Facts
- Piper Jaffray & Co. (Piper), a Delaware corporation with its principal place of business in Minnesota, provides financial services, including in Madison, Wisconsin.
- Nina Severini and David Lehrer were citizens and residents of Wisconsin.
- On June 23, 2006, Piper filed an action against Severini and Lehrer in the U.S. District Court for the Western District of Wisconsin seeking injunctive relief, and it moved for a temporary restraining order (TRO) and a preliminary injunction.
- On June 26, 2006, before the scheduled federal hearing, Piper voluntarily dismissed that federal action under Federal Rule of Civil Procedure 41.
- Later on June 26, 2006, Piper filed a new action in Dane County Circuit Court seeking the same injunctive relief; the state-court complaint and requested relief were nearly identical to the earlier federal filing.
- On June 26, 2006, the state judge held a telephonic hearing and granted Piper’s TRO motion on the condition that Piper post a $300,000 bond, and set an evidentiary hearing for June 27, 2006.
- The TRO was not issued and the evidentiary hearing did not occur because, later on June 26, 2006, Severini and Lehrer filed a notice of removal to federal court based only on diversity jurisdiction under 28 U.S.C. § 1332 (no federal question was alleged).
- Piper moved to remand under the forum-defendant rule in 28 U.S.C. § 1441(b) and sought attorney’s fees and costs under 28 U.S.C. § 1447(c).
- After removal, Piper also sent a June 30, 2006 letter to the federal court requesting injunctive relief in the alternative, which defendants cited as a reason to deny remand.
Issues
- Whether removal based solely on diversity jurisdiction was barred by 28 U.S.C. § 1441(b) because the defendants were citizens of Wisconsin, the state where the action was brought.
- Whether Piper waived its right to seek remand (including by its earlier federal filing and dismissal, or by requesting injunctive relief after removal).
- Whether equitable doctrines such as judicial estoppel barred Piper from seeking remand after first choosing a federal forum.
- Whether Piper was entitled to attorney’s fees and costs under 28 U.S.C. § 1447(c) following remand.
Decision
- The court granted Piper’s motion to remand the action to Dane County Circuit Court.
- The court held that removal was improper under the forum-defendant rule because the case was removed solely on diversity grounds and both defendants were Wisconsin citizens.
- The court rejected defendants’ waiver argument, concluding Piper timely sought remand and did not forfeit its objection by its litigation choices, including the earlier Rule 41 dismissal and the post-removal request for injunctive relief.
- The court rejected judicial estoppel and related equitable arguments based on Piper’s initial federal filing, concluding those doctrines did not permit defendants to avoid the statutory limits on removal.
- The court awarded Piper its attorney’s fees and costs incurred as a result of removal under § 1447(c), finding defendants lacked an objectively reasonable basis to remove in light of the clear forum-defendant rule.
Legal Principles
- In a case removed solely under diversity jurisdiction, 28 U.S.C. § 1441(b) bars removal when a properly joined defendant is a citizen of the state in which the action is filed (the forum-defendant rule).
- A case may satisfy the requirements of diversity jurisdiction under 28 U.S.C. § 1332 yet still be nonremovable because § 1441(b) restricts removal by in-state defendants.
- A plaintiff does not waive a timely objection to improper removal merely by previously filing and voluntarily dismissing a similar federal action, or by seeking interim relief after removal while also requesting remand.
- Judicial estoppel generally requires a party to have prevailed on an earlier inconsistent position; a voluntary dismissal without a merits determination does not, standing alone, justify estoppel.
- Under 28 U.S.C. § 1447(c), when remand is ordered, a court may award costs and attorney’s fees incurred because of removal, and fees are appropriate when removal lacks an objectively reasonable basis.
Conclusion
Piper sued Wisconsin defendants for injunctive relief in Wisconsin state court after dismissing a prior federal action, and the defendants removed on diversity grounds; the federal district court held that § 1441(b) barred removal by in-forum defendants, rejected waiver and estoppel arguments tied to Piper’s earlier federal filing and post-removal conduct, remanded to Dane County Circuit Court, and ordered defendants to pay Piper’s fees and costs under § 1447(c) because the removal had no objectively reasonable basis.