Kent State Univ. Bd. of Trs. v. Lexington Ins. Co.
| Decision Date | 22 January 2013 |
| Docket Number | No. 11-3601,11-3601 |
| Parties | KENT STATE UNIVERSITY BOARD OF TRUSTEES, et al., Plaintiffs - Appellees, v. LEXINGTON INSURANCE COMPANY, et al., Defendants - Appellants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 13a0080n.06
ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF
OHIO
Before: CLAY and STRANCH, Circuit Judges; BELL, District Judge.*
JANE B. STRANCH, Circuit Judge. Defendant Lexington Insurance Company ("Lexington") appeals an award of $11,072.50 in attorneys' fees issued pursuant to 28 U.S.C. § 1447(c). The award stems from efforts by plaintiffs Kent State University Board of Trustees and Tuscarawas County University Branch District Board of Trustees (collectively, "Kent State") to secure payment from Lexington for an alleged $2.1 million in damages resulting from an early 2009 construction project accident. Kent State brought suit in Ohio state court against Lexington; York Risk Services Group, Inc.; and York employee James P. Sweeney. The defendants removed the action to federal court, alleging that Sweeney had been fraudulently joined in order to destroy the diversity of citizenship among the parties and thereby limit the defendants' right to a federal forum.The district court remanded the case to state court and granted Kent State's motion for attorneys' fees. Defendants appealed the award, and we now AFFIRM.
Lexington issued an insurance policy to Kent State, effective July 1, 2008 through July 1, 2009 ("Policy"). The Policy specified the claims adjuster to be a York employee, James (Jim) P. Sweeney, and noted that the "assigned may be changed by mutual consent of the Insured and the Company." On March 9, 2009, the structural steel framing of a Kent State construction project collapsed, and Kent State alleges it suffered at least $2.1 million in damages as a result. The Policy required Kent State to report any losses to defendant Sweeney, and Kent State alleges that it advised Sweeney of the damages on or about March 10.
According to their Ohio state court complaint, the plaintiffs heard nothing from the defendants about the claim until they met with Sweeney on December 1, 2009, almost nine months later. Although coverage of the claim had never been challenged and payment had been indicated as forthcoming, in January of 2010 Sweeney issued a reservation of rights letter asserting a possible exclusion of coverage. Lexington later rescinded the letter and made an interim payment of $111,000. No more payments were made, however, and the plaintiffs eventually issued a demand to the defendants to inform them of the claim coverage. On November 1, 2010, Kent State filed suit in Common Pleas Court for Tuscarawas County, Ohio, against Lexington, York, and Sweeney. The suit alleged breach of contract, negligence, bad faith, wanton and reckless conduct, and violation of the duty of good faith and fair dealing.
Defendants timely removed the suit to federal court, alleging that Sweeney, a resident of Ohio, had been fraudulently joined to defeat diversity jurisdiction. They argued that Sweeney wasnot in privity of contract with the plaintiffs and thus could not be liable to them, and also that he could not be liable as the representative for a disclosed principal. Within a week of the notice of removal, Lexington also filed a motion to dismiss York and Sweeney from the suit; a motion to strike all references to American International Group ("AIG"), the parent corporation of Lexington; and an answer to the original complaint. Kent State filed a memorandum in opposition to the motion to strike, a motion to stay briefing on the motion to dismiss, and a motion to remand the case to Ohio state court. During this time, the parties participated in multiple telephone conference calls with the court, a case management conference, and a mediation conference. Lexington at first filed a response in opposition to the motion to remand, but it eventually withdrew that opposition and stipulated to the remand.
Kent State subsequently filed a motion for attorneys' fees under the federal statute covering removal actions and motions to remand, 28 U.S.C. § 1447(c). The motion requested fees representing the 165.5 attorney hours and 16.5 paralegal hours that the Ohio Attorney General's office had allegedly spent in pursuit of the remand. The motion did not include specific evidence detailing the hourly activities of individual attorneys and paralegals, but did include affidavits from various Assistant Attorneys General testifying to the number of hours each had spent working on the case after the notice of removal had been filed. The motion set the hourly rate at $125 per attorney hour and $65 per paralegal hour, for a total of $21,760. Lexington filed a memorandum in opposition, Kent State filed a reply, and Lexington filed a sur-reply.
