[17-1471] Home Depot U.S.A., Inc. v. Jackson

Home Depot U.S.A., Inc. v. Jackson

Wikipedia · Justia (with opinion) · Docket · oyez.org

Argued on Jan 15, 2019.
Decided on May 28, 2019.

Petitioner: Home Depot U.S.A., Inc..
Respondent: George W. Jackson.

Advocates:

• William P. Barnette (for the petitioner)
• F. Paul Bland, Jr. (for the respondent)

Facts of the case (from oyez.org)

In 2016, Citibank initiated a debt-collection action in a North Carolina state court against George W. Jackson, alleging that Jackson had failed to pay for a water treatment system he purchased using a Citibank-issued credit card. In responding to Citibank’s complaint, Jackson asserted a counterclaim against Citibank and third-party class-action claims against Home Depot and Carolina Water Systems (CWS). In these third-party claims, Jackson alleged that Home Depot and CWS had engaged in unfair and deceptive trade practices with respect to the water treatment systems; Jackson’s counterclaim against Citibank alleged that Citibank was jointly and severally liable to him because Home Depot had sold or assigned the transaction to Citibank. Citibank subsequently dismissed its claims against Jackson.

Home Depot filed a notice of removal in federal court, citing federal jurisdiction under the Class Action Fairness Act (CAFA). Home Depot then filed a motion to realign parties with Jackson as plaintiff and Home Depot, CWS, and Citibank as defendants. Jackson moved to remand the case to state court and amended his third-party complaint to remove any reference to Citibank.

The district court denied Home Depot’s motion to realign parties, finding that there were not “antagonistic parties on the same side,” and granted Jackson’s motion to remand because Home Depot was not a “defendant” eligible to remove under CAFA. The US Court of Appeals for the Fourth Circuit affirmed, finding that the district court properly declined to realign the parties because the purpose of realignment—to prevent parties from fraudulently manufacturing diversity jurisdiction—was not implicated in the dispute. Moreover, the Fourth Circuit found that allowing Home Depot to remove would be inconsistent with its prior interpretations of CAFA’s removal statute.

Question

1. Does the Class Action Fairness Act permit removal to federal court by a third-party counterclaim defendant?
2. Does Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941)—which holds that an original plaintiff may not remove a counterclaim against it—extend to third-party counterclaim defendants?

Conclusion

Neither the general removal statute, 28 U.S.C. § 1441, nor the Class Action Fairness Act (CAFA), 28 U.S.C. § 1453(b), permits removal to federal court by a third-party counterclaim defendant. Writing for a 5-4 majority, Justice Clarence Thomas found that while Home Depot is a “defendant” to a “claim,” section 1441(a) refers to the defendant of a “civil action,” not a claim. If Congress intended for defendants to remove such actions to federal court, it would have done so as it has done in other contexts. Interpreting section 1441(a) to allow for removal by a party who was not a defendant to the original action defies the text of the statute, as well as the history and purpose of the removal procedure.

Nor does 28 U.S.C. § 1453(b) permit removal by Home Depot in this circumstance. The Court found unpersuasive Home Depot’s argument that section 1453(b) permits removal by “any defendant” to a “class action.” This interpretation would require interpreting the term “defendant” to have different meanings in different sections of the statute, rendering the the removal provisions incoherent. The same holding in Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941)—that a counterclaim defendant who was the original plaintiff is not one of “the defendants”—applies equally to third-party counterclaim defendants.

Justice Samuel Alito filed a dissenting opinion, in which Chief Justice Roberts and Justices Neil Gorsuch and Brett Kavanaugh joined. The dissent argued that third-party counterclaim defendants are defendants within the language of the statute and that the distinction the Court draws between various parties leaves third-party defendants unprotected under both CAFA and section 1441. The dissent described this distinction as “irrational” and contrary to the plain meaning and context of removal laws generally.