Jackson County Bank v. Mathew R. DuSablon

Jackson County Bank sued its former

employee, Mathew R. DuSablon, in Indiana state court, asserting

various state law claims, including theft of property

and breach of contract. Following his unsuccessful motion to

dismiss, DuSablon removed the case to federal court. The district

court remanded the case to state court for want of jurisdiction

and untimely removal and further ordered DuSablon

2 No. 18-2809

to pay the costs and fees for the wrongful removal. DuSablon

now appeals the remand order and the district court’s imposition

of sanctions. We dismiss the appeal of the district

court’s remand order and affirm its award of costs and fees.

I. Background

Jackson County Bank (“JCB”) is an Indiana state-chartered

bank. Although not a registered broker-dealer, JCB had a

third-party agreement with INVEST Financial Corporation, a

registered broker-dealer, to offer securities to JCB customers.

Mathew R. DuSablon, who resides in Indiana, began

working for JCB in 2007. In July 2017, JCB assigned DuSablon

to assist the bank in identifying and establishing an investment

business with a new third-party broker-dealer. DuSablon,

however, failed to perform his job and abruptly resigned

on January 8, 2018. JCB thereafter learned that DuSablon

had transferred customers’ accounts from JCB’s former

third-party broker-dealer, INVEST, into his own name and

had started a business to compete with JCB.

On February 28, 2018, JCB filed suit in Indiana state court,

seeking a preliminary injunction and asserting state-law

claims against DuSablon, including violation of the Indiana

Uniform Trade Secrets Act, breach of contract, breach of fiduciary

duty, tortious interference, unfair competition, civil conversion,

and computer trespass. DuSablon moved to dismiss,

arguing with references to federal law that JCB is an unlicensed

broker-dealer and therefore lacks standing to enforce

its rights in the information at issue; and that Financial Industry

Regulatory Authority, Inc. (“FINRA”) rules bar the suit.

JCB responded that it had standing and is not subject to

FINRA rules. The court denied the motion on April 20, 2018.

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Days later, on May 2, 2018, DuSablon removed this case to

the United States District Court for the Southern District of

Indiana, asserting that the federal district court “has exclusive

jurisdiction pursuant to 15 U.S.C. § 78aa and the Securities

and Exchange Act of 1934.” Acknowledging that JCB did not

plead a federal claim, DuSablon contended that JCB’s response

to his motion to dismiss in state court “raises a federal

question as all of [JCB’s] claims against [DuSablon] rest upon

the legality of direct participation in the securities industry

which is determined and regulated by the [Securities] Act.”

On May 11, 2018, JCB moved to remand for lack of jurisdiction,

and also argued, among other things, that DuSablon

used the removal statute inappropriately to postpone preliminary

injunction proceedings in state court and “run the

clock” on his non-compete. The district court granted the motion,

concluding that it lacked jurisdiction and that the removal

was untimely. The district court accordingly remanded

the case to state court and additionally ordered DuSablon to

pay JCB costs and fees of $9,035.61 under 28 U.S.C. § 1447(c).

II. Discussion

DuSablon appeals the district court’s remand and sanctions

orders. JCB, for its part, requests additional costs and

fees under § 1447(c) for its defense of this appeal.

DuSablon challenges the district court’s order remanding

this case to state court. But “[a]n order remanding a case to

the State court from which it was removed is not reviewable

on appeal or otherwise,” subject to exceptions not pertinent

here. 28 U.S.C. § 1447(d); see also PNC Bank, N.A. v. Spencer,

763 F.3d 650 (7th Cir. 2014) (per curiam). We therefore dismiss

this aspect of DuSablon’s appeal for lack of jurisdiction. See

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Adkins v. Illinois Cent. R.R. Co., 326 F.3d 828, 834 (7th Cir. 2003)

(“[T]he rule of nonreviewability … in § 1447(d) means that

even remands based on an erroneous belief in the lack of federal

subject matter jurisdiction cannot be reviewed….”).

DuSablon next challenges the district court’s award of

costs and fees to JCB pursuant to 28 U.S.C. § 1447(c). This we

can review. See, e.g., Garbie v. DaimlerChrysler Corp., 211 F.3d

407, 409–10 (7th Cir. 2000) (holding that an appellate court has

jurisdiction to review sanctions under § 1447(c)). Under

§ 1447(c), “‘[a]n order remanding a removed case to state

court ‘may require payment of just costs and any actual expenses,

including attorney fees, incurred as a result of the removal.’”

