F I L E D

United States Court of Appeals

Tenth Circuit

DEC 30 2004

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

GERALD T. MARTIN and JUANA M.

MARTIN, individually and on behalf of all

persons similarly situated,

Plaintiffs-Appellants,

v.

FRANKLIN CAPITAL CORPORATION, a

Utah corporation; and CENTURY-NATIONAL

INSURANCE COMPANY, a California

corporation,

Defendants-Appellees.

No. 02-2048

Appeal from the United States District Court

for the District of New Mexico

(D.C. No. CIV-96-1480-LH)

James M. Pietz of Malakoff Doyle & Finberg, P.C., Pittsburgh, Pennsylvania

(Michael P. Malakoff of Malakoff Doyle & Finberg, P.C., Pittsburgh,

Pennsylvania; and Richard N. Feferman of Albuquerque, New Mexico, on the

briefs), for Plaintiffs-Appellants.

Jan T. Chilton of Severson & Werson, San Francisco, California, for DefendantAppellee Franklin Capital Corporation.

Stevan Douglas Looney (Jay D. Hertz on the brief) of Sutin, Thayer & Browne,

Albuquerque, New Mexico, for Defendant-Appellee Century-National Insurance

Company.
*The Honorable James H. Payne, Chief District Judge, United States

District Court for the Eastern District of Oklahoma, sitting by designation.

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Before SEYMOUR and BRISCOE, Circuit Judges, and PAYNE*, District Judge.

SEYMOUR, Circuit Judge.

Gerald T. Martin and Juana M. Martin (Martins) sought an award of

attorney’s fees and expenses pursuant to 28 U.S.C. § 1447(c) from Franklin

Capital Corporation and Century-National Insurance Company (defendants) after

this court determined defendants should not have removed the instant action to

federal court. The district court denied the Martins’ request for fees and

expenses, and they appeal. We exercise jurisdiction pursuant to 28 U.S.C. § 1291

and affirm.

I

In September 1996, the Martins filed a lawsuit against defendants in New

Mexico state court. On their behalf and on behalf of all persons similarly

situated, the Martins sought damages under state statutory and common law

theories for alleged illegalities with respect to automobile financing and insurance

contracts they had entered into with defendants. About a month after the Martins
1This action was filed in state court on September 13, 1996. At the time, 28

U.S.C. § 1332 required the amount in controversy to exceed $50,000. The amount

in controversy requirement has since been increased to $75,000 and applies to

cases filed on or after January 17, 1997. See Federal Courts Improvement Act of

1996, Pub. L. No. 104-317, § 205, 110 Stat. 3847, 3850 (Oct. 19, 1996).

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filed their complaint, defendants removed the action to federal court based on

diversity of citizenship pursuant to 28 U.S.C. §§ 1332 and 1441. The Martins

raised no objection to defendants’ removal at the time and did not seek remand. 

Over a year later, and during a hearing before the district court on defendants’

motion to dismiss, the Martins first questioned whether the court possessed

jurisdiction over the case. The Martins subsequently filed a motion to remand the

action to state court for lack of subject matter jurisdiction on the basis that their

claims did not meet the $50,000 amount in controversy requirement for diversity

jurisdiction.1 

In opposition to the Martins’ motion, defendants argued variously the

amount in controversy requirement was satisfied because the Martins’ complaint

sought punitive damages of more than $50,000 in the aggregate; sought attorney’s

fees of more than $50,000 in the aggregate; and sought monetary relief for the

named plaintiffs for more than $50,000. The district court agreed with defendants

and denied the Martins’ motion to remand, finding “[t]he allegations of the

complaint and the contents of [defendants’] notice of removal demonstrate the

requisite $50,000 amount in controversy.” Aplt. App. at 263.
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The Martins requested the district court certify its order denying remand so

they could seek interlocutory appeal under 28 U.S.C. § 1292(b), which the court

denied. The Martins subsequently petitioned the court to grant judgment against

them in order to permit an immediate appeal on the question of jurisdiction. The

district court granted the Martins’ voluntary dismissal with prejudice and they

filed an appeal. 

