In the
United States Court of Appeals
For the Seventh Circuit
No. 10-3134
M ICROMETL C ORP.,
Plaintiff-Appellee,
v.
T RANZACT T ECHNOLOGIES, INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 08 C 3257—Nan R. Nolan, Magistrate Judge.
A RGUED M ARCH 30, 2011—D ECIDED A UGUST 24, 2011
Before F LAUM, W OOD , and T INDER, Circuit Judges.
W OOD , Circuit Judge. After Micrometl Corp. filed suit
in state court against Tranzact Technologies, Inc., alleging
overbillings in excess of $100,000, Tranzact removed to
federal court. The parties are of diverse citizenship, and so
jurisdiction appeared secure. Over a year and a half
after the lawsuit commenced, however, Micrometl pro-
duced a document showing that its damages were
really, so it seemed, less than $40,000. Tranzact believed
2 No. 10-3134
that the document conclusively established that the
amount in controversy had never exceeded $75,000, and
if that was true, then the district court lacked subject-
matter jurisdiction under 28 U.S.C. § 1332. Inexplicably,
Tranzact waited ten months, until after a settlement
conference failed to resolve the underlying dispute, to
alert the court about this problem. Only then did it file
a motion to remand the case to state court, along with
a request for attorneys’ fees and costs. See 28 U.S.C.
§§ 1447(c) and 1927. The district court, acting through
a magistrate judge, remanded but decided not to award
fees and costs. We affirm.
I
Micrometl sued Tranzact in the Circuit Court of Marion
County, Indiana, alleging that Tranzact overbilled for
services rendered in connection with a shipping services
agreement. The facts of the dispute are not relevant to
this litigation, except that Micrometl claimed that
Tranzact refused to correct overbillings in excess of
$100,000. Tranzact removed to federal court for the South-
ern District of Indiana without objection on March 11,
2008, and then transferred the case to the Northern District
of Illinois based on a forum selection clause in the con-
tract. On July 14, 2008, the parties filed a joint status
report in which Micrometl reiterated its claim for more
than $100,000. Shortly thereafter, Micrometl and Tranzact
consented to the jurisdiction of the United States Magis-
trate Judge pursuant to 28 U.S.C. § 636(c).
No. 10-3134 3
Discovery took place over the next year and a
half. Micrometl produced a spreadsheet in August 2009
showing that it had incurred almost $140,000.00 in
overbillings, but that it also received refunds from
third-party sources that reduced Tranzact’s liability to
$38,846.98. Tranzact then deposed two Micrometl execu-
tives who testified that the amount of potential damages
was only $38,846.98 and, importantly, that Micrometl
had received the refunds that reduced the overbillings
by November 14, 2007—well before Micrometl filed suit
in early 2008. Micrometl does not dispute this. It does,
however, point out that the spreadsheet in question is
in fact a document based on information available to
both parties that Tranzact prepared and Micrometl
revised after discovery began. In Micrometl’s view,
Tranzact easily could have crunched the numbers to
arrive at the conclusion apparent in the August 2009
document: that Tranzact owed only $38,846.98. Micrometl
makes this point with some hesitation, however, since
the company also maintains that it is possible for it to
recover more. Notably, Tranzact does not dispute that
it could have figured out that the amount in con-
troversy was lower than Micrometl claimed by doing
some simple math. Even so, Tranzact exercised its right
to remove to federal court based on the numbers stated
in Micrometl’s complaint.
This much is clear: once Tranzact had the August 2009
spreadsheet in hand, it had every reason to believe that
diversity jurisdiction was lacking because the amount in
controversy could not be satisfied. Discovery closed
five months later on January 7, 2010, and the parties
4 No. 10-3134
participated in a settlement conference at the direction of
the court on June 9, 2010. When the conference failed to
resolve the dispute, Tranzact filed a motion to remand
the case to state court on June 17, 2010. The district court
immediately ordered the parties to brief the issue and
ultimately remanded the case based on the finding that
it was legally impossible for the plaintiffs to recover
more than $40,000. See Rising-Moore v. Red Roof Inns, Inc.,
435 F.3d 813, 815 (7th Cir. 2006) (“When the complaint
includes a number, it controls unless recovering that
amount would be legally impossible.”). For the purpose
of our inquiry, we assume that the district court correctly
concluded that the necessary amount in excess of
$75,000 was never “in controversy.” This determination
in any event is unreviewable. See 28 U.S.C. § 1447(d).
