Appeals from the United States District Court for the Central District of California. D.C. No. CV-93-03109-CBM. Consuelo B. Marshall, District Judge, Presiding.
Before: John T. Noonan, Jr., Diarmuid F. O'Scannlain, and Edward Leavy, Circuit Judges. Opinion by Judge Leavy; Dissent by Judge O'Scannlain.
In this case we are called upon to decide whether a district court has discretion to award attorneys' fees to a contingency fee litigant under 28 U.S.C. § 1447(c).
The issues before us arose out of procedural maneuverings that took place at the outset of this litigation. On March 12, 1993, Marsha Gotro filed an amended complaint in the Superior Court for Orange County, California, alleging employment-related claims against several defendants. On May 28, some of the named defendants removed the action to federal court. On June 1, in order to protect her position, Gotro filed a Demand for Jury Trial in the district court. On June 17, Gotro filed a Motion to Remand to the State Court; on the same day, some of the named defendants moved to dismiss some of the claims. On June 28, Gotro filed her opposition to the dismissal.
On July 12, the district court held a hearing on the Motion to Remand and concluded that the case had been improvidently removed. Consequently, the court ordered a remand to the state court. The order also awarded Gotro her costs and attorneys' fees incurred as a result of the removal, pursuant to 28 U.S.C. § 1447(c).
On August 5, Gotro's attorneys submitted an affidavit detailing the attorneys' fees and costs incurred in preparing the Motion to Remand, the Opposition to the Motion to Dismiss, and the Bill of Costs. The affidavit totalled costs and fees at $13,564.05.
The defendants then filed an Opposition contending that there was no evidence before the court to establish that Gotro herself had incurred the attorneys' fees detailed in the affidavit. The defendants deposed Gotro on this matter and determined that Gotro had hired her attorneys on a contingent fee basis - that is, if Gotro recovered any damages from the defendants, then she was obligated to pay a percentage of those damages to her attorneys and that she was not obligated to pay any attorneys' fees if she failed to recover damages. With respect to any statutory attorneys' fees that she might recover, Gotro's fee agreement provides:
Statutory Fees and Sanctions: I understand that all attorney fees that may be recovered from defendants, by settlement or litigation, pursuant to any law . . . shall belong to the attorney. I understand that any sanctions awarded by the court to client and or his attorney in this matter shall belong to the Attorney in return for his efforts related to the hearing or motion which such sanctions are awarded.
The district court awarded Gotro the $13,564.05 she requested. The defendants moved for sanctions under Rule 11 of the Federal Rules of Civil Procedure, on the ground that Gotro's attorneys misrepresented to the court that their client had incurred the attorneys' fees when she had not. The district court denied the motion.
The defendants appeal both the district court's award of attorneys' fees and its refusal to impose Rule 11 sanctions.
Section 1447(c) of Title 28, U.S.C.,*fn1 provides a vehicle whereby a litigant may obtain a remand of a case to state court when the case has been improperly removed. In the 1988 amendments to this statute, Congress added the provision that "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." The defendants maintain that this statutory language precludes a ...