Summary
awarding costs and expenses in case handled on a contingency fee basis based on a "reasonable market rate"
Summary of this case from Speece v. American Family Mut. Ins. Co.Opinion
CAUSE NO. 1:02-cv-1392-DFH
April 18, 2003
ENTRY ON REMOVAL FEE PETITION
Plaintiffs have petitioned for an award of attorneys' fees and costs under 28 U.S.C. § 1447(c) following the improper removal of this action from state court and its speedy remand to the state court whence it came. The petition is granted in the total amount of $8,846.07.
Plaintiffs filed this action in the Delaware County Superior Court alleging claims for relief under Indiana securities law and the common law. Defendant James R. Leone removed the case to this court on the theory that plaintiffs could have pled claims for relief under federal securities laws, even though they chose to limit their claims to state law. See Notice of Removal ¶¶ B(2) B(3)(C).
Leone's theory of removal was imaginative, but it conflicted with well-established principles of federal jurisdiction, which allow the plaintiffs to choose the law under which they seek relief. See, e.g., Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (plaintiff is "the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law"); Davis v. Rodriguez, 106 F.3d 206, 208 (7th Cir. 1997) (same). The fact that state law may incorporate federal law by reference does not transform a state law claim into a federal law claim. Louisville Nashville R.R. Co. v. Western Union Telegraph Co., 237 U.S. 300, 303 (1915); Buethe v. Britt Airlines, Inc., 749 F.2d 1235, 1239 (7th Cir. 1984); accord, Hill v. Marston, 13 F.3d 1548, 1550 (11th Cir. 1994) (removal of state securities law claims improper although state law referred to federal securities laws).
Accordingly, on December 4, 2002, the court remanded this action to the state court. Defendant Leone's attempt to appeal that remand was dismissed, predictably, by the Seventh Circuit on March 21, 2003. See 28 U.S.C. § 1447(d) (barring appellate review of remand orders).
Plaintiffs filed a timely petition for attorney fees and costs resulting from the remand. Such awards are proper under 28 U.S.C. § 1447(c). The original petition sought fees of $8,937.50 (32.5 hours x $275/hr.) and costs of $167.25. Plaintiffs filed a supplemental petition seeking an additional $1,512.50 in fees and $16.25 in costs incurred in Leone's frivolous appeal of the remand order. Notwithstanding the earlier remand, this court retains jurisdiction to resolve such issues under § 1447(c). Wisconsin v. Hotline Industries, Inc., 236 F.3d 363, 365 (7th Cir. 2000).
Section 1447(c) "is not a sanctions rule; it is a fee-shifting statute, entitling the district court to make whole the victorious party. An opponent's bad faith may strengthen the position of a party that obtained a remand, but it is not essential to an award, any more than under the multitude of other fee-shifting statutes." Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 410 (7th Cir. 2000) (emphasis in original). In this case, Leone's removal was objectively baseless and "unjustified under settled law." Id. The removal appears to have been merely a device to impose delay and expense on the plaintiffs who sued Leone. An award of fees and costs is appropriate in this case.
Leone has opposed the fee petition, arguing that no fee should be awarded where plaintiffs' counsel is handling the case on a contingency basis. The argument is based on an interpretation of the language of § 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." Leone cites no case authority for his position, though Judge O'Scannlain of the Ninth Circuit has taken that position in a dissenting opinion. See Gotro v. R B Realty Group, 69 F.3d 1485, 1489 (9th Cir. 1995). The majority in Gotro reached the opposite result, however, affirming a fee award under § 1447(c) in a contingent-fee case. 69 F.3d at 1488.
In Tenner v. Zurek, 168 F.3d 328, 330 n. 3 (7th Cir. 1999), the Seventh Circuit acknowledged the divided views in Gotro but did not express views directly on this question.
