Martin v. Franklin Capital Corp.

(Slip Opinion) OCTOBER TERM, 2005 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader.

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

MARTIN ET UX v. FRANKLIN CAPITAL CORP.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE TENTH CIRCUIT

No. 04–1140. Argued November 8, 2005—Decided December 7, 2005

In removing petitioner Martins’ state-court class action to federal court

on diversity grounds, respondents (collectively, Franklin) acknowl-

edged that the amount in controversy was not clear from the face of

the state-court complaint, but argued that this requirement for fed-

eral diversity jurisdiction was nonetheless satisfied under precedent

suggesting that punitive damages and attorney’s fees could be aggre-

gated in making the calculation. The District Court denied the Mar-

tins’ motion to remand to state court and eventually dismissed the

case with prejudice. Reversing and remanding with instructions to

remand to state court, the Tenth Circuit agreed with the Martins

that their suit failed to satisfy the amount-in-controversy require-

ment and rejected Franklin’s aggregation theory under decisions is-

sued after the District Court’s remand decision. The latter court then

denied the Martins’ motion for attorney’s fees because Franklin had

legitimate grounds for believing this case fell within federal-court ju-

risdiction. Affirming, the Tenth Circuit disagreed with the Martins’

argument that attorney’s fees should be granted on remand as a mat-

ter of course under 28 U. S. C. §1447(c), which provides that a re-

mand order “may require payment of just costs and any actual ex-

penses, including attorney fees,” but provides little guidance on when

fees are warranted. The court noted that fee awards are left to the

district court’s discretion, subject to review only for abuse of discre-

tion; pointed out that, under Circuit precedent, the key factor in de-

ciding whether to award fees is the propriety of removal; and held

that, because Franklin had relied on case law only subsequently held

to be unsound, its basis for removal was objectively reasonable, and

the fee denial was not an abuse of discretion.

Held: Absent unusual circumstances, attorney’s fees should not be

2 MARTIN v. FRANKLIN CAPITAL CORP.

Syllabus

awarded under §1447(c) when the removing party has an objectively

reasonable basis for removal. Conversely, where no objectively rea-

sonable basis exists, fees should be awarded. This Court rejects the

Martins’ argument for adopting a strong presumption in favor of

awarding fees. The reasons for adopting such a presumption in

Newman v. Piggie Park Enterprises, Inc., 390 U. S. 400, 402 (per cu-

riam), are absent here. Also rejected is Franklin’s argument that

§1447(c) simply grants courts jurisdiction to award costs and attor-

ney’s fees when otherwise warranted. Were the statute strictly juris-

dictional, there would be no need to limit awards to “just” costs; any

award authorized by other provisions of law would presumably be

“just.” The Court therefore gives the statute its natural reading: Sec-

tion 1447(c) authorizes courts to award costs and fees, but only when

such an award is just. That standard need not be defined narrowly,

as the Solicitor General argues, by awarding fees only on a showing

that the unsuccessful party’s position was frivolous, unreasonable, or

without foundation. Christiansburg Garment Co. v. EEOC, 434 U. S.

412, 422, and Flight Attendants v. Zipes, 491 U. S. 754, 762, distin-

guished. The fact that a §1447(c) fee award is discretionary does not

mean that there is no governing legal standard. When applying fee-

shifting statutes, the Court has found limits in “the large objectives” of

the relevant Act. E.g., Zipes, 491 U. S., at 759. The appropriate test

for awarding fees under §1447(c) should recognize Congress’ desire to

deter removals intended to prolong litigation and impose costs on the

opposing party, while not undermining Congress’ basic decision to af-

ford defendants a right to remove as a general matter, when the

statutory criteria are satisfied. In light of these “large objectives,”

the standard for awarding fees should turn on the reasonableness of

the removal. In applying the general rule of reasonableness, district

courts retain discretion to consider whether unusual circumstances

warrant a departure in a given case. A court’s reasons for departing,

however, should be “faithful to the purposes” of awarding fees under

§1447(c). Fogerty v. Fantasy, Inc., 510 U. S. 517, 534, n. 19. Pp. 3–9.