Our concern is with the court’s ancillary order on attor-
neys’ fees and costs. It denied Tranzact’s motion for
fees and costs under 28 U.S.C. §§ 1447(c) and 1927
and ruled instead that each side should bear its own
expenses. Tranzact appeals from that order, which is
one over which we have jurisdiction. See Garbie v.
DaimlerChrysler Corp., 211 F.3d 407, 409-10 (7th Cir. 2000);
Tenner v. Zurek, 168 F.3d 328, 329 (7th Cir. 1999).
II
We review a district court’s decision to award fees
and costs for an abuse of discretion. Lott v. Pfizer, Inc.,
492 F.3d 789, 792 (7th Cir. 2007). To the extent that the
decision relies on an interpretation of the fee-shifting
statute, our review is de novo. See Wisconsin v. Hotline
No. 10-3134 5
Indus., Inc., 236 F.3d 363, 365 (7th Cir. 2000). The
federal removal statute permits a defendant to remove
a civil action from state court when a district
court has original jurisdiction over the action. 28 U.S.C.
§ 1441(a). Removal in this case was based on 28
U.S.C. § 1332(a), which confers original jurisdiction on
federal courts where the amount in controversy
exceeds $75,000 and the action is between citizens of
different states. If, however, “at any time before final
judgment it appears that the district court lacks subject-
matter jurisdiction,” the case must be remanded. § 1447(c).
Section 1447(c) provides that a court “may” require
payment of “just costs and any actual expenses, including
attorney fees, incurred as a result of the removal.” Id.
Interpreting this statute, Martin v. Franklin Capital Corp.,
546 U.S. 132, 137 (2005), said that the attorneys’ fees
provision does not create a strong presumption either
for or against awarding fees. Still, the Court wrote, “ab-
sent unusual circumstances, attorneys’ fees should not
be awarded when the removing party has an objectively
reasonable basis for removal.” Id. at 136. When deciding
whether fee-shifting is appropriate, courts should
balance the policy objectives of the removal statute and
its fee-shifting provision, protecting the right to remove
to federal court once certain criteria are met while deter-
ring improper removals as a way to delay litigation.
See id. at 140.
Most actions seeking fees under § 1447(c) are brought
by a plaintiff who wanted all along to be in state court
against a defendant who improperly removed. The
parties here have spilled much ink debating whether
6 No. 10-3134
a defendant can ever recover fees pursuant to § 1447(c).
This is puzzling, since the statute says nothing about
limiting the right to fees to plaintiffs, nor did the district
court imply that it lacked the competence to award fees
to the defendant. We can assume that it is unusual for a
defendant to seek fees and costs associated with re-
moval when it is the party that chose the federal forum
after the plaintiff filed in state court. But such cases are
not unheard of. See, e.g., Vaughan v. McArthur Bros. Co.,
227 F. 364 (8th Cir. 1915) (plaintiff ordered to pay fees
for failing to inform court there was no basis for
diversity of citizenship after eight years of litigation) and
Duarte v. Donnelley, 266 F. Supp. 380 (D. Haw. 1967)
(plaintiff ordered to pay fees after misrepresenting dam-
ages claim that led defendant to remove). Of course, a
plaintiff cannot conceal facts necessary to determine
whether jurisdiction is secure or otherwise thwart the
jurisdictional inquiry with impunity. See BEM I, LLC
v. Anthropologie, Inc., 301 F.3d 548, 551 (7th Cir. 2002)
(observing that “deliberately to avoid raising the issue
[of subject-matter jurisdiction] is improper, indeed
sanctionable . . . and quite possible unethical”); Martin,
546 U.S. at 141 (observing that “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”). In brief, we see no party-based
limitation in § 1447(c) on a district court’s discretion
to award fees and costs.
