On Tuesday May 28, 2019, the United State Supreme Court declined to afford state court third-party, class action defendants the ability to remove a class action to federal court. See Home Depot U.S.A., Inc. v. Jackson, 17-1471 (May 28, 2019).
In Jackson, Citibank, N.A., filed a debt-collection action against George Jackson in North Carolina state court. Jackson answered this action and filed his own claims: (1) an individual counterclaim against Citibank and (2) a third-party class-action against Home Depot U.S.A., Inc., and Carolina Water Systems, Inc.
After Citibank dismissed its claims against Jackson, Home Depot filed a notice of removal pursuant to 28 U.S.C. §§ 1332, 1441, 1446, and 1453. Jackson subsequently moved to remand which the federal district court granted and the United States Court of Appeals for the Fourth Circuit affirmed.
After oral argument, the United State Supreme Court affirmed the Fourth Circuit in a 5-4 decision delivered by Justice Thomas. In the opinion, the Court held that 28 U.S.C. § 1441(a) does not permit removal by a third-party counterclaim defendant as such removal is limited to the original defendants as held in Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941). The Court also held that 28 U.S.C. § 1453(b) does not compel a different outcome. Although § 1453(b) states “may be removed by any defendant” as opposed to § 1441(a)’s “the defendant”, the Court held that this clause does not alter the limitation on who can remove a class action.
In the end, Jackson affirmed what Judge Niemeyer over a decade ago had called “an unfortunate loophole in the Class Action Fairness Act that only the Supreme Court can now rectify.” Palisades Collections LLC v. Shorts, 552 F.3d 327, 345 (4th Cir. 2008). Now, it is up to Congress to rectify this “loophole.” Until then, however, the decision in Jackson presents an additional challenge for third-party defendants in class actions.