Cardinal Health 200, LLC v. Allscripts, LLC et al

Filing 41

ORDER adopting Report and Recommendations re 30 Report and Recommendations; OVERRULING 33 Defendants' Objections; granting in part and denying in part 25 Motion for Attorney Fees. Signed by Judge Algenon L. Marbley on 3/12/2014. (cw)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
CARDINAL HEALTH 200, LLC,
Plaintiff,
Civil Action 2:13-cv-305
Judge Algenon L. Marbley
Magistrate Judge Elizabeth P. Deavers

v.

ALLSCRIPTS, LLC, et al.,
Defendants.
OPINION AND ORDER
On August 13, 2013, the United States Magistrate Judge issued a Report and
Recommendation recommending that the Court remand this action to state court, grant in part
and deny in part Plaintiff’s request for costs and fees, and deny as moot Defendants’ Motion to
Dismiss or in the Alternative Transfer Venue. (ECF No. 30.) Thereafter, Defendants filed
objections to the Report and Recommendation. (ECF No. 33.) Based upon the parties’
agreement, the Court remanded this action to state court, denied Defendants’ Motion to Dismiss
as moot, and retained limited jurisdiction to resolve Defendants’ Objections to the August 13,
2013 Report and Recommendation. (ECF No. 38.) This matter is before the Court for the
consideration of the portion of the Report and Recommendation concerning costs and fees (ECF
No. 30), Defendants’ Objections (ECF No. 33), Plaintiff’s Response (ECF No. 35), and
Defendants’ Reply in Support of Objections (ECF No. 37). For the reasons that follow,
Defendants’ Objections are OVERRULED, the August 13, 2013 Report and Recommendation
is ADOPTED, and Plaintiff’s request for costs and fees is GRANTED IN PART AND
DENIED IN PART.