393 F. 3d 1143, affirmed.

ROBERTS, C. J., delivered the opinion for a unanimous Court.

Cite as: 546 U. S. ____ (2005) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Wash-

ington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 04–1140

_________________

GERALD T. MARTIN, ET UX., PETITIONERS v.

FRANKLIN CAPITAL CORPORATION ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE TENTH CIRCUIT

[December 7, 2005]

CHIEF JUSTICE ROBERTS delivered the opinion of the

Court.

A civil case commenced in state court may, as a general

matter, be removed by the defendant to federal district

court, if the case could have been brought there originally.

28 U. S. C. §1441 (2000 ed. and Supp. II). If it appears

that the federal court lacks jurisdiction, however, “the case

shall be remanded.” §1447(c). An order remanding a

removed case to state court “may require payment of just

costs and any actual expenses, including attorney fees,

incurred as a result of the removal.” Ibid. Although

§1447(c) expressly permits an award of attorney’s fees, it

provides little guidance on when such fees are warranted.

We granted certiorari to determine the proper standard

for awarding attorney’s fees when remanding a case to

state court.

I

Petitioners Gerald and Juana Martin filed a class-action

lawsuit in New Mexico state court against respondents

Franklin Capital Corporation and Century-National In-

surance Company (collectively, Franklin). Franklin re-

2 MARTIN v. FRANKLIN CAPITAL CORP.

Opinion of the Court

moved the case to Federal District Court on the basis of

diversity of citizenship. See §§1332, 1441 (2000 ed. and

Supp. II). In its removal notice, Franklin acknowledged

that the amount in controversy was not clear from the face

of the complaint—no reason it should be, since the com-

plaint had been filed in state court—but argued that this

requirement for federal diversity jurisdiction was nonethe-

less satisfied. In so arguing, Franklin relied in part on

precedent suggesting that punitive damages and attor-

ney’s fees could be aggregated in a class action to meet the

amount-in-controversy requirement. See App. 35.

Fifteen months later, the Martins moved to remand to

state court on the ground that their claims failed to satisfy

the amount-in-controversy requirement. The District

Court denied the motion and eventually dismissed the

case with prejudice. On appeal, the Court of Appeals for

the Tenth Circuit agreed with the Martins that the suit

failed to satisfy the amount-in-controversy requirement.

The Tenth Circuit rejected Franklin’s contention that

punitive damages and attorney’s fees could be aggregated

in calculating the amount in controversy, in part on the

basis of decisions issued after the District Court’s remand

decision. The Court of Appeals reversed and remanded to

the District Court with instructions to remand the case to

state court. 251 F. 3d 1284, 1294 (2001).

Back before the District Court, the Martins moved for

attorney’s fees under §1447(c). The District Court re-

viewed Franklin’s basis for removal and concluded that,

although the Court of Appeals had determined that re-

moval was improper, Franklin “had legitimate grounds for

believing this case fell within th[e] Court’s jurisdiction.”

App. to Pet. for Cert. 20a. Because Franklin “had objec-

tively reasonable grounds to believe the removal was

legally proper,” the District Court denied the Martins’

request for fees. Ibid.

The Martins appealed again, arguing that §1447(c)

Cite as: 546 U. S. ____ (2005) 3

Opinion of the Court

requires granting attorney’s fees on remand as a matter of

course. The Tenth Circuit disagreed, noting that award-

ing fees is left to the “wide discretion” of the district court,

subject to review only for abuse of discretion. 393 F. 3d

1143, 1146 (2004). Under Tenth Circuit precedent, the

“ ‘key factor’ ” in deciding whether to award fees under

§1447(c) is “ ‘the propriety of defendant’s removal.’ ” Ibid.