In Martin v. Franklin Capital Corp., 251 F.3d 1284 (10th Cir. 2001)

(Martin I), we reversed the district court’s ruling. In the course of our analysis,

we rejected defendants’ argument that “the punitive damages claimed by the

entire class could be aggregated and attributed to the Martins in determining the

amount in controversy” for jurisdictional purposes. Id. at 1291. We also rejected

defendants’ contentions that an aggregation of attorney’s fees or the amount of

relief requested by the Martins as class representatives satisfied the amount in

controversy requirement. Id. at 1291, 1293. Accordingly, we remanded with

directions that the case be sent back to state court. Id. at 1294.

Upon returning to the district court, the Martins moved for an award of

attorney’s fees and expenses pursuant to § 1447(c), which grants the district court

discretion to award attorney’s fees incurred as a result of removal when a case is

remanded. The district court denied the Martins’ request, determining that at the

time defendants removed the case to federal court, they had objectively
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reasonable legal grounds to believe removal was proper. The Martins challenge

on appeal the district court’s denial of attorney’s fees and expenses.

II

The language of § 1447(c) directs that the award of attorney’s fees rests

squarely within the discretion of the district court when a remand is ordered. See

§ 1447(c) (“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.”

(emphasis added)). Given our decision in Martin I that removal was improper in

this case, the district court had discretion to award attorney’s fees to the Martins

if it believed fees were appropriate. The district court determined defendants

possessed objectively reasonable grounds to believe removal was proper and

therefore declined to award fees to the Martins. We review that decision for

abuse of discretion. Suder v. Blue Circle, Inc., 116 F.3d 1351, 1352 (10th Cir.

1997); Excell, Inc. v. Sterling Boiler & Mech., Inc., 106 F.3d 318, 322 (10th Cir.

1997); Daleske v. Fairfield Cmtys, Inc., 17 F.3d 321, 323 (10th Cir. 1994). We

review de novo the district court’s legal analysis underlying its decision. Daleske,

17 F.3d at 323.

In challenging the district court’s ruling, the Martins assert that in a case

where a defendant’s removal to federal court serves as what the Martins
2

In this context, we note that the Martins’ citation to and reliance on

Wisconsin v. Hotline Indus., Inc., 236 F.3d 363 (7th Cir. 2000), is misplaced. The

controversy in Hotline did not involve entitlement to fees but focused instead on

the appropriate amount of fees awarded. Id. at 366-68. But see Sirotzky v. New

York Stock Exch., 347 F.3d 985, 987 (7th Cir. 2003) (“provided removal was

improper, the plaintiff is presumptively entitled to an award of fees”). 

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characterize as “test litigation” regarding the existence of federal jurisdiction, and

jurisdiction is subsequently found to be lacking, fees should be awarded to the

plaintiff as a matter of course. They also assert the district court did not properly

apply the standard articulated by our court in Suder and Daleske. Building upon

their test litigation argument, they contend the district court should have adhered

to what they argue is a more “plaintiff-based standard” which they say has been

adopted by the Seventh and Ninth Circuits, citing Wisconsin v. Hotline Indus.,

Inc., 236 F.3d 363 (7th Cir. 2000), and Hofler v. Aetna US Healthcare of Ca., 296

F.3d 764 (9th Cir. 2002).2

 Under this approach, the Martins urge that attorney’s

fees should be awarded when removal is deemed improper, irrespective of

whether the defendant had a legitimate or objective basis for believing in the

propriety of removal. We are not persuaded. 

As we have recognized:

In deciding whether to award costs under § 1447(c), the key factor is

the propriety of defendant’s removal. The district court does not

have to find that the state court action has been removed in bad faith

as a prerequisite to awarding attorney fees and costs under § 1447(c).

