Commercial Litigation and Arbitration

Removal: In What Circumstances Is a Third Party Complaint Removable?

Druivenga v. Hillshire Brands Co.,2018 U.S. Dist. LEXIS 33130 (N.D. Iowa Mar. 1, 2018): 

Did The Hillshire Brands Company timely remove this action, involving what was originally a third-party claim by Mark Druivenga, d/b/a Contract Welding & Mechanical, against Hillshire, in a state lawsuit originally filed against Druivenga by various insurers, as subrogees of Hillshire? [*2]  The answer to that question turns on when this action commenced. Did this action commence with the filing of the insurers' original claims against Druivenga in state court, before Druivenga improvidently removed the insurers' case to federal court the first time? If so, then Hillshire's removal of Druivenga's third-party claim, filed after remand to state court, was untimely, as Druivenga contends, because it occurred more than one year after the action originally commenced in state court. On the other hand, did this action commence only with the filing of Druivenga's third-party claim against Hillshire after remand to state court? If so, the removal was timely, as Hillshire contends, because it was just two months after Druivenga filed his third-party claim against Hillshire in the reopened state court case and less than a month after the insurers dismissed their claims, which made the third-party claim removable.


1. Removal by a third-party defendant

In his briefing, Druivenga does not challenge Hillshire's right to remove the third-party complaint, only the timeliness of the removal. Nevertheless, it is worth noting that, while there is a split, most Circuit Courts of Appeals have held that, in general, third-party defendants do not have a right of removal pursuant to § 1441, because they are not "defendants" in the action. See Settlement Funding, L.L.C. v. Rapid Settlements, Ltd., 851 F.3d 530, 534 n.10 (5th Cir. 2017) (citing First Nat'l Bank of Pulaski v. Curry, 301 F.3d 456, 461-63 (6th Cir. 2002)); see also Laurelwood Care Ctr., L.L.C. v. Pavlosky, Case No. 3:17-cv-184, 2018 WL 623584, at *4 (W.D. Pa. Jan. 29, 2018) (citing cases); but see Waltrous, Inc. v. B.P.T. Air Freight Forwarding, Inc., No. 89 C 7900, 1990 WL 43332 (N.D. Ill. Mar. 30, 1990) (seeing no reason to treat a third-party defendant any differently than any other "defendant" under § 1441, and allowing a third-party defendant to remove an action).

More importantly, however, for present purposes, courts recognize at least some exceptions to that general rule.7 One exception is that third-party defendants sued on a separate and independent claim may remove that independent claim. See Carl HeckEngineers v. LaFourche Parish Police Jury, 622 F.2d 133, 136 (5th Cir. 1980); see also Texas Bd. of Regents v. Walker, 142 F.3d 813, 816-18 (5th Cir. 1998) (discussing and applying the "Carl Heck exception"). Another exception is when the state court has severed the third-party claim from the principal claim. See Thibodeaux Family Ltd.P'ship v. Holland, No. 06-1626, 2006 WL 3899908, at *1 (W.D. La. Nov. 29, 2006) (citing Central of Georgia Ry. Co. v. Riegel Textile Corp., 426 F.2d 935, 938 (5th Cir. 1970)). Yet another exception is when the principal claims have been settled and [*17]  voluntarily dismissed, leaving only the remaining third-party claim as removable. Id. (citing Johns Pendleton & Associates v. Miranda Warwick & Milazzo, No. CIV.A. 02- 1486, 2002 WL 31001838 (E.D. La. Sept. 4, 2002)); see also Sun Indus., L.L.C. v.Phoenix Ins. Co., Civ. No. 16-172-BAJ-EWD, 2016 WL 6275188, at *5-6 (M.D. La. Sept. 15, 2016) (describing this exception as an extension of the "Riegel exception," and also citing Johns Pendleton, 2002 WL 31001838).

7   There is also a statutory exception, in the case of a third-party action against a foreign state, see 28 U.S.C. § 1441(d), but it is not applicable, here.

I am convinced that the "Riegel/Johns Pendleton exception" last mentioned, above, is not only appropriate, as a matter of law, but applicable, here. Indeed, nothing in § 1441 expressly states the general rule against removal by a third-party defendant that courts have generally stated. See Waltrous, Inc., 1990 WL 43332 (seeing no reason to treat a third-party defendant any differently than any other "defendant" under § 1441, and allowing a third-party defendant to remove an action). In my view, reading removal by a third-party defendant as unavailable under § 1441 creates some conflict between subsections (b) and (c) of § 1446. Section 1441(b)(1) refers to the time for removal "of a civil action" as within 30 days after the defendant is served with "a copy of the initial pleading setting forth the claim for relief upon which such action . . . is based." (Emphasis added). Thus, the reference is not to the "initial pleading setting forth the original [*18]  claims upon which the original action is based," but to the "initial pleading setting forth the claim" upon which the "action" is based. The initial pleading that sets forth a third-party claim is the third-party petition, so it follows that the pertinent action on which that third-party claim is based is the third-party action. Although § 1446(c) does not refer to commencement of any "claim" upon which the "action . . . is based," for the one-year time limitation on removal, the "action" at issue in the two subsections of the same statute logically means the same thing. See, e.g., Union Pac. R.R. Co. v.Surface Transp. Bd., 863 F.3d 816, 826 (8th Cir. 2017) (recognizing "the principle that a term is presumed to have the same meaning throughout the same statute"). On the other hand, reading "action" in § 1446(c) to mean "the original action by the original plaintiff," without reference to the claim upon which the action is based, would give "action" in that subsection a meaning quite different from the meaning implicit in the language of subsection (b).

Furthermore, the "Riegel/Johns Pendleton exception" also does not run afoul of the policy concerns announced in Shamrock Oil & Gas Co. v. Sheets, 131 U.S. 100, 108-09 (1941), that a third-party defendant should not be permitted to destroy an original plaintiff's choice of forum. Where the original plaintiff's claims [*19]  have been settled, the original plaintiff no longer has any interest in the matter, and by removing the remaining third-party claims, the third-party defendant is doing only what it could have done, if the third-party petition had been filed as a separate lawsuit. Sun Indus., 2016 WL 6275188, at *6.

The "Riegel/Johns Pendleton exception," allowing third-party defendants to remove the action after settlement of the original plaintiff's claim or claims, is also applicable here. First, the claims of the original plaintiffs, the insurers, were entirely resolved by settlement and dismissed shortly after Druivenga filed his Third-Party Petition against Hillshire in the reopened state court action, leaving no claims pending but Druivenga's third-party claim against Hillshire. Id. I conclude that, upon dismissal of the insurers' claims, Druivenga's third-party claim presented precisely the situation addressed in § 1446(b)(3). Specifically, prior to dismissal of the insurers' claims, the case stated by the insurers was not removable, but upon the voluntary dismissal of those claims, the remaining third-party claim became removable on the basis of diversity jurisdiction. The rationale for the last exception also applies here: Hillshire, [*20]  the third-party defendant is not destroying the choice of forum by the original plaintiffs, the insurers, where the insurers no longer have any interest in the matter, and permitting removal allows Hillshire to do what it could have done, had Druivenga's Third-Party Petition been filed as a separate lawsuit, that is, remove it based on diversity. Sun Indus., 2016 WL 6275188, at *6.

Thus, I conclude that Hillshire was a proper party to remove Druivenga's Third-Party Petition.

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