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Bank of New York Mellon v. Cioffi

United States District Court, D. Massachusetts

July 21, 2016

THE BANK OF NEW YORK MELLON f/k/a The Bank of New York, as successor trustee to JPMorgan Chase Bank, N.A., as trustee for the certificate holders of CWABS Master Trust, Revolving Home Equity Loan Asset Backed Note, 2004-C, Plaintiff,
GERARD CIOFFI, Defendant/Counterclaim Plaintiff,
BANK OF AMERICA, N.A. Counterclaim Defendant.


          F. Dennis Saylor IV United States District Judge.

         This is an action arising out of the foreclosure and sale of a residential property owned by defendant Gerard Cioffi. It presents a somewhat unusual procedural question: whether a party who is newly added to a case as an additional counterclaim defendant-and who is thus neither an original defendant; an additional defendant added by the plaintiff; nor a third-party defendant-can then remove the case from state to federal court. The majority view is that such a party cannot remove the case. For the reasons set forth below, although the majority view is arguably at odds with the purpose and even the language of the removal statute, the Court will nonetheless follow those rulings, and the motion to remand will be granted.

         I. Background

         In September 2011, Bank of America, N.A. ("BANA") foreclosed on a property located at 11 Frances Drive, Newburyport, Massachusetts, owned by Gerard Cioffi. It then sold the property to plaintiff Bank of New York Mellon ("BNYM").

         In January 2012, BNYM commenced a summary process action in the Massachusetts Northeast Housing Court against Gerard Cioffi seeking possession of the property. Almost three and a half years later, Cioffi filed a motion "for leave of court to implead" BANA as a defendant under Massachusetts Rule of Civil Procedure 14. (Greaney Aff. Ex. B). In his motion, Cioffi stated that he intended to bring claims against BANA for, among other things, breach of contract, unfair and deceptive trade practices, and wrongful foreclosure.[1] The claims against BANA alleged, in substance, that the bank did not properly foreclose on the property prior to the sale. The Housing Court granted that motion on November 9, 2015, by means of a handwritten margin order. In full, the order stated as follows: "Aft. Hearing, allowed. See MRCP Rules 14(a), 17(a), 18, 19(a), 20(a), 25(c)." (Greaney Aff. Ex. B).

         BANA removed the case to federal court on November 24, 2015, fifteen days later. The jurisdictional basis for removal was diversity of citizenship. According to the notice of removal, Cioffi is a citizen of Massachusetts; BNYM is a Delaware corporation with a principal place of business in New York; and BANA is a national banking association with a principal place of business in North Carolina.

         Although Cioffi's motion for leave "to implead" BANA included a draft complaint, no complaint was served on BANA prior to November 24. Cioffi timely filed a motion to remand on December 3, 2015.

         II. Analysis

         Under 28 U.S.C. § 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." (emphasis added). There are many different types of "defendants, " however, not all of whom are entitled to remove an action under the statute. Accordingly, the first issue before the Court is how to characterize BANA's position in this litigation.

         A. BANA is an Additional Counterclaim Defendant

         Cioffi contends that BANA is a "third-party defendant" based on the housing court's granting of his motion for leave to "implead" BANA pursuant to Mass. R. Civ. P. 14. However, the housing court's margin order purported to allow the motion pursuant to Rules 14, 17, 18, 19, 20, and 25.

         Mass. R. Civ. P 14(a) provides that "a defending party, as a third-party plaintiff, may . . . cause a summons and complaint to be served upon a person who is or may be liable to him for all or part of the plaintiff's claim against him." Here, Cioffi is the "defending party" in the summary process action. But the claims Cioffi makes against BANA assert that it is directly liable to Cioffi for its separate misconduct; BANA's liability to Cioffi is not dependent on, and does not flow from, any liability Cioffi may have to BNYM for possession of the property. Thus, BANA is not a party "who is or may be liable to" Cioffi "for all or part of" BNYM's claim against Cioffi for possession. Accordingly, BANA cannot be a third-party defendant under Mass. R. Civ. P. 14 or its federal analogue.[2]

         Mass. R. Civ. P. 17 addresses the requirement that an action be brought by the "real party in interest." That rule is clearly inapplicable to the joinder of BANA to the original summary process action. Mass. R. Civ. P. 18 addresses the joinder of claims and remedies, and is likewise clearly inapplicable. Mass. R. Civ. P. 19 addresses the joinder of necessary parties; as BANA notes, "there is no basis for any suggestion by Cioffi that BANA is necessary to the summary process eviction." (BANA Suppl. Opp. 4). Mass. R. Civ. P. 25 addresses the substitution of parties due to death, incapacity, incompetency, or a transfer of interest, and is also clearly inapplicable.

