Fee-Shifting After Remand: Second Circuit Confirms § 1447(c) Awards in “Unusual Circumstances” and Permits Post-Precedent Reasonableness Assessment

Introduction

In City of New York v. Exxon Mobil Corp., No. 24-1568 (2d Cir. Oct. 3, 2025), the Second Circuit affirmed a partial award of attorneys’ fees and costs under 28 U.S.C. § 1447(c) following remand of a removed state-law deceptive advertising action. The case stems from the City of New York’s claims under New York City’s Consumer Protection Law alleging that Exxon and related defendants misled consumers about the role of fossil fuels in climate change. After the defendants removed the case to federal court on seven theories, the district court stayed proceedings to await the Second Circuit’s decision in a closely analogous case, Connecticut v. Exxon Mobil Corp., 83 F.4th 122 (2d Cir. 2023).

Once Connecticut issued, the district court permitted renewed briefing. The City not only sought remand but also requested fees under § 1447(c). While Exxon dropped one ground (OCSLA) in light of Connecticut, it continued to press six jurisdictional theories—two that the Second Circuit had already rejected in Connecticut and four others rejected repeatedly by courts nationwide. The district court remanded and awarded the City a tailored fee award limited to work performed after Connecticut on five of the six reasserted grounds (excluding diversity). Exxon appealed only the fee award.

The Second Circuit affirmed, holding that the district court did not abuse its discretion in awarding fees under § 1447(c) in the “unusual circumstances” presented: Exxon persisted in litigating removal theories that had been “roundly rejected” across circuits even after a controlling Second Circuit decision. The Court also approved the district court’s timing framework, allowing assessment of objective reasonableness at the renewed-remand stage, given the stayed posture and materially changed legal landscape. Judge Jacobs dissented.

Summary of the Opinion

The fee award is affirmed. The district court acted within its discretion under § 1447(c) by awarding the City fees and costs tied to Exxon's post-Connecticut, renewed opposition to remand on five jurisdictional theories that had been uniformly rejected by appellate and district courts nationwide.
Unusual circumstances. Even if one removal ground was not unreasonable (diversity), the district court could still award fees because “unusual circumstances” existed—Exxon continued to press removal theories already rejected by eight circuits and many district courts, including the Second Circuit’s decision in Connecticut.
Timing. A district court may assess objective reasonableness at the time of renewed-remand briefing when a case has been stayed to await controlling precedent and the legal landscape has materially evolved. Neither § 1447(c) nor Martin v. Franklin Capital Corp., 546 U.S. 132 (2005), restricts the timing of the inquiry.
Tailored relief. The award was modest ($68,262.46 by stipulation if affirmed) and appropriately limited to post-Connecticut work and to the five objectively unreasonable theories; no fees were awarded for the diversity ground, which the district court found not unreasonable.
No bad-faith or frivolousness requirement. The Court reiterated that § 1447(c) does not demand a finding of bad faith or frivolousness to award fees. The focus remains on objective reasonableness and the statute’s purposes—deterring delay, unnecessary costs, and waste of judicial resources.

Analysis

Precedents Cited and Their Influence

The opinion weaves together foundational removal and fee-shifting precedents to frame district court discretion under § 1447(c) and the constraints of federal jurisdiction.

Martin v. Franklin Capital Corp., 546 U.S. 132 (2005). Martin sets the central rule: absent unusual circumstances, fees may be awarded only if the removing party lacked an objectively reasonable basis for removal; conversely, fees should be denied when such a basis exists. Crucially, Martin also preserves district court discretion to award fees in “unusual circumstances,” and instructs courts to act “faithful to the purposes” of § 1447(c)—deterring delay and unnecessary costs that removal imposes when cases do not belong in federal court. The Second Circuit’s decision hinges on this exception and purpose.
Connecticut v. Exxon Mobil Corp., 83 F.4th 122 (2d Cir. 2023). The linchpin precedent. Connecticut rejected removal based on:
- Federal question via federal common law/ordinary preemption (only complete preemption suffices);
- Grable embedded federal question (no necessary federal issue in deceptive advertising claims);
- Federal officer removal (energy production contracts and contributions to national defense do not satisfy the statute’s criteria);
- OCSLA (jurisdictional nexus lacking).
Post-Connecticut, Exxon’s continued reliance on the same theories (except OCSLA) significantly informed the finding of unusual circumstances.
Well-pleaded complaint rule and its “tightly circumscribed” exceptions. The Court reiterated that:
- Federal jurisdiction exists when a federal question is apparent on the face of the complaint (Caterpillar Inc. v. Williams; Beneficial Nat’l Bank v. Anderson);
- Exceptions: express statutory removal, complete preemption, or a necessarily raised and substantial federal issue (Grable & Sons v. Darue);
- Ordinary preemption does not create removal jurisdiction; federal defenses (e.g., First Amendment) do not confer jurisdiction.
This framework undercut Exxon's federal-question and First Amendment theories.
Merrill Lynch v. Manning, 578 U.S. 374 (2016); Platinum-Montaur Life Sciences v. Navidea, 943 F.3d 613 (2d Cir. 2019). Both reinforce narrow construction of removal statutes and the presumption against federal jurisdiction when in doubt—supporting remand and underscoring the cautionary approach the district court took.
Morgan Guaranty Trust Co. v. Republic of Palau, 971 F.2d 917 (2d Cir. 1992). The Second Circuit reaffirmed that § 1447(c) fee awards do not require bad faith, aligning with Martin’s objective reasonableness standard and the statute’s remedial aims.
BP P.L.C. v. Mayor & City Council of Baltimore, 141 S. Ct. 1532 (2021). Cited in the dissent for the proposition that fees may be ordered for “frivolous” removals. The majority responded that neither BP nor § 1447(c) imposes a frivolousness prerequisite; Martin and Morgan Guaranty allow fee awards without findings of bad faith or frivolousness, particularly in unusual circumstances and when faithful to statutory purposes.
Extensive circuit and district court decisions rejecting similar removal theories. The majority emphasized a national judicial consensus against the oil companies’ removal arguments (First, Third, Fourth, Fifth, Eighth, Ninth, Tenth, D.C. Circuits, and numerous district courts), with a single outlier permitting removal under CAFA in a representative action unlike this case. This widespread rejection is central to the “unusual circumstances” rationale.

