Milani Construction, LLC v. Creative Concepts Group, Inc. ( 2020 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
MILANI CONSTRUCTION, LLC,
Plaintiff,
v.
Civil Action No. 19-3669 (TJK)
CREATIVE CONCEPTS GROUP, INC.
et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
This case illustrates why Congress provided for recovery of attorneys’ fees under 28
U.S.C. § 1447(c) when a party removes a case to federal court without a reasonable basis for
doing so. The parties litigated this matter in the Superior Court of the District of Columbia for
nearly two years, and Milani Construction, LLC secured a final judgment against Creative
Concepts Group, Inc. On the eve of a hearing related to the satisfaction of that judgment, a third
party—the sole member of which is Creative’s President, see ECF No. 1 at 3—filed a notice of
removal that brought the litigation to a standstill. Before the Court is Milani’s motion to remand
and request for attorneys’ fees, ECF No. 5. The parties agree that the case must be remanded
because diversity jurisdiction is lacking, but they disagree on whether an award of costs and
expenses, including attorneys’ fees, is warranted. Section 1447 seeks “to deter removals sought
for the purpose of prolonging litigation and imposing costs on the opposing party.” Martin v.
Franklin Capital Corp., 546 U.S. 132, 140 (2005). Because the third party’s dilatory maneuver
had no reasonable basis, the Court will remand the case and award Milani the costs and expenses
it incurred as a result of the improper removal.
Background
Milani sued Creative, its contractor, and Creative’s President, Bryan Neumann, in
Superior Court in December 2017. See ECF No. 1-3 (“Compl.”) at 1–2. Milani alleges that
Creative failed to reimburse a steel subcontractor after Milani paid Creative for the steel. Id. at
2–5. The Superior Court judge granted Milani’s Motion for Partial Summary Judgment as to its
breach of contract claim against Creative. See ECF No. 1-6. After Milani dismissed its claim
against Neumann with prejudice in April 2019, the judge entered final judgment in Milani’s
favor in the amount of $393,623.30. Id.In June 2019, Milani moved for a writ of attachment under D.C. Code § 16-546 to satisfy
the judgment with funds due from a contract with a non-party, Fort Myer Construction Corp.
See ECF No. 5-1 at 2; ECF No. 6 at 1. But Fort Myer had not contracted with Creative Concepts
Group, Inc.—the defendant—but with another entity, Creative Concepts Group, LLC (“CCGI
LLC”). See ECF No. 5-1 at 1–2; ECF No. 6 at 1. The court held a hearing on November 26,
2019, to determine whether Creative and CCGI LLC were “all one and the same entity” and
whether there had been “a fraudulent conveyance” from Creative to CCGI LLC to avoid
Creative’s debt to Milani. ECF No. 6-1 at 1, Hrg. Tr. 6:8–10. The hearing was scheduled to
resume on December 10, 2019. Hrg. Tr. 69:1–5.
But on December 9, 2019—the day before the hearing was to continue—CCGI LLC filed
(1) an opposed motion to intervene, arguing that the LLC had an interest in the case because the
Superior Court “intended to sua sponte garnish funds owed to [CCGI LLC] under contracts it has
with Fort Myer Construction to satisfy a judgment entered against Creative,” ECF No. 1-2 at 1,
and (2) a notice of removal to this Court, citing diversity jurisdiction, ECF No. 1 at 2–3.
Needless to say, when CCGI LLC filed the notice of removal, the Superior Court judge had yet
to rule on the motion to intervene, although she denied it the next day. ECF No. 5-1 at 3. Milani
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now seeks to remand the case back to Superior Court and recover its costs and attorneys’ fees in
litigating the remand; it argues that removal was improper because (1) the parties are not diverse
and (2) CCGI LLC, the removing party, was not a defendant in the Superior Court action, as is
required. ECF No. 5.
Legal Standards
A “defendant or the defendants” may remove an action brought in state court if the
federal court has original subject matter jurisdiction. 28 U.S.C. § 1441(a). Diversity jurisdiction
exists where the amount in controversy exceeds $75,000 and the action involves citizens of
different states, 28 U.S.C. § 1332(a), meaning that “no plaintiff may share state citizenship with
any defendant.” CostCommand, LLC v. WH Adm’rs, Inc., 820 F.3d 19, 21 (D.C. Cir. 2016). The
citizenship of a limited liability company is determined by the citizenship of each member of the
limited liability company. Id.“[T]he case shall be remanded” if the district court lacks subject matter jurisdiction. 28
U.S.C. § 1447(c). Upon a plaintiff’s motion to remand for “lack of subject matter jurisdiction,
the defendant bears the burden of establishing that federal subject matter jurisdiction exists.”
