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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

“No, You Just Thought You Were a Defendant,” the Sixth Circuit Tells MERS

Posted in Case Summaries

In Re Mortgage Electronic Registration Systems, Inc., 680 F.3d 849 (6th Cir. 2012).

Here, the plaintiff, Kathy Hanson, obtained a loan from America’s Wholesale Lender to purchase real property, and signed a mortgage with Mortgage Electronic Registration Systems (MERS) as the beneficial holder. 

BAC Home Loans Servicing, LP subsequently filed a foreclosure action, and the plaintiff filed a counterclaim, arguing that BAC did not establish that it was the valid holder of the note and mortgage. The plaintiff then obtained leave of court to file a third-party class action against MERS. 

MERS removed under CAFA, and the plaintiff filed a motion to remand, arguing that MERS, although a defendant under the third party complaint, was not a “defendant” under CAFA. 

The district court agreed and remanded the case, and the Sixth Circuit Court of Appeals affirmed.

The court noted that, under the general removal statute and interpretive case law, a counterclaim or third-party defendant is not a “defendant” who may remove the action to federal court. MERS tried to distinguish the CAFA removal language by pointing out that it allowed “any defendant” to remove. The court was not convinced, stating that that provision “simply modifies the rule that all defendants must consent to removal.” 

The court noted that the majority of courts considering the issue had concluded that the CAFA removal provision did not “overwrite the accepted meaning of ‘defendant.’” Thus, the court concluded that third-party defendants do not have the statutory authority under CAFA to remove a state court action to federal district court.