State of Wisconsin v. Hotline Industries ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-3256
State of Wisconsin,
Plaintiff-Appellee,
v.
Hotline Industries, Inc.,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 99-C-0398-C--Barbara B. Crabb, Judge.
Argued August 8, 2000--Decided December 29, 2000
Before Bauer, Coffey, and Manion, Circuit Judges.
Bauer, Circuit Judge. This case involves an
award of attorney’s fees to the State of
Wisconsin under 28 U.S.C. sec. 1447(c), the fee-
shifting provision governing improper removal.
The principal issue is whether sec. 1447(c),
which authorizes payment of "actual" attorney’s
fees "incurred" in resisting removal, permits
salaried government attorneys to recover at
prevailing market rates. The district court
concluded that it does. Because we believe that
the provision limits a fee award to actual
outlays, we vacate the award and remand for
further proceedings.
I.
Hotline Industries, Inc., a Minnesota
corporation, owns and maintains an old railroad
ore dock on Lake Superior that is adjacent to a
public boat ramp maintained by the City of
Superior, Wisconsin. When Hotline began
installing piers off the dock and advertising a
marina development, the State of Wisconsin sought
a preliminary injunction in state court to enjoin
Hotline from constructing any more piers.
According to the state, Hotline never obtained
the permits required by state law for placing
structures in navigable waterways. The state also
complained that the piers obstructed boat traffic
around the public boat ramp and constituted a
public nuisance. Hotline removed this case to
federal district court. See 28 U.S.C. sec. 1441.
The district court set a hearing date for the
state’s preliminary injunction motion, and the
state moved to remand the action to state court.
See 28 U.S.C. sec. 1447(c).
Although the hearing was held, the motion for
preliminary injunction was never addressed
because Hotline could not establish a basis for
federal jurisdiction (states are not citizens for
purposes of diversity jurisdiction, and there was
no federal question). The court advised Hotline
that the removal appeared groundless, and that it
could either file a response to the state’s
remand motion or stipulate to a remand. Hotline
stipulated to the remand, and the court issued a
remand order. The state then filed a motion for
costs and fees under sec. 1447(c), attaching
affidavits from an assistant attorney general
that claimed an hourly billing rate of $200 for
nearly 28 hours that she and another assistant
devoted to the removal proceedings. The court
accepted the $200 hourly figure as a reasonable
market rate for the government attorneys, and
awarded the state $5,583.60 for attorney’s fees.
From this decision Hotline appeals.
II.
Hotline limits its appeal to the award of fees;
we have jurisdiction to review this award. Tenner
v. Zurek, 168 F.3d 328, 329 (7th Cir. 1999). We
review the district court’s fee award for abuse
of discretion, Garbie v. DaimlerChrysler Corp.,
211 F.3d 407, 410 (7th Cir. 2000), but to the
extent that the district court’s decision rests
on its interpretation of sec. 1447(c), our review
is de novo. See Eli Lilly & Co. v. Natural
Answers, Inc., ___ F.3d ___, No. 00-1375, 2000 WL
1735075, at *9 (7th Cir. Nov. 21, 2000).
Hotline first argues that the district court
lacked jurisdiction to award attorney’s fees
after it remanded the case to state court.
Focusing on sec. 1447(c)’s language, Hotline
contends that the award had to be included in the
very same order remanding the case, and the
district court’s remand order did not mention an
award. The plain wording of sec. 1447(c) does not
resolve the question; it provides only that "an
order remanding the case may require payment of
actual expenses, including attorney fees,
incurred as a result of the removal." But the
statute does not purport to be exclusive, and it
contains no language to suggest that there cannot
be a supplemental order. Several courts have
directly rejected Hotline’s argument, holding
that district courts retain jurisdiction to
consider collateral matters after remand and that
attorney’s fees may be awarded under a separate
order. Stallworth v. Greater Cleveland Reg’l
Transit Auth., 105 F.3d 252, 257 (6th Cir. 1997);
Mints v. Educational Testing Serv., 99 F.3d 1253,
1257 (3d Cir. 1996); Moore v. Permanente Group,
Inc., 981 F.2d 443, 445 (9th Cir. 1992); see
Citizens for a Better Env’t v. Steel Co., 230
F.3d 923, 927 (7th Cir. 2000). Hotline attempts
to distinguish this line of cases by observing
that the remand order in the present case was
based on a voluntary stipulation. But Cooter &
Gell v. Hartmarx Corp., 496 U.S. 384, 396 (1990),
held that a plaintiff’s voluntary dismissal did
not divest the court of jurisdiction to assess
fees under Fed. R. Civ. P. 11. See Szabo Food
Serv., Inc. v. Canteen Corp., 823 F.2d 1073,
1076-79 (7th Cir. 1987). Although Cooter & Gell
dealt with Rule 11 sanctions, its underlying
principle applies in the context of sec. 1447(c).
