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Richardson Investments, Inc. v. Doe

United States District Court, D. New Mexico

November 15, 2017

RICHARDSON INVESTMENTS, INC., A New Mexico corporation, Plaintiff,
JOHN DOE I, QWEST CORPORATION, a foreign profit corporation, GREENWICH INSURANCE COMPANY, a foreign company, And SEDGWICK CLAIMS MANAGEMENT SERVICES, INC., A foreign profit organization, Defendants.



         Plaintiff moves for reimbursement of attorneys' fees incurred in connection with Defendants' removal of this case to federal court following the Court's Order (Doc. 62) granting Plaintiff's Motion to Remand this matter to state court. Doc. 65. As described in more detail below, the Court finds that when Defendants removed this case to federal court they had a legal basis for doing so and, therefore, the removal was not improvident. As a result, the Court DENIES Plaintiff's Motion for Attorneys' Fees Based on Defendants' Improvident and Objectively Unreasonable Removal (Doc. 65).[1]

         I. BACKGROUND

         Plaintiff initially filed its Complaint in the Second Judicial District Court of the State of New Mexico. Doc. 1-1. Plaintiff alleged that Defendants were liable for damage to its property following a collision between Defendant Qwest's service truck and Plaintiff's building. Doc. 1-1. Plaintiff alleged that Defendant John Doe I was the driver of the vehicle responsible for Plaintiff's property damage. Doc. 1-1. Plaintiff further alleged that John Doe I was acting within the course and scope of his employment at the time of the collision. Doc. 1-1 at 7. Plaintiff acknowledged that the identity of John Doe I was unknown at the time of filing but would be determined through discovery. Doc. 1-1 at ¶ 3.

         On January 20, 2017, Defendants removed the action to this Court. Doc. 1. Within seven days thereafter, Plaintiff's counsel sent an e-mail to Defendants' counsel seeking the name and address of John Doe I in anticipation of filing a motion to remand. Doc. 57 at 7. Defendant apparently declined to provide this information. See doc. 22 at 2-3. Nonetheless, Plaintiff filed its Motion to Remand on February 28, 2017. Doc. 22. In the Motion, Plaintiff contended that although the identity of John Doe I had not been conclusively determined, John Doe I was, in all likelihood, a citizen of New Mexico and that removal was therefore improper. Doc. 22. Plaintiff attached an affidavit by Charlie Wingate, the maintenance manager of the property, representing that he had asked the driver for identification and that the driver produced a New Mexico license. Doc. 22-1. On March 9, 2017, Defendants provided Plaintiff their initial disclosures. Doc. 28. Although the Court has not been provided a copy of these initial disclosures, Plaintiff represents that Defendants “named the driver but withheld the real party in interest's address and phone number (citizenship) from Plaintiff.” Doc. 45 at 2.

         Chief Magistrate Judge Karen Molzen held a scheduling conference on April 11, 2017. Doc. 43. Due to Plaintiff's Motion to Remand, Judge Molzen stayed discovery but ordered Defendants to provide to Plaintiff information regarding the citizenship of the driver by April 14, 2017. Doc. 43. It appears that Defendant then provided this information on April 14, 2017. See Defendants' Notice of Admission, Doc. 48 (noting that “Defendants notified Plaintiff's counsel of Mr. Hummel's home address by electronic mail”); Plaintiff's Reply to Defendants' Response in Opposition of Plaintiff's Motion to Remand, Doc. 45 at 7 (“Under Order of the Court, the Defendants have disclosed Jonathan Hummel is a citizen of the State of New Mexico.”).

         Following Defendants' disclosure of this information, the Court held a status conference on May 11, 2017, to discuss the status of Plaintiff's Motion to Remand. During the status conference, the Court referenced McPhail v. Deere & Co., 529 F.3d 947, 951 (10th Cir. 2008), and explained to Plaintiff that the onus was on it to either file a motion to amend the complaint or file briefing as to why the Motion to Remand should be granted without an amendment to the Complaint. See Doc. 55. Plaintiff subsequently filed its Motion for Joinder and Motion to File Second Amended Complaint on May 26, 2017. Doc. 56. On June 9, 2017, Defendant filed a response opposing Plaintiff's motion. Doc. 57. The Court, on July 21, 2017, entered an Order granting Plaintiff's Motion to Amend and ordered that the case be remanded to state court. Doc. 62. The Court did not, however, address the issue of attorney fees which, although briefly referenced in Plaintiff's Motion, was not substantively addressed in the parties' briefs.

