Reply Brief — AT&T Mobility, LLC v. Shorts (No. 08-1156)

(A> FILED

(5) JUN 1 - 2009

No. 08-1156 OFFICE OF THE CLERK

In the Supreme Court of the Cnited States

AT&T MOBILITY LLC AND

AT&T MOBILITY CORPORATION,

Petitioners,

Vv.

CHARLENE SHORTS AND

PALISADES COLLECTIONS LLC,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Fourth Circuit

REPLY BRIEF FOR PETITIONERS

JEFFREY M. WAKEFIELD CHARLES A. ROTHFELD

Flaherty Sensabaugh & EVAN M. TAGER

Bonasso PLLC DAN HIMMELFARB

200 Capitol Street Counsel of Record

Charleston, WV 25301 JACK WILSON

(304) 347-4231 Mayer Brown LLP

1909 K Street, NW

Washington, DC 20006

(202) 263-3000

Counsel for Petitioners

[Additional counsel listed on inside cover]

Pc cS DRA IESE TC TN LS INDE IIE LEE ITE LEE | QSPRS TS: SSE EM BEEN HEI

WILSON-EPES PRINTINGCO , INC. — (202) 789-0096 -— WASHINGTON,D C 20002

WILLIAM M. CONNOLLY

MICHAEL P. DALY

Drinker Biddle & Reath LLP

One Logan Square

18th & Cherry Streets

Philadelphia, PA 19103

(215) 988-2700

i

TABLE OF CONTENTS

Page

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A. This Court Has Jurisdiction ................00.0.0..0s0000202- 1

B. The Question Presented Is An Important

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C. The Court Of Appeals’ Decision Is

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TABLE OF AUTHORITIES

Page(s)

CASES

American National Red Cross v. S. G.,

5O5 U.S. 247 (1992).....cccccccccessesesesececescecesescssesees 3,4

Caterpillar, Inc. v. Williams,

Rt as esl dk sa savadualnnnansaves 4

Deutsche Bank Nat'l Trust Co. v. Weickert,

2009 WL 1011098 (N.D. Ohio Apr. 15,

A a SREP a Re CERT: 7 aOR 6, 8

FIA Card Servs., N.A. v. Gachiengu,

2008 WL 336300 (S.D. Tex. Feb. 5, 2008) .......... 6

Fidelity Fed. Bank & Trust v. Kehoe,

re i caries sii Lek dn dnd deckcbxivenouen 8

Franchise Tax Bd. v. Constr. Laborers

Vacation Trust For S. Cal.,

Ie ara a nce hand co sys Seka hans anewnes 4

Holmes Group, Inc. v. Vornade Air Circulation

Sya., Inc., 585 U.S. B26 (2002) .........ccc0.c0..-cesecceses 4

Kircher v. Putnam Funds Trust,

eich secs indnicaccwcapevouns 4

Merrill Lynch, Pierce, Fenner & Smith, Inc. v.

pe SR a kB | ee ea 10

Shamrock Oil & Gas Corp. v. Sheets,

er is aoe acidecded cxccanddnvdeesioen’ 9, 10

Vaden v. Discover Bank,

Be Be Be Co nan kar deicccbcscees severed 4

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TABLE OF AUTHORITIES—continued

Page(s)

STATUTES AND RULES

Class Action Fairness Act of 2005, Pub. L. No.

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OTHER AUTHORITIES

E. Gressman et al., SUPREME COURT PRACTICE

a eh ce vanpiawies 9

Don Zupanec, Palisades Collections LLC v.

Shorts, 24 FED. LITIGATOR 7 (Feb. 2009).............. 5

REPLY BRIEF FOR PETITIONERS

In his dissent from the denial of rehearing en

banc, Judge Niemeyer invited this Court to grant

certiorari. He explained that the case involves “an

important issue of statutory interpretation” and that

“the majority’s interpretation creates an unfortunate

loophole in [CAFA] that only the Supreme Court can

now rectify.” Pet. App. 37a.

The need for review is confirmed by the amicus

brief filed by the Chamber of Commerce, which both

represents businesses that are defendants in inter-

state class actions and played a significant role in

CAFA’s enactment. Br. 1-2. On the basis of this ex-

perience, the Chamber predicts that the decision be-

low will result in “widespread circumvention” of the

Act, “largely undoing the changes instituted by

CAFA” and “substantially compromising the stat-

ute’s effectiveness,” and that the decision will there-

fore have “an immediate, substantial impact on class

action litigation in the United States.” Br. 4-5.

