Hunton Employment & Labor Perspectives

The combination of a quirky procedural posture and broad language used by the Supreme Court in 1941 have left Home Depot trapped in a North Carolina state court defending against a class action, despite the removal provisions of the Class Action Fairness Act.  On September 27, 2018, the Supreme Court granted certiorari to decide whether CAFA authorizes removal of class action counterclaims when its requirements are otherwise met.

When George W. Jackson was sued in a debt collection action in North Carolina state court, he responded by filing a class action consumer protection counterclaim against the original plaintiff and others, including Home Depot.  The original plaintiff voluntarily dismissed its complaint without prejudice, and Home Depot filed a notice of removal, relying on CAFA.  Home Depot also moved to realign the parties since at that point, the case consisted solely of Jackson’s class action claims.  But, the federal court denied the motion to realign the parties and remanded the case.  The federal court reasoned that the right of removal is limited to defendants, and the original plaintiff had not asserted any claim against Home Depot.  The Fourth Circuit affirmed.

The general removal statute allows removal by “the defendant or defendants.”  The Supreme Court held in 1941 that plaintiffs in state court can’t remove to federal court based on counterclaims asserted against them.  After all, the plaintiffs made the decision to file in state court to begin with.

CAFA, on the other hand, allows removal by “any defendant.”  The courts reviewing Home Depot’s removal didn’t view “any defendant” as altering the ban on removal of counterclaims.  But, Home Depot was never a plaintiff and never chose to be in state court, so it argued that the 1941 precedent was misapplied.  The Supreme Court has agreed to resolve the issue.

Setting aside the technical distinction between “the defendant” and “any defendant,” it’s hard to see Home Depot as anything other than a defendant of the sort that CAFA was enacted to protect – Home Depot certainly wasn’t a plaintiff.  Although it may not happen often, if an employer finds itself in this unusual situation, Supreme Court clarification on CAFA removal will be welcome.