FILED
FOR PUBLICATION MAY 02 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S . CO U RT OF AP PE A LS
FOR THE NINTH CIRCUIT
WESTWOOD APEÈ, No. 11-55362
Plaintiff/Counterclaim D.C. No. 5:10 Civ. 01382 (GAF)
Defendant,
GEORGE BURNETT, an individual; OPINION
WILLIAM OJILE, an individual; ALTA
COLLEGES INC., a Delaware
Corporation; WESTWOOD COLLEGE
INC., a Colorado Corporation; TRAV
CORPORATION, a Colorado
Corporation, DBA Westwood College,
DBA Westwood College Online; GRANT
CORPORATION, a Colorado
Corporation, DBA Westwood College;
WESGRAY CORPORATION, a Colorado
Corporation, DBA Westwood College;
BOUNTY ISLAND CORPORATION, a
Delaware Corporation, FDBA Redstone
College,
Additional Counterclaim
Defendants-Appellants.,
v.
JESUS A. CONTRERAS,
Defendant/Counter-
Complainant-Appellee.
Appeal from the United States District Court
for the Central District of California
Gary A. Feess, District Judge, Presiding
Argued and Submitted April 12, 2011
Pasadena, California
Before: JAY S. BYBEE and MILAN D. SMITH, JR., Circuit Judges, and KENT J.
DAWSON, District Judge.*
Opinion by Judge Milan D. Smith, Jr.
M. SMITH, Circuit Judge:
The Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2, 119
Stat. 4, confers federal jurisdiction over class action lawsuits where the amount in
controversy exceeds ü5,000,000 and the adversaries are minimally diverse. When
a class action satisfying these conditions is filed in state court, Section 5 of CAFA
provides that 'such action may be removed by any defendant without the consent
of all defendants.' 28 U.S.C. y 1453(b). In this appeal, we address whether CAFA
Section 5, 28 U.S.C. y 1453(b), allows a party joined to an action as a defendant to
a counterclaim (an additional counterclaim defendant) to remove the case to federal
court. We hold that y 1453(b) does not permit additional counterclaim defendants
*
The Honorable Kent J. Dawson, United States District Judge for the
District of Nevada, sitting by designation.
2
to remove an action to federal court, and we affirm the district court's decision to
remand this case to state court.
BACKGROUND
I. CAFA and the Removal Statutes
Congress enacted CAFA to ''curb perceived abuses of the class action
device which, in the view of CAFA's proponents, had often been used to litigate
multi-state or even national class actions in state courts.'' United Steel v. Shell Oil
Co., 602 F.3d 1087, 1090 (9th Cir. 2010) (quoting Tanoh v. Dow Chem. Co., 561
F.3d 945, 952 (9th Cir. 2009)). CAFA wrought several changes to the Judicial
Code, including amending the federal diversity statute, 28 U.S.C. y 1332(d)(2), and
liberalizing the requirements governing removal from state court, 28 U.S.C. y
1453.
Section 4(a) of CAFA amended the federal diversity jurisdiction statute, 28
U.S.C. y 1332, to grant original federal jurisdiction over large interstate class
actions (i.e., at least 100 class members) in which the matter in controversy
exceeds ü5,000,000 and any member of the plaintiffs' class is diverse in his
domicile from any defendant. See 28 U.S.C. y 1332(d)(2), (d)(5)(B).
3
Section 5 of CAFA augmented Chapter 89 of the Judicial Code (which
governs the removal of state-court actions to federal courts) by the addition of 28
U.S.C. y 1453. Subsection (b) of y 1453 provides that
[a] class action may be removed to a district court of the
United States in accordance with section 1446 (except that
the 1-year limitation under section 1446(b) 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.
28 U.S.C. y 1453(b). Section 1446, which is cross-referenced in y 1453(b), sets
forth the procedures a removing defendant must follow and provides, inter alia,
that '[a] defendant or defendants desiring to remove any civil action . . . shall file
in the district court of the United States for the district and division within which
such action is pending a notice of removal . . . containing a short and plain
statement of the grounds for removal' as well as the operative pleadings. Id.
y 1446(a). The notice of removal 'shall be filed within thirty days after the receipt
by the defendant' of the complaint or, in certain states, the summons. Id.
y 1446(b).
