Riverview Health Institute LLC et al v. North American Laserscopic Spine Institute et al

Filing 31

REPORT AND RECOMMENDATIONS that 27 Plaintiffs' Motion for Attorney Fees and Costs for Wrongful Removal be GRANTED; Plaintiffs shall submit, by June 20, 2014, a memorandum as directed by the Recommendations; and further briefing (opposition and reply memoranda, if any) will then proceed under the deadlines set by S.D. Ohio Civ. R. 7.2(a)(2). Objections to R&R due by 6/23/2014. Signed by Chief Magistrate Judge Sharon L Ovington on 6/6/14. (mm1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
RIVERVIEW HEALTH INSTITUTE,
LLC, et al.,

:
:

Plaintiffs,

Case No. 3:12cv00428
:

vs.
:

District Judge Walter Herbert Rice
Chief Magistrate Judge Sharon L. Ovington

NORTH AMERICAN LASERSCOPIC
SPINE INSTITUTE, et al.,
:
Defendants.

:

REPORT AND RECOMMENDATIONS1

Plaintiffs originally filed this case in state court asserting many claims against
Defendants including, for example, fraud, civil conspiracy, and breach of contract.
Defendants removed the case to this Court on December 31, 2012, invoking subject
matter jurisdiction based on the parties’ diversity of citizenship. The case proceeded
through Defendants’ Answers, the parties’ Rule 26(f) Report, the Court’s Preliminary
Pretrial Order (later partially amended), and an Agreed Protective Order.
The jurisdictional waters began to roil, however, on or near February 4, 2014,
when Defendants’ counsel realized that they “were operating under the mistaken belief”

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Attached hereto is a NOTICE to the parties regarding objections to this Report and
Recommendations.

that complete diversity of citizenship – and hence subject matter jurisdiction – existed.
(Doc. #21, PageID at 228). Their realization occurred when they “discovered through the
course of discovery that a member of Defendant North American Laserscopic Spine
Institute, LLC is an Ohio citizen.” Id. As a result, counsel filed Defendants’ Motion to
Remand. Id. The Court then granted Plaintiffs “thirty days to do sufficient discovery to
determine whether it wishes to join Defendants’ Motion to Remand.” (Doc. #25). Once
Plaintiffs subsequently indicated that they would not oppose Defendants’ Motion, the
Court remanded the case to state court. (Doc. #26).
This case is presently before the Court upon Plaintiffs’ Motion for Fees and Costs
for Wrongful Removal (Doc. #27), Defendants’ Response in Opposition (Doc. #29),
Plaintiffs’ Reply (Doc. #30), and the record as a whole.
Plaintiffs argue that an award of attorney fees and costs is warranted under 28
U.S.C. §1447(c) because Defendant North American Laserscopic Spine Institute lacked
any objectively reasonable basis for removal. In response, Defendants do not specifically
contend that they had an objectively reasonable basis for removing the case from state
court. They instead view Plaintiffs’ attorney fees and costs as non-compensable because
they did not incur those fees and costs “as a result of the removal,” as §1447(c) mandates.
“An order remanding the case may require payment of just costs and any actual
expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. §
1447(c). An award of fees and just costs under §1447(c) is neither automatic nor

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presumed when a mistaken removal has occurred. See Martin v. Franklin Capital Corp.,
546 U.S. 132, 136-38, 126 S.Ct. 704 (2005); see also Warthman v. Genoa Twp. Bd. of
Trustees, 549 F.3d 1055, 1059 (6th Cir. 2008). It is within this Court’s discretion to
require, or not, payment of attorney fees and costs under 28 U.S.C. §1447(c).
“‘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. Conversely, when an objectively reasonable basis exists, fees should be
denied.’” Martin v. Franklin Capital Corp., 546 U.S. 132, 141, 126 S.Ct. 704 (2005); see
Warthman v. Genoa Twp. Bd. of Trustees, 549 F.3d 1055, 1059 (6th Cir. 2008).
As previously noted, Defendants do not specifically challenge Plaintiffs’ assertion
that Defendant North American Laserscopic Spine Institute lacked any objectively
reasonable basis for removing this case from state court. See Doc. #29, PageID at 25455. Consequently, the parties’ central remaining dispute concerns the meaning of
§1447(c)’s requirement that plaintiffs in a wrongfully removed case may recover the
attorney fees and costs they incurred “as a result...” of the mistaken removal.
Defendants insist that Plaintiffs did not incur fees and costs as a result of the
mistaken removal. Defendants contend that courts construing §1447(c)’s “as a result of
removal” language have limited plaintiffs’ recovery for wrongful removal to the fees and
costs incurred “‘researching and briefing a motion to remand.’” (Doc. #29, PageID at
254). In support of this proposition, Defendants cite Playa Marel, P.M., S.A. v. LKS