The need for review is also confirmed by Shorts’

brief in opposition, which offers no persuasive reason

why the Court should decline Judge Niemeyer’s invi-

tation.

A. This Court Has Jurisdiction

Shorts contends that this Court lacks jurisdiction

to review the decision below. She argues that

(1) “(28 U.S.C.] § 1447(d) is a complete bar to appel-

late jurisdiction” and (2) “the well-pleaded complaint

* * * shows no basis for federal jurisdiction.” Opp. 5,

7. Neither Section 1447(d) nor the “well-pleaded

complaint” rule applies here.

yA

1. Section 1447 is titled “Procedure after removal

generally.” Subsection (d) provides that “[a]n order

remanding a case to the State court from which it

was removed is not reviewable on appeal or other-

wise.” Section 1453 is titled “Removal of class ac-

tions.” Subsection (c)(1) provides that, “notwith-

standing section 1447(d), a court of appeals may ac-

cept an appeal from an order of a district court grant-

ing or denying a motion to remand a class action to

the State court from which it was removed” (empha-

sis added).

As it correctly concluded, the court of appeals

“possess|[ed] jurisdiction to review the district court’s

remand order under 28 U.S.C.[] § 1453(c)(1).” Pet.

App. 5a. It follows that this Court has jurisdiction to

review the court of appeals’ decision under 28 U.S.C.

§ 1254(1), which provides that “[c]ases in the courts

of appeals may be reviewed by the Supreme Court”

by writ of certiorari.

Shorts asserts that “Congress declined to pro-

vide, in CAFA, for an appeal to the Supreme Court.”

Opp. 6. But Congress did not have to provide for re-

view by this Court in CAFA. Such review is already

authorized by Section 1254(1) for any case “in” the

court of appeals, and an appeal under Section

1453(c)(1) is assuredly such a case. If Congress had

wished to limit this Court’s jurisdiction, it would

have done so explicitly, as it has done elsewhere.

See, e.g., 28 U.S.C. § 2244(b)(3)(E) (“The grant or de-

nial of an authorization by a court of appeals to file a

second or successive application [for a writ of habeas

corpus] ** * shall not be the subject of a peti-

tion * * * for a writ of certiorari.”). There is no such

limitation in CAFA.

3

Shorts also asserts that CAFA’s “strict time lim-

its for [appellate] review have now passed.” Opp. 3-

4. But the 60-day deadline for a decision applies to

“the court of appeals.” 28 U.S.C. § 1453(c)(2). The

only timing requirement applicable in this Court is

that the petitioner file its petition for certiorari

within 90 days from the date on which the court of

appeals denied rehearing. Sup. Ct. R. 13. ATTM has

done so.

Shorts purports to find it “[rljemarkablf[e]” that

the petition “makes [no] reference to § 1447(d).”

Opp. 7. But because Section 1447(d) has no applica-

bility to a class action like this one, and because this

case was properly in the court of appeals under Sec-

tion 1453(c)(1), the only “remarkable” omission is

Shorts’ failure to explain why this Court lacks juris-

diction under Section 1254(1)—a provision, tellingly,

that she does not even cite. Shorts also fails to ex-

plain why Congress would have divested of jurisdic-

tion the only Court capable of ensuring uniform ap-

plication of a statute that regulates interstate class

actions.

2. Shorts’ second jurisdictional argument is that,

under the “well-pleaded complaint” rule, a case can-

not be removed unless the district court’s jurisdiction

is established on the face of the complaint and that

Palisades’ state-court complaint does not establish

federal jurisdiction. Opp. 1 & n.2, 7, 11. That argu-

ment is equally baseless.

This case involves diversity jurisdiction, under

28 U.S.C. § 1332. The well-pleaded complaint rule

applies only in cases involving federal-question ju-

risdiction, under 28 U.S.C. § 1331. This Court ex-

plicitly so held in American National Red Cross v.

S. G., 505 U.S. 247 (1992), a case that Shorts does

4

not cite. There the Court made “short work” of the

argument that a “conferral of federal jurisdiction”

other than one based on a federal question is “subject

to the requirements of the ‘well-pleaded complaint’

rule * * * limiting the removal of cases from state to

federal court.” Jd. at 258. The Court explained that

the plaintiffs had “erroneously invoke[d]” the rule

“outside the realm of statutory ‘arising under’ juris-

diction, t.e., jurisdiction based on 28 U.S.C. § 1331.”