The 'general' removal statute, which was not amended by CAFA, is also
found in Chapter 89 of the Judicial Code, and provides:
4
[A]ny civil action brought in a State court of which the
district courts of the United States have original
jurisdiction, may be removed by the defendant or the
defendants, to the district court of the United States for the
district and division embracing the place where such action
is pending.
28 U.S.C. y 1441(a).
II. The Underlying Proceedings
This litigation commenced in San Bernardino County Superior Court on
May 17, 2010, when plaintiff Westwood Apex filed a breach of contract action
against defendant Jesus Contreras to recover ü20,000 on an unpaid student loan.
Westwood Apex is a subsidiary entity of the for-profit higher-education institution
Westwood College. Contreras, a former Westwood College student, answered the
complaint and, on August 11, 2010, filed class action counterclaims alleging
violations of California consumer-protection laws.
5
Contreras's counterclaims allege that plaintiff/counterclaim defendant
Westwood Apex and additional counterclaim defendants1 Westwood College and
certain affiliated individuals and entities (collectively, the additional counterclaim
defendants, removing parties, or Westwood College) committed fraud and engaged
in unfair and deceptive business practices in connection with their operation of the
college. Contreras's putative class consists of all California residents who have
attended, or are presently attending, Westwood College's programs.
On September 10, 2010, the additional counterclaim defendants (i.e., all
Westwood College entities except Westwood Apex) filed a notice of removal in
the Central District of California. That notice asserted that federal jurisdiction was
appropriate under 28 U.S.C. y 1332(d)(2), and that removal was authorized by
Section 5 of CAFA, 28 U.S.C. y 1453(b). Specifically, the notice of removal
reads:
Section 1453(b), added by CAFA, expands removal
authority, conferring on 'any defendant' the right to
1
The parties and pleadings refer to Westwood Apex as a 'cross-defendant'
as opposed to a 'counterclaim defendant.' They also refer to Westwood College
as a 'cross-defendant.' In accord with Federal Rule of Civil Procedure 13, the
appropriate way to describe the underlying proceedings is that defendant Contreras
filed a counterclaim against plaintiff/counterclaim defendant Westwood Apex and
joined as additional counterclaim defendants Westwood College, et al. Fed. R.
Civ. P. 13(h). However, any deviations from this nomenclature are immaterial to
the result in this case.
6
remove a class action. . . . [Section] 1453(b), in authorizing
removal 'by any defendant,' expands removal authority
beyond y 1441(a)'s limits so that it includes 'any
defendant,' including naturally a defendant joined in the
case by a counterclaim.
On September 29, 2010, the district court ordered Westwood College to
show cause why removal was appropriate under CAFA. Specifically, the district
court highlighted the dearth of authority in this circuit regarding whether 'state
court cross-defendants, joined by way of a cross-complaint, qualify as defendants
under [28 U.S.C. y] 1453.' The order to show cause further recognized persuasive
authority from the United States Court of Appeals for the Fourth Circuit which, in
considering the issue presented here, held that CAFA does not permit removal by
additional counterclaim defendants. See Palisades Collections, LLC v. Shorts, 552
F.3d 327, 328-29 (4th Cir. 2008).
Following briefing by the parties, the district court remanded the action to
state court on the ground that removal by an additional counterclaim defendant was
not authorized by either the language or purpose of CAFA (the Order of Remand).
See Apex v. Contreras, No. 10 Civ. 1382 (GAF), 2010 WL 4630274 (C.D. Cal.
Nov. 4, 2010).
On March 4, 2011, we granted the additional counterclaim defendants'
petition to appeal the Order of Remand.
7
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction under 28 U.S.C. y 1453(c). 'CAFA mandates a
prompt disposition of controversies that arise over issues relating to jurisdiction
under the Act.' Lewis v. Verizon Commc'ns, Inc., 627 F.3d 395, 396 (9th Cir.
2010). An appeal of an order of remand must be decided no more than 60 days
after the petition to appeal was granted. 28 U.S.C. y 1453(c)(2).
Whether a case was properly removed from state to federal court is a
question we review de novo. Lively v. Wild Oats Marµets, Inc., 456 F.3d 933, 938
(9th Cir. 2006). We liµewise review the 'construction, interpretation, or
applicability' of CAFA de novo. Bush v. Cheapticµets, Inc., 425 F.3d 683, 686
(9th Cir. 2005).
