Hood v. PowerPay, LLC
| Docket Number | 1:22-cv-00018-RJS |
| Decision Date | 13 January 2023 |
| Parties | CAROLE HOOD, an individual, Plaintiff, v. POWERPAY, LLC, a Wyoming limited liability company; LIFELINE SMART HOME, LLC, dba HOMEPAY INC., a Delaware corporation, dba SAFE HOME CONTROL, INC., a Delaware corporation; and JOHN DOES I-X, Defendants. |
| Court | U.S. District Court — District of Utah |
CAROLE HOOD, an individual, Plaintiff,
v.
POWERPAY, LLC, a Wyoming limited liability company; LIFELINE SMART HOME, LLC, dba HOMEPAY INC., a Delaware corporation, dba SAFE HOME CONTROL, INC., a Delaware corporation; and JOHN DOES I-X, Defendants.
No. 1:22-cv-00018-RJS
United States District Court, D. Utah, Northern Division
January 13, 2023
MEMORANDUM DECISION AND ORDER DENYING PLAINTIFF'S MOTION FOR ATTORNEYS' FEES
ROBERT J. SHELBY UNITED STATES CHIEF DISTRICT JUDGE
Before the court is Plaintiff Carole Hood's Motion for Attorneys' Fees under 28 U.S.C. § 1447(c).[1]For the reasons set forth below, the Motion is DENIED.
BACKGROUND AND PROCEDURAL HISTORY
On January 8, 2022, Hood filed her Amended Complaint in Utah State Court, alleging violations of state and federal consumer protection statutes by Defendant PowerPay, LLC.[2]Hood also asserted state law claims against Defendants Lifeline Smart Home, LLC, Safe Home Control, Inc., and Homepay Inc. (collectively, the Non-Removing Defendants).[3]On February 7, 2022, PowerPay timely removed this action pursuant to 28 U.S.C. §§ 1331, 1441, and 1446, stating “[r]emoval of this action . . . is proper under 28 U.S.C. § 1331 because a majority of
Plaintiff's claims against PowerPay arise under the laws of the United States.”[4] Hood countered with a Motion to Remand on March 7, 2022, arguing, among other things, that PowerPay's removal was “fatally defective . . . [because] the defendants did not unanimously agree to removal,” as required by the federal removal statute, 28 U.S.C. § 1446.[5]After some discussions between the parties,[6] Hood and PowerPay filed a Stipulation to Remand on March 28, 2022,[7]which was granted by this court.[8]
On April 14, 2022, Hood filed the instant Motion for Attorneys' Fees (the Motion), seeking $23,700 in attorneys' fees incurred as a result of PowerPay's allegedly improper removal.[9] Hood accuses PowerPay of two procedural defects: (1) failing to attach returns of service to the removal notice, as required by 28 U.S.C. § 1441(a); and (2) failing to meet the unanimity requirement of § 1446(b)(2)(A).[10]PowerPay responds that § 1447(c) attorneys' fees are unwarranted because it did not lack “an objectively reasonable basis for removal,” as required by Supreme Court precedent.[11]It concedes the removal notice did not have the consent of the co-defendants, but nevertheless argues these co-defendants are “nominal parties” excepted
from the unanimity requirement.[12]In the alternative, PowerPay urges that “any . . . award should be minimal,” pointing to a recent decision of this court reducing a fee award where the “[d]efendant's error was based on inadvertence and lacking in any evidence of an improper motive.”[13]The court first discusses the legal standards governing the parties' dispute before turning to the merits of their arguments.
LEGAL STANDARDS
Under the “bedrock principle known as the ‘American Rule,'” “[e]ach litigant pays his [or her] own attorney's fees, win or lose, unless a statute or contract provides otherwise.”[14] The federal statute governing post-removal procedures, 28 U.S.C. § 1447, provides one such source of discretionary fee-shifting. In relevant part, § 1447(c) permits a district court to “require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.”[15]“Any award of fees under § 1447(c) is discretionary and based on the reasonableness of removal.”[16]In deciding when fees should be awarded, however, the Supreme Court has held that “[a]bsent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking
removal.”[17]The Tenth Circuit further advises that the test for fees under § 1447(c) does not require a showing of bad faith by the removing party.[18]“What is required to award fees, however, is a showing that the removal was improper ab initio.”[19]Accordingly, the court must first consider the propriety of PowerPay's removal before evaluating Hood's request for attorneys' fees.
