In the case of In re: Mortgage Electronic Registration Systems, Inc., No. 12-501, 2012 U.S. App. LEXIS 9405 (6th Cir. May 9, 2012) the plaintiffs signed a mortgage with Mortgage Electronic Registration Systems, Inc. (“MERS”) as security for a loan to buy real property. In 2010, BAC Home Loan Servicing, LP filed a foreclosure action against the plaintiffs in Kentucky state court. The plaintiffs challenged the foreclosure arguing that MERS and not BAC validly held the mortgage. BAC claimed an assignment from MERS, and responded to the counterclaim by asserting that the plaintiffs had not jointed a necessary party. Plaintiffs then obtained leave of court to file a third-party class action complaint against MERS asserting that MERS did not hold a valid mortgage on the property. MERS removed the case to federal court pursuant to CAFA. The plaintiffs moved for remand arguing that pursuant to 28 U.S.C. § 1441(a), only a “defendant” or “defendants” may remove an action, nothing in CAFA changes this rule, and consequently a third-party defendant may not remove a case to federal court. The district court agreed with the plaintiffs and remanded the case and MERS appealed.
On appeal, the Sixth Circuit addressed two issues. First, the court addressed a timing provision in 28 U.S.C. §1453. Section 1453(c)(1) provides that “a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not more than 10 days after entry of the order.” Section 1453(c)(2) provides that “[i]f the court of appeals accepts an appeal under paragraph (1), the court shall complete all action on such appeal, including rendering judgment, not later than 60 days after the date on which such appeal was filed, unless an extension is granted under paragraph (3).” In order to make application to the court of appeals, the appellant must file a petition for permission to appeal the order. The appellate court then decides whether or not to grant the petition. The Sixth Circuit considered whether the 60 day time limit in §1453(c)(2) begins to run when the party files the petition, or when the appellate court grants the petition. The court examined the statutory language and held that the 60 day period runs from the date the petition is granted, and not from the date the petition is filed. The court determined that this interpretation was consistent with both the statutory language and with decisions from other federal circuit courts.
The Sixth Circuit then turned to the issue of whether a third-party defendant may remove a class action case to federal court under CAFA. The general removal statute, 28 U.S.C. § 1441(a), states that “the defendant or the defendants” may remove a case to federal court. The term defendant in the context of removal has been very narrowly construed my multiple courts, including the Sixth Circuit, to exclude the third-party defendant. CAFA, however, uses different language in 28 U.S.C. §1453(b) which provides that “[a] class action may be removed to a district court of the United States in accordance with section 1446 [28 USCS § 1446] (except that the 1-year limitation under section 1446(c)(1) [28 USCS § 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.” (emphasis added). MERS contended that the use of “any defendant” constituted a change from 28 U.S.C. § 1441(a), thus allowing a third-party defendant to remove a class action case to federal court. The Sixth Circuit rejected this notion, holding that CAFA must be read as a whole: “such action may be removed by any defendant without the consent of all defendants.” This language was not intended to allow third-party defendants to remove cases; it was intended to allow any single defendant to remove a case without the consent of all other defendants. Consequently, the Sixth Circuit affirmed the lower court’s remand order.© 2013 Dinsmore & Shohl LLP. All rights reserved.