CMGRP, Inc. v. Agency for the Performing Arts, Inc., 689 F. App'x 40

Background

CMGRP sued APA and three employees (including Sheila Munguia) in New York state court for breach of a non-solicitation agreement after Munguia began working for APA and allegedly solicited CMGRP clients.
Defendants removed the action to federal court, asserting diversity jurisdiction by alleging Munguia was fraudulently joined (i.e., non-diverse and improperly sued).
CMGRP moved to remand; the district court granted remand and awarded CMGRP costs and attorneys’ fees under 28 U.S.C. § 1447(c).
Defendants appealed only the award of fees and costs.
The Second Circuit reviewed the fee award for abuse of discretion and considered whether defendants had an objectively reasonable basis for removal (fraudulent joinder claim).
The Second Circuit affirmed the remand and fee award, but denied CMGRP’s request for appellate attorney’s fees under § 1447(c) (granting costs under Fed. R. App. P. 39 instead).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether removal was objectively reasonable (fraudulent joinder)	CMGRP argued Munguia was properly joined and plead a plausible breach-of-contract claim based on a signed non-solicitation agreement and alleged solicitation/damages	Defendants argued Munguia was fraudulently joined so diversity jurisdiction existed; relied on affidavits and argued the covenant was overbroad	Held: Removal lacked an objectively reasonable basis; district court did not abuse discretion in awarding fees under § 1447(c)
Whether affidavits overcoming complaint defeat joinder	CMGRP argued pleadings must be accepted as true on motion to dismiss; defendants’ affidavits cannot resolve at removal stage	Defendants relied on affidavits to show impossibility of recovery against Munguia	Held: Affidavits do not negate the complaint for fraudulent-joinder analysis; CMGRP could plausibly state a claim
Whether overbroad covenant makes claim impossible	CMGRP argued even if covenant breadth is disputed, factual issues remain and New York law allows partial enforcement	Defendants argued the covenant was overbroad and therefore unenforceable, making claim impossible	Held: Even if overbroad, that does not show impossibility; factual dispute could allow partial enforcement, so fraudulent joinder not shown
Whether appellate attorneys’ fees are recoverable under § 1447(c)	CMGRP sought attorneys’ fees and costs for the appeal as part of § 1447(c) award	Defendants opposed; argued statute limits fees to remand order only	Held: § 1447(c) applies only to remand orders; appellate fees under that statute not available, but costs on appeal granted under Fed. R. App. P. 39

Key Cases Cited

Calabro v. Aniqa Halal Live Poultry Corp., 650 F.3d 163 (2d Cir. 2011) (standard for awarding fees under § 1447(c): award only when removal lacked objectively reasonable basis)
Martin v. Franklin Capital Corp., 546 U.S. 132 (U.S. 2005) (purposes of § 1447(c) fee awards: deter delay, avoid added costs, conserve judicial resources)
Whitaker v. Am. Telecasting, Inc., 261 F.3d 196 (2d Cir. 2001) (fraudulent-joinder doctrine and burden on removing defendant)
Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459 (2d Cir. 1998) (defendant must show no possibility plaintiff can state claim against non-diverse defendant)
Miglino v. Bally Total Fitness of Greater N.Y., Inc., 985 N.E.2d 128 (N.Y. 2013) (on motion to dismiss, complaint’s allegations are accepted as true and affidavits cannot defeat them)
Brown & Brown, Inc. v. Johnson, 34 N.E.3d 357 (N.Y. 2015) (factual dispute can permit partial enforcement of an overbroad restrictive covenant)
Fischer & Mandell, LLP v. Citibank, N.A., 632 F.3d 793 (2d Cir. 2011) (elements of a breach of contract claim under New York law)
Spielman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 332 F.3d 116 (2d Cir. 2003) (§ 1447(c) limited to remand orders; appellate fee authority differs)
Utah v. Strieff, 136 S. Ct. 2056 (U.S. 2016) (noted for the adage “two wrongs don’t make a right” cited in context of litigation misconduct)