         II. ANALYSIS

         Plaintiff argues that it is entitled to attorney fees because Defendants improvidently removed this case to federal court. The starting point for analyzing such a claim is 28 U.S.C. § 1447(c), which states in relevant part, “An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the remand.” In 2005, the Supreme Court noted that this language, “provides little guidance on when such fees are warranted” and resolved a Circuit split over when fees should be awarded under § 1447(c). Martin v. Franklin Capital Corp., 546 U.S. 132, 134, 136 (2005). Specifically, the Court rejected a presumption in favor of awarding fees when a remand is issued and, instead, held, “absent unusual circumstances, attorney's fees should not be awarded when the removing party has an objectively reasonable basis for removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 136 (2005). Plaintiff does not argue that unusual circumstances existed; therefore, whether Plaintiff should receive attorney fees pursuant to § 1447(c) turns on whether Defendants had an objectively reasonable basis for removal.

         Defendants removed the case to federal court on the basis of diversity jurisdiction. Specifically, at the time of removal, complete diversity existed because Defendant Jonathon Hummel had not yet been substituted in for John Doe 1. See 28 U.S.C. § 1441(b)(1) (“[T]he citizenship of defendants sued under fictitious names shall be disregarded.”). Plaintiff does not dispute that complete diversity existed at the time of removal and that Defendants therefore met the requirements of 28 U.S.C. § 1441 in removing the case to federal court. That federal law allowed Defendants to remove the case makes it very difficult for Plaintiff to establish that such removal was improvident. Indeed, Plaintiff cites no instance in which a court found that a defendant improvidently removed a case where complete diversity existed and removal occurred shortly after the complaint was filed.

         Nonetheless, Plaintiff argues that removal here was improvident because, as the Court previously stated, “Defendants knew from the outset that Plaintiff intended to formally name as a defendant a person who would defeat diversity jurisdiction.” Doc. 62 at 7. The Court, however, made this statement in the context of determining whether joining Hummel would unfairly prejudice Defendants. It found that Defendants' knowledge that Plaintiff intended to join Hummel to the lawsuit undermined their later assertion that his joinder would unfairly prejudice them. While Defendants' knowledge of Plaintiff's intentions might have served to prevent Defendants from being prejudiced when those intentions came to pass, it does not follow that Defendants' knowledge of Plaintiff's intentions barred Defendants from removing the case to federal court at a time when complete diversity of citizenship existed.

         Even so, Plaintiff's argument does have intuitive appeal. As the Supreme Court recognized, “[t]he 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.” Martin, 546 U.S. at 140. Here, Defendants knew from the outset that Plaintiff was bringing a lawsuit against the driver of the vehicle. See Compl, doc. 1-1, at ¶ 3, (“John Doe 1 is the driver of the vehicle which caused the property damage alleged herein. The actual name is currently unknown to Plaintiff and will be substituted through discovery.”). Although Plaintiff did not have ready access to John Doe I's citizenship, Defendant Qwest, as John Doe I's employer, did. Thus, Defendants also knew from the outset that the driver was a citizen of New Mexico and, as a result, his joinder in the lawsuit would destroy federal diversity jurisdiction. Knowing all of this, Defendants removed the case to federal court and declined to provide Plaintiff with their driver's citizenship. See Doc. 57 at 7 (Defendants' acknowledgment that almost immediately after Defendants removed the case, Plaintiff began seeking the name and address of the John Doe defendant so that it could get the remand process started). While Plaintiff sought information about John Doe I's citizenship so that it could have the case remanded to state court, Defendants filed a motion to dismiss. Doc. 5.

         Defendants' litigation strategy is obvious. Defendants hoped to have the federal court rule on its motion to dismiss before Plaintiff could learn John Doe I's citizenship and have the case remanded to state court. Because the Court ordered Defendants to disclose John Doe I's citizenship before it ruled on Defendants' motion to dismiss, this strategy failed. The present question is whether fees should be shifted under § 1447(c) when a defendant pursues such a strategy.

         The Tenth Circuit's decision in McPhail v. Deere & Co., indicates that, even though the Court does not countenance such a strategy, adoption of such a strategy does not lead to fee shifting under § 1447(c). 529 F.3d 947 (10th Cir. 2008). In McPhail, a plaintiff sued a known defendant and three unidentified John Doe defendants. 529 F.3d at 950-51. The defendant removed the case to federal court on the basis of diversity jurisdiction. Id. The three John Doe defendants were then identified as entities whose citizenship would destroy diversity jurisdiction. Id. at 951. Even though the plaintiff had not moved to amend her complaint, she argued that the identification of these defendants destroyed diversity jurisdiction. Id. The Tenth Circuit disagreed. It found that, despite knowledge that these John Doe defendants were actually entities that destroyed diversity ...

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