I.
Defendants timely filed their objections to the Report and Recommendation under
Federal Rule of Civil Procedure 72(b). If a party objects within the allotted time to a report and
recommendation, the Court “shall make a de novo determination of those portions of the report
or specified proposed findings or recommendations to which objection is made.” 28 U.S.C.
§ 636(b)(1); see also Fed R. Civ. P. 72(b). Upon review, the Court “may accept, reject, or
modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28
U.S.C. § 636(b)(1).
II.
The Magistrate Judge summarized the relevant factual background and the parties’
arguments as follows:
On February 27, 2013, Plaintiff filed this action in state court asserting statelaw breach-of-contract and declaratory judgment claims against Defendants,
Allscripts, LLC, Allscripts Healthcare, LLC, and Allscripts Healthcare Solutions,
Inc. The Complaint identified Plaintiff as a Delaware limited liability company with
its principal place of business in Dublin, Ohio. (Compl. ¶ 1, ECF No. 5.)
On April 2, 2013, Defendants removed the case to this Court alleging
diversity jurisdiction and accusing Plaintiff of fraudulently joining Allscripts
Healthcare Solutions, Inc. as a party to defeat diversity jurisdiction. (ECF No. 1.)
Plaintiff dismissed Allscripts Healthcare Solutions, Inc. and consented to the
jurisdiction of this Court. (ECF No. 15.) In support of removal, Defendants
represented that neither Allscripts, LLC nor Allscripts Healthcare, LLC were
“citizen[s] of the State of Ohio,” such that this Court “has original jurisdiction
because of diversity of citizenship.” (Pet. for Removal 3 at ¶ 11, ECF No. 1.)
Defendants then moved to stay the litigation and twice sought extensions of
time to file their answer. (ECF Nos. 6, 7, 10.) The Court denied Defendants’ motion
to stay and ordered them to answer by May 31, 2013. (ECF No. 14.) On May 31,
2013, Defendants filed a motion seeking dismissal or transfer to the United States
District Court for the Eastern District of North Carolina. (ECF No. 16.) On June 20,
2013, Plaintiff’s counsel asked Defense counsel to identify the membership of its
entities in an effort to ascertain whether diversity jurisdiction actually existed.
Defense counsel did not respond, prompting Plaintiff to make three additional
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inquiries over the course of a month. Because Defense counsel still did not respond,
Plaintiff contacted the Court to schedule a conference call to address the issue. Prior
to the scheduled call, on July 23, 2013, Defense counsel tendered a proposed order
stipulating to remand.
During the July 25, 2013 conference call, Defense counsel conceded that
complete diversity between the parties does not exist such that remand is appropriate.
The parties agree that the remaining issue is whether or not the “payment of just
costs and any actual expenses, including attorney fees incurred as a result of the
removal” under 42 U.S.C. § 1447(c) is proper. On this issue, Plaintiff has moved for
costs and attorneys fees. (ECF No. 25.)
In the subject Motion for Costs and Fees, Plaintiff asserts that an award of
costs in fees under 28 U.S.C. § 1447(c) is warranted given that Defendants lacked
an objectively reasonable basis for seeking removal. Plaintiff concedes that
jurisdiction cannot be determined from the face of the Complaint, but posits that
Defendants had a duty to investigate whether diversity jurisdiction existed prior to
removal. Citing Defendants’ subsequent motion to stay, their motions for an
extension of time to file an answer, their motion to dismiss and transfer, and their
failure to file an answer to date, Plaintiff maintain that Defendants’ strategy is to
delay this litigation. Plaintiff seeks “all of its fees associated with the removal and
from the time of the removal.” (Pl.’s Reply 6, ECF No. 28.) In the event fees are
awarded, Plaintiff seeks seven days to file its fee petition.
Defendants counter that their removal of the instant action to this Court was
objectively reasonable because diversity jurisdiction could not be determined from
the face of the Complaint. Defendants explain that “Plaintiff could have pled its
Complaint in such a manner to identify its members and their citizenship, but it chose
not to do so . . . .” (Pl.’s Mem. In Opp. 3, ECF No. 27.) Defendants deny that they
engaged in delay tactics. They further maintain that Plaintiff’s consent to this
Court’s jurisdiction and their failure to move for remand also weigh against awarding
costs and fees under § 1447(c). Finally, Defendants submit that the Court should
reject Plaintiff’s fee petition because it failed to attach supporting documentation.
Defendants add that at most, Plaintiff could be reimbursed for four emails.
(Aug. 13, 2013 Report & Rec. 1–3, ECF No. 30.)
The Magistrate Judge then set forth the authority governing the propriety of awarding
costs and fees incurred as a result of an improper removal as follows:
When a court determines that the removal of a state-court case to federal
court was improper, “the action must be remanded, and the order ‘may require
payment of just costs and actual expenses, including attorney fees, incurred as a
result of the removal.’” Kent State Univ. Bd. of Trustees v. Lexington Ins. Co., 512
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F. App’x 485, 488–89 (6th Cir. 2013) (quoting 28 U.S.C. § 1447(c)). An award of
costs and fees under § 1447(c) is discretionary, “but subject to the guidance set forth
by the Supreme Court in Martin v. Franklin Capital Corp., 546 U.S. 132, 136–37
(2005).” Id. (citing Warthman v. Genoa Twp. Bd. of Trs., 549 F.3d 1055, 1059 (6th
Cir. 2008). In Martin, the Supreme Court imposed an objective reasonableness
standard, limiting a court’s discretion to award fees to those cases in which “the
removing party lacked an objectively reasonable basis for seeking removal.” 546
U.S. at 141. The United States Court of Appeals has similarly held that an award of
costs and fees under § 1447(c) “is inappropriate where the defendant’s attempt to
remove the action was fairly supportable, or where there has not been at least some
finding of fault with the defendant’s decision to remove.” Wartham, 549 F.3d at
1059–60 (internal quotation marks and citation omitted).
(Id. at 3–4.)
The Magistrate Judge concluded that Defendants lacked an objectively reasonable basis
for removal of this action to federal court and recommended that the Court award reasonable
attorneys’ fees and costs incurred as a result of the improper removal. The Magistrate Judge
further recommended that the Court limit those fees and costs to those incurred after June 20,
2013.
Defendants object to the Magistrate Judge’s recommendation, asserting that her
recommendation “appears to arise from incorrectly imposing a duty upon [Defendants] to
investigate the citizenship of [Plaintiff’s] members before removal.” (Pl.’s Obj. 6, ECF No. 33.)
Defendants further assert that they “had no duty or ability to investigate the identity of
[Plaintiff’s members] before removal, and Magistrate Judge Deavers erred in imposing such an
impossible burden on [Defendants].” (Id.) Defendants contend that fees and costs are not
appropriate because removal on diversity grounds was objectively reasonable based upon the
allegations in the Complaint. Defendants alternatively submit that even if their removal was not
objectively reasonable, fees and costs are not appropriate because they operated in good faith,
with no motivation to delay or impose cost, and because they promptly stipulated to remand.