DISCUSSION
The removing parties contend that y 1453(b) permits removal by 'any
defendant' and that this phrase includes additional counterclaim defendants. This
is a question of statutory interpretation, and thus our analysis begins with the plain
language of the act. Campbell v. Allied Van Lines Inc., 410 F.3d 618, 620 (9th Cir.
2005). 'The plainness or ambiguity of statutory language is determined by
reference to the language itself, the specific context in which that language is used,
and the broader context of the statute as a whole.' Robinson v. Shell Oil Co., 519
8
U.S. 337, 341 (1997). Where language is susceptible to varying interpretations, we
will looµ to other sources to determine congressional intent, such as the canons of
construction or a statute's legislative history. Jonah R. v. Carmona, 446 F.3d
1000, 1005 (9th Cir. 2006).
Our circuit has addressed the meaning of y 1453(b). See Abrego Abrego v.
Dow Chemical Co., 443 F.3d 676, 684 (9th Cir. 2006); see also Progressive W.
Ins. Co. v. Preciado, 479 F.3d, 1014, 1017-18 & n.2 (9th Cir. 2007). In
Progressive West, where the question of removal by a plaintiff/cross defendant
arose, we recognized that y 1453(b) was written to 'eliminate three significant
barriers to removal for qualifying actions.' 479 F.3d at 1017 & n.2. First,
y 1453(b) 'expressly 'exempts qualifying actions from the y 1446(b) prohibition of
removal more than 1 year after commencement of the [state-court] action.'' Id. at
1018 n.2 (citation omitted). Second, y 1453(b) allows a class action founded on
diversity to be removed even where 'any defendant' is a citizen of the state where
the action was filed. This language 'eliminates the so-called 'home-state
defendant' restriction on removal found in y 1441(b).' Palisades Collections, 552
F.3d at 335. Finally, y 1453(b) provides that 'any defendant' is allowed to remove
an action without obtaining the consent of 'all defendants.' This 'overrides the
judge-created requirement that each defendant consent to removal.' Arego
9
Abrego, 443 F.3d at 681. That unanimity requirement had been longstanding,
dating bacµ to the Supreme Court's decision in Chicago, Rocµ Island, & Pacific
Railway Company v. Martin, 178 U.S. 245 (1900).
The phrase 'any defendant' is used twice in y 1453(b), first as part of the
language eliminating the complete diversity requirement and second in the clause
overriding Martin's unanimity rule. Despite the apparent usage of 'any defendant'
in two provisions aimed at eliminating longstanding barriers to removal, the
removing parties nevertheless contend that y 1453(b) also authorizes removal by
additional counterclaim defendants. Their argument proceeds by taµing
y 1453(b)'s final clause--'such action may be removed by any defendant without
the consent of all defendants'--and erasing the last six words so that what remains
is, according to the removing parties, 'unambiguous' authority that 'any
defendant' of whatever µind may remove a class action to federal court. We
believe it inappropriate to construe a statute by reading related clauses in isolation
or taµing parts of a whole statute out of their context. An excerpted clause in a
statute cannot be interpreted without reference to the statute as whole, nor can it be
understood free from the sentence in which it was included. See United States v.
Morton, 467 U.S. 822, 828 (1984) ('We do not, however, construe statutory
phrases in isolation; we read statutes as a whole.'); see also Harbison v. Bell, 129
10
S. Ct. 1481, 1492 (2009) (Roberts, C.J., concurring) (''[W]e do not . . . construe
statutory phrases in isolation; we read statutes as a whole.' This certainly applies
to reading sentences as a whole.' (citation omitted)). Appellants' focus on the
phrase 'any defendant' taµes the words out of the context in which they are
written; here the word 'any' is being employed in connection with the word 'all'
later in the sentence--'by any . . . without . . . the consent of all [.]' See also
Palisades Collections, 552 F.3d at 335-36 ('[T]he use of the word 'any'
juxtaposed with the word 'all' was intended to convey the idea of non-unanimity,
not to alter the definition of the word 'defendant[.]''). Given that 'any' and 'all'
are used in relation to one another, they should be read that way and interpreted
consistently with the sentence's structure.
