IMH Special Asset NT 168 LLC v. Aperion Communities LLLP et al
Filing
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ORDER granting 42 IMH's motion for attorneys' fees and costs. IMH is awarded attorneys' fees and costs in the amount of $15,000. Signed by Judge David G Campbell on 3/1/17.(LSP)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE DISTRICT OF ARIZONA
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IMH Special Asset NT 168 LLC,
Plaintiff,
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ORDER
v.
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No. CV-16-04164-PHX-DGC
Aperion Communities LLLP, et al.,
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Defendants.
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IMH Special Asset NT 168, LLC and IMH Special Asset NT 161, LLC
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(collectively, “IMH”) ask the Court to award attorneys’ fees and costs against Hart
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Interior Design, LLC 401(k) Profit Sharing Plan, by and through Athena Hart-Kolle,
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Trustee (“the Plan”), pursuant to 28 U.S.C. § 1447(c) and Local Rule 54.2(b).
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Doc. 42 at 1. The motion has been fully briefed (Docs. 42, 48, 49, 50), and the Court
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concludes that oral argument is not necessary. For the reasons set forth below, the Court
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will grant IMH’s motion.
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I.
Background.
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IMH filed a motion to remand (Doc. 11) after the Plan removed a complex state
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receivership case from Maricopa County Superior Court (Doc. 1). The case is IMH
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Special Asset NT 168, LLC v. Aperion Communities, LLLP, et al., No. CV2010-010990
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(“the State Court Action”). The Court granted the motion to remand, finding that only a
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defendant may remove a claim to federal court and that the Plan was not a defendant.
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Doc. 35 at 4. The Court’s previous order provides a summary of the relevant background
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information. Id. at 1-4.
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II.
Reasonable Basis for Removal.
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“An order remanding [a] case may require payment of just costs and any actual
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expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447.
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Although district courts retain discretion to award fees under this statute, the decision
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“should turn on the reasonableness of the removal. Absent unusual circumstances, courts
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may award attorney’s fees under § 1447(c) only where the removing party lacked an
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objectively reasonable basis for seeking removal.” Martin v. Franklin Capital Corp., 546
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U.S. 132, 141 (2005); Patel v. Del Taco, Inc., 446 F.3d 996, 999 (9th Cir. 2006). When
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assessing objective reasonableness, a court considers “whether the relevant case law
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clearly foreclosed the defendant’s basis of removal,” taking into account “clarity of the
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law at the time of removal.” Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1066
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(9th Cir. 2008).
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IMH argues that the Plan lacked on objectively reasonable basis for removal
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because the Plan did not satisfy three clear requirements for removal – the Plan was not a
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defendant, the removal was untimely, and the Plan did not obtain the consent of all
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defendants to remove. Doc. 42 at 9. The Plan contends that its removal raised an issue
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of first impression in the Ninth Circuit that was not foreclosed by relevant case law and
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was actually supported by precedent from other circuits. Doc. 48 at 6-11. As a result, the
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Plan contends, its basis for asserting standing to remove was objectively reasonable. Id.
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at 5. The Plan also argues that it had objectively reasonable grounds for asserting that
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removal was timely and that it did not need consent of other defendants. Id. at 12-16. In
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its order, the Court found that the Plan was not a defendant and did not reach the issues of
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whether the Plan timely removed or should have sought consent from other defendants.
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Doc. 35. The Court did note, however, that there “appear[ed] to be serious questions of
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whether the Plan’s attempted removal was timely and whether it should have been joined
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by all other interested parties.” Id. at 7.
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As this Court has already emphasized, “[f]ederal law makes clear that only a
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defendant may remove a claim to federal court.” Id. at 4. The Plan does not appear to
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dispute this. Doc. 48 at 8 (recognizing the “general rule prohibiting a non-party from
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removing”). Federal law determines who is a plaintiff and who is a defendant. Chicago,
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R.I. & P.R. Co. v. Stude, 346 U.S. 574, 580 (1954). Thus, the question before the Court
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is whether it was reasonable for the Plan to argue that it was a defendant under federal
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law. The Court finds that it was not.
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First, the Plan conceded that it was not a party to the underlying deficiency
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actions, but argued that it was a party to the post-judgment receivership resulting from
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those deficiency actions. Doc. 35 at 4. The Court rejected this argument, finding “that
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the receivership proceedings [do not] constitute a separate case from the 2010 deficiency
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actions for purposes of removal. Rather, the receivership proceedings are an extension of
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the relief granted to the Judgment Creditors, intended to ensure the adequate provision of
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remedies ordered by the Court as a result of the deficiency actions.” Id. at 5. The Court
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noted that the case number and name of the State Court Action had remained constant
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since 2010, and there were no allegations that the named parties had changed. Id.
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The Plan contends that there was no Ninth Circuit precedent explicitly stating that
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a claimant in a receivership could not be a party for purposes of removal. Doc. 48 at 6.
