PHILIP BOWLING, JENNIE M. BOWLING v. U.S. BANK NATIONAL ASSOCIATION, As Trustee for C-Bass Mortgage Loan Asset-Backed Certificates, Series 2007-SP2, LITTON LOAN SERVICING, LP, OCWEN LOAN SERVICING, LLC
No. 17-11953
United States Court of Appeals for the Eleventh Circuit
June 23, 2020
D.C. Docket No. 2:13-cv-01881-MHH. [PUBLISH]
Appeal from the United States District Court for the Northern District of Alabama
(June 23, 2020)
Before ROSENBAUM, BRANCH, and HIGGINBOTHAM,* Circuit Judges.
Perhaps some might think removal is not the most riveting topic. But it‘s important: the removal statutes establish the basis for federal jurisdiction in qualifying cases originally filed in state court. And every so often, a new Supreme Court case comes along that changes the removal playing field—at least in our Circuit. That‘s what happened here.
After the district court upheld Third-Party Counterclaim Defendants U.S. Bank National Association, Litton Loan Servicing, LP, and Ocwen Loan Servicing, LLC‘s removal of this case from Alabama state court, the Supreme Court issued Home Depot U.S.A., Inc. v. Jackson, 139 S. Ct. 1743 (2019). That case had the effect of upending Carl Heck Engineers, Inc. v. Lafourche Parish Police Jury, 622 F.2d 133 (5th Cir. 1980), our longstanding Circuit precedent on removal by third-party counterclaim defendants.
As a result, we must reverse the district court‘s denial of Defendants/Third-Party Counterclaim Plaintiffs-Appellants Philip and Jennie Bowling‘s motion to remand, which was based in substantial part on Carl Heck. And since we conclude that the district court erred in denying the Bowlings’ motion to remand, the district court‘s order granting the Third-Party Counterclaim Defendants’ motion for summary judgment must be vacated, and the entire case must be remanded to state court.
I.
In 1986, Defendants/Third-Party Counterclaim Plaintiffs-Appellants Philip and Jennie Bowling bought a house located in Birmingham, Alabama. To pay for the house, the Bowlings obtained a 30-year mortgage loan from First Security Mortgage Corporation. As a part of this loan, the Bowlings executed a promissory note in favor of First Security. Over the life of the loan, the note and mortgage were transferred several times. Most recently, in July 2012, Bank of America assigned the loan to Third-Party Counterclaim Defendant-Appellee U.S. Bank National Association.
For many years, the Bowlings made their loan payments. But they began missing payments in 1999, and after that, they hovered in and out of default for some time. During this period, the servicer of the loan was Third-Party Counterclaim Defendant-Appellee Litton Loan Servicing, LP. The Bowlings continued this pattern until they made their last payment (which was not the final payment required) on the
Between September 20, 2011, and August 2012, Ocwen and the Bowlings had various communications related to foreclosure and Ocwen‘s responsibilities under federal law. The following month, on September 24, 2012, Ocwen accelerated the loan and provided a notice to the Bowlings that a foreclosure sale was scheduled for October 24, 2012.
WGB, LLC, purchased the Bowlings’ house for $178,000.00 at the October 24, 2012, foreclosure sale. But the Bowlings refused to vacate the property.
So in Alabama state court, WGB filed a Complaint against the Bowlings for ejectment. In response to the ejectment action, the Bowlings filed what they titled an “Answer and Counterclaim.” The filing added three new parties to the action—U.S. Bank, Ocwen, and Litton (the “Third-Party Counterclaim Defendants“)—and it added fifteen claims that were a mix of state and federal claims. With respect to the federal claims, the Bowlings asserted violations of the Truth in Lending Act (“TILA“), the Real Estate Settlement Procedures Act (“RESPA“), the Fair Credit Reporting Act (“FCRA“), and the Fair Debt Collection Practices Act (“FDCPA“). The Bowlings directed all claims in the “Answer and Counterclaim” at the three new Third-Party Counterclaim Defendants and none against the original plaintiff WGB.