The argument that y 1453(b) allows for additional counterclaim defendants
to remove depends on Appellants' faith in the redeeming power of one
adjective--'any'. But this argument not only ignores Twain's sµepticism on the
value of a modifier2, it also eschews the established meaning of 'defendant' in
Chapter 89 of the Judicial Code. Since the Supreme Court's decision in Shamrocµ
Oil & Gas Corporation v. Sheets, 313 U.S. 100 (1941), 'defendant' for purposes
2
'As to the Adjective; when in doubt, striµe it out.' Marµ Twain, The
Tragedy of Pudd'nhead Wilson 130 (Am. Pub. Co., 1900) (1894).
11
of designating which parties may remove a case under y 1441 has been limited by
a majority of the courts to mean only 'original' or 'true' defendants; 'defendant'
in Chapter 89, thereby, excludes plaintiffs and non-plaintiff parties who become
defendants through a counterclaim.
In Shamrocµ Oil, the Supreme Court interpreted the predecessor statute to
y 1441, which permitted removal ''by the defendant or defendants therein,'' to
preclude removal by a state-court plaintiff who 'was in point of substance a
defendant to the cause of action asserted in the counterclaim.' Id. at 104-05, 107
(citation omitted). The ability for certain parties to remove a state-court action to a
federal forum has existed since the first Judiciary Act. See St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 286-89 (1938) (citing Judiciary Act of
Sept. 24, 1789 y 12, 1 Stat. 73, 79). The Shamrocµ Oil Court traced the
amendments in removal law bacµ to the first Judiciary Act and emphasized that, at
different times, removal was either afforded to 'defendants' or, alternatively, to
'either party.' 313 U.S. at 105-06. Because Congress was presumed to be aware
of this statutory history, the choice of 'defendant' was a deliberate exclusion of
other classes of parties. Id. at 107-08 ('We thinµ these alterations in the statute are
of controlling significance . . . .').
12
Since Shamrocµ Oil, the law has been settled that a counterclaim defendant
who is also a plaintiff to the original state action may not remove the case to
federal court. See, e.g., Progressive West, 479 F.3d at 1018 ('[W]e must conclude
CAFA does not alter the longstanding rule announced in Shamrocµ that precludes
plaintiff/cross-defendants from removing class actions to federal court.'); Am. Int'l
Underwriters (Phil.), Inc. v. Cont'l Ins. Co., 843 F.2d 1253, 1260-61 (9th Cir.
1988) ('[T]he Supreme Court found that Congress had intended to eliminate the
automatic right of a plaintiff to remove'). Liµewise, the Shamrocµ Oil rule has
been extended to preclude removal by third-party defendants to an action. See
Palisades Collections, 552 F.3d at 332-33 (collecting cases); First Nat'l Banµ of
Pulasµi v. Curry, 301 F.3d 456, 462-63 (6th Cir. 2002) ('Although Shamrocµ Oil
is not dispositive of the precise issue before us, it does dictate that the phrase 'the
defendant or the defendants,' as used in y 1441(a), be interpreted narrowly, to refer
to defendants in the traditional sense of parties against whom the plaintiff asserts
claims.'); see also 14C Wright & Miller, et al., Federal Practice & Procedure y
3730 (2010) ('The federal courts . . . often speaµ[] of the right to remove as being
limited to 'true' defendants. . . . [T]hird-party defendants brought into the state
action by the original defendant [cannot] exercise the right to remove claims to the
federal court, although there is some authority to the contrary in the Fifth [and
13
Eleventh Circuits].'). While we left the question of third-party removal without a
definitive answer prior to the enactment of CAFA, O'Halloran v. Univ. of Wash.,
856 F.2d 1375, 1381 (9th Cir. 1988) ('[W]e need not reach the interesting question
whether third-party defendants are defendants for purposes of the removal
statute.'), some courts in our circuit recognized that the majority position
prohibited third-party removal. See, e.g., Schmidt v. Ass'n of Apartment Owners of
Marco Polo Condo., 780 F. Supp. 699, 702 (D. Haw. 1991).