ANALYSIS
A. PowerPay's Removal Was Procedurally Defective
“Federal courts are courts of limited jurisdiction, possessing only that power authorized by Constitution and Statute.”[20] The party removing the case to federal court bears the burden of establishing jurisdiction by a preponderance of the evidence.[21]It also has the burden to show compliance with the requirements for removal.[22]In its Notice of Removal, PowerPay cites 28 U.S.C. § 1331 as the basis for federal jurisdiction.[23]Section 1331 vests federal courts with jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.” The removal statute further provides that “any civil action brought in State court of which the district courts of the United States have original jurisdiction, may be removed by the
defendant or the defendants.”[24]PowerPay thus contends removal was proper because “a majority of Plaintiff's claims against PowerPay arise under the laws of the United States,” including the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq., and the Truth in Lending Act, 15 U.S.C. § 1601, et seq.[25]As these federal claims appear “on the face of the complaint” filed by Hood, the court agrees that PowerPay could properly seek removal based on federal question jurisdiction.[26]
However, Hood does not challenge PowerPay's substantive grounds for seeking removal.[27]Instead, she argues PowerPay's removal was “fatally defective” for failing to meet certain procedural requirements of 28 U.S.C. §§ 1441 and 1446-most notably, the requirement that the removing party obtain the consent of all co-defendants as part of the removal process.[28]“[B]ecause removal jurisdiction is statutory in nature, it is strictly construed.”[29]The removing party's failure to comply with the “express statutory requirements for removal can fairly be said to render the removal ‘defective' and justify a remand.”[30] Moreover, the Tenth Circuit has specifically recognized “noncompliance with the unanimity requirements in § 1446(b)(2)(A)” as
among the procedural defects requiring remand.[31]Therefore, the court will focus its analysis on PowerPay's purported breach of the § 1446(b)(2)(A) unanimity requirement rather than the alleged failure to attach returns of service to the removal notice.
In a case removed based on federal question jurisdiction, the “unanimity rule” requires “all defendants who have been properly joined and served . . . [to] join in or consent to the removal of the action.”[32]To satisfy the unanimity rule, this court has found that each consenting defendant must state its consent for the record, thereby removing “any doubt for the court . . . of the clear intent of each party defendant.”[33]However, PowerPay's Notice of Removal does not even mention the Non-Removing Defendants, let alone provide an unambiguous showing of unanimous consent to removal.[34]
In explaining the lack of consent from its co-defendants, PowerPay avers it “did not obtain the[ir] consent . . . because they are nominal parties and ‘nominal, unknown, unserved, or fraudulently joined defendants need not consent to removal.'”[35]In particular, PowerPay claims its “review of relevant filings and available information” revealed that the Non-Removing Defendants “are no longer actively engaged in business, and therefore, are nominal parties whose
consent was not required.”[36]PowerPay further urges that “it is not necessary for the [c]ourt to agree with PowerPay's position to deny Plaintiff's fee request,” given the lack of controlling Tenth Circuit case law.[37]
It is undisputed that PowerPay failed to raise the nominal party exception when removing the case.[38]Only after Hood demanded § 1447(c) attorneys' fees did PowerPay aver, for the first time on the record, that the Non-Removing Defendants are nominal parties excepted from the unanimity rule.[39]Importantly, sister courts have found that such a failure to affirmatively explain the absence of any co-defendants in the removal notice renders the notice defective and compels a remand.[40]Given the fundamental purpose of the unanimity rule,[41]the court concludes
PowerPay's late explanation for the absence of the Non-Removing Defendants does not save an otherwise defective petition. PowerPay neither obtained the Non-Removing Defendants' consent nor affirmatively explained their absence in the removal notice itself.[42]Thus, the removal was improper ab initio, compelling remand.
Having found the removal notice procedurally defective, the court will now discuss whether PowerPay's improper removal supports a discretionary award of attorneys' fees under § 1447(c).
B. PowerPay's Improper Removal Does Not Support an Award of Attorneys' Fees
The court has broad discretion to award attorneys' fees under § 1447(c), provided “the removing party lacked an objectively reasonable basis for seeking removal.”[43]“Conversely, when an objectively reasonable basis exists,” the Supreme Court has held that “fees should be denied.”[44] However, federal courts diverge on the circumstances that constitute an “objectively reasonable basis for seeking removal”-particularly with respect to failures to comply with the unanimity rule. While this court has previously declined to award § 1447(c) attorneys' fees based solely on violations of the unanimity rule,[45]other courts have been more willing to award
attorneys' fees for such procedural defects.[46]For instance, courts in the Second Circuit have repeatedly found that a failure to comply with the rule of unanimity is “objectively unreasonable” and “merits the imposition of costs and attorneys' fees.”[47]By contrast, other courts have refused to grant attorneys' fees where the principal defect was the failure to comply with the unanimity rule...
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