See Willy v. Coastal Corp., 503 U.S. 131, 136 &
n.2 (1992). A district court has jurisdiction to
award attorney’s fees under sec. 1447(c) even if
the removing party voluntarily withdraws its case
and stipulates to a remand.
Hotline next contends that the state did not
incur any reimbursable attorney’s fees because
its lawyers already were on the government
payroll as salaried employees. But salaried
government lawyers, like in-house and non-profit
counsel, do incur expenses if the time and
resources they devote to one case are not
available for other work. See Hamilton v. Daley,
777 F.2d 1207, 1213 (7th Cir. 1985) (affirming
fee award under 42 U.S.C. sec. 1988 to state’s
attorneys for their representation of "prevailing
defendants"); Napier v. Thirty or More
Unidentified Fed. Agents, 855 F.2d 1080, 1092-93
(3d Cir. 1988) (affirming fee award under Fed. R.
Civ. P. 11 to government for time of assistant
U.S. attorney in defending a frivolous lawsuit);
see also Central States, Southeast & Southwest
Areas Pension Fund v. Central Carthage Co., 76
F.3d 114, 115-16 (7th Cir. 1997) (affirming award
under ERISA fee-shifting statute to prevailing
pension fund for its staff attorneys’
representation); see also Softsolutions v.
Brigham Young Univ., 1 P.3d 1095, 1106 n.5 (Utah
2000) (collecting federal and state cases). To
deny reimbursement under these circumstances
would indirectly penalize the institution, be it
public or private, for providing its own legal
counsel throughout a case.
Even if fees are recoverable, Hotline argues,
they exceed whatever amount was allowed under
sec. 1447(c). Section sec. 1447(c) provides that
"[a]n order remanding the case may require
payment of just costs and any actual expenses,
including attorney fees, incurred as a result of
the removal." The district court construed sec.
1447(c) to authorize a fee award based on the
prevailing rate in Madison, Wisconsin for lawyers
specializing in similar work. "From a purely
practical standpoint," the court wrote, "it makes
sense to compensate government lawyers in the
same manner as privately retained counsel rather
than undertaking a calculation of the actual
costs incurred."
In using the market rate as the measure of
compensation, the district court followed the
general rule for calculating fee awards made
under numerous statutes authorizing a "reasonable
attorney’s fee as part of the costs." This rule,
applied in Blum v. Stenson, 465 U.S. 886, 895
(1984), holds that "reasonable fees" under fee-
shifting statutes such as 42 U.S.C. sec. 1988
"are to be calculated according to the prevailing
market rates in the relevant community,"
regardless of whether the plaintiff is
represented by a private law firm or a legal aid
society. See also Independent Fed’n of Flight
Attendants v. Zipes, 491 U.S. 754, 758 n.2 (1989)
(observing that "fee-shifting statutes’ similar
language is ’a strong indication’ that they are
to be interpreted alike") (citation omitted);
Burlington v. Dague, 505 U.S. 559, 562 (1992)
(extending "our case law construing what is a
’reasonable’ fee . . . uniformly to all
[similarly worded fee-shifting statutes]").
Congress enacted such fee-shifting statutes to
encourage lawyers to take meritorious cases and
thereby promote private enforcement of the law.
See Pennsylvania v. Delaware Valley Citizens’
Council, 478 U.S. 546, 560 (1986); Blum 465 U.S.
at 893-94. By using market rates as a basis to
calculate attorney’s fees, Congress intended that
nonprofit legal aid organizations (which have no
billing rate) would receive no less in fee awards
than lawyers working in the private sector. Blum,
465 U.S. at 894. This general rule has been
applied even when the victorious party is
represented by salaried government counsel. See,
e.g., Hamer v. Lake County, 819 F.2d 1362, 1365
n.9 (7th Cir. 1987); Hamilton, 777 F.2d at 1213;
State of Illinois v. Sangamo Constr. Co., 657
F.2d 855, 861-62 (7th Cir. 1981); United States
v. Big D Enters., Inc., 184 F.3d 924, 936 (8th
Cir. 1999); Napier, 855 F.2d at 1092-93.
But Fogerty v. Fantasy, Inc., 510 U.S. 517(1994), in our words, "squelched" any inclination
to treat all fee-shifting statutes as if they
were minor variations on sec. 1988. Stomper v.
Amalgamated Transit Union, Local 241, 27 F.3d
316, 318 (7th Cir. 1994). Fogerty involved the
interpretation of 17 U.S.C. sec. 505, the
attorney’s fee provision of the Copyright Act.
Although sec. 505 tracks 42 U.S.C. sec. 2000e-
5(k), the attorney’s fee provision in Title VII
of the Civil Rights Act of 1964, the Court held
that both statutes have unique historical
contexts and interpretations that cannot be
generalized to one another. 510 U.S. at 522-25.
