A familiar story in troubled economic times has produced a new ruling concerning federal civil procedure from the Sixth Circuit.
A Kentucky couple bought a house with a loan issued by America’ Wholesale Lender, secured by a mortgage with Mortgage Electronic Registration Systems (MERS). Later, the couple defaulted on the mortgage. Countrywide Home Loans foreclosed in state court, claiming MERS assigned the mortgage.
The couple filed a counterclaim against Countrywide, arguing that MERS never had a valid mortgage. Countrywide said the counterclaim was deficient because MERS wasn’t joined as a necessary party.
The couple then filed a third-party class action complaint against MERS. MERS, said the couple, was nothing more than an electronic data base for keeping track of mortgages and did not hold a valid mortgage, having failed to follow Kentucky’s registration procedures.
Here’s where the fresh twist to things begins.
MERS, as a third-party defendant, removed the case to federal district court. Normally, third-party defendants can’t do that. First Nat’l Bank of Pulaski v. Curry, 301 F.3d 456, 461 (6th Cir. 2002).
The Kentucky couple, citing Pulaski and 28 U.S.C. § 1441(a), moved to remand their case to state court.
This time it’s different, MERS argued.
[MERS] sought removal of the action based on 28 U.S.C. § 1453(b). The [Class Action Fairness Act of 2005] provides that a district court has jurisdiction in a civil action where there is diversity of citizenship; the amount in controversy exceeds $5 million; and the proposed class includes at least one hundred members. …
[MERS argued] that under section 1453(b), a qualifying class action “may be removed by any defendant without the consent of all defendants.”
You’re reading the statute way too broadly, the Sixth Circuit ruled.
[MERS] attempts to distinguish Pulaski by arguing that section 1453(b), which includes the term “any defendant,” has expanded the right of removal in Class Action Fairness Act cases.
But that language is used in a specific context — it is part of a larger clause providing that an appropriate action “may be removed by any defendant without the consent of all defendants.” Contrary to [MERS’] position, the provision simply modifies the rule that all defendants must consent to the removal.
What the Class Action Fairness Act doesn’t do is extend removal opportunities to third-party defendants, the Sixth Circuit concluded.
The case is In re Mortgage Electronic Registration Systems.
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