Excell, Inc., 106 F.3d at 322 (internal citations omitted). On the other hand,
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attorney’s fees may be denied where the defendant “had a fair basis for removing

the case.” Daleske, 17 F.3d at 324.

Other circuits have also recognized that the award of fees under § 1447(c)

is left to the wide discretion of the district court once remand is ordered. See,

e.g., Balcorta v. Twentieth Century Fox-Film Corp., 208 F.3d 1102, 1105 (9th

Cir. 2000) (reviewing for abuse of discretion district court’s fee award

determination); Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 292 (5th Cir.

2000) (“The decision of the district court to award or not to award attorney’s fees

is reviewed for an abuse of discretion.”); Mints v. Educ. Testing Serv., 99 F.3d

1253, 1260 (3d Cir. 1996) (“a district court has broad discretion and may be

flexible in determining whether to require the payment of fees under section

1447(c)”); Morris v. Bridgestone/Firestone, Inc., 985 F.2d 238, 240 (6th Cir.

1993) (agreeing that “the . . . statute affords a great deal of discretion in

fashioning awards of costs and fees”) (quotation omitted)); Morgan Guar. Trust

Co. of N.Y. v. Republic of Palau, 971 F.2d 917, 924 (2d Cir. 1992) (statute

provides district courts with discretion in how to award costs and fees). While

the Seventh Circuit has suggested there is a presumption that fees be awarded to

plaintiffs under § 1447(c) upon a finding of improper removal, see e.g., Sirotzky

v. New York Stock Exch., 347 F.3d 985, 987 (7th Cir. 2003), “[n]evertheless, the
3Contrary to the Martins’ assertion, we are not convinced the Ninth Circuit

follows a similar approach. In Balcorta v. Twentieth Century Fox-Film Corp.,

208 F.3d 1102 (9th Cir. 2000), the court made clear that “it may be within the

discretion of the district court not to award fees” when a defendant’s attempt to

remove the action had a sufficient basis in the law, and also that the circuit’s

“case law does permit an award of fees when a defendant’s removal, while ‘fairly

supportable,’ was wrong as a matter of law.” Id. at 1106 n.6; see also Hofler v.

Aetna US Healthcare of Ca., 296 F.3d 764, 770 (9th Cir. 2002) (“fees are proper

when removal is wrong as a matter of law, even though the defendant’s position

may be ‘fairly supportable’”). In other words, in the Ninth Circuit, as in our

circuit, if defendant’s removal position is objectively reasonable under the law,

the district court may, in its discretion, either award attorney’s fees to the plaintiff

or decline to award fees. The decision is then reviewed for an abuse of

discretion.

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entitlement is not automatic – the presumption is not irrebuttable . . . .” Id.3

 

Between these varied expressions regarding § 1447(c), there remains the

broadly accepted position that if a defendant’s removal could be fairly supported

by the law at the time, even if later deemed incorrect, a district court’s

discretionary decision not to award fees is appropriate. Indeed, most courts do

not impose fees when the defendant had a legitimate ground for seeking removal. 

See 16 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE § 107.41[3][a][ii]

(3d ed. 1997); see also 14C CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE

AND PROCEDURE § 3739 (3d ed. 1998) (noting award of fees is at discretion of

district court, and fees may be denied “when there are reasons to believe that the

removability of the case was plausible”).

The Martins incorrectly claim the district court employed a standard other
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than that required by our circuit. In accordance with Suder and Daleske, the

district court recognized that a plaintiff is not automatically entitled to attorney’s

fees simply because removal was ultimately determined to be improper. Instead,

relying on Valdes, 199 F.3d at 292, it determined it should “evaluate the merits of

Defendants’ removal action at the time it was filed.” Aplt. App. at 344; see also

Valdes, 199 F.3d at 293 (“the question we consider in applying § 1447(c) is

whether the defendant had objectively reasonable grounds to believe the removal

was legally proper”). This characterization accords with our decision in Daleske,

in which we upheld a denial of fees where the defendant “had a fair basis for

removing the case.” 17 F.3d at 324. Upon determining that defendants’ removal

position was objectively reasonable at the time they sought removal, the court

exercised its discretion and declined to award fees to the Martins. As we discuss

in more depth below, we find no fault in the district court’s articulation or

implementation of the fee award standard. 

