginally removable cases: removal would be at their financial peril. The court’s decision, however, provides defendants comfort to remove as long as there are objectively reasonable grounds for doing so: no peril unless the essential standard of Rule 11 is violated. Georgene M. Vairo is a professor of law and William M. Rains fellow at Loyola Law School, Los Angeles. She can be reached at [email protected].

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