In the

United States Court of Appeals
               For the Seventh Circuit

No. 08-2203

K ENNETH J. W OLF and KJW, LLC,
                                                Plaintiffs-Appellants,
                                  v.

F ORD K ENNELLY, R OSENTHAL C OLLINS
G ROUP, LLC and L AWRENCE S PAIN,
                                    Defendants-Appellees.


             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
          No. 1:07-cv-02218—Rebecca R. Pallmeyer, Judge.



       A RGUED M AY 28, 2009—D ECIDED JULY 23, 2009




 Before B AUER, F LAUM, and K ANNE, Circuit Judges.
   F LAUM, Circuit Judge. Ford Kennelly prevailed in a
National Futures Association arbitration against several
commodities brokers with whom Kennelly had accounts
and who, he alleged, ran “boiler room” operations that
caused him to incur severe losses. Those brokers then
filed separate petitions to vacate in Illinois state court
and the Northern District of Illinois. Kennelly sought,
2                                               No. 08-2203

unsuccessfully but over a period of several months, to
remove the state court case to federal court; and while he
was unsuccessful in getting the case into federal court he
did persuade the district court to bar KJW, LLC, one of the
commodities brokers, from seeking attorneys’ fees for his
attempted removal. KJW now appeals that ruling.
  For the following reasons, we conclude that clearly
established law foreclosed Kennelly’s attempts to remove
the state court case to federal court and accordingly we
reverse the district court’s minute order barring the
petition for attorneys’ fees.


                      I. Background
   Ford Kennelly, an Indiana citizen, sued Ken Wolf, KJW
(his broker), Lawrence Spain (another broker) and the
Rosenthal Collins Group, LLC (“RCG”) in a National
Futures Association (“NFA”) arbitration. The arbitra-
tion panel found in Kennelly’s favor, awarding him $1.3
million in damages, with RCG and Wolf jointly and
severally liable for $543,386.12, plus interest. RCG filed a
petition to vacate that award in the Northern District of
Illinois, posting bond in the amount of the entire joint
and several award pursuant to NFA rules before doing
so. According to Wolf, they also made demands on him
to indemnify RCG under an agreement between RCG
and KJW. Wolf was not a party to RCG’s petition.
  On March 25, 2007, Wolf and KJW filed their own
petition to vacate in Cook County Circuit Court. Wolf
included in his state court petition a count for declara-
No. 08-2203                                               3

tory relief against RCG under Illinois state law, seeking
a declaration that RCG did not have a valid claim for
indemnification.
  Kennelly responded by seeking to remove Wolf’s petition
to federal court. Wolf’s counsel, in a letter sent to
Kennelly’s counsel, warned that RCG was an Illinois
citizen for purposes of jurisdiction and that 28 U.S.C.
§ 1441(b), the “forum defendant rule,” prevented removal
to federal court. Kennelly nonetheless sought to remove
the case in a motion filed on April 23, 2007. To cure
the removal problems presented by the forum defendant
rule, Kennelly asked the district court to realign RCG as
a petitioner (instead of a respondent) “according to their
actual interests in the litigation.” Kennelly also claimed
that Wolf’s declaratory judgment action against RCG
was premature because, if the arbitration award were
vacated, “there would be no need for a court to deter-
mine whether KJW and Wolf are legally obligated to
indemnify RCG.” Kennelly also expressed his concern
that if the state case were not removed, there was a possi-
bility of inconsistent decisions.
  On May 21, 2007, Wolf moved to remand. Wolf argued
that because RCG was a respondent, Kennelly’s removal
violated § 1441(b)’s forum defendant rule and that
RCG had not consented to removal. Wolf also opposed
realignment as the petitioner in the Illinois state court
case. Wolf’s motion opposing removal cited American
Motorists Ins. Co. v. Trane Co., 

