The Court Holds That Third-Party Counterclaim Defendants Cannot Remove Cases To Federal Court

Author:Mr Todd Phillips, Kevin C. Maclay and Nathaniel R. Miller
Profession:Caplin & Drysdale
 
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In a 5-4 decision last week, Justice Thomas joined Justices Ginsburg, Breyer, Sotomayor, and Kagan to hold that two removal statutes, the general removal provision and the removal provision in the Class Action Fairness Act of 2005 (CAFA"), prevent third-party defendants from removing a suit from state to federal court.1 Importantly, the Court held that only original defendants named in the complaint have the authority to remove under either statute, even in the circumstance where a third-party defendant who was previously uninvolved in the case and had no role in selecting the forum was added to the action.

Background

Citibank initiated a debt-collection action in North Carolina state court against a consumer for charges he incurred on a Home Depot credit card.2 Shortly thereafter, the consumer answered the complaint and filed his own claims: a counterclaim against Citibank and third-party class-action claims against Home Depot and Carolina Water Systems for claims arising out of an alleged scheme between Home Depot and Carolina Water Systems to induce homeowners to buy water treatment systems at inflated prices.3

After Citibank dismissed its claims against the consumer, Home Depot filed a notice of removal to federal court.4 The consumer moved to remand to state court, arguing that precedent barred removal by a "third-party/additional counter defendant like Home Depot."5 The District Court granted the motion to remand and the Fourth Circuit affirmed, holding that neither the general removal provision, 28 U.S.C. § 1441(a), nor the removal provision in CAFA, 28 U.S.C. § 1453(b), allowed Home Depot to remove the class-action claims filed against it.6

The Court's Analysis

The Supreme Court considered whether either 28 U.S.C. §§ 1441(a) or 1453(b) allows a third-party counterclaim defendant to remove a lawsuit to federal court or whether removal authority is limited to the original defendant under those statutes.7

The Court began by analyzing the plain language of § 1441(a). The statute itself allows "the defendant or the defendants" to remove "any civil action" from state court to federal court when the federal district court has "original jurisdiction" over the action.8 Significantly, the Court concluded that "the defendant" to the "civil action" over which the district court has "original jurisdiction" is limited to the defendant to the original complaint, not a party named as a defendant in a counterclaim.9 The Court pointed to multiple...

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