CHICAGO – Retailer Home Depot can’t remove a Madison County class action to federal court because it entered the action as a counterclaim defendant, the Seventh Circuit ruled on Jan. 5.
The federal appeals court held that under the national Class Action Fairness Act, only original defendants can remove actions to federal court.
Justices affirmed Southern Illinois district Chief Judge Michael Reagan, who signed an order remanding the action to Madison County last September.
Counterclaim plaintiffs Michael Bauer and Stacey Bauer claim the retailer tricked them into buying useless water treatment systems.
Local lawyers Troy Walton, Micah Summers, Brian Kreisler and Sean Cronin represent the Bauers, along with George Granade of New York City.
When the action began, it involved the Bauers as defendants and it didn’t involve Home Depot at all.
Tri-State Water Treatment sued the Bauers in Madison County small claims court in 2015, claiming they failed to pay for a system Tri-State installed at their house.
The Bauers responded with a counterclaim against Tri-State, asserting a multi state class action for fraud.
They amended the counterclaim last February, to add Home Depot as defendant. They also added Aquion Inc., doing business as Rainsoft.
The class is defined as everyone who bought a system after defendants conducted a water test in their homes.
Plaintiffs say the tests identified mineral content rather than contaminants.
Home Depot removed the action to federal court last April, arguing that it deserved special status as an additional counterclaim defendant.
In May, the Bauers moved to remand the action to Madison County.
Reagan held a hearing in September, and ruled for the Bauers later that month.
The Seventh Circuit accepted an appeal petition and heard argument on Dec. 1.
They reached a decision quickly, finding the Class Action Fairness Act doesn’t extend a right of removal to a party that wasn’t an original defendant.
Chief Judge Diane Wood wrote, “Home Depot argues that absurd results would arise if we were to hold that additional counterclaim defendants cannot remove actions under the Class Action Fairness Act.
“It fears that doing so would reward gamesmanship, because lawyers would be able to use small claims litigation as springboards for counterclaim class actions that would be stuck in state court.
“This, it predicts, would reintroduce the forum shopping the Class Act Fairness Act was designed to eliminate.
“We are not convinced that this will come to pass.”
Wood wrote that state courts have all the tools they need to manage abusive amendments to pleadings.
She wrote that the Act selectively increased federal jurisdiction but “did not roll out the welcome mat for all multi state class actions.”
On Jan. 9, Reagan declared his previous order effective immediately.
Stewart Haskins of Atlanta represents Home Depot, and Russell Scott of the Greensfelder firm in Belleville acts as local counsel.