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This lack of precedent, the Plan asserts, renders its argument reasonable. Id. The Court
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disagrees. The State Court Action on its face confirmed that the Plan is not a party. The
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entire State Court Action, not just the receivership proceedings, was removed to this
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Court. The Plan identifies no precedent suggesting that receivership proceedings should
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be considered separate from the underlying action from which they arose. And even if
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the receivership proceedings were considered independent, the Plan has not shown that,
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as a claimant, it would be considered a defendant in those proceedings.
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The Plan cites two cases to support its proposition – a 1937 case from the Fifth
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Circuit and a 1968 case from the District of Minnesota. Doc. 48 at 9-10 (citing Bethke v.
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Grayburg Oil Co., 89 F.2d 536 (5th Cir. 1937), and Magnusson v. Am. Allied Ins. Co.,
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286 F. Supp. 573, 574 (D. Minn. 1968)). The Plan did not cite Magnusson in its
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opposition to IMH’s motion to remand, and neither case supports the Plan’s argument
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here. The Bethke court concluded that individuals who filed a proof of claim in a
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receivership proceeding in federal court had intervened sufficiently to be bound by the
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outcome of that proceeding. 89 F.2d at 539. The case says nothing about whether a
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claimant may be a party for purposes of removal, but rather adopts the logical conclusion
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that an individual who participates in a proceeding should be bound by its outcome.
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Magnusson deals with the attempted removal of a state receivership proceeding. 286 F.
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Supp. at 573. The district court addressed only whether a claimant was in the position of
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a plaintiff or a defendant for purposes of removal. Id. at 574. Concluding that the
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claimant was a plaintiff and thus could not have properly removed the claim, the court
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remanded without reaching other arguments. Contrary to the Plan’s assertion, the case
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says nothing about whether a claimant is considered a party for purposes of removal.
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Moreover, only a counterclaim was removed to federal court, not the underlying action
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itself. Id. Magnusson specifically stated that it was assuming, without deciding, that the
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counterclaim constituted an independent cause of action. Id. This assumption allowed
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the court to consider only whether the claimant was in the position of a plaintiff or a
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defendant in the context of a removed counterclaim. Id.1
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The Plan also opposed the remand motion on the ground that, even if it was not a
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formal party, it should have been considered one under the functional test. The Plan
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relied on a 1907 Supreme Court case allowing for realignment of parties for purposes of
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removal when state law had improperly positioned those parties Doc. 28 at 4 (citing
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Mason City & Fort Dodge RR Co. v. Boynton, 204 U.S. 570 (1907)). The Plan cited no
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case law suggesting this “functional test” may be applied to nonparties. In rejecting the
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Plan’s argument, the Court relied on a 2012 case from the Central District of California –
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a case not discussed by the Plan but easily found by the Court through a Westlaw search
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The Court also has difficulty with the suggestion that the Plan’s actions could be
deemed reasonable on the basis of a case it did not cite, and presumably had not found,
when it removed the state action or opposed the motion to remand.
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– holding that the functional test of Mason City could not be used to recharacterize a
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nonparty as a defendant for purposes of removal. Anaya v. QuickTrim, LLC, No. CV 12-
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1967-CAS DTBX, 2012 WL 6590825 (C.D. Cal. Dec. 17, 2012). Anaya cited a series of
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federal cases uniformly holding that non-parties cannot remove state cases to federal
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court. Doc. 35 at 6-7.
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The Ninth Circuit has made clear that “defendant” should be construed strictly for
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purposes of removal. See Westwood Apex v. Contreras, 644 F.3d 799, 804 (9th Cir.
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2011) (“‘defendant’ for purposes of designating which parties may remove a case under
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§ 1441 has been limited by a majority of the courts to mean only ‘original’ or ‘true’
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defendants; ‘defendant’ in Chapter 89, thereby, excludes plaintiffs and non-plaintiff
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parties who become defendants through a counterclaim.”). In light of this strict approach,
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the Ninth Circuit’s general presumption against removal, Gaus v. Miles, Inc., 980 F.2d
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564, 566 (9th Cir. 1992), and the clear inapplicability of the cases relied on by the Plan,
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the Court finds that the Plan did not have a reasonable basis for removing the State Court
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Action. Because the Court finds that removal was not reasonable, it need not address
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IMH’s other arguments. See Doc. 42 at 4.
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III.
Amount of the Fee Award.
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IMH originally sought $34,173.68 in attorneys’ fees and $3,068.90 in costs. Doc.
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42 at 12. IMH has submitted an additional request for $6,977.08 in attorneys’ fees
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related to drafting IMH’s reply. Doc. 50 at 1.
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The Court views these fee requests as clearly excessive. The remand required one
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motion. IMH did not even file a reply. And fees incurred in this case while it was
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removed, such as disputes over an emergency arising from the rupture of certain wells,
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would have been incurred if the case was pending in state court – they were not caused
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by the removal. The Court will award $15,000 in attorneys’ fees. The Court views this
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amount as reasonable for IMH’s 17-page motion to remand. See Doc. 11.
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IT IS ORDERED that IMH’s motion for attorneys’ fees and costs (Doc. 42) is
granted. IMH is awarded attorneys’ fees and costs in the amount of $15,000.
Dated this 1st day of March, 2017.
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