After Fogerty, "[d]ifferent statutes receive
individual analysis," or should. Stomper, 27 F.3d
at 318; see Citizens for a Better Environment,
230 F.3d at 931.
Section 1447(c) is unusual among fee-shifting
statutes. Unlike the numerous statutes that
authorize the recovery of "reasonable" attorney’s
fees, see, e.g., Delaware Valley Citizens’
Council, 478 U.S. at 562; Marek v. Chesny, 473
U.S. 1, 43 (1985) (appendix to Brennan, J.,
dissenting), sec. 1447(c) expressly limits fee
awards to actual outlays-- specifically, to "any
actual expenses, including attorney fees,
incurred" (emphasis added). The mention of
"actual" and "incurred" is significant. Neither
word appeared in the statute’s earlier version
that authorized only "the payment of just costs."
As amended in 1988, sec. 1447(c) now explicitly
includes "attorney fees" among the "actual
expenses" that can be awarded. The statutory
change makes clear that sec. 1447(c) constitutes
an alternative means to reimburse the victorious
party without resorting to Rule 11. The
legislative history of this change is scanty (a
mere two paragraphs), but it reveals that "the
proposed amendment to section 1447(c) will ensure
that a substantive basis exists for requiring
payment of actual expenses incurred in resisting
an improper removal; civil rule 11 can be used to
impose a more severe sanction when appropriate."
H.R. Rep. No. 889, 100th Cong., 2d Sess. 72,
reprinted in 1988 U.S.C.C.A.N. 5982, 6033.
Only a few fee-shifting statutes explicitly
limit recoveries to actual outlays. For example,
the Uniform Relocation Assistance and Real
Property Acquisition Policies Act, 42 U.S.C. sec.
4654, will "reimburse" prevailing claimants for
attorney’s fees "actually incurred" in litigating
condemnation proceedings brought by the
government. See United States v. 122.00 Acres of
Land, 856 F.2d 56, 58 (8th Cir. 1988). Similarly,
the Equal Access to Justice Act, 28 U.S.C. sec.
2412(d)(1)(A), authorizes monetary recovery for
attorney’s fees "incurred" as a result of
unjustified federal action, see TGS Int’l, Inc.
v. United States, 983 F.2d 229, 230 (Fed. Cir.
1993); United States v. Paisley, 957 F.2d 1161,
1164 (4th Cir. 1992), and an analogous statute
contained in the Internal Revenue Code permits
recovery of attorney’s fees "paid" or "incurred"
in successful challenges to tax related actions,
26 U.S.C. sec. 7430(c)(1)(B)(iii); see Marre v.
United States, 38 F.3d 823, 828-29 (5th Cir.
1994). These three statutes, all of which aim to
check or deter unjustified governmental conduct,
permit parties to be reimbursed for fees actually
incurred in achieving victory. But cf. Raney v.
Federal Bureau of Prisons, 222 F.3d 927, 934
(Fed. Cir. 2000) (en banc) (citing the Freedom of
Information Act, the Privacy Act, and Fed. R.
Civ. P. 37(a)(4) as examples in which "the courts
have neither interpreted the ’incurred’ term . .
. to restrict or limit the payment of fees to
those actually incurred, nor prevented market-
rate fees from being awarded").
Congress envisioned a similar reimbursement
scheme under sec. 1447(c). This provision
specifies that the fees awarded must be the
"actual" fees that were "incurred." This
formulation more closely approaches the Uniform
Relocation Act or the Equal Access to Justice Act
than the civil rights statutes that speak of a
"reasonable attorney’s fee as part of the costs."
Cf. Neal v. Honeywell, Inc., 191 F.3d 827, 833
(7th Cir. 1999) (concluding that the formula in
the False Claims Act authorizing "reasonable
attorneys’ fees" as part of "damages" has
"greater affinity to sec. 1988 than to the Equal
Access to Justice Act"). Indeed, we have likened
sec. 1447(c) to Fed. R. Civ. P. 37(a)(4), the
fee-shifting rule requiring the loser in certain
discovery disputes to pay his opponent’s legal
expenses. Both rules contemplate that the victor
should recoup his full outlay. As we reiterated
in Garbie, 211 F.3d at 411, "The rationale of
fee-shifting rules is that the victor should be
made whole--should be as well off as if the
opponent had respected his legal rights in the
first place." Improper removal prolongs
litigation (and jacks up fees). Under the
American Rule parties bear their expenses in one
court system, "but when their adversary
wrongfully drags them into a second judicial
system the loser must expect to cover the
incremental costs." Id. For the State of
Wisconsin, those incremental costs include its
actual attorney’s fees incurred (a proportional
share of the salaries of its attorneys handling
the removal) plus related overhead costs.
We vacate the judgment as to the amount of
attorney’s fees awarded to the state and remand
so that the district court may determine the
actual amount of fees incurred. The state bears
the burden of proving these amounts. The district
court, however, has discretion "to tailor the
documentation requirement" according to the
stakes involved, see Garbie, 211 F.3d at 411;
Ustrak v. Fairman, 851 F.2d 983, 987 (7th Cir.
1988), lest the resources devoted to detailing
entitlements outstrip the expenses received under
sec. 1447(c).
Vacated and Remanded