Cleveland Acceptance Corp v. Seese et al

Filing 17

Opinion and Order signed by Judge James S. Gwin on 12/1/14 granting the motion to remand this case to the Cleveland Municipal Court. (Related Doc. 9 ) (M,G)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
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CLEVELAND ACCEPTANCE CORP.,
:
:
Plaintiff-Counterclaim Defendant,
:
:
v.
:
:
KARLA SEESE,
:
:
Defendant,
:
:
WADE BELL,
:
:
Defendant-Counterclaim Plaintiff:
Third Party Plaintiff,
:
v.
:
:
NORTON FURNITURE INC. ET AL.,
:
:
Third Party Defendants.
:
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CASE NO. 1:14-CV-02033

OPINION & ORDER
[Resolving Docs. 1, 6, 9]

JAMES S. GWIN, UNITED STATES DISTRICT JUDGE:
The motion to remand this case to state court raises a single question: whether counterclaim
defendants and third party defendants may remove cases under 28 U.S.C. § 1441(c). Concluding that
they may not, the Court GRANTS the motion and REMANDS this case to the Cleveland
Municipal Court.
I. Background
On May 27, 2014, this case began when Plaintiff-Counterclaim Defendant Cleveland
Acceptance Corp. (“Cleveland Acceptance”) brought an action in the Small Claims Division of
Cleveland Municipal Court against Defendant Karla Seese and Defendant-Counterclaim Plaintiff-

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Case No. 1:14-CV-02033
Gwin, J.
Third Party Plaintiff Wade Bell seeking payment on a loan.1/
On August 29, 2014, Bell filed a counter complaint against Cleveland Acceptance and third
party complaint against Third Party Defendants Norton Furniture, Inc., and Marc Brown.2/ He
alleges that Cleveland Acceptance violated the federal Truth in Lending Act and the Ohio Retail
Installment Sales Act,3/ that the Third Party Defendants violated the Cleveland Municipal Consumer
Code,4/ and that Cleveland Acceptance and the Third Party Defendants conspired to violate Ohio
usury laws and the Cleveland Municipal Code.5/
Then, on September 15, 2014, Cleveland Acceptance and the Third Party Defendants
removed the case to this Court.6/ Bell seeks to remand the case to state court, arguing that
counterclaim and third party defendants are not eligible to remove cases.7/
II. Legal Standard
“The district courts of the United States . . . are ‘courts of limited jurisdiction. They possess
only that power authorized by Constitution and by statute.’”8/ Congress has provided for the
removal of certain claims and actions that could have been originally filed in federal court.9/

1/

Doc. 1-2 at 1. Seese was the primary borrower, while Bell was a co-signer. Id. at 6.

2/

Doc. 1-1. Bell also successfully sought to have the case t ransferred to the General Division of Cleveland
Municipal Court because the amount the counter complaint and third party complaint put in controversy exceeded the
limit for the small claims division. See id. at 2.
3/
Id. at 14-17.
4/
5/
6/
7/

Id. at 17-18.
Id. at 18-19.
Doc. 1. They subsequently filed an amended notice of removal. Doc. 6.
Doc. 9. The Counter Defendant and Third Party Defendants have responded, Doc. 10, and Bell has replied,

Doc. 11.
8/

Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005) (quoting Kokkonen v. Guardian Life
Ins. Co. of Am., 511 U.S. 375, 377 (1994)).
9/
28 U.S.C. § 1441 (2012).

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Case No. 1:14-CV-02033
Gwin, J.
“Removal statutes are strictly construed with all doubts resolved against removal.”10/ The removing
party has the burden of establishing federal court jurisdiction.11/
Two subsections of the federal removal statute are relevant to this case. The first, 28
U.S.C. § 1441(a), says:
Generally.--Except as otherwise expressly provided by Act of Congress, 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.12/
The other subsection, 28 U.S.C. § 1441(c), has recently been amended. The language effective prior
to the amendment provided:
Whenever a separate and independent claim or cause of action within the jurisdiction
conferred by section 1331 of this title is joined with one or more otherwise
non-removable claims or causes of action, the entire case may be removed and the
district court may determine all issues therein, or, in its discretion, may remand all
matters in which State law predominates.13/
After an amendment in late 2011, which became effective in early 2012, § 1441(c) now reads:
Joinder of Federal law claims and State law claims.--(1) If a civil action includes–
(A) a claim arising under the Constitution, laws, or treaties of the United
States (within the meaning of section 1331 of this title), and
(B) a claim not within the original or supplemental jurisdiction of the district
court or a claim that has been made nonremovable by statute, the entire
action may be removed if the action would be removable without the
inclusion of the claim described in subparagraph (B).

10/

Sollitt v. KeyCorp, 463 F. App’x 471, 473 (6th Cir. 2012) (citing Syngenta Crop Prot., Inc. v. Henson, 537
U.S. 28, 32 (2002)).
11/
Harndon v. Jayco, Inc., 496 F.3d 579, 581 (6th Cir. 2007) (citing Eastman v. Marine Mech. Corp., 438 F.3d
544, 549-50 (6th Cir. 2006)).
12/
29 U.S.C. § 1441(a) (2012).
13/

29 U.S.C. § 1441(c) (2006) (amended by Federal Court Jurisdiction and Venue Clarification Act of 2011,
Pub. L. No. 112-63, 125 Stat. 758 (Dec. 7, 2011)).