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The Court finds Defendants’ objections to be without merit. In recommending that the
Court award limited costs and fees, the Magistrate Judge pointed out that on one hand,
Defendants concede that jurisdiction cannot be determined from the face of the Complaint, yet
on the other hand, they argued that removal on diversity grounds was objectively reasonable
based upon the allegations in the Complaint. Judge Deavers also pointed out that although
Defendants removed this action on April 2, 2013, alleging diversity jurisdiction, they “failed to
do any investigation of the citizenship of the parties . . . until June 2013, and only then because
of Plaintiff’s inquiries.” (Aug. 13, 2013 Report & Rec. 4, ECF No. 30.) The Court agrees with
the Magistrate Judge’s findings concerning the lack of investigation. Consistent with this
finding, Defendants’ removal petition fails to identify even their own members and the
citizenship of those members. And significantly, despite Plaintiff’s repeated inquiries and
Defendants’ assertion that this Court should conclude that their removal of this action was
objectively reasonable, to date, Defendants have failed to identify their members and the
citizenship of those members.1
The Magistrate Judge also noted Defendants’ actions after removal, which the Court
finds evidenced an intent to delay the progress of this litigation. Specifically, Judge Deavers
noted that upon removing this action, Defendants contemporaneously moved to stay the
litigation and twice sought extensions of time to file their answer before filing a motion seeking

