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Standard of Review of Sanctions under 28 U.S.C. § 1447(c) — Automatic Stay Does Not Preclude Imposition of Sanctions for Frivolous Removal, Post-Petition, of Action Filed Pre-Petition

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From Garrett v. Cook, 2011 U.S. App. LEXIS 14403 (10th Cir. July 14, 2011):

The district court awarded fees and costs pursuant to 28 U.S.C. § 1447(c), which reads as follows:

(c) A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. 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. A certified copy of the order of remand shall be mailed by the clerk to the clerk of the State court. The State court may thereupon proceed with such case.

28 U.S.C. § 1447(c) (emphasis added).

We recently summarized our standard of review of a district court's award of fees and costs under § 1447(c):

Although we generally lack jurisdiction over remand orders, we do have subject-matter jurisdiction to review the district court's order under § 1447(c) awarding attorney's fees to plaintiffs. A court's decision to grant a fee award is reviewed for abuse of discretion, while the underlying legal analysis is reviewed de novo. The standard for awarding fees should turn on the reasonableness of the removal. 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.

Porter Trust v. Rural Water Sewer & Solid Waste Mgmt. Dist. No. 1, 607 F.3d 1251, 1253 (10th Cir. 2010) (quotations, citations, and internal brackets omitted). ***

[D]efendant's untimeliness in filing his notice of removal is "precisely the type of removal defect contemplated by § 1447(c)." Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 128 (1995) (discussing non-reviewability provision). If objectively unreasonable, an untimely removal may give rise to an award of fees and costs under § 1447(c). See Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1254 (9th Cir. 2006).

At the outset, we consider the effect of Cook's bankruptcy proceedings on the district court's award of fees and costs. We must determine whether the award was barred by the automatic stay that came into effect when Cook filed his petition. *** [T]his case began in state court in 2003. Cook filed his bankruptcy petition in 2004. He filed the notice of removal at issue here on January 27, 2010. He thus voluntarily pursued, post-petition, a separate round of litigation in federal court.

The automatic stay prohibits

the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title[.]

11 U.S.C. § 362(a)(1) (emphasis added).

Thus, "[t]he stay is limited to actions that could have been instituted before the petition was filed or that are based on claims that arose before the petition was filed. It does not include actions arising post-petition." Bellini Imports, Ltd. v. Mason & Dixon Lines, Inc., 944 F.2d 199, 201 (4th Cir. 1991) (citation omitted). Although the Garrett Trust initiated this case by filing its complaint pre-petition against Cook, the attorney's fees and costs at issue here are entirely due to voluntary, post-petition litigation Cook undertook in an unfounded attempt to remove the case to federal court. Under these circumstances, we conclude that the automatic stay does not prevent Cook from being held liable for the attorney's fees and costs. See Grynberg v. Danzig Claimants (In re Grynberg), 143 B.R. 574 (D. Colo. 1990) (upholding, notwithstanding existence of automatic stay, post-petition award of costs from state appellate court where litigation was initiated pre-petition but debtor pursued appeal post-petition resulting in costs), aff'd on other grounds, 966 F.2d 570 (10th Cir. 1992).4 We therefore proceed to the merits of Cook's appeal.

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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