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Case No. 1:14-CV-02033
Gwin, J.
(2) Upon removal of an action described in paragraph (1), the district court shall
sever from the action all claims described in paragraph (1)(B) and shall remand the
severed claims to the State court from which the action was removed. Only
defendants against whom a claim described in paragraph (1)(A) has been asserted are
required to join in or consent to the removal under paragraph (1).14/
III. Analysis
Before the 2011 amendment, Sixth Circuit law held that neither 1441(a) nor 1441(c) allowed
third party or counterclaim defendants to remove claims. In First National Bank of Pulaski v. Curry,
the court concluded that third party defendants and counterclaim defendants could not remove cases
under 28 U.S.C. § 1441(a) because the phrase “defendant or defendants” did not include them.15/
As to the then-effective version of 28 U.S.C. § 1441(c), which allowed removal when separate and
independent claims were “joined,” the court concluded that the word “joined” meant that the
provision covered only claims brought by the original plaintiff or plaintiffs.16/
The Counterclaim Defendant and the Third P arty Defendants do not argue that 28
U.S.C. § 1441(a), which has remained materially unchanged since Curry, could by itself support
removal. Instead, they rest their claim of removal jurisdiction on § 1441(c). They say that the
revised provision was intended “to broaden the path to removal.”17/ And they point to several
aspects of the statute, including the inclusion of the words “claim” and “action” and the deletion of
the word “joined” and the phrase “separate and independent.” From these premises, they argue that
the revised provision is “a detailed grant of removal jurisdiction in its own right.”18/ The Court

14/

29 U.S.C. § 1441(c) (2012).

15/

First Nat’l Bank of Pulaski v. Curry, 301 F.3d 456, 461-63 (6th Cir. 2002).
Id. at 463-67.

16/
17/
18/

Doc. 10 at 5.
Id. at 7.

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Case No. 1:14-CV-02033
Gwin, J.
disagrees.
As an initial matter, the word “claim” in revised § 1441(c) replaces the phrase “claim or
cause of action” in the old version of that provision.19/ Likewise, the word “action” in the revised
provision replaces the word “case.”20/ The Counterclaim Defendant and Third Party Defendants
have provided no reason to think that removing the phrase “or cause of action” causes “claim” to
sweep more broadly, nor have they explained how the change in language from “case” to “action”
implies a drastic expansion of removal jurisdiction.
The absence of “joined” and “separate and independent” from revised § 1441(c) gets the
Counterclaim Defendant and Third Party Defendants no further. The Counterclaim Defendant and
Third Party Defendants focus on the language in § 1441(c)(1)(A), which requires the presence of
a claim giving rise to federal question jurisdiction. But they ignore § 1441(c)(1)(B). That provision,
which must also be satisfied for § 1441(c) to apply, requires both the presence of “a claim not within
the original or supplemental jurisdiction of the district court or a claim that has been made
nonremovable by statute,” and that the “action would be removable without the inclusion of” any
such claim.21/ This subsection thus recasts, albeit in slightly different language, the same “separate
and independent” and “joined” requirements found in the older version of the statute.
This does not mean that the amendment to § 1441(c) lacked significance. Rather, the reason
for its adoption appears obvious. Prior to its amendment, the statute allowed a federal court to
“determine all issues” in a case that included claims over which the federal court lacked any basis
to exercise jurisdiction. This conflicted with the principle that federal courts are courts of limited

19/

Compare 28 U.S.C. § 1441(c) (2012), with 28 U.S.C. § 1441(c) (2006).

20/

Compare 28 U.S.C. § 1441(c) (2012), with 28 U.S.C. § 1441(c) (2006).
28 U.S.C. § 1441(c)(1)(B) (2012).

21/

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Case No. 1:14-CV-02033
Gwin, J.
jurisdiction and raised constitutional concerns. The revised version attempts to address this problem
by specifying that any claims over which the federal court lacks jurisdiction must be remanded.22/
Accordingly, the Court concludes that the revisions to § 1441(c) do not broaden its scope to
allow removal by counterclaim or third party defendants.
Finally, even if the amendments to § 1441(c) did generally allow counterclaim or third party
defendants to remove cases, removal would be improper here. By its terms, § 1441(c) applies only
when both a claim a federal court has federal question jurisdiction over and a claim the court lacks
original and supplemental jurisdiction over are present.23/ Here, federal question jurisdiction would
be proper over the counterclaim for violation of the Truth in Lending Act. Because all of the other
claims, counterclaims, and third party claims in this lawsuit arise out of the same transaction or
occurrence as this federal claim, supplemental jurisdiction would be proper for all of them.24/ The
absence of a claim over which the district court would lack original or supplemental jurisdiction thus
provides another reason why§ 1441(c) cannot support removal in this case.
IV. Conclusion
For the reasons set forth above, the Court GRANTS Bell’s motion and REMANDS this case

22/

28 U.S.C. § 1441(c)(2) (2012).

23/

28 U.S.C. § 1441(c) (2012).
See 28 U.S.C. § 1367 (2012).

24/

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Case No. 1:14-CV-02033
Gwin, J.
to the Cleveland Municipal Court.
IT IS SO ORDERED.

Dated: December 1, 2014

s/
James S. Gwin
JAMES S. GWIN
UNITED STATES DISTRICT JUDGE

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