# Amicus Curiae Brief — Home Depot U.S.A., Inc. v. Jackson, 139 S. Ct. 51 (2018) (No. 17-1471)

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0825%3A12

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2018

## Text

No. 17-1471

IN THE
Supreme Court of the United States

HOME Deport U.S. A., INC.,

Petitioner,

GEORGE W. JACKSON,

Respondent.

On Writ of Certiorari to the United States
Court of Appeals for the Fourth Circuit

BRIEF OF AMICUS CURIAE
AMERICAN ASSOCIATION FOR JUSTICE

ELISE SANGUINETTI
President

JEFFREY WHITE

Senior Associate General
Counsel

AMERICAN ASSOCIATION
FOR JUSTICE

777 6th Street, NW #200
Washington, DC 20001

Counsel for
Amicus Curiae

SMOGER & ASSOCIATES
13250 Branch View Lane
Dallas, TX 75234

(972) 243-5297
gerson@texasinjurylaw com

David M. Arbogast
ARBOGAST LAW

933 WOODLAND AVENUE
SAN CARLOS, CA 94070
(650) 587-3006
david@arbogastlaw com

TABLE OF CONTENTS

TABLE OF AUTHORITIES ..................ccsscrcceeeeeees v
INTEREST OF AMICUS CURIAE ......................... l
SUMMARY OF ARGUMENT. 2
——————pñ̃ ¼——pp—————j—ĩ—j—j—çjr—:᷑]m 4

|. ASSUMING ARGUENDO THAT HOME
DEPOT IS CORRECT IN ITS ANALYSIS,
HOME DEPOT WOULD STILL NOT BE
ABLE TO REMOVE THIS CASE TO
FEDERAL COURT; AS SUCH, ANY
DECISION BY THIS COURT WOULD AT
44 SO 4

A. Home Depot, Even as a “Defendant,” Would
Not Have Been Entitled to Remove this
Action Under the Law as it Existed Before
the Enactment of CAT...... 6

B. Even if Home Depot is Considered To Be a
“Defendant,” CAFA Would Still Not Provide
Home Depot With an Alternate Basis for
EE ELE ETS oh RO 7

C. Ultimately It Will Be Proven That this Court
Does Not Have Jurisdiction to Hear this
Case and Any Opinion Will Accordingly
e iiscninnearcinenernpannintinees 9

II.

u

CONTRARY TO THE PROTESTATIONS OF
HOME DEPOT AND ITS AMICI, ALL
PUBLIC POLICY ARGUMENTS WEIGH IN
FAVOR OF THIS CASE PROCEEDING IN
NORTH CAROLINA STATE COURT......... 10

A. Home Depot and Its Amici Recite Rote

B.

D.

Descriptions About Class Actions Absent
Case or Documentary Support, Ignoring
That this is the Prototypical Class Action
That Congress, When Enacting CAFA,
Intended Would Remain in State Court..... 10

In Contrast to the Protestations of Amici
Chamber, When Congress Passed CAFA, It
Expressly Did Not Show a Desire to Enhance
the Coverage of MDL Jurisdiction.............. 13

. The State Courts Are Necessary Courts of

General Jurisdiction and the Much Smaller
Federal Court System Is Limited in Its
, cs SS eR 15

Amicus DRI Is Categorically Wrong in Its
Characterization of State Judges as Being
Biased Due to Their Elections Being
Dominated by Contributions from the
EEE ET SAR SI cE 17

ill

III. ITS TEXT AND HISTORY MAKE IT CLEAR

THAT CONGRESS NEVER MEANT TO
INCLUDE “THIRD-PARTY
COUNTERCLAIM DEFENDANTS” WHEN
IT GRANTED REMOVAL RIGHTS TO
J.... — 19

A. Congress Intended to Grant Removal Rights

IV.

Only to Traditional Defendants.................. 19

. This Court’s Long-Established Tradition to

Strictly Construe Removal Under § 1441
Was Not Changed By CAFA and § 1453 in
Order to Extend Removal Rights to Third-
Party Counterclaim Defendants. ................ 23

Home Depot Cannot Use Congress’ Silence
on Its Idiosyncratic Interpretation of
“Defendant” To Support That Unique
D “3 27

IF THIS COURT CONCLUDES THAT
“THIRD-PARTY COUNTERCLAIM
DEFENDANTS” MAY REMOVE ACTIONS
TO FEDERAL COURT, INSTEAD OF
LIMITING GAMESMANSHIP, IT WILL
USHER IN A NEW ERA OF A VASTLY
ENLARGED FEDERAL DOCKPT............. 29

iv

A. Home Depot’s Concerns Are Grossly
Overblown; There Have Been Relatively Few
Third-party Counterclaim Class Actions in
the Thirteen Years Since CAFA Became
—r L —ͤ— —k2 29

B. If This Court Rules As Home Depot Wishes,
the Much Greater Risk Will Be That Some
Defendants Will Attempt to Game the
System In Order to Gain Their Preferred
ie . 32

C. History Shows That Certain Defendants
Have Used Such Loopholes to Gain Their
Preferred Federal Jurisdiction. .................. 35

CONCLUSION .................4. ä — — — 36

Vv
TABLE OF AUTHORITIES
Cases
Alexander v. Sandoval,

e

Bender v. Williamsport Area School Dist.,

e

Cannon v. Univ. of Chi.,

e

Cent. Bank of Denver, N. A. v. First Interstate

Bank of Denver, N.A., 511 U.S. 164 (1994).....

Cent. Virginia Cmty. Coll. v. Katz,

e —Rm n

Chi., Rock Island, & Pac. Ry. Co. v. Martin,

e

Chisom v. Roemer,

I

City of Ann Arbor Emps. Ret. Sys. b. Gecht,
No. C-06-7453 EMC, 2007 WL 760568

Croy u. Buckeye Int'l, Inc.,

483 F. Supp. 402 (D. Md. 1979).......................

vi

Dart Cherokee Basin Operating Co. v. Owens,

135 S.Ct. 547, 554-55 (20 14) 26, 30, 31
Dauenhauer v. Superior Court,

149 Cal. App. 2d 22 (3rd Dist. 1987) 32
Doran v. Salem Inn, Inc.,

EEE 18
Epic Sys. Corp. v. Lewis,

r 27
Exxon Mobil Corp. v. Allapattah Servs. Inc.,

SS 20
First Bank v. DJL Props., LLC,

598 F.3d 915 (7th Cir. 2010)... . 31
Foster v. Chatman,

, 10
Garcia v. San Antonio Metro. Transit Auth.

r ̃ 222... ecensowoonenee 15
Grupo Dataflux v. Atlas Global Grp., L.P.,

, a 9
Harvey u. Shelter Ins. Co, Civ. A. No. 13-392,

2013 WL 1768658 (E. D. La. Apr. 24, 2013) 35
Holloway v. Gamble-Skogmo, Inc.,

274 F. Supp. 321 N. D. III. 1967 )) 34

Hyde v. Carder,

310 F. Supp. 1340 (W. D. Ky. 1970 34
In re Morig. Elec. Registration Sys., Inc.,

680 F.3d 849 (6th Cir. 2012) 31
Keene Corp. v. U.S.,

/ een 28
King v. Burwell,

e are ree oe 23
Kokkenen v. Guardian Life Ins. Co. of Am.,

e .. 21
Lewis v. Lewis & Clark Marine, Inc.,

r eminent 18
Marshall u. Vauco, Inc.,

152 F. Supp. 50 (S. D. Tex. 1957) 34

Monessen Sw. Ry. Co. v. Morgan,
I 27

Morris v. Marshall Cty. Bd. of Educ.,
560 F. Supp. 43 N. D. W. Va. 1983) 33

Muskrat v. United States,
I 10

NLRB v. Jones and Laughlin Steel Co.,
, ̃ ... 15

Palisades Collections LLC v. Shorts,
552 F.3d 327 (4th Cir. 2008) 30, 31

Palsgraf v. Long Island R.R. Co.,
163 N.E. S (N.Y. 1 16

Phillips Constr., LLC v. Daniels Law Firm, PLLC,
93 F. Supp. 3d 544 (S. D. W. Va. 2015) 35

