Martin v. Franklin Capital Corp.

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Opinion [Chief Justice Roberts]




certiorari to the united states court of appeals for the tenth circuit

No. 04–1140. Argued November 8, 2005—Decided December 7, 2005

In removing petitioner Martins’ state-court class action to federal court on diversity grounds, respondents (collectively, Franklin) acknowledged that the amount in controversy was not clear from the face of the state-court complaint, but argued that this requirement for federal diversity jurisdiction was nonetheless satisfied under precedent suggesting that punitive damages and attorney’s fees could be aggregated in making the calculation. The District Court denied the Martins’ motion to remand to state court and eventually dismissed the case with prejudice. Reversing and remanding with instructions to remand to state court, the Tenth Circuit agreed with the Martins that their suit failed to satisfy the amount-in-controversy requirement and rejected Franklin’s aggregation theory under decisions issued after the District Court’s remand decision. The latter court then denied the Martins’ motion for attorney’s fees because Franklin had legitimate grounds for believing this case fell within federal-court jurisdiction. Affirming, the Tenth Circuit disagreed with the Martins’ argument that attorney’s fees should be granted on remand as a matter of course under 28 U. S. C. §1447(c), which provides that a remand order “may require payment of just costs and any actual expenses, including attorney fees,” but provides little guidance on when fees are warranted. The court noted that fee awards are left to the district court’s discretion, subject to review only for abuse of discretion; pointed out that, under Circuit precedent, the key factor in deciding whether to award fees is the propriety of removal; and held that, because Franklin had relied on case law only subsequently held to be unsound, its basis for removal was objectively reasonable, and the fee denial was not an abuse of discretion.

Held: Absent unusual circumstances, attorney’s fees should not be awarded under §1447(c) when the removing party has an objectively reasonable basis for removal. Conversely, where no objectively reasonable basis exists, fees should be awarded. This Court rejects the Martins’ argument for adopting a strong presumption in favor of awarding fees. The reasons for adopting such a presumption in Newman v. Piggie Park Enterprises, Inc., 390 U. S. 400, 402 (per curiam), are absent here. Also rejected is Franklin’s argument that §1447(c) simply grants courts jurisdiction to award costs and attorney’s fees when otherwise warranted. Were the statute strictly jurisdictional, there would be no need to limit awards to “just” costs; any award authorized by other provisions of law would presumably be “just.” The Court therefore gives the statute its natural reading: Section 1447(c) authorizes courts to award costs and fees, but only when such an award is just. That standard need not be defined narrowly, as the Solicitor General argues, by awarding fees only on a showing that the unsuccessful party’s position was frivolous, unreasonable, or without foundation. Christiansburg Garment Co. v. EEOC, 434 U. S. 412, 422, and Flight Attendants v. Zipes, 491 U. S. 754, 762, distinguished. The fact that a §1447(c) fee award is discretionary does not mean that there is no governing legal standard. When applying fee-shifting statutes, the Court has found limits in “the large objectives” of the relevant Act. E.g., Zipes, 491 U. S., at 759. The appropriate test for awarding fees under §1447(c) should recognize Congress’ desire to deter removals intended to prolong litigation and impose 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. In light of these “large objectives,” the standard for awarding fees should turn on the reasonableness of the removal. In applying the general rule of reasonableness, district courts retain discretion to consider whether unusual circumstances warrant a departure in a given case. A court’s reasons for departing, however, should be “faithful to the purposes” of awarding fees under §1447(c). Fogerty v. Fantasy, Inc., 510 U. S. 517, 534, n. 19. Pp. 3–9.

393 F. 3d 1143, affirmed.

Roberts, C.J., delivered the opinion for a unanimous Court.


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