, 151 (7th Cir.
1981), which holds that realignment is only proper “where
there is no actual, substantial conflict between the
4                                              No. 08-2203

parties that would justify placing them on opposite sides
of the lawsuit.” Wolf emphasized in his motion that
there was a live controversy with RCG over the issue of
indemnification. Kennelly opposed the motion to
remand the case back to the Illinois state court.
  At a status conference on June 25, 2007, the district
court appeared persuaded by Kennelly’s opposition. The
district court stated that “it does seem to me that the
real dispute here is between the party that prevailed at
the arbitration and the parties that were found by the
arbitrator to have violated . . . Mr. Kennelly’s rights. So
with that understanding, I do think removal was
proper.” The district court said that it was “concerned”
about Wolf’s argument regarding a substantial dispute
about indemnification but suggested that she saw
another problem, that Kennelly had not raised in his
motion to remove, regarding whether “complete justice
can be done in the absence of the Wolf and KJW parties”
in RCG’s federal case. However, RCG indicated its inten-
tion to dismiss its federal petition and litigate in state
court if the district court remanded Wolf’s case. Wolf
and RCG filed a supplemental brief restating that inten-
tion on July 12, 2007.
  On August 14, 2007, Kennelly argued that Wolf’s declara-
tory judgment action against RCG should be severed
and that the district court should regard that part of the
case as a “sham orchestrated by Wolf and RCG jointly to
keep Kennelly out of federal court.” The parties went
through mediation without success. The district court
held another hearing on September 19, 2007 in which the
No. 08-2203                                                5

court signaled once again its intention to deny the
motion for remand. Two more months then elapsed. On
November 27, 2007, the district court ordered Wolf to
respond to the arguments Kennelly had raised in his
August 14 brief regarding severance of the indemnifica-
tion issue.
   At some point in late November or early December 2007,
it emerged that one of RCG’s limited partners was an
Indiana citizen. It thus now appeared that RCG could not
be realigned as a petitioner because Kennelly was an
Indiana citizen and placing the two on opposite sides
would destroy the diversity of the suit.
  On December 13, 2007, Wolf submitted another brief
arguing that American Motorists still applied but that it did
not matter whether the district court realigned RCG or
not. As RCG stated, sending RCG (an Indiana resident) to
the plaintiff’s side against Kennelly (also an Indiana
resident) would destroy diversity. Wolf also cited case
law holding that mere “misjoinder” of a defendant could
not cure removal defects, as the standard was the much
more imposing “fraudulent joinder.” Wolf pointed out
that even if misjoinder standards applied, there was no
pending motion to sever RCG from the case. Kennelly,
in response to Wolf, made such a motion to sever on
January 10, 2008.
  On February 12, 2008, the district court issued a twelve-
page memorandum granting the motion to remand. The
district court first found that it must remand if RCG was
a respondent in the case. As the district court stated,
since jurisdiction did not rest on a federal question, under
§ 1441(b) the case was “removable only if none of the
6                                              No. 08-2203

parties in interest properly joined and served as defen-
dants is a citizen of the state in which such action is
brought.” RCG was a citizen of Illinois, so this criterion
was not met. The district court also found that removal
was improper, assuming RCG as a respondent, because
courts have interpreted the statutory language providing
for removal “by the defendant or the defendants,”
28 U.S.C. § 1441(a), as requiring that all defendants
consent to removal. RCG was not willing to consent to
removal. Next, the district court explained that RCG’s
realignment as a petitioner was not possible because it
would destroy diversity between the parties. The district
court also stated that, even if RCG was not a resident of
Indiana, realignment would not be proper because of
the substantial controversy between Wolf and RCG
regarding indemnification. Finally, the district court held
that severance of the indemnification dispute was not
proper without a showing of fraudulent misjoinder or
procedural misjoinder, neither of which Kennelly could
prove. Accordingly, the district court remanded the
case back to state court.
  Wolf then tried to recover attorneys’ fees for Kennelly’s
attempted removal. Wolf mailed Kennelly an offer to
confer along with detailed invoices. Receiving no
response from Kennelly, Wolf moved the district court
for instructions to set a schedule for conferring under
Local Rule 54.3(b). Kennelly cross-moved to bar Wolf
from filing any motion for fees and costs.
  The district court held a status conference on April 14,
2008. The district court granted Kennelly’s cross-motion
to bar Wolf from filing for fees and costs, stating:
No. 08-2203                                                  7

