In Home Depot U.S.A., Inc. v. Jackson, 139 S.Ct. 1743 (May 28, 2019), the U.S. Supreme Court affirmed in a 5-4 decision authored by Justice Thomas that neither the general removal provision (28 U.S.C. §1441(a)) nor the removal provision in the Class Action Fairness Act of 2005 (28 U.S. C. §1453(b)) permits a third-party counterclaim defendant to remove a class-action from state to federal court.
Citibank filed a debt-collection action against George Jackson alleging he was liable for charges he incurred on a Home Depot credit card. In response, Jackson filed a counterclaim against Citibank and third-party class-action claims against Home Depot U.S.A. and Carolina Water Systems. Jackson alleged that Home Depot and Carolina Water induced homeowners to buy water treatment systems at inflated prices and engaged in unlawful referral sales and deceptive and unfair trade practices. Jackson also alleged that Citibank was jointly and severally liable for the conduct of Home Depot and Carolina Water and that his obligations under the sale were null and void. After Citibank dismissed its claims against Jackson, Home Depot removed the case to federal court under the Class Action Fairness Act (“CAFA”). Jackson moved to remand, arguing that precedent barred removal by a third-party/additional counter-defendant like Home Depot.
The District Court remanded and the Fourth Circuit affirmed, relying on some almost-80 year old precedent that the general removal provision (§1441(a)) did not allow Home Depot as a third-party defendant to remove the class-action claims; and concluding that CAFA’s removal provision (§1453(b)) likewise did not allow removal. The Supreme Court affirmed.
The general removal statute, 28 U.S.C. §1441(a), provides that “any civil action” over which a federal court would have original jurisdiction may be removed to federal court by “the defendant or the defendants.” Similarly, CAFA provides that a “class action” may be removed to federal court by “any defendant without the consent of all defendants.” 28 U.S.C. §1453(b).
Home Depot argued that because a third-party counterclaim defendant is a “defendant” to the claim against it, it may remove pursuant to §1441(a). The Supreme Court disagreed based on the structure of the statute and precedent. When determining whether a district court has original jurisdiction over a civil action, it must evaluate whether that action could have been brought originally in federal court, either because it raises claims arising under federal law or because it falls within the court’s diversity jurisdiction. The Court noted that the presence of a counterclaim is irrelevant to whether the district court has “original jurisdiction” over the civil action because the “civil action” of which the district court must have original jurisdiction is the action as defined by the plaintiff’s complaint and the “defendant” to that action is the defendant to that complaint, not a party named in a counterclaim. Further, the Court noted that Congress did not intend for the phrase “the defendant or the defendants” in §1441(a) to include third-party counterclaim defendants because the Federal Rules of Civil Procedure differentiate between third-party defendants, counterclaim defendants, and defendants. Additionally, in other removal provisions, Congress clearly extended the reach of the statute to include parties other than the original defendant (See §1452(a) and §§1454(a) and (b)), whereas §1441(a) does not so clearly extend its reach. Section 1441(a) limits removal to “the defendant or the defendants” in a civil action over which the district courts have original jurisdiction. Section 1441(a), therefore, does not permit removal by any counterclaim defendant, including parties brought into the suit for the first time by a counterclaim.
Home Depot also argued that it could remove under §1453(b) because of the different wording of that statute. It argued that although §1441(a) permits removal only by “the defendant or the defendants” in a “civil action,” §1453(b) permits removal by “any defendant” to a “class action.” The Court disagreed, holding that there was no indication that this language does anything more than alter the general rule that a civil action may not be removed on the basis of diversity jurisdiction “if any of the … defendants is a citizen of the State in which such action is brought.” The Court found that the two clauses in §1453(b) that use the term “any defendant” simply clarify that certain limitations on removal do not limit removal under that section. The Court specifically found held that neither alters the limitation on who can remove, which suggests that Congress intended to leave that limit in place.
The Court also referenced and reaffirmed its holding in Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941), which held that an original plaintiff may not remove a counterclaim against it. The Court found that this decades-old holding applies equally to third-party counterclaim defendants.
