Opinion
2:08-cv-00724-GEB-KJM.
June 18, 2008
ORDER
This matter was determined to be suitable for decision without oral argument. L.R. 78-230(h).
On May 5, 2008, Plaintiffs filed a motion seeking to remand this action to state court under 28 U.S.C. § 1447 and for an award of attorney's fees and costs incurred in connection with the removal. (Dkt. No. 18.) Defendants oppose the motion. For the following reasons, the motion is granted.
BACKGROUND
On December 21, 2006, Hanger Prosthetics Orthotics, Inc. ("Hanger") filed suit against, among others, Santiago Rosales, Glen Ellis and Capstone Orthopedic, Inc. (the "Plaintiffs" in this action) in the Eastern District of California. (Hanger Prosthetics Orthotics, Inc. v. Capstone Orthopedic, Inc., No. 2:06-cv-02879-GEB-KJM (E.D. Cal. Dec. 21, 2006).) On December 21, 2007, Plaintiffs commenced the instant action by filing a complaint in the Superior Court of California for the County of San Joaquin against Hanger and Richmond "Rick" Taylor ("Defendants") containing claims for defamation, malicious prosecution, unfair business practices, intentional interference with prospective economic advantage and trade libel. (Notice of Removal, Ex. A, Compl., Dkt. No. 1.) On April 14, 2008, Defendants removed this action to the Eastern District of California under 28 U.S.C. § 1367.
REMOVAL STANDARD
"[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendants, to the district court for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). The removal statute is strictly construed against removal jurisdiction, see Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992), and the party seeking removal "has the burden of establishing that removal [is] proper." Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996). There is a "`strong presumption' against removal" and "any doubt as to the right of removal" is resolved in favor of remand. Gaus, 980 F.2d at 566.
ANALYSIS
I. Supplemental Jurisdiction
Plaintiffs argue Defendants' removal of this action "to federal court pursuant to [ 28 U.S.C. §] 1367 is improper and is contrary to well established case law." (Mot. at 6:1-3.) Defendants counter "Plaintiffs' claims . . . constitute compulsory counterclaims under Federal Rule of Civil Procedure 13(a). . . . Because it is closely related to the subject matter of the action, a compulsory counterclaim under Rule 13(a) falls within a federal court's ancillary jurisdiction and an independent basis for federal jurisdiction is not necessary." (Opp'n at 7:14-16, 26-28 (citing Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1 (1974)).)
"Ancillary jurisdiction . . . cannot provide the original jurisdiction that [Defendants] must show in order to qualify for removal under [28 U.S.C.] § 1441." Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 34 (2002). Defendants have cited no authority creating an exception to this rule for compulsory counterclaims.
Defendants' reliance on Baker is unavailing. Baker involved an action where there was "primary jurisdiction over the parties and over the subject matter" in federal court and the Court was simply noting that "[i]f a counterclaim is compulsory, the federal court will have ancillary jurisdiction over it even though ordinarily it would be a matter for a state court." Baker, 417 U.S. at 469 n. 1.
II. Diversity Jurisdiction
In their Opposition, Defendants argue that diversity jurisdiction exists over this action because "Plaintiffs included Taylor [the only non-diverse defendant] as a defendant for the sole purpose of destroying diversity. Under the Fraudulent Joinder Doctrine, his inclusion alone does not destroy diversity. . . ." (Opp'n at 3:14-16.) Plaintiffs rejoin that "Defendants attempt to perform a legal magic trick by transforming the basis of removal jurisdiction from supplemental jurisdiction, the sole basis for jurisdiction cited in their notice of removal, to diversity jurisdiction despite defendant Taylor being a citizen of California like the plaintiffs." (Reply at 2:2-5.)
Courts "may decline to assert jurisdiction over [a] case for reasons not averred in the removal notice." 14C Charles Alan Wright, Arthur R. Miller Edward H. Cooper, Federal Practice and Procedure § 3732 (3d ed. 1998); see also Mattel, Inc. v. Bryant, 441 F. Supp. 2d 1081, 1091 n. 11 (C.D. Cal. 2005) ("Because these arguments did not appear in the Notice of Removal, the court need not consider them.")
Defendants' Notice of Removal was brought under 28 U.S.C. § 1367. (Notice of Removal at 1.) Defendants argued in their Notice of Removal, "this action is a civil action of which this Court has ancillary and/or supplemental jurisdiction under 28 U.S.C. § 1367, and is one which may be removed to this Court by Defendants. Specifically, Plaintiffs' claims arise out of the same transactions and/or occurrences that are the subject matter of a case pending in [this district]." (Id. ¶ 4.) No other basis for removal was asserted.