    Without reaching that question, I don’t think—I think
    even if we were to view fee shifting as the norm,
    I think this case is exceptional. It’s not one where
    removal was clear. Had that been—removal was
    clearly improper. Had that been the case, it would
    certainly not have taken me months to resolve the
    dispute that I think was an unfortunately costly one
    for both sides.
    I am not inclined to shift fees in this case. So my
    instructions would be that you proceed with state
    court.
In a minute order following the status conference, the
district court stated that: “[T]he court directs the parties to
proceed with litigation in State court. Fee-shifting is not
warranted in this case. Motion to bar therefore also
granted.”
  Wolf now appeals the denial of attorneys’ fees.


                       II. Discussion
   In general, we review a district court’s decision to
award attorneys’ fees for abuse of discretion. King v. Ill.
State Bd. of Elections, 

, 411 (7th Cir. 2005). As
the Supreme Court has pointed out, however, “[a] district
court would necessarily abuse its discretion if it based
its ruling on an erroneous view of the law or on a
clearly erroneous assessment of the evidence.” Cooter &
Gell v. Hartmarx Corp., 

, 405 (1990). Our
review of the legal issues underlying the claim for attor-
neys’ fees is de novo. See Dupuy v. Samuels, 

,
718 (7th Cir. 2005).
8                                                 No. 08-2203

   Wolf makes two arguments against the district court’s
ruling. First, he argues that the district court’s ruling on
the attorneys’ fees issue—and here he focuses on the
minute order—was too summary to assure a reviewing
court that the district court in fact exercised its discretion.
We disagree. While the district court’s written ruling
was indeed very summary, the minute order was essen-
tially only memorialized what had occurred on the record
during the earlier status hearing. In that hearing, the
district court found that the present case was “not [a case]
where . . . removal was clearly improper” and therefore
denied fees. At the time that the district court made
its ruling, it had issued a thorough opinion on the
removal issue, noting both parties’ positions on that
issue. It also had before it both Wolf’s motion for sched-
uling instructions and Kennelly’s motion to bar fees.
Kennelly’s motion to bar fees cited the appropriate cases
in this area (including both Martin v. Franklin Corp., 

(2005) and Lott v. Pfizer, Inc., 

(7th
Cir. 2007)). The district court was thus aware of the
proper standard for fees and appeared to use it in
reaching its decision. Moreover, the district court cited
reasons for its decision, including the fact that the case
was “exceptional” and not one where removal was
clearly improper, and the unusual amount of time it
took the court to resolve the dispute. Because the
district court’s reasons were supported by the record, the
more summary minute order does not constitute an
abuse of discretion. See Dugan v. Smerwick Sewerage Co.,

, 408 (7th Cir. 1998) (noting that we
have “affirmed decisions refusing sanctions without
No. 08-2203                                                  9

elaboration when the reasons for doing so are clear
from the record”).
   Wolf’s second argument is that the district court abused
its discretion because clearly established law foreclosed
removal in this case. We agree that at the time of
Kennelly’s attempted removal the forum defendant
rule barred any attempt to remove the case without
realigning RCG as a petitioner, and that this circuit’s case
law foreclosed any attempt to realign RCG.
  “An order remanding [a] case may require payment of
just costs and any actual expenses, including attorney fees,
incurred as a result of the removal.” 28 U.S.C. § 1447(c). In
Martin v. Franklin Capital, the Supreme Court held that a
district court may award attorneys’ fees under § 1447(c)
only where the removing party lacked an “objectively
reasonable basis” for seeking removal. 

. Martin resolved a circuit split over the correct stan-
dard for such situations. Compare Hornbuckle v. State Farm
Lloyds, 

, 541 (5th Cir. 2004) (“Fees should be
awarded only if the removing defendant lacked ‘objec-
tively reasonable grounds to believe that removal was
legally proper.’ ”) with Sirotzky v. N.Y. Stock Exch., 

, 987 (7th Cir. 2003) (“[P]rovided removal was im-
proper, the plaintiff is presumptively entitled to an award of
fees.”) (emphasis in original). The Supreme Court adopted
the Fifth Circuit’s approach and pointed out that “[i]f fee
shifting were automatic, defendants might choose to
exercise this right only in cases where the right to remove
was obvious.” 