Poznanovich v. AstraZeneca Pharm. LP,
Civ. A. No. 11-4001 (JAP), 2011 WL 6180026

r 35
Progressive West Ins. Co. v. Preciado,

479 F.3d 1014 (9th Cir. 2007) 30
Robinson v. Shell Oil Co.,

e ER eS 21
San Remo Hotel, L. P. v. City and Cnty. of S. V.,

e ee EP . 18
Schoneweather v. L. V. Richardson, Inc.,

122 F. Supp. 692 (W. D. Mo. 1954) 34

Shamrock Oil & Gas Corp. v. Sheets,
SRN . passim

Share v. Sears, Roebuck & Co.,
550 F. Supp. 1107 (E.D. Pa. 1982) ..................... 33

Sullivan v. Novartis Pharm. Corp.,
575 F. Supp. 2d 640 (D.N.J. 2008) 36

Tri-State Water Treatment, Inc. v. Bauer,
845 F.3d 350 (7th Cir. 2017) ——— 31

Tuyagda Aluminum Prods. Corp. v. Hull Dobbs

65th Infantry Ford, Inc.,
313 F. Supp. 774 (D.P.R 1970) 34

United Founders Life Ins. Co. of Ill. v.

Blackhawk Holding Corp.,
341 F. Supp. 483 (E. D. Wis. 1972 33

United States v. Corrick et ul.,
. ——. 10

United States v. Heirs of Boisdoré,
49 U.S. (8 How.) 113 (1850) 21

Verschell v. Fireman’s Fund Ins. Co.,
257 F. Supp. 153 (S.D.N.Y. 1966)....................... 33

Vimar Seguros y Reaseguros, S.A. v.
M/V Sky Reefer, 515 U.S. 528 (1999) 27

White v. Baltic Conveyor Co.,
209 F. Supp. 716 O. N. J. 1962) .......................... 34

Will v. Michigan Dep't of State Police,

400 24
Wisconsin Cent. Lid. v. United States,

0 22
Statutes
. ..— passim
1 — 13, 14
1 passim
1 6, 23, 24
ü 8 23
1 — 3, 23, 26
Other Authorities
Act of 1789, ch. 20, § 12, 1 Stat. 73 (1845) 20
Act of Mar. 3, 1887, ch. 373, § 2,

en 19
Alicia Bannon et al.,

Who Pays for Judicial Races?, 7 (2017) ............. 18

Blacks Law Dictionary (10th ed. 2014)................ 21

xi

Buzzfile, Caroline Water Systems Inc. Business
Description, http://www.buzzfile.com/
business/Rainsoft-Water-Treatment-
ie 5

The Class Action Fairness Act of 2005,
S. Rep. No. 109-14 (200 5))))))))))) 11, 13

Corporate Office Headquarters,
The Home Depot, Inc., http://www.corporate-
office-headquarters.com/the-home-depot-inc....... 5

1 22

Followthemoney. org, Courting Donors: Money in
Judicial Elections, 2011 and 2012,
https://www.followthemoney.org/research/institut
e-reports/courting-donors-money-in-judicial-
elections-201 1-and-2012#item_1........................ 17

The Home Depot, Store Finder,
https://www.homedepot.com/I/ search / north%20
carolina /full/?lat=35.760336605333244&Ing=-
79.22108 101843261 &radius=100....................... 12

Judiciary Act of 1875, ch. 137,
Tee 19

Andrew F. Popper, On ‘he Necessity of Preserving
Access to State Courts and Civil Justice:

xii

Rediscovering Federalism & Debunking
“Fraudulent” Joinder,
44 Rutgers L. Rec. 160 (2017) 16

Wiley E. Rice, “Allegedly “Biased,” “Intimidating,”
and “Incompetent” State Court Judges and the
Questionable Removal of State Law Class Actions
to Purportedly “Impartial” and “Competent”
Federal Courts -- A Historical Analysis of Class
Action Dispositions in Federal and State Courts,
1925-2011, 3 Wm. & Mary Bus. L. Rev. 419
“ee ES 11, 16

Joanna Shepherd, Justice At Risk An Empirical
Analysis Of Campaign Contributions And
Judicial Decisions, American Constitution
Society for Law and Policy (June 2013 17

Jed Handelsman Shugerman,
The People’s Courts: Pursuing Judicial
Independence in America (2012) 16

INTEREST OF AMICUS CURIAE!

The American Association for Justice (“AAJ”) is
a national voluntary bar association founded in 1946
to safeguard the right of all Americans to seek legal
recourse for wrongful injury, strengthen the civil-
justice system, and protect access to the courts. AAJ
is the world’s largest trial bar association, with
members in the United States, Canada, and abroad.
Throughout its 70-year history, AAJ has served as a
leading advocate of the right to access to the courts
for legal redress for wrongful injury.

This case is of acute interest to AAJ, because
the redefinition of the basic term “defendant,” as
Petitioner proposes, rejects this Court’s careful
jurisprudence and invites a host of unintended
consequences, including unwarranted expansion of
federal court jurisdiction over state-law causes of
action, diminution of state courts’ important role in
developing and defining state law, and undermining
the historic right of plaintiffs to proceed in the forum
of their choice.

' Pursuant to Rule 37.6, amicus affirms that no counsel for any
party authored this brief in whole or in part and no person or
entity, other than amicus, its members, or its counsel has made
a monetary contribution to its preparation or submission.
Petitioner and Respondent have consented to the filing of this
brief.

2

SUMMARY OF ARGUMENT

Assuming arguendo that Petitioner Home
Depot U.S. A., Inc. (“Home Depot”) is correct in its
analysis and it should be construed to be a
“defendant” under the removal statutes, Home
Depot would still not be able to remove this case to
federal court. First, Home Depot, even as a
“defendant,” would not be entitled to remove this
action under the law as it existed before the
enactment of the Class Action Fairness Act Of 2005
(“CAFA”), because it would not be able to get the
agreement of all “defendants” to that removal.
Secondly, the CAFA amendments do not provide
Home Depot the right to remove, because Home
Depot cannot survive the “local controversy”
exception to CAFA federal court jurisdiction. As a
result, it will ultimately be proven that this Court
does not have jurisdiction to hear this case and any
opinion will accordingly be merely advisory.

While Petitioner and its amici make various
claims about the public policy behind the enactment
of CAFA, none of them makes even a passing
attempt to relate those policy considerations to the
actual facts of the case before this Court. In fact, all
public policy arguments weigh in favor of this case
proceeding in North Carolina state court, as the
facts of this case make it the prototypical type of
class action Congress expressly intended should
remain in state court. Nor, as is argued by the Brief
of the Retail Litigation Center, Inc. and the
Chamber of Commerce of the United States of

3

America (“Chamber”), did Congress feel that the
absence of CAFA might affect MDL jurisdiction;
indeed, in the body of CAFA, Congress actually
included a limitation upon the jurisdiction of MDLs.
Further, the Brief of Defense Research Institute
(“DRI”) is categorically wrong when without any
evidence it argues that state court judges are biased
due to their elections being dominated by
contributions from the plaintiff bar when the reality
is, if anything, the opposite. The bottom line is that
state courts are absolutely necessary courts of
general jurisdiction in the federal scheme and the
denigration of those courts by Home Depot and its
amici is unwarranted.

