Chen v. Pony AI Inc.

Background

On August 13, 2026, the court remanded the case to Alameda County Superior Court because the federal court lacked federal-question jurisdiction. The court retained limited jurisdiction to decide whether an award of costs and attorneys’ fees was appropriate under 28 U.S.C. § 1447(c), a statute governing the consequences of removing a case from state court to federal court.

Plaintiff Lei Chen moved for $105,253 in attorneys’ fees and $83.60 in costs incurred because of the defendants’ removal. The defendants objected.

Reasoning

Under Section 1447(c), a court may award costs and actual expenses, including attorneys’ fees, resulting from removal. Ordinarily, fees are awarded only when the party that removed the case lacked an objectively reasonable basis for doing so, although unusual circumstances may affect the decision.

The court concluded that the defendants did not have an objectively reasonable basis for removal. The defendants had cited federal tax-withholding requirements under 26 U.S.C. § 3402. But the court found that Chen’s claims were state-law claims that did not depend on interpreting that federal tax law. The parties agreed that the defendants had to withhold and pay the taxes by a particular deadline, and the meaning of the federal tax provision was not genuinely disputed. The court also found that Chen’s breach-of-contract claims could be resolved under state law.

The court nevertheless declined to award fees. It emphasized that Chen never filed a motion asking the federal court to remand the case and never challenged whether removal was proper. Instead, Chen litigated in federal court by responding to a motion to dismiss and seeking discovery. The court concluded that Chen was at least partly responsible for the case remaining in federal court until the court raised the jurisdiction issue on its own.

Disposition

The court denied Plaintiff’s motion for attorneys’ fees. The opinion does not state that the denial was with or without prejudice.