March 9, 1995
On September 7, 1994, plaintiff Mary F. Shrader ("Mary") filed an eleven-count complaint in the Court of Common Pleas of Philadelphia County, naming Legg Mason Wood Walker, Inc., Thomas Dugan, and Allen H. Shrader ("Allen H.") as defendants, and Allen R. Shrader ("Allen R.") as a nominal defendant. The complaint relied exclusively on state law. Apart from naming Allen R. (her son) as a nominal defendant, the eleven counts of Mary's complaint were nearly indistinguishable from an earlier complaint, ten counts of which we dismissed on the merits by Order dated December 20, 1993, see Memorandum Opinion and Order, Shrader v. Legg Mason Wood Walker, Inc., et al., No. 93-3967, 1993 U.S. Dist. LEXIS 18049 (E.D. Pa. December 20, 1993).
Defendants Legg Mason, Dugan, and Allen H. removed the second complaint to this Court on September 27, 1994. They relied on the general rule that nominal defendants need not be diverse from a plaintiff, Navarro Savings Association v. Lee, 446 U.S. 458, 461, 64 L. Ed. 2d 425, 100 S. Ct. 1779 (1980), nor need they join in a notice of removal, Farias v. Bexar County Bd. of Trustees for Mental Health Mental Retardation Servs., 925 F.2d 866, 871 (5th Cir.), cert. denied, 502 U.S. 866, 112 S. Ct. 193, 116 L. Ed. 2d 153 (1991). See Notice of Removal at 5. By Order dated September 29, 1994, we raised the question of our jurisdiction to hear this action mea sponte and directed the parties to file briefs addressing two issues.
In her briefs to the Court, however, Mary abjured her Complaint and wrote, "Allen R. is not a nominal party; he is an indispensable party, because he has a vested interest in the issues which will be decided in this lawsuit", see Memorandum of Mary Shrader in Support of Remand at 5 (emphasis added). We analyzed the applicable law and ultimately agreed with this statement. Mary has never explained this inconsistency.
We concluded that defendants deserved an award for costs and attorney's fees pursuant to 28 U.S.C. § 1447(c) because "difficult, threshold, and collateral jurisdictional issues have arisen in this action only because Mary [F.] chose to name her son as a 'nominal defendant' despite earlier, clear iterations of substantive trust law on identical issues between these same parties in an earlier case." Order, Shrader v. Legg Mason Wood Walker, No. 94-5881, at 5 (E.D. Pa. January 4, 1995). We granted leave to defendants to file a motion for fees and costs "for plaintiff's misleading description of Allen R. as a nominal defendant", id. at 7, and Legg Mason and Dugan (collectively "Legg Mason") filed such a motion on January 12, 1995. They seek $ 25,811.26.
In this Memorandum we consider whether to award costs and fees to Legg Mason, and, if so, the amount of the award.
A. Awarding Costs and Attorney's Fees under 28 U.S.C. § 1447(c)
28 U.S.C. § 1447(c) provides:
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.
We discuss the statutory language in more detail below, but at the outset we note that § 1447(c) provides district courts with the discretion to remedy abuses in the use of the removal procedure. As Mary wisely concedes, § 1447(c) does not require a finding of bad faith, see, e.g., Miranti v. Lee, 3 F.3d 925, 929 (5th Cir. 1993); Moore v. Permanente Medical Group, Inc., 981 F.2d 443, 445-447 (9th Cir. 1992); Morgan Guar. Trust Co. v. Republic of Palau, 971 F.2d 917, 923-24 (2d Cir. 1992), and we therefore conclude that Congress intended the statute to serve remedial, not punitive, purposes. See, e.g., Moore, 981 F.2d at 447 (noting that § 1447(c) awards are "simply reimbursement"); Morgan Guaranty Trust Co., 971 F.2d at 926 (Walker, J., dissenting) ("Section 1447 is principally designed to compensate . . . .").
The legislative history of § 1447(c) confirms this interpretation. See H.R. Rep. No. 899, 100th Cong., 2d Sess. 72 (1988), reprinted in 1988 U.S.C.C.A.N. 5982, 6033 (noting that § 1447(c) allows "payment of actual expenses incurred" and that "civil rule 11 can be used to impose a more severe sanction when appropriate").
Mary presents two arguments in response to the motion. First, she argues that her complaint did not cause Legg Mason to believe that Allen R. was a nominal defendant and, thus, that her conduct does not warrant an award. Second, she argues that 28 U.S.C. § 1447 (c) does not permit a court to award costs and fees to defendants ; Mary construes § 1447(c) to permit awards only to plaintiffs, against defendants who improvidently remove actions to federal court without jurisdiction. We consider these arguments in turn.
1. The Purpose of the Award
In essence, Mary's first argument assumes that Legg Mason knew, or should have known, that Allen R. was not a nominal defendant. This argument has some merit, since in our earlier opinion we had held that Mary lacked an independent right to sue Legg Mason without joining Allen R., the trustee. We also had held that Allen R. was an indispensable party to Mary's claim for breach of the trust. See Memorandum Opinion, Shrader v. Legg Mason Wood Walker, Inc., et al., 1993 U.S. Dist. LEXIS 18049, No. 93-3967, at 2, 7-21 (E.D. Pa. December 20, 1993). Legg Mason was certainly aware of this prior jurisprudence.
Mary's argument fails, however, in practical application. After all, Mary labelled her son "nominal". If Mary was willing to use that label, then Legg Mason could -- at the very least -- also use it to try to remove the case to federal court. Legg Mason might well have thought that Mary had erred in calling Allen R. nominal, and it might also have discounted the likelihood of success in removing the case. Yet it could certainly try to remove the case, and it could justifiably rely on Mary's label in its legal argument. In short, Mary's conduct led to the removal, and Legg Mason's removal was a proper response to that conduct.
Mary's argument also suffers from the clarity of hindsight. Legg Mason received a complaint in which the plaintiff had named a nominal defendant. Mary (who wishes to charge Legg Mason with the prior jurisprudence between the parties) may well be charged with the Supreme Court's removal teaching, which emphasizes that a plaintiff is the mistress of her complaint. See, e.g., Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 96 L. Ed. 2d 318, 107 S. Ct. 2425 (1987) ("The [well-pleaded complaint] rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law."). It is also well-settled that a court must take the facts of the complaint as true at the time of removal. See, e.g., Steel Valley Auth. v. Union Switch and Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987). In short, to the contrary of Mary's assertions, it became "obvious" that Allen R. was not a nominal defendant only after we so ruled.
Finally, Mary's argument does not fully describe the facts of the removal. We consider an award of costs and fees appropriate not only because she labeled her son "nominal" -after all, Mary might mistakenly have thought that Allen R. could be a nominal defendant -- but also because of her inconsistency. In Bloom v. Barry, 755 F.2d 356 (3d Cir. 1985), an analogous case, the American Honda Motor Company removed a case from a Florida state court, alleging that the complaint satisfied jurisdictional thresholds. Id. at 356. After the district court transferred the case to the District of New Jersey, Honda sought dismissal, alleging that the complaint did not satisfy the same jurisdictional thresholds. Id. at 357. After completing review of unrelated issues, the Third Circuit suggested:
The odyssey to which Mr. Bloom and his counsel have been subjected as a result of the inconsistent positions taken by Honda with respect to jurisdictional amount suggests that consideration by the district court of an award of excess costs, expenses, and attorneys' fees pursuant to 28 U.S.C. § 1927 (1982) may be appropriate.