The text and history of 28 U.S.C. §§ 1441 and
1453 make it clear that Congress never meant to
confer upon “third-party counterclaim defendants”
the removal rights it granted to “defendants” that
were sued by the plaintiff. This Court's long
established tradition to strictly construe removal
under § 1441 should not be changed, and it was not
changed by CAFA and § 1453 in order to extend
removal rights to third-party counterclaim
defendants. Shamrock Oil & Gas Corp. v. Sheets,
313 U.S. 100 (1941) has been correctly viewed as
limiting removal rights to only defendants sued by
the plaintiff and there is no reason to change that
interpretation now.

Home Depot’s concerns over a great loophole
opening the floodgates to federal jurisdiction are
grossly overblown, as there have been relatively few

4

third-party counterclaim class actions in the
thirteen years since CAFA became law. However, if
this Court concludes that third-party counterclaim
defendants may be construed to be “defendants”
under the removal statutes and afforded the same
rights to remove proper state court actions as
defendants sued by the plaintiff(s), instead of
limiting gamesmanship, it will likely usher in a new
era of a vastly enlarged federal court civil docket.
History shows that certain defendants have abused
textual loopholes to gain federal jurisdiction when
preferred, and nothing in contemporary
jurisprudence indicates they won't do it again.

ARGUMENT

I. ASSUMING ARGUENDO THAT HOME
DEPOT IS CORRECT IN ITS ANALYSIS,
HOME DEPOT WOULD STILL NOT BE
ABLE TO REMOVE THIS CASE TO
FEDERAL COURT; AS SUCH, ANY
DECISION BY THIS COURT WOULD AT
BEST BE ADVISORY.

Home Depot does not dispute that the removal
statutes vest the right of removal exclusively in a
“defendant” who has been sued by a plaintiff in a
civil action brought in state court. Instead, the
consistent thrust of Home Depot’s argument is that
it should also be regarded as a “defendant” and,
therefore, enjoy all of the removal rights accorded to
the defendants sued by the plaintiff. Thus, under
Home Depot's proposed formulation there would
actually be three defendants in this action that could

5

seek removal rights under the removal statutes: Mr.
Jackson, an individual residing in North Carolina
and the defendant sued by the plaintiff; Home
Depot, a Georgia-based, publicly traded company
and third-party counterclaim defendant, Pet. for a
Writ of Certiorari at ii;? and Carolina Water
Systems, Inc. (“CWS”), a North Carolina-based
third-party counterclaim defendant, Respondent's
Brief (“RB”) 58 (citing Dist. Ct. Dkt. No. 24, at 16-
17).5 Yet, even if Home Depot is correct, Home Depot
would still not be entitled to remove this action.

See also Corporate Office Headquarters, The Home Depot,
Inc, http://www.corporate-office-headquarters.com/the-home-
depot-inc (last visited December 13, 2018).

® Publicly available information describes CWS as follows:
“Business Description Carolina Water Systems, which also
operates under the name Rainsoft Water Treatment, is located
in Charlotte, North Carolina. This organization primarily
operates in the Water Purification Equipment business /
organization has been operating for approximately 21 years.
Carolina Water Systems is estimated to generate $4.2 million
in annual revenues, and employs approximately 29 people at
this single location.” Buzzfile, Carolina Water Systems Inc.
Business Description, http://www.buzzfile.com/business/
Rainsoft-Water-Treatment-704-921-1950 (last visited
December 13, 2018).

6

A. Home Depot, Even as a “Defendant,”
Would Not Have Been Entitled to
Remove this Action Under the Law
as it Existed Before the Enactment
of CAFA.

Before CAFA was enacted, the only avenue for
removal of this action by Home Depot would have
been under the diversity provisions of 28 U.S.C.
§ 1332(d). However, such removal would not have
been possible, because when § 1441(a) provides the
sole basis for removal, “all defendants who have
been properly joined and served must join in or
consent to the removal of the action.” 28 U.S.C.
§ 1446(b)(2)(A). Indisputably, Mr. Jackson, who has
been properly joined and served, has not consented
to removal. Therefore, even if this Court construed
Home Depot to have been a defendant pursuant to
§ 1441(a), Home Depot could not remove this action
to federal court. The plain text of the removal
statutes requires Mr. Jacksons consent and Home
Depot has never had that.

While there can be no question that Mr.
Jackson is a defendant as defined by § 1441(a), even
if Mr. Jackson were somehow considered a

“plaintiff,”* Home Depot still could not remove based

‘ This Court has already determined that Mr. Jackson, having
not initiated the original proceeding, may not be considered a
“plaintiff” Even in the more liberal context of CAFA, in

Mississippi ex rel. Hood v. AU Optronics Corp., 571 U.S. 161,
169-170 (2014) this Court held that when Congress used the

7

upon the traditional diversity statutes. An action
“may not be removed if any of the parties in interest
properly joined and served as defendants is a citizen
of the State in which such action is brought,”
§ 1441(b)(2), and Defendant CWS is a citizen of
North Carolina. Further, pursuant to § 1332(a), no
diversity jurisdiction e ts over cases in which any
plaintiff is a citizen of the same state as any
defendant, and here both Mr. Jackson and CWS are
North Carolina citizens.

B. Even if Home Depot is Considered
To Be a “Defendant,” CAFA Would
Still Not Provide Home Depot With
an Alternate Basis for Successful
Removal.

Post-CAFA § 1332(d)(4) specifically exempts
local controversies, such as this, from federal court
jurisdiction. Section 1332(d)(4) provides that that
there is no federal court jurisdiction under CAFA
when four criteria are met: (1) “greater than two-
thirds of the members of all proposed plaintiff
classes are citizens of the State in which the
action was originally filed”; (2) “at least” one
defendant “from whom significant relief is sought”
and “whose alleged conduct forms a significant basis
for the claims” is “a citizen of the State in which the
action was originally filed”; (3) “principal injuries
resulting from the alleged conduct or any related

word “plaintiffs,” it intended the term to have its ordinary
meaning as used in the Federal Rules of Civil Procedure.

8

conduct of each defendant were incurred in the State
in which the action was originally filed”; and (4)
“during the 3-year period preceding the filing of that
class action, no other class action has been filed
asserting the same or similar factual allegations
against any of the defendants on behalf of the same
or other persons.” § 1332(d)(4).

Before the courts below, Mr. Jackson properly
raised the local controversy exception. RB 57-59.
The facts as summarized below lead inexorably to
the conclusion that there is no federal court
jurisdiction even if Home Depot is considered a
“defendant” for purposes of its ability to remove this
action under the CAFA amendments.

The class at issue includes all people who
purchased water-treatment systems from Home
Depot and CWS, with class members residing almost
entirely within the state of North Carolina. Joint
Appendix (“JA”) 62. Home Depot’s own records show
that out of 286 purchasers, 259 have North Carolina
addresses. Dist. Ct. Dkt. No. 42-1, at 5-15. Thus,
approximately ninety percent of the proposed
class—greater than the two-thirds required—are
citizens of North Carolina. /d. Third-party
counterclaim defendant CWS is a citizen of North
Carolina, meaning that “at least” one defendant
“from whom significant relief is sought” and “whose
alleged conduct forms a significant basis for the
claims” is an in-state defendant. The class definition
shows that the principal injuries of the alleged
North Carolina water-treatment scheme occurred in

9

North Carolina. Dist. Ct. Dkt. No. 24, at 18-19.
Finally, the record reveals that no other class action
asserting similar factual allegations against Home
Depot or CWS was filed in the three years preceding
Mr. Jackson's counterclaims. Id. at 19. Given this,
CAFA does not provide federal court jurisdiction to
Home Depot even if it is considered to be a
“defendant” trying to remove.

