Active Resources, Inc. v. Hagewood

District Court, S.D. West Virginia·Decided October 17, 2022·No. 2:22-cv-00172·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA

CHARLESTON DIVISION

ACTIVE RESOURCES, INC. and JON NIX,

Plaintiffs,

v. CIVIL ACTION NO. 2:22-cv-00172

JACK HAGEWOOD and GLACIER RESOURCES, LLC,

Defendants.

MEMORANDUM OPINION AND ORDER

The Court has reviewed the Plaintiffs’ Memorandum in Support of Attorney’s Fees (Document 23), the Defendants’ Response to Plaintiffs’ Memorandum in Support of Attorney’s Fees (Document 24), the Plaintiffs’ Reply in Support of Attorney’s Fees (Document 26), and all attached exhibits. For the reasons stated herein, the Court finds that the Plaintiffs are entitled to an award of attorney fees in the amount of $10,650.15. FACTS AND PROCEDURAL HISTORY On January 6, 2022, the Plaintiffs, Active Resources, Inc., and Jon Nix, filed a Petition to Enforce Settlement Agreement (“Complaint”) in the Circuit Court of Fayette County, West Virginia. (Document 1-1). On April 8, 2022, the Defendants, Jack Hagewood and Glacier Resources, LLC, removed the case to this Court, purportedly based on diversity jurisdiction. (Document 1). Plaintiff Active Resources, Inc., is a Delaware Corporation with its principal place of business in Tennessee, and Plaintiff Jon Nix is a citizen of Tennessee. (Document 1-1). There is no dispute that the Defendants are both citizens of West Virginia.1 (Document 1). Additionally, the alleged amount in controversy exceeds $75,000 (Document 1). Upon removal, the Defendants also filed a counterclaim against the Plaintiffs and added JJ Resources, LLC, a corporation related to the Plaintiffs, as a third-party defendant. On April 20,

2022, the Plaintiffs moved to remand this case to the state court citing the forum defendant rule and the alleged untimeliness of the Defendants’ removal. (Document 5). The case arises from the Defendants’ alleged violation of a settlement agreement on December 23, 2019, and Defendant Hagewood’s breach of his fiduciary duties. (Document 1-1). This alleged violation of the settlement agreement occurred in connection with a separate lawsuit pending in McDowell County, West Virginia, and is based on Defendant Hagewood signing an affidavit in that action2 (Document 1-2). In the Notice of Removal, the Defendants state that “[o]n or about the 10th day of January 2022, Defendants received service of the Summons and Complaint in the Circuit Court action via service on the West Virginia Secretary of State.” (Document 1). Further, it notes the addition of

what it initially referred to as a “Counterclaim Defendant” but appears more accurately to be a third-party claim against JJ Resources, LLC.3 (Document 1). The Notice of Removal did not allege any deficiencies in service or potential fraud in the joinder of any defendant.

1 The Defendants did not contest that they were residents of the forum state. Instead, they contested whether they were properly joined and served as required by the removal statute.

2 Defendant Hagewood serves as the agent of Glacier Resources, LLC, but Glacier Resources was not specifically a party to the affidavit. While Glacier Resources was not a party to the affidavit, the affidavit includes language indicating Mr. Hagewood was acting partially in a representative capacity for Glacier Resources, LLC. At the end, the affidavit states, “[e]ntering into this agreement is not intended to be, nor shall it be construed to be, an admission of guilt against Jack Hagewood nor Glacier Resources, LLC.” (Document 1-2).

3 JJ Resources, LLC is a Delaware corporation with its principal office in Tennessee. (Document 1). 2 On June 29, 2022, this Court issued a Memorandum Opinion and Order (Document 20) remanding this matter to the Circuit Court of Fayette County, West Virginia, but retained jurisdiction over the dispute regarding a potential award of attorney’s fees. The Court found that questions remained regarding the appropriateness of attorney’s fees and instructed the Plaintiffs to

file a memorandum regarding the appropriateness and amount of fees if they still wished to pursue the same. The Plaintiffs subsequently filed the Plaintiffs’ Memorandum in Support of Attorney’s Fees (Document 23) seeking an award of $10,678.50. The Defendants filed the Defendants’ Response to Plaintiffs’ Memorandum in Support of Attorney’s Fees (Document 24) disputing the appropriateness of the attorney’s fees generally, and alternatively arguing that the proposed fees are unreasonable. The Plaintiffs filed the Plaintiffs’ Reply in Support of Attorney’s Fees (Document 26), providing additional support for their request, disputing the Defendants’ contentions, and adding a request for an additional $1,155 in fees for preparing the Reply.

DISCUSSION The Plaintiffs seek attorney’s fees incurred in connection with the improper removal of this action. They argue that the Defendants lacked an objectively reasonable basis for seeking removal based on where each Defendant is domiciled and because the removal was untimely. The Defendants argue that despite the Court’s determination that the removal was improper, attorney’s fees are unwarranted because there is no evidence of bad faith on their part and their arguments were objectively reasonable even if the Court ultimately disagreed with the substantive merit.

Further, they argue that the Plaintiffs are engaged in gamesmanship and the Defendants’ counterclaim against the Plaintiffs demonstrates the Plaintiffs’ bad faith in this action.

3 The procedure for determining the appropriateness of an award for attorney’s fees following removal and remand is governed by 28 U.S.C. § 1447(c). It states, in pertinent part, that “[a]n order remanding the case may require payment of just costs and any actual expenses including attorney's fees, incurred as a result of removal.” 28 U.S.C. § 1447(c). The Fourth

Circuit has held that 28 U.S.C. § 1447(c) “provides the district court with discretion to award fees when remanding a case” where it finds such awards appropriate. In re Lowe, 102 F.3d 731, 733 n.2 (4th Cir. 1996). A court does not “abuse its discretion in denying party's motion for attorney fees incurred as result of removal of action which was remanded to state court where there was no evidence of bad faith on part of parties, and it was not obvious that federal jurisdiction in action was lacking.” Id. The Supreme Court has held that “[a]bsent unusual circumstances, courts may award attorney’s fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees should be denied.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005).

Here, the Defendants lacked an objectively reasonable basis for removal, and have compounded the issue repeatedly throughout their briefing. Accordingly, given the misapplication of clearly established law, and the consistent efforts to misdirect the Court as to the purported basis for removal, the Court finds that no objectively reasonable basis existed, and the Plaintiffs are entitled to an award of attorney’s fees. Initially, as discussed at length in the June 29, 2022 Memorandum Opinion and Order (Document 20), and incorporated herein, the purported basis for removal rested on a deeply flawed theory that ran counter to established precedent.

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Active Resources, Inc. v. Hagewood, (S.D.W. Va. 2022).

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