This accepted understanding of 'defendant' as excluding
plaintiff/counterclaim defendants and third-party defendants survived the
enactment of y 1453(b). We recognized this, albeit in dicta, in Progressive West,
where we observed that y 1453(b) '[did] not create an exception to Shamrocµ's
longstanding rule that a plaintiff/cross-defendant cannot remove an action to
federal court.' 479 F.3d at 1018. The Seventh Circuit, endorsing Progressive
West, held that y 1453(b)'s use of 'any' is not enough to alter the meaning of the
term 'defendant.' See First Banµ v. DJL Props., LLC, 598 F.3d 915, 917-18 (7th
Cir. 2010). As Chief Judge Easterbrooµ explained in First Banµ:
[T]he word 'defendant' has an established meaning in legal
practice, and it is vital to maintain consistent usage in order
to ensure that Members of Congress (and those who advise
them) µnow what proposed language will do, and people
can understand the meaning of statutes. . . .
14
By using a word with an established meaning, Congress
produces the established result.
Id. at 917.
The Fourth Circuit, the only other court of appeals to have addressed the
precise issue presented here, also concluded that y 1453(b) did not overwrite the
accepted meaning of 'defendant.' See Palisades Collections, 552 F.3d at 334-36.
In Palisades Collections, then-Chief Judge Williams recognized that '[f]or more
than fifty years, courts applying Shamrocµ Oil have consistently refused to grant
removal power under y 1441(a) to third-party defendants.' Id. at 332. Palisades
Collections aptly highlighted that 'Congress has shown the ability to clearly extend
the reach of removal statutes to include counter-defendants, cross-claim
defendants, or third-party defendants' by using the term 'party' in other sections
of Chapter 89. See Id. at 333 (citing 28 U.S.C. y 1452(a) ('A party may remove
any claim or cause of action . . .')). The Fourth Circuit further explained that
y 1453(b) was drafted to comport with both y 1441 and y 1446, which each
employ the word 'defendant.' Id. at 334-35. If the meaning in y 1441(a) and
y 1446 is dictated by Shamrocµ Oil, and excludes third parties (i.e., both third-
party defendants and counterclaim defendants), then y 1453(b) does as well. Id. at
335.
15
The various judicial interpretations of CAFA, including our own, recognize
that 'CAFA . . . evidences [a] detailed appreciation of the bacµground legal
context.' Abrego Abrego, 443 F.3d at 684; see also Blocµbuster, Inc. v. Galeno,
472 F.3d 53, 58 (2d Cir. 2006) ('CAFA's detailed modifications of existing law
show that Congress appreciated the legal bacµdrop at the time it enacted this
legislation.'). To the extent there is any ambiguity about the meaning of
'defendant' as it is used in y 1453(b), the legislative history reveals that
Congress's purpose in drafting CAFA Section 5 was not animated by concerns
regarding Shamrocµ Oil or its progeny, nor was y 1453(b) drafted with the
intention of changing the meaning of 'defendant.' As explained above, y 1453(b)
removed three longstanding obstacles to removal of interstate class actions, namely
'(1) the rule that, in a diversity case, a defendant cannot remove a case from its
home forum, y 1441(b); (2) the rule that a defendant cannot remove a diversity
case once it has been pending in state court for more than a year, y 1446(b); and (3)
the rule that all defendants must consent to removal.' Palisades Collections, 552
F.3d at 331-32.
The report of the Senate Judiciary Committee confirms Congress's intent to
remove these three longstanding barriers to removal. The report specifically
identifies each barrier to removal, discusses its potential for abuse, and explicitly
16
states that y 1453(b) eliminates it. See S. Rep. No. 109-14, at 48-50
(2005), reprinted in 2005 U.S.C.C.A.N. 3, 45-47. Despite the numerous abuses of
the class action system chronicled in its lengthy legislative history, y 1453(b) omits
any mention of Shamrocµ Oil or the majority rule limiting the right of removal to
original defendants. Indeed, there is no mention of 'Shamrocµ Oil' or 'third-
party' or 'counterclaim defendant' in the entirety of the Senate Report. Given the
care Congress tooµ to modify the three established legal principles discussed
above, we cannot conclude that Congress also intended to modify the original
defendant rule--another established legal principle--without any mention of its
desire to do so. See Abrego Abrego, 443 F.3d at 684 ('Given the care taµen in
CAFA to reverse certain established principles but not others, the usual
presumption that Congress legislates against an understanding of pertinent legal
principles has particular force.'); cf. First Banµ, 598 F.3d at 917 ('If the drafters of
the 2005 Act wanted to negate Shamrocµ Oil, they could have written 'defendant
(including a counterclaim defendant)' or 'any party'. . . . But they chose the
unadorned word 'defendant,' a word with a settled meaning.').
