June 11, 2019
Home Depot U.S.A., Inc. v. Jackson, 587 U.S. ___ (2019) (Thomas, J.).
Response by Alan B. Morrison
Geo. Wash. L. Rev. On the Docket (Oct. Term 2018)
Slip Opinion | SCOTUSblog
When Is a Defendant Not a Defendant? Home Depot U.S.A., Inc. v. Jackson
Some cases, like the travel ban or the census case, are bound for the Supreme Court from the moment they are filed. Home Depot U.S.A., Inc. v. Jackson1 is not one of them. The case began as a collection action in the state courts of North Carolina by Citibank, which sued George Jackson for failure to pay his credit card bill. Mr. Jackson had not paid because he believed that Home Depot and the Carolina Water Systems (“CWS”) had perpetrated a fraud on his purchase of a home water treatment system, which had been charged on his Citibank credit card. According to the complaint, the total purchase price was $8,900, of which approximately $1,200 was currently due. Mr. Jackson alleged that, with interest, the total amount he would owe would approach $31,000.
In addition to raising a number of defenses, Mr. Jackson filed a class action counterclaim on behalf of all individuals who purchased the same water treatment system from Home Depot as he did. In doing so, he brought in as third-party defendants both Home Depot and CWS. At that point, Citibank decided it had enough and voluntarily dismissed its complaint, without prejudice, apparently without any objection from Mr. Jackson. Then, Home Depot removed the case to federal court, relying mainly on the removal portion of the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1453(b). Mr. Jackson then moved to remand on several grounds, including that Home Depot was not a “defendant” under CAFA’s special removal provision in § 1453(b) or the general removal provision in 28 U.S.C. § 1441.2
Both the district court and the Fourth Circuit agreed with Mr. Jackson that removal was not proper, and the Supreme Court, in an 11-page 5–4 decision written by Justice Thomas, upheld that ruling. There was no dispute that Home Depot was on the defendant side of the “v” in Mr. Jackson’s class action counterclaim and that it had not been an original party to the case. Everyone also agreed that CAFA made removal of cases covered by it easier by allowing “any defendant” to remove, even if one of the defendants was a citizen of the state in which the case was filed, eliminating two barriers that § 1441 would have imposed but for CAFA.
The majority nonetheless rejected Home Depot’s argument because the Court had ruled in 1941 in Shamrock Oil & Gas Corp. v. Sheets,3 that a plaintiff against whom a counterclaim was filed did not thereby become a “defendant” for purposes of the removal statute and hence was forced to remain in state court. Part of the rationale for that ruling was that the plaintiff had chosen to be in state court to start, and hence was stuck with that decision even in the face of a counterclaim filed against it. According to the majority, neither the fact that Home Depot was not an original plaintiff, nor the broad removal provision of CAFA, altered that outcome. Justice Alito, in his 26-page dissent, which was joined by the Chief Justice and Justices Gorsuch and Kavanaugh, concluded that removal was proper, relying on the text and purposes of CAFA and of § 1441 as support.
Home Depot is hardly the kind of case which occurs with great frequency, and the petition did not allege that there was any conflict among the circuits on this issue. That suggests that the actual holding in the case is not likely to be the deciding factor in many removal disputes, and now that the law is settled, the merits of the competing opinions are less important than that the issue was decided one way or the other. There are points on both sides and perhaps the most notable is that all of the purpose arguments—especially that Home Depot was not a willing state court plaintiff and that CAFA is a very pro-removal statute—were made by the dissenters who are generally not known to rely heavily on that basis in deciding cases. In the end, both sides seemed to agree that Congress had not focused on this precise problem, and the question became whether the limited removal approach of Shamrock, or the pro-removal approach of CAFA, would triumph.
As one who likes to think that rules and statutes governing procedure (not to mention substantive areas of law) should be responsive to the purposes that animate them, Home Depot brings into focus significant misalignments of purposes concerning the law of removal. Let’s start with Shamrock, where there are at least two applications in which the current ban on plaintiff removal do not fit with the stated rational, aside from the focus on the word “defendant” in the statute. First, in a diversity case, the plaintiff may not have had a choice of suing in federal court (as Citibank did not here) because the amount in controversy was well below the required $75,000. Second, suppose that the counterclaim is based on federal law: the defendant cannot remove because § 1441 is available only if the district court would have had subject matter jurisdiction over the original complaint, which may not be the case where the plaintiff sued for less than $75,000 or there is no diversity. Moreover, there is a different rationale for allowing removal of a federal counterclaim by either the defendant or the plaintiff: the desirability of having federal courts decide questions of federal law. That rationale is especially significant when the counterclaim is compulsory (presumably under the state court equivalent of Federal Rules of Civil Procedure 13(a)) or is likely to raise thorny questions of issue preclusion if filed separately.
The CAFA aspects of the case raise some other perplexing issues. CAFA applies only to state-law-based class actions, and so if Mr. Jackson had based his class complaint on federal law, for example the Truth in Lending Act or RICO, CAFA would have been irrelevant because CAFA applies only to class actions in which diversity of citizenship is the basis for subject matter jurisdiction. Second, suppose that the CAFA class action had been filed solely against Citibank, which did “choose” to file in state court and which clearly under Shamrock could not remove. Removal or not, even under the dissent’s approach? And what should have happened if Mr. Jackson had not let Citibank get out of the case, in which case there would have been two defendants, one of whom is arguably entitled to remove under CAFA and the other is clearly barred from doing so because it was an original plaintiff?
The truth of the matter is that Congress never considered these (and probably other similar) situations when it enacted both of these removal provisions. My experience with the results when Congress tries to fix jurisdictional statutes is not always positive, but perhaps this time could be different. Two other alternatives are worth consideration. First, Congress could ask the Judicial Conference (or one of its committees) to review these provisions and make some recommendations. Second, Congress could authorize the Supreme Court, as part of its rulemaking authority, to define “defendant” in § 1441, much as it has authorized the Court to issue rules that “define when a ruling of a district court is final for the purposes of appeal under section 1291 of [Title 28].”5
Counterclaim removal is surely not among the ten most important problems affecting our country or even the federal judicial system, but perhaps that might be a reason why some progress might be possible.
Dean Alan B. Morrison is the Lerner Family Associate Dean for Public Interest & Public Service Law, George Washington University Law School. He teaches civil procedure and constitutional law.
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- No. 17-1471 (U.S. June 8, 2019).
- The other two grounds for remand were case specific and, if accepted, would not have provided Supreme Court fodder. Mr. Jackson claimed that his damages were only $1,080 and that there were at most 286 members in the class. If his claim was typical in amount, the total class damages would be less than $300,000, well below the $5 million required by 28 U.S.C. § 1332(d)(2) to come within CAFA’s removal provision. Even if class damages were calculated based on the full purchase price of $8,900, the total would be only $2,545,000. In addition, in case that hurdle was overcome, Mr. Jackson also argued that the case came within the local class exceptions in 28 U.S.C. § 1332(d)(4) because CWS was a North Carolina company and 259 out of 286 purchases were by persons with North Carolina addresses. Instead of ruling on those alternative grounds, the district court certified the “defendant” question to the Fourth Circuit, from which Home Depot obtained review in the Supreme Court.
- 313 U.S. 100 (1941).
- 28 U.S.C. § 2072(c) (2012).
Recommended Citation
Alan B. Morrison, Response, Home Depot U.S.A., Inc. v. Jackson, Geo. Wash. L. Rev. On the Docket (June 11, 2019), https://www.gwlr.org/home-depot-u-s-a-inc-v-jackson.