. The Court noted
that Congress would not have conferred a right to
10                                                No. 08-2203

remove and then discouraged its exercise in all but the
obvious cases. 

Court did not define what sorts of beliefs
are “objectively reasonable” in its Martin opinion be-
cause the parties in that case agreed that the defendant’s
basis for removal was reasonable. In Lott v. Pfizer, Inc., 

(7th Cir. 2007), we decided that “qualified immu-
nity jurisprudence provides appropriate guidance for
determining whether a defendant had an objectively
reasonable basis for removal.” 

As we discussed
in Lott, the qualified immunity doctrine assumes that
state officials are aware of existing case law and holds
officials liable only if they violate clearly established and
particularized rights. See 

(citing Brosseau v.
Haugen, 

, 199 (2004)). We reasoned that just
as the qualified immunity doctrine attempts to protect
zealous law enforcement, the removal statute encourages
litigants to make liberal use of federal courts, so long as the
right to remove is not abused. 

We then an-
nounced the “general rule” to govern such cases:
     if, at the time the defendant filed his notice in federal
     court, clearly established law demonstrated that he
     had no basis for removal, then a district court should
     award a plaintiff his attorneys’ fees. By contrast, if
     clearly established law did not foreclose a defendant’s
     basis for removal, then a district court should not
     award attorneys’ fees.

Wolf argues that this court’s decision in
American Motorists foreclosed Kennelly’s attempts at
removal. In American Motorists we held that “[r]ealign-
No. 08-2203                                                11

ment is proper when the court finds that no actual, sub-
stantial controversy exists between the parties on one
side of the dispute and their named opponents . . .” Am.

(citing Indianapolis v. Chase Nat’l
Bank, 

(1941)). We stated that in determining
whether realignment is proper, courts must focus on “the
points of substantial antagonism, not agreement.” 

This held true even if the parties shared an interest
in avoiding liability in the suit altogether. “[A] mere
mutuality of interest in escaping liability” does not man-
date realignment. 

concluded that re-
alignment was not proper in that case because while the
plaintiff insurance company and a defendant insurance
company both had an interest in escaping liability for
any claims, the dispute over their respective duties to
defend was a real and substantial controversy that
justified placing the parties on opposite sides of the
dispute. 

subsequently held on the basis of American
Motorists that it is “undoubtedly improper” to realign
parties for the purpose of preserving jurisdiction if “an
actual, substantial controversy exists between a party
on one side of the dispute and its named opponent.”
Krueger v. Cartwright, 

, 932 n.5 (7th Cir. 1993)
(citing Am. 

). At the time that
Kennelly sought to remove KJW’s suit to federal court,
then, this circuit had a long-standing precedent that
realignment is not proper where an “actual, substantial”
controversy exists between the parties, even if the
parties share an interest in avoiding liability in the suit.
12                                                   No. 08-2203

  Kennelly counters by alleging, as he did throughout
the district court proceedings, that the indemnification
dispute was a “sham” fabricated by Wolf and RCG in
order to keep the case out of federal court. He alleges,
among other factors, that the dispute is dubious because
the parties have never produced a written indemnifica-
tion agreement, RCG has never demanded payment, and
the parties have been, in Kennelly’s view, less than vigor-
ous in pursuing the indemnification issue. It is true that
the two parties ultimately agreed to dismiss the declara-
tory action, and while this may have given Kennelly some
basis to believe, at the time he removed the case, that the
indemnification dispute was not a “real” dispute, the
district court’s opinion on the removal issue ultimately
found that the indemnification dispute was “actual” and
“substantial” and the merits of that ruling are not
on appeal.1
  Moreover, we stated in American Motorists that “the
facts which form the basis for realignment must have
been in existence at the time the action was commenced.”
Am. 

