Wells Fargo Bank v. Gilleland, 621 F.Supp.2d 545 (N.D.Ohio 2009)

A defendant is only a defendant if it was named as a defendant in the original complaint, according to the Ohio district court in Gilleland. There, mortgagee Wells Fargo filed a foreclosure action in state court against the Gillelands. They in turn filed counterclaims based on servicing and collection practices against Wells Fargo and other defendants, including Lerner, Sampson & Rothfuss (“LSR”), on behalf of a putative class with “hundreds of thousands” of members. LSR removed the action, and the Gillelands moved to remand, arguing that LSR was a “third-party defendant” which was not entitled to remove.

Notwithstanding its agreement that “third-party defendants” cannot remove, the district court disagreed with the Gillelands that LSR was in fact a “third-party defendant” under Fed. R. Civ. P. 14, which defines a third-party defendant as an impleader defendant, not a defendant against whom entirely new claims are asserted. Concluding that LSR was in fact a counterclaim defendant, the court then went on to determine whether it could remove under 28 U.S.C. § 1441 or CAFA.

Citing the majority rule, the court held that § 1441 does not allow removal by a counterclaim defendant. The court also quickly dismissed the possibility that CAFA provides an independent basis for removal, stating that Congress intended to expand federal jurisdiction under CAFA only by “doing away with the nonaggregation rule and providing for minimal diversity,” not by allowing removal by crossclaim or counterclaim defendants.

Notably, the Sixth Circuit has denied a petition for permission to appeal the remand ruling, but has granted permission to appeal a decision out of the same court allowing removal by a counterclaim defendant, in Deutsche Bank Nat. Trust Co. v. Weickert, Case No. 3:09-CV-288, 2009 WL 1954505 (N.D. Ohio July 2, 2009). (Quack.)