Citibank, N.A. v. Jackson

Filing 44

ORDER granting 23 Motion to Remand, and this case is remanded to the Superior Court of Mecklenburg County; denying without prejudice 32 Motion to Dismiss ; denying without prejudice 11 Motion to Compel; denying withou t prejudice 11 Motion to Dismiss ; denying 14 Motion Realign the Parties; denying without prejudice 16 Motion to Dismiss ; denying without prejudice 17 Motion to Dismiss. Signed by Senior Judge Graham Mullen on 3/21/2017. (eef)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
CIVIL ACTION NO. 3:16-CV-00712-GCM
CITITBANK, N.A.,
Plaintiff,
v.
GEORGE W. JACKSON,
Defendant.
___________________________________
GEORGE W. JACKSON,
Counter-Plaintiff and Third-Party
Plaintiff,
v.
HOME DEPOT U.S.A., INC.,
CAROLINA WATER SYSTEMS, INC.,
Third-Party Defendants.

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ORDER

THIS MATTER is before the Court on Third-Party Defendant Home Depot’s Motion to
Realign the Parties (Doc. No. 14), Defendant, Counter-Plaintiff, and Third-Party Plaintiff George
W. Jackson’s Motion to Remand (Doc. No. 23), Jackson’s Memorandum in Opposition to
Motion to Realign the Parties (Doc. No. 27), Home Depot’s Response to Motion to Remand
(Doc. No. 35), Home Depot’s Reply to Response to Motion to Realign the Parties (Doc. No. 37),
and Jackson’s Reply to Reponses to Motion to Remand (Doc. No. 38).

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1) Background
Jackson was sued by Plaintiff and Counterclaim Defendant Citibank NA (“Citibank”) to
collect an allegedly outstanding debt for a water filtration system purchased by Jackson from
Home Depot and Counterclaim Defendant Carolina Water Systems (“CWS”). Jackson timely
answered and asserted a Third Party class action complaint on August 26, 2016, alleging that
Home Depot and CWS had a scheme of misleading customers about the alleged dangerousness
of their water and subsequently selling them unnecessary water filtration systems. Jackson
claims this scheme is an unfair and deceptive trade practice. Further, Jackson alleges Home
Depot’s and CWS’s advertising and solicitation of water treatment system, offering free products
and/or compensation to potential customers who agree to refer other purchasing customers, is a
violation of North Carolina’s Referral Sales Statute. G.S. § 25A-37. Citibank voluntarily
dismissed its lawsuit without prejudice against Jackson on September, 23 2016.
Counter-Plaintiff Jackson asserts claims on behalf of himself and “[a]ll persons in the
state of North Carolina that entered into a Home Improvement Agreement with Home Depot for
‘water treatment’ equipment.” Complaint, ¶ 46. Further, Counter-Plaintiff Jackson asserts claims
on behalf of himself and “[a]ll persons in the state of North Carolina that purchased a Water
Treatment System from Carolina Water Systems, Inc., during the Class Period.” Id.
On October 28, 2016 Third-Party Defendant Home Depot filed a Motion to Realign the
Parties. On November 8, 2016 Counter-Plaintiff Jackson filed a Motion to Remand. The analysis
for these motions affect each other and so the Court’s analysis handles both motions.

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2) Standard of Review
28 U.S.C.A. § 1441, the general removal statute, provides that “any civil action brought
in a State court of which the district courts of the United States have original jurisdiction, may be
removed by the defendant or the defendants, to the district court of the United States for the
district and division embracing the place where such action is pending.” § 1441(a).
CAFA expanded federal diversity jurisdiction by conferring original federal jurisdiction
over class actions in which “any civil action in which the matter in controversy exceeds the sum
or value of $5,000,000, exclusive of interest and costs, and is a class action in which—(A) any
member of a class of plaintiffs is a citizen of a State different from any defendant.” 28 U.S.C.A.
§ 1332(d)(2).
Plus Congress added 28 U.S.C.A. § 1453(b), which says:
A class action may be removed to a district court of the United States in
accordance with [28 U.S.C. § ] 1446 (except that the 1–year limitation under
section 1446(b) shall not apply), without regard to whether any defendant is a
citizen of the State in which the action is brought, except that such action may be
removed by any defendant without the consent of all defendants.
“We begin with the undergirding principle that federal courts, unlike most state courts,
are courts of limited jurisdiction, created by Congress with specified jurisdictional requirements
and limitations. Accordingly, a party seeking to adjudicate a matter in federal court must allege
and, when challenged, must demonstrate the federal court's jurisdiction over the matter.” Strawn
v. AT & T Mobility, 530 F.3d 293, 296 (4th Cir.2008) (citations omitted).

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3) Analysis
A.
The analysis of whether third-party defendant Home Depot is allowed to remove a case to
federal court is straight forward. There is clear Fourth Circuit precedent on this issue that says
only the original defendant in a case is granted the power to remove. Home Depot argues that
this precedent should no longer be followed. This Court disagrees as is explained below.
The Fourth Circuit has held that “an additional counter defendant is not a ‘defendant’ for
purposes of § 1441(a).” Palisades Collections LLC v. Shorts, 552 F.3d 327, 333 (4th Cir. 2008).
This holding is consistent with the Supreme Court case Shamrock Oil & Gas Corp v. Sheets, 61
S.Ct. 868 (1941) which courts have applied to “consistently refuse[] to grant removal power
under § 1441(a) to third-party defendants—parties who are not the original plaintiffs but who
would be able to exercise removal power under ATTM's interpretation.” Palisades, 552 F.3d at
332.
Home Depot argues that the Palisades precedent that third-party defendants are not
permitted to remove cases to federal court under § 1453(b) has since been overruled by the
Supreme Court in Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S.Ct. 547 (2014).
Interestingly, in a nearly identical case the Seventh Circuit Court of Appeals rejected the
same argument made by Home Depot in its court. Tri-State Water Treatment, Inc. v. Bauer v.
Home Depot U.S.A., Inc., 845 F.3d 350 (7th Cir. Jan. 5, 2017). In Bauer, Tri-State Water
Treatment brought a collection action against the Bauers for failing to pay for a water treatment
system that Tri-State installed after doing a free, in-home assessment of the water in the Bauers’
house. Id. at 352. The Bauers responded by filing a class-action counterclaim against Aquion,

