Micrometl Corp.. v. Tranzact Technologies Inc.

• Decision Date: 24 August 2011
• Docket Number: No. 10–3134.,10–3134.
• Citation: 656 F.3d 467
• Parties: MICROMETL CORP., Plaintiff–Appellee,v.TRANZACT TECHNOLOGIES, INC., Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

656 F.3d 467

MICROMETL CORP., Plaintiff–Appellee,

v.TRANZACT TECHNOLOGIES, INC., Defendant–Appellant.

No. 10–3134.

United States Court of Appeals, Seventh Circuit.

Argued March 30, 2011.Decided Aug. 24, 2011.

Robert M. Frye, Mickey J. Lee (argued), Attorneys, Stewart & Irwin, Indianapolis, IN, Jill C. Taylor, Attorney, Ungaretti & Harris, Chicago, IL, for Plaintiff–Appellee.Ryan A. Mahoney (argued), Daniel C. Sullivan, Attorneys, Sullivan Hincks & Conway, Oak Brook, IL, for Defendant–Appellant.Before FLAUM, WOOD, and TINDER, Circuit Judges.WOOD, Circuit Judge.

After Micrometl Corp. filed suit in state court against Tranzact Technologies, Inc., alleging overbillings in excess of $100,000, Tranzact removed to federal court. The parties are of diverse citizenship, and so jurisdiction appeared secure. Over a year and a half after the lawsuit commenced, however, Micrometl produced a document showing that its damages were really, so it seemed, less than $40,000. Tranzact believed that the document conclusively established that the amount in controversy had never exceeded $75,000, and if that was true, then the district court lacked subject-matter jurisdiction under 28 U.S.C. § 1332. Inexplicably, Tranzact waited ten months, until after a settlement conference failed to resolve the underlying dispute, to alert the court about this problem. Only then did it file a motion to remand the case to state court, along with a request for attorneys' fees and costs. See 28 U.S.C. §§ 1447(c) and 1927. The district court, acting through a magistrate judge, remanded but decided not to award fees and costs. We affirm.

I

Micrometl sued Tranzact in the Circuit Court of Marion County, Indiana, alleging that Tranzact overbilled for services rendered in connection with a shipping services agreement. The facts of the dispute are not relevant to this litigation, except that Micrometl claimed that Tranzact refused to correct overbillings in excess of $100,000. Tranzact removed to federal court for the Southern District of Indiana without objection on March 11, 2008, and then transferred the case to the Northern District of Illinois based on a forum selection clause in the contract. On July 14, 2008, the parties filed a joint status report in which Micrometl reiterated its claim for more than $100,000. Shortly thereafter, Micrometl and Tranzact consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636(c).

Discovery took place over the next year and a half. Micrometl produced a spreadsheet in August 2009 showing that it had incurred almost $140,000.00 in overbillings, but that it also received refunds from third-party sources that reduced Tranzact's liability to $38,846.98. Tranzact then deposed two Micrometl executives who testified that the amount of potential damages was only $38,846.98 and, importantly, that Micrometl had received the refunds that reduced the overbillings by November 14, 2007—well before Micrometl filed suit in early 2008. Micrometl does not dispute this. It does, however, point out that the spreadsheet in question is in fact a document based on information available to both parties that Tranzact prepared and Micrometl revised after discovery began. In Micrometl's view, Tranzact easily could have crunched the numbers to arrive at the conclusion apparent in the August 2009 document: that Tranzact owed only $38,846.98. Micrometl makes this point with some hesitation, however, since the company also maintains that it is possible for it to recover more. Notably, Tranzact does not dispute that it could have figured out that the amount in controversy was lower than Micrometl claimed by doing some simple math. Even so, Tranzact exercised its right to remove to federal court based on the numbers stated in Micrometl's complaint.

This much is clear: once Tranzact had the August 2009 spreadsheet in hand, it had every reason to believe that diversity jurisdiction was lacking because the amount in controversy could not be satisfied. Discovery closed five months later on January 7, 2010, and the parties participated in a settlement conference at the direction of the court on June 9, 2010. When the conference failed to resolve the dispute, Tranzact filed a motion to remand the case to state court on June 17, 2010. The district court immediately ordered the parties to brief the issue and ultimately remanded the case based on the finding that it was legally impossible for the plaintiffs to recover more than $40,000. See Rising–Moore v. Red Roof Inns, Inc., 435 F.3d 813, 815 (7th Cir.2006) (“When the complaint includes a number, it controls unless recovering that amount would be legally impossible.”). For the purpose of our inquiry, we assume that the district court correctly concluded that the necessary amount in excess of $75,000 was never “in controversy.” This determination in any event is unreviewable. See 28 U.S.C. § 1447(d). Our concern is with the court's ancillary order on attorneys' fees and costs. It denied Tranzact's motion for fees and costs under 28 U.S.C. §§ 1447(c) and 1927 and ruled instead that each side should bear its own expenses. Tranzact appeals from that order, which is one over which we have jurisdiction. See Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 409–10 (7th Cir.2000); Tenner v. Zurek, 168 F.3d 328, 329 (7th Cir.1999).

