One of the many tort reform remedies passed through the years was the Class Action Fairness Act of 2005 (“CAFA”). CAFA provides that a class action filed in state court may be removed to federal court by any “defendant” without the consent of all defendants. See 28 U.S.C. 1453(b). So is a defendant in a class action counterclaim a “defendant” under CAFA so that the claims can be removed to federal court? In Home Depot U.S.A., Inc. v. Jackson, 139 S.Ct. 1743, 204 L.Ed. 2d 34 (U.S. 2019), the United States Supreme Court answered that question with a resounding no!
In Home Depot, Citibank brought a collection action in state court against a consumer based on a Home Depot credit card which was used to purchase a water treatment system. The consumer counterclaimed and brought in Home Depot and Caroline Water Systems as third party defendants. Home Depot removed the case to federal court and the consumer filed a motion to remand that was granted. The case was sent back to state court. Home Depot appealed the remand.
The real issues in Home Depot are the wording of two removal statutes, CAFA and the general federal removal statute at 28 U.S.C. 1441(a). Both use the term defendant or the the defendants in defining the types of parties eligible to use the removal statutes but is that only to the original defendant sued by the plaintiff or does it include third party defendants? The Supreme Court ruled that Home Depot was not a “defendant” under CAFA or a “defendant or the defendants” under the general removal statute because it was a third party defendant based on the counterclaim. The general removal statute only allows removal if there is federal jurisdiction for the plaintiff’s original complaint so that the defendants who can take advantage of the general removal statute (and CAFA removal) are limited to the original defendants sued by plaintiffs.
The Home Depot opinion opens the door for many consumer counterclaims to be used as a tool to remain in state court even when raising claims that would normally go to federal court based on a federal question, such as Fair Debt Collection Act claims. Home Depot also allows consumer to bring class action counterclaims to be able to remain in state court and avoid removal. The implications of Home Depot‘s holding is very broad.
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