A Forever Recovery, Inc. v. Township of Pennfield

NOT RECOMMENDED FOR PUBLICATION
File Name: 15a0241n.06
FILED
Nos. 13-2657 and 14-1354 Apr 02, 2015
DEBORAH S. HUNT, Clerk
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
)
A FOREVER RECOVERY, INC.; TIA
CORPORATION, )
Plaintiffs–Appellees, )
) ON APPEAL FROM THE UNITED
v. STATES DISTRICT COURT FOR THE
) WESTERN DISTRICT OF MICHIGAN
)
TOWNSHIP OF PENNFIELD,
)
Defendant–Appellant.
)
Before: BOGGS, ROGERS, and STRANCH, Circuit Judges.
BOGGS, Circuit Judge. Defendant-Appellant Pennfield Charter Township (Pennfield)
appeals the district court’s award of attorney’s fees under 28 U.S.C. 1447(c). Plaintiffs-
Appellees A Forever Recovery (AFR) and its parent company, TIA Corporation (TIA), filed a
lawsuit in Michigan state court against Pennfield, alleging violations of the Just Compensation
Clause of the Fifth Amendment and the Due Process Clause of the Fourteenth Amendment of the
United States Constitution. Pennfield removed to federal court on the basis of federal-question
jurisdiction and, six days later, filed a motion to dismiss on the ground that the federal questions
raised were unripe. The district court remanded the case to Michigan state court and awarded
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attorney’s fees in the amount of $7,720 to AFR and TIA. Pennfield timely appeals the award of
fees only. We affirm.
I. BACKGROUND
AFR is a Michigan Corporation owned by co-plaintiff TIA. Pennfield is a Michigan
charter township that includes parts of Battle Creek, Michigan. In 2002, Pennfield amended a
conditional-use permit and granted a use variance to allow the property located on 216 and 218
Saint Mary’s Lake Road in Battle Creek, Michigan to function as a drug-and-alcohol treatment
center. Since that time, AFR has operated the Saint Mary’s Lake Road property as a drug-and-
alcohol treatment facility.
In 2012, the Plaintiffs sought to expand the facility and applied for a building permit.
Pennfield denied the application and informed the Plaintiffs that they must apply for another use
variance from the Pennfield Zoning Board of Appeals. The Plaintiffs applied, and the Zoning
Board denied their application in 2013. In response, the Plaintiffs filed suit in Michigan state
court on June 18, 2013. Count I of the Plaintiffs’ complaint alleged that Pennfield’s denial of the
building permit violated the township’s zoning ordinances. Count II was an inverse-
condemnation claim alleging that the denial was an uncompensated regulatory taking and a
violation of substantive-due-process rights under the Michigan and the United States
Constitutions.
On July 19, 2013, Pennfield removed the case to federal district court on the basis of
federal-question jurisdiction under 28 U.S.C. §§ 1331, 1441. Six days later, Pennfield filed a
motion to dismiss, arguing that all federal questions raised in the complaint were unripe. The
Plaintiffs responded in August 2014 by filing a motion to remand to Michigan state court rather
than dismiss the case. On November 19, 2014, the district court granted the Plaintiffs’ motion to
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remand and awarded attorney’s fees to the Plaintiffs because it found that (1) Pennfield lacked an
objectively reasonable basis for removal because of well-settled precedent governing the
ripeness of takings claims, and (2) Pennfield removed in bad faith to delay litigation because it
was aware that the federal claims were unripe at the time of removal. A Forever Recovery, Inc.
v. Twp. of Pennfield, No. 1:13-CV-782, 2013 WL 9873171, at *5 (W.D. Mich. Nov. 19, 2013).
On March 10, 2014, the district court determined that the “the attorney’s fee award to be paid is
$7,720.” Pennfield timely appeals the district court’s decision only with respect to the award of
attorney’s fees.
II. DISCUSSION
A
“District courts have considerable discretion to award or deny costs and attorney fees
under 28 U.S.C. § 1447(c), and we will overrule whatever decision is reached only where such
discretion has been abused.” Warthman v. Genoa Twp. Bd. of Trs., 549 F.3d 1055, 1059 (6th
Cir. 2008). A district court abuses its discretion when it “relies on clearly erroneous findings of
fact, or when it improperly applies the law or uses an erroneous legal standard.” Ibid. (quoting
Christian Schmidt Brewing Co. v. G. Heileman Brewing Co., 753 F.2d 1354, 1356 (6th Cir.