Tranzact argues that the district court should have
awarded fees and costs under § 1447(c) because
Micrometl knew or should have known that its damages
No. 10-3134 7
could not satisfy the jurisdictional threshold. In sup-
port, Tranzact asserts that the district court based its
decision on a “clearly erroneous assessment” of the law
and facts. But we perceive no errors in the district
court’s analysis. The court plainly understood that
Micrometl had the relevant information in its possession
to arrive at a more accurate calculation of the amount
in controversy, but it failed to analyze the information
to determine how much money was at stake. In that
regard, the court agreed with Tranzact’s argument that
Micrometl should have known that it could not recover
the amount required to secure diversity jurisdiction. We
also note that the court was not hoodwinked by
Micrometl’s contradictory arguments, asserting on one
hand that the amount in controversy was sufficient to
satisfy diversity jurisdiction, yet on the other that it had
never claimed that damages were in excess of $100,000.
“Entirely disingenuous” is how the court described
Micrometl’s position, and we are inclined to agree.
We suspect that if that was all there was to this case,
the district court would have sided with Tranzact. This
is not because Micrometl likely inflated its allegation of
damages in state court; in that forum the amount in
controversy has no jurisdictional effect. See Rising-Moore,
435 F.3d at 815. But if Micrometl knew that the amount
in controversy could not satisfy § 1332(a), it should
have opposed removal or alerted the district court that
jurisdiction was lacking. The court understandably ex-
pressed its dismay at Micrometl’s failure to do so. Yet
the court was equally troubled by Tranzact’s ten-month
delay in alerting it to the problem with subject-matter
8 No. 10-3134
jurisdiction once Tranzact had the relevant facts in hand.
In the court’s view, Tranzact’s delay in seeking remand
undercut its entitlement to fees and costs under § 1447(c).
To excuse its foot-dragging, Tranzact points to a verbal
order from the court at the close of discovery telling the
parties to participate in mediation before filing for sum-
mary judgment. This command, according to Tranzact,
prevented it from informing the court that it lacked
subject-matter jurisdiction and compelled both parties
to attend a settlement conference—even though ulti-
mately the court had no authority to resolve the case.
This argument makes no sense. Every federal judicial
officer knows that subject-matter jurisdiction is a sine qua
non for a federal proceeding. Nothing about an order
regulating discovery or dispositive motions says a thing
about this essential feature of the court’s power. And no
litigant should believe that a judge’s order telling the
parties to seek mediation before filing for summary
judgment would prohibit it from informing the court
that the entire matter is not properly before it. What is
the point of having a federal judge preside over a settle-
ment conference when the court lacks the authority to
hear the case at all? We do not see anything in the
district court’s statement to the parties on January 7, 2010,
that relieved Tranzact (or Micrometl) from its duty to
inform the court if jurisdiction was absent. See gen-
erally FED. R. C IV. P. 12(h)(3). As lawyers who practice
in federal courts certainly know, they “have an obligation
to assist the judges to keep within the boundaries fixed
by the Constitution and Congress; it is precisely to
impose a duty of assistance on the bar that lawyers are
No. 10-3134 9
called ‘officers of the court.’ ” See BEM I, LLC, 301 F.3d
at 551. We do not accept the argument that a court’s
instruction to the parties to attend a settlement con-
ference in any way relieved either party of the duty to
raise a jurisdictional issue.
Next, Tranzact contends that the district court decided
not to award fees and costs based on an erroneous under-
standing of the law. In its view, because § 1447(c) says
that a case can be remanded “at any time” for lack of
subject-matter jurisdiction, the court’s ruling based on
a delay is in conflict with the statute. A brief look at
the statute illustrates why this strained argument has
no merit. In relevant part, § 1447(c) provides:
If at any time before final judgment it appears that the
district court lacks subject matter jurisdiction, the
case shall be remanded. 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.
