Opinion
Civil Action No. 3:03-CV-0879-D
June 23, 2003
MEMORANDUM OPINION AND ORDER
Plaintiff Julie Fathergill ("Fathergill") moves to remand this removed shareholder derivative action to state court. Concluding that none of her state-law causes of action requires resolution of a substantial question of federal law, the court grants the motion.
Defendants have filed a separate motion to transfer this case to Judge Lynn's docket. Because the court is remanding the case to state court, it denies the motion as moot.
I
Fathergill brings this shareholder derivative action against certain officers and directors of Michaels Stores, Inc. ("Michaels"). She alleges claims under Texas state law for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment. Although her state-court petition refers to certain conduct that is like that often found in securities fraud complaints, none of her claims alleges a federal-law cause of action. Defendants nevertheless removed the case to this court, contending her petition is virtually identical to several securities fraud cases concerning Michaels that were recently filed in this court. They posit that the case arises under federal law because its adjudication will require determination of the substantial question of federal law whether defendants have violated Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5, and § 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a). Fathergill moves to remand.II
It is undisputed that the parties are not completely diverse citizens and that Fathergill does not assert a federal claim as such. This case is removable only if one of her state law causes of action arises under federal law in that it "requires resolution of a substantial question of federal law." Howery v. Allstate Ins. Co., 243 F.3d 912, 918 (5th Cir.), cert. denied, 534 U.S. 993 (2001). To establish jurisdiction on this basis, defendants "must show that (1) a federal right is an essential element of [Fathergill]'s state claim, (2) interpretation of the federal right is necessary to resolve the case, and (3) the question of federal law is substantial."
Defendants cannot meet the first requirement of the relevant test — that a federal right is an essential element of her state claims. Although to prove her claims Fathergill asserts that defendants failed to comply in some respects with federal securities laws, these actions are but a subset of an array of acts that also allegedly violate state law. As in Howery, the fact that conduct that violates federal law serves as a basis for a state-law claim does not make a federal right an essential element of that claim. See id.
Because defendants cannot meet the first requirement, it follows that they cannot satisfy the second. See id. Moreover, they cannot comply with the second element because Fathergill's state-law theories survive even without proof of a violation of federal law. Applying the holding of Howery to the present case,
[s]ince no federal right is an element of [Fathergill]'s state claim, no federal right needs to be interpreted. Even if a violation of [federal law] were an element of [her state-law] claim, [Fathergill]' scomplaint alleges that the [federal-law] violation is one of many alternate grounds for finding a violation of [state law]. As an alternate theory supporting a single claim, the federal question is not a necessary element of the state claim, and thus does not create federal question jurisdiction.Id.
Defendants cannot meet the third component of the Howery test because the federal law issues are not substantial.
III
Fathergill requests an award of attorney's fees. Under 28 U.S.C. § 1447 (c), "[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." The decision to award fees is a matter of discretion. See Avitts v. Amoco Prod. Co., 111 F.3d 30, 32 (5th Cir. 1997); Miranti v. Lee, 3 F.3d 925, 928 (5th Cir. 1993) (stating that "the propriety of the defendant's removal continues to be central in determining whether to impose fees."). The court holds that Fathergill is entitled recover her attorney's fees and costs incurred in procuring the remand of this case that was improvidently removed. The award is limited to the "fees and costs incurred in federal court that would not have been incurred had the case remained in state court." Avitts, 111 F.3d at 32. She may apply for an award no later than 30 days from the date this memorandum opinion and order is filed if the parties cannot agree on the amount.Fathergill's May 12, 2003 motion to remand is granted. The court holds that it lacks subject matter jurisdiction and, pursuant to § 1447(c), remands this case to the 192nd Judicial District Court of Dallas County, Texas. The clerk of court shall effect the remand according to the usual procedure.