The Third-Party Counterclaim Defendants removed the entire case to federal court, asserting that removal was proper under either
After reviewing the Bowlings’ motion to remand, the district court denied it. But it severed WGB‘s original ejectment claim and remanded that to Alabama state court. As a result, WGB was no longer a party to the federal proceedings.
Meanwhile, in the federal proceedings, the Third-Party Counterclaim Defendants moved for summary judgment on the federal claims (TILA, RESPA, FCRA, and FDCPA). The Bowlings opposed and sought to strike the declaration testimony of one of the Third-Party Counterclaim Defendants’ witnesses and all exhibits that were a part of that testimony, on the grounds that the witness‘s testimony was not based on personal knowledge. After the issues were fully briefed, the district court denied the Bowlings’ motion to strike and granted the Third-Party Counterclaim Defendants’ motion for summary judgment on the federal claims. The court declined to exercise supplemental jurisdiction over the remaining state-law claims and instead remanded them to the Alabama state court.
The Bowlings timely appealed the rulings denying remand, denying the motion to strike the declaration testimony, and granting summary judgment on the claims against the Third-Party Counterclaim Defendants.
II.
We review de novo the denial of a motion to remand. Blevins v. Aksut, 849 F.3d 1016, 1018 (11th Cir. 2017). The right to removal is statutory. Global Satellite Commc‘n Co. v. Starmill U.K. Ltd., 378 F.3d 1269, 1271 (11th Cir. 2004) (citation omitted). But because removal jurisdiction implicates “significant federalism concerns,” we construe removal statutes strictly. Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999); see also Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108 (1941). On a motion to remand, the removing party shoulders the burden of establishing federal subject-matter jurisdiction. Conn. State Dental Ass‘n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1343 (11th Cir. 2009).
The district court denied the motion to remand because it concluded that the Third-Party Counterclaim Defendants properly removed the case from state court under
At the time Carl Heck was decided,
Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, 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 not otherwise within its original jurisdiction.
In Carl Heck, Carl Heck Engineers, Inc., the plaintiff, sued Lafourche Parish Police Jury in Louisiana state court. 622 F.2d at 134. Carl Heck sought liquidated damages on a contract Heck had with Lafourche concerning engineering services for the building and repair of public roads. Id. Lafourche then filed a third-party claim against Maryland Casualty Company. Id. at 134-35. In that third-party claim, Lafourche asserted that Maryland was required to defend Lafourche and hold it harmless from Heck‘s claim. Id. Lafourche based its claim on an agreement Lafourche and Maryland had reached for Maryland to take over the responsibilities on the road project for the general contractor (Douglas G. Lambert Contractor, Inc.), whom Lafourche had previously separately contracted with and who had abandoned the project before completion. Id. at 134.
Maryland removed the action to federal court. Id. at 135. In response, Lafourche moved to remand the entire case to state court. Id. The district court denied Lafourche‘s motion, holding that the action was properly removable to federal court under the then-existing version of
of citizenship existed between Maryland and Lafourche,3 and the third-party claim
Our predecessor Court affirmed. Id. at 137. It reasoned that “the language of the statute does not require only those causes of action joined by the original plaintiff to form the basis of removal.” Id. at 136. Rather, the Court explained, the statute allowed for the removal of third-party claims that were “not unrelated to the main claim [in the original action], but sufficiently independent of it that a judgment in an action between [the parties to the third-party claim] alone can be properly rendered.” Id. In our predecessor Court‘s view, removal made sense because “[s]uch actions can be and often are brought in a separate suit from that filed by the original plaintiff in the main claim.” Id. And since it found that Lafourche‘s claim against Maryland stated a “separate and independent claim which if sued upon alone could have been brought properly in federal court,” the old Fifth Circuit concluded that the case was
properly removable. Id.
