HSBC Bank USA, Nat’l Association v. Arnett, 2011 WL 532313 (N.D. Ohio Feb. 9, 2011) (NO. 3:10cv2306)
When interpreting the meaning of the phrase “any defendant” in the CAFA removal statute, the Northern District of Ohio has decided to keep things old school.
After the defendant stopped making mortgage payments, the plaintiff filed a foreclosure action in state court. The defendant responded by filing a counterclaim against both the plaintiff, as well as an additional counterclaim defendant. In its counterclaim, the original defendant alleged on behalf of himself and a putative class that the counterclaim defendant had wrongfully serviced the original defendant’s loan. The counterclaim defendant removed the action pursuant to U.S.C. §§ 1332(d),1453, and the tug-of-war ensued.
Perhaps some general background is helpful. In the case of removal outside of CAFA, courts have confirmed that the word “defendant” in U.S.C. § 1441 refers to only original defendants. Thus, counterclaim defendants and third party defendants lack the pedigree required to remove actions to federal court.
On the other hand, the CAFA removal statute is not as simple as the ordinary removal statute because of one three-letter addition: “any”. (Editors’ Note: we can think of many three letter words that are much more interesting than “any,” but if we shared them with you, then we would violate most standards of professionalism. So, we just invite you to think of them yourself.).
The CAFA statute, U.S.C. § 1453(b), states the action may be removed by “any” defendant. Facing a textual interpretive dilemma, the original defendant and the counterclaim defendant could only agree on one point: Congress intended to expand removal jurisdiction. The point on which they diverged was exactly how Congress effected its overarching goal.
The original defendant argued congressional intent to broaden removal power through CAFA occurred in threes. First, the initial “any” as used in the phrase “whether any defendant is a citizen of the state in which the action is brought” broadened removal by negating U.S.C. § 1441(b)’s requirement that a home state defendant cannot remove a diversity suit.
Second, CAFA broadened removal by eliminating the rule that a defendant cannot remove a diversity case in state court after it has been pending for more than one year under U.S.C. § 1446(b).
Third, the original defendant interpreted the second “any” employed in the CAFA language stating “such action may be removed by any defendant without the consent of all defendants” as eliminating the judicially recognized rule of unanimous consent. Thus, argued the original defendant, the adjective “any” did not change the traditional meaning of the word defendant to include counterclaim or third party defendants.
But do three changes in tradition really make a “right” interpretation of congressional intent? The counterclaim defendant argued otherwise. Its interpretation of “any” aligned with the Supreme Court’s opinion that “any” is an expansive term, and when read naturally means “one or some indiscriminately of whatever kind.” Thus, urged the counterclaim defendant, it was time for the original defendants to let unoriginal defendants into their club because third party defendants and counterclaim defendants are clearly “kinds” of defendants.
Perhaps recognizing that the arguments supporting its textual interpretation lacked the simplicity of the counterclaim defendant’s plain meaning argument, the original defendant deferred to its crystal ball and discussed what Congress would have, could have, or should have said if “any” was supposed to mean more than, well, “any”. The original defendant argued that U.S.C. §1453(b) references removal in accordance with U.S.C. §1446, the original removal statute, which settled precedent held only allowed original defendants to remove to federal court. Thus, argued the original defendant, the maxim that Congress intends to use the settled meaning of words applied because it did not make sense for Congress to allow removal by unoriginal defendants in accord with the procedure of a statute affording removal solely to original defendants.
In the end, another maxim held true- to the victor go the spoils- especially when the “spoils” include the last word on exactly how Congress manifests its intent. The winner in this dispute, the original defendant, argued “any” was not some magical word Congress inserted into CAFA to broaden the traditional meaning of the word “defendant”. Thus, the case was remanded to state court and the “Original Defendant” club did not have to grant any new membership rights in Ohio.
(Editors’ Note: Regular readers of the CAFA Law Blog know that we disagree with the holding of this decision, as well as similar decisions. See the following scholarly articles for why we think these cases should be removable to federal court: "How to Avoid Reaping What You Didn’t Sow: CAFA’s Solution for Removal of Counterclaim Class Actions," Consumer Financial Services Law Report, Vol. 13, Issue 16 (February 17, 2010), by Anthony Rollo and Candy Burnette;
"A Move in the Right Direction – The Tide is Turning for Removal by Counterclaim Defendants Under CAFA,” BNA, Inc. Class Action Litigation Report, Vol. 10, No. 22 (November 27, 2009), by Anthony Rollo and Candy Burnette; and
"Requested En Banc Rehearing Petition to 4th Circuit in Palisades Could Breathe New Life into CAFA Removal Petition“, Consumer Financial Services Law Report, Vol. 12, Issue 14 (January 21, 2009), by Anthony Rollo and Candy Burnette
By: Lacey Rochester