Liberty Credit Services v. Yonker, No. 5:10-CV-00838, 2010 WL 2639903 (N.D. Ohio, June 29, 2010).

A District Court in Ohio remanded the action to state court holding that the phrase “any defendant” used in 28 U.S.C. §1453(b) includes one of the parties against whom the original plaintiff asserts a claim and not counterclaim defendants.

Liberty Credit Services filed a complaint in state court against Crystal Yonker to collect a debt of $517.18 that Liberty claimed Yonker owed on a line of credit.  Yonker filed an answer and a counterclaim asserting a class action against Liberty, Slovin & Associates Co. LPA, and Randy Slovin alleging a violation of the Fair Debt Collection Practices Act, the Ohio Consumer Sales Practices Act, fraud, defamation, abuse of process, and civil conspiracy.  

Slovin removed the action the federal court under CAFA. Then, Yonker filed a motion to remand, which the District Court granted.

There was no dispute that Liberty was the original plaintiff and Yonker was the original defendant.  The Court, however, designated Slovin as “additional counterclaim defendants” instead of “third-party defendants” as Slovin claimed. The Court stated that Yonker joined Slovin as a party to her counterclaim in accordance with Ohio Civil Rules 13(H), which regulates counterclaims and cross-claims and Rule 20, which governs permissive party joinder. If Yonker had joined Slovin under Rule 14, making Slovin “third-party defendants,” such joinder would only be proper if Slovin was liable to Yonker for all or part of Liberty’s claim against Yonker.  As Yonker did not seek indemnification or contribution from Slovin, the Court stated that Slovin could not be a third-party defendant.

The Court noted that 28 U.S.C. §1453(b) permits removal by “any defendant” without the consent of “all defendants.” The Court, however, remarked that counterclaim defendants did not fall within the meaning of §1453(b)’s “any defendant” for the purpose of removal.   

The distinction between the use of adjective “any” preceding the noun “Defendants” in §1453(b) and its use of the definite article–“the” preceding “defendant” and “defendants” in §1441(a), in light of the legislative purpose of CAFA, according to Slovin, compelled the conclusion that §1453(b) grants additional counterclaim defendants the statutory authority to remove cases to federal district courts.  Yonker argued that the consistent meaning of the noun “defendant” throughout Chapter 89 of the US Code precludes an interpretation of §1453(b) that grants additional counter-defendants a removal right.

Slovin relied on Deutsche Bank National Trust Company v. Weickert, 638 F. Supp. 2d 826, 828-29 (N.D. Ohio 2009), which held that CAFA provides additional counterclaim defendants with removal authority.  (Editors’ Note: See the CAFA Law Blog analysis of Weicker posted on May 26, 2009). Weickert, however, noted the tension between the two statutes: CAFA uses the phrase “any defendant” while §1441(a) uses the phrase “the defendant” or “the defendants.”  Weickert relied on the dissenting opinion in Palisades Collections LLC v. Shorts, 552 F.3d 327, 328 (4th Cir. 2008) to explain this “tension.” (Editors’ Note: See the CAFA Law Blog analysis of Shorts posted on March 9, 2009). The dissent in Shorts, in light of Congress’ purpose to “expand federal diversity jurisdiction in qualifying class actions,” looked to the Supreme Court’s definition of “any” in Ali v. Federal Bureau of Prisons, 552 U.S. 214 (2008), as “one or some indiscriminately of whatever kind” and concluded that “a counterclaim defendant is certainly a ‘kind’ of defendant and falls easily within ‘indiscriminately of whatever kind’ of defendant.”

Alternatively, Yonker suggested that Capital One Bank (USA) v. Jones, No. 1:09-CV-2833, 2010 WL 1258110, at **3, 4 (N.D. Ohio March 29, 2010) held that CAFA did not grant additional counterclaim defendants the right to remove, represented a superior analysis of the scope of §1453(b).

After applying the reasoning of the Supreme Court in Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 106 (1941), and the Sixth Circuit in First Nat’l Bank of Pulaski v. Curry, 301 F.3d 456, 462-63 (6th Cir. 2002) to conclude that §1441(a) did not grant counterclaim defendants the right to remove, the Jones Court found that the majority’s opinion in Shorts and Judge Katz’s opinion in Wells Fargo Bank v. Gilleland, 621 F. Supp. 2d 545 (N.D. Ohio 2009) were “better-reasoned” decisions than Weickert and concluded that the plain language and the statutory structure of §1453(b) did not allow additional counterclaim defendants to remove.  (Editors’ Note: See the CAFA Law Blog analysis of Gilleland posted on October 23, 2009). 

The Court noted that in Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 106 (1941), the Supreme Court explained that the legislative history of the general removal statute demonstrated that Congress did not intend to confer the right to remove upon “either party,” but rather only on the “defendant or defendants.” The Supreme Court, respecting the rightful independence of the state governments, strictly construed the removal legislation stating that the federal courts should scrupulously confine their own jurisdiction to the precise limits which the statute has defined.

The Court accepted Yonker’s argument that Jones–and, accordingly, Gilleland and Shorts--contained the more convincing analysis of the scope of §1453(b)’s removal right.  In light of Shamrock Oil’s strict construction of removal statutes, the Court declined to accept Slovin’s argument. The Court maintained that in interpreting §1441(a), §1446, and §1453(b), Ali, Curry, and Shorts have defined “defendant” to refer only to “defendants in the traditional sense of parties against whom the original plaintiff asserts claims.”  As Jones explains, “Congress’s choice of a word with a settled legal meaning usually indicates its intent to adopt that meaning-especially when it has shown elsewhere that it knows how to use a different word to extend the reach of removal statutes,” i.e. by granting removal authority to “a party” in §1452(a). Furthermore, the fact that §1453(b) contains a reference to §1446 makes it even more difficult to accept the notion that the noun carries a different meaning in each of these provisions, Jones maintained.  

Therefore, the Court found that Congress intended §1453(b)’s “any defendant” to include one of the parties against whom the original plaintiff asserts a claim, and not “counterclaim defendant.” 

Because the Court found that construing the adjective “any” in §1453(b)’s “any defendant” to change the meaning of “defendant” in the context of a removal statute would violate the Shamrock Oil principle of strict construction, and legislative purpose of CAFA, the Court granted Yonker’s motion to remand.