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ARE ALL DEFENDANTS “DEFENDANTS”? 

December 7, 2018

ARE ALL DEFENDANTS “DEFENDANTS”? HOME DEPOT U.S.A., INC. V. JACKSON AND THE QUESTION OF THIRD-PARTY COUNTERCLAIM DEFENDANTS’ REMOVAL POWERS

By: Travis Panneck, Volume 103 Staff Member

The Supreme Court has granted certiorari to hear arguments in Home Depot U.S.A., Inc. v. Jackson.[1] The case has been described as “an esoteric battle that only a lexicographer or civil procedure nerd would find interesting.”[2] Indeed, the thrust of the argument in the case is whether the use of an adjective so modifies a noun such that the noun should be given a different meaning.[3] Yet at its core, the case is a battle over to the extent to which third-party counterclaim defendants haled into a forum they never chose have any control over where they fight.

In Jackson, Citibank brought a debt collection action against George W. Jackson for failure to pay for a water treatment system.[4] In his Answer, Jackson brought a class action counterclaim against not only Citibank, but Home Depot and Carolina Water Systems, Inc., asserting deceptive trade practices claims.[5] Citibank voluntarily dismissed the debt collection action, leaving only Jackson’s claims against Home Depot and Carolina Water Systems.[6] It was now as if Jackson had brought the class action claims as a plaintiff.

Home Depot timely sought to remove the action to federal court, claiming federal jurisdiction under the Class Action Fairness Act of 2005 (CAFA).[7] The removal provisions of CAFA permit “any defendant” to remove an action to federal court.[8] Assuming that Home Depot met the other requirements of CAFA jurisdiction, it seems like an easy case, right? Home Depot is, after all, a “defendant” to the class action.

Wrong. The district court denied the motion to remove[9] and the Fourth Circuit affirmed.[10]What happened? The reasoning derives from a Supreme Court decision in 1941.

In Shamrock Oil & Gas Corp. v. Sheets, the Supreme Court held that under removal statutes analogous to those in force today,[11] an original plaintiff that filed in state court who became subject to a counterclaim could not remove the counterclaim to federal court.[12]The Court relied on an expression of Congressional intent; when Congress modified the removal rules to allow only defendants to remove, they had expressed concern about plaintiffs gaming the rules to “obtain unfair concessions and compromises from defendants.”[13] Thus, plaintiffs should be required to stick with the forum they chose.[14]

Circuit Courts have uniformly extended this idea to encompass third-party counterclaim defendants, arguing that the lesson from Shamrock Oil is that “defendant” in removal statutes means “original defendant.”[15] Despite CAFA using the term “any defendant” as opposed to the general removal statutes’ “the defendant or defendants,” courts have held that “any” does not expand the scope of “defendant.”[16]

This is perfectly cromulent statutory interpretation. Courts presume Congress legislates against the backdrop of well-established terms.[17] Additionally, courts strive to give the same word the same meaning throughout a statute.[18] Thus, even though Congress appears to have intended CAFA to enlarge federal jurisdiction over class actions,[19]presumably Congress knew about Shamrock Oil and intended the term “defendant” in CAFA to carry the same meaning as the term “defendant” in the general removal statute.

In light of Shamrock Oil and subsequent decisions solidifying the so-called “original-defendant rule,” CAFA’s statutory language appears inescapable to this author, despite arguments by Home Depot to the contrary.[20] To reach the result that Home Depot desires, the Court would have to conclude that an original plaintiff subject to a counterclaim that no longer asserts claims against the defendant is not a “defendant” while a third-party counterclaim defendant is a “defendant.” While it may be the desirable result, to reach this result would require extreme contortions of the English language.

While the High Court may certainly be capable of straining language to its limits, the principal issue with this language is not a matter of interpretation, but a matter of policy, traditionally the domain of Congress.[21] While it “seems strange” that Congress could have intended this result, especially given CAFA’s general expansion of federal jurisdiction,[22] it is a matter squarely within Congress’s province to resolve. The policy argument is straightforward: third-party counterclaim defendants had no say in the forum and are “dragged into state court by service of process the same way that any other ‘defendant’ is brought into court.”[23] Indeed, the very reasoning behind Shamrock Oil in the first place was that original plaintiffs who had a choice in the forum should not be able to change their minds once a counterclaim was brought.[24] This reasoning has no clear application to third-party defendants and yet language and precedent demand its application to Home Depot in Jackson.