Martin v. Franklin Cap. Corp., 546 U.S. 132, 134 (2005)

(quoting 28 U.S.C. § 1447(c)). A district court may award fees

under § 1447(c) where “the removing party lacked an ‘objectively

reasonable basis’” for seeking removal. Wolf v. Kennelly,

574 F.3d 406, 411 (7th Cir. 2009) (quoting Martin, 546 U.S. at

141). Sanctions may be awarded when removal is clearly improper,

id., but not necessarily frivolous, Martin, 546 U.S. at

138–40 (further explaining the rationale for fee-shifting in appropriate

cases).

We review a district court’s decision to award sanctions

for abuse of discretion. See Wolf, 574 F.3d at 410. And here, we

find no abuse of discretion, as we agree that DuSablon lacked

an objectively reasonable basis to remove this case to federal

court. The impropriety of removal, as the district court observed,

was “not a close question.” JCB did not plead any federal

claim nor is any federal question apparent from the face

of its complaint. See Bastien v. AT&T Wireless Servs, Inc., 205

F.3d 983, 986 (7th Cir. 2000). The complaint is based entirely

on state law and any potential federal defense cannot form the

No. 18-2809 5

basis for removal. See Caterpillar Inc. v. Williams, 482 U.S. 386,

392 (1987); Studer v. Katherine Shaw Bethea Hosp., 867 F.3d 721,

723 (7th Cir. 2017).

DuSablon nonetheless argues that JCB’s state law claims

involve significant questions of federal securities laws. But

DuSablon cannot manufacture a basis for removal by injecting

federal issues into a case under these circumstances. See

Panther Brands, LLC v. Indy Racing League, LLC, 827 F.3d 586,

589 (7th Cir. 2016) (holding in a breach of contract action that

an allegation that a defendant violated federal statutes is insufficient

to create subject-matter jurisdiction). This is particularly

so because, as the district court observed, DuSablon

cited no cases supporting his position nor attempted to apply

controlling law, namely Grable & Sons Metal Prods., Inc. v. Darue

Eng’r & Mfg., 545 U.S. 308, 314–15 (2005) (invoking federal

jurisdiction over state law claim to quiet title to property

seized by federal government where the validity of the seizure

was “the only legal or factual issue[] in the case”).

Other considerations support the district court’s exercise

of discretion. The first is the court’s finding that “DuSablon’s

conduct in defending the motion to remand” suggested that

“removal was undertaken at least in part to delay a resolution

of the noncompete issues to his benefit and to allow for a second

bite at the apple after losing his motion to dismiss in state

court.” We see no clear error in this finding. The second consideration

is the untimeliness of DuSablon’s removal. Despite

his claimed ignorance of the supposed substantial federal

question until JCB responded to his motion to dismiss, DuSablon’s

motion itself raised many issues of federal law. The district

court properly determined that DuSablon was or should

6 No. 18-2809

have been aware of his asserted grounds for removal more

than 30 days prior to his notice of removal.

Accordingly, the district court did not abuse its discretion

in determining that DuSablon lacked an objectively reasonable

basis to remove the case to federal court.

Finally, JCB requests an award of costs and fees incurred

in defending this appeal.1 “[L]itigants who receive an award

of fees in the district court under § 1447(c) automatically receive

reimbursement for the expense of defending that award

on appeal.” MB Fin., N.A. v. Stevens, 678 F.3d 497, 500 (7th Cir.

2012). JCB is therefore “entitled to an award of ‘legal fees for

the cost of work reasonably performed in defense of the district

court’s decision.’” PNC Bank, 763 F.3d at 655 (quoting

M.B. Fin., 678 F.3d at 500). JCB has fourteen days from the date

of this decision to submit a statement of fees. DuSablon will

have fourteen days to respond.



* * *



1In its brief, JCB also requests fees under Federal Rule of Appellate

Procedure 38. But JCB did not file a separate motion under Rule 38, so we

deny its request. See Vexol, S.A. de C.V. v. Berry Plastics Corp., 882 F.3d 633,

638 (7th Cir. 2018) (denying request for sanctions where party did not submit

a “‘separately filed motion’” for sanctions) (quoting FED. R. APP. P. 38).

We DISMISS the appeal of the district court’s remand order

and AFFIRM its award of costs and fees.