1985)).
B
A defendant can remove a civil case from state court to federal district court if the
plaintiff could have filed in federal district court originally. 28 U.S.C. § 1441. If the district
court later finds that it lacks jurisdiction, it must remand the case to state court. 28 U.S.C. §
1447(c). The removal statute contains a fee-shifting provision that provides that “[a]n order
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remanding the case may require payment of just costs and any actual expenses, including
attorney fees, incurred as a result of the removal.” Ibid.
As a general rule, the award of fees is inappropriate if the removing party had “an
objectively reasonable basis for seeking removal.” Martin v. Franklin Capital Corp., 546 U.S.
132, 141 (2005); see also Paul v. Kaiser Found. Health Plan of Ohio, 701 F.3d 514, 523 (6th
Cir. 2012) (“Absent unusual circumstances, courts may award attorney’s fees under § 1447(c)
only where the removing party lacked an objectively reasonable basis for seeking removal.”)
(citation and internal quotation marks omitted). However, “a district court’s discretion to award
or deny fees under § 1447(c) involves more than an on-off switch that is solely dependent on the
objective reasonableness of the removal decision.” Warthman, 549 F.3d at 1060. The Supreme
Court has held that “district courts retain discretion to consider whether unusual circumstances
warrant a departure from the [objectively-reasonable-basis] rule in a given case.” Martin, 546
U.S. at 141.
We therefore apply a two-step test to review the award of attorney’s fees under § 1447(c).
First, we consider whether Pennfield had an objectively reasonable basis to remove the case.
Second, we consider whether an “unusual circumstance” justified departing from the objectively-
reasonable-basis rule.
C
A defendant seeking to remove a case pursuant to 28 U.S.C. § 1441 bears the burden of
showing that the case as pleaded falls within the federal-question jurisdiction of the district court.
Eastman v. Marine Mech. Corp., 438 F.3d 544, 549 (6th Cir. 2006). Federal-question
jurisdiction exists if “federal law creates the cause of action or the plaintiff’s right to relief
necessarily depends upon a resolution of a substantial question of federal law.” Franchise Tax
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Bd. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27-28 (1983). A defendant lacks
an objectively reasonable basis for removal when well-settled case law makes it clear that federal
courts lack jurisdiction to hear the case. Powers v. Cottrell, Inc., 728 F.3d 509, 520 (6th Cir.
2013) (“In light of clear case law, Contrell had no objectively reasonable basis for removal.”);
Kent State Univ. Bd. Of Trs. v. Lexington Ins. Co., 512 F. App’x. 485, 493 (6th Cir. 2013)
(“Viewed through the lens of . . . the [well-settled] standard Lexington knew would be applied
by the district court in this case [,] removal based on the clearly unsettled nature of Ohio state
law was not ‘fairly supportable’ or ‘objectively reasonable.’”).
Pennfield argues that removal in this case was objectively reasonable because Count II of
the complaint alleges that Pennfield’s actions constitute “violations of the Petitioners’
Substantive Due Process Rights under the [Fourteenth Amendment of the] United States
Constitution” and “a regulatory taking of the Property under the [Fifth Amendment of the]
United States Constitution.” Appellant’s Br. at 8. The district court disagreed, holding that
Pennfield lacked an objectively reasonable basis for removal because it was aware that clear
Supreme Court precedent establishes that the federal takings and substantive-due-process claims
against Pennfield were unripe. A Forever Recovery, 2013 WL 9873171, at *5.
In Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City,
the Supreme Court held that a federal takings claim against a state-government entity is not ripe
unless (1) the state-government entity has reached a final decision with respect to the property,
and (2) the property owner has sought compensation through state-law procedures. 473 U.S.
172, 186, 194 (1985). Without meeting the finality and state-litigation requirements, a federal
takings claim is unripe regardless of “whether it is analyzed as a deprivation of property without
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due process under the Fourteenth Amendment, or as a taking under the Just Compensation
Clause of the Fifth Amendment.” Id. at 200.
