Amount In Controversy In Lawsuit Challenging Arbitration Award Includes The Full Matter At Stake In The Arbitration

If a defendant removes a case to federal court but the plaintiff successfully moves to remand the case, 28 U.S.C. § 1447(c) provides that a district court "may require payment of just costs and any actual expenses, including attorney fees, incurred as the result of the removal."

In Sirotsky v. New York Stock Exchange, No. 02-3240, 2003 WL 22442988 (7th Cir. Oct. 29, 2003), as the losing party in an NYSE arbitration, plaintiff was ordered by the arbitrators to pay the NYSE's $4,800 arbitration fee. Plaintiff sued her opponent and the NYSE in Illinois state court to vacate that order on the ground that her opponent's lawyer was not licensed to practice in Illinois. Defendant believed plaintiff was litigating both over the $4,800 fee and over the original arbitration in which she sought $242,000, and therefore removed on diversity grounds. The court determined that only the $4,800 fee was at stake, and remanded based on failure of the jurisdictional minimum. Plaintiff then asked for an award of attorneys' fees under § 1447(c), but the district court denied the motion.

On appeal, for the first time in the case, plaintiff clarified that she only was litigating over the $4,800 fee. However, the Seventh Circuit held that it was reasonable for defendant to assume that plaintiff would not have made a federal case out of the fee award alone, and had the right to assume plaintiff was intending to reopen the arbitration. As such, the amount in controversy in any new arbitration proceeding that plaintiff hoped to commence would have been the original $242,000. Thus, it was clear at the time of removal that defendant properly removed a case with an amount in controversy exceeding $75,000.

Regarding the denial of attorneys' fees, the Seventh Circuit found no abuse of discretion. It clarified that although the statue does not set forth the criteria for awarding fees and costs, the cases are in agreement that the plaintiff must show that removal was improper and need not establish that defendant acted in bad faith. Furthermore, the court noted that the Seventh Circuit has taken the further step of holding that, provided removal was improper, there is a rebuttable presumption that the plaintiff is entitled to an award of fees, as under standard fee-shifting statutes. Here, the removal itself was not even improper.