Ibid. The well-pleaded-complaint rule, the Court

held, “apples only to statutory ‘arising under’ cases’;

it “has no applicability” to cases “based on a separate

and independent jurisdictional grant.” Jbid. That

includes diversity. See Kircher v. Putnam Funds

Trust, 547 U.S. 633, 644 n.12 (2006); Franchise Tax

Bd. v. Constr. Laborers Vacation Trust for S. Cal.,

463 U.S. 1, 8 (1983). The decisions on which Shorts

relies—Holmes Group, Inc. v. Vornado Air Circula-

tion Systems, Inc., 535 U.S. 826 (2002), and Vaden v.

Discover Bank, 129 S. Ct. 1262 (2009)—are federal-

question cases.

It would be particularly inappropriate to apply

the “well-pleaded complaint” rule in a diversity case,

like this, in which federal jurisdiction was created by

the non-removing party. One of the principal pur-

poses of the rule is to prevent a defendant from re-

moving on the basis of a claim asserted by the defen-

dant, because that would defeat the plaintiffs choice

of a state forum. See Holmes Group, 535 U.S. at 831-

832; Caterpillar, Inc. v. Williams, 482 U.S. 386, 398-

399 (1987). In this case, the defendant (more specifi-

cally, the “additional” counterclaim defendant) has

sought to remove on the basis of a claim asserted by

the plaintiff (more specifically, the counterclaim

plaintiff/—namely, Shorts’ class-action allegations.

ATTM’s removal no more defeats Shorts’ choice of a

5

state forum here than in any case in which the plain-

tiffs state-court action is one over which there is fed-

eral jurisdiction.

B. The Question Presented Is An Impor-

tant One

The court below held that a qualifying class ac-

tion can be removed to federal court under CAFA if it

is filed as an independent suit but not if it is filed as

a counterclaim to an existing suit. As the petition

explains (at 21-24), that holding is highly consequen-

tial, because it undermines CAFA’s basic purpose,

which is to prevent plaintiffs’ lawyers from manipu-

lating pleadings to keep interstate class actions in

state court. Shorts does not deny that the decision

below permits—and indeed encourages—precisely

what CAFA was enacted to prevent. Instead, she ar-

gues that certiorari should be denied because

(1) there is not yet a circuit conflict and (2) ATTM

overstates the likelihood that the issue will recur.

Opp. 7-13. Shorts is mistaken on the second point;

and the first is not a reason to deny review.

1. A commentary on the decision below correctly

described the filing of class-action counterclaims in

cases of this type as “an increasingly frequent sce-

nario.” Don Zupanec, Palisades Collections LLC v.

Shorts, 24 FED. LITIGATOR 7 (Feb. 2009). Shorts nev-

ertheless contends that there is a “dearth of actual

cases on point.” Opp. 13. According to her, “only six

counterclaim class actions have been removed to the

federal courts” since CAFA’s enactment in 2005.

Ibid.; see td. at 8-9 n.9 (citing cases).

That figure is too low. To begin with, it omits at

least three identifiable cases in which a counterclaim

class action was removed: this case; a case cited by

6

Shorts herself, FIA Card Services, N.A. v. Gachiengu,

2008 WL 336300 (S.D. Tex. Feb. 5, 2008); and a case

decided less than two months ago, Deutsche Bank

National Trust Co. v. Weickert, 2009 WL 1011098

(N.D. Ohio Apr. 15, 2009). Even as modified, more-

over, the figure includes only cases in which there is

an electronically available written decision. That is

likely an inaccurate measure of the number of state-

court cases in which a defendant has filed a counter-

claim class action, because it does not capture those

in which (a) the counterclaim defendant has decided

not to remove (perhaps because of adverse prece-

dent); (b) the counterclaim defendant has decided to

remove but has not yet done so; (c) the counterclaim

plaintiff has not yet filed a motion to remand; (d) the

district court has not yet acted on the motion; (e) the

court acted on the motion without issuing a written

order; or (f) the order is not electronically available.

Even if it were true that there have been only

nine post-CAFA cases in which a state-court defen-

dant filed a counterclaim class action, the cases

would still represent, in the words of Shorts’ own

consultant, “just the tip of an approaching iceberg.”

