Martin v. Franklin Capital Corp
546 U.S. 132 (2005)
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Rule of Law:
Absent unusual circumstances, a court may award attorney's fees under 28 U.S.C. § 1447(c) only where the party that removed a case from state to federal court lacked an objectively reasonable basis for seeking removal.
Facts:
- Gerald and Juana Martin filed a class-action lawsuit against Franklin Capital Corporation and Century-National Insurance Company (collectively, Franklin) in a New Mexico state court.
- The Martins' complaint did not specify a monetary amount of damages sought.
- Franklin removed the case to federal court, asserting diversity jurisdiction.
- To satisfy the amount-in-controversy requirement for diversity jurisdiction, Franklin argued that the potential punitive damages and attorney's fees for the entire class could be aggregated.
- At the time of removal, Franklin's argument for aggregating damages and fees was supported by some existing legal precedent.
Procedural Posture:
- The Martins filed a class-action suit against Franklin in New Mexico state court.
- Franklin removed the case to the U.S. District Court for the District of New Mexico.
- The Martins moved to remand the case to state court for lack of subject matter jurisdiction.
- The District Court denied the motion to remand and later dismissed the case with prejudice.
- The Martins, as appellants, appealed to the U.S. Court of Appeals for the Tenth Circuit.
- The Tenth Circuit reversed, holding that jurisdiction was lacking, and instructed the District Court to remand the case to state court.
- On remand, the Martins moved the District Court for an award of attorney's fees under § 1447(c).
- The District Court denied the motion for fees, finding Franklin had an objectively reasonable basis for removal.
- The Martins, as appellants, appealed the denial of fees to the Tenth Circuit, which affirmed the District Court's decision.
- The U.S. Supreme Court granted certiorari to resolve a circuit split on the standard for awarding fees.
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Issue:
Under 28 U.S.C. § 1447(c), may a court award attorney's fees to a plaintiff whose case is remanded to state court only when the removing defendant lacked an objectively reasonable basis for the removal?
Opinions:
Majority - Chief Justice Roberts
Yes. The standard for awarding fees under § 1447(c) should turn on the reasonableness of the removal. The statute's use of the word 'may' rather than 'shall' confers discretion on the district court, not an automatic entitlement to fees for the prevailing party. This discretion must be guided by the purposes of the removal statute, which balances the defendant's statutory right to a federal forum against the need to deter removals sought merely to delay litigation and impose costs. Unlike civil rights fee-shifting statutes, where fee awards are presumed, a defendant exercising a right to remove is not a 'violator of federal law.' An 'objectively reasonable basis' standard properly balances these competing interests by discouraging improper removals without chilling defendants' legitimate exercise of their statutory right. Therefore, when an objectively reasonable basis for removal exists, fees should be denied.
Analysis:
This decision resolved a significant circuit split, establishing a uniform national standard for awarding attorney's fees upon remand under § 1447(c). By adopting the 'objectively reasonable basis' test, the Court clarified that an unsuccessful removal is not, by itself, a sanctionable action. This ruling protects defendants from being penalized for asserting a colorable, even if ultimately incorrect, basis for federal jurisdiction, thereby preventing a chilling effect on the statutory right of removal. For plaintiffs, it means they can only recover fees when the removal was not just wrong, but indefensible.
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