The majority's approach in Gotro is also consistent with the Seventh Circuit's decision in Garbie and the evident purposes of § 1447(c). In Garbie, the Seventh Circuit affirmed a fee award that was almost certainly (though the court did not say so) based on the efforts of attorneys working on a contingent fee basis. The court based its conclusion on parallel fee-shifting provisions in which fees are routinely awarded to clients whose attorneys work for contingent fees:
Because § 1447(c) is a fee-shifting statute, the plaintiffs as prevailing parties are presumptively entitled to recover the attorneys' fees incurred in defending their award. Commissioner of INS v. Jean, 496 U.S. 154 (1990). It works much like the provisions in the Rules of Civil Procedure requiring the party that unsuccessfully opposes a discovery request to pay the other side's legal expenses. Rickels v. South Bend, 33 F.3d 785 (7th Cir. 1994), holds that Fed.R.Civ.P. 37(a)(4) is a fee-shifting rule, and that the victor therefore is entitled to recover fees on appeal. "The rationale of fee-shifting rules is that the victor should be made whole — should be as well off as if the opponent had respected his legal rights in the first place. This cannot be accomplished if the victor must pay for the appeal out of his own pocket." 33 F.3d at 787 (emphasis in original). Section 1447(c) entitles plaintiffs to "just costs and any actual expenses, including attorney fees, incurred as a result of the removal" — and plaintiffs' expenses on appeal, no less than their expenses in the district court, were "incurred as a result of the removal." Unjustified removal complicates and extends litigation; the American Rule requires parties to bear their expenses in one set of courts, but when their adversary wrongfully drags them into a second judicial system the loser must expect to cover the incremental costs. Wisconsin v. Glick, 782 F.2d 670 (7th Cir. 1986). Cf. Continental Can Co. v. Chicago Truck Drivers Pension Fund, 921 F.2d 126 (7th Cir. 1990).
Garbie, 211 F.3d at 411.
All of those reasons apply regardless of whether the immediate burden of defeating an improper removal falls on the plaintiff paying an hourly rate or on a plaintiff's lawyer who took the case on a contingency. Also, the court must recognize that the vast majority of fee awards under § 1447(c) will go to plaintiffs and/or their attorneys, and that a very large proportion of plaintiffs' cases are handled on a contingent fee basis. If § 1447(c) were read so as not to authorize awards in such cases, then it would not apply to most cases of improper removal. Accordingly, this court follows the reasoning and explicit holding in Gotro and the reasoning and implicit holding in Garbie to award fees in this action based on a reasonable market rate for plaintiffs' attorney, who is working on a contingent fee basis in this case.
Leone has not challenged the reasonableness of attorney Bell's hourly rate of $275.00, and that rate is within reasonable bounds. The court has considered Wisconsin v. Hotline Industries, Inc., 236 F.3d 363 (7th Cir. 2000), in which the Seventh Circuit held that fee awards under § 1447(c) for salaried government attorneys should be based on their pro-rated salaries rather than market rates for private attorneys. The court did not suggest, however, that it would prohibit fee awards under § 1447(c) for private attorneys who work on a contingent-fee basis, or that such awards should be based on a different rate.
Leone also contends that the fee petition includes time spent on motions other than the removal and remand. Awards under § 1447(c) are limited to fees and costs incurred as a result of the improper removal itself. See Tenner v. Zurek, 168 F.3d at 330. Plaintiffs' petition acknowledges that it includes some time devoted to other motions filed by Leone, which plaintiffs also deem frivolous. The court's best estimate is that 20 percent of attorney Bell's time reported in the petition was spent on such other matters. The court therefore reduces the fees in the original petition by 20 percent, and allows all claimed costs and all fees claimed in the supplemental petition.
The 20 percent figure is admittedly a rough estimate, but "District judges have discretion to tailor the documentation requirement so that it is appropriate in light of the stakes. . . ." Garbie v. DaimlerChrysler Corp., 211 F.3d at 411. Otherwise, the cost of supporting a fee petition could become unreasonable as compared with the amount in question.
The total number of hours allowed in this award is still relatively high in light of the straightforward jurisdictional issue. Defendant Leone, however, briefed and argued his position thoroughly and vigorously. Plaintiffs were entitled to respond in kind, even though the effort was more than would be required in most cases of this type. The court will therefore enter a separate judgment pursuant to 28 U.S.C. § 1447(c) and Fed.R.Civ.P. 54 ordering defendant James R. Leone to pay plaintiffs and their attorneys $8,662.50 in attorney fees and $183.57 in costs, for a total of $8,846.07.
So ordered.