Pet. 23. Shorts points out that the same article ar-

gues that counterclaim defendants have no authority

to remove. Opp. 12. But a law professor's defense of

counterclaim class actions makes it more likely that

plaintiffs’ lawyers will employ the tactic, not less.

The same is true of the Fourth Circuit’s decision

here. Indeed, one of the central points of the petition

is that review is warranted because the decision pro-

vides a roadmap on how to circumvent the Act.

Whatever the precise number of class-action counter-

claims that have been filed since CAFA’s enactment,

therefore, there are sure to be many more now that

7

the Fourth Circuit has given the practice its impri-

matur.

Shorts suggests that there are not likely to be

many such cases, because “joinder rules limit the use

of class action counterclaims.” Opp. 13. But in the

typical class action against a “joined” party that

gives rise to the issue here-—-a case in which B at-

tempts to collect a debt from A, who then counter-

claims against B and joins C, the entity that sold the

debt to B—there is no reason (and Shorts provides

none) to think that A will be unable to join C as an

“additional” counterclaim defendant under state law.

In any event, the Fourth Circuit held that CAFA

does not authorize removal by any counterclaim de-

fendant, “additional” or otherwise (Pet. App. 14a

n.4), and that is the question on which ATTM is

seeking review (Pet i). The supposed difficulty of

“joinder” would not prevent the issue from arising in

cases—of which there are already several—where

the defendant filed a counterclaim only against the

plaintiff and did not join any “additional” counter-

claim defendant.

Finally, there need not be scores, or even dozens,

of cases in which the question presented arises be-

fore it can be considered sufficiently important to

warrant this Court’s intervention. By the very na-

ture of the issue, there is a large amount of money at

stake—at least $5 million (the jurisdictional thresh-

old) in every case; tens of millions of dollars in this

one (Pet. App. 53a)—and there is generally a higher

probability of coercive settlement when a case re-

mains in state court. For that reason, the identifi-

able cases that present the issuc, the substantial

likelihood that there are others, and the near cer-

tainty that there will be many more are—

8

collectively—sufficient to justify review. “Thfe]

enormous potential liability, which turns on a ques-

tion of federal statutory interpretation, is a strong

factor in deciding whether to grant certiorari.” Fidel-

ity Fed. Bank & Trust v. Kehoe, 547 U.S. 1051, 1051

(2006) (Scalia, J., joined by Alito, J., concurring)

2. Shorts also contends that certiorari should be

denied because “there is no circuit split to resolve.”

Opp. 7. As the petition explains (at 9-10), however,

that is not a reason to deny review when the decision

below is seriously flawed, fundamentally undermines

the core purpose of an important statute, and threat-

ens nationwide harm; when both sides of the issue

have been exhaustively explored in the majority and

dissenting opinions; and when awaiting another case

would require class-action defendants to continue

expending large sums of money in defense and set-

tlement of the very type of state-court litigation that

CAFA was enacted to prevent. That is doubtless

why Judge Niemeyer urged this Court to give the

case “early consideration.” Pet. App. 36a-37a.

There is another reason why the absence of a cir-

cuit conflict is not a basis for denying review. After

the petition in this case was filed, a district court in

the Northern District of Ohio held that “additional”

counterclaim defendants “may properly remove th[e]

case to this Court under CAFA.” Deutsche Bank

Natl Trust Co., 2009 WL 1011098 at *3. (The Sixth

Circuit will not decide the issue in that case, because

the counterclaim plaintiffs did not seek permission to

appeal.) Shorts is therefore mistaken in her conten-

tion that there is “no case * * * that purports to allow

removal [by a counterclaim defendant] pursuant to

CAFA.” Opp. 7 n.7. While the conflicting district

court decision obviously does not provide a basis for

9

certiorari by itself, see Sup. Ct. R. 10, it “reinforce[s]

[the] other and more substantial bas/fe]s for review,”

E. Gressman et al., SUPREME COURT PRACTICE § 4.8,

at 256-257 (9th ed. 2007).

C. The Court Of Appeals’ Decision Is Erro-

neous

As the petition explains (at 10-21), the decision

below is inconsistent both with CAFA’s unambiguous

text and with its undisputed purpose. The Act pro-

vides that “any” defendant may remove—a term, as

this Court has repeatedly held, that means “of what-

ever kind.” Pet. 11. Because a counterclaim defen-

dant is obviously a “kind” of defendant, the “plain

language” of CAFA “clearly provides” that a counter-

claim defendant has removal authority. Pet. App.