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Inc. and Home Depot. Id. Home Depot timely filed a notice of removal. The similarities of the
Bauer case to the current case before the Court are apparent. The district court in Bauer found
that CAFA did not expand the parties entitled to removal beyond the original defendants and
Home Depot appealed. Id.1
While decisions from other circuits are not precedential, they can be highly persuasive in
the Court’s analysis of a legal issue. See, eg. Stuckey v. Colvin¸2013 WL 6185837 (E.D.Va. Nov.
24, 2013); Morrison v. Astrue, 2011 WL 1303651 (W.D.N.C. Mar. 31 2011).
The Seventh Circuit’s reaction in Bauer when Home Depot made the argument that Dart
Cherokee has changed the analysis of the interpretation of which defendants have the power to
remove is identical to this Court’s reaction:
This is slightly surprising because Dart Cherokee does not address the issue
before us . . . there is not a whisper in Dart Cherokee of any move to overrule
Shamrock Oil. If that is where the Supreme Court is going, it will have to get
there on its own; it is not for us to anticipate such a move.
Bauer at 356.
The Court finds that Dart Cherokee did not overrule the holdings of Shamrock Oil and
Palisades and therefore Home Depot, being not an original defendant, did not have the right to
remove this case to federal court.
B.
In addition, Home Depot argues that the Court should first realign the parties
making Home Depot the defendant in this case before reaching the question of remand.

The Seventh Circuit found the Fourth Circuit case Palisades to be “directly on point, as it rejected an additional
counter-claim-defendant’s argument for removal under § 1453(b). The Fourth Circuit reasoned that the word ‘any’
did not change the well-established meaning of ‘defendant.’” Bauer, 845 F.3d at 356 (citation omitted).
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(Doc No. 36 at 7-8). It is argued that Jackson should be realigned as the Plaintiff and
Home Depot and Carolina Water Systems should be realigned as the Defendants. Under
this alignment, the removing party would arguable be a “defendant” for the purposes of
the removal statute.
Federal courts have a “duty to look beyond the pleadings, and arrange the parties
according to their sides in the dispute.” City of Indianapolis v. Chase Nat. Bank of City of
N.Y., 314 U.S. 63, 69, 62 S. Ct. 15, 17 (1941) (internal quotation marks omitted).
“The Fourth Circuit has adopted the two-step principal purpose test to
assess the proper alignment of parties.” Wayne J. Griffin Elec., Inc. v. Travelers Prop.
Cas. Co. of Am., 2014 WL 842983 (M.D.N.C. Mar. 4, 2014) (citing Palisades, 552 F.3d
at 337). “Application of the principal purpose test entails two steps. First, the court must
determine the primary issue in the controversy. Next, the court should align the parties
according to their positions with respect to the primary issue.” U.S. Fid. & Guar. Co. v. A
& S Mfg. Co., 48 F.3d 131, 133 (4th Cir. 1995).
In this case the “principle purpose” for Citibank to file this suit was to collect
Jackson’s debt. On that issue, the parties were properly aligned. See e.g. Arrow Financial
Services, LLC v. Williams, 2011 WL 9158435, at *4 (W.D.Mo. Jan, 20, 2011); Palisades,
552 F.3d at 337.
This is not a situation where there are antagonistic parties on the same side. Even
if the parties were not properly aligned, a second consideration would weigh significantly
against realignment. Prior to removal, Citibank dismissed its claim against Jackson
without prejudice. In similar circumstances, courts have found that allowing realignment
only to create federal jurisdiction would promote forum shopping. See Chancellor’s

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Leaning Sys., Inc. v. McCutchen, 2008 WL 269535, at *3 (N.D.Ohio Jan 29, 2008)
(explaining “[plaintiff] brought a breach of contact action in state court ... [defendant]
answered and filed a counterclaim asserting a claim under a federal statute. Thereafter,
[plaintiff] ma[de] a strategic decision to dismiss its complaint without prejudice and
remove the action ... [that] claim has not been adjudicated and by dismissing without
prejudice, [plaintiff] may intend to re-assert the claim as a counterclaim [or setoff] in
federal court if removal is permitted ... the Court ... will not re-align the parties to enable
[plaintiff] to forum shop.”); see also, Arrow, 2011 WL 9158435 at *4; General Credit
Accceptance, Co. LLC v. Deaver, 2013 WL 2420392 (E.D.Mo. June 3, 2013).
Since the parties are properly aligned according to the principal purpose test and
realignment would only serve the purpose of forum shopping, the Court refuses to realign
the parties.
4) Conclusion
For all the reasons set for forth above, it is hereby
ORDERED that Jackson’s Motion to Remand (Doc. No. 23) is GRANTED; it is
further
ORDERED that Home Depot’s Motion to Realign the Parties (Doc. No. 14) is
DENIED; it is further
ORDERED that all other pending motions are DISMISSED WITHOUT
PREJUDICE, subject to refiling in the Superior Court of Mecklenburg County; it is
further
ORDERED that this case is remanded to the Superior Court of Mecklenburg
County.

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SO ORDERED.

Signed: March 21, 2017

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