Justice Alito wrote a lengthy dissenting opinion (joined by Justices Roberts, Gorsuch, and Kavanaugh), arguing that a “defendant” is a ‘person sued in a civil proceeding’ and that the majority’s decision leaves third-party defendants unprotected under §1441 and CAFA. He thus asserted that the majority opinion reads an irrational distinction into the removal statutes.
As noted by the dissent, this inability of a third-party defendant to remove raises concerns about out-of-state bias, the inability to take advantage of federal procedure rules, and the inability to use multidistrict litigation procedure.
Dangerous Advertising: Violations of a fair trade practices statute creates new liability for firearm manufacturers and sellersApril 4, 2019 | James Seigfreid and Andreea Sharkey
On December 14, 2012, Adam Lanza used his mother’s XM15-E2S to shoot his way into the locked Sandy Hook Elementary School. Lanza killed twenty-six persons and wounded two others. The attack lasted four and one-half minutes. One hundred fifty-four rounds from Lanza’s XM15-E2S were fired.
The XM15-E2S Bushmaster is an AR-15 assault style semi-automatic rifle. It is similar to the standard issue M16 military service rifle used by the United States Armed Forces. Following the shooting, plaintiffs (Sandy Hook parents and others) filed actions against the Bushmaster Firearms International, LLC company (Remington) alleging a number of distinctive theories of liability. Among these was the claim that defendant wrongfully advertised and marketed Lanza’s assault rifle, emphasizing its character as a military style assault rifle suitable for offensive combat missions. Plaintiffs alleged, among other things, that this advertising was unethical, oppressive, immoral, unscrupulous, and in violation of the Connecticut Unfair Trade Practices Act (“CUTPA”). Defendants countered that the CUTPA was not broad enough to encompass such a claim and that defendants were immunized from suit by the federal Protection of Lawful Commerce in Arms Act (“PLCAA”).
The trial court agreed. On appeal, however, the Connecticut Supreme Court in Soto v. Bushmaster Firearms International, et al. concluded that the PLCAA did not immunize firearms manufacturers or suppliers who engage in wrongful marketing practices promoting criminal conduct. The Court also found that the CUTPA was indeed broad enough to address wrongful advertising practices and that it would fall to a jury to decide whether or not the defendant’s advertising violated standards set forth in Connecticut’s Unfair Trade Practices Act.
The CUTPA is an unfair and deceptive acts and practices statute with counterparts in every state. These acts prohibit deceptive, unfair and unconscionable practices and commonly create private rights of action for individuals harmed by the practices prohibited. Many such statutes also create authority for governmental entities or state consumer protection officials to bring suit.
Historically, firearms manufacturers and sellers have relied on the PLCAA bar to claims and immunize them from suits for injuries caused by the criminal conduct of third-party gun users. The Court in Soto, however, held that the PLCAA did not insulate Bushmaster from claims related to its advertising and marketing of the XM15-E2S assault style weapon.
The Connecticut Supreme Court also found that while prior interpretations limited the reach of the CUTPA with respect to such claims, plaintiffs’ claims in this case would be permitted. The holding expands the scope of the Connecticut statute in at least three important respects: (1) plaintiffs no longer need to have a “commercial relationship” with defendant; (2) personal injuries are now a cognizable harm under the CUTPA; and (3) continuous advertising up to and including the date of plaintiffs’ filing prohibits the tolling of applicable statutes of limitation.
While this ruling greatly changes the use and landscape of the CUTPA in Connecticut, the Court has only addressed the issue of standing in this case and no disposition has yet been made on the merits of plaintiffs’ claims.
The ruling is likely to encourage plaintiffs in other states to challenge advertising and marketing by firearm manufacturers under similar and applicable unfair practices acts. Plaintiffs’ challenge in Connecticut may be the first of many such efforts yet to come.
Soto v. Bushmaster Firearms Int'l, LLC, 331 Conn. 53, 157 (2019)
The deadline to appeal an order granting or denying class certification is a rigid one that is not subject to equitable tolling, according to a unanimous United States Supreme Court. Reversing the Ninth Circuit Court of Appeals, the high court found that lower courts lack the power to relax the 14-day deadline for filing a petition for permission to appeal class-certification rulings.