Thus, Appellants asµs us to do what Congress did not, by rewriting the
meaning of an accepted and understood term. To do so and change the meaning of
'defendant' in y 1453(b) would, as Judge Easterbrooµ phrased it, 'maµe hash of
17
Chapter 89, because y 1453(b) refers to y 1446; unless the word 'defendant' means
the same thing in both sections, the removal provisions are incoherent.' First
Banµ, 598 F.3d at 917. Although it is at times reasonable to give disparate
meanings to the same word used in related statutes, see Envtl. Def. v. Duµe Energy
Corp., 549 U.S. 561, 574 (2007), this is not such a rare occasion. Finally, adhering
to the narrow and historical interpretation of 'defendant' does not render the use of
'any' in y 1453(b) redundant; by reading 'any defendant' to mean 'any defendant
to the original suit,' or 'true defendant,' y 1453(b) still achieves CAFA's purposes
of eliminating the complete diversity rule and Martin's unanimity rule.
CONCLUSION
While CAFA eliminated several important roadblocµs to removal of class
actions commenced in state court, we hold that 28 U.S.C. y 1453(b) did not change
the longstanding rule that a party who is joined to such an action as a defendant to
a counterclaim or as a third-party defendant may not remove the case to federal
court. Accordingly, the district court's order remanding this suit to California state
court is AFFIRMED.
18
COUNSEL
Jeffrey K. Brown, Esq., Payne & Fears, LLP, Irvine, California; Christopher King,
Esq., Homer Bonner, P.A., Miami, Florida, for Appellants.
Timothy G. Blood, Esq., Blood Hurst & O'Reardon, LLP, San Diego, California;
John A. Yanchunis, Esq., James Hoyer Newcomer Smiljanich & Yanchunis, P.A.,
Tampa, FL, for Appellee.
19
FILED
Westwood Apex v. Contreras, No. 11-55362 MAY 02 2011
MOLLY C. DWYER, CLERK
BYBEE, Circuit Judge, concurring: U.S . CO U RT OF AP PE A LS
I join Judge M. Smith's opinion in full, but I write separately to emphasize
that Congress may wish to reexamine the applicability of the original defendant
rule in the Class Action Fairness Act context.
In this case, what started as a ü20,000 debt-collection case has now morphed
into a complex class action involving approximately 7,000 counter-plaintiffs and
an amount in controversy in the hundreds of millions of dollars. The original
action filed by Westwood Apex against Jesus Contreras has been consumed by
Contreras's counterclaim. The original debt is now a sideshow, an insignificant
offset to anything recovered by the class. It is thus counterintuitive that CAFA
does not authorize the removal of this suit but, for the reasons explained in the
principal opinion, the court has properly adopted the original defendant rule as
CAFA's own.
Under the original defendant rule, as adopted by a majority of the circuits,
only an original defendant (i.e., a defendant named in the pleading that
commenced the action) may remove a case to federal court. Although courts
derived this rule from Shamrocµ Oil & Gas Corporation v. Sheets, 313 U.S. 100
(1941), Shamrocµ Oil does not compel it. Shamrocµ Oil held that an original
plaintiff against whom the defendant asserts a permissive counterclaim may not
remove the suit to federal court on the grounds of diversity of citizenship because,
by voluntarily choosing to commence his action in state court, the original plaintiff
thereby submitted himself to the state court's jurisdiction. Shamrocµ Oil, 313 U.S.
at 106-07. As the Supreme Court explained nearly 150 years ago, original
plaintiffs who 'voluntarily resort[] . . . to the State court . . . [are] bound to µnow of
what rights the defendants to their suit might avail themselves under [that State's
rules of civil procedure]. Submitting themselves to [this] jurisdiction they submit[]
themselves to it in its whole extent.' West v. Aurora City, 73 U.S. 139, 142
(1867). Over time, the holding of Shamrocµ Oil--that an original plaintiff could
not remove the case after a counterclaim was filed--transformed into a rule that
only the original defendant could remove the case. See Palisades Collections LLC
v. Shorts, 552 F.3d 327, 332-33 (4th Cir. 2008) (citing cases); First Nat'l Banµ of
Pulasµi v. Curry, 301 F.3d 456, 461-62 (6th Cir. 2002).
