Martin v. Franklin Capital Corp.

• Decision Date: 30 December 2004
• Docket Number: No. 02-2048.,02-2048.
• Citation: 393 F.3d 1143
• Parties: Gerald T. MARTIN and Juana M. Martin, individually and on behalf of all persons similarly situated, Plaintiffs-Appellants, v. FRANKLIN CAPITAL CORPORATION, a Utah corporation; and Century-National Insurance Company, a California corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

393 F.3d 1143

Gerald T. MARTIN and Juana M. Martin, individually and on behalf of all persons similarly situated, Plaintiffs-Appellants, v. FRANKLIN CAPITAL CORPORATION, a Utah corporation; and Century-National Insurance Company, a California corporation, Defendants-Appellees.

No. 02-2048.

United States Court of Appeals, Tenth Circuit.

December 30, 2004.

James M. Pietz of Malakoff Doyle & Finberg, P.C., Pittsburgh, Pennsylvania (Michael P. Malakoff of Malakoff Doyle & Finberg, P.C., Pittsburgh, Pennsylvania; and Richard N. Feferman of Albuquerque, NM, on the briefs), for Plaintiffs-Appellants.

Jan T. Chilton of Severson & Werson, San Francisco, CA, for Defendant-Appellee Franklin Capital Corporation.

Stevan Douglas Looney (Jay D. Hertz on the brief) of Sutin, Thayer & Browne, Albuquerque, NM, for Defendant-Appellee Century-National Insurance Company.

Before SEYMOUR and BRISCOE, Circuit Judges, and PAYNE^*, District Judge.

SEYMOUR, Circuit Judge.

Gerald T. Martin and Juana M. Martin (Martins) sought an award of attorney's fees and expenses pursuant to 28 U.S.C. § 1447(c) from Franklin Capital Corporation and Century-National Insurance Company (defendants) after this court determined defendants should not have removed the instant action to federal court. The district court denied the Martins' request for fees and expenses, and they appeal. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.

I

In September 1996, the Martins filed a lawsuit against defendants in New Mexico state court. On their behalf and on behalf of all persons similarly situated, the Martins sought damages under state statutory and common law theories for alleged illegalities with respect to automobile financing and insurance contracts they had entered into with defendants. About a month after the Martins filed their complaint, defendants removed the action to federal court based on diversity of citizenship pursuant to 28 U.S.C. §§ 1332 and 1441. The Martins raised no objection to defendants' removal at the time and did not seek remand. Over a year later, and during a hearing before the district court on defendants' motion to dismiss, the Martins first questioned whether the court possessed jurisdiction over the case. The Martins subsequently filed a motion to remand the action to state court for lack of subject matter jurisdiction on the basis that their claims did not meet the $50,000 amount in controversy requirement for diversity jurisdiction.¹

In opposition to the Martins' motion, defendants argued variously the amount in controversy requirement was satisfied because the Martins' complaint sought punitive damages of more than $50,000 in the aggregate; sought attorney's fees of more than $50,000 in the aggregate; and sought monetary relief for the named plaintiffs for more than $50,000. The district court agreed with defendants and denied the Martins' motion to remand, finding "[t]he allegations of the complaint and the contents of [defendants'] notice of removal demonstrate the requisite $50,000 amount in controversy." Aplt.App. at 263.

The Martins requested the district court certify its order denying remand so they could seek interlocutory appeal under 28 U.S.C. § 1292(b), which the court denied. The Martins subsequently petitioned the court to grant judgment against them in order to permit an immediate appeal on the question of jurisdiction. The district court granted the Martins' voluntary dismissal with prejudice and they filed an appeal.

In Martin v. Franklin Capital Corp., 251 F.3d 1284 (10th Cir.2001) (Martin I), we reversed the district court's ruling. In the course of our analysis, we rejected defendants' argument that "the punitive damages claimed by the entire class could be aggregated and attributed to the Martins in determining the amount in controversy" for jurisdictional purposes. Id. at 1291. We also rejected defendants' contentions that an aggregation of attorney's fees or the amount of relief requested by the Martins as class representatives satisfied the amount in controversy requirement. Id. at 1291, 1293. Accordingly, we remanded with directions that the case be sent back to state court. Id. at 1294.

Upon returning to the district court, the Martins moved for an award of attorney's fees and expenses pursuant to § 1447(c), which grants the district court discretion to award attorney's fees incurred as a result of removal when a case is remanded. The district court denied the Martins' request, determining that at the time defendants removed the case to federal court, they had objectively reasonable legal grounds to believe removal was proper. The Martins challenge on appeal the district court's denial of attorney's fees and expenses.