Legal Reasoning

The Second Circuit’s analysis proceeds in three main steps: (1) clarifying the availability of § 1447(c) fees when one removal ground is arguably reasonable; (2) resolving the timing of the reasonableness inquiry; and (3) evaluating the measured, partial nature of the award.

Fees despite one reasonable ground—unusual circumstances.
Exxon argued that because the district court found its diversity argument “not unreasonable,” fees were categorically barred by Martin. The Second Circuit rejected this absolutist reading, emphasizing Martin’s opening clause: “Absent unusual circumstances.” The Court held that where unusual circumstances exist, fee awards may issue even if the removing party had one objectively reasonable (albeit unsuccessful) ground. The record showed unusual circumstances: after a two-year stay to await controlling precedent, Exxon persisted in removal theories that had been “roundly” and repeatedly rejected in eight circuits and many district courts, including the Second Circuit’s own Connecticut decision. The district court described several theories as “absurd” and “the silliest” among those asserted (federal enclave and CAFA), underscoring the outlier nature of Exxon's renewed opposition.

Although the district court did not use the phrase “unusual circumstances,” the Second Circuit affirmed on any ground supported by the record, concluding the record clearly reflected such circumstances and that even defense counsel had acknowledged the case was “unusual.”
Timing—assessing reasonableness at the renewed-remand stage.
Exxon argued that objective reasonableness must be gauged as of the 2021 removal, citing Valdes v. Wal-Mart (5th Cir.). The Second Circuit found no such temporal limitation in either § 1447(c) or Martin. Instead, Martin emphasizes district court discretion to award fees “when such an award is just” and to deter removal as a delaying tactic. Here, because the case was stayed to await Connecticut, the pertinent question was whether it was reasonable to continue to oppose remand in 2023 after the legal landscape had materially shifted. The Court reasoned that restricting the analysis to the moment of removal would unduly constrain district court discretion and undermine § 1447(c)’s purposes. The Court distinguished Valdes as neither binding nor directly on point in these circumstances and noted Martin did not adopt Valdes’s timing gloss.
Measured, purpose-aligned fee tailoring.
The Court highlighted that the district court awarded fees only:
- for work performed after Connecticut issued;
- for five of the six removal theories (excluding diversity), specifically those already rejected in Connecticut or uniformly rejected elsewhere; and
- in a modest stipulated amount ($68,262.46).
This tailoring reflected fidelity to § 1447(c)’s purposes: deter delay and needless costs without undermining defendants’ right to remove when statutory criteria are met. The Court also reaffirmed that bad faith or frivolousness is not required for a § 1447(c) fee award.

The Dissent

Judge Jacobs dissented on two principal grounds:

Bright-line protection when any reasonable ground exists. The dissent read Martin to require denial of fees whenever the defendant had at least one objectively reasonable removal basis (here, diversity), absent a clear and invoked finding of “unusual circumstances.” In the dissent’s view, the district court did not invoke that exception and thus exceeded its discretion.
Time-of-removal benchmark. The dissent argued that objective reasonableness must be assessed as of the time of removal, not at a later renewed-remand briefing, and suggested that later “frivolous” arguments are properly addressed under Rule 11, § 1927, or inherent power, not § 1447(c). The dissent also referenced the subsequent dismissal of the City’s complaint in state court to underscore its view that the underlying claims—not the removal—were frivolous.

The majority responded that § 1447(c) does not require frivolousness, that Martin’s “unusual circumstances” exception applied on this record, and that timing is not cabined to the moment of removal—especially in a stayed case where governing precedent intervened. The majority also emphasized that the merits of the state-law claim do not retroactively justify pressing plainly foreclosed removal theories: “two wrongs do not make a right.”