. Thus, the decision to
dismiss the declaratory action at a later stage would not


1
  Kennelly also alleges that Wolf’s Illinois state court pleadings
were deficient because they failed to include a copy of the
supposed indemnity agreement and because the pleadings
failed to satisfy Illinois’ fact-pleading requirements. Again,
however, we note that the district court found that the dispute
between RCG and Wolf was an “actual, substantial” contro-
versy, and the validity of that decision or the adequacy of the
pleadings is not an issue before us in an attorneys’ fees petition.
No. 08-2203                                              13

justify the attempt to remove the case at the start of the
litigation.
  Kennelly also argues that his desired realignment was
not foreclosed by law because, even assuming that the
dispute between Wolf and RCG for indemnification
was concrete, it was insubstantial in relation to their
“ultimate interest” in the outcome of the litigation over
the arbitration award. In support of this position
Kennelly cites Indianapolis v. Chase Nat’l Bank, 

(1941), a case in which the Supreme Court held that
parties should be aligned according to their “ultimate
interests.” In that case, the Supreme Court realigned a
defendant as a plaintiff despite a million-dollar contro-
versy between them because the million-dollar dispute
was “frivolous” and the parties were “colloquially speak-
ing, partners in the litigation.” 

Kennelly
ignores, however, that American Motorists interpreted
Chase National Bank and foreclosed his desired realign-
ment. Specifically, American Motorists held that “a mere
mutuality of interest in escaping liability is not of itself
sufficient to justify realignment.” American 

(citations omitted). Realignment is only
proper where there is no actual, substantial conflict
between the parties that would justify placing them on
opposite sides of the suit. 

to distinguish the case but his argu-
ments essentially amount to arguments against the Ameri-
can Motorists test. As the district court recognized,
Kennelly ultimately wants this court to abandon American
Motorists and join the majority of circuits in adopting the
14                                                    No. 08-2203

“primary purpose” test, which would have allowed him
to realign RCG as a petitioner. American Motorists is a
minority view among the circuits. See, e.g., 13B Charles
Alan Wright, et al., Federal Practice & Procedure § 3607 (2007
Supp. at 417-18) (describing circuit split and noting that
this circuit’s decision in American Motorists places it in
the minority of circuits which have adopted the “actual
and substantial conflict” test). Whatever the merits of
Kennelly’s desire for this circuit to revisit the realign-
ment test, however, during this attorneys’ fee petition
we are only concerned with the state of the law at the
time Kennelly sought removal, when American Motorists
governed his realignment argument.2
  Kennelly’s final argument that removal was not fore-
closed by clearly established law is that when he



2
   Kennelly also cites this circuit’s decision in Naiditch v. Banque
de Gestion Privee-SIB, No. 92 C 5290, 1993 U.S. Dist. Lexis 14681,

(N.D. Ill. Oct. 19, 1993), to support his belief
that American Motorists did not foreclose realignment. The
Naiditch court cited American Motorists but ultimately departed
from its holding. The district court there found that an “actual
and substantial” conflict between defendant and another entity
rendered “insubstantial in comparison” the conflict between
plaintiff and that entity. 1993 U.S. Dist. L EXIS 14681 at *5.
Thus, the court realigned the entity as a plaintiff and character-
ized its realignment as being supported by American Motorists.
1993 U.S. Dist. L EXIS 14681 at *4. Apparently, Naiditch read
American Motors as endorsing a “primary purpose” test, which
is not its test for realignment. At any rate, as we noted in Lott,
“[d]istrict court decisions . . . do not render the law clearly
established.” 

.
No. 08-2203                                             15

removed the case he labored under the erroneous impres-
sion that RCG was only a resident of Illinois for pur-
poses of jurisdiction. In other words, he argues that but-
for RCG’s mistake regarding its citizenship he would not
have removed the case at all. Kennelly’s representation
in this regard is plausible, because if he had known
RCG was also a citizen of Indiana he would not have
pursued removal under the suggested realignment. But
the argument is irrelevant if, taking the facts as Kennelly
saw them at the time, he did not have an objectively
reasonable basis for seeking removal in the first place.
Even if RCG was only an Illinois citizen, realignment
still would have been foreclosed by American Motors.


                     III. Conclusion
  For the foregoing reasons, we R EVERSE the district
court’s order barring a petition for fees and remand for
proceedings in light of this opinion.




                          7-23-09