In light of Carl Heck and its post-Circuit-split Fifth Circuit progeny, the district court here understandably concluded that the Third-Party Counterclaim Defendants’ claims were removable under
But the removal playing field has dramatically changed since the district court issued its order denying remand of the entire case against the Third-Party Counterclaim Defendants. As promised, see supra at notes 1 & 4, we now get to the removal game-changer: Home Depot U.S.A, Inc. v. Jackson, 139 S. Ct. 1743 (2019).
In Home Depot,
Because Home Depot abrogates our forty-year-old precedent Carl Heck and requires reversal of the district court‘s order denying remand here, we discuss it at length. In Home Depot, Citibank, N.A., filed a debt-collection action against Jackson in state court. Home Depot, 139 S. Ct. at 1747. The action contended that
Jackson was liable for charges he made on his Home Depot credit card. Id. In response, Jackson filed an answer, as well as a counterclaim against Citibank and third-party class-action claims against Home Depot and Carolina Water Systems, Inc. Id. Essentially, the claims alleged that Home Depot and Carolina Water Systems had schemed to induce homeowners to buy water-treatment systems at inflated prices and that Citibank was jointly and severally liable for this alleged conduct. Id.
Citibank soon dismissed its claims against Jackson, and Home Depot removed the case, citing, among other statutes,
As relevant here, en route to affirming, the Supreme Court considered whether
(a) 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.
The Supreme Court began its analysis of the statute with a discussion of the meaning of the phrase “the defendant or the defendants.” Home Depot, 139 S. Ct. at 1748. Noting that the phrase must be construed “in light of the structure of the statute and [Supreme Court] precedent,” the Court concluded that “§ 1441(a) does not permit removal by any counterclaim defendant, including parties brought into the lawsuit for the first time by the counterclaim.” Id.
Six things demanded this conclusion, the Court reasoned.
First,
that action is the defendant to that complaint, not a party named in a counterclaim.” Id.
Second, the Court pointed to the meaning of the term “defendant” in “related contexts” and noted that it did not include third-party counterclaim defendants. Id. at 1749. For example, the Court pointed out that the Federal Rules of Civil Procedure distinguish among “third-party defendants, counterclaim defendants, and defendants.” Id. In particular, the Court observed,
Third, the Court compared the language of
relating to patents, plant variety protection, or copyrights.” Id. But
Fourth, the Court reasoned that its decision in Shamrock Oil also supports the conclusion that “third-party counterclaim defendants are not ‘the defendant or the defendants’ who can remove under
Fifth, the Court concluded after considering other removal statutes that “the limits Congress has imposed on removal show that it did not intend to allow all defendants an unqualified right to remove.” Id. (citing
So the Court found unpersuasive Home Depot‘s argument that the Court‘s narrow reading of “the defendant” in
And sixth, the Court observed that the broader construction of “the defendant” to include a third-party counterclaim defendant would lead to absurd results in the context of other removal statutes. Id. The Court pointed, for example, to
For all these reasons, the Court held that “a third-party counterclaim defendant is not a ‘defendant’ who can remove under
Though Home Depot deals with
(c) 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).
(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).
Every analytical tool the Supreme Court relied on in Home Depot to conclude that counterclaim defendants may not remove a civil action under
First, the text of
reviewing
The caption of
Taking the Court‘s remaining reasons out of order, just as Shamrock Oil is consistent with the conclusion that “third-party counterclaim defendants are not ‘the
defendant or the defendants’ who can remove under
As for the remaining points the Supreme Court cited in Home Depot when it concluded that a third-party counterclaim defendant is not a “defendant” who can remove under
For all these reasons, Carl Heck cannot govern our construction of the current version of
In short, to the extent that Carl Heck‘s interpretation of
defendant to the original action may seek to remove a case under
III.
After Home Depot, Carl Heck is no longer good law. And Home Depot dictates that third-party counterclaim defendants cannot remove a “civil action” under
REVERSED, VACATED, and REMANDED.