II

We review a district court's decision to award fees and costs for an abuse of discretion. Lott v. Pfizer, Inc., 492 F.3d 789, 792 (7th Cir.2007). To the extent that the decision relies on an interpretation of the fee-shifting statute, our review is de novo. See Wisconsin v. Hotline Indus., Inc., 236 F.3d 363, 365 (7th Cir.2000). The federal removal statute permits a defendant to remove a civil action from state court when a district court has original jurisdiction over the action. 28 U.S.C. § 1441(a). Removal in this case was based on 28 U.S.C. § 1332(a), which confers original jurisdiction on federal courts where the amount in controversy exceeds $75,000 and the action is between citizens of different states. If, however, “at any time before final judgment it appears that the district court lacks subject-matter jurisdiction,” the case must be remanded. § 1447(c). Section 1447(c) provides that a court “may” require payment of “just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” Id. Interpreting this statute, Martin v. Franklin Capital Corp., 546 U.S. 132, 137, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005), said that the attorneys' fees provision does not create a strong presumption either for or against awarding fees. Still, the Court wrote, “absent unusual circumstances, attorneys' fees should not be awarded when the removing party has an objectively reasonable basis for removal.” Id. at 136, 126 S.Ct. 704. When deciding whether fee-shifting is appropriate, courts should balance the policy objectives of the removal statute and its fee-shifting provision, protecting the right to remove to federal court once certain criteria are met while deterring improper removals as a way to delay litigation. See id. at 140, 126 S.Ct. 704.

Most actions seeking fees under § 1447(c) are brought by a plaintiff who wanted all along to be in state court against a defendant who improperly removed. The parties here have spilled much ink debating whether a defendant can ever recover fees pursuant to § 1447(c). This is puzzling, since the statute says nothing about limiting the right to fees to plaintiffs, nor did the district court imply that it lacked the competence to award fees to the defendant. We can assume that it is unusual for a defendant to seek fees and costs associated with removal when it is the party that chose the federal forum after the plaintiff filed in state court. But such cases are not unheard of. See, e.g., Vaughan v. McArthur Bros. Co., 227 F. 364 (8th Cir.1915) (plaintiff ordered to pay fees for failing to inform court there was no basis for diversity of citizenship after eight years of litigation) and Duarte v. Donnelley, 266 F.Supp. 380 (D.Haw.1967) (plaintiff ordered to pay fees after misrepresenting damages claim that led defendant to remove). Of course, a plaintiff cannot conceal facts necessary to determine whether jurisdiction is secure or otherwise thwart the jurisdictional inquiry with impunity. See BEM I, LLC v. Anthropologie, Inc., 301 F.3d 548, 551 (7th Cir.2002) (observing that “deliberately to avoid raising the issue [of subject-matter jurisdiction] is improper, indeed sanctionable ... and quite possible unethical”); Martin, 546 U.S. at 141, 126 S.Ct. 704 (observing that “a plaintiff's delay in seeking remand or failure to disclose facts necessary to determine jurisdiction may affect the decision to award attorney's fees”). In brief, we see no party-based limitation in § 1447(c) on a district court's discretion to award fees and costs.

Tranzact argues that the district court should have awarded fees and costs under § 1447(c) because Micrometl knew or should have known that its damages could not satisfy the jurisdictional threshold. In support, Tranzact asserts that the district court based its decision on a “clearly erroneous assessment” of the law and facts. But we perceive no errors in the district court's analysis. The court plainly understood that Micrometl had the relevant information in its possession to arrive at a more accurate calculation of the amount in controversy, but it failed to analyze the information to determine how much money was at stake. In that regard, the court agreed with Tranzact's argument that Micrometl should have known that it could not recover the amount required to secure diversity jurisdiction. We also note that the court was not hoodwinked by Micrometl's contradictory arguments, asserting on one hand that the amount in controversy was sufficient to satisfy diversity jurisdiction, yet on the other that it had never claimed that damages...