Removing Party's Request To Realign Co-Defendant As Plaintiff To Allow Removal Was Improper Under The Circuit's "Clearly Established" Law - Remand Order Should Have Considered A Fee Award
WOLF v. KENNELLY (July 23, 2009)
Ford Kennelly, an Indiana citizen, received a $1.3 million arbitration award, jointly and severally, against commodities brokers Rosenthal Collins Group ("RCG") and Ken Wolf. Wolf filed a petition to vacate in state court. He included a request for declaratory relief against RCG, alleging that RCG had made a demand for indemnity against him. Kennelly removed the petition to federal court and asked that RCG be realigned as a petitioner. RCG was an Illinois citizen. Its presence as a defendant prevented removal. Wolf moved to remand, opposing the realignment of RCG. Several months later, the parties discovered that one of RCG's limited partners was an Indiana citizen. Since Kennelly was also an Indiana citizen, diversity would be destroyed if RCG was realigned as a petitioner. The district court granted the motion to remand. The court then denied Wolf's request for attorneys' fees, concluding that the case was an exceptional one not warranting a fee award. Wolf appeals.
In their opinion, Judges Bauer, Flaum and Kanne reversed and remanded. The Court first rejected Wolf's argument that the court's brief minute order, without much discussion or analysis, was an abuse of discretion. The Court noted that the issue had been fully briefed and the judge explained his rationale on the record, although not repeating it in the minute order. On the merits, the Court concluded that Wolf did not have an objectively reasonable basis for seeking removal. The "objectively reasonable basis" standard is similar to the qualified immunity doctrine. A district court may award fees if "clearly established" law prevents removal. At the time Kennelly sought removal, the long-standing precedent in the circuit was that realignment of a party was improper if an actual and substantial controversy existed between the plaintiff and that party. The fact that Wolf and RCG shared an interest in escaping liability altogether did not justify the realignment. The Court remanded for consideration of the fee petition.
