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

• Decision Date: 22 January 2018
• Docket Number: No. 17-1627,17-1627
• Citation: 880 F.3d 165
• Parties: George W. JACKSON, Third Party Plaintiff–Appellee, v. HOME DEPOT U.S.A., INCORPORATED, Third Party Defendant–Appellant, and Carolina Water Systems, Inc. ; Citibank, N.A., Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

880 F.3d 165

George W. JACKSON, Third Party Plaintiff–Appellee,

v.HOME DEPOT U.S.A., INCORPORATED, Third Party Defendant–Appellant,andCarolina Water Systems, Inc. ; Citibank, N.A., Defendants.

No. 17-1627

United States Court of Appeals, Fourth Circuit.

Argued: December 5, 2017

Decided: January 22, 2018

ARGUED: Sidney Stewart Haskins, II, KING & SPALDING, LLP, Atlanta, Georgia, for Appellant. David Kevin Lietz, VARNELL & WARWICK, P.A., Lady Lake, Florida, for Appellee. ON BRIEF: Merritt McAlister, J. Andrew Pratt, Zheyao Li, Atlanta, Georgia, Antonio E. Lewis, KING & SPALDING, LLP, Charlotte, North Carolina, for Appellant. Daniel K. Bryson, WHITFIELD, BRYSON & MASON, LLP, Raleigh, North Carolina; Rashad Blossom, BLOSSOM LAW PLLC, Charlotte, North Carolina; Janet R. Varnell, VARNELL & WARWICK, P.A., Lady Lake, Florida, for Appellee.

Before NIEMEYER, SHEDD and DUNCAN, Circuit Judges.

Affirmed by published opinion. Judge Duncan wrote the opinion, in which Judge Niemeyer and Judge Shedd joined.

DUNCAN, Circuit Judge:

Third-Party Defendant Home Depot U.S.A., Inc., filed a Petition for Permission to Appeal the district court’s order remanding this case to state court. This court deferred ruling on Home Depot’s Petition for Permission to Appeal pending consideration of the merits of the appeal. Home Depot argues that it is entitled to remove the class action counterclaim against it despite Fourth Circuit precedent to the contrary because either the Supreme Court has called this precedent into question or it is distinguishable here. Home Depot also appeals the district court’s denial of its motion to realign the parties.

We grant Home Depot’s Petition for Permission to Appeal. For the reasons that follow, we affirm both the district court’s decision to remand this case to state court and its denial of Home Depot’s motion to realign the parties.

I.

On June 9, 2016, Citibank, N.A., filed a debt collection action against George W. Jackson in the District Court Division of the General Court of Justice of Mecklenburg County, North Carolina. Citibank alleged that Jackson failed to pay for a water treatment system he purchased using a Citibank-issued credit card. On August 26, 2016, Jackson filed an Answer in which he asserted a counterclaim against Citibank and third-party class action claims against Home Depot and Carolina Water Systems, Inc. ("CWS"). Jackson alleged that Home Depot and CWS engaged in unfair and deceptive trade practices by misleading customers about their water treatment systems, and that Citibank was jointly and severally liable to him because Home Depot "directly sold or assigned the transaction to" Citibank. J.A. 51. On September 23, 2016, Citibank voluntarily dismissed its claims against Jackson without prejudice.

Home Depot filed a notice of removal on October 12, 2016, citing federal jurisdiction under the Class Action Fairness Act of 2005 ("CAFA"). Home Depot asserted that its notice of removal was timely under 28 U.S.C. § 1446(b) because it was filed within thirty days of its September 12, 2016, receipt of Jackson’s counterclaim. On October 28, 2016, Home Depot moved to realign the parties with Jackson as plaintiff and Home Depot, CWS, and Citibank as defendants. On November 8, 2016, Jackson moved to remand. On November 18, 2016, Jackson amended his third-party complaint to remove any reference to Citibank.

The district court denied Home Depot’s motion to realign because it concluded that this was not a case "where there are antagonistic parties on the same side," and granted Jackson’s motion to remand because Home Depot did not meet the removal statute’s definition of "defendant." See Citibank, N.A. v. Jackson , No. 3:16-CV-00712-GCM, 2017 WL 1091367, at *2–4 (W.D.N.C. Mar. 21, 2017).

II.

We review de novo the district court’s decision to remand to state court. See Quicken Loans Inc. v. Alig , 737 F.3d 960, 964 (4th Cir. 2013). We also review de novo the district court’s refusal to realign the parties, but review the district court’s factual determinations on this point for clear error. See Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc. , 204 F.3d 867, 872–73 (9th Cir. 2000).

Under the general removal statute, "any civil action brought in a State court of which the district courts of the United States have original jurisdiction[ ] may be removed by the defendant or the defendants" to the appropriate district court. 28 U.S.C. § 1441(a). Section 1446 establishes the procedure for removal under § 1441 and other sections.

