E.D. Cal. Discusses Circuit Split Re Ability of Third Party Defendants to Remove on the Basis of 28 U.S.C. § 1441(c)

Per Foster Poultry Farms, Inc. v. International Business Machines Corp., 2006 WL 2769944 (E.D. Cal. Aug. 1, 2006):

Recently, the U.S. Supreme Court held that a counterclaim can not be the basis of federal jurisdiction. Holmes Group, Inc. v. Vornado Air Circulation Sys., 535 U.S. 826, 830 (2002). There is a longstanding circuit split on the related issue of whether third party defendants can remove a case to federal court based on the substance of a third party claim. The Sixth, Seventh, and Eighth Circuits have held that third party defendants can not remove on the basis of 28 U.S.C. § 1441(c). First Nat'l Bank of Pulaski v. Curry, 301 F.3d 456, 465 (6th Cir.2002) (concluding the same holds true for § 1441(a) as well); Thomas v. Shelton, 740 F.2d 478, 488 (7th Cir.1984); Lewis v. Windsor Door Co., Div. of Ceco Corp., 926 F.2d 729, 733 (8th Cir.1991). The Fifth Circuit has held that "a third-party indemnity defendant may remove a case to federal court pursuant to § 1441(c)." Texas by & through Board of Regents of the Univ. of Tex. Sys. v. Walker, 142 F.3d 813, 816 (5th Cir.1998); Accord N. Natural Gas Co. v. Sheerin, SA-03-CA-304-RF, 2003 U.S. Dist. LEXIS 20049, at *14 (W.D.Tex., Oct. 20, 2003) (third party defendant removed, "in determining relatedness to the Enron bankruptcy, the Court examines only the third party claims against Lay"). The Third Circuit has noted the divide but has expressed no opinion. Cook v. Wikler, 320 F.3d 431, 437 (3rd Cir.2003). "The Ninth Circuit has yet to reach the 'interesting question' whether third-party defendants are 'defendants' for the purposes of section 1441 and thus may remove cases to federal court. However, the great weight of district court authority within this circuit indicates that third-party defendants lack such a right." Ciolino v. Ryan, NO. C03-1396 TEH, 2003 U.S. Dist. LEXIS 11639, at * 9-10 (N.D.Cal., July 9, 2003), citing O'Halloran v. University of Washington, 856 F.2d 1375, 1381 (9th Cir.1988) ("we need not address the issue whether a third-party defendant can base its petition for removal on an alleged federal question presented in the complaint between the original parties").


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