CML-AZ Blue Ridge LLC et al v. Blue Ridge Plaza East LLP et al

Filing 44

ORDER denying Defendants/Third-Party Plaintiffs' Motion for Award of Costs and Attorneys' Fees Incurred as a Result of Improper Removal (Doc 41 ). Signed by Judge James A Teilborg on 2/22/2012.(KMG)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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CML-AZ Blue Ridge, LLC, a Florida)
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limited liability company,
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Plaintiff,
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vs.
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Blue Ridge Plaza East, LLP, an Arizona)
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limited liability partnership, et al.
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Defendants.
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vs.
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Federal Deposit Insurance Corporation, )
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Third-Party Defendant.
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No. CV-11-01123-PHX-JAT
ORDER

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Pending before the Court is Defendants/Third-Party Plaintiffs’ Motion for Award of

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Costs and Attorneys’ Fees Incurred as a Result of Improper Removal. Doc. 41. The Court

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now rules on the motion.

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I.

BACKGROUND

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On January 21, 2011, Plaintiff CML-AZ Blue Ridge, LLC initiated this action in

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Maricopa County Superior Court against Defendants/Third-Party Plaintiffs Blue Ridge Plaza

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East, LLP, among others. Defendants/Third-Party Plaintiffs subsequently filed a Third-Party

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Complaint against the Federal Deposit Insurance Corporation (FDIC). The FDIC was served

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with the Third-Party Complaint on April 20, 2011. The FDIC filed a notice of removal with

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this Court on June 3, 2011. Doc. 1. The FDIC filed its notice 44 days after the FDIC was

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served with the Third-Party Complaint and 91 days after the filing of the Third-Party

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Complaint. Doc. 41 at 5-6. On June 27, 2011, Third-Party Plaintiffs filed a motion to remand

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this case to state court. Doc. 17. This Court granted the motion, and remanded the case to

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Maricopa County Superior Court on September 2, 2011. Doc. 38.

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On September 30, 2011, Third-Party Plaintiffs filed a motion for an award of costs

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and attorneys’ fees incurred as a result of improper removal. Doc. 41.

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II.

AWARD OF ATTORNEYS’ FEES

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A. 28 U.S.C. § 1447(c)

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28 U.S.C. § 1447(c) provides that “[a]n order remanding [a] case may require payment

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of just costs and any actual expenses, including attorney fees, incurred as a result of the

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removal.”

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B. Legal Standard

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When a district court has remanded a case to state court, the district court retains

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jurisdiction to award attorneys’ fees permitted under 28 U.S.C. section 1447(c). Moore v.

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Permanente Medical Group, Inc., 981 F.2d 443, 445 (9th Cir. 1992). Attorneys’ fees may

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be awarded if the “removing party lacked an objectively reasonable basis for seeking

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removal.” Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2006) (quoting

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Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). The purpose of this statute is

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to grant district courts the discretion to “deter removals sought for the purpose of prolonging

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litigation and imposing costs on the opposing party.” Martin, 546 U.S. at 140. When an

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objectively reasonable basis exists for seeking removal, fees should be denied. Lussier, 518

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F.3d at 1065 (citation omitted).

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The Ninth Circuit has implied, though it has not explicitly stated, that an untimely

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filed notice of removal lacks an objectively reasonable basis for removal. See Durham v.

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Lockheed Martin Corp., 445 F.3d 1247, 1254 (9th Cir. 2006); see also Things Remembered,

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Inc. v. Petrarca, 516 U.S. 124, 128 (1995) (untimely removal is “precisely the type of

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removal defect contemplated by § 1447(c).”). The Eleventh Circuit has found filing an

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untimely notice of removal to be objectively unreasonable. Taylor Newman Cabinetry, Inc.
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v. Classic Soft Trim, Inc., 436 F. App’x 888, 893, 2011 WL 2150183, at *4 (11th Cir. 2011).

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The Tenth Circuit also considers untimely removals to be objectively unreasonable. Garrett

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v. Cook, 652 F.3d 1249, 1254 (10th Cir. 2011) (“[i]f objectively unreasonable, an untimely

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removal may give rise to an award of fees and costs”) (citing Durham, 445 F.3d at 1254).

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There may be, as there was in this case, a dispute regarding whether a notice of removal was

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timely filed. It is then appropriate to examine whether the removing party’s timeliness

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argument was objectively reasonable.

