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Supreme Court Declines to Remove Loophole in CAFA

On May 28, 2019, Justice Clarence Thomas ­­— joined by unlikely allies Justices Ginsburg, Breyer, Sotomayor, and Kagan — wrote the 5-4 majority opinion holding that third-party counterclaim defendants in class actions do not have the authority to remove claims to federal court under either the general removal statute, 28 U.S.C. § 1441(a), or § 1453(b) of the Class Action Fairness Act (CAFA). In this pro-consumer ruling, Justice Thomas declined to close an emerging “loophole” in CAFA jurisprudence, as discussed in our prior blog here, allowing class action plaintiffs to thwart a defendant’s attempt to remove class actions to federal court.

The general removal statute permits “the defendant or the defendants” to remove “any civil action” brought in state court over which a federal court would have original jurisdiction. CAFA, on the other hand, provides that “any defendant” may move a qualifying class action from state to federal court. Relying on statutory construction and precedent, Justice Thomas found that the term “defendant” as used in these removal provisions “refers only to the party sued by the original plaintiff” and thus concluded that neither provision allows a third-party defendant to remove.

The majority opinion was guided by the “original defendant” rule found in Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-109 (1941). In Shamrock Oil, the Court held that the original plaintiff in a state court case could not remove a counterclaim brought against it, reasoning that the general removal statute should be limited to the original defendant. Although Home Depot was not an original plaintiff, the majority deduced that “[i]f a counterclaim defendant who was the original plaintiff is not one of ‘the defendants,’ we see no textual reason to reach a different conclusion for a counterclaim defendant who was not originally part of the lawsuit.”

Justice Thomas was unpersuaded by Home Depot’s argument that CAFA’s reference to “any defendant” broadened the scope of the general removal statute, stating that “although the term ‘any’ ordinarily carries an ‘expansive meaning’ … the context here demonstrates that Congress did not expand the types of parties eligible to remove a class action.”

Acknowledging that the ruling may be used as a tactic to prevent removal, Justice Thomas invited Congress to amend the statute, stating “that result is a consequence of the statute Congress wrote. Of course, if Congress shares the dissent’s disapproval of certain litigation ‘tactics,’ it certainly has the authority to amend the statute. But we do not.”

In dissent, Justice Samuel Alito stated that under the majority’s interpretation, “a defendant’s routine attempt to collect a debt from a single consumer could be leveraged into an unremovable attack on the defendant’s ‘credit and lending policies’ brought on behalf of a whole class of plaintiffs — all in the very state courts that CAFA was designed to help class-action defendants avoid.” Chief Justice John Roberts and Justices Neil Gorsuch and Brett Kavanaugh joined the dissent.

Home Depot U.S.A., Inc. v. Jackson, No. 17-1471 (U.S. May 28, 2019).

©2011-2020 Carlton Fields, P.A.


About this Author

 Gary M. Pappas, Carlton Fields, Civil litigation lawyer

Gary Pappas is a trial attorney with nearly 30 years' experience in civil litigation. Gary's experience includes products liability, business torts, insurance coverage, intellectual property, environmental law and civil rights in both individual and class action lawsuits. Gary has tried and defended catastrophic personal injury cases involving automobiles, protective head gear, medical devices, and water sports equipment. He has also tried and defended multi-million dollar business loss and property damage cases involving agricultural chemicals, hotels, electronic equipment, underground...

Raina T. Shipman Business Litigation Lawyer Carlton Fields Law Firm

Raina Shipman’s practice focuses on general business litigation matters. Her experience includes litigation work for clients in the insurance, pharmaceuticals, real estate, and telecommunications industries.

Prior to law school, Raina interned for Southern Legal Counsel, where she assisted with a factual investigation for a statewide education lawsuit. While in law school, Raina was an active member of the trial team and competed in various tournaments, including the Peter James Johnson National Mock Trial Competition, where she received an award for best opening statement.