(quoting Excell, Inc. v. Sterling Boiler & Mechanical, Inc.,

106 F. 3d 318, 322 (CA10 1997)). In calculating the

amount in controversy when it removed the case, Franklin

had relied on case law only subsequently held to be un-

sound, and therefore Franklin’s basis for removal was

objectively reasonable. 393 F. 3d, at 1148. Because the

District Court had not abused its discretion in denying

fees, the Tenth Circuit affirmed. Id., at 1151.

We granted certiorari, 544 U. S. ___ (2005), to resolve a

conflict among the Circuits concerning when attorney’s

fees should be awarded under §1447(c). Compare, e.g.,

Hornbuckle v. State Farm Lloyds, 385 F. 3d 538, 541 (CA5

2004) (“Fees should only be awarded if the removing de-

fendant lacked objectively reasonable grounds to believe

the removal was legally proper” (internal quotation marks

omitted)), with Sirotzky v. New York Stock Exchange, 347

F. 3d 985, 987 (CA7 2003) (“[P]rovided removal was im-

proper, the plaintiff is presumptively entitled to an award

of fees”), and Hofler v. Aetna U. S. Healthcare of Cal., Inc.,

296 F. 3d 764, 770 (CA9 2002) (affirming fee award even

when “the defendant’s position may be fairly supportable”

(internal quotation marks omitted)). We hold that, absent

unusual circumstances, attorney’s fees should not be

awarded when the removing party has an objectively

reasonable basis for removal. We therefore affirm the

judgment of the Tenth Circuit.

II

The Martins argue that attorney’s fees should be

4 MARTIN v. FRANKLIN CAPITAL CORP.

Opinion of the Court

awarded automatically on remand, or that there should at

least be a strong presumption in favor of awarding fees.

Section 1447(c), however, provides that a remand order

“may” require payment of attorney’s fees—not “shall” or

“should.” As Chief Justice Rehnquist explained for the

Court in Fogerty v. Fantasy, Inc., 510 U. S. 517, 533

(1994), “[t]he word ‘may’ clearly connotes discretion. The

automatic awarding of attorney’s fees to the prevailing

party would pretermit the exercise of that discretion.”

Congress used the word “shall” often enough in §1447(c)—

as when it specified that removed cases apparently outside

federal jurisdiction “shall be remanded”—to dissuade us

from the conclusion that it meant “shall” when it used

“may” in authorizing an award of fees.

The Martins are on somewhat stronger ground in press-

ing for a presumption in favor of awarding fees. As they

explain, we interpreted a statute authorizing a discretion-

ary award of fees to prevailing plaintiffs in civil rights

cases to nonetheless give rise to such a presumption.

Newman v. Piggie Park Enterprises, Inc., 390 U. S. 400,

402 (1968) (per curiam). But this case is not at all like

Piggie Park. In Piggie Park, we concluded that a prevail-

ing plaintiff in a civil rights suit serves as a “ ‘private

attorney general,’ ” helping to ensure compliance with civil

rights laws and benefiting the public by “vindicating a

policy that Congress considered of the highest priority.”

Ibid. We also later explained that the Piggie Park stan-

dard was appropriate in that case because the civil rights

defendant, who is required to pay the attorney’s fees, has

violated federal law. See Flight Attendants v. Zipes, 491

U. S. 754, 762 (1989) (“Our cases have emphasized the

crucial connection between liability for violation of federal

law and liability for attorney’s fees under federal fee-

shifting statutes”).

In this case, plaintiffs do not serve as private attorneys

general when they secure a remand to state court, nor is it

Cite as: 546 U. S. ____ (2005) 5

Opinion of the Court

reasonable to view the defendants as violators of federal

law. To the contrary, the removal statute grants defen-

dants a right to a federal forum. See 28 U. S. C. §1441

(2000 ed. and Supp. II). A remand is necessary if a defen-

dant improperly asserts this right, but incorrectly invok-

ing a federal right is not comparable to violating substan-

tive federal law. The reasons for adopting a strong

presumption in favor of awarding fees that were present

in Piggie Park are accordingly absent here. In the absence

of such reasons, we are left with no sound basis for a

similar presumption. Instead, had Congress intended to

award fees as a matter of course to a party that success-

fully obtains a remand, we think that “[s]uch a bold depar-

ture from traditional practice would have surely drawn

more explicit statutory language and legislative com-

ment.” Fogerty, supra, at 534.