Defendants argue that "[t]he Civil Cover Sheet filed and served along with Hanger's Notice of Removal plainly discloses the bas[i]s of jurisdiction as diversity. Moreover, Hanger clarified any confusion in an email exchange between counsel shortly after its filing." (Opp'n at 6:22-26.)
None of Defendants' arguments are availing. Checking a box on the civil cover sheet does not constitute an "argument;" nor is the civil cover sheet part of the "Notice of Removal." Mattel, 441 F. Supp. 2d at 1091. The preamble on the civil cover sheet states "the information contained herein [does not] supplement . . . other papers as required by law. . . ." Nor is the email exchange cited by Defendants part of the Notice of Removal.
Defendants further argue that "so long as a case is removable in the first place, a federal court may exercise its jurisdiction despite defects in the manner in which removal is effected." (Id. at 7:10-11 (citing Fristoe v. Reynolds Metals Co., 615 F.2d 1209, 1213 (9th Cir. 1980)).) However, Fristoe is inapplicable to Plaintiffs' remand motion. In Fristoe, plaintiff was found to have waived objection to an untimely removal by failing to timely object on that ground. Here, Plaintiffs' objection is timely. Accordingly, Defendants' diversity jurisdiction argument is not considered.
III. Attorney Fees and Costs
Plaintiffs argue they should be awarded their attorney's fees and costs because "there was no reasonably objective basis for defendants' Notice of Removal." (Mot. at 7:19.) Defendants rejoin that they "removed the instant action in order to simplify the litigation between the parties by having all related matters heard before the same court. . . . Moreover, . . . Hanger had an objectively reasonable basis for seeking removal pursuant to the fraudulent joinder doctrine." (Opp'n at 9:28-10:6.)
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 "standard for awarding fees . . . turn[s] on the reasonableness of the removal. Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal."Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). "Assessing costs and fees on remand reduces the attractiveness of removal as a method for delaying litigation and imposing costs on the plaintiff." Id. at 140.
As Defendants implicitly concede, supplemental jurisdiction is not an objectively reasonable basis for removal jurisdiction.Hornung v. City of Oakland, 2006 WL 279337, at *3 (N.D. Cal. Feb. 3, 2006) (finding theory of ancillary jurisdiction was not a reasonable basis for removal). Even if Defendants were trying to seek an efficient resolution of the action, doing so without an objectively reasonable basis for removal still imposed needless costs on Plaintiffs.
Defendants argue that even if they did not have an objectively reasonable basis for removal, Hornung v. City of Oakland, 2006 WL 279337, (N.D. Cal. Feb. 3, 2006), suggests that in situations such as this "`unusual circumstances warrant a departure from the rule.'" (Opp'n at 10:9-12 (quoting Martin, 546 U.S. at 141).) InHornung, defendants removed the action to federal court based on an ancillary jurisdiction theory. When defendants discovered their removal theory was improper, they quickly offered a stipulation to remand, which plaintiffs refused absent an award of fees and costs. 2006 WL 279337, at *1. In these circumstances, the Hornung court did not award fees since defendants did not intend to delay the case and plaintiffs themselves caused additional delay. Id. at *4. Unlike in Hornung, when the Defendants to this action were made aware of the invalidity of their removal theory, instead of stipulating to remand they asserted an ad hoc theory for removal jurisdiction. Accordingly, Plaintiffs are entitled to reasonable attorney's fees and costs.
Plaintiffs' counsel declares that he spent 5.8 hours preparing the Motion to Remand at a rate of $300 per hour. (Kachmar Decl. ¶ 3.) He also requests the right to supplement his Declaration with additional information regarding time spent preparing a reply brief. (Id.) The request is granted. Plaintiff shall submit an Amended Declaration of James Kachmar by 4:00 p.m. on June 23, 2008. The amount of attorney's fees awarded will be determined subsequently. See Stallworth v. Greater Cleveland Reg'l Transit Auth., 105 F.3d 252, 257 (6th Cir. 1997) ("[A] district court, after issuing an order of remand, may make an award of attorney fees and costs in a separate order."); Mints v. Educ. Testing Serv., 99 F.3d 1253, 1257-58 (3rd Cir. 1996) (holding a district court retains jurisdiction to award fees and costs after remanding the case to state superior court).
CONCLUSION
For the reasons stated, Plaintiffs' motion for remand and attorney's fees and costs is granted. The Clerk of the Court shall remand this action to the San Joaquin County Superior Court. Plaintiff has leave to submit an amended declaration provided it is filed by 4:00 p.m. on June 23, 2008. If Defendants desire to respond to the amended declaration, that response shall be filed by 4:00 p.m. on June 30, 2008. The amount of attorney's fees awarded will be determined after the last filing deadline.
IT IS SO ORDERED.