Impact and Practical Implications

This decision has significant consequences for removal practice in the Second Circuit and beyond, particularly in serial-removal contexts (e.g., climate deception, consumer protection, and other coordinated litigation):

Unusual circumstances clarified. Persisting with removal theories that have been repeatedly rejected by multiple circuits—especially after a controlling circuit decision—can qualify as “unusual circumstances” justifying fee-shifting even if the defendant also asserts one not-unreasonable ground.
Timing flexibility. District courts may assess objective reasonableness at the time of renewed-remand briefing when the procedural posture (such as a stay awaiting precedent) and legal developments justify it. This prevents parties from using removal to prolong litigation despite a changed legal landscape.
Tailored, phase-specific fee awards. Courts may cab in § 1447(c) awards to specific arguments and time periods (e.g., post-precedent work), aligning fee-shifting with the statute’s remedial goal without chilling legitimate removal attempts.
Deterrence of “nationwide repeat” arguments. Corporate defendants and industry groups should recalibrate removal strategies when analogous arguments have been consistently rejected elsewhere. Continuing to press such theories after adverse controlling authority now carries a clearer risk of fee exposure.
No bad-faith/frivolousness prerequisite. Parties should not assume that avoiding Rule 11 or § 1927 sanctions insulates them from § 1447(c) fees. Objective unreasonableness (in unusual circumstances) suffices.
Climate deception litigation posture. Although this appeal concerned fees, the Court’s reasoning fortifies the trend of keeping state-law deceptive trade practices claims in state courts and discourages removal attempts premised on federal common law, federal officer removal, OCSLA, federal enclave theory, CAFA (where inapposite), or embedded federal questions where the complaint sounds in deception rather than emissions.

Complex Concepts Simplified

28 U.S.C. § 1447(c) fee awards. When a removed case is remanded, the court may order the removing party to pay the other side’s costs and attorney’s fees incurred “as a result of the removal.” The general rule (from Martin) is: award fees only if the removal lacked an objectively reasonable basis—unless “unusual circumstances” justify fees despite one reasonable ground.
Objective reasonableness. An external, not subjective, measure of whether legal grounds for removal were defensible under existing law at the relevant time. It does not require bad faith or frivolousness.
Unusual circumstances. Situations where the normal rule would undermine § 1447(c)’s purpose—e.g., a party persists in removal theories already foreclosed by controlling or widespread appellate authority, thereby delaying the case and increasing costs.
Well-pleaded complaint rule. Federal-question jurisdiction generally must be evident on the face of the plaintiff’s complaint. Federal defenses (like the First Amendment) typically do not create federal jurisdiction. Exceptions are narrow (express statutory removal, complete preemption, or a necessary and substantial federal issue under Grable).
Complete vs. ordinary preemption. Complete preemption converts a state-law claim into a federal claim for jurisdictional purposes; ordinary preemption is a defense that does not confer federal jurisdiction.
Federal officer removal (28 U.S.C. § 1442). Allows removal when a defendant acted under a federal officer, with a nexus between the conduct and official authority and a colorable federal defense. Mere federal contracts or general contribution to national defense is insufficient.
OCSLA (43 U.S.C. § 1349(b)(1)). Confers federal jurisdiction over actions arising out of operations on the Outer Continental Shelf; courts have consistently rejected its application to state deceptive advertising suits like this one.
Federal enclave jurisdiction. Limited to claims arising on federal enclaves; the mere fact that internet or broadcast ads can be viewed on an enclave does not create jurisdiction.
CAFA (Class Action Fairness Act). Broadens federal jurisdiction over certain class or mass actions. It does not apply to single-plaintiff enforcement actions under municipal codes that are not Rule 23-like class proceedings.
Fraudulent joinder (diversity). A doctrine permitting disregard of a non-diverse defendant if there is no colorable claim against it. A colorable claim defeats fraudulent-joinder arguments and preserves the non-diverse party.
Abuse of discretion review. Appellate courts defer to the district court’s judgment unless it misapplied the law, clearly misread the record, or acted outside the permissible range of choices.

Conclusion

City of New York v. Exxon Mobil Corp. meaningfully develops § 1447(c) fee-shifting doctrine in the Second Circuit. It confirms that district courts retain discretion to award fees in unusual circumstances—even when a defendant asserts one not-unreasonable removal ground—where continued opposition to remand relies on arguments repeatedly rejected by courts, especially after controlling precedent arrives. The Court also clarifies that, in a stayed case with intervening precedent, the reasonableness assessment may properly focus on the renewed-remand stage, aligning fee awards with § 1447(c)’s purpose of deterring delay and needless cost.

The decision signals a pragmatic, purpose-driven approach: fee awards should be calibrated to the phase of proceedings and the specific arguments that proved objectively unreasonable in context. For future removal practice—particularly in serial or coordinated litigation—this opinion warns that persisting in nationally repudiated removal theories after adverse precedent carries fee risk, even if a defendant preserves one colorable basis. At the same time, it safeguards the legitimate right to remove by endorsing tailored, modest awards that target only the unjustified prolongation of the federal forum fight.