C. Ultimately It Will Be Proven That
this Court Does Not Have
Jurisdiction to Hear this Case and
Any Opinion Will Accordingly Be
Merely Advisory.

This Court made clear in Grupo Dataflux v.
Atlas Global Grp., L.P. that by “whatever route a
case arrives in federal court, it is the obligation of
both district court and counsel to be alert to
jurisdictional requirements.” 541 U.S. 567, 593
(2004) (citing Bender v. Williamsport Area School
Dist., 475 U.S. 534, 541 (1986), which states that
“every federal appellate court has a ‘special
obligation to satisfy itself not only of its own
jurisdiction, but also that of the lower courts in a
cause under review, even though the parties are
prepared to concede it” (quoting Mitchell v. Maurer,
293 U.S. 237, 244 (1934)).

Here, the bottom line is that despite the
questions accepted for review by this Court, as has
been shown above, federal courts do not have the
underlying jurisdiction to hear this case. When a
lower district court lacks jurisdiction, this Court's

10

only jurisdiction on appeal is “not of the merits, but
merely for the purpose of correcting the error of the
lower court in entertaining the suit.” United States
v. Corrick et al., 298 U.S. 435, 440 (1936) (footnotes
omitted). See also Foster u. Chatman, 136 S.Ct. 1737,
1763 (2016) (Thomas, J., dissenting) (warning that
proceeding further without establishing the Court’s
jurisdiction will lead to “an impermissible advisory
opinion.”). Such an impermissible advisory opinion
would be the ultimate fate of any decision this Court
renders here. Simply put, Congress did not confer
jurisdiction on Article III federal courts to render
— opinions. See Muskrat v. United States, 219
U.S. 346, 354-56 (1911).

II. CONTRARY TO THE PROTESTATIONS
OF HOME DEPOT AND ITS AMICI, ALL
PUBLIC POLICY ARGUMENTS WEIGH
IN FAVOR OF THIS CASE PROCEEDING
IN NORTH CAROLINA STATE COURT.

A. Home Depot and Its Amici Recite
Rote Descriptions About Class
Actions Absent Case or
Documentary Support, Ignoring
That this is the Prototypical Class
Action That Congress, When
Enacting CAFA, Intended Would
Remain in State Court.

Home Depot's amici resuscitate a time-worn
parade of supposed horrible conduct perpetrated by
class counsel and the class actions they bring. Many
of their citations and references regarding the

11

problematic nature of class actions come from The
Class Action Fairness Act of 2005, S. Rep. No. 109
14 (2005) (‘Senate Report”). See Chamber 18-19,
Brief of Washington Legal Foundation and Allied
Educational Foundation (““WLF”) 30, DRI 5, 9-10.
These descriptions by their very nature are at best
descriptive of a pre-CAFA world. However, in this
post-CAFA world, Chamber goes to great lengths to
explain that CAFA was a huge success and has
worked quite well. Chamber 3, 5, 13, 20.5

It is to the detriment of this ostensibly
massively-improved post-CAFA federal court world
that Home Depot and its amici argue plaintiffs have
discovered a “giant loophole” which could bring down
the efficient CAFA edifice. Petitioner's Brief (“PB”)
42. The result would do serious harm to CAFA’s
overriding purpose — the critical need for federal
jurisdiction of interstate cases of national
importance. See, e.g., Chamber 20, DRI 7, WLF 13.

gut for a contrary view, see Wiley K. Rice, Allegedly “Biased,”
“Intimidating,” and “Incompetent” State Court Judges and the
Questionable Removal of State Law Class Actions to
Purportedly “Impartial” and “Competent” Federal Courts -- A
Historical Analysis of Class Action Dispositions in Federal and
State Courts, 1925-2011, 3 Wm. & Mary Bus. L. Rev. 419, 559-
60, 568 (April 2012) (“[t}he research and empirical findings in
this Article strongly suggest: (1) CAFA’s highly questionable
removal and jurisdictional rules evolved from untruths or just
plain fabrications, and (2) the new rules undermine the
principles of judicial federalism.”). In this extensive study,
Professor Rice analyzed and coded 2,657 federal and state

12

Yet, neither Home Depot nor its amici ever
make even a passing attempt to relate the actual
facts at issue before this Court to their doom and
gloom scenario. The reason is obvious. This case is
not what has been defined as an interstate case nor
can it conceivably be considered a case of national
rather than North Carolina importance. The alleged
fraudulent scheme in question was perpetrated
within the state of North Carolina to almost entirely
North Carolina residents and has been brought
pursuant to North Carolina law, including
allegations of violation of the rather unique North
Carolina Referral Sales Statute (N.C. Gen. Stat. §
25A-37.). The defendant that Home Depot was
allegedly in cahoots with is based in North Carolina.
And from purely a public policy perspective, even
Home Depot can hardly be considered the type of
disadvantaged “out of state” resident the framers
sought to protect. See PB 25, WLF 23. Home Depot
has 39 locations within the state of North Carolina.®

® On its website, Home Depot lists the following North Carolina
locations: Apex; Asheville; Battleground; Burlington; Cary;
Cornelius; Durham; E. Charlotte; E. Greensboro; Fayetteville;
Fuquay Varina; Garner, Gastonia; Greensboro,
Hendersonville; Hickory; High Point; Hillsborough;
Jacksonville; Kannapolis; Kitty Hawk; Knightdale; Matthews,
Myrtle Grove; North Durham; Northwest Raleigh; Pineville; S.
Boulevard Charlotte; Shallotte; South Charlotte; Statesville;
Steele Creek; University; W. Asheville; Wake Forest;
Wendover, Wilmington; and Winston Salem (2). See The Home
Depot, Store Finder, https://)www.homedepot.com/\/search/
north% 20carolina/full/7lat=35. 760336605333244&Ing=79.22

108101843261 &radius=100 (last visited December 13, 2018).

13

Instead, this case is a prototype of the type of
case Congress concluded should remain in state
court even after CAFA was enacted. At page 41 of
the Senate Report, an example of a class action
brought against a Florida funeral home is described
as one that “would remain in state court” even after
CAFA. In the example, just as here, “about 90
percent” of the class members are residents of the
state where the action is brought. Similar to the
third-party crossclaim defendants here, the example
describes one in-state resident defendant along with
an out-of-state defendant. And just as here, no other
class action has been filed regarding the issues of
concern. As a result, the Senate Report concludes:
“This is precisely the type of case for which the Local
Controversy Exception was developed the
controversy is at its core a local one, and the Florida
state court where it was brought has a strong
interest in resolving the dispute.” /d.

B. In Contrast to the Protestations of
Amici Chamber, When Congress
Passed CAFA, It Expressly Did Not
Show a Desire to Enhance the
Coverage of MDL Jurisdiction.

In 1968, Congress created the multidistrict
litigation device and, to administer it, the United
States Judicial Panel on Multidistrict Litigation
(“MDL Panel”). See 28 U.S. C. § 1407. Amici
Chamber argue without explanation that the failure
of this case to proceed in federal court will somehow
undermine the entire MDL system. Chamber 8-11.

14

How this would happen is unclear. There is no MDL
referenced that the within action might be a part of
nor is there an explanation as to how a consumer
fraud action for North Carolina residents against a
North Carolina company for conduct committed
almost entirely in North Carolina would become
part of an MDL. Moreover, there is certainly no
attempt to demonstrate that a federal court would
handle this matter more efficiently than a North
Carolina state court, particularly when most of the
issues are peculiar to North Carolina law.