Nutraceutical Corporation v. Lambert arose from a putative consumer class action filed against the maker of a dietary supplement. Although the Central District of California initially certified a class of similarly situated plaintiffs, it later changed its decision and entered an order decertifying the class. Rule 23(f) of the Federal Rules of Civil Procedure provides that a petition for permission to appeal that order had to be filed with the Ninth Circuit Court of Appeals within 14 days.
However, 10 days after the ruling, the plaintiffs’ lawyers informed the district court at a status hearing that they intended to file a motion for reconsideration of the order decertifying the class. The district judge instructed them to do so within 10 days of the hearing—20 days from the decertification order—which they did. Several months later, the trial court denied the motion for reconsideration, and the plaintiffs’ lawyers then filed their petition for permission to appeal. While the petition for permission to appeal was filed within 14 days of the order denying reconsideration, it was more than four months after the initial order decertifying the class action.
Notwithstanding this apparent procedural defect, the Ninth Circuit accepted the appeal. It rejected the manufacturer’s argument that the appeal was untimely, primarily because the plaintiffs’ lawyers had told the trial court of their intention to seek reconsideration within the initial 14-day window and then sought permission to appeal within 14 days of the denial of that motion for reconsideration. To reach this result, it invoked the doctrine of equitable tolling to “soften” the deadline and permit the appeal. True to its reputation as a judicial outlier, the Ninth Circuit acknowledged contrary authority from the Second, Third, Fourth, Fifth and Seventh Circuits and admitted those courts “would likely not toll the Rule 26(f) deadline” under these circumstances.
The United States Supreme Court took a far more rigid view of the 14-day deadline imposed by Rule 26(f), describing it as “purposefully unforgiving.” Writing for a unanimous court, Justice Sonia Sotomayor framed the issue as whether the text of the rules left room for flexibility in how this deadline is imposed. Although appellate courts have very broad authority under the Federal Rules of Appellate Procedure to “suspend any provision of these rules in a particular case,” that flexibility comes with an important caveat: Appellate Rule 26 expressly provides that courts of appeals “may not extend the time to file […] a petition for permission to appeal.” The court found that this language shows “a clear intent to compel rigorous enforcement” of the 14-day deadline to file with the appellate court. “Courts may not,” Justice Sotomayor concluded, “disregard a properly raised procedural rule’s plain import any more than they may a statute’s.”
The plaintiffs’ lawyers tried to draw a distinction between “extending the time to file” a petition to appeal, which Appellate Rule 26 expressly forbids, with a decision “to excuse late filings on equitable grounds after the fact.” Relying on prior Supreme Court precedent under the analogous rules of criminal procedure, the high court rejected this type of hair-splitting. No matter how it is described, the acceptance of a late filing is a de facto extension of time.
But this opinion does not completely dash these plaintiffs’ attorneys’ hopes of appealing the decertification of their class. The Supreme Court declined to weigh in on two of their primary arguments for certification, because those were not addressed by the underlying court of appeals opinion. This leaves the Ninth Circuit free to revive those arguments on remand.
First, the plaintiffs’ lawyers argued that regardless of whether the deadline for a petition for permission to appeal could be extended, the trial court could extend the time to file a motion for reconsideration, and they claimed the district court did just that when it instructed them to file their motion for reconsideration within 10 days of the hearing. Alternatively, they argued that the order denying reconsideration was itself an “order granting or denying class-action certification,” starting a new 14-day window in which to file a petition to appeal, even if they had blown the initial deadline. In either case, the crux of the argument is that the deadline to file a petition for permission to appeal should have been calculated from the date the motion for reconsideration was denied, not the date of the initial class decertification.
And these arguments might have some legs, too. The Supreme Court carefully confined its analysis to the narrow issue of whether equitable tolling could be applied to the deadline to appeal class certification orders, since that was the sole basis for the Ninth Circuit’s ruling. Justice Sotomayor even acknowledged that a timely motion for reconsideration can render an otherwise final decision not final for appeal purposes. The question of whether the motion for reconsideration was timely and, if so, its effect remains unanswered. This means the parties’ appellate battle is not over, with the next round back before the Ninth Circuit. And regardless of how that court rules, a second appeal to the Supreme Court may be necessary to untie the rest of this procedural knot.
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