A Madison County first: old class action removed to federal court

By Steve Korris | Jul 13, 2005

Ann Hatch

For the first time, a defendant in a Madison County class action lawsuit has removed a case to federal court under the new Class Action Fairness Act enacted in February.

Option One Mortgage served notice July 7 that it removed a lawsuit of Madison County residents Larry and Pamela Smith to U. S. District Court. The Smiths claim that Option One improperly collected an extra day of interest on a home loan.

Defense attorney Ann Hatch, of Herzog Crebs in St. Louis, argued in the notice that federal law applies because the Smiths sued after Feb. 18, the date of its enactment.

Removal of a state case to federal court does not always stick. A federal court can remand a case to state court.

The lawsuit started last year, but with different plaintiffs. Madison County residents Larry and Brandi Freitag filed it, but in March they accepted a cash settlement.

In May, the Smiths were substituted for the Freitags and filed an amended complaint. Madison County Circuit Judge Nicholas Byron granted the motion June 10.

In Option One Mortgage’s notice of removal, Hatch wrote that the new complaint represents a new case that was filed June 10.

“The Freitags’ counsel’s effort to interject the Smiths into the Freitags’ already defunct case, rather than filing a new case, constituted an obvious attempt to circumvent application of the newly enacted Class Action Fairness Act,” Hatch wrote.

She relied on Knudsen vs. Liberty Mutual Insurance, a June 7 decision of the U. S. Court of Appeals, Seventh Circuit.

In that case, Knudsen sued Liberty Mutual in 2000. This year, after Feb. 18, he changed the definition of the class he represented.

Liberty Mutual served notice of removal to federal court in the Northern District of Illinois, arguing that Knudsen had started a new action.

A federal judge rejected the argument and remanded the case to circuit court.

Liberty Mutual appealed. The Seventh Circuit denied the appeal, holding that a change in class definition did not start a new action.

Leaving a door open for defendants, the Seventh Circuit held that a new claim for relief, the addition of a defendant, or another distinct step could start new litigation, “even if it bears an old docket number for state purposes.”

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