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Martin v. Franklin Capital Corp.

Supreme Court of the United States · 2005 · Civil Procedure

Civil ProcedureRemovalRemandAttorney's Fees28 U.S.C. § 1447(c)remandremovalattorney's fees

Facts

The Martins filed a class action in New Mexico state court against Franklin Capital Corporation and Century-National Insurance Company. Franklin removed on diversity grounds, acknowledging the complaint did not clearly show the amount in controversy but arguing the requirement was met in part because punitive damages and attorney's fees could be aggregated in a class action. The Tenth Circuit later rejected that amount-in-controversy theory and ordered remand, relying in part on decisions issued after the District Court's earlier remand ruling. When the Martins then sought fees under § 1447(c), the District Court found Franklin had objectively reasonable grounds for believing removal was legally proper and denied fees.

Issue

What standard governs a district court's decision whether to award attorney's fees under 28 U.S.C. § 1447(c) after remanding a removed case to state court? More specifically, should fees be automatic, presumptively awarded, rarely awarded, or tied to whether the removing party had an objectively reasonable basis for removal?

Rule

Section 1447(c) gives district courts discretion to award costs and attorney's fees on remand, but that discretion is governed by legal standards derived from the statute's purposes. 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. A court may depart from this general rule in unusual circumstances, but its reasons must be faithful to the purposes of fee awards under § 1447(c).

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Nora Patel sued Lakeview Transit Services in Ohio state court after a contract dispute. Lakeview removed to federal court on diversity grounds based on a colorable reading of unsettled lower-court precedent, but the district court later concluded subject-matter jurisdiction was lacking and remanded.

Nora moves for attorney's fees under 28 U.S.C. § 1447(c), arguing that she won the remand motion and therefore should ordinarily recover her removal-related fees. How should the district court rule?

Explanation. Section 1447(c) uses the word "may," so fee awards are discretionary rather than automatic. The governing rule is that, absent unusual circumstances, fees should not be awarded when the removing party had an objectively reasonable basis for seeking removal, even if removal ultimately failed. The proper focus is objective reasonableness, not whether the plaintiff ultimately obtained remand. (Derived from Martin v. Franklin Capital Corp. (2005).)