Uptime Systems, LLC v. Kennard Law, P.C.

Background

Uptime Systems, LLC provided technology services, including cloud storage, to Kennard Law, P.C. The parties’ contracts required Kennard Law to remove its data before account suspension and stated that disputes would be brought in state or federal court in Hennepin County, Minnesota.

Uptime alleged that Kennard Law stopped paying for services after November 2018. Uptime filed a Minnesota state-court lawsuit seeking payment for breach of contract and, alternatively, unjust enrichment, including costs related to storing Kennard Law’s data. Uptime claimed $45,787.82 in damages, excluding interest, costs, and fees.

Kennard Law filed a separate action in Texas seeking to require Uptime to continue storing its data. The Texas court issued a temporary restraining order, but later dismissed that proceeding. In the Minnesota case, Kennard Law filed answers and counterclaims, with its second counterclaim seeking $1.5 million. The Minnesota state court later granted Uptime’s motion on its breach-of-contract claim, awarded Uptime $17,400, dismissed Kennard Law’s counterclaims, and deferred Uptime’s sanctions motion.

Removal and Remand

Kennard Law removed the Minnesota case to the District of Minnesota on July 15, 2020, asserting diversity jurisdiction. Diversity jurisdiction generally requires complete diversity between the parties and more than $75,000 in dispute. The parties did not dispute complete diversity, but Uptime argued that removal was untimely and that the amount-in-controversy requirement was not met.

Federal law generally requires a defendant to remove a case within 30 days after receiving the initial pleading. A later removal may sometimes be allowed after an amended pleading, motion, or order first makes the case removable, but a diversity case generally cannot be removed more than one year after it begins unless the plaintiff acted in bad faith to prevent removal.

Uptime served Kennard Law with the Minnesota complaint on February 7, 2019. Kennard Law did not remove the case until July 15, 2020, more than 17 months later. The court found no allegation that Uptime acted in bad faith and rejected Kennard Law’s argument that its earlier Texas proceeding justified the delay. The court held that removal was untimely and that no exception applied.

Because the removal was untimely, the court stated that it lacked jurisdiction to consider the substance of the case and would return the case to state court. The court also stated that it retained jurisdiction over the pending sanctions motion.

Attorney’s Fees and Costs

Under the federal remand statute, a court may award costs and actual expenses, including attorney’s fees, caused by an improper removal. The court found that Kennard Law lacked an objectively reasonable basis for removing the case because the removal was plainly untimely and showed strong indications of being intended to delay the proceedings.

The court therefore granted Uptime’s Motion for Attorney’s Fees and Costs. It ordered Uptime to provide an accounting of the fees and expenses incurred because of the remand motion within 14 days. The opinion did not set the final fee amount.

Motion to Amend

Kennard Law had moved under Rule 15 to amend its answer and counterclaims. The motion had been stayed while the remand motion was pending. Because the court determined that the removal was untimely, it denied the Motion to Amend as moot, stating that an amendment could not overcome the removal defect.

Disposition

The court ordered that Uptime’s Motion to Remand was GRANTED, Uptime’s Motion for Attorney’s Fees and Costs was GRANTED, and Kennard Law’s Motion to Amend was DENIED as moot.