For its part, Franklin begins by arguing that §1447(c)

provides little guidance on when fees should be shifted

because it is not a fee-shifting statute at all. According to

Franklin, the provision simply grants courts jurisdiction to

award costs and attorney’s fees when otherwise war-

ranted, for example when Federal Rule of Civil Procedure

11 supports awarding fees. Although Franklin is correct

that the predecessor to §1447(c) was enacted, in part,

because courts would otherwise lack jurisdiction to award

costs on remand, see Mansfield, C. & L. M. R. Co. v. Swan,

111 U. S. 379, 386–387 (1884), there is no reason to assume

Congress went no further than conferring jurisdiction

when it acted. Congress could have determined that the

most efficient way to cure this jurisdictional defect was to

create a substantive basis for ordering costs. The text

supports this view. If the statute were strictly jurisdic-

tional, there would be no need to limit awards to “just”

costs; any award authorized by other provisions of law

would presumably be “just.” We therefore give the statute

its natural reading: Section 1447(c) authorizes courts to

6 MARTIN v. FRANKLIN CAPITAL CORP.

Opinion of the Court

award costs and fees, but only when such an award is just.

The question remains how to define that standard.

The Solicitor General would define the standard nar-

rowly, arguing that fees should be awarded only on a

showing that the unsuccessful party’s position was “frivo-

lous, unreasonable, or without foundation”—the standard

we have adopted for awarding fees against unsuccessful

plaintiffs in civil rights cases, see Christiansburg Garment

Co. v. EEOC, 434 U. S. 412, 421 (1978), and unsuccessful

intervenors in such cases, see Zipes, supra, at 762. Brief for

United States as Amicus Curiae 14–16. But just as there

is no basis for supposing Congress meant to tilt the exer-

cise of discretion in favor of fee awards under §1447(c), as

there was in Piggie Park, so too there is no basis here for a

strong bias against fee awards, as there was in Chris-

tiansburg Garment and Zipes. The statutory language

and context strike us as more evenly balanced between a

pro-award and anti-award position than was the case in

either Piggie Park or Christiansburg Garment and Zipes;

we see nothing to persuade us that fees under §1447(c)

should either usually be granted or usually be denied.

The fact that an award of fees under §1447(c) is left to

the district court’s discretion, with no heavy congressional

thumb on either side of the scales, does not mean that no

legal standard governs that discretion. We have it on good

authority that “a motion to [a court’s] discretion is a motion,

not to its inclination, but to its judgment; and its judgment

is to be guided by sound legal principles.” United States v.

Burr, 25 F. Cas. 30, 35 (No. 14,692d) (CC Va. 1807) (Mar-

shall, C. J.). Discretion is not whim, and limiting discretion

according to legal standards helps promote the basic princi-

ple of justice that like cases should be decided alike. See

Friendly, Indiscretion About Discretion, 31 Emory L. J.

747, 758 (1982). For these reasons, we have often limited

courts’ discretion to award fees despite the absence of

express legislative restrictions. That is, of course, what

Cite as: 546 U. S. ____ (2005) 7

Opinion of the Court

we did in Piggie Park, supra, at 402 (A prevailing plaintiff

“should ordinarily recover an attorney’s fee unless special

circumstances would render such an award unjust”), Chris-

tiansburg Garment, supra, at 422 (“[A] plaintiff should not

be assessed his opponent’s attorney’s fees unless a court

finds that his claim was frivolous, unreasonable, or ground-

less”), and Zipes, 491 U. S., at 761 (Attorney’s fees should be

awarded against intervenors “only where the intervenors’

action was frivolous, unreasonable, or without foundation”).

