Removing Defendant May Be Awarded Fees under § 1447(c) for Frivolous Removal Caused by Plaintiff’s Misconduct

From Micrometl Corp. v. Tranzact Techs., Inc., 2011 U.S. App. LEXIS 17693 (7th Cir. Aug. 24, 2011):

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.***

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 (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.

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