In this case, the Plaintiffs’ federal takings and substantive-due-process claims were
indisputably unripe because they had not satisfied the state-litigation requirement. Id. at 186.
The district court concluded that, because “[f]ederal courts cannot accept removed cases that
contain unripe federal claims,” Pennfield lacked an objectively reasonable basis for removal on
the basis of federal-question jurisdiction. A Forever Recovery, 2013 WL 9873171, at *3, 5.
However, a federal court can exercise subject-matter jurisdiction over a case that is
unripe under Williamson County in certain circumstances. The Supreme Court has clarified that
Williamson County ripeness requirements are only “prudential” rather than jurisdictional. Horne
v. Dep’t of Agric., 133 S. Ct. 2053, 2062 (2013) (“[W]e have recognized that [Williamson
County ripeness] is not, strictly speaking, jurisdictional.”); see also Stop the Beach Nourishment,
Inc. v. Florida Dep’t. of Envtl. Prot., 560 U.S. 702, 729 (2010); San Remo Hotel v. City and
Cnty. of San Francisco, 545 U.S. 323, 351 n.2 (2005) (Rehnquist, C.J., concurring in the
judgment). In Miles Christi Religious Order v. Township of Northville, we acknowledged that
ripeness under Williamson County is only a “prudential requirement, and we need not follow it
when its application would not accord with sound process.” 629 F.3d 533, 541 (6th Cir. 2010)
(citation, internal quotation marks, and alterations omitted).
We need not determine whether the district court should have exercised jurisdiction to
hear the prudentially unripe federal takings claims in this case, or indeed whether well-settled
precedent made it objectively unreasonable for Pennfield to remove on the basis of federal
takings claims that were not initially litigated in state court. In some unripe federal-takings-
claim cases, to be sure, the exercise of federal jurisdiction was not objectively unreasonable. In
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Wilkins v. Daniels, we exercised federal-question jurisdiction to decide a federal takings claim
on the merits even though the state-litigation requirement had not been satisfied because “it
[was] clear that there has been no ‘taking.’” 744 F.3d 409, 418 (6th Cir. 2014). The Ninth
Circuit reached a similar conclusion in Guggenheim v. City of Goleta, 638 F.3d 1111, 1118
(9th Cir. 2010) (en banc). The Fourth Circuit held in Sansotta v. Town of Nags Head that the
state-litigation requirement is not applicable where, as here, a municipality defendant removes on
the basis of a federal takings claim. 724 F.3d 533, 545 (4th Cir. 2013). These cases demonstrate
that, in some circumstances, a district court may have jurisdiction to hear a federal taking claim
that fails to meet the state-litigation requirement for prudential ripeness under Williamson
County. However, because Pennfield fails at the second step of the inquiry, we need not resolve
the question of whether this is such a case.
D
The district court retained discretion to award fees if it identified an “unusual
circumstance” that justified departing from the objectively-reasonable-basis rule. Martin, 546
U.S. at 141. In exercising this discretion, the district court should aim to “deter removals sought
for the purpose of prolonging litigation and imposing costs on the opposing party, while not
undermining Congress’ basic decision to afford defendants a right to remove as a general matter,
when the statutory criteria are satisfied.” Id. at 140.
Six days after removing the case to federal district court on the basis of federal-question
jurisdiction, Pennfield filed a motion to dismiss the case for lack of ripeness. This indicates that
Pennfield removed on the basis of prudentially unripe claims that it did not believe the district
court should hear. It is possible that Pennfield removed in good faith because it was ignorant of
Williamson County’s ripeness requirements, and that ignorance was dispelled within the six-day
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period. The district court, however, found that this possibility “strain[ed] credulity,” and instead
concluded that Pennfield must have known that the claims were unripe but nonetheless removed
in bad faith for the “sole purpose” of “generating extra cost and delay.” A Forever Recovery,
