Just Who Is a Defendant? Third-Party Counterclaim Defendants' Removal Rights Under CAFA

Abstract

This article discusses and analyzes the issues on appeal to the United States Supreme Court in Home Depot Inc., U.S.A. v. Jackson, argued to the Court on January 15, 2019. The case involves the right of a third-party defendant to remove a case from state court to federal court when an original defendant sues a third-party defendant in an existing lawsuit, based on assertion of a counterclaim. In the original lawsuit, plaintiff Citibank sued defendant Jackson in a state debt collection action. Jackson then asserted a counterclaim against Citibank under state consumer laws, and counterclaimed against Home Depot as an additional third-party defendant. Under existing precedent, the Fourth Circuit declined to permit Home Depot’s removal petition based on the defendant’s counterclaim.

The Court will have to determine the extent and limits of third-party removal rights when a defendant asserts a counterclaim, under the general removal and Class Action Fairness Act removal statues.The Home Depot appeal presents a gnarly issue concerning removal jurisdiction that has, as Home Depot points out, opened the door to strategic pleading and some degree of litigation gamesmanship. Against this backdrop, the Court may re-examine the scope of its Shamrock Oil holding, or instead focus on a construction of the CAFA removal provision, as Jackson requests.

The Court is most likely to engage in a close exercise of statutory construction. Hence, one may expect that the Court will spend a fair amount of time parse the meaning of “defendant,” “defendants,” and “any defendants” as those terms appear in the interlocking removal provisions, both in the general removal statutory scheme, as well as in CAFA. And, as Home Depot has invited the Court, the justices may clarify just who is a defendant for the purposes of the general removal and CAFA removal provisions.

The Court may resolve this appeal narrowly, as a detailed problem of statutory construction. On the other hand, the Court may range beyond parsing the term “defendant” to consider the policy implications raised by Home Depot and challenged by Jackson. When all is said and done, the significance of this appeal may lay in its implications for litigation gamesmanship.