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Tri-State Water Treatment, Inc. v. Bauer

United States Court of Appeals, Seventh Circuit

January 5, 2017

Tri-State Water Treatment, Inc., Plaintiff/Counterclaim- Defendant,
v.
Michael Bauer and Stacey Bauer, Defendants/Counterclaim-Plaintiffs/ Appellees,
v.
Home Depot U.S.A., Inc., Counterclaim-Defendant, Appellee.

          Argued December 1, 2016

         Appeal from the United States District Court for the Southern District of Illinois. No. 16-cv-0419-MJR-RJD - Michael J. Reagan, Chief Judge.

          Before WOOD, Chief Judge, and Flaum and ROVNER, Circuit Judges.

          Wood, Chief Judge.

         In First Bank v. DJL Properties, LLC, 598 F.3d 915 (7th Cir. 2010), we held that a counterclaim-defendant is not entitled to remove a case from state court to federal court under the provisions of the Class Action Fairness Act (CAFA), 28 U.S.C. § 1453(b). Today's case presents a related question: whether, even though the original counterclaim-defendant is barred from removing, an additional counterclaim-defendant may nevertheless do so. We conclude that the statute does not support treating an original counterclaim-defendant differently from a new one, and so we affirm the district court's order remanding this case to state court.

         I

         This case began as a simple collection action brought in the Small Claims Court of Madison County, Illinois, by Tri-State Water Treatment, Inc., against Stacey and Michael Bauer. Tri-State alleged that the Bauers failed to pay for a water treatment system it had installed at their house following a free, in-home assessment of their water. The Bauers responded on June 5, 2015, by answering the complaint and filing a counterclaim against Tri-State. See 735 ILCS 5/2-608. But it was not just any counterclaim: it asserted a multi-state class action against Tri-State for fraud in connection with the sale of its water-treatment system. See 735 ILCS 5/2-801. For purposes of the counterclaim, the Bauers were counterclaim-plaintiffs and Tri-State was the sole counterclaim-defendant.

         Matters became more complicated when, on February 26, 2016, the Bauers filed an amended class-action counterclaim in which they added Home Depot U.S.A., Inc., and Aquion, Inc., as counterclaim-defendants. See 735 ILCS 5/2-616(a) (permitting amendments that "introduce] any party who ought to have been joined as plaintiff or defendant"). The Bauers served the amended counterclaim on Home Depot on March 15, 2016.

         The amended counterclaim defines the class as consumers who purchased a water treatment system from Tri-State, Rainsoft, and Home Depot, following an in-home water test. It asserts that the counterclaim-defendants conducted in-home water tests that did nothing but identify mineral content, rather than contaminants, and thereby misled consumers into buying their water treatment systems.

         Home Depot filed a timely notice of removal on April 14, 2016. See 28 U.S.C. §§ 1446(b)(1), 1453(b). It argued that even though it was not an original "defendant" in the underlying case, its status as an additional counterclaim-defendant in an action meeting CAFA's criteria entitled it to take this step. The Bauers filed a motion to remand pursuant to 28 U.S.C. § 1447(c). They argued that the general removal statute (§ 1446), as modified by CAFA, does not permit any kind of counterclaim-defendant (original or additional) to remove, and thus that the case had to be returned to the state court.

         In an order issued on September 29, 2016, the district court agreed with the Bauers' position. It concluded that CAFA did not disturb the longstanding rule that only original defendants can remove cases to federal court. The court relied in particular on First Bank v. DJL Properties, LLC, supra, which it read as a broad statement that only the original defendants are entitled to remove, not any of the hyphenated defendants, whether initial counterclaim-defendants, new counterclaim-defendants, third-party defendants, or anything else in that general family.

         On October 11, 2016, Home Depot petitioned this court for permission to appeal the remand order pursuant to 28 U.S.C. § 1453(c). We granted that request on November 16, 2016, in order to resolve the unsettled question whether CAFA permits an additional counterclaim-defendant to remove an action. See 28 U.S.C. § 1453(c)(2); Hart v. FedEx Ground Package Sys., Inc., 457 F.3d 675, 679 (7th Cir. 2006).

         II

         As the party seeking removal, Home Depot bears the burden of establishing federal jurisdiction. In re Safeco Ins. Co. of Am.,585 F.3d 326, 329-30 (7th Cir. 2009); Brill v. Countrywide Home Loans, Inc.,427 F.3d 446, 447-48 (7th Cir. 2005). It argues that Congress granted parties in its ...


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