Unliµe an original plaintiff who, by voluntarily choosing to bring his action
in state court, thereby submits himself to the state court's jurisdiction, a third-party
defendant or an additional counterclaim defendant has no say in the chosen forum.
This defendant 'never voluntarily submitted [himself] to the jurisdiction of the
state court,' is 'dragged into state court by service of process the same way that
any other 'defendant' is brought into court,' and 'is as much a defendant as if the
2
case had been originally brought against [him].' Ford Motor Credit Co. v. Aaron-
Lincoln Mercury, 563 F. Supp. 1108, 1113 (N.D. Ill. 1983). In other words, this
defendant 'has been sued in the only meaningful sense of the word--[he] has been
haled into court involuntarily and must defend an action for relief against [him].'
Id.
Here, these concerns are even more acute because Contreras's counterclaim
is unrelated to the original debt-collection action instituted by the plaintiff. '[I]t is
[thus] difficult to see what practical effect or even conceptual distinction exists
between a defendant defending against an original claim and a plaintiff defending
against a counterclaim.' Recent Development, A Plaintiff's Power to Remove to
Federal Court, 53 C OLUM. L. R EV. 282, 283 (1953). Additionally, even the
application of Shamrocµ Oil's rationale to the original plaintiff may be questioned
under these circumstances: that Westwood Apex '[brought its] claim in state court
does not evidence acquiescence to state court jurisdiction of [an unrelated]
counterclaim when, as in the instant case, that is the only available forum because
[its] claim is below the federal jurisdictional amount.' Id.
Until today, our circuit had never adopted the original defendant rule; that is,
we had not yet decided whether to extend the Shamrocµ Oil rule to cases in which
the removing party is either a third-party defendant or an additional counterclaim
3
defendant. The closest we came was remarµing in a pre-CAFA case that it
presented an 'interesting question.' O'Halloran v. Univ. of Wash., 856 F.2d 1375,
1381 (9th Cir. 1988). We extend Shamrocµ Oil today, but ironically we have no
occasion to reflect on whether Shamrocµ Oil's rationale warrants its extension.
Because of CAFA's unique context, it suffices to recognize that the original
defendant rule is an established legal principle (whether or not we have established
such a principle in our circuit), see Palisades Collections, 552 F.3d at 332 ('For
more than fifty years, courts applying Shamrocµ Oil have consistently refused to
grant removal power under y 1441(a) to third-party defendants.'), that Congress
understood established legal principles at the time it enacted CAFA, see Abrego
Abrego v. The Dow Chemical Co., 443 F.3d 676, 684 (9th Cir. 2006) (stating that
'CAFA . . . evidences detailed appreciation of the bacµground legal context'), and
that Congress was careful to maµe clear when it was eliminating an established
legal principle, see First Banµ v. DJL Props., 598 F.3d 915, 917 (7th Cir. 2010)
('If the drafters of the 2005 Act wanted to negate Shamrocµ Oil, they could have
written 'defendant (including a counterclaim defendant)' or 'any party'. . . . But
they chose the unadorned word 'defendant,' a word with a settled meaning.').
The facts of our case, however, highlight the problems with this approach.
Here, the removing parties did not choose to litigate this lawsuit in state court; they
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are not original parties and therefore not within a close reading of Shamrocµ Oil.
Rather, they were forced into state court when Contreras transformed a ü20,000
debt-collection lawsuit into an unrelated multi-million dollar class action by filing
a counterclaim not only against the original plaintiff, but also against the removing
parties. Had Contreras filed this class action separately and not by means of a
counterclaim, the defendants could have removed the case from state court to
federal court under 28 U.S.C. y 1453; but because Contreras did not do so, they
must now, by happenstance, litigate in state court.
Given that 'Congress expressly intended CAFA to expand federal diversity
jurisdiction over class actions,' Lowery v. Alabama Power Co., 483 F.3d 1184,
1197 (11th Cir. 2007), it seems strange that Congress would have wanted to funnel
class actions filed by means of an original complaint into federal court but µeep
those filed by means of a counterclaim in state court. But as the court correctly
concludes, CAFA achieves this particular result, and if Congress does not liµe it,
Congress should rethinµ the rule.
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