US Bank v. Ernst et al

Filing 8

ORDER granting 6 defendants' motion to remand...case is remanded to the district court of Canadian County, Oklahoma for further proceedings. Signed by Honorable Joe Heaton on 07/03/2013. (lam)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
U.S. BANK, N.A., In its Capacity as
Trustee for the Registered Holders of the
Home Equity Asset Trust 2003-6, Home
Equity Pass-Through Certificates, Series
2003-6,

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Plaintiff,
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vs.
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JAYSON ERNST and VICKI ERNST,
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Defendants,
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vs.
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OCWEN LOAN SERVICING, LLC,
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Third-Party Defendant. )

NO. CIV-13-0215-HE

ORDER
Plaintiff brought this foreclosure action against Jayson and Vicki Ernst (the “Ernsts”
or “defendants”) in Oklahoma state court. Defendants filed an answer, counterclaim and
cross-petition which asserted third-party claims against Ocwen Loan Servicing, LLC
(“Ocwen” or “third-party defendant”). Ocwen removed the case to federal court, asserting
that removal is proper under 28 U.S.C. § 1441(a), based on the existence of diversity
jurisdiction under § 1332(a)(1) and the Class Action Fairness Act (“CAFA”) under §
1332(d). Defendants filed a motion to remand, contending that the third-party claim does not
satisfy the standards of CAFA and that removal by a third-party defendant is improper. The

motion is at issue.1 The court concludes that Ocwen, as a third-party defendant, may not
properly remove the action in these circumstances and that remand is appropriate.
While the Tenth Circuit has not ruled on the precise issue at hand, it has held that
“there is a presumption against removal jurisdiction.” Laughlin v. Kmart Corp., 50 F.3d 871,
873 (10th Cir. 1995). Further, “[i]t is well-established that statutes conferring jurisdiction
upon the federal courts, and particularly removal statutes, are to be narrowly construed in
light of our constitutional role as limited tribunals.” Pritchett v. Office Depot, Inc., 420 F.3d
1090, 1094-95 (10th Cir. 2005) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100,
108-109 (1941)) (additional citation omitted). To the extent there is an ambiguity in the
removal statutes, federal courts must adopt a “reasonable, narrow construction.” Id. at 1095.
Ocwen contends that removal is proper under 28 U.S.C. § 1441(a). That section
states:
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.
28 U.S.C. § 1441(a) (emphasis added). However, “[t]he majority view is that third-party
defendants are not ‘defendants’ for purposes of § 1441(a).” First Nat’l Bank of Pulaski v.
Curry, 301 F.3d 456, 461-62 (6th Cir. 2002) (collecting cases and authority); see also Fed.

1

The plaintiff and the third-party defendant also filed a motion to dismiss [Doc. #3].
However, in light of the court’s disposition of this matter, the court does not reach the issues raised
in that motion.

2

Nat’l Mort. Ass’n v. Sechrist, No. 11-CV-02392-WJM-MJW, 2012 WL 3778288, at *3 (D.
Colo. Aug. 30, 2012) (noting the “overwhelming weight of authority” and “uniform
treatment” within the Tenth Circuit holding that third-party defendants may not remove
actions under § 1441(a)); 14C Charles Alan Wright, Arthur R. Miller, Edward H. Cooper &
Joan E. Steinman, Federal Practice and Procedure § 3730, at 432-33 (4th ed. 2009) (“Nor can
third-party defendants brought into the state action by the original defendant exercise the
right to remove claims to the federal court . . . .”). In light of the presumption against
removal jurisdiction and the weight of authority holding that third-party defendants may not
remove an action under § 1441(a), the court concludes that the removal of this action was
improper, depriving the court of jurisdiction over this case.
While the third-party defendant here based its removal on § 1441(a), because Ocwen
emphasized cases construing the rule under § 1441(c) in its response, the court notes that a
majority of courts have extended this principle to cases removed under § 1441(c). See, e.g.,
First Nat’l Bank of Pulaski, 301 F.3d at 465; NCO Fin. Sys., Inc. v. Yari, 422 F. Supp. 2d
1237, 1240 (D. Colo. 2006) (“[T]his Court finds that the better view and the one consistent
with related Tenth Court precedent is that third party removal is impermissible under 28
U.S.C. § 1441(c)); 14B Charles Alan Wright, Arthur R. Miller, Edward H. Cooper & Joan
E. Steinman, Federal Practice and Procedure § 3722.3, at 616 (4th ed. 2009) (“A majority of
the considerable number of cases decided by the courts of appeals and the district courts also
have concluded that a third-party defendant or a cross-claim defendant is not entitled to
remove a case utilizing Section 1441(c).”). But see Carl Heck Eng’rs, Inc. v. Lafourche
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Parish Police Jury, 622 F.2d 133, 136 (5th Cir. 1980) (permitting removal by a third-party
defendant under § 1441(c)), superseded on other grounds by Judicial Improvements Act of
1990, Pub.L. 101-650.
The text of § 1441(c) was amended in 2011. However, as other courts have
concluded,
The revised language of § 1441(c) does not materially alter a third-party
defendant's ability to remove under the statute. . . . [D]espite the long-running
debate among the federal courts as to whether third-party defendants may
properly remove under § 1441(c), the language of subsection 1441(a) remains
unchanged. Had Congress intended to permit removal by third-party
defendants, it could have amended § 1441(a) to clarify the definition of ‘the
defendant or the defendants,’ or added additional language to § 1441(c)
specifying that removal under that subsection is available to parties other than
original defendants. It did not.
E.g., Mut. Pharm. Co., Inc. v. Goldman, No. 12-0815, 2012 WL 2594250, at *2 (E.D. Pa.
July 3, 2012). Regardless, the amended version of § 1441(c) makes clear that it would not
provide a basis for removal in these circumstances. Section 1441(c) only allows the removal
of a civil action that includes a nonremovable claim if the action includes “a claim arising
under the Constitution, laws or treaties of the United States (within the meaning of section
1331 of this title)”–in other words, a federal question. 28 U.S.C. § 1441(c)(1)(A). However,
Ocwen relies only on the purported existence of diversity jurisdiction (which is found in 28
U.S.C. § 1332) and CAFA jurisdiction (a type of diversity jurisdiction found in § 1332(d)).
The notice of removal does not suggest the existence of a federal question; therefore, §
1441(c) provides no basis for removal in these circumstances, even if it could be
accomplished by a third-party defendant.
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Finally, removal by a third-party defendant is also improper under the removal
provisions of the Class Action Fairness Act, 28 U.S.C. § 1453(b). See, e.g., In re Mortg.
Elec. Registration Sys., Inc., 680 F.3d 849, 854 (6th Cir. 2012) (collecting cases); Palisades
Collections LLC v. Shorts, 552 F.3d 327, 333, 336 (4th Cir. 2008) (holding that counterdefendants and third-party defendants may not remove under § 1441(a) or CAFA);
Westwood Apex v. Contreras, 644 F.3d 799, 807 (9th Cir. 2011) (holding that CAFA “did
not change the longstanding rule that a party who is joined to such an action as a defendant
to a counterclaim or as a third-party defendant may not remove the case to federal court”).
Under the circumstances existing here, the court concludes that removal of this case
by the third-party defendant was improper. Defendants’ motion to remand [Doc. #6] is
GRANTED and the case is REMANDED to the District Court of Canadian County,
Oklahoma.
IT IS SO ORDERED.
Dated this 3rd day of July, 2013.

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