2013 WL 9873171, at *5.
On appeal, Pennfield does not dispute that it knowingly removed on the basis of unripe
claims that it did not believe the district court should hear. Instead, it makes the bold argument
that “any delay in resolving the inverse condemnation action stemmed not from Defendant’s
choice to remove, but rather from [the Plaintiffs’] decision to file unripe federal claims as part of
[their] state court inverse condemnation action.” Appellant Br. at 13 (quoting Seiler v. Charter
Twp., 53 F. Supp. 2d 957, 962 (E.D. Mich. 1999)).1 This argument is unpersuasive because the
Supreme Court expressly rejected the “contention that Williamson County prohibits plaintiffs
from advancing their federal [takings] claims in state courts.” San Remo, 545 U.S. at 346. In
fact, the Court invited plaintiffs to litigate federal takings claims in state court because “state
courts undoubtedly have more experience than federal courts do in resolving the complex
factual, technical, and legal questions related to zoning and land-use regulations.” Id. at 347.2
“Michigan has long recognized the doctrine of inverse condemnation” as an available state-court
remedy for federal takings claims. Bigelow v. Michigan Dep’t of Natural Res., 970 F.2d 154,
1
The Seiler court’s conclusion was based upon the mistaken premise that “the right to remove federal
claims is separate and distinct from the question of whether those claims are ripe for adjudication.” 53 F. Supp. 2d
at 962. But if this were the case, a state or political-subdivision defendant would be able to “manipulate litigation to
deny a plaintiff a forum for his claim” by removing a federal takings claim that is properly before the state court to
federal court and moving to dismiss on ripeness grounds. Sansotta, 724 F.3d at 545.
2
Moreover, if the Plaintiffs did not litigate the federal takings claims as part of their state-court action,
they may have been precluded from bringing those claims in federal court at a later time. See Rockstead v. City of
Crystal Lake, 486 F.3d 963, 968 (7th Cir. 2007) (“The failure to complain of the taking under federal as well as state
law is a case of ‘splitting’ a claim, thus barring by virtue of the doctrine of res judicata a subsequent suit under
federal law.”).
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158 (6th Cir. 1992). The Plaintiffs properly filed their federal takings claims in Michigan state
court as part of an inverse-condemnation action. It was Pennfield’s choice to remove to federal
court that brought these claims before a forum in which they were unripe. Therefore, Pennfield
is responsible for ripeness-related delays.
We review the district court’s finding of bad-faith motivation for clear error, and so we
would reverse only if the “decision strikes us as wrong with the force of a five-week-old,
unrefrigerated dead fish.” United States v. Perry, 908 F.2d 56, 58 (6th Cir.), cert. denied, 498
U.S. 1002 (1990) (quoting Parts & Elec. Motors, Inc., v. Sterling Elec., Inc., 866 F.2d 228, 233
(7th Cir. 1988), cert. denied, 493 U.S. 847 (1989)). If a district court chooses one of several
permissible views of the evidence, its conclusion is not clearly erroneous. Anderson v. City of
Bessemer City, 470 U.S. 564, 574 (1985). The six-day turnaround between removal and its
motion to dismiss raises suspicion that Pennfield was aware that the federal claims were unripe
and lacked a good-faith belief that the district court should have heard the claims when it
removed. Pennfield’s counterarguments do not dispel this suspicion. Under such circumstances,
the district court’s bad-faith determination was not clearly erroneous.
Bad-faith motivation to remove for the purpose of prolonging litigation and imposing
costs on the opposing party indisputably qualifies as an “unusual circumstance” that would
justify the award of fees under § 1447(c), even if the defendant had an objectively reasonable
basis for removal. Martin, 546 U.S. at 141 (encouraging district courts to exercise their
discretion to award fees in order to “deter removals sought for the purpose of prolonging
litigation and imposing costs on the opposing party”); see also Baldwin v. Burger Chief Sys.,
Inc., 507 F.2d 841, 842 (6th Cir. 1974) (“A court exercising its equitable powers may award
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attorney’s fees in certain extraordinary circumstances. For example, when an adversary has
acted in bad faith or vexatiously, attorney’s fees may be recovered.”).
III. CONCLUSION
The district court did not abuse its discretion in finding that Pennfield removed the case for
the bad-faith purpose of prolonging litigation, which justified the award of fees regardless of
whether Penfield had an objectively reasonable basis for removal. Accordingly, we AFFIRM the
award of attorney’s fees.
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