Furthermore, the actual text of 28 U.S.C.
§ 1407 demonstrates that Congress did not view the
MDL procedure as a panacea for all similar claims
as those claims removed pursuant to CAFA. In fact,
subsections § 1332(d)(11)(C) and (D), enacted as a
part of CAFA, state that when a mass action is
removed to a federal court under CAFA’s new
provisions, it may not be transferred to another
federal court under the MDL statute (§ 1407) unless
a majority of the plaintiffs request such a transfer.
This is hardly the ringing endorsement of the MDL
process proffered in Chamber's brief, but rather a
Congressional expression of keeping local matters
local.

15

C. The State Courts Are Necessary
Courts of General Jurisdiction and
the Much Smaller Federal Court
System ls Limited in Its
Jurisdiction.

Home Depot and its amici spend much time
denigrating the state court system. PB 43-45,
Chamber 16-17, DRI 7-15, 19-21. They ignore the
fact that from the founding of our Republic, the
expectation has been that the state courts would be
the primary forum for the protection of rights and
interests of citizens and that the power of the federal
courts and Congress itself would be carefully
confined or limited. Indeed, from 1789 through to
the present, the 10th Amendment has made it
explicit that the states are to play a vital role in
protecting the interests of citizens. [Thel Tenth
Amendment was adopted specifically to ensure that
the important role promised the States by the
proponents of the Constitution was realized.” Garcia
v. San Antonio Metro. Transit Auth., 469 U.S. 528,
568 (1985) (Powell, J., dissenting).

As a result, this Court has long recognized the
hazard of undue assertion of federal power. [The
scope of this [federal] power must be considered in
the light of our dual system of government, and may
not be extended so as to . . . effectually obliterate the
distinction between what is national and what is
local and create a completely centralized
government.” NLRB v. Jones and Laughlin Steel
Co., 301 U.S. 1, 37 (1937).

16

This deference is necessary not only
constitutionally but administratively. The vast
majority of litigation in the United States takes
place in state courts. As of 2012, there were 94
federal district courts as against approximately
2,177 state trial courts of general jurisdiction with
approximately 10,387 state judges trying cases. See
Rice, supra footnote 5, at 559-60.

State court cases touch on every aspect of
modern life and every imaginable type of dispute,
including many that have their origin in federal law.
Indeed, the development of tort law and its guiding
principles are indebted to legal issues first resolved
by state courts. Just one example is the seminal
decision by Justice Benjamin Cardozo in Palsgraf v.
Long Island R.R. Co., 162 N.E. 99 (N.Y. 1928). Tort
law students are trained in the decisions of
California Justices Malcolm Lucas and Roger
Traynor.

“History and precedent affirm the virtue of
state courts to protect citizens, evolve new
standards, and achieve just and fair resolution of
claims.” Andrew F. Popper, On The Necessity of
Preserving Access tc State Courts and Civil Justice:
Rediscovering Federalism & Debunking
“Fraudulent” Joinder, 44 Rutgers L. Rec. 160, 170
(2017) (citing Jed Handelsman Shugerman, The
People’s Courts: Pursuing Judicial Independence in
America (2012), which states “Margaret Marshall,
the recently retired chief justice of the
Massachusetts Supreme Judicial Court said “From

17

the people’s point of view, justice in America is
delivered first and foremost through the state
courts|.|”)). Home Depot and its amici’s general
denigration of the state court system is, to say the
least, unfortunate.

D. Amicus DRI Is Categorically
Wrong in Its Characterization of
State Judges as Being Biased Due
to Their Elections Being
Dominated by Contributions from
the Plaintiffs’ Bar.

Without any evidentiary support, DRI claims
state court bias due to the fact that “state-court trial
judges’ electoral campaigns routinely receive
substantial financial support from the plaintiffs’
bar.” DRI 7. However, the empirical evidence shows
the exact opposite. For instance, during 2011 and
2012, the Ohio Republican Party was the highest
donor nationally, followed by large defense firms,
many of which are presumably members of DRI. See
Followthemoney.org, Courting Donors: Money in
Judicial Elections, 2011 and 2012, https://www.
followthemoney.org/research/institute-reports/court
ing-donors-money-in-judicial-elections-201 1-and-
2012#item_1.

In fact, a 2013 study shows that business
interests, not plaintiff lawyers, dominate judicial
election financing and that the votes of justices are
influenced by these contributions. See Joanna
Shepherd, Justice At Risk An Empirical Analysis

18

Of Campaign Contributions And Judicial Decisions,
American Constitution Society for Law and Policy
(June 2013), available at https://www.acslaw.org/
wp-content/uploads/old-uploads/originals/document
s/JusticeAtRisk_Nov2013.pdf.

More recently, a report by The Brennan Center
noted that “[o]ne of the most striking aspects of the
2015-16 cycle was the sharp rise in outside spending
most of it non-transparent — by political action
committees, ‘social welfare organizations’
incorporated under 501(c)(4) of the Internal Revenue
Code, and other non-party groups, mirroring the
trends in regular political races, both state and
federal.” Alicia Bannon et al., Who Pays for Judicial
Races?, 7 (2017), available at https://www.brennan
center.org/sites/default/files/publications/Politics of
Judicial Elections Final. pdf.

Thus, DRl's naked suggestion that state courts
are impermissibly biased because they “receive
substantial financial support from the plaintiffs’
bar” should be flatly rejected as entirely without
support. While state courts certainly have a strong
interest in providing a forum for their citizens, this
does not suggest a bias or lack of fairness. Rather, it
suggests the proper role of state courts, which has
been repeatedly acknowledged by this Court. See
San Remo Hotel, L.P. v. City and Cnty. of S. V., 545
U.S. 323, 347 (2005); Lewis v. Lewis & Clark Marine,
Inc., 531 U.S. 438, 449 (2001); Doran v. Salem Inn,
Inc., 422 U.S. 922, 930 (1975).

19

III. ITS TEXT AND HISTORY MAKE IT
CLEAR THAT CONGRESS NEVER
MEANT TO INCLUDE “THIRD-PARTY
COUNTERCLAIM DEFENDANTS” WHEN
IT GRANTED REMOVAL RIGHTS TO
“DEFENDANTS.”

A. Congress Intended to Grant
Removal Rights Only to Traditional
Defendants.

In 1875, Congress “greatly liberalized” removal
practice by allowing “either party” to remove a case
to federal court. See Judiciary Act of 1875, ch. 137,
18 Stat. 470, 471 (1875) (permitting removal in a
case “wholly between citizens of different States, and
which can be fully determined as between them,” by
“either one or more of the plaintiffs or defendants
actually interested in such controversy”). Within
twelve years, Congress recoiled from the vast
expansion of the federal docket and replaced the
“either party” language of the 1875 Act with “the
defendant or defendants therein” language that
eventually made its way into the 28 U.S.C. § 71
(1940) that was considered by this Court in the
seminal case of Shamrock Oil & Gas Corp. v. Sheets,
313 U.S. 100 (1941). See Act of Mar. 3, 1887, ch. 373,
§ 2, 24 Stat. 552, 553 (1887).

In 1911, with some alterations in language, this
statute became § 28 of the Judicial Code (Act of Mar.
3, 1911, ch. 231, 36 Stat. 1087, 1094-1095 (1911)
(codified at 28 U.S.C. § 71 (1940)), and in 1948, with
additional alterations, it migrated to § 1441 (Act of

20

June 25, 1948, ch. 646, Pub. L. No. 80-773, 62 Stat.
869, 937-938 (1949)). Today, § 1441(a) governs
removal in the absence of another, more specific
removal provision.

