In The City of New York v. Exxon Mobil Corp., No. 24-1568 (2d Cir. Oct. 3, 2025), a 2-1 panel holds that Exxon could be sanctioned under 28 U.S.C. § 1447(c) for pressing the same grounds for removal that eight U.S. Courts of Appeals had rejected after the original removal. The dissent would hold that the proper time frame for measuring the defendant’s good faith is the time of removal (2021) rather than two years later when the motion was finally argued and decided (2023).
Section 1447(c) provides that “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” In Martin v. Franklin Capital Corp., 546 U.S. 132 (2005), the Supreme Court interpreted this provision to provide 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.”
“Starting in approximately 2017, numerous state and local entities sued Exxon (and, in some instances, other oil companies as well) in different state courts under state and local deceptive advertising, nuisance, and other consumer protection laws [relating to climate change]. In response, Exxon repeatedly removed the cases to federal court. The state and local entities moved to remand, and Exxon opposed, consistently raising the same or similar grounds for removal as proffered in this case. In virtually all of those cases, Exxon failed in its efforts to oppose remand, as its jurisdictional arguments were roundly rejected, both before it renewed its opposition to remand in this case (November 11, 2023) and thereafter, as courts continued to reject its jurisdictional arguments in later cases.”
In the present case, Exxon removed the original suit in 2021. In the intervening years between removal and remand, Exxon and other fossil-fuel companies lost in eight U.S. Courts of Appeals decisions on the same grounds relied upon here: federal common law, complete preemption, admiralty jurisdiction, federal enclave jurisdiction, bankruptcy jurisdiction, OCSLA, First Amendment, and the federal officer removal statute. One of the cases that rejected these arguments was the Second Circuit itself, in Connecticut v. Exxon Mobil Corp., 83 F.4th 122 (2d Cir. 2023) (“Connecticut”).
When the district court finally granted remand in this case in 2023, it held that in the face of virtually unbroken, intervening authority that denied federal jurisdiction in these cases, including controlling circuit authority, Exxon lacked an objectively reasonable basis to continue to press the same arguments in 2023: “Defendants conceded that Connecticut controlled one of its grounds for removal, . . . but conceded nothing else, despite the string of cases in district and circuit courts that have rejected the very arguments they were pursuing. Whatever may have been the state of play in 2021, this can no longer be considered a good faith litigation strategy.”
The parties stipulated that the sanction was in the amount of $68,262.46. Exxon appealed only the sanction; it did not challenge the district court’s order to remand the case.
The panel majority affirms the award. Exxon contended that under Martin, the “objectively reasonable basis” must be measured by the time of removal (2021) and not two years later after the federal courts nearly universally rejected these grounds. But panel majority holds that the district court’s decision fell within the “unusual circumstances” proviso.
“This case, in our view, clearly presented unusual circumstances. Exxon’s renewed opposition to remand in this case was not made in a vacuum, but after efforts to remove similar state cases to federal court had been rejected all around the country. On November 11, 2023, when Exxon renewed its opposition to the City’s motion to remand below, its arguments opposing remand had been rejected by eight circuits — the First, Third, Fourth, Fifth, Eighth, Ninth, and Tenth as well as by this Court in Connecticut — and by at least eleven district courts (including the district court in Connecticut).”
Indeed, “the case was stayed in the district court precisely to give the parties the benefit of this Court’s decision in Connecticut. Exxon had the ability in 2023 to evaluate this Court’s ruling in Connecticut — as well as all the other decisions from around the country — to decide whether to persist in its opposition to remand. At that point, it was largely irrelevant whether Exxon had reasonable grounds for removing the case in 2021; the question was whether, given the undeniable change in the legal landscape, Exxon had reasonable grounds for prolonging litigation by continuing to oppose remand.”
“Accordingly, we hold that this case presented unusual circumstances such that the district court had the discretion to award fees and costs pursuant to § 1447(c) even though, as the district court found, Exxon had one objectively reasonable – though meritless – basis for removing the case in 2021 and for renewing its opposition to remand in November 2023.”
The dissent, by Judge Jacobs, would hold that Section 1447(c) did not support sanctions for legal arguments that, in hindsight, were universally rejected. “The district court asked whether the defendants’ grounds for removal were reasonable as of the last time they advocated those grounds to the court—in the 2023 briefing, not as of the time of removal in 2021. But the Supreme Court teaches that Section 1447(c) awards punish only the act of ‘frivolously remov[ing]’: bringing a state court action to federal court when it clearly does not belong there . . . . ‘Frivolous arguments’ to avoid a later remand, like those “in virtually 4 any context,” are instead the province of ‘sanction[s]’ under Fed. R. Civ. P. 11 . . . or 28 U.S.C. § 1927, for vexatious multiplication of proceedings, or the court’s inherent authority. Each has attendant procedural protections distinct from Section 1447(c).”
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