The U.S. Court of Appeals for the Seventh Circuit upheld a district court opinion finding that the Class Action Fairness Act does not authorize counter-defendants to remove. In so ruling, the Seventh Circuit agreed with both the Fourth and Ninth Circuit Courts of Appeals. A copy of the opinion is attached.
The Class Action Fairness Act of 2005 allows any Defendant to remove a class action, without consent of the other defendants involved in the case and without diversity being required. In this case, First Bank, commenced two state court suits against DJL Properties. DJL Properties filed class action counterclaims in both actions. First Bank, as counter-defendant, sought to remove the cases to federal court, under the Class Action Fairness act. Two different federal judges then remanded each suit, on the grounds that a counter-defendant is not a defendant for the purposes of the Class Action Fairness Act.
In 1941, the Supreme Court determined in Shamrock Oil & Gas Corp. v. Sheets that, “a litigant who files suit in state court is a ‘plaintiff’ and cannot remove the case, even if the defendant files a counterclaim.” The Seventh Circuit found First Bank’s argument that the Class Action Fairness Act altered this 70-year-old definition unconvincing. Rather, the court determined that the term “defendant” “has an established meaning in legal practice, and it is vital to maintain consistent usage in order to ensure that Members of Congress, know what proposed language will do, and people can understand the meaning of statutes.” The Court concluded that, because the statute employed “time-tested legal language,” without alteration, the standard definition should apply. The Seventh Circuit thus affirmed the district court’s decisions to remand the cases.
Ralph T. Wutscher
Kahrl Wutscher LLP
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