Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Colo.: Quizno’s franchisees denied attorney fees because franchisor’s remand request could not be deemed unreasonable, (Jul 12, 2013)

By Peter Reap, J.D., LL.M.

The request for attorney fees of several Quizno’s sandwich shop franchisees (the “Plaintiffs”) who filed suit against the franchisor QFA Royalties LLC, several of its related entities, and certain individuals (collectively, the “Defendants”) was denied because, although the Defendants’ attempt to remove the lawsuit to federal court was ultimately unsuccessful, it could not be said that the attempt was unreasonable, the federal district court in Denver has determined (MB Light House Inc. v. QFA Royalties LLC, July 9, 2013, Arguello, C.).

The Plaintiffs filed their Complaint in the Denver District Court on December 19, 2012. The Plaintiffs alleged 28 claims for relief under Colorado statutes and common law, including violations of the Colorado Organized Crime Control Act, violations of the Colorado Consumer Protection Act, breach of contract, unjust enrichment, fraud, conspiracy, and negligent misrepresentation. That same day, nine other groups of Quiznos’ franchisees filed similar complaints in Denver District Court.

On January 31, 2013, Defendant Patrick E. Meyers removed this case, and the other nine similar cases, to federal court based upon federal question subject-matter jurisdiction. On February 8, Judge Brimmer of this District sua sponte entered an order remanding one of the ten cases back to Denver District Court.

On February 11, 2013, the Plaintiffs’ counsel asked Defendants’ counsel to withdraw their remaining nine notices of removal. Reasoning that one judge’s remand order did not “mean that the basis for removal is without merit,” the Defendants’ counsel refused.

The Plaintiffs next filed a motion to remand the instant case to state court, which was granted on February 13, 2013. The Plaintiffs then filed the instant motion, seeking attorney fees incurred in preparing the motion to remand.

Analysis. The Plaintiffs asked for an award of attorney fees and costs incurred as a result of the improper removal of this case, pursuant to 28 U.S.C. § 1447(c). In pertinent part, § 1447(c) states, “An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal,” the court noted.

Absent unusual circumstances, courts may award attorney fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. The Plaintiffs argued that removal was unreasonable as evidenced by sua sponte remands of the other cases; thus, they contended that the Defendants knew or should have known that their position was unreasonable and should have withdrawn their motion for removal. However, even if a similar case was sua sponte remanded, this indicated only that removal was not valid, not that it was also unreasonable, according to the court. Furthermore, the Plaintiffs’ temporal focus was misplaced—courts addressing the propriety of removal under § 1447(c) looked to whether removal was proper at the time the petition for removal was filed.

Thus, although ultimately unsuccessful, the court could not determine that the Defendants’ attempt to remove this case was unreasonable.

The case is Civil Action No. 13-cv-00263-CMA-CBS.

Attorneys: Jeffrey Cohen (Ballard Spahr, LLP) for MB Light House, Inc. Chantell LeAnn Marie Taylor (Hogan Lovells US LLP) for QFA Royalties LLC.

Companies: MB Light House, Inc.; QFA Royalties LLC.

Cases: FranchisingDistribution ColoradoNews