DC Liquidators, LLC v. Warehouse Equipment Specialists, LLC et al
Filing
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MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 3/27/2015: For the reasons stated in the accompanying decision, the Court grants plaintiff's motion for attorney's fees and expenses [dkt. no. 17]. Because the de fendants do not challenge the amount or reasonableness of plaintiff's fee request, the Court awards plaintiff the full amount requested, $11,596.39. Defendants are directed to pay this sum to plaintiff within fourteen days after entry of this order on the docket. (mk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DC LIQUIDATORS, LLC,
Plaintiff,
vs.
WAREHOUSE EQUIPMENT
SPECIALISTS, LLC and
SHAWN MARCO,
Defendants.
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Case No. 14 C 7222
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Defendants Warehouse Equipment Specialists, LLC (WES) and Shawn Marco
removed this case from state court based on diversity of citizenship. On December 1,
2014, this Court remanded the case to state court. Plaintiff DC Liquidators has moved
for an award of attorneys' fees and expenses pursuant to 28 U.S.C. § 1447(c). For the
reasons outlined below, this Court grants the motion and awards DC $11,596.39.
Procedural History
On March 27, 2014, DC filed suit against defendants in state court for breach of
contract and conversion. On that same date, DC moved for a temporary restraining
order and a preliminary injunction. DC later amended its complaint to add a breach of
fiduciary duty claim.
Before the state court, defendants moved to quash service of summons. On
June 8, 2014, DC filed an affidavit from a process server who stated that he had served
defendants with summons on June 6, 2014. On August 26, 2014, the state court judge
ruled that defendants had, in fact, been properly served as of June 6, 2014.
About three weeks after the state court judge's order, on September 15, 2014,
dependents removed the case to federal court, asserting there was federal jurisdiction
based upon diversity of citizenship. With regard to the parties' citizenship, defendants
stated in their notice of removal only that DC is "an Illinois Limited Liability Company,"
WES is "a New York Limited Liability Company," and Marco "is a New York resident."
Not. of Removal ¶ 13. Two days after defendants removed the case, the Court entered
an order specifically identifying several deficiencies in the citizenship allegations and
directing defendants to correct those deficiencies within two weeks or face remand.
See Order of Sept. 18, 2014.
On September 23, 2014, defendants filed an amended removal notice. They
said that according to public records in the Illinois Secretary of State’s Office, DC—
which defendants had described as a limited liability company—"is incorporated [sic] in
Illinois." Am. Not. of Removal ¶ 13. They also asserted that DC's principal place of
business is in Illinois. Id. Defendants also identified DC's managers as Illinois
"resident[s]". Id. Defendants further stated that WES is "a limited liability company
incorporated [sic] in the State of New York" and that its sole member, Shawn Marco, "is
a New York resident." Id. Later, after DC moved to remand the case, defendants'
attorney offered an affidavit stating that Marco is a citizen of New York and is the only
member of WES. This, however, did not cure defendants' failure to describe DC's
citizenship.
This Court remanded the case to state court via an order dated December 1,
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2014. The Court first noted that defendants had failed to show diversity of citizenship
despite multiple attempts. Order of Dec. 1, 2014 at 2. Second, the Court concluded,
defendants' removal of the case was untimely. Id. The removal statute requires the
removing defendant to file the notice of removal within thirty days after the defendant's
receipt, through service or otherwise, of a copy of the initial pleading setting forth the
claim that gives the basis for removal. 28 U.S.C. § 1446. The Court concluded that
because the state court had ruled that service was proper as of June 6, 2014, the time
for removal expired thirty days after that, on July 6, 2014. Order of Dec. 1, 2014 at 3.
Discussion
DC has moved for an award of attorney's fees pursuant to 28 U.S.C. § 1447(c).
Section 1447(c) authorizes a court, when it remands a case to state court to award "any
actual expenses, including attorney fees, incurred as a result of the removal." The
Supreme Court has held that this statute permits a court, "absent unusual
circumstances, to award attorneys' 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, 136 (2005). "[C]ourts determine whether an act is objectively
reasonable by examining the clarity of the case law" at the time the defendant filed his
notice of removal. Lott v. Pfizer, Inc., 492 F.3d 789, 792 (7th Cir. 2007). More
specifically,
if, at the time the defendant filed his notice in federal court, clearly
established law demonstrated that he had no basis for removal, then a
district court should award a plaintiff his attorneys' fees. By contrast, if
clearly established law did not foreclose a defendant's basis for removal,
then a district court should not award attorneys' fees.
