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Gavin v. AT&T Corp.

March 17, 2008


The opinion of the court was delivered by: John F. Grady, United States District Judge


Pending before the court is the plaintiff Lila T. Gavin's motion for attorney's fees, pursuant to 28 U.S.C. § 1447(c), for the defendants' allegedly unreasonable removal of this case from state court. On the appeal of the merits, the Seventh Circuit held that the fraud alleged by the plaintiff was not "in connection with" the purchase or sale of MediaOne stock within the meaning of the Securities Litigation Uniform Standards Act ("SLUSA"), so that there was no federal question entitling the defendants to removal. Gavin v. AT&T Corp., 464 F.3d 634 (7th Cir. 2006). The case was reversed with instructions to dismiss. Id. The question of attorney's fees was not before the Court.

In an order of May 14, 2007, we ruled that the defendants are liable for fees because they had "lacked an objectively reasonable basis for seeking removal," the test expressed in Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). We cited the numerous statements in Judge Posner's opinion in Gavin indicating that the exchange of shares in this case could not reasonably be considered to have occurred "in connection with" the merger. We concluded that "this language from the Seventh Circuit opinion is thoroughly inconsistent with any notion that there was an objectively reasonable basis for the removal. The opposite conclusion is compelled by the Court's language." Order of May 14, 2007 at 4. We ordered the parties to proceed with an effort to determine the appropriate amount of fees in accordance with our Local Rule 54.3. Id. at 4-5.

The parties were unable to agree on a reasonable amount of fees, and plaintiff has now filed a voluminous fee petition seeking $574,623.50 in attorney's fees and $39,445.34 in costs allegedly incurred as a result of the removal. Defendants have responded to the motion on the merits and, in addition, have asked for reconsideration of the May 14, 2007 order holding that the removal had been objectively unreasonable.

We believe the motion for reconsideration is deserving of attention. Plaintiff objects that it comes too late, having been filed more than 10 days after May 14, 2007. But the order of May 14 was not a final, appealable order and can be changed at any time before final judgment. As the Court observed in Diaz v. Indian Head, Inc., 686 F.2d 558, 562-63 (7th Cir. 1982):

As Professor Moore has observed:

Since a lower court cannot by its law of the case bind a higher court having appellate jurisdiction over it, the only sensible thing for a lower federal court . . . to do is to set itself right instead of inviting reversal above, when convinced that its law of the case is substantially erroneous.

Moore's Federal Practice ¶ 0.404[1], at 407 (1982) (footnotes omitted).

Defendant's motion to reconsider is based on two post-Gavin Seventh Circuit cases not previously considered by this court.*fn1

The first of the cases is Lott v. Pfizer, Inc., 492 F.3d 789 (7th Cir. 2007). The issue was whether the defendant, Pfizer, had had an "objectively reasonable basis" for removing a case that had been filed in state court before the enactment of the Class Action Fairness Act ("CAFA"). The Act provided that it applied only to "civil action[s] commenced on or after the date of enactment." The defendant argued that "commenced" meant the date the case was removed to federal court, not the date it had been filed in state court. The district court agreed with the plaintiffs' argument that "commenced" meant the date of filing in state court and remanded the case for lack of subject matter jurisdiction. The court later awarded attorney's fees under § 1447(c), citing Seventh Circuit case law that fees and costs should be awarded as "normal incidents of remands for lack of jurisdiction." Id. at 791. The defendant moved for reconsideration, citing the Supreme Court's decision in Martin that fees should be awarded only where the removing party lacked an "objectively reasonable basis" for seeking removal. The district court denied the motion, and the defendant appealed the fee award.

The Seventh Circuit opinion, written by Judge Flaum, noted that the Supreme Court had no occasion in Martin to define "objectively reasonable" because the parties had agreed that the defendant's basis for removal was reasonable. The Martin Court did cite case law suggesting, however, that objective reasonableness might be determined by "examining the clarity of the law at the time the notice of removal was filed." 492 F.3d at 792. Following up on the Supreme Court's implication, the Seventh Circuit opinion referred to what it regarded as an analogous an situation where the courts look to the clarity of case law:

Of course, there are other contexts in which courts determine whether an act is objectively reasonable by examining the clarity of the case law. The qualified immunity doctrine assumes that state officials are aware of existing case law and holds officials liable only if they violate clearly established and particularized rights.

The doctrine balances society's desire to punish those who knowingly violate the law with a need for zealous law enforcement, and, as such, allows state officials to make reasonable errors without worrying about being sued.

Id. at 792-93 (citations omitted). The Court observed that "Martin's objectively reasonable standard -- like the qualified immunity doctrine's objectively reasonable standard -- also balances competing interests. . . . Indeed, just as the qualified immunity doctrine attempts to protect zealous law enforcement, the removal statute encourages litigants to make liberal use ...

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