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Wednesday, March 24, 2010

Ind. Decisions - 7th Circuit decides issue of first impression re the meaning of the word “defendant” in §1453(b)

In First Bank v. DJL Properties (SD Ill.), a 5-page opinion, Chief Judge Easterbrook writes:

We grant First Bank’s petition for leave to appeal, see §1453(c)(1), because the cases present an issue not yet resolved in this circuit.

Chapter 89 of the Judicial Code, 28 U.S.C. §§ 1441–53, authorizes removal of certain cases by “defendants.” Almost 70 years ago, the Supreme Court concluded that a litigant who files suit in state court is a “plaintiff” and cannot remove the case, even if the defendant files a counterclaim and the original plaintiff then wears two hats, one as plaintiff and one as defendant—and even if the counterclaim is distinct from the original claim and could have been a separate piece of litigation. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941). That rule may be as old as 1867. See West v. Aurora, 73 U.S. 139, 142 (1867). It remains the law for removal in general, and two circuits have held that it applies to removal under the Class Action Fairness Act in particular. Palisades Collections LLC v. Shorts, 552 F.3d 327, 336 (4th Cir. 2008); Progressive West Insurance Co. v. Preciado, 479 F.3d 1014, 1018 (9th Cir. 2007). Judge Gilbert held that Shamrock Oil, Palisades Collections, and Progressive West Insurance prevent First Bank from removing; Judge Reagan agreed; so do we. We conclude that Palisades Collections and Progressive West Insurance were rightly decided.

Section 1453(b) says that a “class action” (a defined term) may be removed “in accordance with section 1446” whether or not “any defendant” is a citizen of the state in which the suit is pending, and “without the consent of all defendants”. (Otherwise every defendant must sign the notice of removal. Chicago, Rock Island & Pacific Ry. v. Martin, 178 U.S. 245 (1900).) The 2005 Act thus refers us to §1446, which specifies where and when “defendants” file notices of removal. Section 1441, which creates the right of removal for cases that could have been filed initially in federal court, also says that “defendants” may remove a suit.

First Bank contends that the word “defendant” in §1453(b) includes a counterclaim defendant even though the word “defendant” in §1441 and §1446 does not. That would make hash of Chapter 89, because §1453(b) refers to §1446; unless the word “defendant” means the same thing in both sections, the removal provisions are incoherent. More than that: the word “defendant” has an established meaning in legal practice, and it is vital to maintain consistent usage in order to ensure that Members of Congress (and those who advise them) know what proposed language will do, and people can understand the meaning of statutes. * * *

The word “defendant” in §1453(b) means what the word “defendant” means elsewhere in Chapter 89—and, as Shamrock Oil held, that word does not include a plaintiff who becomes a defendant on a counterclaim. AFFIRMED

Posted by Marcia Oddi on March 24, 2010 10:48 AM
Posted to Ind. (7th Cir.) Decisions