II

The language of § 1447(c) directs that the award of attorney's fees rests squarely within the discretion of the district court when a remand is ordered. See § 1447(c) ("An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." (emphasis added)). Given our decision in Martin I that removal was improper in this case, the district court had discretion to award attorney's fees to the Martins if it believed fees were appropriate. The district court determined defendants possessed objectively reasonable grounds to believe removal was proper and therefore declined to award fees to the Martins. We review that decision for abuse of discretion. Suder v. Blue Circle, Inc., 116 F.3d 1351, 1352 (10th Cir.1997); Excell, Inc. v. Sterling Boiler & Mech., Inc., 106 F.3d 318, 322 (10th Cir.1997); Daleske v. Fairfield Cmtys, Inc., 17 F.3d 321, 323 (10th Cir.1994). We review de novo the district court's legal analysis underlying its decision. Daleske, 17 F.3d at 323.

In challenging the district court's ruling, the Martins assert that in a case where a defendant's removal to federal court serves as what the Martins characterize as "test litigation" regarding the existence of federal jurisdiction, and jurisdiction is subsequently found to be lacking, fees should be awarded to the plaintiff as a matter of course. They also assert the district court did not properly apply the standard articulated by our court in Suder and Daleske. Building upon their test litigation argument, they contend the district court should have adhered to what they argue is a more "plaintiff-based standard" which they say has been adopted by the Seventh and Ninth Circuits, citing Wisconsin v. Hotline Indus., Inc., 236 F.3d 363 (7th Cir.2000), and Hofler v. Aetna U.S. Healthcare of Ca., 296 F.3d 764 (9th Cir.2002).² Under this approach, the Martins urge that attorney's fees should be awarded when removal is deemed improper, irrespective of whether the defendant had a legitimate or objective basis for believing in the propriety of removal. We are not persuaded.

As we have recognized:

In deciding whether to award costs under § 1447(c), the key factor is the propriety of defendant's removal. The district court does not have to find that the state court action has been removed in bad faith as a prerequisite to awarding attorney fees and costs under § 1447(c).

Excell, Inc., 106 F.3d at 322 (internal citations omitted). On the other hand, attorney's fees may be denied where the defendant "had a fair basis for removing the case." Daleske, 17 F.3d at 324.

Other circuits have also recognized that the award of fees under § 1447(c) is left to the wide discretion of the district court once remand is ordered. See, e.g. Balcorta v. Twentieth Century-Fox Film Corp., 208 F.3d 1102, 1105 (9th Cir.2000) (reviewing for abuse of discretion district court's fee award determination); Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 292 (5th Cir.2000) ("The decision of the district court to award or not to award attorney's fees is reviewed for an abuse of discretion."); Mints v. Educ. Testing Serv., 99 F.3d 1253, 1260 (3d Cir.1996) ("a district court has broad discretion and may be flexible in determining whether to require the payment of fees under section 1447(c)"); Morris v. Bridgestone/Firestone, Inc., 985 F.2d 238, 240 (6th Cir.1993) (agreeing that "the ... statute affords a great deal of discretion in fashioning awards of costs and fees") (quotation omitted); Morgan Guar. Trust Co. of N.Y. v. Republic of Palau, 971 F.2d 917, 924 (2d Cir.1992) (statute provides district courts with discretion in how to award costs and fees). While the Seventh Circuit has suggested there is a presumption that fees be awarded to plaintiffs under § 1447(c) upon a finding of improper removal, see e.g., Sirotzky v. New York Stock Exch., 347 F.3d 985, 987 (7th Cir.2003), "[n]evertheless, the entitlement is not automatic — the presumption is not irrebuttable...." Id.³

Between these varied expressions regarding § 1447(c), there remains the broadly accepted position that if a defendant's removal could be fairly supported by the law at the time, even if later deemed incorrect, a district court's discretionary decision not to award fees is appropriate. Indeed, most courts do not impose fees when the defendant had a legitimate ground for seeking removal. See 16 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE § 107.41[3][a][ii] (3d ed.1997); see also 14C CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3739 (3d ed.1998) (noting award of fees is at discretion of district court, and fees may be denied "when there are reasons to believe that the removability of the case was plausible").

The Martins incorrectly claim the district court employed a standard other than that required by our circuit. In accordance with Suder and Daleske, the district court recognized that a plaintiff is not automatically entitled to attorney's fees simply because removal was ultimately determined to be improper. Instead, relying on Valdes, 199 F.3d at 292, it determined it should "evaluate the merits of Defendants' removal action at the time it was filed." Aplt.App. ...