III

Having determined the district court employed the proper standard in

deciding whether to award fees to the Martins, we now examine whether the court

correctly concluded that when defendants removed the underlying action in

October 1996, they had a legitimate basis to believe the federal court could
4Because we agree with the district court’s conclusion that defendants’

removal to federal court on an aggregation of punitive damages theory was

objectively reasonable, as well as with the court’s subsequent refusal to award

fees to the Martins on the basis of that argument, we need not address defendants’

remaining positions supporting removal.

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exercise jurisdiction over the case. Valdes, 199 F.3d at 293; Daleske, 17 F.3d at

325. While a close question, we agree with the district court that at the time

defendants removed this action to federal court on the basis of aggregating

punitive damages, they “had objectively reasonable grounds to believe the

removal was legally proper.”4 Aplt. App. at 347.

In support of their motion to remove to federal court, defendants contended

that “punitive damage claims in a class action suit may be considered in the

aggregate when determining the amount in controversy.” Id. at 3. In making this

argument, defendants relied on case law from the Fifth and Eleventh Circuits,

which at the time indicated that aggregation of punitive damages in a class action

suit was permissible to reach the amount in controversy requirement for diversity

jurisdiction. See Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353 (11th Cir.

1996); Allen v. R&H Oil & Gas Co., 63 F.3d 1326 (5th Cir. 1995). Although

these cases were subsequently severely limited and overruled by their respective

circuits, see H&D Tire & Auto.-Hardware, Inc. v. Pitney Bowes Inc., 227 F.3d

326, 330 (5th Cir. 2000); Cohen v. Office Depot, Inc., 204 F.3d 1069, 1076 (11th

Cir. 2000); Ard v. Transcon. Gas Pipe Line Corp., 138 F.3d 596, 601-02 (5th Cir.
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1998), Tapscott and Allen represented viable authority in October 1996 upon

which defendants could rely to support their petition for removal. 

As noted above, in Martin I we rejected defendants’ argument regarding

aggregating punitive damages. We commented on the demise of Tapscott and

Allen, and we noted that “all of the circuits considering the issue now hold that

punitive damages cannot be aggregated and attributed in total to each member of

a putative class for purposes of satisfying the amount-in-controversy requirement

of diversity jurisdiction.” Martin I, 251 F.3d at 1292 (emphasis added) (citing

Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1264-65 (11th Cir. 2000); Ard,

138 F.3d at 600-02; Gilman v. BHC Sec., Inc., 104 F.3d 1418, 1430-31 (2d Cir.

1997); Anthony v. Sec. Pac. Fin. Servs., Inc., 75 F.3d 311, 315 (7th Cir. 1996)). 

Based on this precedent, we joined these other circuits in concluding that the

amount in controversy requirement in a class action suit may not be satisfied by

aggregating punitive damages. Id. at 1293. 

On remand, the district court emphasized that we relied primarily on case

law post-dating defendants’ October 1996 removal to federal court in reversing

the district court’s earlier ruling. Likewise, the court pointed out that the Fifth

and Eleventh Circuit rulings undermining Allen and Tapscott were decided several

years after the removal action in this case. Finally, the court took special notice

of our comment that we had not previously “ruled directly on [the] matter” of
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aggregating punitive damages. Aplt. App. 345 (quoting Martin I, 251 F.3d at

1292). The district court stated accordingly that

[b]ased on the language contained in this Tenth Circuit, and given

the history of the law in this area, I am unable to conclude that the

removal was improper ab initio . . . . It appears that the Tenth

Circuit remanded [this case] largely based on changes in the law

during the time between the removal (1996), and its opinion (2001).

Id. at 345-46. The district court did not err in this ruling.

