Split high court limits counterclaim defendant’s ability to remove class action to federal court

A split U.S. Supreme Court decided Tuesday to limit a third party counterclaim defendant's ability to remove class actions to federal court.

Justice Clarence Thomas broke from his conservative colleagues in Home Depot U.S.A. Inc. v. Jackson, 2019 DJDAR 4505 (U.S. May 28, 2019), writing the majority opinion in which Justices Ruth Bader Ginsburg, Stephen G. Breyer, Elena Kagan and Sonia M. Sotomayor concurred.

"The limits Congress has imposed on removal show that it did not intend to allow all defendants an unqualified right to remove," Thomas wrote.

The case stemmed from a third-party class-action claim filed by a North Carolina man, George Jackson, against Home Depot U.S.A. and Carolina Water Systems Inc., a counterclaim to an earlier debt-collection action filed against Jackson for charges incurred on his Home Depot credit card. When Home Depot filed a notice of removal, Jackson moved to remand, a request granted by the state court and upheld by the 4th U.S. Circuit Court of Appeals. It held that neither the general removal provision nor the removal provision under the 2005 Class Action Fairness Act allowed for Home Depot's request because its status is defined by the plaintiff's original claim as a counterclaim defendant, not a "defendant."

Glenn A. Danas, a class action attorney at Robins Kaplan LLP who was not involved in the case, said the alignment of the court is less surprising considering the a matter dealt with federal statutory construction on a procedural issue.

"This is precisely the sort of issue that one would expect from Thomas and his textualist approach," Danas wrote in an email. "In Home Depot, he refused to look to policy concerns, instead noting that a third-party counterclaim defendant is not a 'defendant' within the meaning of the general removal and CAFA removal statutes."

Justice Samuel A. Alito Jr. wrote the dissent, joined by the remaining conservatives, Chief Justice John G. Roberts Jr. and Justices Brett M. Kavanaugh and Neil M. Gorsuch. Citing opinions from lower courts, Alito called the use of the Class Action Fairness Act to prevent removal a "tactic" used to subvert the statute's true aim.

"I cannot imagine why a Congress eager to remedy alleged state court abuses in class actions would have chosen to discriminate between two kinds of defendants, neither of whom had ever chosen the allegedly abusive state forum, all based on whether the claim against them had initiated the lawsuit or arisen just one filing later (in the countercomplaint)," Alito wrote.

Alito's reference to alleged state court bias was concerning for Jackson's attorney Brian W. Warwick, a partner at Florida-based Varnell & Warwick P.A.. He said he was pleased the majority of justices stuck to a "strict interpretation" of the Class Action Fairness Act and found the expansion of federal court jurisdiction improper.

"It is shocking that Justice Alito and the other conservative members of the court would imply that our state courts are biased towards one party over the other," Warwick wrote. "This is especially troubling at a time when so many Americans clearly distrust our court system. It is a shame that the highest court in the land would imply that state court judges are biased."

State judges "are more than capable of handling minor class actions" such as the one filed by his client, Warwick said.

Thomas addressed the dissenting justices' claim that the statute was being used as a tactic by writing if that were the case "that result is a consequence of the statute Congress wrote."

In an email, Danas said the dissent reads like "26 pages expressing its antipathy for any corporation having to face a class action in a state court against its will, a concern no doubt that animated CAFA, but not one whose statutory text supported Home Depot in this case's unusual posture."

Home Depot was represented by Maryland-based Goldstein & Russell P.C. partner Sarah E. Harrington, who did not respond to a request for comment.