In Shamrock Oil, this Court unequivocally held
that in interpreting the removal statute, the phrase
“the defendants or defendants therein” means what
it says and provides only that the defendant(s) sued
by the plaintiff(s) in a case have the right to remove.
313 U.S. at 104-109. This Court’s reasoning focused
on the history and language of the various iterations
of the removal statute. Id. at 105-108. In particular,
the first removal statute, § 12 of the Judiciary Act of
1789, allowed only “the defendant” to remove a case.
See Act of 1789, ch. 20, § 12, 1 Stat. 73, 79 (1845); see
also Shamrock Oil, 313 U.S. at 105-106. This Court
further found that the specificity of the word
“defendant” standing alone is clear, which to this
day has not changed and should govern this Court's
answer to the question presented regarding
Shamrock Oil: Shamrock Oil’s removal bar does
“extend to third-party counterclaim defendants,”
because they have never been considered to be
“defendants” to an action brought by a plaintiff as
that word was used at the time the language in
question was first drafted through to today.

This Court has long mandated that
jurisdictional statutes, particularly removal
statutes, must be textually limited. See Exxon Mobil
Corp. b. Allapattah Servs. Inc., 545 U.S. 546, 558
(2005) (stating that wle must not give

21

jurisdictional statutes a more expansive
interpretation than their text warrants.”); Kokkenen
v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
(1994).

The starting point of any textual analysis of a
statute is the plain language of the statute and here
that language only uses the word “defendant” rather
than the word “defendant” with some preceding
descriptive language, such as “third-party,” “cross-,”
or “third-party counterclaim.” “The plainness or
ambiguity of statutory language is determined by
reference to the language itself, the specific context
in which the language is used, and the broader
context of the statute as a whole.” Robinson v. Shell
Oil Co., 519 U.S. 337, 341 (1997); see also United
States v. Heirs of Boisdoré, 49 U.S. (8 How.) 113
(1850). Here, the word “defendant,” standing on its
own, has long commonly meant a party sued by a
plaintiff.

This is because textually a “third-party
defendant” is “[a] party brought into a lawsuit by the
original defendant.” Black’s Law Dictionary (10th
ed. 2014) (emphasis added). Here, of course, Home
Depot is one of the third-party counterclaim
defendants brought into the action in state court by
Mr. Jackson and would never commonly be referred
to as the “defendant.” Home Depot's reliance on an
idiosyncratic revamping of the meaning of the word
“defendant” is unavailing against the more specific
generally used term “third-party defendant” that in
common parlance describes its status. See, e.g., Fed.

22

R. Civ. Pro. 14 (Third Party Practice) (which would
be rendered meaningless if Rule 14 was made
applicable to all or “any defendants”). Moreover,
Home Depot and its amici “supply no persuasive
proof that Congress sought to invoke their
idiosyncratic definition” of the word “defendant”
when enacting the removal statutes. See Wisconsin
Cent. Lid. v. United States, 138 S.Ct. 2067, 2072-73
(2018) (‘while the term ‘money’ sometimes might be
used in this much more expansive sense, that isn't
how the term was ordinarily used at the time of the
Act’s adoption (or is even today).”).

Moreover, this Court in Shamrock Oil bolstered
its interpretation of § 71 with a policy argument: the
desirability of “strict construction” of “acts of
Congress regulating the jurisdiction of the federal
courts.” 313 U.S. at 108. “Due regard for the rightful
independence of state governments,” this Court
noted, requires the federal courts to “scrupulously
confine their own jurisdiction to the precise limits
which the statute has defined.” Id. at 109 (quoting
Healy v. Ratta, 292 U.S. 263, 270 (1934) (internal
quotation marks omitted)). It did not and could not
have meant to expand that jurisdiction by allowing
third-party counterclaim defendants removal rights.
For more than 200 years, with only a short break,
removal textually has been limited to those
“defendants” sued by the plaintiff. Defendant, as a
term standing alone, means the party sued by the
plaintiff. This is consistent with this Court’s recent
guidance that ſilf the statutory language is plain,

23

the Court must enforce it according to its terms.”
King v. Burwell, 135 S.Ct. 2480, 2483 (2015).

Removal Under § 1441 Was Not
Changed By CAFA and § 1453 in
Order to Extend Removal Rights
to Third-Party Counterclaim
Defendants.

This Court's long-established tradition to
narrowly construe removal under § 1441 as
expressed in Shamrock Oil should be followed unless
it was specifically prohibited by the clear meaning of
the textual provisions of § 1453. It was not.

With the passage of CAF A, Congress expressed
its intention to expand removal in discrete ways by
amending various sections of 28 U.S.C. §§ 1332,
1446, and 1447. Importantly, CAFA did not
completely rewrite or replace the removal statute
§ 1441 in its entirety. Rather, removal under CAF A,
codified as § 1453, is an entirely separate procedural!
statute that adds discrete, specific, changes, none of
which changed or altered § 1441 removal in a way
that would permit a third-party counterclaim
defendant to remove an action to federal court.
Indeed, a careful, textual, examination of § 1453
reveals that it clearly does not confer removal
authority to third-party counterclaim defendants.

Here, the last clause of § 1453(b) provides that
certain actions “may be removed by any defendant

24

without the consent of all defendants.” Home Depot
has glommed onto the word “any” in order to provide
a reading to this phrase that is not described in the
Senate History nor any other similar statute.
Clearly, when read in its context, the use of the word
“any” only alters this Court's rule requiring the
unanimous consent of all defendants in cases not
subject to CAFA.’ See, e.g., Chi., Rock Island, & Pac.
Ry. Co. v. Martin, 178 U.S. 245, 247-48 (1900)
(stating that because the removal statute “is
confined to the defendant or defendants, it was well
settled that a removal could not be effected unless
all the parties on the same side of the controversy
united in the petition”). CAFA does not, as Home
Depot and its amici argue, expand the removal
statute, § 1441, to include removal rights for third-
party counterclaim defendants.

This Court’s canon is to follow ordinary usage
of a term, such as “defendant,” unless Congress
specifically provides a specified or technical
meaning. See Will v. Michigan Dep't of State Police,
491 U.S. 58, 64 (1989). Here, Congress did not
provide a specified or technical meaning to the word
“defendant” when it is used in the phrase “any
defendant.” Thus, regardless of the use of the
adjective “any,” there is absolutely no reason to

' Notably, the unanimous consent requirement of
§ 1446(b)(2)(A) has not been extended to third-party
counterclaim defendants when a defendant has sought removal
pursuant to § 1441(a).

25

believe that Congress meant to change the meaning
of the word “defendant.” Certainly, Congress cannot
ressonably be believed to have meant that the use of
the word “defendant” in “any defendant” would
mean something different from the same word
“defendant” it had been using in the phrase “a
defendant or defendants” for more than 100 years
nor that such a novel definition of the word
“defendant” would be readily apparent to those
reading the new statute.

If Congress had desired to alter the
understanding of such an enduring term as
“defendant” to suddenly include “third-party
counterclaim defendants,” it would not have done so
subtly and silently. To the contrary, it can be
presumed that a prior legal rule should be retained
if no one in legislative deliberations even mentioned
the rule or discussed any changes in the rule. See
Chisom v. Roemer, 501 U.S. 380, 396 & n.23 (1991).
This is described as the “dog didn’t bark” canon,
which is particularly relevant here, because
Congress never even mentioned, much less
discussed, providing removal rights to a third-party
counterclaim defendant, such as Home Depot, or
enlarging the ambit of the word “defendant” to
include third-party counterclaim defendants.

Under both §§ 1441(a) and 1453(b), the text of
these statutes simply does not permit a third-party
counterclaim defendant to remove a case to federal
court. Congress is presumed to know the legal
landscape against which it legislates. Applying the

26

long-standing, well-established rules and canons of
statutory interpretation, if Congress wants to
overturn a precedent, it can do so expressly. As to
third-party counterclaim defendants, such as Home
Depot, Congress was meaningfully silent. There can
only be one conclusion. The plain text of §§ 1441 and
1453 do not permit a third-party counterclaim
defendant to remove a case to federal court. This
should end the inquiry.

