Opinion
No. 3-01-CV-2110-G
November 19, 2002
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Plaintiffs have filed a motion for just costs, actual expenses, and attorney's fees under 28 U.S.C. § 1447 (c) and a motion for sanctions. For the reasons stated herein, both motions should be denied.
I.
On June 29, 1999, Plaintiffs Dennis Gill and Barbara Smith, individually and in their representative capacities, brought an asbestos personal injury action against numerous defendants, including Federal Mogul, Inc. and various subsidiaries ("Federal Mogul Defendants"), in the 40th Judicial District Court of Ellis County, Texas. Garlock, Inc. ("Garlock"), another defendant in the case, filed a cross-claim against "all co-defendants" for contribution and indemnity. At the time plaintiffs initiated the state court action, there was no basis for federal jurisdiction. The case was progressing toward trial when, on October 1, 2001, Federal Mogul filed a Chapter 11 bankruptcy petition in Delaware. This prompted Garlock to remove the instant case, along with 87 other asbestos lawsuits pending throughout Texas, to 15 different federal district courts. As grounds for removal, Garlock alleged that federal jurisdiction was proper under 28 U.S.C. § 1334 because its contribution claims "related to" the Federal Mogul bankruptcy. Garlock also moved to transfer venue to the District of Delaware pursuant to 28 U.S.C. § 157 (b)(5). Plaintiffs herein, as well as the plaintiffs in the other removed cases, filed emergency motions to remand for lack of subject matter jurisdiction, to sever claims against the bankrupt defendants, and for mandatory or discretionary abstention. While these motions were pending, plaintiffs either dismissed or attempted to dismiss their claims against the Federal Mogul Defendants. It was against this background that the remand motions were decided.
Section 1334 provides, in pertinent part:
(a) Except as provided in subsection (b) of this section, the district court shall have original and exclusive jurisdiction of all cases under title 11.
(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.28 U.S.C. § 1334. A civil action may be removed to federal court "if such district court has jurisdiction of such claim or cause of action under section 1334 of this title." Id. § 1452(a).
This statute provides:
The district court shall order that personal injury tort and wrongful death claims shall be tried in the district court in which the bankruptcy case is pending, or in the district court in the district in which the claim arose, as determined by the district court in which the bankruptcy case is pending.28 U.S.C. § 157 (b)(5).
The first court to address the propriety of removal was the United States District Court for the Southern District of Texas in Arnold v. ACS, Inc., No. C-01-478 (S.D. Tex. Nov. 7, 2001). In that case, the district judge found that removal was proper under section 1334 because Garlock's contribution claims against the debtors were arguably "related to" the Federal Mogul bankruptcy. Id. at 9, citing In re Wood, 825 F.2d 90, 93 (5th Cir. 1987) (holding that claim is "related to" bankruptcy if it "could conceivably have any effect on the estate being administered"). Consistent with this ruling, the court severed the contribution claims against the debtors and transferred those claims to the District of Delaware. Id. at 11-12. Any abstention issues were to be decided by the Delaware court. Id. at 16. Because plaintiffs' personal injury claims against the remaining defendants were not related to the Federal Mogul bankruptcy, they were remanded to state court. Id. at 12, citing 28 U.S.C. § 1447 (c) ("If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.").
The procedural history of the instant case largely mirrors that of Arnold. Garlock removed the state court action to federal court on October 19, 2001 — less than three weeks after Federal Mogul filed for bankruptcy. Plaintiffs then filed an emergency motion for remand, severance, and other relief. They also voluntarily dismissed their claims against the Federal Mogul Defendants. Relying exclusively on Arnold, the district judge severed the contribution claims against the debtors, transferred them to the District of Delaware, and remanded the remaining claims to state court. Gill v. Acands, Inc., et al., No. 3-01-CV-2110-G, op. at 2 (N.D. Tex. Nov. 15, 2001). Judges in other asbestos cases removed by Garlock followed suit. See, e.g. Brame v. Acands, Inc., No. A-01-CV-702-JRN (W.D. Tex. Dec. 5, 2001); Smith v. Acands, Inc., No. SA-01-CA-973-FB (W.D. Tex. Nov. 28, 2001); Allphin v. Acands, Inc., No. G-01-660 (S.D. Tex. Nov. 19, 2001); Wayne v. ACS, Inc., No. 1-01-CV-724-TH (E.D. Tex. Nov. 16, 2001).
Garlock immediately appealed these decisions and sought a stay pending appeal. In denying emergency relief, the Fifth Circuit determined that Garlock had not shown that its contribution claims, which arose solely under Texas law, were sufficient to invoke "related to" bankruptcy jurisdiction under section 1334. Four reasons were given for this decision: (1) the dismissal of plaintiffs' claims against the Federal Mogul Defendants eliminated Garlock's right to contribution; (2) a debtor in bankruptcy is not a "responsible third party" from whom contribution may be sought; (3) the Federal Mogul Defendants and non-bankrupt defendants were not sufficiently related to support the transfer and consolidation of the state law asbestos claims with the federal bankruptcy case; and (4) Garlock had never actually litigated a contribution claim in any of the prior 250,000 asbestos lawsuits in which it was a party. Arnold v. Garlock, Inc., 278 F.3d 426, 439-41 (5th Cir. 2001). While the court was careful not to impugn Garlock's motives in removing the cases and seeking a transfer of venue, it ultimately concluded that "the contribution claims were `so tenuously related to the bankruptcy case' as to be `virtually immaterial.'" Id. at 441. Garlock's motion for rehearing en banc was denied. Arnold v. Garlock, Inc., 288 F.3d 234 (5th Cir. 2002).