In Zipes, we reaffirmed the principle on which these

decisions are based: “Although the text of the provision does

not specify any limits upon the district courts’ discretion to

allow or disallow fees, in a system of laws discretion is

rarely without limits.” Id., at 758. Zipes also explains how

to discern the limits on a district court’s discretion. When

applying fee-shifting statutes, “we have found limits in ‘the

large objectives’ of the relevant Act, which embrace certain

‘equitable considerations.’ ” Id., at 759 (citation omitted).*

By enacting the removal statute, Congress granted a

right to a federal forum to a limited class of state-court

defendants. If fee shifting were automatic, defendants

might choose to exercise this right only in cases where the

right to remove was obvious. See Christiansburg Gar-

ment, supra, at 422 (awarding fees simply because the

party did not prevail “could discourage all but the most

airtight claims, for seldom can a [party] be sure of ulti-

mate success”). But there is no reason to suppose Con-

gress meant to confer a right to remove, while at the same

——————

* In Fogerty, we did not identify a standard under which fees should

be awarded. But that decision did not depart from Zipes because we

granted certiorari to decide only whether the same standard applied to

prevailing plaintiffs and prevailing defendants. See Fogerty v. Fantasy,

Inc., 510 U. S. 517, 521 (1994). Having decided this question and re-

jected the claim that fee shifting should be automatic, we remanded to

the Court of Appeals to consider the appropriate test in the first in-

stance. Id., at 534–535.

8 MARTIN v. FRANKLIN CAPITAL CORP.

Opinion of the Court

time discouraging its exercise in all but obvious cases.

Congress, however, would not have enacted §1447(c) if

its only concern were avoiding deterrence of proper re-

movals. Instead, Congress thought fee shifting appropri-

ate in some cases. The process of removing a case to

federal court and then having it remanded back to state

court delays resolution of the case, imposes additional

costs on both parties, and wastes judicial resources. As-

sessing costs and fees on remand reduces the attractive-

ness of removal as a method for delaying litigation and

imposing costs on the plaintiff. The appropriate test for

awarding fees under §1447(c) should recognize the desire

to deter removals sought for the purpose of prolonging

litigation and imposing costs on the opposing party, while

not undermining Congress’ basic decision to afford defen-

dants a right to remove as a general matter, when the

statutory criteria are satisfied.

In light of these “ ‘large objectives,’ ” Zipes, supra, at 759,

the standard for awarding fees should turn on the reason-

ableness of the removal. 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 objec-

tively reasonable basis exists, fees should be denied. See,

e.g., Hornbuckle, 385 F. 3d, at 541; Valdes v. Wal-Mart

Stores, Inc., 199 F. 3d 290, 293 (CA5 2000). In applying

this rule, district courts retain discretion to consider

whether unusual circumstances warrant a departure from

the rule in a given case. For instance, a plaintiff’s delay in

seeking remand or failure to disclose facts necessary to

determine jurisdiction may affect the decision to award

attorney’s fees. When a court exercises its discretion in

this manner, however, its reasons for departing from the

general rule should be “faithful to the purposes” of award-

ing fees under §1447(c). Fogerty, 510 U. S., at 534, n. 19;

see also Milwaukee v. Cement Div., National Gypsum Co.,

Cite as: 546 U. S. ____ (2005) 9

Opinion of the Court

515 U. S. 189, 196, n. 8 (1995) (“[A]s is always the case

when an issue is committed to judicial discretion, the

judge’s decision must be supported by a circumstance that

has relevance to the issue at hand”).

* * *

The District Court denied the Martins’ request for at-

torney’s fees because Franklin had an objectively reason-

able basis for removing this case to federal court. The

Court of Appeals considered it a “close question,” 393

F. 3d, at 1148, but agreed that the grounds for removal

were reasonable. Because the Martins do not dispute the

reasonableness of Franklin’s removal arguments, we need

not review the lower courts’ decision on this point. The

judgment of the Court of Appeals is therefore affirmed.

It is so ordered.