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Micrometl Corp. v. Tranzact Technologies

August 17, 2010


The opinion of the court was delivered by: Nan R. Nolan United States Magistrate Judge

Magistrate Judge Nan R. Nolan


Plaintiff MicroMetl Corp., an Indiana corporation, filed suit against Tranzact Technologies, Inc., an Illinois corporation, in the Circuit Court of Marion County, Indiana, alleging breach of contract in connection with a shipping services agreement. Plaintiff specifically alleged that Defendant overbilled the company "in excess of $100,000," and "failed and refused to correct the overbillings." (Doc. 1-1, ¶¶ 8, 11.) On March 11, 2008, Defendant removed the case to the Southern District of Indiana on the basis of diversity jurisdiction, noting that the parties are "citizens of different States," and asserting that Plaintiff sought damages in excess of $75,000. (Doc. 1, ¶ 5.) Defendant then moved to transfer the case to the Northern District of Illinois based on a forum selection clause in the parties' contract. The Indiana district court granted that motion on June 5, 2008. (Doc. 25.) Shortly thereafter, Defendant answered the complaint and filed a counterclaim in the amount of $49,766.83. (Doc. 31.) On July 14, 2008, the parties filed a joint status report in which Plaintiff reiterated its claim to more than $100,000 in overbillings. (Doc. 37.) Two days later, the parties consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636(c).

Over the next year and a half, the parties engaged in extensive discovery. Defendant claims that in August 2009, Plaintiff produced a document showing that it had incurred over $139,444.44 in overbillings arising out of this matter, but that it had also received refunds from third-party sources that reduced the total amount at issue to only $38,846.98. (Doc. 74, Ex. E.) Consistent with this document, Plaintiff's Vice President and General Manager, Mark Webber, and Plaintiff's Controller, Sandra Ellis, both testified at their depositions that (1) the amount of potential damages was only $38,846.98; and (2) Plaintiff had received all relevant refunds by November 14, 2007, more than three months before Plaintiff filed this lawsuit on February 25, 2008.

Defendant now seeks to remand the case to state court, arguing that Plaintiff at all times possessed sufficient documentation to determine that its actual losses in no way exceeded $75,000 as required for diversity jurisdiction. Defendant also seeks sanctions against Plaintiff for allowing the improper removal and/or for knowingly and unnecessarily multiplying the costs of litigation. Plaintiff insists that remand is improper; denies that it knew about all of the refunds prior to filing suit; and seeks its fees and costs incurred in responding to this motion. For the reasons set forth below, the motion to remand is granted in part and denied in part, and the requests for sanctions and fees are denied.


Defendant seeks to remand the case pursuant to 28 U.S.C. § 1447(c), which states: If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. 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.

Section 1447(c) typically applies where a plaintiff claims that the defendant has improperly removed a case from state court. See, e.g., Lott v. Pfizer, Inc., 492 F.3d 789, 792 (7th Cir. 2007) (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)) ("[P]laintiffs are entitled to attorneys' fees under § 1447(c) . . . if the defendant 'lacked an objectively reasonable basis for seeking removal.'") Here, Defendant is the party that both removed the case in the first place, and now wants a remand. Defendant explains that it based its decision to remove the case to federal court on Plaintiff's representation that it incurred more than $100,000 in overbilling damages. During the course of discovery, however, Defendant claims to have learned that before Plaintiff ever filed this lawsuit, it had in its possession documentation proving that the total overbilling damages were always less than $40,000. Based on this information, Defendant seeks to remand the case to the Circuit Court for the Eighteenth Judicial Circuit, Du Page County, Illinois, and to recover its costs and fees incurred in connection with the removal.

A. Remand

"In removal cases based on diversity jurisdiction, the amount in controversy is determined based on the plaintiff's complaint at the time the notice of removal is filed." Presnell v. Cottrell, Inc., No. 09-cv-656-JPG, 2009 WL 4923808, at *2 (S.D. Ill. Dec. 14, 2009). As a general rule, "nothing filed after removal affects jurisdiction." See also In re Burlington Northern Santa Fe Ry. Co., 606 F.3d 379, 380 (7th Cir. 2010). However, "[e]vents subsequent to removal that merely reveal whether the required amount was in dispute on the date of filing, rather than alter the current amount in controversy, can be considered in deciding what that original amount in controversy was." BEM I, L.L.C. v. Anthropologie, Inc., 301 F.3d 548, 552 (7th Cir. 2002).

The Seventh Circuit has explained that "[t]he amount in controversy in a diversity case is the stakes that the plaintiff or defendant alleges, and provided the allegation is not false to a 'legal certainty' the amount is taken as true for purposes of jurisdiction." Smoot v. Mazda Motors of Am., Inc., 469 F.3d 675, 677 (7th Cir. 2006). In other words, a number stated in the complaint controls "unless [the plaintiff's] recovering that amount [in the litigation] would be legally impossible." Id. (quoting Rising-Moore v. Red Roof Inns, Inc., 435 F.3d 813, 815-16 (7th Cir. 2006)).

The facts in this case demonstrate that at the time of removal, Plaintiff could not legally have recovered more than $38,846.98 from Defendant. Plaintiff terminated its relationship with Defendant effective November 30, 2007, before it filed this suit in February 2008. (Doc. 77-5, at 2.) At that point, Plaintiff's damages for breach were fixed and complete. Specifically, Plaintiff had incurred all possible overbillings, totaling $139,444.44, but had also received refunds for all but $38,846.98 of that amount. (Doc. 74, Exs. E, F.) Plaintiff speculates that there could have been additional overbillings, but in fact there were not. It thus was legally impossible for Plaintiff ever to recover more than $38,846.98, well below the jurisdictional amount, even if the company won on the merits. See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938) (if it was "apparent, to a legal certainty, that [Plaintiff] never was entitled to recover th[e] amount [claimed], . . . the suit will be dismissed.")

Where, as here, the court discovers that it does not have jurisdiction over the case, the appropriate recourse is to remand the case to state court. See, e.g., Wald v. Brink's Inc., No. 2:10-CV-00075-WCL-APR, 2010 WL 2608990, at *1 (N.D. Ind. June 25, 2010) ("If the ...

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