3la, 36a (Niemeyer, J., dissenting). But even if the

statutory text does not unambiguously authorize re-

moval by a counterclaim defendant, the text cer-

tainly does not unambiguously prohibit it. For that

reason, the interpretation that is consistent with the

Act’s purpose should be preferred to the one that is

not. Shorts offers no persuasive counter-arguments.

1. Shorts-contends that CAFA incorporates the

holding of Shamrock Oil & Gas Corp. v. Sheets, 313

U.S. 100 (1941)—that a counterclaim defendant

could not remove under the gencral removal statute

then in effect—and that, as a removal statute, Sec-

tion 1453(b) must in any event be strictly construed.

Opp. 14-15 & n.16, 17-18. We explain in the petition

(at 11-13) why those arguments are wrong. As to the

first, because CAFA uses expansive language (“any

defendant”), Congress could not have meant to incor-

porate an interpretation of restrictive language (“the

defendant”). As to the second, the federalism-based

canon of strict construction has no applicability to

10

CAFA, which explicitly “liberalized removal author-

ity” and did so for the very purpose of “further[ing]

the proper balance of federalism.” Pet. App. 30a

(Niemeyer, J., dissenting) (first emphasis added).

Shorts provides no response to either point. She

does argue that, because Congress considered but re-

jected the possibility of allowing removal by “class-

member plaintiffs,” it “should not be presumed to

have altered [the Shamrock Oil rule] silently.” Opp.

18. But Congress did decide to allow removal by

“any defendant,” and thereby altered the Shamrock

Oil rule expressly.

2. As for our argument that CAFA must be read

in light of the congressional purpose, Shorts mis-

characterizes it as one based upon “legislative his-

tory.” Opp. 15. In so doing, she ignores CAFA’s text,

which provides, in a subsection titled “Purposes,”

that one of “[t]he purposes of this Act” is to “provid[e]

for Federal court consideration of interstate cases of

national importance under diversity jurisdiction.”

CAFA § 2(b)(2). The purpose explicitly set forth in

the statute passed by both Houses of Congress and

signed by the President is thus precisely the same as

that reflected in the “legislative history”: to ensure

that qualifying class actions can be litigated in fed-

eral court.

In this connection, it is telling that Shorts does

not even cite, much less attempt to distinguish,

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit,

547 U.S. 71 (2006), a case the petition discusses at

length (at 20-21). Dabit involved a statute very

much like CAFA and relied heavily on its purpose in

interpreting it broadly to prevent plaintiffs’ lawyers

from circumventing class-action limitations imposed

by Congress.

11

Shorts argues that “there is no basis for inferring

that Congress intended that all or even most class

actions should end up in federal court,” because

CAFA “does not require that any class action be filed

in or removed to federal court” and the Act “re-

quire[s] district courts to remand class actions” in

certain circumstances. Opp. 17. But ATTM has

never suggested that Congress wanted all class ac-

tions to be litigated in federal court; and neither of

the features of CAFA that Shorts identifies remotely

supports the conclusion that Congress meant to pro-

hibit counterclaim defendants from removing quall-

fying class actions. The class actions that district

courts are required to remand, by definition, are not

qualifying ones—1.e., they are not “interstate cases of

national importance.” CAFA § 2(b)(2). And the point

of CAFA is not that class actions that are qualifying

ones must be litigated in federal court, but that they

may be at the defendant’s option. The decision below

is erroneous because it deprives a defendant of that

option in any case in which counsel chooses to plead

a qualifying class action as a counterclaim rather

than a freestanding suit.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

JEFFREY M. WAKEFIELD CHARLES A. ROTHFELD

Flaherty Sensabaugh & EVAN M. TAGER

Bonasso PLLC DAN HIMMELFARB

200 Capitol Street . Counsel of Record

Charleston, WV 25301 JACK WILSON

(304) 347-4231 Mayer Brown LLP

WILLIAM M. CONNOLLY 1909 K Street, NW

MICHAEL P. DALY Washington, DC 20006

Drinker Biddle & Reath (202) 263-3000

LLP

One Logan Square

18th & Cherry Streets

Philadelpiriia, PA 19103

(215) 988-2700

Counsel for Petitioners

JUNE 2009