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When the relevant case law clearly forecloses the defendant’s basis of removal,

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removal is not objectively reasonable. See Lussier, 518 F.3d at 1066-67 (citing Lott v. Pfizer,

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Inc., 492 F.3d 789, 793-94 (7th Cir. 2007)). The Ninth Circuit has held that removal is not

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objectively reasonable when the petition for removal is unsupported by the relevant statute

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or case law. Patel v. Del Taco, Inc., 446 F.3d 996, 999 (9th Cir. 2006).

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C. Discussion

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As Third-Party Plaintiffs implicitly concede, Doc. 41 at 5, there is no Ninth Circuit

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case clearly holding that an untimely filed notice of removal is per se objectively

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unreasonable. Although Durham’s implication of such a per se rule is well-supported by the

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Supreme Court’s holding in Martin and with the decisions of the other Circuits, because there

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is no case law directly on point, Lussier requires this Court to analyze whether the relevant

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case law regarding the notice’s timeliness clearly foreclosed the FDIC’s basis of removal.

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In determining whether the FDIC made objectively reasonable arguments regarding

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the timeliness of its notice of removal, the Court considers the removal statutes in question

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and the extent of other Circuits’ case law supporting or contradicting the FDIC’s position.

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In its reply to Third-Party Plaintiffs’ motion, the FDIC repeatedly points out that it has a

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special removal statute, 12 U.S.C. section 1819(b)(2)(B). This is certainly true and is not in

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dispute. The FDIC then argues that all case law not mentioning the special removal statute

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is inapposite in finding that untimely notice of removal is objectively unreasonable. The

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FDIC’s argument is incorrect. Notice of removal is untimely if it fails to comply with the

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requirements of the applicable removal statute, whether that is 28 U.S.C. section 1446(b) or
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the FDIC’s special removal statute. Cases need not mention the special removal statute to be

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relevant on the issue of whether a notice of removal, once found untimely, is objectively

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reasonable.

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Since the parties agree that the FDIC filed its notice of removal outside of the

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timeliness standard of 28 U.S.C. section 1446(b), the relevant question is whether the FDIC

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was objectively reasonable in its interpretation of the special removal statute’s timeliness

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requirement. Although this Court has previously held in this same case that the FDIC’s

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interpretation is inconsistent with the unambiguous text of the special removal statute, CML-

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AZ Blue Ridge, LLC v. Blue Ridge Plaza East, LLP, No. CV11-1123-PHX-JAT, 2011 WL

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3876040, at *4 (D. Ariz. 2011), this holding does not necessarily preclude the FDIC’s

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interpretation from being objectively reasonable.

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In making its argument, the FDIC relied solely upon a District Court of Colorado

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decision, Costin Engineering Consultants, Inc. v. Latham, 905 F. Supp. 861, 864 (D. Colo.

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1995). The court in Costin concluded in dicta that Congress, in drafting a statute that uses the

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word “filed,” actually intended the 90-day period to run from when the FDIC was “served.”

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905 F. Supp at 864. See also W. States Contracting v. Spilsbury, No. 2:10-CV-1141-TC,

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2011 WL 2357883, at *2 (D. Utah 2011) (approving of Costin). At the time that the FDIC

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filed its notice of removal, this Court had never interpreted the removal period provided in

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12 U.S.C. section 1819(b)(2)(B). This Court has subsequently twice rejected the FDIC’s

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argument. CML-AZ Blue Ridge, 2011 WL 3876040, at *2; CML-AZ Blue Ridge, LLC v.

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Sterling Plaza West, LLC, No. CV11-01122-PHX-FJM, 2011 WL 4068877, at *2 (D. Ariz.

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2011).

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Despite rejecting the FDIC’s interpretation of the special removal statute, this Court

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is not prepared to say that the FDIC lacked an objectively reasonable basis for its

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interpretation. Costin was the product of an Article III judge reaching a conclusion based

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upon a reasoned and fully articulated opinion. While this Court respectfully disagrees with

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the result in Costin, it was not objectively unreasonable for the FDIC to rely upon the

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decision. When another district court has issued a decision supporting the removing party’s
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argument, the relevant case law does not clearly foreclose the basis for removal.

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Accordingly, the basis for the argument is objectively reasonable. See Lussier, 518 F.3d at

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1066-67 (citing Lott, 492 F.3d at 793-94).

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Because the FDIC had an objectively reasonable basis for seeking removal, this Court
will not grant attorneys’ fees to Third-Party Plaintiffs.

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Accordingly,

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IT IS ORDERED denying Defendants/Third-Party Plaintiffs’ Motion for Award of

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Costs and Attorneys’ Fees Incurred as a Result of Improper Removal. Doc 41.
DATED this 22nd day of February, 2012.

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