Finally, while this Court in Dart Cherokee
Basin Operating Co. v. Owens, 135 S. Ct. 547, 554-55
(2014) has interpreted CAFA, and in particular,
§ 1453, to be read broadly, that does not mean § 1441
should now be read beyond the words Congress
chose to include in the statute. When there is
nothing in the text of CAFA or in the Congressional!
record that even suggests that Congress intended
§ 1441 to be read broadly, there is no textual or
historical basis to change this Court’s Shamrock Oil
decision and now read § 1441 in favor of removal by
a separately described entity, a third-party
counterclaim defendant. Moreover, as is discussed
below, to do so would be to broadly expand federal!
jurisdiction, which the Constitution, Congress, and
this Court have consistently limited.

27

C. Home Depot Cannot Use
Congress’ Silence on Its
Idiosyncratic Interpretation of
“Defendant” To Support That
Unique Interpretation.

In order to support its idiosyncratic
reinterpretation of the word “defendant, Home
Depot and its amici (WLF 21-22) seek to persuade
this Court to assume a lack of Congressional
awareness of judicial precedents on existing
statutory schemes. But Cannon v. Univ. of Chi., 441
U.S. 677, 696-98 (1979) clearly stands for the
proposition that Congress is presumed to know the
existing laws and their interpretation when it drafts
new legislation. See also Monessen Sw. Ry. Co. v.
Morgan, 486 U.S. 330, 338 (1988); Vimar Seguros y
Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528,
554 (1995); Cent. Virginia Cmty. Coll. v. Katz, 546
U.S. 356, 362 n.3 (2006). Additionally, this Court has
held that “Congress will specifically address
preexisting law when it wishes to suspend its
normal operations in a later statute. [Citation.|.”
Epic Sys. Corp. b. Lewis, 138 S. Ct. 1612, 1624 (2018).

There can be little question that long before
CAFA was adopted the word “defendant” was
consistently interpreted to mean only the party sued
by the plaintiff(s) and not “third-party counterclaim
defendants.” Where there is a “settled judicial
construction,” this Court has applied the
“presumption that Congress was aware of these
earlier judicial interpretations and, in effect,

28

adopted them.” Keene Corp. v. U.S., 508 U.S. 200,
212 (1993) (citing Lorillard v. Pons, 434 U.S. 575,
580 (1978)). Even the authority cited at WLF 21-22,
Cent. Bank of Denver, N.A. v. First Interstate Bank
of Denver, N.A., states, “[w|hen Congress reenacts
statutory language that has been given a consistent
judicial construction, we often adhere to that
construction in interpreting the reenacted statutory
language.” 511 U.S. 164, 185 (1994).

WLFs separate reliance on Alexander ov.
Sandoval is misplaced, as it is in conflict with Home
Depot's statement throughout its briefing of the
extensive and lengthy study Congress undertook in
adopting CAFA. See PB passim; see also Chamber
14. It certainly is not true about CAFA that
“Congress [did] not comprehensively revise] a
statutory scheme but has made only isolated
amendments” that would call into question its
approval of the court’s interpretations. Alexander v.
Sandoval, 532 U.S. 275, 292 (2001). As is discussed
by amici Chamber, CAF A resulted from a “grinding
eight-year effort” and “required an exceedingly rare
level of persistence and, ultimately, bipartisan
cooperation.” Chamber 14. Under these
circumstances, it is ludicrous to think that Congress
was not aware of prior precedents when CAFA was
enacted.

29

IV. IF THIS COURT CONCLUDES THAT
“THIRD-PARTY COUNTERCLAIM
DEFENDANTS” MAY REMOVE ACTIONS
TO FEDERAL COURT, INSTEAD OF
LIMITING GAMESMANSHIP, IT WILL
USHER IN A NEW ERA OF A VASTLY
ENLARGED FEDERAL DOCKET.

A. Home Depot’s Concerns Are Grossly
Overblown; There Have Been
Relatively Few Third-party
Counterclaim Class Actions in the
Thirteen Years Since CAFA Became
Law.

Home Depot argues that upholding the Fourth
Circuit’s reading of CAFA as consistent with all
prior removal statutes would somehow result in a
dystopian world of class-action litigation where
plaintiffs’ attorneys would devote their time to
combing over dockets for “a debt collection
proceeding or other minor state-court litigation to
use as a vehicle for asserting an interstate class-
action claim against an entity that is not even a
party to the state-court action.” PB 43.

Then, without evidentiary support of any
pattern or practice on the part of the Plaintiffs’ bar,
Home Depot alleges that the uniform decisions of the
Fourth, Sixth, Seventh, and Ninth Circuits “provide
a roadmap for circumventing” what it asserts is the
clear purpose of CAFA to “combat the observed
biases against out-of-state defendants.” /d.

30

In support of its position, Home Depot cites to
articles fretting about a perceived risk without
identifying any actual tsunami of state court class
actions resulting from the appellate cases they point
to as allegedly opening up the floodgates.* The
reality is that there have been remarkably few cases
that have needed to address this issue, much less
enough to necessitate asking this Court to wade into
an area where there is no split of authority among
the Circuits and the appellate court decisions are
remarkably consistent. The paucity of cases falling
into the category of third-party counterclaim class
actions over the thirteen years since CAFA was
enacted is striking. All of two circuit courts ruled on
this issue prior to this Court’s decision in Dart
Cherokee. See Progressive West Ins. Co. v. Preciado,
479 F.3d 1014, 1017 (9th Cir. 2007); Palisades
Collections LLC v. Shorts, 552 F.3d 327, 332-33 (4th
Cir. 2008).° And just two more circuit courts have

For instance, Home Depot cites as authority a “legal opinion
letter” from Dan Himmelfarb disparaging the Fourth Circuit's
holding in Palisades without disclosing that Mr. Himmelfarb
represented the appellants in that case. PB 42-43. His views,
far from being scholarly insight, were an extension of his
advocacy in that case. Dan Himmelfarb, Fourth Circuit Ruling
Permits Broad Circumvention of Class Action Fairness Act,
Legal Opinion Letter (Wash. Legal Found.), Apr. 10, 2009, at
2.

Home Depot's position at PB 10 that Dart Cherokee somehow
overruled Palisades and ita progeny by holding that there is no
“antiremoval presumption” under CAFA is incorrect because it
misstates the basis for the Fourth Circuit's decision. Dart
Cherokee, 135 S. Ct. at 554. Palisades certainly recognized that

31

ruled after this Court's decision in Dart Cherokee,
with both rulings being consistent with the first two
circuits. See Tri-State Water Treatment, Inc. v.
Bauer, 845 F.3d 350, 356 (7th Cir. 2017); In re Mortg.
lec. Registration Sys., Inc., 680 F.3d 849, 854 (6th
Cir. 2012) “(MERS’); First Bank v. DJL Props., LLC,
598 F.3d 915, 916-17 (7th Cir. 2010). Equally
remarkable is the extremely small number of
counterclaim class actions Home Depot and its amici
have been able to cite to which have not generated
circuit court decisions. See PB 39, Chamber 13, PLC
8, and DRI 18.

Absent evidentiary support or any pattern of
abuse, Home Depot's floodgate fears are nothing
more than a lament that it is “stuck litigating a large
class action in a state court of someone else’s
choosing” — as if its business decision to partner in
a predatory scheme to defraud North Carolina
consumers was not a choice. PB 45.

There is simply nothing in the cases Home
Depot and its amici point to as creating a roadmap
to defeat CAFA actually operating that way.
Instead, there is remarkable consistency among the
circuits in the way CAFA was intended to apply.

“Congress clearly wished to expand federal jurisdiction
through CAFA.” Palisades, 552 F3d. at 336.