Recognizing that federal law precludes the appeal of a remand order, Garlock attempted to appeal the denial of its motion to transfer, any decision regarding abstention, and the dismissal of plaintiffs' claims against the Federal Mogul Defendants. See Arnold v. Garlock, Inc., 278 F.3d 426, 432-33 (5th Cir. 2001).
The law firm of Waters Kraus, LLP represented plaintiffs in all 88 asbestos cases removed by Garlock. Six of these cases were removed to the Northern District of Texas. Maltais v. Acands, Inc., No. 3-01-CV-2107-G; Gill v. Acands, Inc., No. 3-01-CV-2110-G; Ridenhour v. Acands, Inc., No. 3-01-CV-2111-G; Bye v. Acands, Inc., No. 3-01-CV-2112-G; Thomas v. Acands, Inc., No. 3-01-CV-2113-G; Figgatt v. Acands, Inc., No. 3-01-CV-2114-G. Although not formally consolidated, all six cases were assigned to the same judge and were remanded to state court on identical grounds. Plaintiffs now seek a total of $7,775.58 in attorney's fees and expenses, or $1,295.93 in each case, which accounts for their proportionate share of the $114,041.61 in fees and expenses incurred by Waters Kraus as a result of the removal of all 88 lawsuits. (Plf. App., Exh. D). Additionally, plaintiffs request $100,000 in sanctions to punish Garlock for abusive litigation tactics and to deter future frivolous removals of asbestos cases involving the Waters Kraus firm. The motion has been fully briefed by the parties and is ripe for determination.
Garlock does not challenge the reasonableness or apportionment of these fees and expenses.
II.
A district court has discretion to award "just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1447 (c). The propriety of removal is central to this determination. See Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 293 (5th Cir. 2000); Miranti v. Lee, 3 F.3d 925, 929 (5th Cir. 1993). An award of fees and expenses need not be "predicated on a finding of bad faith or negligent or frivolous removal." Miranti, 3 F.3d at 929, citing News-Texan, Inc. v. City of Garland, 814 F.2d 216, 220 (5th Cir. 1987). Instead, the relevant inquiry is "whether the defendant had objectively reasonable grounds to believe the removal was legally proper." Valdes, 199 F.3d at 293; Kent v. Ford Motor Co., 200 F. Supp.2d 670, 672 (S.D. Miss. 2002). This determination must be based on an objective view of the legal and factual elements in each particular case. Valdes, 199 F.3d at 293.
Although Garlock was unsuccessful in its attempt to retain federal jurisdiction and transfer plaintiffs' claims to the District of Delaware, the court cannot say that its decision to remove the case was objectively unreasonable. To the contrary, the district court in Arnold specifically determined that removal was proper under 28 U.S.C. § 1334. Arnold, No. C-01-478, op. at 9. Significantly, plaintiffs still had claims against the Federal Mogul Defendants at the time the case was removed to federal court. Only after removal did plaintiffs dismiss their claims against the debtors. On these facts, the Fifth Circuit held that Garlock's contribution claims did not support the exercise of "related to" bankruptcy jurisdiction. Arnold, 278 F.3d at 439-41. Given the unsettled law in this area until Arnold was decided, the court cannot conclude that Garlock acted improperly in removing this action. See Wayne, No. 1-01-CV-724 (TH), ord. at 1 (E.D. Tex. Aug. 19, 2002) (declining to award attorney's fees and costs under section 1447(c) following remand); Camden v. Acands, Inc., No. G-01-651, op. at 3 (S.D. Tex. Aug. 15, 2002) (same); Peacock v. Acands, Inc., No. 3-01-CV-2881-D, op. at 4 (N.D. Tex. Jul. 24, 2002) (same); Kennamer v. Able Supply Co., No. C-01-477 (S.D. Tex. Aug. 6, 2002) (denying motion for costs, expenses, and attorney's fees without prejudice to plaintiffs' right to request same relief from state court). But see Coward v. ACS, Inc., No. EP-01-CA-0376-DB, ord. at 1 (W.D. Tex. Sept. 23, 2002) (awarding plaintiffs $10,367.44 in fees and expenses for improper removal of seven asbestos cases); Lansford v. Acands, Inc., No. 9-01-CV-273, ord. at 1 (E.D. Tex. Sept. 9, 2002) (awarding plaintiffs $1,295.93 in fees and expenses).
Nor is there any evidence of bad faith or improper motive that would warrant the imposition of sanctions. The court's finding that removal was not objectively unreasonable would seem to preclude any sanction award. Moreover, this same request has already been considered by at least five federal district judges in 36 other cases. No court has yet to sanction Garlock for removing any of the asbestos lawsuits involved in the Arnold appeal. ( See Jt. Stat. Rep., 11/8/02, Exh. 1).
RECOMMENDATION
For these reasons, plaintiffs' motion for just costs, actual expenses and attorney's fees under 28 U.S.C. § 1447 (c) and motion for sanctions should be denied.