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Date: 02-07-2019

Case Style:

Jackson County Bank v. Mathew R. DuSablon

Case Number: 18-2809

Judge: St. Eve

Court: United States Court of Appeals for the Seventh Circuit on appeal from the Southern District of Indiana (Marion County)

Plaintiff's Attorney: Phillip J. Fowler, Debra Ann Mastrian and Phillip J. List

Defendant's Attorney: W. Brent Gill and Jason M. Smith

Description:





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.
No. 18-2809 3
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
4 No. 18-2809
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).

Outcome: We DISMISS the appeal of the district court’s remand order
and AFFIRM its award of costs and fees.

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Defendant's Experts:

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