Tuesday, December 16, 2008, 4:34 PM

Fourth Circuit Issues Another CAFA Decision Against Removal In First-Impression Case

Today the Fourth Circuit issued its third decision this week on removal under the Class Action Fairness Act (CAFA). And once again the Court rejected removal. The case is Palisades Collections LLC v. Shorts.

This case began as a collection action filed by a collection agency for AT&T Mobility against a cell phone service customer. The defendant filed a class action counterclaim and joined AT&T as a counter-defendant on her counterclaim, contending that AT&T's cell phone service contracts violated the West Virginia Consumer Credit and Protection Act.

Relying on CAFA, AT&T removed the case to federal court, presenting an issue of first impression: can a party joined as a defendant to a counterclaim remove the case to federal court solely because the counterclaim satisfies CAFA's jurisdictional requirements?

The panel majority said no. The opinion was written by Chief Judge Williams and joined by Judge King.

Judge Niemeyer dissented, concluding that CAFA's text does indeed authorize AT&T to remove this class action, even though AT&T was sued as a counterclaim defendant, not as an original defendant.

The U.S. Chamber of Commerce had filed an amicus brief in favor of removal. The Chamber argued in that brief: "If the district court's decision is left undisturbed, the plaintiffs' bar will have a tool for circumventing CAFA – simply bring all class actions as counterclaims. As a practical matter, it will be relatively easy for plaintiffs' attorneys to find debt collection proceedings or other small-scale litigation to serve as the vehicle for such counterclaim class actions. Indeed, if need be, plaintiffs' attorneys could even engineer such initial proceedings by, for example, having a potential counter-claim plaintiff fail to pay certain bills."

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