North Carolina Business Litigation Report

Fourth Circuit Holds That Attorneys Can't Be Assessed With Fees For Improperly Removing A Case To Federal Court

If an attorney improperly removes a case to federal court, the Fourth Circuit concluded today in In re Crescent City Estates, LLC that he or she can't be liable for attorneys' fees. The Court interpreted 28 U.S.C. §1447(c), which says that "[a]n order remanding the case may require payment of just costs and and any actual expenses, including attorneys fees, incurred as a result of the removal." It held that this statute allows fees to be imposed only on parties, not their counsel.

The issue was whether the silence in the statute on the power to assess fees on attorneys should be read to allow it. The Appellants said that the lack of mention in the statute as to counsel was the equivalent of Congressional permission, but Judge Wilkinson held that  "the proper presumption is that when a fee-shifting statute does not explicitly permit a fee award against counsel, it prohibits it."

The Court premised its decision on the American Rule, which provides that "the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser."  It referred to the Rule as "a longstanding legal principle" and said that it was the Court's "duty to keep the American Rule intact."

The potential chilling effect of imposing fees on counsel was a fundamental part of the Court's decision.  It held that "holding counsel responsible under §1447(c) could begin to transform what it means to practice law. A lawyer should not be required to risk personal liability merely for acting in a representational capacity or for seeking to place a client in a more favorable litigation posture."

The Court observed that in an exceptional case, a "particularly blameworthy" removal could result in an imposition of fees on the attorney under Rule 11 or 28 U.S.C. §1927. 

The Fourth Circuit said that it is only the only Circuit Court to address whether fees can be assessed on counsel under the removal statute, and it observed that the district courts considering the issue "are badly divided."

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Mack Sperling
Brooks Pierce, LLP
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