FOURTH CIRCUIT ISSUES FIRST-IMPRESSION FEES RULING

 

[Posted December 7, 2009]  Federal removal.  Remand to state court.  Attorney’s fees.  Have I got your attention?  If you’re a civil trial lawyer and you deal in the sometimes-ambiguous realm where state and federal jurisdiction intersect, I already know the answer to that question.  Today we get a ruling from the Fourth – which assures us that it’s a question of first impression – that addresses this important area.  The decision is In re Crescent City Estates.

 

This one comes out of bankruptcy court in Maryland, but it started in state court.  Six months after the litigation began, the defendant removed it to federal court.  The plaintiff sought remand and simultaneously asked for an award of attorney’s fees under 28 USC §1447(c).  The issue in the case is a touchy one: Assuming an award of fees is appropriate, who has to pay, the client or the lawyer?  The plaintiff sought an award from both; the bankruptcy court ruled that that was permitted, because §1447(c) doesn’t limit the liable parties to clients; but the district court reversed.

 

Today, after an interlocutory appeal, the Fourth Circuit affirms the district court, ruling that lawyers can’t be liable for attorney’s fees under §1447(c) for filing an improper removal.  True, the statute doesn’t specifically prevent such awards, but the presumption is against fee-shifting, and Congress didn’t provide that fees could run against the lawyers (as it did in, for example, Rule 11).

 

This ruling begs one ultimate question:  How does a losing side’s lawyer deal with his client now?  The client relies upon the lawyer’s advice in seeking removal; the court decides the removal was improper and hits the client with a fee award; and the client wants to know if the lawyer will accept the responsibility for the misstep.  In many lawyer-client relationships, the client will just shrug; but in some, the client will insist that the lawyer who made the mistake should pay.  In this sense, an obligation that does not exist under the law may well be created by the business end of the relationship.