Id. at 793.
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The law on timeliness of removal was clearly established. Section 1446(b)
unequivocally states that a party has thirty days from a suits commencement to file a
removal. The state court ruled that the defendants were served with summons on June
6, 2014. Yet defendants did not file their notice of removal until September 15, 2014.
The removal was plainly contrary to established law. Defendants seem to believe that
the time for removal ran from the date of the state court's decision denying their motion
to quash service. However, they offer no support for this contention, which is contrary
to the plain language of section 1446(b).
The law is equally clear that the state court's decision on the propriety of service
was binding after removal, unless vacated or modified in federal court—a step
defendants never asked this Court to take. "Whenever any action is removed from
State court to a district court of the United States . . . [a]ll injunctions, orders, and other
proceedings had in such action prior to its removal shall remain in full force and effect
until dissolved or modified by the district court." 28 U.S.C. § 1450. This unambiguous
statutory language constitutes clearly established law that made defendants' late
removal of the case objectively unreasonable.
Defendants elected to litigate the adequacy of service in state court. This choice
was theirs to make, but it represented a calculated risk on their part. Specifically, they
took the risk that if the state court concluded that service was proper, by then it would
be too late to remove the case to federal court. Having made this choice, defendants
had to live with the consequences. The Court concludes that defendants lacked an
objectively reasonable basis to remove the case.
Defendants' removal of the case also disregarded clearly established law relating
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to establishing diversity of citizenship. The Court does not rely on this as an
independent basis for awarding attorney's fees, for reasons that will become apparent.
That said, defendants' inattention to the law in removing the case lends support to the
proposition that there was no objectively reasonable basis for removal.
As indicated earlier, defendants' initial notice of removal essentially said nothing
at all about the parties' citizenship. This contravened 28 U.S.C. § 1446(a), which
requires a party's removal notice to "contain[ ] a short and plain statement of the
grounds for removal . . . ." Rather, the initial removal notice referred only to the states
where the two limited liability companies that are parties had been formed. It has been
clear in this circuit since Cosgrove v. Bartolotta, 150 F.3d 729 (7th Cir. 1999), however,
that this is a jurisdictionally irrelevant fact; the relevant inquiry involves the citizenship of
the LLC's members, not where the LLC was formed. In addition, defendants' initial
removal notice said nothing about Marco's citizenship; it referred only to his residence.
It is well established that residence in a state does not necessarily mean citizenship in
that state and thus that an allegation of residence alone is insufficient as an allegation of
citizenship. See, e.g., Heinen v. Northrop Grumman Corp., 671 F.3d 669, 670 (7th Cir.
2012).
In short, the removal notice was doubly deficient and failed to show an
objectively reasonable basis for removal. The Court could have simply remanded the
case at that point. Instead, the Court called the citizenship defects to defendants'
attention and gave them a chance to correct the defects. But defendants still failed to
correct the defects. They filed an amended notice that erroneously described the
plaintiff, DC Liquidators, LLC, as "incorporated in Illinois" and WES as "incorporated in
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the State of New York," and they repeated the statement about Marco being a "resident"
of New York. All of this made it apparent that defendants had paid no attention to
established law regarding jurisdictional requirements.
Defendants ultimately cleared up the citizenship of Marco and WES—albeit only
after the Court gave them a second chance at a do-over—and it is true, as they point
out, that at a hearing on October 21, 2014, the Court deemphasized the citizenship
issue and focused on the question of the timeliness of the removal. Because of the
Court's comments on October 21, the Court does not now rely on defendants' ultimate
failure to establish complete diversity as a separate basis for imposition of attorney's
fees under section 1447(c). Their disregard of clearly established law on this point at
and even after the removal of the case, however, further buttresses the Court's
conclusion that they lacked an objectively reasonable basis to remove the case.
Conclusion
For the reasons stated above, the Court grants plaintiff's motion for attorney's
fees and expenses [dkt. no. 17]. Because the defendants do not challenge the amount
or reasonableness of plaintiff's fee request, the Court awards plaintiff the full amount
requested, $11,596.39. Defendants are directed to pay this sum to plaintiff within
fourteen days after entry of this order on the docket.
_______________________________
MATTHEW F. KENNELLY
United States District Judge
Date: March 27, 2015
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