Attorney Fees When Cases are Remanded to State Court

For numerous reasons, a defendant in state court might rather be in federal court. Federal law provides that, under the correct circumstances, a defendant can “remove” its case from state court to federal court. If the plaintiff successfully challenges the removal to federal court (because the requirements for removal were not met), the case will be “remanded” back to the state court. Such an improvident detour through the federal system creates delay and causes unnecessary expenses, including attorney fees. To discourage defendants from using removals as a delaying tactic, the law provides that, “An order remanding the case may require the payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. §1447(c)(emphasis added).

The word "may" is, of course key, as it begs the question of when the court should shift the costs and expenses associated with an improvident removal to federal court. The United States Supreme Court addressed this question in Martin v. Franklin Capital Association, 546 US 132, 126 S.Ct. 704, 163 L. Ed. 2d 547 (2005) by holding that, “absent unusual circumstances, attorney’s fees should not be awarded when the removing party has an objectively reasonable basis for removal.” Id., 546 US at 136, 126 S.Ct. at 708, 163 L.Ed. 2d at 552 (emphasis added). In setting the objectively reasonable standard, the Court sought to achieve a balanced approach to dissuade unreasonable removals without deterring defendants from validly seeking removal in matters that are merely less than certain.

The Court also discussed the "absent unusual circumstances" portion of the standard, explaining that it should be applied, consistent with the standard's objective, to achieve balanced results. For example, delay by the plaintiff in challenging a removal would militate against the award of fees. On the other hand, a defendant withholding information that shows removal to be unreasonable operates as a militating factor in favor of sanctions. Id., 546 US at 141, 126 S.Ct. at 711, 163 L.Ed. 2d at 555.

Predictably, a consequence of the above standard is much litigation over the circumstances that will tip the scales one way or the other. Defendants considering removing their cases to federal court under less than ideal conditions, and plaintiffs deciding how to respond, should factor the potential for an attorney fee recovery into their considerations.

The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.

Attorney Fee Awards Without Winning

A recent case in NJ illustrates how, depending on statutory language, it might be possible to receive an award of attorney fees where winning is merely likely, but not assured. In Penna v. Newell Funding, which is presently in discovery (the long middle part of litigation where each side gathers facts about the other) the Court recently issued an order awarding attorney fees based, not on the final resolution for the case or as a sanction against one of the parties, but based upon the plaintiff winning a preliminary injunction.

A preliminary injunction is a form of equitable relief where the court issues an order aimed at preserving the status quo until the conclusion of the litigation. For example, in a case arising out of a pending foreclosure, a preliminary injunction might suspend the foreclosure process. Typically, to win a preliminary injunction you must show that: (1) absent the injunction, you will be damaged in such a way that a monetary award later will not make you whole; (2) no harm will result from the issuance of the injunction that is greater than the harm that will be prevented by the injunction; and (3) there is a substantial likelihood that you will prevail on the merits of the case.

In Penna the plaintiff won a preliminary injunction in a case predicated on New Jersey’s Consumer Fraud Act. The Court determined that winning the injunction qualified as the sort of equitable relief that would justify awarding attorney fees under the statute. The Court was aided in its decision by the fact that the award of a preliminary injunction carried with it a determination that plaintiff was likely to prevail on the merits at the end of the case. The Court awarded all fees incurred from the beginning of the case until the preliminary injunction.

Such rulings, if upheld, will further shift the economics of litigation brought under consumer protection laws.


The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.