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Defendants repeatedly submit that because Plaintiff’s citizenship could not be discerned
from the face of the Complaint, it was reasonable for them to assume that Plaintiff was a citizen
of Ohio and Delaware and that they were under no obligation to investigate the true citizenship
of Plaintiff’s sole member either before or after removal. Even if the Court were to accept
Plaintiff’s contention, the Court cannot conclude that removal was objectively reasonable
because Defendants have provided no evidence demonstrating that their members are not also
citizens of Ohio or Delaware or that they had even ascertained the citizenship of their members
prior to removal.
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dismissal or venue transfer. Further, contrary to Defendants assertion, they did not “promptly
offer[] to stipulate to remand to state court.” As the Magistrate Judge pointed out, Defendant
ignored Plaintiff’s June 20, 2013 request to identify the membership of its entities, prompting
Plaintiff to make three additional inquiries over the course of a month. Defense counsel failed to
respond to any of these inquiries such that Plaintiff was forced to seek court intervention. On
July 19, 2013, the Court scheduled a status conference for July 25, 2013, to address Defendants’
refusal to identify its membership. Defendants waited until July 23, 2013, just two days before
the conference, before agreeing to stipulate to remand. Even though Defendants failed to
identify the citizenship of their members in their Petition for Removal, they were presumed to
know their own citizenship when they removed this action on April 2, 2013. Thus, their
repeated refusal to answer Plaintiff’s jurisdictional inquiries necessitating court involvement,
combined with their other actions after removal, reveals their intention to delay these
proceedings.
The Court also agrees with the Magistrate Judge’s finding that Plaintiff’s actions
subsequent to removal are relevant to the amount of fees to be awarded. Judge Deavers analyzed
this issue as follows:
Plaintiff’s subsequent actions are . . . relevant to the determination of the fees
to be awarded. Most courts interpreting the meaning of “incurred as a result of the
removal” have limited the award to those fees and costs incurred “researching and
briefing a motion to remand.” Marel, P.M., S.A. v. LKS Acquisitions, Inc., No. 3:06cv-366, 2010 WL 1372412, at *2 (S.D. Ohio Mar. 31, 2010) (collecting cases). In
3W International, Inc. v. Scottdel, Inc., 722 F.Supp.2d 934 (N.D. Ohio 2010), the
court declined to award the fees and costs the defense counsel incurred in drafting
a motion for remand even though the court had determined that the plaintiff lacked
an objectively reasonable basis for removal. The court explained that the plaintiff’s
agreement to remand immediately upon becoming aware of the issue through the
defendant’s motion suggested that it would have just have readily agreed to remand
after a simple phone call. Id. at 936. The court concluded that “[g]ranting [the
defendant] full recompense would be both inequitable and unwise” because it could
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encourage lawyers to incur fees that could have been avoided. Id. at 937.
Ultimately, the court awarded fees under § 1447 for what it would have cost to call
or email the plaintiff to alert him of the jurisdictional issue and to warn him a motion
of remand would be filed absent an agreement. (Id. at 936–37.)
Under the circumstances presented here, the Undersigned recommends that
Plaintiff be awarded its reasonable fees and costs incurred after it sent the June 20,
2013 email to Defense counsel alerting Defendants of the jurisdictional issue. Costs
and fees incurred prior to the June 20, 2013 email may have been avoidable had
Plaintiff not consented to this Court’s jurisdiction or raised the jurisdictional issue
sooner. Costs and fees incurred after the June 20, 2013 email are clearly attributable
to Defendants’ improper removal and refusal to respond to Plaintiff’s jurisdictional
inquiries. Upon receipt of the June 20, 2013 email, Defense counsel could have
communicated with Plaintiff’s counsel in an attempt to determine whether their
removal was proper. Instead, Defendants failed to respond to Plaintiff’s initial and
subsequent inquiries, waiting until July 23, 2013, to stipulate to remand.
Significantly, during this timeframe, Plaintiff continued to pursue its motion seeking
a venue transfer to another federal court. (See Pl.’s July 11, 2013 Reply, ECF No.
18.) Finally, the Undersigned rejects Defendants’ assertion that the Court should
deny Plaintiff’s request for fees because it failed to attach a fee petition to its Motion.
In the event the Court determines that an award of fees is appropriate, Plaintiff may
file a fee petition within seven (7) days.
(Aug. 13, 2013 Report & Rec. 5–6, ECF No. 30.) The Court agrees with and adopts this
analysis.
In sum, the Court has reviewed the Report and Recommendation and Defendants’
Objections in accordance with 28 U.S.C. § 636(b)(1) and Rule 72(b) and finds Defendants’
objections to be without merit. The Court concludes that Plaintiff is entitled to fees incurred
after June 20, 2013, such that Plaintiff’s forthcoming costs and fee petition may include costs for
pro hac vice motions and attorneys’ fees incurred in connection with the following: time
expended opposing Defendants’ motion seeking transfer; time expended corresponding with
Defendants’ counsel in an effort to ascertain their citizenship; and time expended in connection
with the July 25, 2013 telephonic conference with the Court. The Court encourages the parties
to reach an agreement regarding the appropriate amount of fees to be awarded.

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III.
For the reasons set forth above, Defendants’ Objections (ECF No. 33) are
OVERRULED, the August 13, 2013 Report and Recommendation (ECF No. 30) is ADOPTED,
and Plaintiff’s Motion for Costs and Fees (ECF No. 25) is GRANTED IN PART AND
DENIED IN PART as set forth above. In the event the parties are unable to reach an agreement
regarding the appropriate amount of fees to be awarded, Plaintiff may file its fee petition
WITHIN SEVEN (7) DAYS.
IT IS SO ORDERED.

s/Algenon L. Marbley
ALGENON L. MARBLEY
UNITED STATES DISTRICT COURT
DATED: March 12, 2014

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