Opinion ID: 161501
Heading Depth: 1
Heading Rank: 4

Heading: Reasonableness of the Attorneys' Fees

Text: 15 In addition to challenging Huffman and Newton's entitlement to appellate fees, Saul objected to numerous time entries on their fee application with respect to fees in the district court. For example, Saul questioned the reasonableness of a four-hour trip to the federal courthouse to retrieve a document and file a motion. Saul also claimed that the $1800 charged to prepare the fee application, representing 25 percent of the total amount sought in the petition, was excessive. 16 From our perspective, these objections are not without merit; at a minimum, it seems to us, they demand a response from Huffman and Newton. Yet the district court refused to consider Saul's objections, stating that the statute [ 1447(c)] permits recovery of actual fees incurred as a result of the removal rather than allowing a reasonable fee to be determined by the Court. Aplt.'s App. at 327-28 (emphasis added). Consequently, the district court granted the fee petition in full, without conducting an independent inquiry into the reasonableness of the fees demanded. In eschewing such a role, the court erred. 17 No doubt the district court intended to interpret the statute literally. Hence its focus on the statute's use of the word actual. To be sure, 1447(c) declares that an order remanding a case to state court may require payment of just costs and any actual expenses, including attorneys' fees. 28 U.S.C. 1447(c). But the district court was selectively literal in its interpretation. The statute immediately qualifies the capacious language quoted above by plainly limiting actual expenses to those incurred as a result of the removal. Id. 18 Pursuant to this limiting language, it is fair to characterize Saul's argument as presenting a question: were certain of Huffman and Newton's time entries incurred as a result of the removal, or instead, as Saul alleges, were they incurred as a result of unreasonable billing practices? If it is the latter, the billing entries are not compensable under the statute; if it is the former, they are. The district court must make the determination. We see no way for the court to perform this task without conducting an inquiry into the reasonableness of the time entries contained in the fee petition submitted by Huffman and Newton. 19 Our ruling in this regard reflects what district courts have long presumed. That is, they are duty-bound to ensure that an award of attorneys' fees pursuant to 1447(c) is reasonable. See, e.g., Braco v. MCI Worldcom Communications, Inc., 138 F. Supp. 2d 1260, 1271 (C.D. Cal. 2001) ([T]he Court retains discretion (and presumably a duty) to ensure that the amount of attorneys' fees requested is 'reasonable'); Mehney-Egan v. Mendoza, 130 F. Supp. 2d 884, 885 (E.D. Mich. 2001) (The Court's directive to the plaintiff to present evidence of her just costs and expenses was not an invitation to indulge in overreaching. Rather, the statutory prescription to award 'just' costs incorporates the concept of reasonableness in assessing a claim for attorney fees.); Park Nat'l Bank of Houston v. Kaminetzky, 976 F. Supp. 571, 584 (S.D. Tex. 1996) (Section 1447(c) awards payments of just costs and reasonable attorney's fees incurred as a result of an improper removal.); Summit Mach. Tool Mfg. Corp. v. Great N. Ins. Co., 883 F. Supp. 1532, 1533 (S.D. Tex. 1995) (In computing an attorney fees award under 1447(c), the Court first multiplies the number of hours reasonably expended on the litigation by a reasonable hourly rate.). 20 Two circuit court cases, both in unusual circumstances, have addressed the award of attorney's fees under 1447(c), see Wisconsin v. Hotline Indus. Inc., 236 F.3d 363 (7th Cir. 2000); Gotro v. R & B Realty Group, 69 F.3d 1485 (9th Cir. 1995). In Hotline Industries, Wisconsin sought an injunction in state court to enjoin Hotline from building a marina on Lake Superior. After Hotline removed the case to federal court, Wisconsin successfully obtained an order remanding it to state court. The district court awarded Wisconsin attorneys' fees based on the prevailing rate in the area (Madison, Wisconsin) for lawyers specializing in similar work. The court rested its market rate approach on the general rule for calculating fee awards made pursuant to various fee-shifting statutes calling for a reasonable fee, e.g. 42 U.S.C. 1988. 21 In reversing, the Seventh Circuit noted what it said was the unusual and significant language contained in 1447(c), focusing on actual and incurred. Id. at 366-67. The court concluded that only actual outlays incurred by the government lawyers as a result of removal are recoverable; in other words, market indicated substitutes for actual outlays are not. Id. The court remanded the matter to the district court to determine the actual outlays incurred by the state as a result of Hotline's improper removal. Id. at 368. 22 In Gotro, the issue was whether an attorney's fee could be awarded under 1447(c) in a remanded case where the attorney had taken the case on a contingent fee basis and would recover nothing if the case was lost on the merits. See 69 F.3d at 1487. Ultimately the Ninth Circuit described the issue as whether Congress had intended by using the words 'any actual expenses, including attorney's fees, incurred' . . . to remove the discretion of the district court to award fees in certain cases, such as contingent fee or pro bono cases, where the client had not actually 'incurred' the obligation to pay her attorney's fees. Id. (emphasis added). The court concluded Congress had not so limited the district court's discretion. The reasonableness of the requested fee was not disputed. 23 We think both these decisions bolster our conclusion here. Our holding is that the statute's limit on actual fees to those incurred as a result of removal requires the district court to conduct some sort of reasonableness inquiry. Our balanced emphasis on the terms actual and incurred mirrors the common-sense approaches taken in both Hotline and Gotro. We have concluded that the phrase incurred as a result of removal informs and narrows the meaning of actual expenses, including attorney fees. Nothing in either Hotline or Gotro suggests that courts are compelled to award unreasonable, if actual, fees to plaintiffs who successfully obtain an order of remand. To be compensable, their fees must be actually incurred, that is, they must reflect efforts expended to resist removal. As we said above, and repeat here, unreasonably high fees are not incurred as a result of removal; rather, excessive fee requests flow from, and accumulate by means of, improper billing practices, and will not be recoverable under 1447(c). 24 We REVERSE the judgment of the district court and REMAND for further proceedings consistent with this opinion. We GRANT Saul's request for leave to file a response to Huffman and Newton's motion to dismiss, and we DENY the motion to dismiss. Each party shall bear its own costs and fees on appeal.