Trial News

Earlier this month, the U.S. Supreme Court heard oral arguments in a case concerning a third-party defendant’s right to remove a case to federal court. (Home Depot U.S.A., Inc. v. Jackson, No. 17-1471 (U.S. oral arg. Jan. 15, 2019).) The Court was asked to determine whether removal is permitted under the general removal statute, 28 U.S.C. §1441(a), or the Class Action Fairness Act (CAFA) removal statute, 28 U.S.C. §1453(b). In addition, the Court is considering whether the Fourth Circuit incorrectly applied the holding in Shamrock Oil & Gas Corp. v. Sheets (313 U.S. 100 (1941)) to prohibit removal by all but the original defendants.

Citibank filed a debt collection action against George Jackson in North Carolina state court, alleging that Jackson failed to pay for a water treatment system he bought from Home Depot using a Citibank credit card. Jackson counterclaimed that Home Depot had engaged in unfair and deceptive trade practices in connection with its sale of the water treatment system. The counterclaim identified a putative class of approximately 286 members who purchased the water treatment systems in North Carolina, including 259 members with a North Carolina home address.

Home Depot sought to remove the case to federal court under CAFA and to realign the parties with Jackson as the plaintiff. Citibank then dismissed its claims against Jackson. The district court denied Home Depot’s motion to realign and remanded the case to state court.

Affirming, the Fourth Circuit relied on its findings in Palisades Collections LLC v. Shorts (552 F.3d 327 (4th Cir. 2008)) that an “additional counter-defendant [is] not ‘the defendant or the defendants’ with removal authority” under the general removal statute, 28 U.S.C. §1441(a), or “‘any defendant’ entitled to removal” under CAFA  (28 U.S.C. §1453(b)). The court noted that at least two other circuits—the Seventh and Ninth—reached the same conclusion that additional counterclaim defendants cannot remove class actions. (Tri-State Water Treatment, Inc., v. Bauer, 845 F.3d 350 (7th Cir. 2017); Westwood Apex v. Contreras, 644 F.3d 799 (9th Cir. 2011).)

On Home Depot’s behalf, Atlanta attorney William Barnette argued that “original jurisdiction does not mean the case as originally filed.” Barnette posited that the filing of a qualifying class action claim under CAFA can allow a case to become subsequently removeable.  “Jackson essentially filed a new civil action in the existing case,” according to Barnette, and the “action qualifies under CAFA, which establishes that it's within the original jurisdiction of the district courts.” Barnette also argued that Shamrock Oil is distinguishable, because it involved an original plaintiff subsequently seeking to remove to federal court upon the filing of a counterclaim, while Home Depot, in contrast, involves a defendant that never had a chance to pick a forum.

On the respondent’s behalf, Washington, D.C., attorney and Public Justice executive director Paul Bland argued that “if there's not original jurisdiction over the plaintiff's complaint . . . you don't qualify for removal.” In addition, CAFA removal provisions under §1453(b), Bland argued, are procedural not “a new grant of removal jurisdiction.”

“A sweeping reinterpretation of the general removal statute [§1441(a)] that allows original jurisdiction to be defined based not on the case as originally filed, but on each claim as filed, would result in a huge growth in the number of cases that could be removed by defendants to federal court,” said Bland. However, he added that if the Court makes the more “narrow change of reinterpreting CAFA’s removal provision under §1453(b), there would be little practical impact, as few cases meet the profile of Home Depot.”

AAJ filed an amicus brief urging the Court to “strictly construe removal under §1441” and affirm the Fourth Circuit’s decision to deny removal rights to third-party counterclaim defendants. AAJ’s brief describes the case as “a prototype of the type of case Congress concluded should remain in state court even after CAFA was enacted” because the case involves largely North Carolina residents and allegations of violation of a North Carolina law.

Justices Sonia Sotomayor, Elena Kagan, and Stephen Breyer appeared to be swayed by Bland’s argument that actions but not individual claims are removable. Justice Samuel Alito expressed concern with creating a procedural path for getting around CAFA removal. He noted that if the CAFA claim had been brought originally, the case would have been removable, as was Congress’s intent.