32

B. If This Court Rules
As Home Depot Wishes, the Much
Greater Risk Will Be That Some
Defendants Will Attempt to Game the
System In Order to Gain Their
Preferred Jurisdiction.

On the facts of this case, Home Depot is arguing
that when the word “defendant” is used in the
removal statutes, it must be read to mean that third-
party counterclaim defendants are among those
permitted to remove a case to federal court. If this
Court agrees, instead of closing what Home "epot
and its amici describe as a “loophole,” it is much
more likely that the door will be left wide open for
defendants to game the system and remove state-
based cases of all types to federal court.

Well before CAFA was enacted, defendants
attempted this gamesmanship. In Dauenhauer v.
Superior Court, after plaintiff filed his complaint, a
defendant filed a cross-complaint against Utah
Home Fire Insurance Company. 149 Cal.App.2d 22,
24 (3rd Dist. 1957). Utah Home Fire Insurance
Company, joined as an out-of-state cross-defendant,
removed the case. Id. It was subsequently and
correctly remanded. Id. However, if such a third-
party counterclaim removal is now sanctioned, any
in-state tort defendant could implead its out-of-state
insurance company to gain a federal venue.

The reality is that there would be no shortage
of cases involving out-of-state’ third-party

33

counterclaim defendants that could provide in-state
defendants with a means to escape from state courts
they do not like. See, e.g., United Founders Life Ins.
Co. of Ill. v. Blackhawk Holding Corp., 341 F. Supp.
483 (E.D. Wis. 1972) (finding in the absence of
diversity of citizenship between a plaintiff and one
or more defendants, crossclaim involving defendants
among whom there was diversity cannot provide a
basis for removal); Verschell v. Fireman’s Fund Ins.
(o., 257 F. Supp. 153 (S. D. N. V. 1966) (holding that
fire insurer was not entitled to remove to federal
court action against it that was brought by insured’s
assignee); Morris b. Marshall Cty. Bd. of Educ., 560
F. Supp. 43 (N.D.W. Va. 1983).

While it is now rather settled law that third-
party counterclaim defendants cannot initiate
removal proceedings, other early cases in which such
removal was attempted highlight the ability
defendants would have if this Court accepts Home
Depot's argument. Gaming of the system could occur
particularly in product liability cases. In Share v.
Sears, Roebuck & Co., 550 F. Supp. 1107 (E. D. Pa.
1982), the plaintiff brought suit against Sears for
injuries he received operating a lawn mower
purchased at the department store. Sears, in turn,
filed a third-party complaint against the lawn
mower manufacturer, seeking indemnification for
any damages. The manufacturer removed the case
on the basis of diversity. The court found that a
third-party defendant is not a “defendant” within
the meaning of the removal statute and, therefore,
the manufacturer did not have standing to remove

34

the case. Id. at 1108-09. Similarly, in Hyde v.
Carder, 310 F. Supp. 1340 (W.D. Ky. 1970), the
defendant beverage distributor filed a third-party
action for indemnification after it was sued for
damages when the plaintiff was injured by an
exploding bottle. Other similar liability cases would
readily end up removed to federal court. See, e. g.
Holloway u. Gamble-Skogmo, Inc., 274 F. Supp. 321,
323-24 (N. D. III. 1967) (involving a defective tire);
White v. Baltic Conveyor Co., 209 F. Supp. 716
(D. N. J. 1962) (involving defective installation of a
conveyor belt); Marshall u. Navco, Inc., 152 F. Supp.
50, 54 (S.D. Tex. 1957) (involving worker injuries);
Schoneweather v. L. V. Richardson, Inc., 122 F.
Supp. 692, 693 (W.D. Mo. 1954) (involving injuries
from the negligent installation of a heating unit).

Such potential for removal would extend to
cases outside of the tort realm. A lawsuit against a
car dealer for rescission and damages would have
been removed after the dealer filed a third-party
complaint against the manufacturer. See, e.g.,
Tuyagda Aluminum Prods. Corp. v. Hull Dobbs 65th
Infantry Ford, Inc., 313 F. Supp. 774 (D.P.R 1970).
Allowing defendants to game the system for even the
most basic of contract disputes would overrun the
federal courts.

One case shows the absurd results that Home
Depot's interpretation could bring about. In Croy v.
Buckeye Int l, Inc., 482 F. Supp. 402 (D. Md. 1979),
it was a fourth-party defendant that sought removal.
The court held that a fourth-party defendant is not

35

a “defendant” under the removal statute.
Conceivably, if this well-crafted limitation is lifted
from third-party counterclaim defendants, every
hyphenated defendant down the chain, no matter
how removed from the original claim, could remove
the action. Federal courts would be overwhelmed.

C. History Shows That Certain
Defendants Have Used Such
Loopholes to Gain Their Preferred
Federal Jurisdiction.

In fact, a number of defendants have already
been gaming removal jurisdiction through the
artifice of checking filings and removing cases before
they have been “properly joined and served,” thereby
gaming the language of § 1441(b)(2). See Phillips
Constr., LLC v. Daniels Law Firm, PLLC, 93 F.
Supp. 3d 544, 554 n.2 (S.D.W. Va. 2015). See also
Harvey v. Shelter Ins. Co, Civ. A. No. 13-392, 2013
WL 1768658, *2 (E.D. La. Apr. 24, 2013). Che
plain language of the statute must prevail over the
plaintiffs policy arguments to the contrary. The
statutory forum defendant rule simply does not
support plaintiffs position.”); City of Ann Arbor
Emps. Ret. Sys. v. Gecht, No. C-06-7453 EMC, 2007
WL 760568, *8-10 (N.D. Cal. Mar. 9, 2007) (holding
that the court was “constrained by the plain
language of § 1441(b)” but also stating that
plaintiffs argument that the resident defendant
engaged in gamesmanship “is not without merit-
indeed, has a great deal of appeal”); Poznanovich v.
AstraZeneca Pharm. LP, Civ. A. No. 11-4001 (JAP),

36

2011 WL 6180026, *3 (D. N. J. Dec. 12, 2011) (courts
following the plain meaning approach “acknowledge
in some way ‘the colorable policy arguments that it
is unjust that a properly joined defendant could
monitor state court dockets and remove cases prior
to being served, and that it makes little sense to
provide a federal forum to an in-state defendant
upon removal of a diversity case, [but] these
decisions found sucl. arguments to be insufficient to
overcome the requirement that a court give meaning
to the plain language of the statute.”).

No doubt, “Congress could not possibly have
anticipated the tremendous loophole that would one
day manifest from technology enabling forum
defendants to circumvent the forum defendant rule
by, inter alia, electronically monitoring state court
dockets.” Sullivan v. Novartis Pharm. Corp., 575 F.
Supp. 2d 640, 645 (D.N.J. 2008). Yet, this loophole
would be de minimus when compared to the
floodgates that would open up if third-party
counterclaim defendants receive removal rights.

CONCLUSION

For the foregoing reasons, AAJ urges this Court
to affirm the judgment of the Fourth Circuit Court

of Appeals.

37

Respectfully submitted,

ELISE SANGUINETTI
President

JEFFREY WHITE

Senior Associate General
Counsel

AMERICAN ASSOCIATION
FOR JUSTICE

777 6th Street, NW #200
Washington, DC 20001

December 17, 2018

GERSON H. SMOGER
Counsel of Record

SMOGER & ASSOCIATES
13250 Branch View Lane
Dallas, TX 75234

(972) 243-5297
gerson@texasinjurylaw com

David M. Arbogast
ARBOGAST LAW

933 WOODLAND AVENUE
SAN CARLOS, CA 94070
(650) 587-3006
david@arbogastlaw com

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0825%3A12. Public record. Not legal advice.