Busby v. Capital One, N.A., 932 F. Supp. 2d 114, 127 (D.D.C. 2013). The plaintiff may also
obtain “payment of just costs and any actual expenses, including attorney fees, incurred as a
result of the removal,” 28 U.S.C. § 1447(c), if “the removing party lacked an objectively
reasonable basis for seeking removal.” Knop v. Mackall, 645 F.3d 381, 382 (D.C. Cir. 2011)
(quoting Martin, 546 U.S. at 141). “Conversely, when an objectively reasonable basis exists,
fees should be denied.” Martin, 546 U.S. at 141.
Analysis
The parties agree that the Court lacks diversity jurisdiction over this suit between
Maryland corporations. See ECF No. 5-1 at 3–4, 7; ECF No. 6 at 2; CostCommand, 820 F.3d at
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21. There is therefore no dispute on the issue of remand. Under the statute, the Court must
remand the case for lack of subject matter jurisdiction. 28 U.S.C. § 1447(c).
The remaining issue is Milani’s request for costs and expenses relating to the removal,
which turns on whether CCGI LLC had an objectively reasonable basis for removing the suit
from Superior Court. The Court holds that, even if CCGI LLC reasonably (but mistakenly)
believed that the parties were diverse, see ECF No. 6 at 2, it lacked an objectively reasonable
basis to remove the case because it was not a defendant when it did so. 28 U.S.C. § 1441(a); see
Home Depot U.S.A., Inc. v. Jackson, 139 S. Ct. 1743, 1746 (2019) (“[I]n the context of the[]
removal provisions the term ‘defendant’ refers only to the party sued by the original plaintiff.”);
cf. MPAC, LLC, v. D.C., 181 F. Supp. 3d 81, 83 (D.D.C. 2014), aff’d sub nom. MPAC, LLC v.
D.C. Alcoholic Beverage Regulation Admin., No. 14-7090, 2014 WL 4628997 (D.C. Cir. Aug.
11, 2014) (“Because federal courts are courts of limited jurisdiction, removal statutes are strictly
construed.”). Indeed, Milani only sued Creative Concepts Group, Inc., ECF No. 1-3, and CCGI
LLC concedes that it is “a separate and legally distinct entity from Inc.,” ECF No. 6 at 1, that was
never “served with any process or other summons” in the case, ECF No. 1-2 at 1.
CCGI LLC offers two theories about why it was a defendant under 28 U.S.C. § 1441(a)
when it removed the case. To avoid having to pay attorneys’ fees and costs, of course, it need
only show that it had an objectively reasonable basis to believe that it was a defendant. But
neither of its theories passes even that modest bar.
In its notice of removal, CCGI LLC suggests that it became a defendant on December 9,
2019, when it moved to intervene. ECF No. 1 at 1. But at that point, of course, the Superior
Court judge had not granted the motion, and in fact she denied it the next day. See ECF No. 5-1
at 3. For a party seeking to intervene as a defendant and remove a case to federal court, “the
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intervention must precede the removal.” 14C Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 3730 (4th ed. 2014). And those circuits that have considered the
question have uniformly held that “until a third party’s motion for leave to intervene is granted, a
case cannot be properly removed” by that party.1 Wellmark Inc. v. Chicoine, Nos. 18-90018-Q,
18-90019-Q, 2019 U.S. App. LEXIS 966, at *25 (11th Cir. Jan. 10, 2019) (per curiam); see, e.g.,
MB Fin., N.A. v. Stevens, 678 F.3d 497, 499 (7th Cir. 2012) (motion to intervene “proposing to
become a party” insufficient for removal without first “wait[ing] for the state court’s decision on
[the] motion” to intervene); Vill. of Oakwood v. State Bank and Tr. Co., 481 F.3d 364, 369 n.3
(6th Cir. 2007) (party could not remove case “before the state court had an opportunity to act on
[its] motion to intervene”). CCGI had no objectively reasonable basis to conclude that the mere
filing of its motion to intervene caused it to become a defendant for removal purposes. And that
it simultaneously removed the case before the hearing the next day suggests that its purpose was
simply to delay the Superior Court proceedings.