Given the lack of a circuit split, the granting of cert in Jackson may be a strong signal that the Supreme Court is poised to undo settled law and perform a forbidden linguistic dance.[25] However, the language and Shamrock Oil are clear and the Court should so find. If this is unsatisfying, well, to quote Judge Bybee: “[I]f Congress does not like it, Congress should rethink the rule.”[26]

  1. No. 17-1471, 2018 WL 1950484 (U.S. Sept. 27, 2018).
  2. Wystan Ackerman, SCOTUS to Decide Whether Class Action Counterclaims Can Be Removed Under Class Action Fairness Act, Robinson+Cole: Class Actions Insider (Oct. 3, 2018), https://www.classactionsinsider.com/2018/10/scotus-to-decide-whether-class-action-counterclaims-can-be-removed-under-class-action-fairness-act/. For the record, this author is not a lexicographer and will not take a position in public on whether he is a “civil procedure nerd.”
  3. See id.
  4. Jackson v. Home Depot U.S.A., Inc., 880 F.3d 165, 167 (4th Cir. 2018), cert. granted, No. 17-1471, 2018 WL 1950484 (U.S. Sept. 27, 2018).
  5. Id.
  6. Id.
  7. Id.; see 28 U.S.C. § 1453 (2012).
  8. 28 U.S.C. § 1453(b) (emphasis added).
  9. Jackson, 880 F.3d at 167.
  10. Id. at 171.
  11. Compare 28 U.S.C. § 71 (1940) (“Any suit of a civil nature . . . may be removed by the defendant or defendants . . . .”), with 28 U.S.C. § 1441 (2012) (“Except as otherwise expressly provided by Act of Congress, any civil action . . . may be removed by the defendant or the defendants . . . .”).
  12. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 106–07 (1941).
  13. See id. at 106 n.2 (quoting H.R. Rep. No. 1078, at 2 (1886)).
  14. See H.R. Rep. No. 1078, at 1 (1886) (“The next change proposed is to restrict the right to remove a cause from the State to the Federal court to the defendant. . . . [I]t is believed to be just and proper to require the plaintiff to abide his selection of a forum.”).
  15. See, e.g., Jackson, 880 F.3d at 170–71; Tri-State Water Treatment, Inc. v. Bauer, 845 F.3d 350, 354–57 (7th Cir. 2017), cert. denied sub nom. Home Depot U.S.A, Inc. v. Bauer, 137 S. Ct. 2138 (2017); Westwood Apex v. Contreras, 644 F.3d 799, 804–05 (9th Cir. 2011); In reMorgan & Pottinger, P.S.C., No. 10-0309, 2010 WL 9476582, at *1 (6th Cir. June 16, 2010). It is somewhat noteworthy that the Supreme Court has granted cert given the lack of a circuit split. See Ryan M. Tosi & Scott G. Ofrias, Does “Any Defendant” Really Mean “Any Defendant”?, Nat’l L. Rev. (Oct. 4, 2018), https://www.natlawreview.com/article/does-any-defendant-really-mean-any-defendant.
  16. See, e.g., Jackson, 880 F.3d at 170–71.
  17. See, e.g., Palisades Collections LLC v. Shorts, 552 F.3d 327, 335 (2008) (applying the principle to interpreting “defendant” in CAFA). Courts make this assumption regardless of any empirical truth of the matter. See John F. Manning, Inside Congress’s Mind, 115 Colum. L. Rev. 1911, 1941–42 (2015).
  18. See, e.g., Palisades, 552 F.3d at 335.
  19. See Class Action Fairness Act of 2005, Pub. L. 109-2, sec. 2, 119 Stat. 4 (2005).
  20. See Brief for Petitioner at 21–22, Home Depot U.S.A., Inc. v. Jackson, No. 17-1471 (U.S. Nov. 9, 2018) (arguing that there is a distinction supported by Shamrock Oil between a “plaintiff who is the only defendant to a counterclaim” and a third-party counterclaim defendant).
  21. See, e.g., U.S. Const. art. I, § 1.
  22. Westwood Apex v. Contreras, 644 F.3d 799, 809 (9th Cir. 2011) (Bybee, J., concurring).
  23. Id. at 808 (quoting Ford Motor Credit Co. v. Aaron–Lincoln Mercury, 563 F.Supp. 1108, 1113 (N.D. Ill. 1983)).
  24. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 106–07 (1941).
  25. See Zachary A. Madonia et al., Supreme Court to Review Whether Third-Party Defendants May Remove Class Action Counterclaims Under CAFA, Bradley: Declassified (Oct. 2, 2018), https://www.classactiondeclassified.com/2018/10/supreme-court-review-whether-third-party-defendants-may-remove-class-action-counterclaims-cafa/ (“Reading the tea leaves, the Supreme Court’s grant of cert despite circuit agreement seems to strongly suggest that the Supreme Court disagrees with—and will overturn—settled law.”).
  26. Westwood Apex, 644 F.3d at 809.
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