546 US 132 Martin v Franklin Capital Corp.

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Case TextSyllabus

MARTIN et ux. v. FRANKLIN CAPITAL CORP. et al.

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) acknowledged
that the amount in controversy was not clear from the face of the statecourt
complaint, but argued that this requirement for federal diversity
jurisdiction was nonetheless satisfied under precedent suggesting that
punitive damages and attorney’s fees could be aggregated in making the
calculation. The District Court denied the Martins’ 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 requirement and rejected Franklin’s aggregation
theory under decisions issued 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 jurisdiction. Affirming, the Tenth Circuit disagreed
with the Martins’ argument that attorney’s fees should be
granted on remand as a matter of course under 28 U. S. C. § 1447(c),
which provides that a remand order “may require payment of just costs
and any actual expenses, 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 discretion; pointed out that, under Circuit precedent, the key factor
in deciding 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
awarded under § 1447(c) when the removing party has an objectively
reasonable basis for removal. Conversely, where no objectively reasonable
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 curiam), are absent
here. Also rejected is Franklin’s argument that § 1447(c) simply
grants courts jurisdiction to award costs and attorney’s fees when other

Syllabus

wise warranted. Were the statute strictly jurisdictional, 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: Section 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, distinguished. 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., id.,
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 afford 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. 136—141.

393 F. 3d 1143, affirmed.

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

Sam Heldman argued the cause for petitioners. With

him on the briefs were Hilary E. Ball, Michael P. Malakoff,

and James M. Pietz.

Jan T. Chilton argued the cause for respondents. With
him on the brief was Ronald J. Segel.*

*Briefs of amici curiae urging affirmance were filed for the United
States by Solicitor General Clement, Assistant Attorney General Keisler,
Deputy Solicitor General Hungar, James A. Feldman, Michael Jay
Singer, and Michael E. Robinson; and for the Product Liability Advisory
Council, Inc., by Robert N. Weiner and Robert D. Rosenbaum.

Opinion of the Court

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 Insurance
Company (collectively, Franklin). Franklin removed
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 complaint had been filed in
state court–but argued that this requirement for federal
diversity jurisdiction was nonetheless satisfied. In so arguing,
Franklin relied in part on precedent suggesting that
punitive damages and attorney’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

Opinion of the Court

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 reviewed
Franklin’s basis for removal and concluded that, although the
Court of Appeals had determined that removal 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 objectively 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) requires
granting attorney’s fees on remand as a matter of
course. The Tenth Circuit disagreed, noting that awarding
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 unsound, 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.

Opinion of the Court

We granted certiorari, 544 U. S. 998 (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 defendant
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 improper, 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 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 pressing
for a presumption in favor of awarding fees. As they ex

Opinion of the Court

plain, we interpreted a statute authorizing a discretionary
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 prevailing 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 standard 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
reasonable to view the defendants as violators of federal law.
To the contrary, the removal statute grants defendants a
right to a federal forum. See 28 U. S. C. § 1441 (2000 ed. and
Supp. II). A remand is necessary if a defendant improperly
asserts this right, but incorrectly invoking a federal right
is not comparable to violating substantive 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 successfully obtains a remand, we think that
“[s]uch a bold departure from traditional practice would have
surely drawn more explicit statutory language and legislative
comment.” Fogerty, supra, at 534.

For its part, Franklin begins by arguing that § 1447(c) provides
little guidance on when fees should be shifted because

Opinion of the Court

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 warranted, 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 jurisdictional, 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 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 narrowly,
arguing that fees should be awarded only on a showing that
the unsuccessful party’s position was “frivolous, 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 exercise 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 Christiansburg Garment and
Zipes. The statutory language and context strike us as
more evenly balanced between a pro-award and anti-award

Opinion of the Court

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) (Marshall,

C. J.). Discretion is not whim, and limiting discretion according
to legal standards helps promote the basic principle
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 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”), Christiansburg 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 groundless”), 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 ob

Opinion of the Court

jectives’ 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 Garment, 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 ultimate success”). But
there is no reason to suppose Congress meant to confer a
right to remove, while at the same 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 removals.
Instead, Congress thought fee shifting appropriate 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. Assessing costs and fees on
remand reduces the attractiveness 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 defendants a right to remove as a general matter,
when the statutory criteria are satisfied.

*In Fogerty v. Fantasy, Inc., 510 U. S. 517 (1994), 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 510 U. S., at 521. Having decided this question and rejected
the claim that fee shifting should be automatic, we remanded to the Court
of Appeals to consider the appropriate test in the first instance. Id., at
534—535.

Opinion of the Court

In light of these “ ‘large objectives,’ ” Zipes, supra, at 759,
the standard for awarding fees should turn on the reasonableness
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 objectively 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 awarding fees under § 1447(c). Fogerty, 510

U. S., at 534, n. 19; see also Milwaukee v. Cement Div., National
Gypsum Co., 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 attorney’s
fees because Franklin had an objectively reasonable
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.

546 U.S. 132 - Martin v Franklin Capital Corp.

546 US 132 Martin v Franklin Capital Corp.