Tuesday’s Argument in Martin v. Franklin Capital Corp.

The Justices were significantly more reticent in Tuesday’s oral argument for Martin v. Franklin Capital Corp. than they were for the Randolph case. What questioning took place indicated the Justices’ dissatisfaction with both sides’ solutions to the question presented. The Justices’ concerns appeared to reflect a preference for the solution proposed by the Solicitor General’s amicus brief. The case, discussed in this prior post, asks the Court to decide what legal standard governs a federal district court’s discretion under 28 U.S.C. 1447(c) to “require payment of just costs and any actual expenses, including attorney fees, incurred as the result of removal” when it remands a removed case to state court.

Sam Heldman argued for the petitioners that Congress intended district courts to almost always award fees and costs against the party that removed improperly. The Court allowed Heldman considerable time to advance arguments against the Solicitor General’s proposed standard, the standard of Christianburg Garment, under which the district court would award fees only when the removing party’s position was unreasonable. Justice O’Connor and the Chief Justice then opened the dialogue by pointing out two structural issues with petitioners’ arguments. Taking issue with petitioners’ contention that Christianburg Garment duplicated a standard already set by Rule 11, Justice O’Connor pointed out that Rule 11 prohibited “frivolous” filings, not “unreasonable” ones, and the Chief Justice pointed out that the scope of Rule 11 was not well-defined when the relevant statutory language was enacted. The Chief Justice also noted that the removal statute did sometimes employ the term “shall,” but in the relevant text chose to employ the term “may,” cutting against petitioners’ virtually discretionless theory.

Several Justices expressed concern that under petitioners’ theory judges would have to award substantial fees and costs to parties who did not deserve them, and against parties who removed for forgivable reasons. Justice Stevens pointed out that a district court had the discretion to award fees and costs to the prevailing party even for litigation on nonjurisdictional issues—awarding all that money by default to petitioners would be a curious result if some of the litigation actually saved time and expenses in the later state court litigation. Justice Kennedy pointed out that removing parties are pressed for time, having only thirty days to file for removal. And on the facts of this case, Justice Ginsburg suggested that petitioners might not deserve a fee award, since they had waited almost a year before requesting removal, and Justice O’Connor pointed out the lower court’s decision that respondents had “objectively reasonable” grounds for their removal. Heldman’s main reply was that even in cases where an award to the party who succeeded in fighting removal might seem unfair, that party has “the cleanest hands in the courtroom” for the purposes of Section 1447(c) because that party helps keep cases in which there is no basis for jurisdiction out of federal court.

Justices Kennedy and Breyer and the Chief Justice expressed doubt about whether Congress intended, in Section 1447(c), to reward parties who successfully keep cases out of federal court. After all, they noted, petitioners’ standard would punish removing parties for exercising their federal right to remove. Justice Ginsburg remarked that petitioners’ proposed standard has in the past only been used to punish parties that had violated federal law.

Jan Chilton argued for respondents that Section 1447(c) is not a fee-shifting statute at all, but rather grants district courts the statutory authority to award fees and costs in the case of improper removal even though they lack subject-matter jurisdiction over such cases. Chilton argued that other federal provisions, like Rule 11, supplied the appropriate standard for the court’s discretion. Justice Scalia expressed doubt about this argument, noting that the statute provided for an award of “just” costs, which to the Justice implied a legal standard. And Justice O’Connor noted that Rule 11 seemed inappropriate as a legal standard, since it dealt with “frivolous” filings, not “unreasonable” or “unjust” ones.

Chilton argued in the alternative that if Section 1447(c) is a fee-shifting statute, petitioners’ plaintiff-friendly standard is incorrect. Chilton contended that “objective reasonableness” of the removing party’s position, as the primary part of a multi-factor test, should determine the district court’s award of fees and costs. Several Justices expressed concern with respondents’ multi-factor proposal, indicating that they might prefer the Solicitor General’s Christianburg Garment standard because it was clearer and would grant less discretion to the district judge. The Chief Justice noted that it would, like all such tests, lead to more litigation. Justice Breyer worried that advancing yet another standard for attorney’s fees would lead to uncertainty in other statutes. Justices Scalia and Stevens expressed concern that a district judge would have such a large amount of discretion to award powerful financial liability, and several Justices asked questions indicating whether there was room to separate awards of costs from awards of fees to reduce the amount of liability and to deal with the statutory distinction between “just costs” and “any actual expenses.”