SCOTUS To Review Whether A Third-Party Defendant Can Remove a Class Action to Federal Court

On September 27, 2018, the Supreme Court agreed to review whether, under the Class
Action Fairness Act (CAFA), a third-party defendant can remove a class action from state to federal court. Home Depot USA, Inc., U.S. No. 17-1471. CAFA allows “any defendant” to remove actions from state to federal court if certain jurisdictional requirements are met.

This case arose when Citibank N.A. brought a debt collection action against George
Jackson in state court alleging he failed to pay for a water treatment system he bought using a Citibank credit card. Jackson filed a counterclaim against Citibank and third-party class action claims against Home Depot and Carolina Water Systems, Inc. for allegedly misleading consumers about their water treatment systems.

Home Depot argued that third-party defendants should be entitled to remove claims
against them to federal court under CAFA. However, the Fourth Circuit held that, as a third-party defendant, Home Depot could not invoke federal jurisdiction under CAFA. The Fourth Circuit, along with other circuits, have held that the “any defendant” language under CAFA applies only to an original defendant and not a third-party or counterclaim defendant.

In its petition for review to the Supreme Court, Home Depot argued that the Fourth
Circuit’s interpretation of CAFA’s removal provision creates a “roadmap for circumventing CAFA’s goal of ensuring that defendants in qualifying class actions may defend themselves in Federal court.” Home Depot and other businesses seek a ruling that precludes plaintiff’s counsel from forcing defendants to litigate national class actions in plaintiff-friendly state courts. On the other hand, Jackson argued that Home Depot’s claim is misplaced, and that Home Depot should take the issue up with Congress and not with the judiciary.

This case has potential implications on future class action filings and strategies employed by both plaintiffs and defendants. If Jackson prevails, future plaintiffs may be encouraged to further forum shop and file class actions in plaintiff’s friendly state courts, whereas a win for Home Depot may give future class action defendants more flexibility in removing class actions to the more generally conservative federal courts.