The district court granted both the motion to remand and the motion for attorneys' fees. The court determined that the combination of the unsettled state of relevant Ohio agency law and the high bar for fraudulent joinder claims in removal actions left no doubt that the matter should not havebeen removed. While the court held a fee award was proper under § 1447(c), it stated that the request "should have been further detailed." Nonetheless, after reviewing the specific filings made and individuals involved, noting the low hourly rate, and acknowledging that the Attorney General's office functions differently than a private firm, the court granted a total fee award of $11,072.50.
Despite this partial victory on the award amount, Lexington appealed the fee award to this court, arguing that (1) the notice of removal was "fairly supportable" as required under Sixth Circuit case law and therefore a fee award is improper, and (2) no fee award is appropriate where the moving party provides insufficient detail to explain the number of hours billed.
We review the district court's decision to award attorneys' fees under 28 U.S.C. § 1447(c) for abuse of discretion. Warthman v. Genoa Twp. Bd. of Trs., 549 F.3d 1055, 1059 (6th Cir. 2008) (). An abuse of discretion occurs "where a district court relies on clearly erroneous findings of fact, or when it improperly applies the law or uses an erroneous legal standard." Id. (internal quotation marks omitted). A reviewing court, however, "cannot overturn a district court solely because it would have made a different decision under the circumstances." Bartholomew v. Town of Collierville, 409 F.3d 684, 686 (6th Cir. 2005) (quoting CSX Transp., Inc. v. Tenn. State Bd. of Equalization, 964 F.2d 548, 556 (6th Cir.1992)).
Where the court "provides a clear and concise explanation of its reasons" we afford the district court "substantial deference" on calculations of the amount of an award. Gonter v. Hunt Valve Co., 510 F.3d 610, 616 (6th Cir. 2007). This discretion "is appropriate in view of the districtcourt's superior understanding of the litigation and the desirability of avoiding frequent appellate review of what essentially are factual matters." Hensley v. Eckerhart, 461 U.S. 424, 437 (1983).
Federal law governs when a civil case brought in state court may be removed to federal court and when the district court must remand an action to state court. See 28 U.S.C. §§ 1441, 1447(c). An action may be removed only when the plaintiff could have filed suit in federal court in the first place. 28 U.S.C. § 1441. If the district court determines that the removal was improper, the action must be remanded, and the order "may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." Id. § 1447(c).
The language of the remand statute "places an award of costs and attorney fees . . . squarely within the discretion of the district court, but subject to the guidance set forth by the Supreme Court in Martin v. Franklin Capital Corp., 546 U.S. 132, 136-37 (2005)." Warthman, 549 F.3d at 1059. In Martin, the Supreme Court limited a district court's discretion to award fees, absent unusual circumstances, to those cases where "the removing party lacked an objectively reasonable basis for seeking removal." 546 U.S. at 141 (emphasis added). "This court has similarly instructed that an award of costs, including attorney fees, is inappropriate where the defendant's attempt to remove the action was 'fairly supportable,' or where there has not been at least some finding of fault with the defendant's decision to remove." Warthman, 549 F.3d at 1059-60 (quoting Bartholomew, 409 F.3d at 687).
In holding that an "objectively reasonable" notice of removal could defeat a request for attorneys' fees, the Supreme Court rejected a line of cases in which a plaintiff was "presumptively"entitled to an award of fees whenever removal was improper. Martin, 546 U.S. at 136. According to the Court, "there is no reason to suppose Congress meant to confer a right to remove, while at the same time discouraging its exercise in all but obvious cases." Id. at 140.
The objective reasonableness standard, however, does not require a showing that the defendant's position was "frivolous" or "without foundation." Martin, 546 U.S. at 138-39 (). Among other factors, objective reasonableness may depend on "the clarity of the law at the time the notice of removal was filed." Lott v. Pfizer, 492 F.3d 789, 792 (7th Cir. 2007); see also Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1066 (9th Cir. 2008).
Here, the reasonableness of Lexington's decision to remove Kent State's claim based on a fraudulent joinder theory depended on the clarity of two bodies of law—the...
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