Westwood Apex v. Contreras

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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