In Shamrock Oil & Gas Corp. v. Sheets , the Supreme Court concluded that the predecessor to § 1441 did not permit an original plaintiff to remove a counterclaim against it. 313 U.S. 100, 108, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). The Court contrasted the statute, which authorized removal "by the defendant or defendants therein," with other statutes that had allowed removal by "either party," and held that Congress’s choice of words indicated "the Congressional purpose to narrow the federal jurisdiction on removal." See id. at 104, 107, 61 S.Ct. 868. While § 1441 was not before the Court in Shamrock Oil , § 1441 uses similar language to its predecessor and allows removal by "the defendant or the defendants." Courts therefore interpret § 1441 in accordance with Shamrock Oil . See, e.g. , Westwood Apex v. Contreras , 644 F.3d 799, 805 (9th Cir. 2011) ; First Nat'l Bank of Pulaski v. Curry , 301 F.3d 456, 462–63 (6th Cir. 2002).

Congress, however, has expanded removal authority for class actions. It enacted CAFA "to curb perceived abuses of the class action device which, in the view of CAFA’s proponents, had often been used to litigate multi-state or even national class actions in state courts." Tanoh v. Dow Chemical Co. , 561 F.3d 945, 952 (9th Cir. 2009). To that end, CAFA, and in particular 28 U.S.C. § 1453(b), was adopted to extend removal authority beyond the traditional rules.

Section 1453(b) states that a class action filed in state court may be removed "in accordance with section 1446 (except that the 1-year limitation under section 1446(c)(1) shall not apply), without regard to whether any defendant is a citizen of the State in which the action is brought, except that such action may be removed by any defendant without the consent of all defendants." 28 U.S.C. § 1453(b) (emphases added). Section 1453(b) thus refers to § 1446, which establishes the procedures for removal.

This court has interpreted § 1453(b) to eliminate three of the traditional limitations on removal. See Palisades Collections LLC v. Shorts , 552 F.3d 327, 331 (4th Cir. 2008) (citing Progressive W. Ins. Co. v. Preciado , 479 F.3d 1014, 1018 n.2 (9th Cir. 2007) ). First, it eliminates the rule that the defendant cannot remove a case filed in its home forum. Id. Second, it eliminates the rule that a defendant cannot remove a case that has been pending in state court for more than one year. Id. Third, it eliminates the rule requiring unanimous consent of all defendants for removal. Id.

This court has also held that CAFA’s expanded removal authority does not allow removal of a class action counterclaim asserted against an additional counter-defendant.¹ See id. at 336. Palisades addressed facts similar to those presented here,² and concluded that an additional counter-defendant was not "the defendant or the defendants" with removal authority under § 1441(a). Id. First, Palisades applied Shamrock Oil and held that an additional counter-defendant was not "the defendant or the defendants" because it was not a defendant against whom the original plaintiff asserted a claim. Id. Second, it emphasized that "Congress has shown the ability to clearly extend the reach of removal statutes to include counter-defendants, cross-claim defendants, or third-party defendants," but § 1441(a) refers only to "the defendant or the defendants," which supports a narrow view of removal under that provision. Id. at 333–34. Third, it observed that this conclusion was consistent with the obligation to construe removal jurisdiction strictly. Id.

Palisades also held that an additional counter-defendant was not "any defendant" entitled to removal under § 1453(b). Id. at 334. First, it concluded that because an additional counter-defendant was not "the defendant or the defendants" under § 1441(a), it could not be "any defendant" under § 1453(b). Id. It reasoned that "any" did not change the meaning of "defendant," and that the inclusion of "any" at most allowed removal by a party that met the existing definition of "defendant." Id. at 335. Second (and relatedly), it examined the text of § 1453(b) and concluded that the two references to "any defendant" eliminated specific removal restrictions but did not expand the definition of "defendant." Id. at 335. According to the court, the phrase "without regard to whether any defendant is a citizen of the State in which the action is brought" merely eliminated the home-state defendant rule. See id. And the phrase "may be removed by any defendant without the consent of all defendants" merely eliminated the unanimity requirement. See id. In the context of construing § 1453(b) as well, Palisades observed that "this conclusion is consistent with our duty to construe removal jurisdiction strictly and resolve doubts in favor of remand." Id. at 336.

Since this court’s decision in Palisades , other courts have considered whether an additional counter-defendant can remove a class action counterclaim. Palisades ’s conclusion that an additional counter-defendant cannot remove a class action has been adopted by at least two other circuits. See Tri-State Water Treatment, Inc., v. Bauer , 845 F.3d 350, 355–56 (7th Cir. 2017) (reaching the same conclusion and stating that "[t]he only two circuits that have squarely addressed this issue agree with us"); Contreras , 644 F.3d 799 (the other decision cited by Tri-State ).

III.

Home Depot argues that it is entitled to remove Jackson’s counterclaim for two reasons. It first...