Later, in its response to Milani’s motion to remand, CCGI LLC argues instead that it
became a defendant on December 10, 2019, when the Superior Court continued the hearing,
because that hearing was “a new proceeding” against CCGI LLC that threatened to attach its
property. ECF No. 6 at 1. That theory fails for several reasons. First, CCGI LLC filed its notice
of removal on December 9, 2019, see ECF No. 1, so even under that theory it was not a
defendant until the day after it removed the case. Second, CCGI LLC offers no reason why the
purported “new proceeding” began on December 10, 2019, instead of November 26, 2019, when
the Superior Court first “indicated from the bench that it would garnish monies owed to” CCGI
LLC. ECF No. 1 at 1. Indeed, if November 26, 2019, was a “new proceeding” in which CCGI
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The D.C. Circuit does not appear to have considered the question.
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LLC was a defendant for removal purposes, it would have had no reason to move to intervene a
couple of weeks later, ECF No. 5-2.
Third, regardless of the hearing’s timing, CCGI LLC is wrong that the hearing made it
“effectively . . . a party to the case,” ECF No. 6 at 1, such that it could remove it. For that
proposition, CCGI LLC cites two cases from outside this Circuit that are readily distinguishable;
the litigants that removed those cases were actually—as opposed to “effectively”—parties to
them. See ECF No. 6 at 1–2. In both Jackson-Platts v. GE Capital Corp., 727 F.3d 1127 (11th
Cir. 2013), and Travelers Prop. Cas. v. Good, 689 F.3d 714 (7th Cir. 2012), the court held that a
supplemental proceeding intended to satisfy a judgment was an “independent civil action” that
could be removed “because it seeks to impose new liability on new parties founded on wholly
new legal theories.” Jackson-Platts, 727 F.3d at 1131–32, 1139; Travelers, 689 F.3d at 725. But
even so, in Jackson-Platts, the court had granted the plaintiff’s motion to add the removing party
“as a new defendant to the underlying action,” 727 F.3d at 1132 (cleaned up). Similarly, in
Travelers, the plaintiff had filed a separate action against the removing party, 689 F.3d at 717.
Nothing of the sort happened here. CCGI LLC was not a party to the Superior Court case or any
ancillary proceeding.2 For that reason, it lacked an objectively reasonable basis to believe that it
was entitled to remove the case under 28 U.S.C. § 1441(a).
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District of Columbia law provides a procedure for third parties like CCGI LLC to protect their
property, but it appears that procedure—which could be construed as a supplemental or ancillary
proceeding—is available only after a court has attached the property. See D.C. Code § 16-551(“garnishee or stranger to the action” may “make claim to the property attached” by filing “an
answer defending against the attachment”). The Superior Court judge cited the availability of
that subsequent procedure as a reason she conducted the hearing, even in CCGI LLC’s absence,
to determine whether to attach funds due from the Fort Myer contract. See Hrg. Tr. 5:24–6:17,
46:22–47:4, 63:6–10, 67:11–19, 69:17–70:11. But at the time of removal, the judge had not
attached CCGI LLC’s property, nor had CCGI LLC filed an answer defending against
attachment.
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Conclusion and Order
For all these reasons, Plaintiff’s Motion to Remand and Request for Attorneys’ Fees,
ECF No. 5, is GRANTED. It is hereby ORDERED that this case shall be remanded to the
Superior Court of the District of Columbia. It is further ORDERED that:
1. CCGI LLC shall pay Plaintiff the costs and expenses it incurred as a result of its improper
removal of the case to this Court in an amount to be determined by the Court;
2. By February 21, 2020, Plaintiff shall file an itemized list of costs and expenses arising
from CCGI LLC’s improper removal;
3. By February 28, 2020, CCGI LLC may file a response to Plaintiff’s list, not to exceed
five pages in length, addressing the appropriate calculation of the compensatory sum
owed to Plaintiff; and
4. The Clerk of Court shall mail a copy of this Memorandum Opinion and Order to the
Clerk of the Superior Court.
SO ORDERED.
/s/ Timothy J. Kelly
TIMOTHY J. KELLY
United States District Judge
Date: February 6, 2020
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