Supreme Court Decision Impacts Ability to Remove Class Action Cases

class action

On May 28, 2019, the United States Supreme Court issued an important decision affecting both class-action practice, and litigants’ ability to remove litigation to federal court.

Home Depot U.S.A., Inc. v. Jackson, started as a collections action by Home Depot’s collection agency. After being sued, Mr. Jackson filed third-party class action claims against Home Depot and Caroline Water Systems for an alleged scheme between those two entities to sell water treatment systems at inflated prices.

Although the collection action against Mr. Jackson was ultimately us-supreme-court-building dismissed, Mr. Jackson persisted in his class-action claims. Home Depot attempted to remove the litigation to federal court under the Class Action Fairness Act (CAFA), but the District Court sent the case back to state court, holding that a third-party defendant had no right of removal. The Court of Appeals and the United States Supreme Court agreed.

This case makes clear that, in the class-action context, a third-party defendant has no right to remove litigation to federal court. Rather, that right is held solely by the party or parties sued by the original plaintiff.

This decision will also likely have effects beyond the class-action context as the Supreme Court also interpreted 28 U.S.C. § 1441, which governs removal to federal court generally. In this regard, the Court held that the term “defendant” as used in that statute did not encompass any counterclaim defendant, including parties brought into the lawsuit for the first time through a counterclaim.

Following this case, it has become clear that the only party with a right to remove litigation from state to federal court is the original defendant or defendants in the matter. In insurance litigation, removal to federal court is often one of the first issues considered when a lawsuit is filed. As this case will likely affect those considerations in certain types of litigation, it is important to take it into account moving forward. (May 30, 2019)