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Acquisitions, Inc., 2010 US Dist LEXIS 40699 at *2, 2010 WL 1372412 2010 at *2 (S.D.
Ohio, Mar. 31, 2010)(Rose, D.J.) (collecting cases). Defendants point out that as soon as
they learned about the lack of complete diversity, they moved to remand the case to state
court without opposition or briefing by Plaintiffs. Defendants contend:
[T]he only costs Plaintiffs incurred because of the motion to remand
in this case were the costs they incurred because of their decision to ask the
Court for time to conduct unnecessary discovery relating to Defendants’
motion.... Awarding Plaintiffs costs and expenses for engaging in
unnecessary discovery, as they did here, would create an improper incentive
for lawyers to do unnecessary work to rack up fees.
(Doc. #29, PageID at 255). Plaintiffs therefore incurred no compensable attorney fees
and costs as a result of the mistaken removal, according to Defendants.
Defendants’ reasoning is not persuasive because it rests on dictum from Playa
Marel and an overly restrictive construction of §1447(c)’s “incurred as a result of the
removal” language. The dictum in Playa Marel was its observation that “All of the cases
found which specifically address the amount of attorneys’ fees and costs awarded, award
attorneys’ fees and costs only for researching and briefing a motion to remand.” 2010
WL 1372412 at *2. This constituted dictum because the District Court in Playa Marel
specifically adopted a potentially broader reading of §1447(c), finding, “The phrase
‘incurred as a result of the removal’ means attorneys’ fees and costs incurred to prosecute
a remand effort.” Id., 2010 WL 1372412 at *3; see Shooter Const. Co., Inc. v. Wells
Fargo Ins. Servs. USA, Inc., 3:11-CV-181, 2011 WL 6339680 (S.D. Ohio Nov. 28, 2011)
(Merz, M.J.) (characterizing as dictum Playa Marel’s statement that “[a]ll of the cases
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found..., impose fees and costs only for researching and briefing a motion to remand.”).
This was a potentially broader reading of §1447(c) because it could encompass more than
just “fees and costs for researching and briefing a motion to remand.” As Magistrate
Judge Merz cogently explains in Shooter Const.:
The natural reading of “incurred as a result” is that expenses that
result from – are caused by – the improper removal are compensable. That
would include, but not be limited to, expenses incurred in prosecuting a
remand motion. It would also include, for example, the necessary expenses
of being in the “second judicial system” referred to by the Seventh Circuit
in Garbie, supra2: expenses of obtaining counsel and having them enter
appearances, participate in the Fed. R. Civ. P. 26(f) conference and prepare
the joint report of that conference, and then participate in the scheduling
conference with the District Judge. A plaintiff even with a concededly
meritorious remand motion cannot count on its being granted before other
case activities take place.
Shooter Const., 3:11-CV-181, 2011 WL 6339680 at *2 (footnote added). In addition,
Judge Merz explained that the natural reading of §1447(c)’s “incurred as a result...”
language is “consistent with the purpose of Congress’ recent amendments to §1447(c)
which the Supreme Court recognized in Martin v. Franklin Capital Corp., 546 U.S. 132,
140, 126 S.Ct. 704 (2005). ‘The Court saw the purpose of assessing fees and costs upon
remand as reducing the use of removal to delay litigation and to impose costs on
plaintiffs.’” Shooter Const., 3:11-CV-181, 2011 WL 6339680 at *2 (quoting, in part,
Wright, Miller, Cooper & Steinman, Federal Practice and Procedure 4th, § 3739 at 891).

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Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 411 (7th Cir. 2000).

