4th Circuit: Palisades Collections, LLC v. Shorts

Daily Record, The (Baltimore), Jan 5, 2009

Civil Procedure

Removal

BOTTOM LINE: District court properly held that counter-defendant was not eligible to remove class action suit from state court to federal court under either 28 U.S.C. [section][section]1441(a) or 1453(b).

CASE: Palisades Collections, LLC v. Shorts, US4th No. 08-2188 (decided Dec. 16, 2008) (Judges WILLIAMS & King) (Judge Niemeyer, dissenting).

COUNSEL: Dan Himmelfarb, Mayer, Brown, L.L.P., Washington D.C., for Appellants. Christopher Regan, Bordas & Bordas, Wheeling, WV, for Appellee.

FACTS: Charlene Shorts had a cellular contract with AT&T Mobility (ATTM), which assigned its right to collect on the contract to Palisades Collections, LLC. When Shorts defaulted under her contract, Palisades filed a collections suit against Shorts in state court to recover $794.87 in unpaid charges plus interest. In response, Shorts filed a class action counter-claim against Palisades and joined ATTM as a counter-defendant.

Relying upon the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. [section][section]1332(d) and 1453(b), ATTM removed the case to federal district court. Shorts filed a motion to remand.

The district court granted Shorts' motion and remanded the case to state court, concluding that ATTM could not remove the case to federal court as it was not a 'defendant' for purposes of removal under 28 U.S.C [section]1441.

ATTM filed an interlocutory appeal to the 4th Circuit, which affirmed.

LAW: 28 U.S.C. [section]1411(a), the general removal statute, allows removal by defendant or defendants, not by a counter- defendant. "The phrase 'the defendant or the defendants,' as used in [section]1441(a), is to be interpreted narrowly to refer to defendants in the traditional sense of parties against whom the [original] plaintiff asserts claims." First Nat'l Bank of Pulaski v. Curry, 301 F.3d 456, 462-63 (6th Cir. 2002).

Additional counter-defendants, like third-party defendants, are certainly not defendants against whom the original plaintiff asserted claims. Thus, in the instant case, an additional counter- defendant was not a "defendant" for purposes of [section]1441(a). See, e.g., Capitalsource Fin., L.L.C. v. THI of Columbus, Inc., 411 F. Supp. 2d 897, 900 (S.D. Ohio 2005).

In crafting [section]1441(a), Congress made the choice to refer only to "the defendant or the defendants," a choice the Court respected. Thus, ATTM, as an additional counter-defendant, could not remove the case to federal court under [section]1441(a). That conclusion was consistent with the well-established principle that "[w]e are obliged to construe removal jurisdiction strictly because of the significant federalism concerns implicated" and that "if federal jurisdiction is doubtful, a remand to state court is necessary." Md. Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 260 (4th Cir. 2005).