         That leaves Rule 20 as the only potential appropriate basis for joinder. Rule 20 allows for the permissive joinder of parties for claims involving the same "transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all these [parties] will arise in the action." Mass. R. Civ. P. 20; see also Fed. R. Civ. P. 20 (same, with minor stylistic differences). Although Mass. R. Civ. P. 20 does not speak directly to the addition of new parties, Rule 13(h) provides that "[p]ersons other than those made parties to the original action may be made parties to a counterclaim or cross-claim in accordance with the provisions of Rules 19 and 20." Mass. R. Civ. P. 13(h).

         Here, BANA was not a party to an original action, and was made a party only as a result of Cioffi's counterclaim. BANA has not asserted any claims against either BNYM or Cioffi, and it is not a plaintiff either in form or in substance. Accordingly, BANA is only a counterclaim defendant in this action. In order to distinguish BANA from a plaintiff that is already party to an action when a counterclaim is asserted against it, the Court will use the phrase "additional counterclaim defendant" to describe BANA's status. See Westwood Apex v. Contreras, 644 F.3d 799, 801 (9th Cir. 2011) (labeling "a party joined to an action as a defendant to a counterclaim" as an "additional counterclaim defendant").

         B. Is BANA a "Defendant" under 28 U.S.C. § 1441(a)?

         The key question presented in this case is whether BANA-as an additional counterclaim defendant-falls within the meaning of "defendant" as used in 28 U.S.C. § 1441, and therefore is within the class of parties entitled to remove an action to federal court.

         1. Shamrock Oil

         The starting point for any discussion of the meaning of "defendant" under § 1441(a) is the Supreme Court's decision in Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941). In that case, Shamrock filed suit in Texas state court against defendant Sheets. Id. at 102. After Sheets filed a counterclaim against Shamrock for breach of contract, Shamrock removed the case to federal court. Id. at 102-03. Shamrock argued that removal was proper because it had become a defendant upon the assertion of the counterclaim. Id. at 104.

         The Supreme Court reviewed the statutory history of § 1441(a) and concluded that that the term "defendant" did not include an original plaintiff who later became a counterclaim defendant after the defendant asserted a counterclaim. Id. at 107-09. The court "emphasized that, at different times, removal was either afforded to ‘defendants' or, alternatively, to ‘either party.' Because Congress was presumed to be aware of this statutory history, [the court found that] the choice of ‘defendant' was a deliberate exclusion of other classes of parties." Westwood Apex, 644 F.3d at 805 (citing Shamrock Oil, 313 U.S. at 105-08).[3] The Shamrock Oil court also observed:

[T]he policy of the successive acts of Congress regulating the jurisdiction of federal courts is one calling for the strict construction of such legislation. The power reserved to the states under the Constitution to provide for the determination of controversies in their courts, may be restricted only by the action of Congress in conformity to the Judiciary Articles of the Constitution. "Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which the statute has defined."

Shamrock Oil, 313 U.S. at 108-09 (quoting Healy v. Ratta, 292 U.S. 263, 270 (1934)). Thus, "[s]ince Shamrock Oil, the law has been settled that a counterclaim defendant who is also a plaintiff to the original state action may not remove the case to federal court." Westwood Apex, 644 F.3d at 805 (listing cases).

         2.The "Original Defendant" Rule

         Over time, the holding of Shamrock Oil evolved into what has been termed the "original defendant rule." Under the original defendant rule, only an "original defendant"-that is, a defendant named in the pleading that commenced the action-may remove a case to federal court. ...

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