We acknowledge that in October 1996, several district courts, including

some in our own circuit, had rejected the approach adopted in Tapscott and Allen. 

See, e.g., Bernard v. Gerber Food Prods. Co., 938 F. Supp. 218, 222-23

(S.D.N.Y. 1996); Bishop v. Gen. Motors Corp., 925 F. Supp. 294, 297-99, 301-02

(D.N.J. 1996); Asten v. Southwestern Bell Tel. Co., 914 F. Supp. 430, 433-34 (D.

Kan. 1996); Visintine v. Saab Auto. A.B., 891 F. Supp. 496, 498-99 (E.D. Mo.

1995); Copeland v. MBNA Am., N.A., 820 F. Supp. 537, 541-42 (D. Colo. 1993). 

Moreover, the courts in both Tapscott and Allen sidestepped circuit precedent

which, according to H&D Tire and Cohen, should have guided them to conclude it

was not permissible to aggregate punitive damages in a class action suit to

establish diversity jurisdiction. See H&D Tire, 227 F.3d at 330; Cohen, 204 F.3d

at 1076. In Lindsey v. Alabama Tel. Co., 576 F.2d 593 (5th Cir. 1978), a class

action, the court had held that claims of individual class members “cannot be

aggregated for the purpose of satisfying this jurisdictional predicate.” Id. at 594. 
5Lindsey v. Alabama Tel. Co., 576 F.3d 593 (5th Cir. 1978), was decided

before the Fifth Circuit was divided into two circuits on October 1, 1981,

resulting in the creation of the Eleventh Circuit. The Eleventh Circuit

subsequently held that decisions handed down by the Fifth Circuit prior to

September 30, 1981, would be binding precedent in the Eleventh Circuit. See

Cohen v. Office Depot, Inc., 204 F.3d 1069, 1072 (11th Cir. 2000); Bonner v. City

of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981). Therefore, Lindsey serves as

binding precedent for both the Fifth and Eleventh Circuits.

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While the court did not specifically discuss the punitive damages claim of one

million dollars, it reversed the removal decision because the complaint failed to

allege the number of class members, an unnecessary result if punitive damages

could be aggregated.5 Id. at 595.

Oddly enough, Lindsey was cited in both Tapscott and Allen, although

neither decision devoted much discussion to it. See Tapscott, 77 F.3d at 1357 n.9

(referencing Lindsey for general proposition that “each putative class member

must satisfy” jurisdictional requirements); Allen, 63 F.3d at 1332 n.9 (noting

disagreement among district courts in Fifth Circuit on whether joint claims of

punitive damages constituted common and undivided interests allowing for

aggregation). When the Fifth and Eleventh Circuits revisited the Allen and

Tapscott decisions, both circuit courts referred to the pre-existing and conflicting

precedent of Lindsey and determined it controlled the question of whether

punitive damages could be aggregated. See H&D Tire, 227 F.3d at 330; Cohen,

204 F.3d at 1076. Nevertheless, that the courts in both Tapscott and Allen cited
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Lindsey gives weight to the argument that the answer to whether punitive damages

could be aggregated in the Fifth and Eleventh Circuits was in flux. While

Lindsey’s precedent ultimately prevailed, the Tapscott and Allen courts’ seeming

rejection of Lindsey’s punitive damages analysis created a legitimate basis on

which defendants could rely to support their aggregation argument.

 In challenging defendants’ contentions that there existed legitimate

grounds to believe punitive damages could be aggregated in order to satisfy the

amount in controversy requirement, the Martins assert the Supreme Court in

Snyder v. Harris, 394 U.S. 332 (1969), and this circuit in Justice v. Atchison,

Topeka & Santa Fe Ry. Co., 927 F.2d 503 (10th Cir. 1991), made clear that any

argument regarding the aggregation of punitive damages in a class action case

would be rejected outright. We disagree. In Snyder, the Supreme Court reiterated

the general rule “that the separate and distinct claims of two or more plaintiffs

cannot be aggregated in order to satisfy the jurisdictional amount requirement.” 