28 U.S.C. § 1447(c). The first sentence explains when a
case must be remanded for a lack of jurisdiction, which
as a practical matter—wholly unrelated to the
fee-shifting provision—is almost always. The reason for
this, of course, is that federal courts are forums of
limited jurisdiction that may not hear cases over which
they have no legal authority. The second sentence gives
district court discretion to decide when the remand order
should include an award of “just costs and actual ex-
penses” to a party based on the other’s conduct relating
to removal.
10 No. 10-3134
Tranzact contends that the statute should be in-
terpreted as follows: a party’s delay in revealing facts
showing that the court lacks subject-matter jurisdiction
is irrelevant to an award of fees and costs “incurred as
a result of removal” because remand is appropriate
“at any time” before final judgment. That reading turns
the purpose of the fee-shifting on its head. It is precisely
because a case must be remanded at any time when a
court lacks jurisdiction that Congress sought to deter
improper removals and delays in seeking remand by
enacting the fee-shifting provision. See Martin, 546 U.S. at
140-41 (observing that assessing costs and fees on
remand deters the use of removal as a way to delay
litigation). When a party fails to disclose facts necessary
to determine whether jurisdiction is secure, it imposes
significant costs on the other party and squanders
judicial resources. By statutory mandate, the case will
have to be remanded to begin anew in state court no
matter how far the proceedings have progressed
(before final judgment) if a federal court determines
jurisdiction is lacking. That is exactly what happened
here: both parties expended considerable resources in
these proceedings, wasting judicial resources along the
way, only to have the case remanded. The fee-shifting
provision deters this. We have no trouble concluding
that the district court did not abuse its discretion by
considering Tranzact’s delay in seeking remand as part
of its decision not to award fees and costs pursuant to
§ 1447(c).
Naturally Tranzact prefers that we focus on
Micrometl’s failure properly to calculate and disclose
No. 10-3134 11
the amount in controversy, rather than its own delay. It
emphasizes this point in support of its argument that the
district court erred in refusing to award fees pursuant
to 28 U.S.C. § 1927. Section 1927 is a sanctions statute
intended “to deter frivolous litigation and abusive prac-
tices by attorneys and ensure that those who create unnec-
essary costs also bear them.” Riddle & Assocs. v. Kelly,
414 F.3d 832, 835 (7th Cir. 2005) (citations omitted). A
sanctions award requires a finding of bad faith on the
part of an attorney who “unreasonably and vexatiously”
multiplies the proceedings in a case. See Shales v. General
Chauffeurs, Sales Drivers and Helpers Local Union No. 330,
557 F.3d 746, 749 (7th Cir. 2009). Yet here the court
found that Micrometl did not litigate in bad faith, con-
cluding that there was no “gamesmanship” on Micrometl’s
part. We see no reason to jettison the court’s analysis of
the facts, particularly under our deferential standard
of review. We might have seen things differently if
Micrometl had filed in federal court based on its
dubious estimate of damages, and then Tranzact was
compelled to seek a dismissal based on the lack of juris-
diction. Cf. Smith v. American General Life and Acc. Ins.
Co., 337 F.3d 888, 892 (7th Cir. 2003) (noting “the assump-
tion that a plaintiff would not fabricate the amount
in controversy to meet the federal diversity jurisdic-
tion requirements and then file her suit in state court
relying on the defendant to remove the case to federal
court”). But, as the district court concluded, nothing in
this record suggests that Micrometl’s counsel inflated
its damages in its state court complaint to dupe Tranzact
into removing, or otherwise exhibited bad faith through-
12 No. 10-3134
out these proceedings. Therefore, we conclude that the
district court suitably exercised its discretion by re-
quiring each party to bear its own costs.
The judgment of the district court is A FFIRMED.
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