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District Judge Rice accepted this reasoning in the same case (although under a different
caption). See Shooter Const. Co., Inc. v. Accordia of Ohio, LLC, 3:11-CV-181, 2011 WL
6370061 (S.D. Ohio Dec. 19, 2011).
In the present case, as in Shooter Const., it is consistent with congressional
purpose to construe §1447(c) as permitting plaintiffs to recover attorney fees and costs for
improper removal including those “that result from – are caused by – the improper
removal.... That would include, but not be limited to, expenses incurred in prosecuting a
remand motion.” Shooter Const., 3:11-CV-181, 2011 WL 6339680 at *2. The mistaken
removal has caused a delay in the ultimate resolution of this case since more than one
year passed from the date of Defendants’ mistaken removal (on December 31, 2012) and
the date (in early February 2014) when Defendants’ counsel discovered the lack of
complete diversity of citizenship and the resulting absence of subject matter jurisdiction.
The mistaken removal has also caused Plaintiffs to incur “as a result of the
removal” the attorney fees and costs related to their decision to ask this Court for
additional time to conduct discovery for the purpose of determining whether they should
join Defendants’ Motion to Remand. Although Defendants contend otherwise, arguing
that such discovery was unnecessary in light of the Declaration (by small minority equity
holder Christopher Bryant Smith, see Doc. #21, PageID at 229, 231)) they provided to
Plaintiffs, Judge Rice recognized, at least implicitly, the need and propriety of such
discovery by granting Plaintiffs thirty days “to do sufficient discovery” on this limited

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issue. (Doc. #25). Given this, the record lacks any indication that Plaintiffs attempted to
improperly “rack up” their attorney fees and costs.
In sum, Plaintiffs are entitle to recover under §1447(c) the fees and costs they
incurred as a result of – were caused by – Defendants’ mistaken, and therefore, improper
removal of this case from state court. This includes, but is not limited to, expenses
incurred in prosecuting a remand motion. See Shooter Const., 3:11-CV-181, 2011 WL
6339680 at *2.
Accordingly, Plaintiffs’ Motion for Fees and Costs for Wrongful Removal is well
taken. Plaintiffs have not provided information about the amount of “just costs and any
actual expenses...,” 28 U.S.C. §1447(c), they incurred as a result of the mistaken removal.
Keeping in mind that such costs and actual expenses must be reasonable, see Shooter
Const., 3:11-CV-181, 2011 WL 6339680 at *2 (citing, in part, Reed v. Rhodes, 179 F.3d
453, 471 (6th Cir.1999)), Plaintiffs will be given an opportunity to request an award of
the specific amount of reasonable fees and costs they seek to recover under §1447(c),
supported by an itemized statement of those fees and costs.

IT IS THEREFORE RECOMMENDED THAT:
1.

Plaintiffs’ Motion for Fees and Costs for Wrongful Removal (Doc. #27) be
GRANTED;

2.

Plaintiffs shall submit, by June 20, 2014, a memorandum directed at
identifying and establishing the amount of reasonable fees and costs they
seek to recover under 28 U.S.C. §1447(c), supported by an itemized
statement of their reasonable fees and costs; and
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3.

Further briefing (opposition and reply memoranda, if any) will then proceed
under the deadlines set by S.D. Ohio Civ. R. 7.2(a)(2).

June 6, 2014
s/Sharon L. Ovington
Sharon L. Ovington
Chief United States Magistrate Judge

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NOTICE REGARDING OBJECTIONS
Pursuant to Fed. R. Civ. P. 72(b), any party may serve and file specific, written
objections to the proposed findings and recommendations within FOURTEEN days after
being served with this Report and Recommendations. Pursuant to Fed. R. Civ. P. 6(d),
this period is extended to SEVENTEEN days because this Report is being served by one
of the methods of service listed in Fed. R. Civ. P. 5(b)(2)(C), (D), (E), or (F). Such
objections shall specify the portions of the Report objected to and shall be accompanied
by a memorandum of law in support of the objections. If the Report and Recommendation
is based in whole or in part upon matters occurring of record at an oral hearing, the
objecting party shall promptly arrange for the transcription of the record, or such portions
of it as all parties may agree upon or the Magistrate Judge deems sufficient, unless the
assigned District Judge otherwise directs. A party may respond to another party’s
objections within FOURTEEN days after being served with a copy thereof.
Failure to make objections in accordance with this procedure may forfeit rights on
appeal. See Thomas v. Arn, 474 U.S. 140 (1985); United States v. Walters, 638 F.2d 947,
949-50 (6th Cir. 1981).

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