Case No. 17-1471, 4th Cir.
Preview by Samuel E. Meredith, Senior Online Editor
Home Depot concerns the ability of third-party counterclaim defendants to remove cases to federal court. The underlying litigation in this case began when Citibank sued George Jackson in a North Carolina court to collect on a debt. In response, Jackson instituted a class action against Citibank and joined Home Depot and Carolina Water Systems (“CWS”) as third-party counterclaim defendants.
After this class action was filed, Home Depot had the case removed to federal court. Before the district court, Jackson averred that Home Depot’s status as a third-party counterclaim defendant, the amount in controversy, and the makeup of the class rendered Home Depot incapable of removing the case. The district court agreed and the Fourth Circuit affirmed.
In affirming the district court, the Fourth Circuit cited Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941), and “held that [28 U.S.C. § 1441(a) (2018)] does not authorize removal by a defendant to a claim asserted as a counterclaim.” Brief for Petitioner at 9, Home Depot U.S.A. Inc. v. Jackson, No. 17-1471 (U.S. filed Nov. 9, 2018). The Court of Appeals also held that the provision of the Class Action Fairness Act (“CAFA”) that permits “any defendant” to remove, 28 U.S.C. § 1453(b), does not apply to third-party counterclaim defendants when they were “not an original plaintiff (or any kind of plaintiff).” Brief for Petitioner at 10, Home Depot U.S.A. Inc. v. Jackson, No. 17-1471 (U.S. filed Nov. 9, 2018). Home Depot has appealed both of these rulings.
With respect to the first of these rulings, Home Depot notes that the Court’s holding in Shamrock Oil only applies to “the original defendant,” and urges the Court not to expand Shamrock Oil to include third-party counterclaim defendants who are “involuntarily brought into state-court proceedings.” Id. at 11–13. Regarding the CAFA issue, Home Depot argues simply that “‘any defendant’ means any defendant.” Id. at 13. Furthermore, Home Depot argues, this understanding of CAFA’s text aligns with CAFA’s overall goal of “combat[ting] state-court biases against out-of-state defendants.” Id. at 14.
In response, Jackson argues that the Fourth Circuit’s application of Shamrock Oil is in line with “a consensus [that] has emerged among federal courts”—a pattern that Congress has not disrupted. Brief for Respondent at 14, Home Depot U.S.A. Inc. v. Jackson, No. 17-1471 (U.S. filed Dec. 10, 2018). According to Jackson, deviating from this trend could be “destabilizing” because it would raise new interpretive questions about other statutes employing the word “defendant.” Id. at 15. On the issue of CAFA, Jackson asserts that CAFA’s text is not as broad as Home Depot makes it seem, claiming that “when Congress wants to refer to counterdefendants, it does so expressly.” Id. at 16.