394 U.S. at 335. But the Court noted an exception to this non-aggregation rule,

stating in part that aggregation would be permitted “in cases in which two or more

plaintiffs unite to enforce a single title or right in which they have a common and

undivided interest.” Id. Hence, under Snyder, there was room to argue that the

nature of a punitive damage claim in a class action suit was common and

undivided, therefore possibly permitting aggregation.
6

See also 14C CHARLES ALAN WRIGHT ET AL. FEDERAL PRACTICE AND

PROCEDURE § 3724 (3d ed. 1998). The Martins vigorously assert that because we

had previously recognized in Justice that federal law determines whether claims

are separate and independent, defendants’ reliance on Tapscott and Allen was

(continued...)

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The courts in Tapscott and Allen tested the Snyder exception and held that

punitive damage claims could be deemed common and undivided based on the

characterization of punitive damages in the two states in those respective cases. 

Therefore they could be aggregated for the purposes of meeting the amount in

controversy requirement. Tapscott, 77 F.3d at 1357-59; Allen, 63 F.3d at 1334-

35. So holding, the courts reached a supportable conclusion that the aggregation

of punitive damages was permitted under the Snyder exception. 

In Justice, our court acknowledged Snyder’s general rule barring

aggregating claims of multiple plaintiffs where those claims are separate and

distinct, rather than common and undivided. 927 F.2d at 504. However, we did

not devote any further discussion to whether the aggregation of common claims

was permitted. Rather, we focused on “whether state law or federal common law

determines if the claims are separate and independent.” Id. We noted that 

federal law is used to determine whether the claims are separate and

independent, and state law determines the nature of the claims to

which the federal law test is applied. In other words, state law

determines the character of plaintiff’s claim, and federal law

determines whether that claim meets the standard of Section 1441(c).

Id. (internal citation omitted).6

 We then examined the nature of the plaintiffs’
6

(...continued)

unwarranted. However, as we also recognized in Justice, state law often plays a

role in determining whether a case can be removed. Professor Wright begins his

discussion by stating “[b]oth federal and state law play a part in determining the

removability of a case under Section 1441(c),” noting that “state law determines

the substantive character of the plaintiff’s claim.” Id. For example, “state law is

relevant to the question of whether an alleged liability is joint and federal law

controls whether a case concerning joint liability is removable.” Id. (emphasis

added); see also, e.g., Kirkland v. Midland Mortgage Co., 243 F.3d 1277, 1280-81

(11th Cir. 2001) (referring to state law to determine nature of punitive damages

and then holding state characterization does not allow for aggregation); Spriggs v.

Wolf, 496 F. Supp. 990, 991 (W.D. Okla. 1979) (court looked to Oklahoma law to

determine if garnishment proceeding was separate from other claims asserted in

action); Anderson v. Union Pac. R.R. Co., 200 F. Supp. 465, 467 (D. Kan. 1962)

(local law determines whether claim is joint or several in character).

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claims, determined they were in fact separate and independent, and held they

satisfied the amount in controversy requirement without aggregation. Id. at 504-

05. Contrary to the Martins’ assertions, neither Snyder nor Justice directly

addressed the specific question of whether a punitive damage claim in a class

action suit may be aggregated for jurisdictional purposes.

In sum, in October 1996, when defendants in the instant case removed this

action to federal court, they possessed legitimate grounds upon which to believe

punitive damage claims could be aggregated in a class action suit in order to

satisfy the amount in controversy requirement. We consequently agree with the

district court that based on the law existing at that time, defendants possessed

“objectively reasonable grounds to believe the removal was legally proper.” Aplt.

App. at 347. Given the uncertain state of the law on aggregation of punitive
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damages when defendants removed this action, we cannot say the district court

abused its discretion in declining to award fees to the Martins. 

We AFFIRM the judgment of the district court.