Landmark Decision: Severson’s Jan T. Chilton Makes the Winning Argument in Chief Justice Roberts’ First Opinion

Attorney Fees on Remand Only When No Reasonable Basis For Removal

(Last updated December 9, 2005)

Supreme Court of the United States / Martin v. Franklin / November 8, 2005 / Artist, Todd Crespi

Many defendants prefer to litigate in federal court. They remove state court cases to federal court whenever possible. They received an early Christmas gift from the United States Supreme Court.

In Martin v. Franklin Capital Corp. (Dec. 7, 2005; No. 04-1440) 546 U.S. ___, the high court ruled that if a removed case is remanded back to state court because the federal court lacks subject matter jurisdiction, the federal court may not award the plaintiff attorney fees unless the defendant lacked an objectively reasonable basis for removal.

In his first opinion for the Court, Chief Justice John Roberts wrote that 28 U.S.C. §1447(c), which provides that an order remanding a case to state court “may require payment of just costs and … attorney fees,” gives federal courts discretion to award fees on remand but that the discretion must be exercised in accordance with legal standards which reflect the large objectives of the removal statutes and §1447(c).

“The appropriate test for awarding fees under §1447(c) should recognize the desire to deter removals sought for the purpose of prolonging litigation and imposing costs on the opposing party, while not undermining Congress’ basic decision to afford defendants a right to remove as a general matter, when the statutory criteria are satisfied.”

Accordingly, “[a]bsent unusual circumstances, courts may award attorney’s fees under §1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal.” Among the “unusual circumstances,” which might allow a departure from this rule are “a plaintiff’s delay in seeking remand or failure to disclose facts necessary to determine jurisdiction.”

The decision is likely to be particularly important in cases removed under the Class Action Fairness Act of 2005 (Pub. L. 109-2; 28 U.S.C. §1453). When served with a multi-state class action, a defendant may have difficulty deciding whether the case is removable under §1453 and whether it will remain in federal court once removed. So long as the defendant has a reasonable basis for removal, Martin protects it against the threat of what could be a large award of fees incurred in figuring out where class members reside and other complex issues governing removal under §1453.

Jan T. Chilton of Severson & Werson represented the removing defendant Franklin Capital Corp. and argued the case before the Supreme Court. Please contact Mr. Chilton ((901) 684-1231; jtc@severson.com) for more information or with questions.

Read the full text of this landmark decision here.

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